While the Indonesian government is snubbing the
Singapore Airshow this week, the country’s main military manufacturer is using
it as an opportunity for a coming-out party, with staff members in orange
flight suits courting potential buyers.
The showing for the state-owned manufacturer, Indonesian
Aerospace, which almost collapsed after the 1997-98 Asian financial
crisis, represents a new sense of optimism that has not been seen in the
country’s domestic military sector since the 1980s.
“I think they’ve been doing good just to sustain their
operations and production in recent years,” said Lis Gindarsah, a military
analyst at the Center for Strategic and International Studies in Jakarta,
Indonesia.
Indonesia’s military industry nearly collapsed in the
late 1990s, when the nation’s economy contracted a staggering 16 percent,
leading to sharp budget and work force cuts by Indonesian military and aviation
manufacturers. The Indonesian military also suffered when the United States
imposed a ban on arms sales to the country after gross human rights violations
by its military in East Timor in 1999.
The ban was not fully lifted until 2010 and exposed
the need for Indonesia’s military to get up to speed.
A major reason for the comeback now is Indonesia’s
president, Susilo Bambang Yudhoyono, who vowed to modernize the country’s
military and has nearly quadrupled the state arms budget to more than $8
billion since taking office in 2004. Under a 2012 law pushed by the president,
the Indonesian military, known as the T.N.I., must buy all of its weaponry,
with some exceptions, from domestic contractors, both state-owned and private.
International events like the Singapore Airshow, Asia’s
largest air show, are providing more opportunities for Indonesian military
contractors to sell both military and civilian hardware.
Indonesian Aerospace, also known as Dirgantara
Indonesia, has been promoting its $26 million-plus CN-235 maritime patrol
aircraft for antisubmarine warfare at Singapore’s exhibition, from which
Indonesia withdrew over a diplomatic spat.
On Wednesday, the company signed a collaboration agreement with Airbus
Helicopters to promote and sell aircraft in Southeast Asia and carry out
maintenance for their users, said Budiman Saleh, the Indonesian Aerospace
director for commerce and restructuring.
“We are working closely with our friends from European
countries and the United States to win some sales campaigns in this region,”
Mr. Budiman said.
Indonesian Aerospace is proceeding with plans this
year to build fighter aircraft jointly with South Korea. And although it had
yet to close any deals this week, the government agreed last month to sell two
multipurpose aircraft to the Philippine Air Force for 813 million pesos, or
$18.1 million, with a further six in the pipeline, he said.
“We are now doing great as a result of the
restructuring of the company’s balance sheet, equity, business operation,
product portfolio and many other reasons,” Mr. Budiman said.
Although the Indonesian armed forces will account for
about 80 percent of all purchases of locally produced weaponry, the country’s
National Police will also be a buyer, and hopes are high for more regional
buyers, Sjafrie Sjamsoeddin, Indonesia’s deputy defense minister, said in an
interview.
The company and the industry are coming back from the
brink with help from Mr. Yudhoyono. A retired three-star army general, he made
military spending a priority.
Indonesia’s military industry has had a rocky history,
including periods during which it was run by Dutch and Japanese colonialists.
In the late 1990s, when military and aviation manufacturers cut back,
Indonesian Aerospace shut down most of its assembly lines in Bandung, the
capital of West Java Province, and laid off about 12,000 workers.
Another state-run arms manufacturer, Pindad, which makes
weapons and ammunition including bullets, machine guns and armored personnel
carriers, lost more than one-third of its work force. Today the machinery at
its plant, also in Bandung, looks much as it did during the 1980s.
The ban on arms sales revealed problems with
Indonesia’s military. Among them was that many of its C-130 transport planes,
built by the giant American company Lockheed Martin, were grounded because the
military was unable to buy spare parts.
“The conclusion was that we had to revitalize our
defense industries,” Mr. Sjafrie said. “For years we had an embargo; we don’t
want to repeat history again.”
While Indonesia itself is not participating in the
Singapore show, international events like it are helping to showcase Indonesian
military contractors.
The companies must meet requirements set by the government
— like meeting budgets and maintaining technical capabilities — and in
exchange, Jakarta promotes them at shows and in the course of bilateral
relations with other countries, Mr. Sjafrie said.
The Indonesian government in 2012 also injected a combined
3 trillion rupiah, or about $250 million, into Indonesian Aerospace and the
state-owned ship builder PAL Indonesia, based in the eastern Java port city of
Surabaya, for factory upgrades and to turn debts into equity. The hope is that
the policy overhaul will bring new and expanded business to the domestic arms
industry. Pindad, for example, booked a profit of 80 billion rupiah in 2012 and
was projecting a profit of 90 billion rupiah for 2013.
“I think it’s a good chance for the defense industry,”
said Wahyu Utomo, Pindad’s director. “We can manage our resources and our
money, if we know the long-term spending program of the T.N.I. It’s become our
guidance.”
Under Mr. Yudhoyono’s military policy, a special
committee was formed in 2013 to coordinate domestic production for the
military, in particular manufacture of combat and special-use vehicles,
warships and submarines, fixed-wing and rotary aircraft, and light and heavy
weaponry.
Indonesian military contractors are also producing or
negotiating agreements with military suppliers from several countries on joint
production of weaponry so Indonesia can gain access to advanced technology.
Potential projects include production of submarines with Daewoo Shipbuilding of
South Korea, a medium tank with FNSS Savunma Sistemleri of Turkey, antiship
missiles with the Aviation Industry Corporation of China, and vehicle-fixed
rocket launchers with MBDA of France.
Late last year, Pindad completed assembly of 11 Panser
armored vehicles whose parts were manufactured by Doosan Infracore of South
Korea, in a deal worth $169 million.
Pindad officials said they were hoping to sign an
agreement this year with AM General, the American heavy vehicle manufacturer
that produces the HMMWV, or Humvee, to supply components to Indonesia.
The Malaysian armed forces are negotiating to buy 32
armored personnel carriers from Pindad for $10 million and $14 million each,
and the Brunei military is also interested in buying, Mr. Sjafrie said.
It remains to be seen whether Indonesia’s military
industry revitalization policy will have any measurable effect on the country’s
economy — which is already the 16th-largest in the world, thanks to commodities
exports and domestic consumption — or on local regions with arms production
plants, including Bandung, Surabaya, Batam Island in western Indonesia and
Banyuwangi in East Java Province.
The country, which has a population of 240 million
people, spends less on the military than Singapore, which has five million
people.
“Made in Indonesia” weaponry and joint production
agreements still cannot meet all of the Indonesian military’s needs, however.
The government gave its Defense Ministry a $5.5
billion credit to buy advanced weaponry from multiple — and at times competing
— foreign sources, including 119 Leopard tanks from Germany, submarines from
Russia and eight Apache attack helicopters from the United States in a
tentative deal announced in August 2013.
The military budget also allocated money to upgrade 24
F-16 fighters given to Indonesia by the United States and five C-130 aircraft
from Australia.
Reference :
http://www.nytimes.com/2014/02/14/business/international/indonesian-arms-industry-seeks-to-drum-up-business.html?_r=1
