01 June 2021

Indonesia reveals USD125 billion military modernisation plan

by Jon Grevatt & Andrew MacDonald

A draft regulation from Indonesia’s presidential office has outlined the requirement for investment of USD125 billion in military modernisation through to the mid-2040s. The funding proposal is indicative of Indonesia’s military ambitions and its growing concerns about regional security.

The draft regulation – entitled ‘Fulfilling the Defence and Security Equipment Needs of the Ministry of Defence and Indonesian Armed Forces (TNI) 2020-24’ – was issued recently but requires various approvals from ministries and the House of Representatives before enactment. The investment plan also highlights Indonesia’s continuing dependency on foreign loans.

Indonesia has stated a requirement for funding worth USD125 billion in military investment through to the mid-2040s. The country’s modernisation requirements are thought to include Lockheed Martin F-16V fighter aircraft. (Lockheed Martin)

The proposed regulation details the requirement for USD124.9 billion for TNI modernisation funding over a period of five ‘strategic plans’ each lasting five years. The first strategic plan runs 2020–24 and coincides with the final phase of the TNI’s Minimum Essential Force (MEF) programme, while the last will be 2040–44.

The document proposes funding of USD79 billion for defence equipment during this 25-year period, USD32.5 billion for sustainment, and the remaining USD13.4 billion for interest payments on foreign loans.

The regulation prioritises sourcing TNI modernisation requirements from local industry. However, it states, “In the event that domestic products cannot be [procured], then foreign products can be used.”

When defence equipment is imported, the regulation identifies the requirement to enforce “technology transfers and offsets” to support local industry’s involvement in the procurement. This industrial strategy also includes the provision of countertrade through which Indonesia seeks to export local commodities in part exchange for materiel.

A draft regulation from Indonesia’s presidential office has outlined the requirement for investment ...

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