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Defense SOEs to reap benefits from government's domestic procurement focus
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Tiger in your tank: Workers of state-owned weapons manufacturer PT Pindad prepare a medium-sized Tiger tank to be displayed at the Indo Defense 2018 Expo & Forum at the Jakarta International Expo center in Kemayoran, Central Jakarta. (The Jakarta Post/Dhoni Setiawan)
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tate-owned enterprises are keen to meet the military’s needs for locally made equipment as instructed recently by President Joko “Jokowi” Widodo, with some of the defense firms still filling previous orders.
State-owned weapons and armored vehicle manufacturer PT Pindad recently secured contracts from the Defense Ministry to make 625 million rounds of ammunition for delivery later this year, president director Abraham Mose told The Jakarta Post on Wednesday.
The firm was also finalizing a contract for the purchase of its recently released Maung 4x4. Pindad aimed to produce 500 of the light tactical vehicles to be delivered to the ministry by the end of this year, he added.
The plan emerged after Defense Ministry Prabowo Subianto personally tested the tactical vehicle in Sentul, West Java, on July 12. The move was apparently a follow-up after Jokowi told his ministers in a Cabinet meeting on July 7 to accelerate spending, including that of the Defense Ministry. Jokowi also told the ministers to stop foreign procurement and start buying local products from state-owned enterprises (SOEs).
Although its budget was reduced from Rp 131.18 trillion (US$8.93 billion) to Rp 122.44 trillion, the Defense Ministry still has the largest budget of all ministries and state agencies.
Defense analyst Curie Maharani of BINUS University said Jokowi’s directive should be taken as a note for the Defense Ministry to increase spending amid adverse economic circumstances and to prioritize procurement through the domestic defense industry, which has limited buyers for its products.
“The President’s statement should be read as a warning for the Defense Ministry to better target its spending amid unfavorable economic situation, as procurement from domestic [defense industries] is more urgent, because the life and death of the defense industries are determined by orders from the government as the main – and often the only – customer,” Curie said.
