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Indonesia’s defense industry amps up to meet military needs

Press release September 4, 2014 Indonesia Defense Industry

Indonesia Defence Industry Report

6. Aerospace and Defence

Mumbai, India – August 25, 2014 -Estimated to be valued at USD7.9 billion in 2014, the Indonesian defense industry is expected to grow at CAGR of 17.88% to USD17.8 billion in 2019. The country’s increased military spending has been reflected in the ongoing modernization drive to replace its aging military hardware along with building its indigenous defense industrial base. To cite an instance, the state-owned manufacturer Indonesian Aerospace that had collapsed after 1997-98 financial crisis in Asia found a new sense of optimism after the government initiatives to revamp the sector, something not seen in the country’ military segment since the 1980s. In recent years, the defense industry has just been sustaining their operations and productions.

This report, The Indonesian Defense Industry - Competitive Landscape and Strategic Insights to 2019: Market Profile, provides analysis on competitive benchmarking along with top companies active across the Indonesia defense industry. It features insights into the recent activity and strategic initiatives of key public sector companies that support the industry.

Market overview

In the past few years, the defense industry has just been just striving to sustain their operations and productions. Furthermore, the military industry shrank in the 1990s by a significant 16% due to a slowdown in the country’s economy, which lead to sharp budget and workforce cuts. Secondly, with the US banning arms sales to the country after human rights violations by its military in East Timor in 1999, the situation worsened. Until 2010, the ban was not lifted. The major reason for defense industry’s comeback can be accredited to Indonesia’s president, Susilo Bambang Yudhoyono, who vowed to modernize the country’s military despite all the odds. Quadrupling the budget by more than USD 8 billion in 2012, a new law ensured that the military purchased all of its weaponry, with some exceptions, from private and state-owned domestic contractors. Moreover, participating in international events like the Singapore air show has also provided more opportunities for Indonesian military contractors who sold both military and civilian hardware to the defense sector.

With such prospects, Indonesian Aerospace had moved forward with plans in 2013 to build fighter aircraft jointly with South Korea. It is still to close any deals but the government has agreed to sell multipurpose aircraft to Philippine Air Force for USD18.1 million. However, companies are expecting to be compliant with the government regulations like meeting budget and maintain technical capabilities, and in exchange promote their shows and in the course of bilateral relations with other countries. The government has already given USD 5.5 billion credit to buy advanced weaponry and allocated money to upgrade its 24 F-16 fighters given to Indonesia by the US and its five C-130 aircraft by Australia.

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Indonesia Defense Industry