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BMI View: Indonesia's armed forces remain heavily dependent on imports to meet equipment requirements
as the domestic defence industry is still in a nascent stage. The sector has some technological capabilities
for development of small arms and ammunition, armoured transport aircraft and patrol craft and frigates,
but infrastructure and research capacity is restricted - the result of years of underinvestment. This will
remain the case over much of our forecast period, as the government continues to focus on the urgent
procurement of modern equipment from abroad.
We note that budgetary constraints imposed by structural economic issues and slow progress on reform will
mean that Indonesia will not be able to make the most advanced and high-end procurements available to it.
Nonetheless, owing to its long-standing strategy of multilateralisation, the country will be able to avail
contracts with a multitude of foreign partners. Those foreign defence contractors able to offer lucrative
technology transfer arrangements along with competitive pricing will be best placed to capture future
? In August 2016, Indonesia and Ukraine signed a Memorandum of Understanding aimed at expanding
cooperation in defence industry and trade.
? In July 2016, in a bid to improve transparency and accountability, Indonesian President Joko Widodo
called on the Ministry of Defence to ensure that military procurement is conducted through proper
? In July 2016, the Indonesian National Police announced that they believed that they had killed a
prominent Indonesian Islamic State-linked terrorist, Santoso, in an exchange of fire during an antiterrorist
operation. Santoso was the leader of the East Indonesian Mujahidin and was one of the first
militant leaders in the country to pledge allegiance to Islamic State.