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Jakarta Post

Indonesian defense industry feels COVID-19 pinch

  • Marchio Irfan Gorbiano

    The Jakarta Post

Jakarta   /   Mon, May 4, 2020   /   05:22 pm
Indonesian defense industry feels COVID-19 pinch Technicians check the avionics sensor on an NC212 aircraft ordered by Vietnam at PT Dirgantara Indonesia in Bandung, West Java, in this 2017 photo. (Jakarta Post/JP/Arya Dipa)

The domestic defense industry is feeling the pinch from COVID-19 as it struggles to maintain manufacturing output amid disruption to supply chains and a decline in productivity as a result of the government’s stay-at-home measures.

Defense firms said they were trying to fulfill existing contracts with buyers, while also shifting some of their operations to produce essential medical products, such as personal protective equipment (PPE) and ventilators, following a Defense Ministry instruction to support the government in tackling the outbreak.

State-owned aircraft manufacturer PT Dirgantara Indonesia (PT DI) president director Elfien Goentoro said the pandemic had affected around 40 of the company’s current contracts with its buyers.

“Not all of [PT DI’s current contracts] will be delayed and [we] will strive to fulfill some of them on time,” Elfien said.

With the global pandemic having forced most countries to impose lockdowns, Elfien said supply chains had been disrupted affecting the daily operations of PT DI, which is heavily reliant on imported goods.

“Our supply chains are disrupted […] we are depending on imports of some components such as engine and avionic [parts],” Elfien said.

Its day-to-day operations were already trimmed down following Indonesia's social distancing orders that forced between 50 and 60 percent of the company’s workforce to work from home.

Read also: Government turns to domestic industry to modernize defense sector

The company’s manufacturing plant is still operating at limited capacity given its status as one of the strategic sectors allowed to continue operating during the pandemic, according to Elfien.

PT DI is currently producing two CN235-220 military transport aircraft -- ordered by the Senegalese and Indonesian air forces -- and a multipurpose light transport aircraft NC212i for the Indonesian Air Force.

The CN235-220 is a twin-engined turboprop plane, while the NC212i is an upgraded version of the NC212-400, a variant of the NC212 medium cargo aircraft series that PT DI manufactured under license from Spanish aircraft maker CASA through a cooperation agreement that dated back to 1976.

CASA is now a part of Airbus Defense and Space, while PT DI was formerly known as PT Industri Pesawat Terbang Nusantata (IPTN).

PT DI has now become the sole producer of the NC212 series and the NC212i being produced will be the 117th such aircraft that the company has manufactured since the series entered into mass production.

The aircraft can carry a 3-ton payload and has a range of 207 nautical miles with the maximum payload. It also has the capability of taking off and landing on unpaved runways, making it suitable as a transport and logistics aircraft serving remote areas.

The CN235-220 aircraft, meanwhile, is a variant of the CN235-10, which was jointly developed by PT DI with CASA in 1979. It was first mass-produced in 1986.

In total, PT DI has manufactured 70 units of CN235-220, including the two latest orders, since it entered mass production, Elfien said.

The military variant of the CN235-220 can carry a 5.2-ton payload with a range of 414 nautical miles carrying a maximum payload. The aircraft can accommodate 49 passengers or 34 paratroopers.

Another defense firm that has scaled down production and delivery because of the pandemic is state-owned arms manufacturer PT Pindad.

“The contracts are not canceled, but delayed,” Pindad president director Abraham Mose said. “Some delays, for example, the ones related to purchase orders from the Defense Ministry, have occurred because of changes in [the ministry’s] budget allocations, from being intended for arms and ammunition purchases to covering expenses to tackle COVID-19.”

The Defense Ministry is among the state institutions whose budget has been slashed because the government is prioritizing its spending mainly for health care and social assistance programs to handle the COVID-19 crisis in the country. The ministry has seen its 2020 budget cut from Rp 131.18 trillion (US$8.6 billion) to Rp 122.44 trillion.

Amid the global pandemic that had also led to shortages of essential medical supplies, Pindad has diverted some of its resources from its subsidiaries to produce ventilators, disinfectant and PPE to support health workers, Abraham said.

"At first it was driven by the needs of Pindad’s own hospitals in Bandung [West Java] and Malang [East Java] for ventilators and PPE," he said.

Read also: COVID-19: Weapons maker Pindad develops ventilators, protective gear

The company, which has the capacity to produce 280 ventilators per week, is waiting for ventilator certification from the Health Ministry.

Abraham said Pindad would return to its core business after the outbreak ended.

PT DI is also lending its manufacturing capacity to produce ventilators in collaboration with the Bandung Institute of Technology (ITB), with an expectation of producing up to 500 ventilators per week, Elfien said.

The ventilators have yet to be mass-produced pending certification from the Health Ministry. The ventilators will offer a continuous positive airway pressure (CPAP) function for noninvasive treatment of COVID-19 patients that have moderate difficulty in breathing.

The impact of COVID-19 on Indonesia's defense industry will be far-reaching, particularly since foreign buyers will shift their spending to handle the pandemic, said Anton Aliabbas from security reform and human rights watchdog Imparsial.

“We are in uncertain [territory]. Will defense spending next year be in line with projections? Or should it be adjusted? If it is adjusted then it will affect the defense industry [as well],” he said.

He predicted that the uncertainties in the global defense industry would remain until 2021 as many countries, including Indonesia, would continue to focus on ways to accommodate a post-pandemic scenario.

Shifting some resources to produce essential medical supplies might help state-owned defense firms cope with the COVID-19 pain, particularly to avoid laying off some of their workforce, he said.