Indonesia To Spend More Than $20 Billion On Defence Procurement

Indonesia will be the fifth fastest-growing defence budget in the world between 2016 and 2025, growing at a compound annual rate of 4.7 percent and spending more than $20 billion on procurement, according to an analysis from IHS Markit.

Due to increasing escalating strategic concerns, Indonesia’s military requires a wide range of equipment, especially in sea and air domains. The procurement programs that the government has approved for the period of 2015 and 2019 include an F-5 multirole fighter, offshore patrol vessels, replacement of mine countermeasure vessels (MCMVs) and artilleries. 

“Indonesia currently faces several challenges. It has confrontations around the Natuna Islands in the South China Sea as well as maritime piracy and terrorism issues in its territorial waters,” said Ridzwan Rahmat, senior defence and security analyst for IHS Jane 360 in a statement today.

“At the same time, it is trying to enhance autonomy in its defence.” Rahmat added.

The Indonesian defence market is shifting, with the country’s commitment to diversify suppliers. Between 2009 and 2018, more than 30 countries are expected to export to Indonesia. “This reflects Indonesia’s wariness about dependency of a supplier or a set of suppliers, as well as the intention to ‘shop around’ for the best defence deals, spurring competition,” said Jon Grevatt, APAC defence industry analyst for IHS Jane’s.

During the same period, South Korea, Russia and France will hold a combined 53 percent of market share. The other half of that market will be shared by about 30 countries, many with even less than 1 percent.

“South Korea recently assumed the major supplier position, mainly supported by such key deals such as the T-50 jet trainer and Type 209 submarines,” Grevatt said. “The U.S. is also quickly gaining market share although the wariness of the US still persists in Indonesia.” he added.