Indonesia Defence and Security Report Q3 2012

Published : June 2012
No. of Pages : 85

Price:

BMI’s Indonesia Defence & Security Report for Q312 examines the country’s strategic position in the
South East Asian region and the wider world. It provides an overview of the contemporary geopolitical
challenges facing the country, and the challenges it may face in the future.
The report examines the trends occurring in the country’s current and future defence procurement, and the
order of battle across its armed forces. The report’s general conclusion is that after many years of
strategic isolation, Indonesia is emerging as an important player in the Asia Pacific region. In keeping
with this development, the Indonesian military, after years of underinvestment and foreign vilification
over its activities in East Timor, is starting to reap the rewards of an increasing defence budget and also of
the country’s improving international reputation.
In particular, the report details how good relations with countries such as Australia, South Korea, the UK
and the US are translating into new avenues for defence materiel. Much of it second hand but has been
provided on favourable terms to a country that now has the image of an attractive international partner.
Russia also remains a key weapon systems provider.
However, the report also makes it clear that there is still progress to be made in Indonesia. The country’s
internal security environment remains less benign than its external security position. In particular,
misguided government policies in Papua continue to make the region highly tense, with violence
continuing there in 2012. The threat from Islamist terrorism currently appears diminished, though.
Over the last quarter BMI has revised the following forecasts/views:
􀂃 Jakarta has softened its stance on the deployment of US Marines to Darwin – a move it was
initially sceptical about. The March 2+2 summit of Australian and Indonesian defence and
foreign ministers appears to have reassured the Indonesian side that an increased US presence
will bring benefits to the region. Military co-operation, including the transfer of Australian C-
130 cargo planes to Jakarta, was also discussed.
􀂃 New procurement objectives have emerged over the last quarter: these include the possible
purchase of OPVs from Brunei, and ongoing interest on the part of the MoD in acquiring main
battle tanks from the Netherlands in spite of parliamentary objections.
􀂃 Issues of domestic concern are also addressed. Chiefly these relate to continuing unrest in Papua
and the absence of a political programme to help solve the problems there, along with the
deterioration of the relationship between Indonesia’s army and its police, whose officers have
increasingly become involved in violent, and sometimes fatal, confrontations. The government’s
decision to use the army to police recent protests over rising fuel prices has also emerged as an
area of concern.

Executive Summary . 5
SWOT Analysis 6
Indonesia Security SWOT .. 6
Indonesia Defence Industry SWOT 7
Indonesia Political SWOT .. 8
Indonesia Economic SWOT 9
Indonesia Business Environment SWOT .. 10
Global Political Outlook 11
Major Risks Looming In 2012-2013 . 11
Global Flashpoints: Eurozone, Iran, Syria, Afghanistan, Korean Peninsula ... 11
Table: Election Timetable, Q212-Q113 ... 15
Wild Cards To Watch ... 18
South East Asia Security Overview . 21
The Strategic Outlook For The 2010s ... 21
South East Asia In A Global Context ... 21
Challenges And Threats To Stability And Security ... 22
Main Islamist Militant Groups In South East Asia ... 24
Sino-US Rivalry In South East Asia . 31
Sino-US Power Struggle To Intensify Over The Coming Decade .. 33
Chinese Influence In Asia: A SWOT Analysis .. 34
US Influence In Asia: A SWOT Analysis .. 36
Does China Seek To ''Dominate'' Asia? . 36
Do Asian States Have To Choose Between China And The US? .. 37
Table: Asian States And Their Relationships With China 38
Emerging Geopolitical Patterns... 40
Security Risk Analysis .. 43
Table: Asia Pacific Regional Security Ratings . 43
Table: Asia Pacific State Vulnerability To Terrorism Index 44
Indonesia’s Security Risks ... 44
Political Overview .. 46
Jakarta Finally Moving To Reform Obsolete Fuel Subsidies 46
Table: Indonesia Political Overview 47
Security Overview .. 49
Internal Security Situation ... 49
Table: Indonesia’s Insurgent Groups ... 53
External Security Situation .. 54
Armed Forces And Government Spending . 58
Defence Budget 59
Army 60
Navy . 61
Air Force.. 62
International Deployments ... 63
Weapons Of Mass Destruction . 63
Market Overview 64
Industry Trends And Developments . 64
Competitive Landscape 65
Table: Key Players In Indonesia’s Defence Sector .. 65
Arms Trade Overview .. 65
Procurement Trends And Developments .. 66
Industry Forecast Scenario .. 69
Armed Forces... 69
Table: Indonesia’s Armed Forces, 2001-2009 (’000 personnel, unless otherwise stated) 69
Table: Indonesia’s Manpower Available For Military Services, 2009-2016 (aged 16-49) .. 69
Defence Expenditure 69
Table: Indonesia’s Defence Expenditure, 2009-2016 .. 70
Table: Defence Expenditure Scenario – Changing % Of GDP, 2009-2016 (US$mn) .. 70
Defence Trade .. 71
Table: Indonesia’s Defence Exports, 2009-2016 (US$mn) .. 71
Table: Indonesia’s Defence Imports, 2009-2016 (US$mn) .. 71
Table: Indonesia’s Defence Trade Balance, 2009-2016 (US$mn) ... 72
Key Risks To BMI’s Forecast Scenario 72
Macroeconomic Forecast.. 73
Growth To Cool Slightly In 2012 As Risks Emerge .. 73
Table: Indonesia – Economic Activity, 2011-2016 ... 75
Company Profiles .. 76
PT Dirgantara Indonesia (IAe) 76
PT Pindad 77
PT Penataran Angkatan Laut (PAL) 78
Country Snapshot: Indonesia Demographic Data . 79
Section 1: Population ... 79
Table: Demographic Indicators, 2005-2030 79
Table: Rural/Urban Breakdown, 2005-2030 80
Section 2: Education And Healthcare .. 80
Table: Education, 2000-2005 ... 80
Table: Vital Statistics, 2005-2030 80
Section 3: Labour Market And Spending Power .. 81
Table: Employment Indicators, 2001-2006 .. 81
Table: Consumer Expenditure, 2000-2010 (US$) 81
Table: Average Annual Manufacturing Wages, 2000-2012 (IDR) ... 82
BMI Methodology ... 83
How We Generate Our Industry Forecasts .. 83
Defence Industry .. 83
Sources 84Table: Election Timetable, Q212-Q113 . 15

Table: Asian States And Their Relationships With China . 38

Table: Asia Pacific Regional Security Ratings . 43

Table: Asia Pacific State Vulnerability To Terrorism Index . 44

Table: Indonesia Political Overview . 47

Table: Indonesia''s Insurgent Groups . 53

Table: Key Players In Indonesia''s Defence Sector . 65

Table: Indonesia''s Armed Forces, 2001-2009 (''000 personnel, unless otherwise stated). 69

Table: Indonesia''s Manpower Available For Military Services, 2009-2016 (aged 16-49) . 69

Table: Indonesia''s Defence Expenditure, 2009-2016 . 70

Table: Defence Expenditure Scenario – Changing % Of GDP, 2009-2016 (US$mn) . 70

Table: Indonesia''s Defence Exports, 2009-2016 (US$mn) . 71

Table: Indonesia''s Defence Imports, 2009-2016 (US$mn) . 71

Table: Indonesia''s Defence Trade Balance, 2009-2016 (US$mn) . 72

Table: Indonesia – Economic Activity, 2011-2016 . 75

Table: Demographic Indicators, 2005-2030 . 79

Table: Rural/Urban Breakdown, 2005-2030 . 80

Table: Education, 2000-2005 . 80

Table: Vital Statistics, 2005-2030 . 80

Table: Employment Indicators, 2001-2006 . 81

Table: Consumer Expenditure, 2000-2010 (US$) . 81

Table: Average Annual Manufacturing Wages, 2000-2012 (IDR) . 82

Indonesia Defence and Security Report Q3 2012

Published By: Business Monitor International

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