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Omnibus law stirs debate on defense industry self-sufficiency
Private investors, both local and foreign, can now participate in the procurement of defense products.
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Workers at state-owned weapons maker PT Pindad prepare the “Harimau” medium tank for display in 2018. (The Jakarta Post/Dhoni Setiawan)
T
he passage of the Job Creation Law has sparked worries about opening the defense industry to the private sector and foreign investors, while private enterprises assert that the step is needed for the industry’s revival.
Defense expert Al Araf said allowing private enterprises into the nation’s defense industry could be harmful as it would spur competition that could obstruct strategic military affairs and weaken defense-related state-owned enterprises (SOEs), which already faced mismanagement, budget shortages and a lack of locally sourced components.
“This [omnibus law] could potentially kill local [defense] industries,” said Al Araf, who is also the director of human rights group Imparsial. He called for a judicial review or a regulation in lieu of law (Perppu) to revise the omnibus law.
He pointed to Article 74 of the omnibus law, which facilitated licensing for private enterprises for both the production of raw materials and components and their integration into higher-order products to make weapons, military vehicles and other military gear. The companies responsible for this higher-order production are called “lead integrators”.
Law No. 16/2012 on the defense industry, which was partially amended by the omnibus law, allowed only SOEs to serve as lead integrators to maintain national military technology secrets, observers have said.
Al Araf added that removing Article 12 of the Defense Industry Law, which regulates the “production of weapons, gunpowder, explosives and war equipment”, from the negative investment list meant local and foreign investors could now participate in the procurement of these products.
Read also: Government to liberalize investment in omnibus bill on job creation
