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DEFEND ID spells new hope for Indonesia’s military modernization plans
The newly established state-owned holding company is a launchpad for Indonesia's defense industry to finally achieve full independence.
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Welcome on board: A ceremony marks the handover of the Indonesian Navy submarine Alugoro-405, jointly built by state-owned shipbuilder PT PAL Indonesia and Daewoo Shipbuilding and Marine Engineering (DSME) from South Korea, to the Defense Ministry at the state firm’s dock in Surabaya, East Java, on March 17, 2021. (Courtesy of /Defense Ministry)
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n April 20, 2022, President Joko “Jokowi” Widodo launched the state-owned holding company for the defense industry, DEFEND ID, at shipbuilder PT PAL Indonesia in Surabaya. The holding company comprises five state-owned enterprises (SOEs) that focus on defense: parent company PT Len Industri, PT Dirgantara Indonesia (PT DI), PT PAL Indonesia, PT Pindad and PT Dahana.
The establishment of DEFEND ID should be understood as a milestone for Indonesia, one of the first countries in Southeast Asia to set up a state-owned holding company for its defense industry, in keeping with a strategy that aims to decrease the country’s dependency on foreign products. In fact, the incorporation of DEFEND ID also highlights the government’s commitment to reforming and developing the defense industry.
At the same time, SOEs Minister Erick Thohir stated that he had discussed with Defense Minister Prabowo Subianto formulating a long-term defense industry road map in the next 10-20 years in order to maximize the share of local content share in procurement deals.
As a matter of fact, DEFEND ID will provide an opportunity for Indonesia to continue to strengthen the domestic defense industry. During the company’s inauguration, President Jokowi emphasized that Indonesia must immediately achieve self-reliance and compete in the international market. He also highlighted that the holding company must achieve its goal of raising Indonesian defense companies to number among the top 50 global defense firms and stressed that at some point, DEFEND ID would become part of the global defense supply chain.
To accomplish such objectives, DEFEND ID is expected to expand the share of local components used in defense equipment to 50 percent and increase this gradually until local companies can manufacture and assemble complete products to fulfill at least the domestic demand.
Interestingly, this strategy can rely only on the capabilities of the domestic defense industry to turn a profit and continue to gain skills and knowledge while improving its human resources. To do so, transfer of technology (ToT) and/or knowledge and offsets should be mandatory to support the domestic defense industry’s growth to independence, which has not always been the case.
For instance, PT PAL booked approximately US$9 million in profit value out of a $1.3 billion procurement contract for three Chang Bogo-class submarines from South Korea’s Daewoo Shipbuilding and Engineering (DSME). Meanwhile, according to several sources, the transfer of knowledge from DSME has been extremely limited.
