In fact, PAL senior management, including president director Kaharuddin Djenod, and Navy chief of staff Adm. Muhammad Ali were present, signaling the important nature of the event.

PAL chief marketing officer Willgo Zainar said IMDEX provided the company with opportunities to promote its products, as well as to explore the latest maritime technology to increase its capabilities. Ali, who briefly attended the event, emphasized the need for the Navy to use locally made products to achieve self-reliance in fulfilling operational requirements, as well as to support the domestic defense industry’s bid to become part of the global supply chain.

It is important to note that to reach the goal, Indonesian defense companies already have strong capital, especially supporting regulations, such as Law No.16/2012 on the defense industry, as well as the government’s commitment to defense investment as part of the Indonesian Military’s (TNI) long-term modernization plan.

The political will to redevelop Indonesia’s strategic industry has several times been expressed by President Joko “Jokowi” Widodo too, most recently during the launch of the state-owned defense industry holding, Defend ID, in April 2022. At that time the President instructed the national defense industry to increase its local content rate to 50 percent through mastery of key technologies. The President also urged state-owned enterprises (SOEs) to join the world’s top-50 defense companies by 2024.

From the industrial side, it is fair to say that at this moment, only SOEs stand an opportunity of joining the global supply chain, especially due to the government’s support, including funding through state capital injections. As part of the state assets expected to generate revenues for the national economy, SOEs hold important positions within defense-procurement projects, as regulated by Law No.16/2012, through their status as the main equipment and main component industries in the first and second tiers, which allows them to take advantage of offset and/or transfer of technology (ToT) programs. In parallel, recipients also bear the responsibility of ensuring the saliency of the offset, as well as to multiply the value (by a 10 percent increase every five years) as required by the law.

However, to realize the goal of partaking in the global supply chain, an important aspect that the government should consider is business growth, which can be obtained not only through the increase in sales of existing products, but also by pursuing opportunities in accessing new technologies.

In fact, the government has determined 10 prioritized technologies the domestic defense industry should master to achieve such a goal, namely fighter aircraft, radar, military satellites, propellants, medium tanks, rockets, unmanned aerial vehicles (UAVs), guided missiles, underwater surveillance and submarines.

These key technologies will eventually enable local companies to innovate and increase their capacities and capabilities, and eventually boost Indonesia’s exports. For example, on May 11, Defense Minister Prabowo Subianto met with his Congolese counterpart, Jean Pierre Bemba Gombo, in Jakarta. Not only did they to discuss cooperation, Prabowo also announced Congo’s interest in buying PT Pindad and PT Dirgantara Indonesia’s products. 

In parallel, the opportunities to excel in new, and relevant, technologies could especially be achieved through partnerships with foreign suppliers within major weapons-system procurement deals.

The Defense Ministry has actually formulated several strategies to develop the country’s defense technological and industrial base (DTIB). First, through countertrade, local content and offset (CTLCO) mechanisms in arms imports. Second, the establishment of a consortium, such as the one on engineering research and development to develop an indigenous rocket, the R-Han 122b.

And lastly, mastering defense technology through partnership or cooperation between local companies and foreign suppliers through several schemes, such as joint development, joint venture and joint production. Such cases have been implemented by the government and can be seen in the KF-21/IF-X fighter aircraft between PT Dirgantara Indonesia and Korea Aerospace Industry (KAI), as the project is resuming after the flights of the first prototype. Another example is the Kaplan/Harimau medium-tank joint development between FNSS Turkey and Pindad, which is expected to help the latter boost exports, especially in the Asian market.

Besides land and air systems, as an archipelago, it is more relevant for Indonesia to pursue and master naval or maritime technologies. Consequently, the Defense Ministry has set up a strategy to master these technologies, such as through a joint-production scheme for Scorpene submarines to increase the local content rate of the product.

While mastering maritime technology is a long path due to its complexities, the process can be accelerated through key technological projects, noting President Jokowi’s wish to see the national defense industry join the global supply chain by next year.

As a matter of fact, during the Industry Days held by PAL and Naval Group on May 10-11, head of the technology transfer and offset division of the Defense Industry Policy Committee (KKIP), Yono Reksoprodjo, said the Scorpene deal, in which the submarines will be 100 percent built at home, will enable PAL to learn about submarine construction within just eight years.

In this light, nearing the final year of the Minimum Essential Forces (MEF) modernization plan, major weapons systems procurement deals should be maximized while key decision makers carefully select and evaluate offset programs that will benefit Indonesia the most. Furthermore, they and Defend ID, as the leading entity in the sector, should also ensure that offset/ToT within procurement deals is advantageous to both the public and private actors involved, in order to create business growth and competitiveness in the market en route to becoming part of the global supply chain.

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The writer is a research coordinator and head of defense at PT Semar Sentinel Indonesia. The views expressed are her own.