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Jakarta Post

RI to start defense contract buyback policy

  • Novan Iman Santosa

    The Jakarta Post

Jakarta   /   Thu, April 3, 2014   /  06:19 pm

Starting on April 5 all new defense contracts with foreign suppliers will carry a mandatory 85 percent buyback plan in the form of countertrade, local content and transfer-of-technology requirements.

'€œThe requirement is stipulated in Law No. 16/2012 on the defense industry,'€ Silmy Karim, the Defense Industry Policy Committee (KKIP) special staff for cooperation and institutional relations, said Wednesday.

Silmy was speaking at a press conference after a KKIP workshop on the drafting of a master plan to fulfill security and defense equipment, which promoted the use of locally-made equipment.

'€œWe already have a transfer-of-technology policy in the second strategic plan [Renstra] to fulfill our defense needs,'€ he went on.

The second Renstra is slated for 2015-2019, it is also known as the second stage of the Minimum Essential Force (MEF). The first is 2010-2014.

The KKIP head of planning division, Said Didu, said that 50 percent of the 85 percent requirement would be fulfilled through counter-trade, which should spur the national economy.

'€œThe counter-trade should focus on Indonesian commodities and not on providing services, such as training, to Indonesia,'€ he said.

'€œThe remaining 35 percent will be achieved through local content and transfer-of-technology mechanisms, aimed at developing the defense industry and manufacturing.'€

Didy, however, said that KKIP would assess what weapons systems would be built locally.

'€œWe do not have a plan, for example, to locally produce Sukhoi jet fighters, unlike India,'€ he said.

'€œBut we may produce Sukhoi parts or request jet fighter transfer-of-technology, which we can use to design our own.'€

He said it was a different case with submarine procurement as Indonesia had a plan to make submarines locally.

The workshop was attended by planning assistants to the chiefs of the Indonesian Military (TNI), representatives from the three branches of the military and the National Police as well as state-owned and private defense industries.

'€œThe users presented what they needed and we will match them with the capabilities of the domestic defense industry, both state owned and private,'€ Silmy said.

'€œSuch pairing is important because defense procurement takes time due to human resource management, facilities, infrastructure and production capacity.'€

The head of the KKIP implementation team, Adm. (ret) Sumardjono, said that the workshop preceded the drafting of a master plan for the fulfillment of defense and security equipment and it'€™s financing.

'€œThere are also master plans on the needs of users and the defense industry,'€ he told the conference.

'€œThe users will determine what equipment they need according to their operational requirements and technical specifications.'€

Sumardjono said in general not all requirements could be met by local defense industries and that it was the KKIP'€™s duties to find out a way on how to reach the desired capabilities.

He added that the master plans would be drafted as inputs for State Budget deliberations.

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