With a surfeit of defence-related shows and conferences filling the calendar year, defence companies have the unenviable task of selecting those that offer the best possibilities for sales and an acceptable return on investment. Against this backdrop, Indonesia has emerged as one of the world’s most important defence markets in recent years and is forecast by IHS Jane’s to remain so for the foreseeable future.
A recently published report by IHS Jane’s Navigating the Emerging Markets, shows defence investment in Indonesia has been on a strong upward trajectory as Jakarta has sought to recapitalise its military inventories while regional strategic drivers intensify.
The report notes: “Strong economic growth has allowed Indonesia to ease the chronic defence underfunding of past years and enabled the Indonesian Armed Forces to become better prepared to respond to the country’s strategic concerns. These include internal threats such as natural disasters and insurgency and external drivers related to offshore territorial disputes and growing concern about China’s expansionism in the South China Sea.”
The IHS Jane’s report goes on to highlight significant defence spending in the market. “Indonesia’s defence budget increased by 40% in real terms between 2011 and 2014, rising to USD7.9 billion. IHS Jane’s Defence Budgets forecasts that the military expenditure will climb a further 36% by 2018, reaching USD10.9 billion.”
“Defence procurement spending is forecast to climb by 40% between 2014 and 2018, rising from USD1.7 billion to USD2.4 billion.”
This expansion is also reflected by by the continuing growth of Indo Defence 2014 Expo & Forum, which has an impressive track record since the first staging of the show in 2004.
The figures for this year speak for themselves. More than 670 companies from 45 countries, 25 of which have their own pavilions, are participating. These include Australia, Azerbaijan, Belarus, Bosnia & Herzegovina, Brazil, Canada, China, the Czech Republic, France, Germany, India, Indonesia, Italy, Malaysia, Poland, Portugal, Russia, Singapore, South Africa, South Korea, the Netherlands, Turkey, Ukraine, the UK and the USA.
A record 18,000+ trade buyers, including 545 overseas delegates, have registered for this event. But these figures alone do not tell the whole story. Around nine of every 10 exhibitors have rated the quality of the previous show as having met or exceeded expectations.
As Southeast Asia’s largest economy, Indonesia is in the forefront in the region in bolstering its capability to protect shipping lanes, ports and maritime boundaries and has sharply increased its defence budget since 2010.
Alongside the exhibition, the defence ministry will hold seminars to discuss opportunities available for co-operation on defence with Indonesian companies, and the local regulations that need to be taken into account for a successful implementation. “We want to promote to the international community all aspects of our defence industries, including the regulations,” said Dr Timbul Siahaan, director general for defence potential, at a press conference before the show
“The 2012 defence industry law states that Indonesian firms must control at least 51 per cent of a joint defence project, and the other 49 per cent can be in the hands of its foreign counterpart,” he added.
The law is part of Indonesia’s visionary strategy to fulfil its Minimum Essential Force (MEF) objective, designed to provide the country with a strong defence industry by 2024. Since being implemented in 2010 with financial backing of 100 trillion rupiah ($8.25 billion), Indonesia has reached 40 per cent of its MEF this year.
The country plans to buy more than a dozen Russian Sukhoi fighter jets and domestically made, missile-equipped patrol ships, as part of a $15 billion five-year campaign to modernise its military. The budget also includes around $1.5 billion for missiles and helicopter gunships, including 24 more Bell helicopters and 20 Sikorsky Black Hawks. Indonesia is also strengthening its military cooperation with Japan, Spain and Turkey.
Indo Defence 2014 is the perfect showcase to target local requirements and those in the wider Southeast Asia region.