Home' Asia Pacific Defence Reporter : APDR May 2010 Contents 28 | Asia Pacific Defence Reporter
PROSPECT AND CHALLENGES
Despite the positive trends that the PKR project is meant to represent,
unfortunately several fundamental problems remain. Among the most
troubling issue has been the financial uncertainty surrounding defense
procurement. Aside from the lack of political and financial commitment
from the government, bureaucratic red-tape has partly led procurement
processes to be bogged down for years.
The uncertainties surrounding government regulations also plays
a significant part in muddying the water. For example, financial
regulations allowing gradual (yearly) disbursal of allocated funds has led
to a low level of actual expenditure—around 30 percent of the USD 3.7
billion allocated Export Credit (KE) for defense procurement in 2004-
2009 was actually spent.
Another factor is the reluctance of major local banks to heavily finance
the project due to the absence of legal and financial “blanket guarantees”
from the government and the uncertainty surrounding the multi-year
budgeting process and also the MoD’s legal status as a creditor.
This brings us to managerial uncertainties in Indonesia’s defense
acquisition process. The absence of a unified defense procurement
and industrial development strategy often leads to confusion as to who
gets to do what, when, and how. In the case of the National Corvette
program for example, it was initially announced back in 2007 that the
National Development Planning Agency (Bappenas), instead of the Navy
headquarters or the MoD, was going to be leading actor in the program.
These problems has also eventually led to the under-utilization of
local supporting industries, making the production capacity of major
strategic state-owned companies like PT. PAL to rely on foreign sources
for basic materials, system and technology.
However, there seems to be light at the end of the tunnel. At least, the
government realizes that all these issues are serious problems that must
be addressed. For example, aside from the multi-year budgeting process
and signed MoU to commit the TNI and government to maximize local
defense companies, a new Defense Industrial Policy Committee will be
All in all however, the fate of the resurrected national corvette program
still hangs in the balance. As LT. Gen. Sjafrie Sjamsoeddin said, then
MoD’s Secretary General in 2009, “the execution [of the program] is still
dynamic. It could go forward, it could go backward.” APDR
NAVAL DEVELOPMENT AND INDUSTRIAL
The MoD had hoped that the locally-built PKRs could be the beginning
of Indonesia’s defense transformation journey to reach its Minimum
Essential Force (MEF) requirement. Specifically, according to the
State Defense Posture document (published in 2007), the Navy’s ideal
version of the MEF is essentially a “274-ship” green water navy based
on an Integrated Fleet System (SSAT) by 2024.
The future fleet is to be divided into: Striking Force (110 ships),
Patrolling Force (66 ships), and Supporting Force (98 ships), based at 59
naval bases under three, and if possible four, Command Regions. This
is to be further supported by a naval air force of 137 aircraft and also a
Marine Force (2 brigades / 11 battalions). The development of the MEF
however is to be done gradually, with financial factors as usual being
the main consideration.
In the overall scheme of things therefore, the planned purchase of
the two PKRs represents a small, yet significant, step in Indonesia’s
First, the locally-built PKR adopting the SIGMA techn ol ogy is
specifically designed to be a “transformational bridge” for the Navy’s
future warships. Officials have even repeatedly stressed that the PKR
will become the “basic technological standard” of their future force
This search for standardization and platform commonality is crucial
because of the Navy’s exisiting complicated web of numerous foreign
suppliers, including the Netherlands, the former Yugoslavia, Ger many,
Russia, U.S., Australia, U.K, Japan, South Korea, China, France, and
finally South Africa. Further, the entire Indonesian Military ( TNI) itself
has over 173 main weapons system (alutsista) coming from 17 different
This has not only caused various inter-operability problems, but
has also strained the education, training, and maintenance budget of
the Navy. Thus, the PKR program could be the initial pilot project to
increase platform commonality in the Navy’s main weapons system.
Second, not only do the SIGMA class cor vettes represent the most
advanced naval technology that Indonesia has so far acquired, but
the initial vision of the national corvette program - and now the PKR
project - had actually been modeled on the commendable idea of
integrating local supply chains (involving 22 Indonesian companies)
while gradually deepening the transfer of foreign technology.
This vision has been taken a step further with the upcoming
presidential decree on defense industrial revitalization that includes
a full commitment to local industrial development, a multi-year
financing model, a “national consortium” of local banks to support the
domestic credit line, as well as greater efficiency of the foreign Export
Credit (KE) option.
Accompanying the decree is a new “master plan” for defense
procurement—as part of a future Defense Industrial Revitalization
Road Map—for the next three Strategic Planning periods (renstra)
spanning the next 15 years. Additionally, in a recent hearing with the
parliament, Defense Minister Purnomo Yusgiantoro announced that
for 2010 to 2014, the Ministry intends to spend over IDR 149 trillion
(over USD 14 billion) for weapons procurement and maintenance.
Finally, the PKR project represents a growing trend in recent years
within the Navy to further deepen their commitment to obtain weapons
system through PT. PAL—all apparently in the name of “defense
self-sufficiency.” In fact, among the chief rationale to modernize -
presented in various policy documents since early 2000 - is not so
much the changing regional or global strategic milieu, but the Navy’s
age old, rapidly deteriorating fleet.
Despite the positive trends that the PKR project is meant to represent, unfortunately several
fundamental problems remain
APDR May 2010.indd 28
1/05/10 5:16 PM
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