THE CONTRIBUTION OF NATIONAL STRATEGIC INDUSTRY DEVELOPMENT (PT PAL INDONESIA PERSERO) TOWARDS MODERNIZATION OF WEAPONS SYSTEM IN INDONESIAN NAVY
(2007-2012)
By
Cornelia Juwita Cintya Dewi ID No. 016201000019
A thesis presented to the Faculty of International Relations, Communication and Law President University In partial fulfilment of the requirements for Bachelor’s Degree in International Relations Specialization in Security and Strategic Defense Studies
2014 THESIS ADVISER RECOMMENDATION LETTER
This thesis entitled “The Contribution of National Strategic Industry Development (PT PAL INDONESIA PERSERO) Towards Modernization of Weapons System in Indonesian Navy 2007-2012” prepared and submitted by Cornelia Juwita Cintya Dewi in partial fulfillment of the requirements for the degree of Bachelor In International Relations in the Faculty of International Relations, Communication and Law has been reviewed and found to have satisfied the requirements for a thesis fit to be examined. I therefore recommend this thesis for Oral Defense.
Cikarang, Indonesia, March 2014
Prof. Anak Agung Banyu Perwita, Ph. D
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DECLARATION OF ORIGINALITY
I declare that this thesis, entitled “The Contribution of National Strategic Industry Development (PT PAL INDONESIA PERSERO) Towards Modernization of Weapons System in Indonesian Navy 2007-2012”is, to the best of my knowledge and belief, an original piece of work that has not been submitted, either in whole or in part, to another university to obtain a degree.
Cikarang, Indonesia, March 2014
Cornelia Juwita Cintya Dewi
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PANEL OF EXAMINER APPROVAL SHEET
The Panel of Examiners declare that the thesis entitled “The Contribution of National Strategic Industry Development (PT PAL INDONESIA PERSERO) Towards Modernization of Weapons System in Indonesian Navy 2007-2012”that was submitted by Cornelia Juwita Cintya Dewi majoring in International Relations from the Faculty of International Relations, Communication and Law was assessed and approved to have passed the Oral Examinations on 21st March 2014.
______Prof. Anak Agung Banyu Perwita, Ph.D
______Teuku Rezasyah, Ph.D Hendra Manurung, MA.
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ABSTRAK Penelitian ini dibuat untuk menganalisis kebutuhan dari Tentara Nasional Indonesia Angkatan Laut untuk meningkatkan sistem persenjataannya dan untuk mengeksplor kontribusi dari Industri Strategis Nasional dalam pembangunan sector militer.Indonesia sebagai negara maritime terbesar di dunia menyadari bahwa kemampuan pertahanannya masih jauh dari cukup untuk menghadapi permasalahan keamanan saat ini. Penelitian ini signifikan dalam menyajikan informasi pada peran pembangunan Industri Strategis Nasional dalam Sistem Pertahanan Indonesia, menyajikan informasi dari Postur Pertahanan Nasional terutama TNI AL, menyajikan informasi pentingnya meningkatkan sistem persenjataan dari TNI AL, membuktikan penting halnya untuk mengurangi ketergantungan Indonesia pada produk dari negara lain. Jangka waktu penelitian ini adalah mulai dari tahun 2007 sampai dengan tahun 2012. Mulai dari akhir tahun 2007 yang ditandai dengan peluncuran Postur Pertahanan Republik Indonesia dengan nomor PER/24/M/ XII.2007 pada tanggal 28 Desember 2007. Diakjiri dengan keluarnya UU nomor 16 Tahun 2012 Tentang Industri Strategis. Penelitian deskriptif- analisis ini menggunakan metode Studi Pustaka yang meliputi analisis rekaman sejarah dan analisis dokumen.Dokumen ini meliputi buku, jurnal, berita, dokumen resmi dari TNI AL, dokumen resmi dari Kementerian Pertahanan, Surat Presiden, dan Undan-Undang.Penelitian ini juga menggunakan Wawancara pribadi dengan anggota yang terlibat dalam kasus yang diteliti ini, seperti personil TNI AL dan Staf dari PT PAL Indonesia (PERSERO). Sebagai ujung tombak revitalisasi Industri Maritim, PT PAL Indonesia (PERSERO) diberi kepercayaan untuk memenuhi kebutuhan militer dan persenjataan, terutama kebutuhan kapal militer.Dalam mencapai kemandirian kebutuhan pertahanan, PT PAL Indonesia (PERSERO) menemui berbagai tantangan yang harus dihadapi.Bagaimanapun, PT PAL Indonesia (PERSERO) harus menghadapi segala tantangan tersebut dengan terus menginovasi produk dan juga sistemnya. PT PAL Indonesia PERSERO terus berinovasi dengan membangun kapal nasional yang dilengkapi dengan sistem lengkap dan dengan mempelajari Transfer of Technology Cooperation dari negara lain. Peran dari TNI AL juga menjadi support yang besar pada BUMN dalam mencapai Minimum Essential Forces. Dengan memilih produk dari Industri Pertahanan Nasional, menyelenggarakan pengadaan barang dan jasa dengan adil, dan memberikan dukungan moral atau respon pada Industri Pertahanan lokal.
Keywords : National Strategic Industry, PT PAL Indonesia (PERSERO), Indonesian Navy, Modernization, Transfer of Technology
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ABSTRACT This research attempts to analyze the needs of Indonesian Navy to increase the weapons system and to explore the contribution of National Strategic Industry in the development of military sector. Indonesia realizes as the biggest maritime country in the world, its defence capability is far from adequate to address the existing security concerns. This research is significant in providing the information on the role of National Strategic Industry Development in Indonesian Defense System, providing the information of National Defense Posture especially for Indonesian Navy, proving the needs to increase the weapons system of Indonesian navy and proving the needs to reduce Indonesia’s dependency to the products from other states. The time framework in this research is from 2007 until 2012. Start from the end of 2007 coincided with the launch of the defense posture of Republic Indonesia number : PER/24/M/XII/2007 dated on December 28, 2007. It ends in the year 2012 with the issuance of UU no 16 tahun 2012 about Strategic Industry. This descriptive-analysis research uses the method of Library Research which covers the analysis of historical records and analysis of the documents. The documents can be the books, journal, news, official documents from Indonesian Navy, official document from Ministry of Defense, President Letters, and Undang-Undang. This research also uses the Field Research by doing Personal Interview with the people who are involved with this research, for example is Navy’s personnel and PT PAL’s staff who are involved with this issue. As the spearheads of Maritime Industrial Revitalization, PT PAL Indonesia (PERSERO) is trusted to meet the needs of military weapons system, especially the needs for military ships. In achieving the independence of the nation in defense equipment needs, PT. PAL Indonesia (PERSERO) finds many challenges to be faced. However, PT PAL Indonesia (PERSERO) overcomes the problems by innovating the product and also the system. They continue to innovate by developing the national ship which is equipped with complete system and by learning Transfer of Technology Cooperation from the other countries. The role of Navy also becomes great support to the Indonesia Stated- Owned Enterprises (PT PAL Indonesia PERSERO) in achieving Minimum Essential Forces. By choosing the national defense industry products, holding the Fair Procurement, and giving moral support or feedback to the Local Defence Industry.
Keywords : National Strategic Industry, PT PAL Indonesia (PERSERO), Indonesian Navy, Modernization, Transfer of Technology
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ACKNOWLEDGEMENT This is the finish line of my journey at President University to obtain degree in International Relations. My life here was fulfilled with invaluable experiences. Thus, I would like to thank all those who significantly gave the possibility to complete my study. First and foremost, I would like to thank to Lord Jesus. As Paul testified, “ I can do all things through Christ who gives me strength” (Philippians 4:13), this is also my testimony when I look back the hurdles that I have overcome. He also tells me not to give up because His plan is far beyond our comprehension. From the beginning to the end. To say “Thank Lord” would never be enough to express my gratitude. To Prof. Anak Agung Banyu Perwita Ph.D, as Dean of Faculty International Relations, Communication, and Law and also my beloved thesis adviser for giving your precious time pie and gave a slice to us. Thank you for all the guidance, understanding, and support. Over and above, huge thanks to Dad, Mom, Brother and Sister, to whom this thesis is dedicated, for they have been a constant source of love, concern, support and strength all these years. I am blessed to have you in my life. Furthermore, I attach importance to my extended families in President University Catholic Society, especially for Agata, Felani, Paskalis, and Norman for through this community I was taught to be humble, to care for others, and to always have faith that Jesus is God. Dear my best roommate ever, Dian Permatasari, for always supports me in every conditions. Thank you for all laughter, sleepless night, crazy little things, and many songs we sing. Dear My Full Team (Theodora, Ghea, Beta, Septian, Octav, and Danto), thank you for all sharing, support, and love. I have become a better person because of the mirror you all hold for me. My International Relations fellows in President University, thank you for all the friendship, joy and sorrows we have shared, for the sleepless nights, for the best
vii part is for you all have been my friend. Now we are ready to walk our own path of life chasing our dreams. My appreciation likewise prolongs to PT Tiga Laras Indonesia, particularly to Mr. Raditya Prayukti for allowing me take day-offs so I could finish my thesis even if it meant leaving office work. To my best supervisor Miss Asinova Devitri for all the support from words and foods, and to Mrs. Yunita, Mr. Didi, Mrs. Linda, and Mrs. Bianca for being such great teammates. Additionally thanks to Achonk, Tiffany, and Mr. Gandhi for being my second family here. Last but not least, my precious Yohnny Nur Halim, for being the mood booster to finish my thesis. Thank you for all the support to help me overcome setbacks and stay focused on my study.
Jakarta, March 2014
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TABLE OF CONTENTS
THESIS ADVISER ...... ii
DECLARATION OF ORIGINALITY ...... iii
PANEL OF EXAMINER ...... iv
ABSTRAK ...... v
ABSTRACT ...... vi
ACKNOWLEDGEMENT ...... vii
TABLE OF CONTENTS ...... ix
CHAPTER I ...... 1
I.1 Background of the Study ...... 1
I.2 Problem Identification ...... 7
I.3 Statement of the Problem ...... 10
1.3.1 Research Question ...... 10
I.4 Research Objective ...... 10
I.5 Significance of the Study ...... 12
I.6 Thoretical Framework ...... 12
1.6.1 Realism ...... 12
1.6.2 Military Modernisation Analysis (Arm Race) ...... 16
I.7 Conceptual Framework ...... 19
I.8 Scope and Limitation of Study ...... 23
I.9 Thesis Structure ...... 23
CHAPTER II ...... 25
II.1 Indonesian Defence Policy ...... 25
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II.1.1 Security Challenges ...... 25
II.1.2 The Defence Policy ...... 27
II.1.3 The Development Plan ...... 29
II.2 Indonesian Navy ...... 30
II.2.1 Indonesian Navy’s Posture ...... 32
II.2.2 Indonesian Waters Conditions and The Needs of Navy Beater Elements ...... 35
II.2.3 The Needs of Armaments System of The Navy ...... 38
II.2.4. Indonesian Naval Doctrine ...... 39
CHAPTER III ...... 42
III.1 Indonesian Defence Industry ...... 42
III.1.1 Indonesia Defence Industry Policy ...... 46
III.2 Indonesia’s Naval Industry (PT PAL Indonesia Persero) ...... 49
III.3 International Collaborations ...... 53
III.3.1 Indonesia’s Defense Offset Policy ...... 54
CHAPTER IV ...... 61
IV. 1 PT PAL INDONESIA (Persero) ability in Strengthening Weapons System of Indonesia’s Forces ...... 61
IV.1.1 Product of PT PAL Indonesia Persero to Indonesian Navy (2007-2012) ...... 61
IV.1.2 PT PAL Indonesia Persero and National Corvette Program ...... 65
IV.2 PT PAL Indonesia Persero and Defense Industry International Collaboration .. 67
IV.2.1 Transfer of Technology Cooperation between PT PAL and Other Countries ...... 67
IV.2.1.1 Indonesia and South Korea ...... 70
IV.2.1.2 Indonesia and Netherland ...... 71
IV.3 Various Challenges Faced by PT PAL INDONESIA (Persero) in Order to Meet the Needs of the Security Sector in Indonesia ...... 71
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IV.4 PT PAL INDONESIA (Persero)’s Efforts to Face the Challenges ...... 77
IV.5 Support From Indonesian Navy to Strategic Industry State-Owned Enterprises ...... 81
CHAPTER V ...... 84
PT PAL Indonesia Persero Contributes to the Modernization of Weapons System in Indonesian Navy in Addressing the Security Challenges ...... 85
BIBLIOGRAPHY ...... 89
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LIST OF TABLES
Table 1 : Weaponry in Critical Condition in 2007
Source : Book of National Defence Posture in 2007...... 6
Table 2 : Weapon System Integrated Fleet of Indonesian Navy
Source : Book of National Defence Posture in 2007...... 34
Table 3 : Key Features of the Main Channels of Technology Transfer
Source : Saad Mohammed, Development through Technologies Transfer, Intelect, UK 2000...... 58
Table 4 : Transfer of Technology and Joint Production
Source : Company news, start from 2007-2012...... 61
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CHAPTER I
INTRODUCTION
I.1 Background of the Study Military Industry that is also called as the defense industry covers the activities between government and commercial industry involved in the process of research, development, production, and service of military material It is includes the Arms Production, Arms Industry, Defense Industrial and Technology Base, Co-Development and Arms Transfer.1 Base on Law of Republic Indonesia, the definition of Defense Industry is the national industry which is consist of state-owned enterprises and business entitles private property either individually or in group set by the government for most or entirely produced defense equipment and security equipment, maintenance service, for meeting strategic interest in the field of defense and security in the territory of Republic Indonesia. 2 From the realist perspective, the rapid development of defense industry occurred during World War and Post World War II3. At that time United States dominated the military equipment. The circumstances led to an arms race between the western bloc countries (led by United States) and the eastern bloc (led by the Soviet Union). The role of the defense industry and defense technology became very important in meeting the needs of defense for the states to compete in international relations.
1Fredy BL Tobing&BeniSukadis.(2012).IndustriPertahanan. In AA Banyu Perwita & Bantarto Bandor. Pengantar Kajian Strategis (pp.109).Jakarta: FISIP UPN “Veteran” Jakarta Press 2012 2Undang-UndangRepublik Indonesia Nomor 12 Tahun 2012, TentangIndustriPertahanan (Law of Republic Indonesia Number 12 year 2012 on Defense Industry. 3PricewaterhouseCoopers Global Aerospace and Defence Leader. (2005). The Defense Industry in 21st Century. London, UK. 1
Military Industry covers the Arms Production, Arms Industry. Defense Industrial and technology base, Co-Development and Arm Transfer.4 Arms Productions is a company that specializes in the manufacture or production of weapons. Arms Industry can be defined as a number of company that produce weapons or can be defined as a number of company that does not only produce military product but also make goods for civilians.5 Based on the statement of Elizabeth Skons and John Dunne in 2007, Defense Industry and Defense Technology are process that involves individuals, companies and knowledge in research and development, mass production, and post-sales services and maintenance of weapons that are reserved for national defense.6 Co-development is the cooperation program between governments and Multi National Company jointly undertake the development and production of weapons system.7 Military Industry is also very close to Arm Transfer. There several reasons why state do the Arm Transfer8. The first reason, the anarchic condition of International System makes state needs weapons to defend itself from potential conflict between states. The second reason, developed countries are considered preserving the international conflict so that their defense industry takes the benefit from the export of weapons to countries in conflict, this phenomenon is called as military industrial complex. The third, there are political factors from domestic region, such as civil conflict and political system. Civil conflict can be a driving force of arms purchases from the government. For the political system, the democratic system is believed to be much less in purchasing weapons than the
4Fredy BL Tobing&BeniSukadis.(2012). IndustriPertahanan.In AA Banyu Perwita & Bantarto Bandoro.Memahami Kajian Strategis (pp.110). Jakarta. FISIP UPN “Veteran” Jakarta Press 2012 5Elizabeth Skonz and John Dunne.(2006).The Economic of Arms Production. 6Skons, Elizabeth and John Dunne. (2007) The Economic of Arms Production, Stockholm: SIPRI. 7Fredy BL Tobing&BeniSukadis.(2012). IndustriPertahanan.In AA Banyu Perwita & Bantarto Bandoro.Memahami Kajian Strategis (pp 111) Jakarta: FISIP UPN “Veteran” Jakarta Press 2012. 8Zarzecki, Thomas. (2002). Arms Diffusion : The Spread of Military Innovation in the International System (Issues in Globalization). England : Routledge 2
authoritarian one. The last is the domestic economic factor can be the driving force for purchasing weapons. The poor countries are difficult to develop the defense industry because the costly infestation. Therefore the developed countries become the manufacturer and exporter of weapons (Invid-Pacivis).9 Indonesia is well known as “the most broken-up nation in the world”, one, one country, one nation, that the people are scattered 10. Indonesia has 17.000 islands and 81.900 km coastline. Indonesia is also inhabited by more than 300 ethnic groups with almost thousand local languages. It is lies in the cross position, between the continents of Asia and Australia and between the Indian and Pacific oceans. The location is very strategic, causing air and road traffic across the sovereign territory of Indonesia is being the most congested traffic in the world. Geographically Indonesia has borders with several countries, including the land border, sea, or the continental and maritime borders. Indonesia’s land borders with three countries, namely Malaysia, Papua New Guinea (PNG) and Timor Leste. In the other hand, Indonesian waters bordered by 10 countries, namely India, Malaysia, Singapore, Thailand, Vietnam, Philippines, Republic of Palau, Australia, East Timor, and Papua New Guinea.11 This condition will give positive impact to our state. In the other hand, this condition can give negative impact that may affect to the state if the state cannot perform adequate supervision and defense. Indonesia should continue to secure, maintain and regulate the territory for keeping the sovereignty. As we know that the requirement of establishing a statehood is by fulfilling the three basic elements, such as territory, people, and sovereign governments12. Territory element here is covering land, sea, and air. All of those aspects can be concluded that safeguard the
9Invid-Pacifis, 48-49 10 Ir. Soekarno, FilsafatPancasilaMenurut Bung Karno, Yogyakarta : Media Pressindo, 2008 11BukuPutihPertahananRepublik Indonesia 2003 (Republic Indonesia White Book 2003) 12 Cornell University Law School doc. Retrieved October 4th, 2013 from http://www.law.cornell.edu/wex/statehood_international_law 3
sovereignty of the country is tantamount to maintaining the viability of the state and nation. One of the current insecurity is the number of maritime terrorism which threat Indonesia and South East Asia. Maritime security issues are not a new problem in South East Asia countries. The one which is considered new is the scope of the problems and its potential to develop into activities related to maritime security challenges. Maritime sector serving nearly 80% of world trade. Approximately 75% of the global maritime trade, and 35 million barrels of oil per day is transferred through maritime platform that is located surrounded by many islands even have the title as the largest archipelago in the world, with nearly two-thirds of the country is water and the ocean.13 From that fact, we know that actually maritime sector in Indonesia is very potential to increase. Related with the United Nations Convention on the Law of the Sea, It stated that Indonesia has three sea routes or well known as ALKI (Alur Laut Kepulauan Indonesia) and has several strategic choke points such as Sunda Strait, Lombok Strait, and Makassar Strait.14 Geographically, Indonesia is well known as maritime country. However the maritime potential in Indonesia itself has been abandoned and more widely used by other countries. Based on opinion from Dietriech G Bengen (a professor of economics and marine, he said that “As many as 45 percent of the flow in the world’s sea trade passed through Indonesia”. 15 The statement announced in a national seminar titled Restoration Indonesian Maritime Civilizations. The concept of maritime countries is not separated from defense industry and defense interest. As the largest archipelago in the world, Indonesia has to maintain the sovereignty and protect all natural resources.
13BantartoBandoro& AA Banyu Perwita. (2013). Ancaman Terorisme Maritim : Keamanan Maritim Indonesia dan Asia Tenggara. In AA Banyu Perwita & Bantarto Bandoro.Pengantar Kajian Strategis (pp. 72). Yogyakarta: Graha Ilmu. 14 “PosturPertahanan Negara”, DepartemenPertahananRepublik Indonesia (2007). p 13. 15 Dietriech G Bengen, Seminar titled Restoration Indonesian Maritime Civilizations. 4
One of the biggest challenges that we have face is the neighboring state’s military capability that is significantly better than the defense capabilities of the Republic Indonesia. It influences the bargaining position of Indonesia in the International diplomacy arena. 16 Therefore, Indonesia must begin to build defense sector over the minimum defense force so that it has the deterrence effects regionally and internationally. Border dispute and territory dispute in some segments in Indonesia are including the factual threat with military dimension. The country’s defense capability is certainly associated with the inadequate number of major weapons systems and other equipment. If there is no action to accelerate the replacement and improvement of major weapons system and other equipment, the process of strengthening state sovereignty and rescuing the territorial integrity would be complicated. This phenomenon is confirmed by data from a number of crisis defense equipment in 2007. The strength of the Navy itself is arranged in 4 SistemSenjata Armada Terpadu (SSAT) (Weapon System Integrated Fleet). SSAT consists of four components. There are : Warships Aircraft Marine Base
16Kekuatan dan Gelar Pertahanan Negara Tahun 2007. PosturPertahanan Negara. (2007). 5
According the data that are contained in the Book of National Defence Posture in 2007, weaponry in critical condition in 200717 :
Category Type Number Description
Navy 1. KRI PK:16, PKR:12, Over 25 years /Warship AT:28 KAL:312
2. Pesud/ Fixwing: 47 Over 25 years Aircraft Rotary Wing : 16 3. Marine Ranpur 306 Coming to 40 (combat years vehicles) Meriam 83 (ordnance) Roket 50 (missile)
If there is no effort to accelerate change, improvements, and reinforcement of weaponry system, the process of state sovereignty enforcement, rescue and maintenance of the territorial integrity of the nation will find it difficult to be implemented.
The challenge that must be overcome to build country’s defense capability is increasing the number of military weapons systems to achieve power beyond the minimum essential forces. 18 This increase must be in accordance with the technological advances. Besides, the government must increase the readiness of reserve components and supporting
17 “Alutsista Kondisi Kritis Pada Posisi Tahun 2007”. PosturPertahanan Negara. (2007). P.59 18 “PosturPertahanan Negara”. DepartemenPertahananRepublik Indonesia.(2007). p.72.
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components. It is including building the capacity of national defense industry which is known as national strategic industry in Indonesia.
The development of national strategic industry requires support from various groups in order to achieve the independence military armaments. These development efforts have experience several obstacles19, such as :
defense Industry has not been able to provide support for the maintenance or repair of weapons system because the internal matters, such as : limited facilities and infrastructure, low work ethic and human resources, liquidity, and the decline in consumer confidence to strategic defense industry in Indonesia, the number of human resources that have high education level is inequitable and slightly deviates from the ideal composition to support the industrialization process, government policies have not been consistent in the budget, procurement, recruitment, and the strategic planning for management of national resources for the benefit of the defense, especially the procurement of weapons system (still dependent on foreign products) lack of research and development that cause less significant results
To achieve self-sufficiency in the development of national defense construction industry, we need strong national strategic industry so as not to lag behind, dependence, and resistance to the other states.
I.2 Problem Identification The assumption that Indonesia is a state that is far from the threat of war is not correct. This assumption makes the defense sector in Indonesia become underestimated. Indonesia’s defense budget that is still below the average, makes military capabilities in Indonesia become less reliable.20Indonesia’s dependence on defense product of foreign countries
19Sukadis, Beni. Tantangan Industri Pertahanan Indonesia”, 13 Juni 2011 20PetaAnggaranPertahanan Di Asia Tenggara. PosturPertahanan Indonesia.(2007).p.10 7
is also the giant problems that must be overcome immediately by Indonesia.
Major problem which faced by Indonesia is about maritime threats that threaten the outbreak of Indonesian marine. This problem affects the sovereignty of Indonesia. Indonesia which has a very broad marine region becomes the very precise world trade routes.21 This phenomenon can lead positive and negative impacts to Indonesia. Its positive impact is Indonesia could benefit financially from the trade that passes through Indonesian waters. This could be a positive point for Indonesia in the investors’ point of view because Indonesia has a strategic location in the international trade. However, this phenomenon can bring negative impact to Indonesia if it is not supported by a strong defense sector. The negative impacts could include threats of the region, piracy, terrorism, and espionage threats. 22 If there is no special attention, this threat will certainly be a big problem for Indonesia.
Neighbouring country’s development of military capabilities that significantly exceed the defense capabilities of Republic Indonesia can weaken the bargaining position in the arena of international diplomacy.23 Therefore, the main challenge of the country’s defense capability development that must be overcome in the future is to build the military sector over the minimal defense forces. It will be very useful because it can cause deterrence effects regionally and internationally.
Steps that should be taken to counter the negative impacts is to put the concentration on developing military sector that has yet achieving the figure of a strong defense so that will be respected in the world. Until now, the national development still put the welfare as the first priority. It causes slow modernization process of defense in our country. Even the defense
21 United Nations Convention Law of The Sea 1982 about Indonesian Choke points. 22PenggolonganAncaman. PosturPertahanan Negara.(2007). p.24 2323Tantangan yang Dihadapi, Pokok-Pokok Pembangunan Jangka Panjang Bidang Pertahanan Negara.Postur Pertahanan Negara. (2007). P.64 8
budget that is allocated in Indonesia is under the neighboring countries around Indonesia.24
Indeed in nominal terms, the defense budget has increased each year start from 2007 until 2012. However, this increase occurred in routine expenditure, while the increase in capital expenditure is very small. It does not give so much effect to modernize and increase the professionalism of the soldiers. It is a big influence on the process of modernization of defense equipment. Besides, the military defense equipment still needs to rely on other countries. It is including the need for maintenance, operation, and spare parts.
That is why national defense strategy is continuously refined to achieve the appropriate Defense System. Hopefully, in the future, the relevant Defense System is able overcoming all the potential threats facing Indonesia. From sea geostrategic aspects, protection of marine jurisdiction of Indonesia is done by increasing the strength and the ability of the defense to conduct surveillance and enforcement in marine region.
This research will investigate how the Indonesian Navy in recent years improve its defense capabilities through modernizing its weapons system by the procurement process that puts the national strategic industry in the first supporter so as reducing he dependence on foreign military products.
The reason why this topic is raised is because concerning Indonesia which is known as maritime states but still cannot explore the wealth of the sea more. Even worse, the maritime region is widely used by other countries. This is because our bargaining power in regional and international are still underestimated. One of major reason is because our defense force especially in maritime sector is still inadequate. This research is expected to support the development of naval defense force by developing national strategic industry and surpressing the dependence on foreign products.
24Peta Anggaran Pertahanan Di Asia Tenggara.Postur Pertahanan Negara. (2007). p.10 9
I.3 Statement of the Problem Topic : This research is about examining The Contribution of National Strategic Industry Development (PT PAL Indonesia) Towards Modernization of Weaponry System in Indonesian Navy (2007-2012).
1.3.1 Research Question – How does National Strategic Industry (PT PAL Indonesia Persero) Contribute to the Modernization of Weapons System in Indonesian Navy ? (2007-2012)
I.4 Research Objective This research objective are classified into descriptive-exploratory objective. Based on C.R Kothari (Former Principal, College of Commerce University of Rajasthan, Jaipu (India) in his book Research Methodology Methods & Techniques, (2004), described descriptive as a thesis with the objective to portray accurately the characteristics of a particular individual, in the other he described exploratory as a thesis with the objective to gain familiarity with a phenomenon or to achieve new insights into it.25
Based on the background stated above, these are the outcomes or deliverables that research aims to achieve. To analyze the needs of Indonesian Navy to increase the weapons system To explore the contribution of National Strategic Industry in the development of military sector
This research objective are classified into descriptive-exploratory objective. Based on C.R Kothari (Former Principal, College of Commerce University of Rajasthan, Jaipu (India) in his book Research Methodology Methods & Techniques, (2004), described descriptive as a thesis with the
25 C.R. Kothari. (2004). Research Methodology Methods & Techniques. India: College of Commerce University of Rajasthan
10 objective to portray accurately the characteristics of a particular individual, in the other he described exploratory as a thesis with the objective to gain familiarity with a phenomenon or to achieve new insights into it.
The type of research method that will be use in this research is Descriptive and Analysis methods. Based on the opinion from C.R. Kothari in his book, he described that Descriptive research includes surveys and fact- finding enquiries of different kinds. There is a term Ex post facto research for descriptive research studies. It means that the researcher has no control over the variables. Similar to this thesis, the writer has no control over the variable (Indonesian Navy and National Strategic Industry). What the writer do is just only report what has happened or what has happening. The methods of research utilized in descriptive research are survey methods of all kinds, including comparative and correlation methods. While, in Analytical research, the researcher has to use facts or information already available and analyze the information to make a critical evaluation of the material. Similar with this research, the writer use the facts or information that already available and analyze the needs of Indonesian Navy to increase the weaponry system and to explore the impacts of weaponry system dependency to other states.
The research methods that used in this research is Library Research and little Field Research. The library research will cover the analysis of historical records and analysis the documents. The documents can be the books, journal, news, Official documents from Indonesian Navy, Official document from Ministry of Defense, the President Letters, and Undang- Undang. Then the Field Research is by doing Personal Interview with the people who are involved with this research.
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I.5 Significance of the Study The Contribution of National Strategic Industry Development (PT PAL Indonesia Persero) Towards Modernization of Weapons System in Indonesian Navy. This research has several key points of study that hopefully can give contribution to National Strategic Industry, Indonesian Navy and the academic. Research provides the information on the role of National Strategic Industry Development in Indonesian Defense System Research provides the information of Indonesian Navy Research proves the needs to increase the Weapons System of Indonesian Navy Research proves the needs to reduce the dependency of weapons product from other states.
I.6 Thoretical Framework Theory that may be the fittest to picture The Contribution of National Strategic Industry Development (PT PAL INDONESIA PERSERO) Towards Modernization of Weapons System in Indonesian Navy. (2007- 2012)
1.6.1 Realism “In such an anarchic system. State power is the key- indeed, the only – variable of interest because only through power can States defend themselves and hope to survive. Realism can understand power in a variety of ways – eg. Military, economically, but ultimately emphasize the distribution of coercive material capacity as the determinant of international politics.” 26
Normative basis of realism is national security and survival of the state. Every state has their national interests that need to be
26Slaughter, Anne-Marie. (2011) . International Relations Principal Theories.Oxford : Princeton University 12
fulfilled. Therefore every state should use their effort to get the power.27
Realism perspective look a problem in war or peace way. This perspective conclude that a state must has a great power for security and defense. Basically, realism prioritizes foreign policy, military forces, and emphasizes on nationalism.
On the point of view of the realist, International System is anarchy, which means that there is no higher authority than a state. State is seen as the protector of its territory, its inhabitants, and a distinctive way of life and valuable. The national interest is the final arbiter in determining foreign policy (Jackson, Robert and Sorensen, Georg. 1999,pp.89). Realist views a state as the main actor, therefore state is obliged to defend its national interests in the international political arena.
Realist thinker placed the national defense as the main priority or main focus. Realist focuses the analysis towards power and autonomy on international relations. It concludes that there are no harmonization among states, so that the concept of self-help is very crucial. The very relevant variable is the military variable. Realist does not reject the morale principals but morality is a marginal variable for them. Practically individual morality is defeated by the national interest of the state and the society. (Wardhani, 2013)
Realist believes that people and state are always wanted to dominate and increase their power. State will act cost-benefit and there will be no state which is willing to sacrifice for other countries. Therefore for avoiding war, we need balance of power
27Jackson, Robert and Sorensen, Georg.(1999). Introduction to International Relations, Theories and Approaches, Third Edition. Oxford: Oxford University Press.
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so that state do not invade the other states because of its power balanced. In realist perspective there is assumption that less likely the occurrence of a cooperation. There will be cooperation, but the cooperation is not purely a cooperative partnership. The cooperation happens because there is national interest from the single state.
If the state has a great power, the state will have more power and can fulfill their national interest. Therefore realist concludes that states’ pursuit of power is only for the individual benefit.
The effort of Indonesia in increasing National Strategic Industry Development is one of the ways to reach the power in the international anarchy system. It is influenced by strong military capability of our neighboring states that significantly exceeds the defense capability of the Republic Indonesia. It has weakened the bargaining position of Indonesia in the arena of international diplomacy. Hence, one of the major challenges of the country’s defense capability development must be faced in the future is to build a minimum essential forces. It is useful to bring out the effect of deterrence in the regionally and internationally.
Balance of Power
Realism point of view looked the existence of war was due to be on human nature, selfish, aggressive, and always wanting more power. Thus, in the process to achieve the stability needs balance of power. Internal community regard as an action-reaction- asymmetric not equivalent: the power to deal with weakness. 28 Base asymmetric inter-state basis can be balanced, for example by way of every state acts to watch each individual position-checks and balances.
28Balance of Power. Retrieved 23rd of March 2014 from https://www.press.umich.edu/pdf/0472112872-ch4.pdf 14
Because of the anarchic international politics as opposed to long- term security and stability, the nation-states should be powering the creation of a balance in the power system, so that in absolute term, security, stability, power, and influence potential can then be improved. It is the duty of a statesman to demonstrate and prioritize the interests of each based on the changes that occur with policies and adjustment based on the goal of creating a conducive stability. Thus, Morgenthau argued that the balance power and foreign policy that was created to be achieved and maintained is not unlikely, moreover, is an important mechanism for stabilizing the international community.29
Closely related to power, in the balance of power there is the concept of national interest and objectives include fundamental purpose to deny the existence of regional and global hegemony, which in essence to prevent the publication of hegemony by allowing all states to maintain identity, unity, and independence, to at the optimal level to prevent potential aggression war, and so forth. Balance of power theory therefore closely related and position aligned with the traditional view of the international relationship. Realist indirectly intended to provide stable international conditions and peace, as well as a stabilizing factor in sovereign countries society. From the definition above, the core theory of balance of power is actually an important concept in creating and maintaining the stability of the international community.
29Balance of Power. Retrieved arch 23rd, 2014 from http://www.pearsonhighered.com/assets/hip/us/hip_us_pearsonhighered/samplechapter/02050595 89.pdf 15
1.6.2 Military Modernisation Analysis (Arm Race) The causes of military modernisation 30 in Indonesia and surrounding countries as follows : (1) there is the sensitive problem of overlapping border in territorial waters because it involves the countries’ sovereignty. (2) Changes in demanding military needs new power projection capabilities, for example, joint operations and oversee the regional order, (3) the economic condition of the ASEAN member countries which led to the establishment of increased budget for the acquisition of weapons.
Four basis conditions by Colin Gray which showed the arm race :
(1) There must be two or more warring countries. For example, in ASEAN there are some member states involved in the conflict, some of the Thai- Cambodian conflict over the Preah Vihear temple, Thailand- Laos border on the region, Malaysia and the Philippines on the Philippine claim over the territory of Sabah, Malaysia-Singapore about the ownership of of the White Stone Island (Pedra Branca), Indonesia- Malaysia on Sipadan- Ligitaan and maritime border in Ambalat. Although there are so many problems amongst the states, the states openly not opposite to each other. However, this peacefully condition can be assessed as negative peace. Negative peace is condition in which the situation of conflict or peace in an element of atmosphere still feels and has the potential to generate new conflicts, if it is not handled to completion.31 (2) Second, the countries that involved in the arm race should develop an effective armed force in facing fighting or warding the arms race participants. For example, ASEAN members
30Analisis Kebijakan Peningkatan Kapabilitas Militer Negara- Negara Anggota ASEAN 2002- 2012. Retrieved on 23rd of March 2014 from http://ejournal.hi.fisip-unmul.ac.id/site/wp- content/uploads/2014/03/eJournal%20Abdi%20Khairendi%20(03-01-14-12-37-44).pdf 31 Cipto, Bambang, 2006, Hubungan Internasional di Asia Tenggara: Teropong terhadap Dinamika, Realitas, dan Masa Depan, Yogyakarta: Pustaka Pelajar. 16
countries have focused on defense, such as reconnaissance aircraft and unmanned aircraft to maintain air security, patrol boats equipped with light weapons and radar system. This is becoming particularly important given the geographical conditions of the ASEAN countries, which generally have sea area. As performed by Malaysia. Malaysian Air Force must be able to patrol along the shoreline and maintaining its sovereignty in border which is very susceptible to piracy, smuggling and illegal immigrants from the Southern Philippines. With sophisticated equipment that can support a strong defense system, for example, the existence of surveillance aircraft Beechcraft Super King Air belonging to Malaysia and Indonesia Super Tanaco belonging is a mainstay for patrol and reconnaissance. For safety marine, Indonesia has a total of 50 patrol boats and 48 support vessels. The degense system is also equipped with such offensive military fighter jets, combat helicopters, frigates class destroyer, submarine and battle tanks. But it is used as a means to support the success of deterrent strategy (deterrence).32 (3) Third, they must compete in quantity (Human Resources, Weapons) and/or quality (Human Resources, weapons, organization, doctrine) in this case each country clearly visible increase in both the quantity and quality of the human resources (personnel number) and weaponry. The increase in quantity and quality is necessary to look at the size of the coverage area of a country. It is intended for the purpose of maintaining good security, economic security, environmental security and public safety.33
32Rudy, May, 2001, Studi Strategis Dalam Transformasi Sistem Internasional Pasca Perang Dingin, Bandung: Refika.
33 2003, Hubungan Internasional Kontemporer dan Masalah-masalah Global Isu, Konsep, Teori dan Paradigma, Bandung: Refika. 17
(4) Fourth, there must be a rapid increase in the quantity and/or quality improvements. Some countries that meet these conditions for example Indonesia, Thailand, and Vietnam (2007-2012). In that period Indonesia has acquired 25 cobat helicopters, 44 amphibious tank units, 4 units corvette, 5 units of Sukhoi, 2 units of submarines and several other defense tools. 34
Based on the above four condition, an increase in military capabilities by Indonesia and surrounding countries can be regarded as an arms race. Arms race would have a political objectives (increased armament adjusted to balance or match the power of the other countries). However, it should be noted that the rapid increase in military spending by two or more neighbouring countries does not mean the race is intended for military or arms race. 35 Strength development is done in a short time for competition to improve or maintain the relative strength and influence. The thing to note is the increase in military capabilities between the ASEAN member countries previously consulted in the ARF (ASEAN Regional Forum). The consultation was carried out in order to avoid misunderstanding and suspicion that can disrupt the stability of inter-state relations. 36
34Analisis Kebijakan Peningkatan Kapabilitas Militer Negara- Negara Anggota ASEAN 2002- 2012. Retrieved on 23rd of March 2014 from http://ejournal.hi.fisip-unmul.ac.id/site/wp- content/uploads/2014/03/eJournal%20Abdi%20Khairendi%20(03-01-14-12-37-44).pdf 35 Soesasiro, Hadi, 2004, Small is (not) Beautiful: the Problem of small arms in Southeast Asia, Jakarta: CSIS. 36Modernisasi Militer Asia Tenggara: Destabilitas Keamanan Regional. Retrieved March 23rd, 2014 from http://www.fkpmaritim.org/modernisasi-militer-asia-tenggara-destabilisasi-keamanan- regional/ 18
I.7Conceptual Framework
Security Challenges Indonesian Defense Policy
TNI Defense Industry
PT PAL Indonesia Navy Persero Naval
Industry
International Other state Collaborations
The concept above declared the relations between the actors in the case of The Contribution of National Strategic Industry Development (PT PAL Indonesia Persero) Towards Modernization of Weapons System in Indonesian Navy (2007-2012). The concept consists of elements of this research. The elements are :
1. Security Challenges Since the independence of Indonesia in August 1945, Indonesia has been faced a lot of national security challenges. The problems such as the communal and religious violence, political conflict, territorial
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dispute, and ideological tension. Indonesia must begun to pay more attention to the security challenges. 2. Indonesian Defence Policy
In addressing security challenges in the defense sector Indonesia recognizes the importance of national security strategy. It is reflected in our national defence policy. The objective of our national defense policy is “protect and uphold state sovereignty, maintain territorial integrity of the Unitary Republic of Indonesia, and ensure the safety of Indonesian people from all forms of threats and disturbances.”37
Those objectives are specified in the Defence White Paper that issued in February 2008. There are five main strategic goals to achieve all of the objectives above, such as :
a. to deter all forms of threats to Indonesia and its people; b. to defeat military aggression by foreign countries; c. to overcome military threats that undermine the existence and interest of Indonesia; d. to address non-military threats that might have adverse impacts on Indonesia’s sovereignty, territorial integrity, and safety of the people; e. to contribute to international peace and regional stability.38 3. Tentara Nasional Indonesia (Indonesian Defence Force) All the strategic goals of Indonesia’s defence is to be carried out by Indonesian Defence Force (TNI). It is because TNI is the main component of state defence. It can through war operations and military operation other than war. 39 Military Defense Posture is the military posture which basically consist of the Navy, and Air Force. TNI Headquarters and Ministry of
37 Act No.3/2002 on State Defence, Article 4. 38BukuPutihPertahanan Indonesia 2008, p.60-64 39Sukma, Rizal. Indonesia’s Security Outlook, Defence Policy and Regional Cooperation. p.8 20
Defense are not including in this posture. The main focus of this research will be the Navy. Indonesian Navy Indonesia Navy assigned to carry out military duties in the field of naval defense, enforce the law and maintain security in the sea area of national jurisdiction in accordance with the provisions of International Law that has been ratified, Navy task diplomacy in support of foreign policy set by the government, carry out military tasks in the construction and naval forces, and implement empowerment sea defense are. 4. Defense Industry Based on Law of Republic Indonesia number 16 year 2012, verse 1, Defense Industry is composed of the National Industrial State- Owned Enterprises and Private Companies either individually or in a group. It is defined by government partially or completely produce the defense and security equipment, maintenance services to meet the strategic interests in the fields of defense and security, for which located in territory of Republic Indonesia. Naval Industry (PT PAL Indonesia Persero) Ship can be defined as form of transportation, tool work mining fisheries, tourism, main tool of defense systems, and can be categorized as part of the national infrastructure development. The naval industry is one of the strategic industry that is important for the future further developed. Naval Industry in the five years period began to be perceived as the continued increase in local-flagged fleet operating in waters in the country. PT PAL Indonesia Persero is one of the Naval Industry which is producing warships and commercial vessels, providing ship repair and maintenance services, as well as general engineering with a particular specification based on order.
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5. Defense Industry International Collaborations To achieve the Minimum Essential Forces, Indonesia must increase the military capability. Defense Industry International Collaboration represent the second-best solution to the problem of defense acquisition. The arrangements of the collaboration reflect the desire of states to maintain domestic military-industrial capacity while incorporating capital and technology from abroad. This collaboration is involsing the Indonesian Defense Forces and also the Naval Industry, in this case PT PAL Indonesia Persero. The colour of the line in the conceptual framework represents the relations between elements in the conceptual framework. 1. Red Line Red line between Security Challenges and Defence Policy. It means, in addressing security challenges, we need the importance of national security strategy which is reflected in our national defense policy. 2. Yellow Line Yellow line represent that Defence Policy in addressing the Security Challenges is divided into two, Tentara Nasional Indonesia (Indonesian Defense Force) and Defense Industry. This research will be more focused on the Navy dna the Naval Industry (PT PAL Indonesia Persero) 3. Blue Line Blue Line represent there is cooperation between the Navy and our Naval Industry (PT PAL Indonesia Persero). In achieving the national security the Navy needs the armaments system especially in Naval Industry which will be produced by PT PAL Indonesia Persero. PT PAL Indonesia Persero as the Naval Industry support the modernization of the Navy. In achieving the Minimum Essential Forces, PT PAL Indonesia Persero and the Navy is involved in Defense Industry International Collaboration.
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4. Black Line Black line between Defense Industry International Collaborations and Security Challenges. It represent that the result of cooperation between the Navy and Naval Industry with additional state can produce Defense Industry International Collaborations that help to overcomecan overcome the Security Challenges.
I.8Scope and Limitation of Study This research will focus on how does the collaboration of Indonesian Navy and the National Strategic Industry (PT PAL Indonesia Persero) can address the Indonesian security challenges. It will cover on two important things, the first is the needs to modernize the weapons system of Indonesian Navy and the second is the development of our National Strategic Industry (PT PAL Indonesia Persero).
The time framework in this research is from 2007 until 2012. Start from the end of 2007 coincided with the launch of the defense posture of Republic Indonesia number : PER/24/M/XII/2007 dated on December 28, 2007. It ends in the year 2012 with the issuance of UU no 16 tahun 2012 about Strategic Industry. It concern with procurement of weapons system in Indonesian Navy. It is relevant with the National Strategic Industry Development. This research analyzes the intervention from National Strategic Industry in the procurement of weapons system in Indonesian Navy.
I.9 Thesis Structure This research will be divided into five chapters. The first chapter will be the introduction chapter. It will introduce the reader to the topic that is discussed in this research. It consists of Background of the Study, Problems Identified, Statement of the Problem, Research Objective, Significance of The Study, Conceptual Framework, and Scope and Limitations of the Study.
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On the second chapter, this research will be much concern with Indonesian Navy (TentaraNasional Indonesia Angkatan Laut). Before go through the Navy’s element, this chapter will explain about the Security Challenges and Indonesia Defence Policy.
On the third chapter, this research will focus on our National Defence Industry. this topic will cover information about PT. PAL. It will consist of the role of the Naval Industry and the importance of International Collaboration in achieving the Minimum Essential Standard.
Chapter IV will be the core of this research. It will focus on the contribution of our National Strategic Industry to the modernization of weapons system in Indonesian Navy. This chapter will cover the importance of National Defence Industry in the development process of our defence sector and how the National Defence Industry contribute to the modernization of Indonesian Navy.
Chapter V will be the last chapter of this research. It will contain of conclusion for the research.
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CHAPTER II
THE IMPORTANCE OF NATIONAL DEFENSE POLICY AND THE POSTURE OF INDONESIAN NAVY
II.1 Indonesian Defence Policy II.1.1 Security Challenges Since Indonesia’s independence in August 1945, Indonesia has been confronted with various problems such has conflicts and territorial disputes, religious conflicts, and political conflict. Various national challenges are becoming increasingly complex. Indonesia then began to give more attention to the threat of trans-national and non-traditional security. Security challenges facing Indonesia is divided into three categories: Internal securities, non-traditional security problems, and external security problems. The form of Internal Security Threats in Indonesia include an armed uprising like the Free Aceh Movement and the Free Papua Movement. Indonesian Armed Forces commissioned to maintain security and stability conditions of Indonesian society. Besides armed movement that emerged in the various regions in Indonesia, the Communal and Religious violence are becoming dangerous threat in Indonesia. 40 Various cases of communal and religious violence are like in Borneo, Maluku, and Poso. Terrorism is also becoming the biggest threat to today’s Indonesian national security. This problem began to unfold when the occurrence of the Bali Bombing in October 2012 that killed 202 people (88 of them were tourist from Australia). This incident was followed by several other crimes
40Buku Putih Pertahanan Indonesia.p.21-22 (2008). Jakarta : Indonesia’s Ministry of Defence 25
such as JW Marriott Hotel bombing in August 2003, Australian Embassy bombing in November 2004, followed with the second Bali bombing in October 2005, and second bombing of JW Mariott and the bombing of Ritz Carlton Hotel in July 2009.41 Non Traditional Security and Trans-National Security problems cover the Natural Disaster and Maritime Security. Indonesia in the last decade is categorized as the country with high intensity of natural disaster. Being located on the Pacific Ring of Fire (an area with a lot of tectonic activity), Indonesia has to cope with the constant risk of volcanic eruptions, earthquakes, floods, and tsunamis.42 Major disaster that awaked Indonesia is tsunami that shook the the province of Aceh in December 2004. This disaster was followed by the earthquake in Central Java in 2006. Then it was followed by the earthquake that occurred in the provinces of Bengkulu and West Sumatera in September 2007 and 2009. Indonesia realized that the development of these natural disasters affect defense, state policies, not only on force planning and logistical support but also on how the procedure is used in the armed forces of the environment. Other problems arise because the form of the natural wealth of Indonesia’s geography are the presence of piracy, illegal fishing, drug trafficking and people smuggling. According to Rossy Verona writing in her article titled “Conquering Human Trafficking in ASEAN”, a conservative estimation puts the number.43 The third is the External Security Problems; it covers Sovereignty, Territorial Disputes, Border Security and Regional Uncertainty. The real case of border dispute/territorial dispute is the Case of Sipadan Ligitan and followed by the case of Ambalat with Malaysia. Malaysia’s claim
41Rizal Sukma. Indonesia’s Security Outlook, Defence Policy and Regional Cooperation In Indonesia’s Security Challenges: Internal Security, NTS, and External Threats p4-p5 42Indonesia’s Natural Disaster. Retrieved Novermber 23rd, 2013 from http://www.indonesia- investments.com/id/bisnis/risiko/bencana-alam/item243 43Rossy Verona. February 25th, 2008. “Conquering Human Trafficking in ASEAN, RI,”. The Jakarta Post 26
over Ambalat and the patrols conducted by Malaysia’vessel in the area, is often seen in Indonesia as “a threat to use force” by the country. 44 The above problems show that the probability of violations in Indonesian territory by other country is very high. This fact makes Indonesia should be prepared to improve its defense capabilities, especially in the Naval Forces.45 The Commander of Indonesia’s Navy, admiral Agus Suhartono believes that if Indonesia does not pay attention to the security of outermost islands they could become a source of conflict with other countries.”46
II.1.2The Defence Policy In facing security challenges as has been mentioned above, Indonesia recognizes the importance of a national security strategy that is implied by the national defence policy and posture. Based on Act no.3/ 2001 about State Defense, the main goals of Indonesia’s Defence Policy is “To Protect and Uphold State Sovereignty, Maintain Territorial Integrity of The Unitary Republic of Indonesia, and Ensure The Safety of Indonesian People From All Forms of Threats and Disturbances.”47 The objective then specified in the Defence White Paper. The Defence White Paper issued in February 2008 contains of 5 strategic goals : 1. To deter all forms of threats in Indonesia and its people 2. To defeat military aggression by foreign countries 3. To overcome military threats that undermine the existence and interests of Indoesia 4. To address non military threats that might have adverse impacts on Indonesia’s sovereignty, territorial integrity, and safety of the people,
44Hikmahanto Juwana. June 5th, 2009. Isu Pokok Ambalat. Kompas. 45BukuPutihPertahanan Indonesia 2008 – Indonesia’s Defence White Paper 2008, p.54. 46TNI AL Jadikan Wilayah Perbatasan Sebagai Prioritas. December 29th, 2010. Antara News. 47 Act No.3/2012 on State Defence, Article 4. 27
5. To contribute to international peace and regional stability48
These 5 goals became the main component of state defence, through war operation and military operation other than war.
For implicating Indonesia’s Defence Policy, the government held total people’s war doctrine. This doctrine stipulates that in case of a foreign military invasion, Indonesia would choose to “total defence system, which involves all the people and resources, national facilities and potential …” 49 However Indonesia places war as the last options. Indonesia has always stressed the importance of regional cooperation and international diplomacy as the first line of defence.50
Indonesia recognized the wide ranging challenges to national security both internally and externally. In reality, Indonesia’s national security concerns remain primarily internal in nature. In this context, it is hardly surprising that the maintenance of internal security remains a major task for military in Indonesia.
Indonesia’s defence policy for example is continuing to focus on improving the capability to fight law intensity war. It is especially in dealing with armed insurgency threats.
Indonesia also plans to improve the defense posture of the armed forces. This action would give capability “to uphold the Unitary Republic Indonesia.” It is triggered by a number of emerging separatist movements in Indonesia, such as terrorism and separatism. 51 Indonesia must also emphasized the need to strengthen “rapid deployment forces:. It is for deploying against any internal security threats.
48BukuPutihPertahanan Indonesia 2008 [Indonesia’s Defence White Paper 2008],p60-p64. 49Mempertahankan Tanah Air Memasuki Abad 21, p.44-45. 50Rizal Sukma. Indonesia’s Security Outlook, Defence Policy and Regional Operation.Implications for Defence : Policy, Force Structure and Procurements. p9-10. 51Mempertahankan Tanah Air Memasuki Abad 21.(2003). Jakarta: Ministry of Defence. P.81 28
Indonesia also need to improve Indonesia’s Defence Capability to overcome non-traditional security threats, especially maritime based security threats, communal violence, and natural disaster.
Based on the writing of Rizal Sukma on his article (Indonesia’s Security Outlook, Defence Policy and Regional Cooperation), when other countries have responded those issues by improving their naval capability, Indonesia has only undertaken limited measures, for the lack of fund, to improve the Straits of Malacca, Sunda, and Lombok due to long standing problem of piracy and the possibility of terrorist attack.52
It is very important for the government to begin modernizing and boosting the country’s naval capability towards the need to protect Indonesia’s sovereignty from security challenges.
II.1.3The Development Plan Law No . 17/2007 on Long-Term Development Plan 2005-2025 is the basis for the defence development plan. It envisions the defence capability “beyond minimum defence requirement capable of upholding Indonesia’s sovereignty, protecting people’s safety and maintaining territorial integrity” with a respectable deterrent effect in order to support Indonesia’s diplomatic position.” 53
The aim of defence capability in the period of 2005-2019 is to achieve minimum essential force. It means that a force level that can guarantee the attainment of immediate strategic defence interests, with the procurement
52 Robert Hartfied and Brian Job. (2005) Raising the Risk of War: Defence Spending Trends and Competiive Arms Processes in East Asia. Working Paper.p-16-17.Columbia : Institute of International Relations. 53Undang-Undang Republik Indonesia No.17 Tahun 2007 Tentang Rencana Pembangunan Jangka Panjang Nasional Tahun 2005-2025, p.62. (2007). Jakarta: Bappenas. 29
priority is given to the improvement of minimum defence strength and or the replacement of outdated main weapon systems/ equipments.”54
In the other hand in operational terms, based on the National Defence White Paper of Indonesia, there is no immediate plan to introduce a significant increase in the number of personnel of the military. The priority will be given to improving the quality of combat readiness, mobility, and the maintenance and improvement of general naval capability, marine corps, and the airforce.55
Another challenges for the Indonesian Defence Force is to narrow the defence gap in the islands outside the Java Island both in terms of organization and main weapons system.56
II.2Indonesian Navy Indonesia is known as archipelagic country. It has a large number of small islands. The Indonesian Navy known as a large navy with a large number of small vessels. The second fact follows from the first fact. Indonesian Navy was established on August 22nd, 1945 after the Proclamation of Indonesian Independence. It was started as Badan Keamanan Rakyat-Laut or BKR (Agency of the People’s Security Sea Service) with only wooden ships, a few landing craft and weapons left by Japan. It was developed by the alumni of the SekolahPelayaranTinggi (Maritime College) and the Koninjklijk Institute de Marine (Dutch Naval Academy). Following the establishment of Indonesian Armed Forces (ABRI) on October 5th 1945, BKR became known as AngkatanLautRepublik Indonesia (ALRI). It was used until 1970, until changed to TentaraNasional Indonesia AngkatanLaut (Indonesian Navy).57
54Peraturan Presiden Republik Indonesia no.7 Tahun 2008 Tentang Kebijakan Umum Pertahanan Negara (Presidential Regulations No.7/2008 on General Policy Guidelines on State Defence Policy) 2008. 55 Alexandra R. Wulan. (2009) Satu Dekade Reformasi Militer Indonesia.p.97. Jakarta : Pacivis and FES. 56Buku Putih Pertahanan Indonesia 2008.p.121. 57Tentara Nasional Indonesia- Angkatan Laut.Retrieved 23rd, 2013 in http://www.globalsecurity.org/military/world/indonesia/alri.htm. 30
Vision With the vision of “The realization of a reliable and respected Navy”58, The Navy is responsible for naval operations, led by a Chief of Naval Mission Staff (Kasal). In achieving the vision, the Navy has the following mission59: 1. Fostering Strength and Capabilities ongoing Navy effectively and efficiently. 2. Guarantees the sovereignty and law, security of the seas, the territorial integrity of the Republic of Indonesia as well as the implementation of naval diplomacy and empowerment sea defense area. 3. Embody a moral and professional Navy Personnel. 4. Embody the Navy forces towards the Principal Minimum Strength (Minimum Essential Force (MEF) 5. Ensuring the implementation of humanitarian aid tasks 6. Embody healthy and charismatic Indonesian Navy 7. Embody healthy and prosperous Navy Forces
Logo
a. The anchor shape symbolizes : Tools for Anchored/ Stop Ship at Sea in emergency timing. b. JalesvevaJayamahe means : Triumphed on the sea, win on the land
Based on Article 9 of Law No.34 of 2004 about Indonesian Forces, Marine forces assigned as follows60 :
1. Carry out military duties in the field of naval defense
58Visi Tentara Nasional Indonesia Angkatan Laut.Retrieved October 23rd, 2013 in http://www.tnial.mil.id/Aboutus/VisiMisi.aspx. 59Misi Tentara Nasional Indonesia Angkatan Laut.Retrieved October 23rd, 2013 in http://www.tnial.mil.id/Aboutus/VisiMisi.aspx. October 23rd, 2013 60Tugas Pokok TNI Angkatan Laut.Retrieved October 23rd, 2013 in. http://www.tnial.mil.id/Aboutus/TugasTNIAL.aspx. 31
2. Enforce the law and maintain security in the sea area of national jurisdiction in accordance with the provisions of International Law that has been ratified 3. Navy task diplomacy in support of foreign policy set by the government 4. Carry out military tasks in the construction and naval forces 5. Implement empowerment sea defense area
While military duty in accordance with Article 7 of Law on the TNI in 2004 to uphold the sovereignty of the state is to maintain the territorial integrity of the Unitary Republic of Indonesia based on Pancasila and the 1945 Constitution and protect the nation and the entire homeland of Indonesia and disorders of the threat to the integrity of the nation and the state.61
II.2.1 Indonesian Navy’s Posture As one of the founding countries of the requirements, national defense is a very important function in determining the life of the state. National defense is to ensure the survival function and defend itself from any threat that comes either from outside or that arise from within the country. That’s why every country should have a reliable defense capability in maintaining the viability of the nation.62
Management of defense systems that are universal embodied in the construction of the national defense posture, which reflects the power of the state to defend themselves and arrayed in integration strengths, capabilities, and deployment of national resources are organized in a system of national defense. The main cause on which to base the design drafting the country’s defense posture is a threat to national sovereignty, territorial integrity of the
61Verse 7 of UU TNI year 2004 about TNI, p.21-22. 62DepartemenPertahananRepublik Indonesia.Postur Pertahanan Negara Republik Indonesia, Pendahuluan. DepartemenPertahanan.(2007). Jakarta. p.1 32
Unitary Republic of Indonesia, and the safety of the nation. Those threats can come from inside and outside the country.63 Strategic environmental stability became part of Indonesia’s national interests.64 Indonesia is concerned to look at the situation that threatens world peace and regional stability. Therefore the implementation of Indonesian national defense functions aimed to achieve national stability so that a conducive environment for regional and global stability. In accordance with Law No. 34 of 2004, article 11 paragraph (1) military posture constructed and prepared as part of the national defense posture to address the armed threat. In article 11 paragraph (2) states that the military posture as referred to in paragraph (1) built and prepared in accordance with the country’s defense policy.65 Defense Posture year 2007 is consisting of Defense Posture and Military Forces Posture (TNI Posture). What is meant with TNI posture is a form that reflected the military appearance of integrating strength, ability and degree of TNI forces. Development and deployment of military force must consider and prioritize security areas, in border areas, areas prone to conflict and remote islands according to geography and defense strategy.66 Military Defense Posture is the the military posture which basically consists of the Army, Navy, and Air Force. TNI Headquarters (Mabes TNI) and Ministry of Defense (Kemhan) are not including in this posture. Therefore in the description of the organization of the national defense posture will be divided into five groups of budget users. The main focus of this research is the Navy in a degree of Defense. To perform all duties listed in the Acts, The Navy’s strength arranged in Weapon System Integrated Fleet which consist of KRI (Ship of Republic
63Departemen Pertahanan. Postur Pertahanan Negara, Kecenderungan Perkembangan Lingkungan Strategis yang Mempengaruhi Kebutuhan Postur Pertahanan, p.3. (2007). Jakarta. 64Departemen Pertahanan Republik Indonesia. Postur Pertahanan Negara, Lingkungan Strategis Global. Departemen Pertahanan Republik Indonesia, p.3.(2007). Jakarta. 65Postur TNI sesuai Undang-Undang No.34 Tahun 2004. Retrieved October 31st, 2013 from www.tni.mil.id/view-4979-postur+tni+sesuai+undang+undang+no34+tahun2004.html 66Postur TNI sesuai Undang-Undang No.34 Tahun 2004. Retrieved October 31st, 2013 from www.tni.mil.id/view-4979- postur+tni+sesuai+undang+undang+no34+tahun2004.html.October31st , 2013 33
Indonesia), KAL (naval Vessels), Aircraft, Marine, and Base. Here is the table of Weapon System Integrated Fleet of Indonesian Navy sourced from the National Defense Posture 2007.
Weapon System Integrated Fleet of Indonesian Navy
WSIF UNIT READINESS EXPLANATION
KRI (Ship of 143 65% 35% not feasible Republic to operate Indonesia KAL (Naval 312 82% Vessels) Aircraft 68 52% 48% not feasible to operate
MARINE 2Marines 55% Equipped with :
1 Infantry Brigade 429 Combat Vehicles& 42 1 Exercise Cannons Command
1 Denjaka
Base Navy Bases: 11 Main Bases 60% (Navy Base Class A)
22 Navy Bases Class B 20 Navy Bases 60% Class C
3Particular Navy
34
Bases 60%
Naval Air Base:
1 Class “A” 60% 7 Class “B”
2Class “C”
Maintenance and Repair
6 Class “A”
4 Class “B”
2Class “C”
Marine Bases:
2 Bases
II.2.2 Indonesian Waters Conditions and The Needs of Navy Beater Elements Those two parameters have strong relations. The relations are : a. Sea room: affect the principle the freedom of manoeuvre. The variations are : 1. Open Sea: waters which are directly related to Indonesian ocean and the Pacific Ocean. Characteristics: does not allow the use of the islands. This leads to the need of high quality weaponry and sensors into the main pedestal. High quality weaponry play active role because they have to face
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the great challenge of the nature. Wave height can reach more than 2.5m (in normal circumstances 2m)/ sea-state 5. It takes elements hitter who has a long endurance. From these conditions, operation requirements beater combat elements are submarines, corvettes type class, Fregate, and Destroyer. These ships have had a Surface to Surface Missile (SSM), Surface to Air Missile (SAM) and Torpedo so as to face the threat of air, on the water and underwater. 2. Semi Enclosed Water67 : includes the Strait of Malacca, Natuna Sea, Celebes Sea, Arafura Sea. Characteristics : allowing the use of the islands I order to implement Archipelagic Warfare, big natural challenge, especially at the height of the summer monsoon and the east wind. The distance between the base of logistic support relatively soon so that logistic support is more easily carried out. Most of them (except the Sulawesi Sea) is a shallow-water, that is why there is almost no threat from enemy submarines. From the above conditions, the operation requirement combat element is small vessels and can move quickly from the type of Fast Patrol Boat (FPB) which equipped with Surface Missile and Surface to Air Missile (SAM). While in the Celebes Sea is relatively deep water. It takes the Corvette types, Fregate and above class that has the capability underwater detection and torpedoes to anticipate the entry of enemy submarines. Moreover, it can also be applied to submarine counter submarine.
67 Enclosed or Semi Enclosed Water in United Nations Covention on Law of The Sea. Retrieved 31th October 2013 from http://www.un.org/depts/los/convention_agreements/texts/unclos/unclos_e.pdf 36
3. Enclosed Water: 68 covers all Indonesian archipelagic waters (Archipelagic Water). Divided into two types of shallow waters (Sunda and Sahul). The character of the sea among others: the optimal utilization of the islands in the implementation Archipelagic Warfare, natural challenges relatively small, and the distance between the base of logistic support relatively near. From these conditions, the type of elements required hitter is kind of small vessels and can move quickly from the tupe of Fast Patrol Boat (FPB). For shallow waters required Fast Missile Patrol Boat (FPB- M) and mines, while the deep waters needed for Fast Missile Patrol Boat (FPB-M), Fast Patrol Torpedo Boat (FPB-T) and submarines.
b. Sea Bottom Profile Sea Bottom Profile influence on mining strategy. Nearly half the shallow marine waters of Indonesia is the potential for the application of the mine lands. However mine lands operations remain to be implemented according to the mine lands doctrine. An overview of Indonesian Sea Bottom Profile is:
1. Continent Effect : forming a relatively flat seabed and the shallow water with an average depth of less than 100m. For example: Sunda Shoal and Sahul Shoal. The caracteristics of these waters is good for the mining strategy but less conducive to submarine. 2. Ocean Effect : forming seabed relief is irregular. It is a deep water that reaches 200 – 7000 m includes Indonesian Archipelagic Water central region and some parts of
68 Enclosed or Semi Enclosed Water in United Nations Covention on Law of The Sea. Retrieved 31th October 2013 from http://www.un.org/depts/los/convention_agreements/texts/unclos/unclos_e.pdf
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eastern Indonesia, and ZEEI Suwu Sea and Sulawesi Sea. The characteristics is conducive to the submarine but do not allow for the mining strategy.
From the above explanation, the Navy needs to bat elements include submarines, ships Corvette types, Fregate, Destroyer and the class above (below HeliAnti Submarine on board), Fast Missile Patrol Boat (FPB-M), Fast Patrol Boat Torpedo (FPB-T) and mines.
II.2.3 The Needs of Armaments System of The Navy In addition to the elements of the bat, it takes other types of weapons systems that are not less important.
1. Striking Force Consists of Submarine, Destroyer, Fregate (Watchtower Missile Destroyer/ PKR), corvet (Destroyer Guard/ PK), Helicopter Anti- Submarine, Fast Patrol- Torpedo Boat (FPB-T), Fast Missile Patrol Boat (FPB-M), Buru Mine (BR) and Sea Mines. 2. Patrolling Force The element consists of a Fast Patrol Boat – Gun (FPB-G), Fast Patrol Boats (PC-36 and PC-40) and Maritime Patrol Aircraft (MPA). In peacetime use of directed patrol elements to prevent and overcome various forms of maritime security threats and in times of crisis.War directed jointly carry out naval beater element. 3. Supporting Force Comprised of Personnel Transport ship (BAP) Transport Tank (LST), Tanker (BCM) Hydro-oceanography (BHO), Ship Headquarters (MA), Boat Repair (BA), Ship Delay (BTD) and Train Ship (LAT). Elements help to support the civic mission patrol and operation. 4. Marines Weaponry In order to support power projection forces required landing Amphibious Tank, Panzer Amphibians, Lifeboat landing, motor vehicle (Ranmor), hovercraft, etc...
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II.2.4. Indonesian Naval Doctrine A Brief History of Navy’s Doctrine Eka Sasana Jaya Naval Doctrine outlines the history of the Navy’s role in the world. The greatness of a nation or state is determined by the maritime power of the sea. Sea power is power of the merchant marine capable of sailing across the ocean to make trade. Naval presence is to provide security at sea. Navy’s Doctrine begins with the formal inauguration of the ALRI Doctrine Eka Sasana Jaya by Decree of Minister/ Commander of the Navy number : 5000.1 on August 17th 1965 and subsequently approved by the President in 1965.69 The definition of Military Doctrine is the fundamental principles that are used by the military as a guide to act in achieving goals. The doctrine is not a set of rules who’s simplicated without the need for thought, but rather a framework for understanding the nature of armed conflict and the use of military force. The aim is to guide, explain and teach, as well as providing a basis for discussion and further study.70 The Outline of Eka Sasana Jaya Navy’s Doctrine a. On Marine Environment and Nature Seapower. In Chapter 1 explain about what is meant by the marine environment and maritime strategic environment of the underlying dimensions of military strategy, combat multi-dimensional space and sea power attributes. b. On War and Armed Conflict. The next chapter discusses the nature of war an armed conflict in a dimension of conflict. This condition push the modern conflict is divided into several levels of conflict and conflict escalation. Thus sea warfare will also be divided in levels of command and
69 Doktrin TNI Angkatan Laut: Sejarah Doktrin TNI AL Eka Sasana Jaya. Retrieved November 12th, 2013.http://www.tnial.mil.id/Aboutus/DoktrinTNIAL.aspx 70 Doktrin TNI Angkatan Laut :Hakekat Doktrin. Retrieved November 12th, 2013.http://www.tnial.mil.id/Aboutus/DoktrinTNIAL.aspx. 39
planning as well as its relationship with the international conventions. c. About Conception of National Defence in the Mediterranean. This chapter examines the meaning of the Indonesian sea. It can be used as the basic conception of national defense. This conception also accommodate national interests as well as the function and role of naval poured into the main points of the archipelago sea defenses. The application of this concept is limited to the area of operation/ focal certain areas as theater of war and in line with the concept of involvement and training areas according to the principles of sea warfare. d. About Power and Maritime Capability. The next chapter provides an overview of how the power and capabilities of maritime projected to become the Navy’s ability to simultaneously implemented in the form of capabilities in marine operations. e. About Principles of The Use of Force Sea. This chapter flows from operating capability at sea by the Naavy in the use of the tasks of war and non-war duty use. f. About Planning, Implementation, and Operation of the Maritime Campaign. This chapter describes the purpose of a military strategy to be achieved utilizing the art of surgery. This objective is achieved through the maritime campaign was preceded by an integrated planning process and the corresponding detailed stages maritime campaign. g. About Command Control of Logistic Support, The final chapter describes the problems of command and control during ongoing naval operations in support of maritime
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campaign, mentioned about the electronics and communications and logistical support that can be given. 71
Navy doctrine Sasana Eka Jaya became the foundation other doctrines embodied in books instructions and guidelines used by the Navy ranks.
Navy doctrine Eka Sasana Jaya explaining the nature of the marine environment and sea power, war and armed conflict, the conception of national defense at sea, maritime powers and abilities as well as give you an idea of how the strength of the Navy can contribute to national defense. This is in line with how the possibility of combat power can be used, in conjunction with each generation as well as with other components of the nation, for the present and for the future. 72
71Doktrin TNI Angkatan Laut: Garis Besar Isi Doktrin TNI AL Eka Sasana Jaya. Retrieved November 15th, 2013 from http://www.tnial.mil.id/Aboutus/DoktrinTNIAL.aspx. 72Doktrin TNI AL: Stratifikasi Doktrin TNI AL Eka Sasana Jaya. Retrieved November 15th, 2013 on http://www.tnial.mil.id/Aboutus/DoktrinTNIAL.aspx 41
CHAPTER III
INDONESIAN DEFENCE INDUSTRY, THE NAVAL INDUSTRY (PT PAL INDONESIA PERSERO), AND THE ROLE OF INTERNATIONAL COLLABORATION
III.1 Indonesian Defence Industry Based on Law of Republic Indonesia number 16 year 2012, verse 1, Defence Industry is composed of the National Industrial State-Owned Enterprises and Private Companies either individually or in groups. It is defined by government to partially or completely produce the defense and security equipment, maintenance services to meet the strategic interests in the fields of defense and security, for which is located in territory of Republic Indonesia. 73 While that is considered by the Defence and Security Equipment Tool is all the equipment to support the national defense, security and public order. The purpose of Defense Industry Implementation is : a. To embody the Defense Industry professional, effective, integrated, and innovative; b. To realize the independence of fulfillment Defence Equipment Tolls and c. To improve the ability to produce defense and security equipment, maintenance services that will be used in order to build strength and security of a reliable defense.
The functions of the Defense Industry are :
a. Strengthening the Defense Industry; b. Developing technologies that benerfit the defense industry, defense security, and public interest;
73 Undang-Undang Republik Indonesia Nomor 16 Tahun 2012 Tentang Industri Pertahanan, pasal 1 ayat 1. (Law of Republic Indonesia Number 16 year 2012 about Defence Industry, verse 1 paagraph 1). 42
c. Increasing economic growth and employment; d. Building self-defense and security systems, and e. Building and improving human resources to underpin the development and utilization of the Defense Industry. In developing its defence industry, Indonesia faces two key challenges. The challenges are the promotion of cooperation between related government institutions as it will integrate six related ministry under one framework of called The Committee of the Defence Industry (Komite Kebijakan Industri Pertahanan) within the armbit of other prominent industries and ministries, as it is requires the state to be main source of funding by providing safety nets through necessary means such as loan provisions and credit guarantees to banks and other financial institutions. 74 1. The promotion of cooperation between government institutions. KKIP will be chaired by the president. It has aimed at changing the approach to national planning particularly how each ministry conducts its business, with the primary aim of championing the development of the local defence industry. It is including the changes in direction of R&D policy, foreign policy approaches, and other related policies such as the Industrial policy and University-based research.
74RSIS Policy Report. Indonesia’s Emerging DefenceEconomy : The Defence Industry Lau and Its Implications, Current Indonesia’aDefence Industry and the Surge of Defence Cooperation. S.Rajaratnam School of International Studies, p.4. 43
The Committee for Defence Industry (KKIP)75
Head :
President
Daily Chairman : Ministry of Defence
Daily Vice Chairman : Ministry of State Owned Enterprise (BUMN)
Ministry of Ministry of Ministry of National Planning Ministry of Commander in Head of Industry Research and Finance Institution Foreign Affairs Chief of TNI Police Technology (BAPPENAS)
Based on Act, in carrying out its functions, the duties and powers of KKIP are:
a. Formulate strategic national policy in the field of Defence Industry b. Develop and establish a Defense Indutry Master Plan, for medium and long term; c. Coordinate and control the implementation of national policies Defense Industries; d. Establish the policies to meet the needs of Defence and Security Equipment Tools; e. Coordinate foreign cooperation in order to promote and develop the defense industry; f. Set the standard of Defence Industry g. Formulate the funding and/or financing the Defence Industry, h. Formulate the mechanism of sale and purchase of Defense and Security Equipment for and from overseas country i. Monitor and evaluate the Defence Industry Policy periodically
75 Indonesia’s emerging Defence Economy: The Defence Industry Law and Its Implications. RSIS Policy Report.S. Rajaratnam School of International Studies. 44
2. The policy situates the indigenous defence industry Indonesia’s government will do the market intervention only when necessary. For example is by providing preferential tariffs for products and fiscal incentives such as free imports and taxes. According to Business Monitor International (BMI), “Indonesia Defence& Security Report Q1 2013,” confidence in the local defence industry is growing. For example, PT PAL (Penataran Angkatan Laut, Indonesian Navy Industry) has announced in June 2012 that it plans to expand its business, an aim to hire 1,000 new workers. PT. Dirgantara also plan to take on 1,500 new workers. It indicates growing confidence in our several defence industries. The Government also introduce the concept of Minimum Essential Forces that will divide the defence development in Indonesia into third stages development. First Stages : 2010-2014 Second Stages : 2015-2019 Third Stages : 2020- 2024
Within each step, the allocation of defence GDP will be gradually increased. 76 The allocation of the defence budget for non-military infrastructure (supporting and reserve components) such as logistics and human capital will also be increased. R&D has become a main concern specifically as the new defence law stipulates a minimum budget allocation of 5 percent from total profit.
During the first and second stages of the development, Indonesian government focused on creating a set of regulations while simultaneously pioneering the development of absorptive capability (in the form of
76The Concept of Minimum Essential Forces.RSIS Policy Report, Indonesia’s Emerging Defence Economy, The Defence Industry Law and Its Implications.p.5. 45
reliable manpower or human capacity and the basic capacity to manufacture).77
III.1.1Indonesia Defence Industry Policy Indonesia Defence Industry Law have to limit the closer cooperation with potential partner countries-clauses that carry strong nationalistic. The action from the government is by choosing the local ownership rather than foreign ownership. Indonesian government control over the ownership of assets in the overall process of the value chain within the main weapon industry category. Indonesia Defence Value Chain. Indonesia Defence Industry Policy is very important because its functions as a guideline in steering the direction and setting the goals that Indonesia wants to achieve in developing its own defence industrial base. As the 16th largest economy in the world and capitalizing on its growing economy, Indonesia is ready to change and modernize the defence industry. This policy is useful to change the course of Indonesia’s approach in dealing with its defence Industry. The current situation of Indonesia Defence Industry is very lack of formal offset mechanism that often excludes technology transfers. The policy is being examined in the Defence Industry Law in UU No.16 2012 on Defence Industry. There are many steps in achieving the Law: a. Indonesia needs the establishment of a strong and clear implementation mechanism. It requires : The creation of a clear roadmap that embraces reachable goals and definite timelines Reward and punishment system to ensure enforcement and adherence to the law, considering the possibility that stakeholders may exploit current loopholes 78
77Allocation for GDP in the first and second step. In RSIS Policy Report, Indonesia’s Emerging Defence Economy, The Defence Industry Law and Its Implications .p.5. 78RSIS Policy Report. Indonesia’s Emerging DefenceEconomy : The Defence Industry Law and Its Implications, The Way Forward point 1. S. Rajaratnam School of International Studies.p.8. 46
b. Indonesia needs the commitment to reduce the gap between proposed and actual budgets. The discrepancy between proposed and actual budget being allocated for defence can and should be minimized. The real cases, for instance, in 2012 the budget proposed was US$ 13.68 million, yet the approved actual budget turned out to be only $5,75 million. As a result, the Ministry of Defence was forced to postpone further modernization efforts.79 c. Indonesia needs to take steps to ensure policy complementary as a supportive and operational gesture. This law must covers a broad spectrum, there has to be complementary policy with regard to its implementation. Such subsidiary policies can cover aspects of coordinated research at the national level between universities and think-tanks and other related policies of critical importance to various Defence-affiliated stakeholders.80 d. The assurance of policy harmonization between stakeholders. There has to be policy between various stakeholders. The adoption of the multi-stakeholder approach will undoubtedly create its own complications particularly when it comes to harmonizing its approaches and SOPs (Standard Operating Procedures). The challenges can be faced by KKIP in the area of unnecessary overlaps between stakeholders. The real case for example, there is a real possibility of an overlapping mandate between the KKIP with the Ministry of Defence. The UU No.3/2002 on Defence has mandated the strategic planning relating to the defence industry weapon acquisition and funding fall under the authority of the Ministry of Defence. 81 However KKIP has shifted responsibility to involve a broader group of related ministries in its decision making process. Confusion may also arise amongst overlapping authorities within
79RSIS Policy Report. Indonesia’s Emerging DefenceEconoy : The Defence Industry Law and Its Implications, The Way Forward point 1. S. Rajaratnam School of International Studies.p.9. 80RSIS Policy Report. Indonesia’s Emerging DefenceEconoy : The Defence Industry Law and Its Implications, The Way Forward, point 2. S. Rajaratnam School of International Studies. p.9 81 The UU No. 3 year 2002 on Defence 47
related ministries. Those things can be problematic as there could be a perception of interference and disruption to other ministries presenting a challenge to the authority of certain stakeholders due to the lack of clarity on the division and management of labour. In order to prevent potential misunderstanding occurring between stakeholders, the boundaries of collaboration have to be clearly defined and harmonized across sectors.82 e. Indonesia needs to exercise greater openness and flexibility with regard to international opportunities in the arena of defence industry cooperation. There is a tendency policy-makers to over-emphasize self-reliance and this can lead to poor policy implementation. A more practical and flexible policy would ensure the healthy development of local industries, technological vibrancy and absorptive capabilities in Indonesia, along with promoting transparency and eradication corruption. The Indonesian government needs to reassess its strong emphasis on self-sufficiency and autarky its implications for policy rigidity. While current existential threats can be contained the cost of weapons acquisition is rising rapidly. Emphasizing self-reliance may not the most viable solution. The government needs to be flexible by placing emphasis on cooperative endeavor rather than championing the notion of autarky. Furthermore, the Indonesian government should be more opern towards opportunities that may arise amidst such condition like the internationalization of defence is also viable strategy to increase purchases and enjoy economies of scale. Doing so will open up more opportunities and advantages to Indonesia. This would include the economic diversification of R&D incorporating the sharing of costs
82RSIS Policy Report. Indonesia’s Emerging DefenceEconoy : The Defence Industry Law and Its Implications, The Way Forward point 3. S. Rajaratnam School of International Studies. p.9 48
and risks and through technology transfer better develop local industries vis-avis collaborative engagements.83
III.2Indonesia’s Naval Industry (PT PAL Indonesia Persero) Indonesia is the largest maritime country in the world. Indonesia is rich in natural resources, mining, fisheries and tourism. Therefore, policy development, and deployment needs to be carried out in synergy and coordinated. Ship as means of transportation and as a means/ tool work mining, fisheries, tourism, as well as the main tool of the defense system. As an essential commodity the ship can also be categorized as part of the national infrastructure development and naval industry is one of the strategic industries that are important for the future development.
The richness of Indonesian waters make this country becomes important to others countries of Asia and Europe. It is seen from the potential for export-import shipping that rise for about 8-9 percent every year. Naval Industry also has started to increase. More and more companies are growing the naval building.
PT PAL Indonesia Persero is a State-Owned Enterprises which is engaged in Naval Industry.
Brief History of PT. PAL Indonesia (Persero)84 PT. PAL Indonesia (Persero), start from a shipyard named MARINE ESTABLISHMENT (ME) and inaugurated by the Dutch government in 1939. During the Japanese occupation, the company changed its name to Kaigun SE 2124. After independence, the Indonesian government nationalized this company and changed its name to Penataran Angkatan Laut (PAL)/ Navy Upgrading.
83RSIS Policy Report. Indonesia’s Emerging DefenceEconoy : The Defence Industry Law and Its Implications, The Way Forward, point 4. S. Rajaratnam School of International Studies.p.10. 84Corporate Profile PT PAL Indonesia (Persero).Retrieved January 8th, 2014 from http://www.pal.co.id/v5/company/index.php?page=E_3_7. 49
In accordance with the certificate no. 12 of Notary Moentoro Hadi, SH., the company changed its status from General Company became a Limited Liability Company. The company is located in the threshold of Surabaya. Its main activity is producing warships and commercial vessels, providing ship repair and maintenance services, as well as general engineering with a particular specification based on order. The ability of PT. PAL Indonesia (Persero) itself has entered the international market with quality that is recognized worldwide. Product The qualified products of PT PAL Indonesia (Persero), which are: o Boat Commercial Products85 The commercial ship products development directed at the international market, the national naval industry model and pioneering shipping for passengers and goods (cargo). Annual production capacity has reached 3 ships with 50,000 DWT size and 2 units of 20,000 DWT ships by size per year. At this time PT PAL Indonesia (Persero) has mastered the production technology for ships such as : Bulker ship up to 50,000 DWT, container ships up to 1,600 TEUS, tankers up to 30,000 DWT, passenger vessels up to 500 PAX. While the products that have been developed is including container ships up to 2,600 TEUS, Chemical Tanker vessels up to 30,000 DWT, LPG Carrier vessels up to 5,500 DWT. o Fast Boat and Special Boat86
85 PT PAL Indonesia (Persero) Corporate Profile : Produk Kapal Niaga. Retrieved January 8th, 2014 from http://www.pal.co.id/v5/company/index.php?page=E_3_7. 86PT PAL Indonesia (Persero) Corporate Profile : Produk Kapal Cepat Khusus. Retrieved January 8th, 2014.http://www.pal.co.id/v5/company/index.php?page=E_3_7. 50
Currently, PT PAL Indonesia (Persero) is developing products that will be marketed in the country, especially to meet the needs of the central government agencies such as the Department of Defense, the National Police, The Ministry of Maritime Affairs, Ministry of Finance/ Directorate General of Customs and Excise and Local Autonomy and Private. Ministry of Maritime Affairs, Ministry of Finance / Directorate General of Customs and Excise and Local Autonomy and private. Products that have been mastered is including: . Ship Landing Platform Dock 125 M . Fast Patrol Boat class steel hull 57 M . Fast Patrol Boats/ Kapal Khusus Lambung Aluminium klas up yo 38 M . Tugboat Ship and Anchor Handling Tug/ Supply, up to 6,000 GRT class . Passenger Ferry up to 500 pax o Maintenance and Repair Service Products87 Product Maintenance and Repair Services products include depo level ship maintenance with 600,000 DWT docking capacity, per year. The others services are : Annual/ special survey and overhaul for commercial ships and warships; electronics repairs and maintenance; weapons repairs and maintenance; and submarine overhaul. Market opportunity for this category comes from the Navy, private, government, and ships that stopped and anchored in Surabaya (the number reach 6,800 ships per year). General Engineering Products88
87PT PAL Indonesia (Persero). Corporate Profile : Produk Jasa Harkan. Retrieved January 8th, 2014 from http://www.pal.co.id/v5/company/index.php?page=E_3_7. 51
Currently PT PAL Indonesia has mastered many products, such as Steam Turbine Engineering General Assembly up to 600 MW, Balance of Plant Components and boilers up to 600 MW, 40 MW Compressor Module, Barge Mounted Power Plant 30 MW, Pressure Vessels and Heat Exchangers, Generator Stator Frame up to 600 MW. While the general engineering products are being developed is a Steam Turbine Power Plant, Jacket’s structure up to 1000 ton and monopod Platform up to 1000 tons. The Spearheads of Maritime Industrial Revitalization89 As one of the spearhead of the national maritime industry revitalization in Indonesia, PT PAL Indonesia (Persero) always strive to reach the goals. Challenges faced within the last 5 years are an increased need for ship as a direct result of the revitalization of industry which will encourage the increase of domestic shipping. The growth in sales of commercial ships continues to be maintained by “Product Mixed” optimization strategy, such as Bulker Ship, Container, and Tanker (either Chemical Tanker or Gas Tanker). Domestic market for commercial ship products aimed to national shipping building programs or pioneering shipping for passengers and goods (cargo). While the direction of marketing products such as warship, Fast Boat and Specific Vessels are more focused to the domestic market both for the central government such as the Department of Defense, the National Police, the Ministry of Maritime Affairs, Ministry of Finance/ Directorate General of Customs and Excise and Local Autonomy and private. The development of maintenance and repairing service cover ship and non-ship maintenance and repairing service (depot level with
88PT PAL Indonesia (Persero). Corporate Profile : Rekayasa Umum. Retrieved January 8th, 2014 from http://www.pal.co.id/v5/company/index.php?page=E_3_7. 89PT PAL Indonesia (Persero).Annual Report.Retrieved January 9th, 2014 from http://www.pal.co.id/v5/investor/index.php?page=E_5_4. 52
capacity up to 600.000 DWT per year) ; the annual/ special survey and overhaul for commercial ship and warship; electronics maintenance and repairing, weapons maintenance and repairing, and submarine overhaul. The market opportunities primarily in the domestic market, such as the Navy, private, and government. General engineering product development is directed to the maintenance and development of the company’s position as a supplier of “sourcing” in the international power generation industry of the world, while the modular product and the EPC will be more focused role in the domestic market. To support the development direction, the company has been made cooperation with Mitsubishi Heavy Industry in the field of design of boilers for power plants, Wärtsilä diesel engines for assembly, AMEC Process and Energy for the design if gas turbine and steam systems. Naval Shipbuilding PT PAL Indonesia is producing various types of Naval Ship, such as : a. Fast Patrol Boat 14 m b. Fast Patrol Boat 28 m c. Fast Patrol Boat 38 m d. Fast Patrol Boat 57 m NAV e. Fast Missile Boat 16 m f. Fast Patrol Boat 15 m g. PAL Landing Platform Dock 125 m h. PAL Motor Yacht 28 m To assist the warship’s mission, each ship equipped with computer navigation system and advanced control standard tool of war with the attached specification upon request.
III.3 International Collaborations In order to modernize defense equipment for the military, the government established a strategic policy to support the domestic defense industry
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self-reliance and reduce dependence on other countries. In addition simultaneously, the national defense industry is currently being driven to continuously improve the quality of production for defense equipment and the ability to improve competitiveness.
Although the government has committed and strive to empower domestic defense industry both government-owned enterprises or private, if in its implementation is not fully able, should be pursued through collaboration, production and development with other countries.90
The external defence collaboration will boost Indonesia’s defence market, making it one of the fastest-growing in the world. Indonesia collaborate its defence ties with many prospective countries like the United Kingdom (UK), France, Germany, the European Union, Australia, South Korea, China, India, Brazil, Japan, Russia, Turkey, Vietnam, and the United States.91
The Collaboration can be through Transfer of Technology and Joint Production with other country and by having the Offset Policy.
III.3.1Indonesia’s Defense Offset Policy The End of the Cold War brought great changes in international arms trading. The transformations change the position of the seller’s market to the buyer market.92This condition makes the stronger bargaining position for buyers position. State who wants to develop their defence equipment can demand other things more than just the equipment that they order. Since this situation offset policy is needed in international arms trading. Based on government of United States, offset can be defined as Industrial compensation practices required as a condition of purchase in either
90Kolaborasi dengan Negara Lain. Retrieved 23rd of March 2014 from http://dmc.kemhan.go.id/post-sekjen-kemhan-ri-jika-industri-pertahanan-nasional-belum- sepenuhnya-mampu-harus-dikejar-dengan-ko.html 91External Defence Collaboration. In RSIS Policy Report, Indonesia’s Emerging Defence Economy, The Defence Industry Law and Its Implications. p.6. 92 Seller market happens when the number of seller is greater than the number of the buyers, and vice-versa 54
government-to government or commercial sales of defence articles and/ or defence services.93 Based on British government, offset can be defined as the term used to describe the situation where, in the event of an overseas procurement…, the seller is required to compensate the buyer for a perceived loss to the economy of the purchasing country.94 Offset can support the local manufacturing activity. It can reduce the unemployment of the nations and bring many more effects to the economy. Offset could bring many advantages for the buyers. However, offset does not mean the total loss for the sellers. The sellers can get the pride of winning procurement contract of one country. It can be a way in understanding the culture of recipient country.95 By having the offset, the buyer countries then have the opportunity to show their capability to the seller by having co-production. It can defined in economy that the seller will then invest their capital to the buyer country. It hopefully will be able to build the buyer country’s economy in the future. The buyer country also can request the Technology-Transfer. It could be a cheap and fast way to build country’s industrialization.96 Indonesia is a developing country which needs to build its own industrial capabilities. Offset policy becomes the tool to develop its own defence industry. Like other countries, this policy hopefully will bring the wide ranging changes of the countries defense procurement policies. By holding this policy, Indonesia expects to call foreign contractors to transfer technologies to Indonesian companies to facilitate our project. At least 40 percent of
93 J. Brauer and JP. Dunne, Arms Trade Offsets and Development.Accessed from http://carecon.org.uk/DPs/0504.pdf. December 2, 2013 94International Offset, Definition and Terminology.http://www.capitol.hawaii.gov/specialstudies/aerospace/8.%20Jim%20Grady.pdf. December 2, 2013 95Yuniorrita, Sezsy. The Role of Offset Practices In The Enhancement Of Indonesian Defence Industrial Company : A Case Study of PT Dirgantara Indonesia. p.14. 96Yuniorrita, Sezsy. Chapter II Theory and Practice of Defence Offset, The Role od Offset Practices In The Enhancement Of Indonesian Defence Industrial Company : A Case Study of PT Dirgantara Indonesia. p.11. 55
production contract is assisted by the foreign contractors to take place under licensed manufacturing arrangements. It was being finalized by the Ministry of Defence(MoD).97 Offset can be divided into two types, direct offset and indirect offset. It can be called as indirect offset if the offset project given is not related with the goods that is being bought. For example is an offset program in Saudi Arabia, Al Yamamah offset program, an offset project where Saudi Arabia enjoyed Sugar Refinery and Pharmaceutical Plant for buying UK’s defence equipment.98 In the other hand, direct offset can be defined when technology transfer will be linked to the purchase of the goods, or in defence sector. Defence sector itself can be divided into three types: 1. Co-Production : “Government-to-Government production contracts where technical information required producing weapon is transferred from one country to another. Development and production are cooperatively generated and coordinated among the participating nations.”99 Co-Production agreements is similar like licensing. It provides the buyer the technical information. So the buyer can produce the partical items in similar ways. Co-Production not only produce the particular items of military equipment only for purchasing country’s need, but also produce the same military equipment to fill orders for that equipment by the government of the country selling the weapons.100 2. Licensed Production
97Grevatt John. Indonesia Prepares to Introduce Defence Offset Policy. p1. www.defenceviewpoints.co.uk/defence-industry/indonesia-prepares-to-introduce-defence-offset- policy 98 Mathews. Saudi Arabia’s defence offset Program. 99 Matthews, Ron. Co-Production. (1997). Butter for Guns. 100 Lloyd J.Dumas. Weapons Procurement and Development: Do Offsets Mitigate or Magnify the Military Burden. Retrieved December 2nd, 2013 from www.ecaar.org/Articles/SA%20Papers/DUmas.pdf 56
Licensed Production can be described as transfer of knowledge in order to manufacture defence equipment from another country. 101 Based on the Dictionary of Military and Associated Terms, US Department of Defence (2005) , Licensed production means “ Providing for the transfer of production information which enables the foreign government, international organization, or commercial producer to manufacture, in whole or in part, an item of US defence equipment.”102 An example of Licensed Production project is when Indonesia managed to assemble the NC-212 under a licensed agreement from CASA-Spain, and then sold the aircraft globally. 3. Buy Back “Where the weapons supplier agrees to buy (or find someone else to buy) part or all of the output of the plant that was transferred to the weapons purchasing country, for a specified period of time”103 The concept of buyback can be defines when the weapon supplier are simply buys the equipment to be used in the weapon that being purchased. It is also called corporate repurchase.
The objective of the offset policy is: a. To improve indigenous industrial capabilities b. Reduce dependency on imports c. Create meaningful employment in a country whose economy is forecast to expand rapidly over the next decade.
101 Yuniorrita, Sezsy. Chapter II Theory and Practice of Defence Offset; Licensed Production, The Role of Offset Practices In The Enhancement Of Indonesian Defence Industrial Company : A Case Study of PT Dirgantara Indonesia. p.11. 102Licensed Production definition from Dictionary of Military and Associated Terms, US Department of Defence (2005). 103 Lloyd J.Dumas. Weapons Procurement and Development: Do Offsets Mitigate or Magnify the Military Burden. Retrieved December 2nd, 2013 from www.ecaar.org/Articles/SA%20Papers/DUmas.pdf
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d. Revitalize the state-owned defence industry (through financial support and a commitment to procure military equipment from indigenous sources whenever possible.
Table II.1 : Key features of the main channels of technology tranfer
(Source : Saad Mohammed. Development through Technologies Transfer, Intelect, UK 2000)
Mechanism of Main Advantages Disadvantages Impact (for technology objectives (for developing (for developing developing transfer countries) countries) countries)
Licensing Transfer of To get the High cost Technology intangibles or technology to resulting and transfer which property rights the market limited impact may take a long faster on in house time is research and dependent upon development. appropriate local Introduction of capabilities and restrictive policies and practice to trust between licensing licensors and agreement licenses. which can impede technology transfer.
Franchising Licensing of an Safe and quick High cost. Franchising is entire business way of owning most popular in system as well a business consumer as offer of under an service property rights. established products whose trade name. manufacture requires
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significat capital invest ment and high level of managerial and technical skills.
Sub-contracting Types of Acquisition of Strong It can help agreement know-how and dependence develop ragig from the technical upon the indigenous purchase of assistance in foreign partner. capabilities in components to areas such as some major the complete plat layout, industries such production of equipment as electronics specific selection and and products. operating automobiles planning, where training on subcontracting quality is important. management However, systems. transfer of technology can be limited to specific areas of subcontracting agreements. The succerss of transfer of technology is dependent upon the subcontracting relationship.
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The current state of the domestic defence industry is further exacerbated by the lack of a formal offset or countertrade mechanism that often excludes technology transfer. Some defence procurement procedures already include the element of offset. However , without a formal policy, the offsets can be misdirected.
For example is the case in 2004. The offset procurement for Su-27Sks and Su- 30 MKs were directed primarily to non-defence related sectors such as rubber, palm oil, coffee, and bauxite.
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CHAPTER IV
THE CONTRIBUTIONS OF NATIONAL DEFENSE INDUSTRY (PT PAL INDONESIA, PERSERO) TO INDONESIAN NAVY
IV. 1 PT PAL INDONESIA (Persero) ability in Strengthening Weapons System of Indonesia’s Forces IV.1.1 Product of PT PAL Indonesia Persero to Indonesian Navy (2007- 2012) PT. PAL Indonesia (PERSERO) as one of its state-owned enterprises Strategic Indonesia is trusted to have a high commitment to meet the needs of military weapons systems, especially the needs for military ships. The Warship Division’s main task develops and manufactures various kinds/ types of ships ranging from Small Patrol Boats to the class of Fregate. Based on the data from company news, start from 2007-2012, the warship division has been able to produce and license products through (transfer of technology and joint production) such as104:
Class Type Year Name State Information
SIGMA Guided 2007 a. KRI Diponegoro Netherland Joint Production Class Missile – (365) – Indonesia between Corvette Corvette 2009 b. KRI Sultan Netherland and Hasanudin (366) Indonesia (PT c. KRI Sultan PAL Indonesia Iskandar Muda Persero). A type (367) of SIGMA (Ship
104Website PT PAL Indonesia (Persero). Perusahaan, Berita : Kunjungan Wartawan DEPHAN dalam Rangka Kemampuan PT PAL Indonesia (Persero) dalam Memperkuat Alutsista TNI: Rincian kapal yang telah diproduksi. http://www.pal.co.id/v5/news/index.php?id=nws2008111815455329. Accessed January 10th, 2014.
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d. KRI Frans Integrated Kaisiepo (368) Geometrical Modularity Approach, starting served 2007-2009
Starting served 2007-2009
SIGMA Missile 2012 SIGMA 10514 Netherland Being made in Class Destroyer - Indonesia PT PAL Frigate Escort Indonesia Persero and will be operated in early 2017.
KCR-60 Missile 2012 KRI 628 Indonesia A missile fast Fast Ship KRI 2 ship that has a KRI 3 length of 60 meters which is being made in PT PAL Indonesia Persero.
Kakap Class Fast Patrol 2012 KRI Kakap Indonesia Ship type FPB- (Kelas Boat VIP (811) 57 first Kakap) FPB 57 KRI Kerapu generation NAV I (812) artificial KRI Tongkol Lürssen, (813) Bremen- KRI Barakuda Vegesack, (814) Germany which is licensed to PT PAL. Having a helipad facility
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NBO-sized helicopter.
Lion Class Torpedo 2012 KRI Andau Indonesia Ship type FPB- Boat FPB 57 second- (Kelas (650) 57 NAV II generation Singa) KRI Singa (651) KRI Tongkak artificial (652) Lürssen, KRI Ajak (653) Bremen- Vegesack, Germany which is licensed to PT PAL. Having the ability as anti-submarine armed with torpedoes.
Padrong Fast Patrol 2012 KRI Pandrong Indonesia FPB-57 ship Class Boat 57 (801) types IV NAV IV KRI Sura (802) generation artificial Lürssen, Vegesack Bremen, Germany who is licensed to PT PAL. At KRI Pandrong been armed with C- 802 missiles.
Todak Class Fast Patrol 2012 KRI Todak Indonesia FPB-57 ship Boat NAV (803) types V V KRI Hiu (804) generation KRI Layang artificial
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(805) Lürssen, KRI Lemadang Bremen- (806) Vegesack, Germany which is licensed to PT PAL. Armed with C-802 missiles on KRI Layang
Landing Auxiliary 2007- KRI Indonesia – KRI Platform Personnel 2011 Banjarmasin South Banjarmasin and Dock Transport (592) Korea KRI Banda Banjarmasi KRI Banda Aceh are being n Class& Aceh (593) made by PT PAL Indonesia Makassar KRI Makassar Persero while Class (590) KRI Surabaya KRI Makassar (591) and KRI Surabaya are being made in South Korea.
Submarine Submarine 2012- 3 unit Type South Changbogo Class prese 209/1400 Korea - class Changbogo nt Indonesia submarines ( a form of Transfer of Technology) from South Korea, will be delivered between 2015- 2018. Two will be builtin Korea and 1 in PT
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PAL Indonesia Persero.
Based on the above data, in five years (2007-2012) PT PAL Indonesia has built :
4 corvette ship, 1 Frigate Ship, 3 Fast Missile Boat, 14 Fast Patrol Boat, 4 Landing Platform Dock. In addition, the Submarines are still ongoing process start from the year of 2012.
PT. PAL Indonesia (PERSERO) is also developing various kinds and types of vessels and others defense equipment, as follows105 :
o Modifying tank BTR-50P into PAL-AFV (Armoured Floating Vehicle) o Develop Offshore Patrol Vessel 60 meter (OPV 60) from FPB 57 o Watchtower Missile Destroyer 105 meter (PKR) o Helicopter Carrier Ship which is an extension of the STAR-50 Double Skin Bulk C
IV.1.2 PT PAL Indonesia Persero and National Corvette Program Since 2004 PT PAL Indonesia (PERSERO) has planned and developed a program of the National Corvette production plans. It is supported by private industry and national strategic industry, including : PT. Pindad, PT. DI, PT. KS, PT. LEN, PT. INTI, PT. Texmaco, PT. Maspion, PT, Tadakara, etc.
105Website PT PAL Indonesia (Persero). Perusahaan, Berita : Kunjungan Wartawan DEPHAN dalam Rangka Kemampuan PT PAL Indonesia (Persero) dalam Memperkuat Alutsista TNI: Jenis, Tipe, dan Alutsista. http://www.pal.co.id/v5/news/index.php?id=nws2008111815455329. Accessed January 10th, 2014 65
National Corvette ship program is the realization of independence country’s main tools in meeting the needs of national defense, especially warships.
National Corvette Ship Program has several major missions, as follows106:
o The Independence National Defense Tools o The Development of the Defense Industry o The increased ability of engineering, design and system integration
In achieving the independence of the nation in defense equipment needs, PT. PAL Indonesia (PERSERO) continues to innovate. Innovations that have been made such as: to develop National Corvettte Ship Watchtower Missile Destroyer (PKR) which is also equipped with a complete system and modern weaponry to carry out a wide range of military tasks, as follow:
o Anti-air attack o Anti-submarine o Anti-war sea level o Anti-war electronics o As well as fire support ship Another example of PT PAL Indonesia (PERSERO) Innovation which intended for the Navy is the KRI Banjarmasin-592 ships. KRI- Banjarmasin-592 was unveiled on 18 November 2009 entered the ranks of the Navy fleet. This ship is one of the flagship products of PT PAL Indonesia (Persero). It is the clear evidence of the contribution from PT PAL Indonesia (PERSERO) in order to fulfill the needs of national defense equipment. The performance system of artificial vessel of PT PAL Indonesia (PERSERO) is experiencing an increase in quality when compared to the
106PT. PAL Indonesia (Persero). Perusahaan, Berita : Kunjungan Wartawan DEPHAN dalam Rangka Kemampuan PT PAL Indonesia (Persero) dalam Memperkuat Alutsista TNI: Program Korvet Nasional. Retrieved January 10th, 2014.http://www.pal.co.id/v5/news/index.php?id=nws2008111815455329. 66
two LPD ships that are build in South Korea. The enhancement is tailored to the operational needs of the navy, as follows: o Helicopter carrying capacity (3 into 5 helicopter) o The increase of the boat speed (from 15 knots into 15.4 knots) o The shape of the form above the “stealth design” to reduce “radar cross section” that is not easily captured radar opponent. o The low vibration of the ship that adds the comfort of the cruise ship crew
IV.2PT PAL Indonesia Persero and Defense Industry International Collaboration IV.2.1 Transfer of Technology Cooperation between PT PAL and Other Countries Technology transfer or Transfer of Technology (ToT) in recent years has always been a topic that came up when talking about defense procurement program. Technology Transfer has even become mandatory points in each procurements from abroad.107 In long term period with the technology transfer process, the Defense Industry experts in Indonesia can achieve independence in the field of defense. Hopefully, by the self-reliance in the defense sector, Indonesia does not have to be to dependent to other countries. This condition will change the political view of Indonesia from the other countries. There are three basic principles that are duly met in developing a defense equipment from the user side, namely; to meet the needs, easy to operate and economical to maintain.108 From the developer/ Industrial defense of course there are also the principles that must be met, namely constructability defense equipment, local content and defense equipment from the base material, and the suitability of the production cost and the purchase price from the
107Transfer of Technology. UNCTAD Series on issues in international investment agreement. United Nations. Newyork-Geneva :2001. 108Lembaga Keris Official Website. Indonesia Defence Jurnal : Alih Teknologi dan Pengembangan Alutsista. Retrieved February 3rd, 2014.http://lembagakeris.net/2013/10/alih- teknologi-transfer-of-technology-pengembangan-alutsista/.
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government. Of course the cost of production must be closed by the government purchased price. In addition, development costs should also be included in the unit cost. Therefore, since the beginning of the plan must be established prior to the development of long-term needs against the defence equipment, thus ensuring the continuity of the production line, because restarting the production line that has stop their production will cost quite expensive. Moreover, the developed weapons must meet the needs of the military. Because if ultimately developed defense equipment cannot meet the needs of the military, it would be beneficial to those that are less self-reliance in the field of defense. The Navy also should be required to be consistent with the plan that was made. So that in the end they will not reject the domestic products that are developed, according to the needs of the military. Stages in the development of defense equipment can be divide into phases : Pre Feasibility Study, Feasibility Study Basic Design/ Engineering Detail Design/ Engineering Production Design/ Engineering Construction Testing and Commission and led to the handover to the user.109 Pre Feasibility Study phase is sometimes overlooked by the developers and planners. Pre Feasibility Study phase is the phase in which to check the real needs of the military and the determination of the main points of the project that require more attention. Besides, the cost per unit was calculated based on the estimated cost of development and production costs. This phase produces output with an accuracy of 20-30%, if the assessed cost per unit of affordable and appropriate to the needs of the military, then it can continue to Feasibility Study which made communication with the parties involved and the possibility of the project feasibility is generally determined
109Lampiran Pidato Kenegaraan Presiden Republik Indonesia dalam Rangka HUT ke-68 Proklamasi Kemerdekaan Republik Indonesia. Retrieved March 3rd, 2014 from http://www.bappenas.go.id/files/4313/8666/LAMPID201314Agustus20132ok.pdf 68
based on the readiness of the budget, facilities, and mastery of the basic technology. The output of this phase has an accuracy of 10-15%.110 Once considered feasible, then it will go into the development phase of the Basic Design/ Engineering where the principal quantities of armaments will be determined (e.g. weight, dimensions, rough 3D modeling, capability, carrying capacity) as well as what equipment that will be in the defense equipment. In this phase, once all the drawing is complete, must go through the process of review and approval of the military who have committed to the use of defense equipment in the future. Communication between developers armaments with prospective users must always be maintained to ensure the quality of defense equipment as needed.111 The next phase will be stepping Detail Design/ Engineering phase.112 It is the critical phase in which the 3D modeling done in detail. Developers would determine the technical matters such as : engine mounting, mounting arms, defense equipment surface detail, weight control, COG (Center of Gravity), modification, cable and pipe routing hydraulic/ pneumatic. In this phase should be ensured through a 3 D model that there is no clash between the items to one another, and when a piece moves will not hit other parts. Detail design must also receive approval from the prospective user to ensure that the elements of operability and main ability met when defense equipment has become part of the military. The next is the construction phase, in this phase it will be printing the parts of defense equipment, the purchase of equipment from third parties, integration between parts, and assembly. In this phase the developer must perform the optimization process in order to prototype and production of defense equipment products can be completed on time so as to minimize the cost of
110Adrianus Prima .(2013). Alih Teknologi (Transfer of Technology) dan Pengembangan Alutsista. Retrieved March 3rd, 2014 from http://lembagakeris.net/2013/10/alih-teknologi-transfer-of- technology-pengembangan-alutsista/ 111China Minta Tambahan Uang Untuk ToT Rudal. Retrieved March 3rd 2014 from http://jakartagreater.com/china-minta-uang-tambahan-untuk-tot-rudal-c-705/ 112 Adrianus Prima .(2013). Alih Teknologi (Transfer of Technology) dan Pengembangan Alutsista. Retrieved March 3rd, 2014 from http://lembagakeris.net/2013/10/alih-teknologi-transfer- of-technology-pengembangan-alutsista/ 69
production. The developers also need to make sure all of the equipment from third parties could arrive on time and can be integrated with existing parts.113 The final phase is the phase of testing and commissioning; in this phase will be calibrated tools and equipment function checks in the defense equipment compared to the initial design specifications. This phase will also determine whether armaments are welcome to be part of the military.114 In this phase, it will generally be found errors and inconsistencies performance against the initial specification, which will then be fed back to the developers to then improve its products. This phase can generally take many years when we tested was a prototype, but for the final product, this phase can take place in a matter of weeks or months because the parameters are known and standardized testing existing products. In overview Weapons and Military Equipment Development, Transfer of Technology initiated process since the Basic Design.115
IV.2.1.1 Indonesia and South Korea An example of this process is the development of Diesel Electric Submarine which is a collaboration between Indonesia and Korea. In the next phase, the personnel of the Navy and PT PAL will be involved in the detailed design and construction phase. In the detailed design phase, Indonesia has the expectation for its experts to be master the principles of goof engineering commonly applied in the design of defense equipment and standard practices. In the construction phase which is a vital phase that could determine the performance and durability of defense equipment, our experts are expected to be able to absorb the science of construction and adequate quality control to ensure the end result as expected. After two submarines were built in Korea, three submarines are expected to be built at PT PAL with facilities for the construction and maintenance of $ 1.5 trillion dollars.
113 Departemen Perindustrian.(2007) Laporan Pengembangan Sektor Industri Tahun 2007.p.151 114Departemen Perindustrian. (2007). Laporan Pengembangan Sektor Industri Tahun 2007. P.153 115Laksamana Madya Putu Adnyana. Security Assistance of the Chief of Navy’s Staff.Personal Interview. Jakarta.February 19th , 2014.4 p.m. 70
IV.2.1.2 Indonesia and Netherland Another example of Transfer of Technology program is the collaboration between Indonesia and Netherland. The joint production between Netherland and Indonesia (PT PAL Indonesia Persero) in making SIGMA (Ship Integrated Geometrical Modularity Approach) Class Corvette. It produced KRI Diponegoro, KRI Sultan Hasanuddin, and KRI Frans Kaiseipo. Netherland and Indonesia (PT PAL Indonesia Persero) also joined production in producing SIGMA (Ship Integrated Geometrical Modularity Approach) Class Frigate with Missile Destroyer Escort in 2012. It is being made in PT PAL Indonesia Persero and will be operated in early 2017.
IV.3 Various Challenges Faced by PT PAL INDONESIA (Persero) in Order to Meet the Needs of the Security Sector in Indonesia Political Policy116 It is inevitable that the implementation of the development of the Navy is strongly influenced by policy decisions by national leaders. Although the development has been detailed in a certain time frame along with the necessary amount of budget needs, support of national leaders cannot be ignored. Because in the end, despite all the government agencies that related to the development program has approved numbers of defense equipment procurement for the Navy, the final decision still be the decision of the national leadership. Economic Policy During this time, the allocation of the defense budget value in real terms is relatively small. Although the defense budget placed the third largest in the state budget for Fiscal year 2010, still more than 60 percent of the
116Tantangan Pelaksanaan Kebijakan Pertahanan Negara. Retrieved March 3rd , 2014 from http://dmc.kemhan.go.id/post-pergeseran-paradigma-salah-satu-tantangan-dalam-pelaksanaan- kebijakan-pertahanan-negara.html 71
defense budget is allocated for the personnel’s expenditures. The percentage for the procurement is relatively small. Therefore, most of the support for the procurement budget still relies on foreign loans, export credits and countries credits. The vibration of advanced economies in developed countries will continuely give negative implications on the Indonesian economy performance.117 In the era of globalization which creates economic interdependence between nations, hose things are inevitable. Its impact on the Indonesian economy performace will certainly give effects to the amount of defense budget in allocated state budget in years to come. Bureaucracy Factors118 Bureacucracy in procurement of weaponry in Indonesia has been quite long and complicated. This kind of situation may be created to reduce the potential for losses to the state due to non-procurement of appropriate and targeted. On the other hand, a long bureaucratic chain also indirectly creates diverse stakeholder interest which are often not aligned with the requirement of the procurement desired by the Navy. The problem of bureaucracy is one of the factors that affect implementation of the procurement in accordance which already establish in the Strategic Plan. The Defense Department could not asses the filling of the Navy’s procurement. Therefore the debate on the proposal of the Navy does not touch the issue. The increase of complicated bureaucracy is when it entered the realm of policy, namely the approval from parliament for budgeting. Pressure from abroad Indonesia as the largest archipelago in the world and the region is accounted for by the other party. Therefore, the development of the
117Tantangan Pelaksanaan Kebijakan Pertahanan Negara. Retrieved March 3rd , 2014 from http://dmc.kemhan.go.id/post-pergeseran-paradigma-salah-satu-tantangan-dalam-pelaksanaan- kebijakan-pertahanan-negara.html 118Laksamana Madya Putu Adnyana. Security Assistance of the Chief of Navy’s Staff.Personal Interview. Jakarta.February 19th , 2014.4 p.m.
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military strength of the Navy always gets special attention from the interested countries. Because the procurement of weapons system still rely on foreign-made, sometimes the political pressure from certain foreign parties caanot be avoided when the Navy want to acquire a variety of weapons. It is not only commercially pressure, but also includes political aspects. Especially when Indonesia want to buy weapons system from other countries that are different from political life of great power in the Asia-Pacific region. Such condition are less favorable for Indonesia, especially if Indonesia cannot be tactical and operational at the political level. For example, if Indonesia decided to buy most of the military defense equipment from Rusia, the policy must be balanced with maintaining strong collaboration with the United States.119 Lack of Readiness of the Defense Industry Itself120 Transfer of Technology policy which has been announced by the Ministry of Defense in the procurement needs to be carefully considered, whether the policy is in line with the foreign policy adopted by Indonesia This question is asked because the transfer of technology in practice is not a value-free thing, but loaded with political interests of the state of technology owners. Referring to the experience of the other developing countries that many of them use the Transfer of Technology policy in the power of the sea construction, the procurement of a foreign shipyard must supported by the national shipping industry readiness. Without the support, the policy is merely a concept that cannot be implemented. During this time, there is no synchronization between defense policy, especially about the future development of the power ; and the government policies on state-owned companies in the field of defense. For
119Tantangan Industri Pertahanan. Retrieved March 3rd, 2014 from http://www.seskoau.mil.id/index.php/8-berita/60-upaya-kemandirian-industri-pertahanan- nasional-diseminarkan-pasis-seskoau-a-50 120Bappenas, Pertahanan dan Keamanan, Retrieved March 3rd 2014 from www.bappenas.go.id/index.php/download file/view/8746/1731/ 73
example, if the period of the strategic plan of the Department of Defense approved the procurement of warships, some of the parts must be produced by the national shipbuilding shipyard through the mechanism of co-production that involves the Ministry State-Owned Enterprises and state-owned defense-related fields. This the relevant SOE can prepare early, so there is no longer case of delayed delivery of warships due to unpreparedness of the SOE in question.121 Readiness here means not only covering the readiness of production facilities, but also cover all aspects of planning, readiness of technology and human resources.Three aspects last noteworthy because government policy for SOE in defense sector was impressed just asking them to give maximum benefits without regard how the three aspects of preparedness. For example, there should be a long-term plan which synchronized between defense policy with SOE policy. The synchronization is an important policy because Defense Industry SOE can prepare production capacity and calculate the projected growth of the industry with consistent defense policy, especially in matters of strength.122 The inconsistency of the implementation of force development during this time contributes to the unprepared SOE of defense industry to support the needs of military armaments. In addition, it must be recognized that the post-reform , the government no longer give full attention to the defense industry SOEs, so that the development of the industry is faltered. In facing various challenges in Navy’s power development in last five years in accordance with the Strategic Plan, there are number of breakthroughs that can be done so tha the implementation of the Navy Strategic Plan 2010-2014, especially on the development of naval material can be well done.
121Tantangan dalam Pelaksanaaan Kebijakan Pertahanan Negara. Retrieved March 3rd, 2014 from http://dmc.kemhan.go.id/post-pergeseran-paradigma-salah-satu-tantangan-dalam-pelaksanaan- kebijakan-pertahanan-negara.html 122Bangkitnya Industri Pertahanan Lokal. Retrieved March 3rd, 2014 from http://webcache.googleusercontent.com/search?q=cache:fx7- v3bfBDcJ:www.kemenperin.go.id/download/3545+&cd=3&hl=id&ct=clnk 74
In the face of various challenges in the development of the power of the Navy in the last five years in accordance with the Strategic Plan, there are a number of breakthroughs that can be done so that the implementation of the Strategic Plan 2010-2014 Navy, particularly on the development of naval material can be done well.123 First, associated with political and economic policies as well as the bureaucracy. In order to face these challenges, intensive approach is required in accordance with the hierarchical levels are available to deliver aspirations of the Navy, as has been stated in the Navy Strategic Plan. One important thing that should be noted is the political and security risk if the Navy Strategic Plan 2010-2014 is not reached. There is the fact that since the 1990s other countries to the regional Asia Pacific intensively build their sea power. There are strong indications that the naval arms race is happening in this region. Meanwhile Indonesia since the 1990s has yet to implement the modernization of massive strength and result in reduced readiness of the Navy defense equipment to carry out the main task.Even if the strength of the Navy is not modernized within the next five years, sooner or later the condition of the Navy in the post- 1965 era will be repeated. Besides, the Navy needs to anticipate the ASEAN agenda in the field of maritime cooperation. To be able to implement it optimally, one of the urgent needs that must be met is the modernization of the Navy. Without modernization, there is concern that Indonesia could not achieve as much profit from the cooperation and more into an object. Whereas geographically Indonesia has the largest water area in Southeast Asia. From that fact illustrated a number of risks to be faced when the government build the Navy Program Force. Risks could include the prestige and dignity of the Indonesian people, can also economic losses suffered by Indonesia and other countries that their SLOC in Indonesia’s
123Indonesia Miliki Komitmen Bangun Siste Pertahanan. Retrieved March 3rd, 2014 from http://webcache.googleusercontent.com/search?q=cache:fx7- v3bfBDcJ:www.kemenperin.go.id/download/3545+&cd=3&hl=id&ct=clnk 75 jurisdiction. From the risks that are reflected, Indonesia is actually not ready to bear it. Related to economic policy and bureaucratic factors, steps that can be taken is lobbying to agencies such as Department of Defense, the Ministry of Finance, Bappenas, and the House of Representatives. In these domains, personal lobby gives big contribution to the achievement of targets to be addressed. Even more so when it comes to issues on budget allocation for all the procurement of which there are many interested parties. It should be realized that behind the scenes there are still attempts to impede development of the power of the Navy, in particular procurement. Therefore, the Navy should implement the steps to the various parties and involved intensively lobby as well as counter to the different parties to the interests of the Navy. For facing the pressure from abroad, the approach may be using diplomacy, both in the context of the navy, inter-governmental and other containers. In the space of this diplomacy, the Navy can provide insight why force development needs to be implemented and should also be able to convinve the other party that such development is not intended to threat the interests of any party. Instead the development aimed at improving Indonesia’s ability to maintain peace and sevurity stability of the region. Diplomacy in the context of the Navy can use containers such as bilateral or multilateral meetings between the Chef of Army Staff in the Asia Pacific region. Navy to Navy Talks and other similar activities. Indeed this agenda may also be deposited to the State Department to convince other countries to give special attention to the development of the Navy over the years. However, it is necessary to implement intensive communication between the two agencies to achieve the same perception/ Because of different characteristics of the two institutions also sometimes affect the individual’s perception of looking at an issue. Other way to convey the intent and purpose of the Navy is building through public diplomacy. For example, when invited as the speaker at seminars or symposiums in the Asia Pacific region, hosted by institutions 76
leading studies that discuss regional security. Such forums should be used optimally by the Navy, so it does not appear negative perception on the development of the power of the future Navy. While for facing the unpreprared of domestic defense industry challenges, the approaches that can be taken by the Navy is using the path through the Department of Defense. Because of these problems is the domain of the Department of Defense, particularly the Directorate Feneral of Defense Facilities. The challenges which is associated with SOEs, the options available to the Department of Defense is coordinating with the Ministry of State Owned Enterprises. In this issue, the position of the Navy is the user of defense equipment provided by the Department of Defense. Department of Defense was mostly bought from the national shipping industry. In this case is PT. PAL. It is important to note that such a challenge is not only faced by the Navy, but also other military dimension.
IV.4 PT PAL INDONESIA (Persero)’s Efforts to Face the Challenges As one of the spearhead revitalization of Indonesian maritime industry, PT PAL INDONESIA Persero always strive hard to realize the adopting mandate. The challenges that are faced by PT PAL INDONESIA Persero for example is in the for of an increased need for the ship as a direct result of Industry Revitalization. It will encouraged the increase of domestic shipping. PT PAL INDONESIA (Persero) is still struggling to increase the ability to win the global competition. The steps that are took by PT PAL INDONESIA (Persero) to increase their ability, as follows : Product Innovation124 For example is the product of commercial which is up to 50.000 DWT (Star DWT). The ideas which are blended with flexibility
124 Inovasi Produk PT PAL INDONESIA (Persero). Retrieved March 10th, 2014 from http://www.pal.co.id/v5/company/index.php?page=E_3_8 77
produce an innovation named Star 50. This Product will continue to be developed in order to have a competitive advantage and be excellent product for other products. Star 50 is an innovation in the production of ships that anaged to increase the capacity of the vessel with Shaped Box Bulk Carrier (BSBC) technology. Company Operation Efficiency In addition to production capacity, the production process is continually upgraded. So that these products can be completed according to the promised date. The Implementation of Full Block Outfitting System 125 is a concerted effort to achieve the Company operation efficiency. This method is done by building blocks that have been equipped with the piping system, fitting, and timely assembled with weight of up to 300 tons per block. This process will accelerate the construction of the ship so that the tie and cost of production will be efficient. By itself will improve the competitiveness of enterprises. With the application of all this, the trend submission production result will increase each year. The Development of Maintenance and Repair Services Toward the development of maintenance and repair services, both ship maintenance and repair services and non ship maintenance and repair services, covers ship maintenance and repair services in depot level with dicking capacity up to 600,000 DWT per year; the annual/ special survey and overhaul for commercial boats and warship; maintenance and repairs of electronics and weapons; and submarine overhaul. Market opportunities in the domestic market mainly comes from the Navy, Private, and Government.126
125 Full Block Outfitting System PT PAL INDONESIA (Persero) Retrieved March 10th, 2014 from http://www.pal.co.id/v5/company/index.php?page=E_3_8 126Arah pengembangan produk rekayasa umum. Retrieved March 10th, 2014 from http://www.pal.co.id/v5/company/index.php?page=E_3_8 78
Improve Corporate Image127 Renewal in the face of the digital age are increasingly required in every institution and company in showing the current conditions in the community. For this reason the Ministry of State-Owned Enterprises Agencies (SOEs) continues to innovate and try to show the current conditions to the community. Through the coordination of information systems managers forum Ministry of Enterprise, Corporate Image enhancement can be maximized for the sustainability of companies in the digital world. Information and technology in the digital world is a container to accelerate the improvement of the Corporate Image. PT PAL Indonesia also sent representatives to attend the training and take part to succeed the transitional portal of SOEs as part of the Company’s Corporate Image. Among the representatives of the Public Portal, HR Portal, and Portal Financial (FIS), as well as IT. 128 It was to follow the format changes of SOEs Portal to improve the Corporate Image of SOEs. Join the Clean SOEs Program129 Clean State Owned Enterprises Program is the realization and commitment of all levels of management and employees of PT PAL INDONESIA (Persero) to uphold and apply the basic principles of Good Corporate Governance (GCG) in the company. This program is to promote good corporate governance practices that is good for the company towards better and sustainable growth.
127 PAL Indonesia Ikuti Pelatihan Perubahan Format Portal BUMN untuk Peningkatan Corporate Image. Retrieved March 10th, 2014 from http://www.bumn.go.id/pal/publikasi/berita/website- bumn-tampilan-corporate-image-masa-kini/ 128Perwakilan PT PAL Indonesia Persero. Retrieved March 10th, 2014 from http://www.bumn.go.id/pal/publikasi/berita/website-bumn-tampilan-corporate-image-masa-kini/ 129Level Manager PT PAL INDONESIA Songsong BUMN Bersih. Retrieved March 11th , 2014 from http://www.bumn.go.id/pal/publikasi/berita/website-bumn-tampilan-corporate-image-masa- kini/ 79
The Improvement of the Company that involves employees PT PAL INDONESIA Persero continues to demonstrate its seriousness in developing the company’s business, improve performance and quality, as well as product innovation and organizational innovation. It continues to be done by engaging employees to participate and provide solutions, innovation, suggestions, as well as aspirations to various problems. It will benefit the improvement of the company. The mission is realized in Continuous Improvement Training Program 130 followed by 33 facilitators ranks of middle management of various work units. The purpose of this training to improve the productivity of the company and its employees through structured and consistent improvement. This program is a continuous program which is conducted every year and has become a plan that has been approved by shareholders.131 Provisions have been obtained by the middle management who act as Agents of Change will then be implemented in the work and disseminated to members of work units each with a yield improvement projects. Goal of the program is the creation of an improved design based on a review of the company’s field employees who are in direct contact with the actor projects in the field. This bring value to PT PAL Indonesia (Persero), Through suggestions and probems that are found by employees, then the employees and their managerial problem solving can find and be able to design a new innovation that is useful for the progress of the company.
130Pelatihan Program Continuous Improvement. Retrieved March 11th, 2014 from http://www.pal.co.id/v5/news/index.php?id=nws2013071109160219 131Tujuan Program Continuous Improvement. Retrieved March 11th, 2014 from http://www.pal.co.id/v5/news/index.php?id=nws2013071109160219 80
It is also greatly contributed in spurring productivity and loyalty of employees, because employees of PT PAL INDONESIA Persero will be considered as well as directly involved in building and repairing company.132
IV.5 Support From Indonesian Navy to Strategic Industry State- Owned Enterprises The independence of the domestic defense industry needs to be supported in order to ultimately materialize an advanced defense industry competitive and capable. To achieve this thing, we require the government policy and the integration of all stakeholders.
a. Meeting the needs of the Navy weapons systems using the products of the national defense industry in efforts to achieve national independence. Related to Navy force development, the government has supported the needs of the main tools of weapons systems (defense equipment) in order to achieve the Minimum Essential Force (MEF) or minimum essential force through domestic defense industry. Growth and development of the national industry itself closely related to the economic conditions of a country, and vice versa. From the various problems faced by the defense, domestic industry, there are two most important things, among others: Seen from the point of view of demand, the military is the only party that serves as the domestic consumers of the national defense industry. This problem is encountered during the limited budget, complicated bureaucracy and low level of confidence in the military industry resulting in weak defense in Indonesia. While from the perspective of an offer, the Indonesia defense industry in general is in unhealthy condition and problematic in terms of both financial and managerial thus ultimately not competitive enough compared to other country’s defense industry.
132 PT PAL INDONESIA (Persero) Libatkan karyawan dalam improvement perusahaan. Retrieved March 11th, 2014 from http://www.pal.co.id/v5/news/index.php?id=nws2013071109160219 81
The efforts that made by the government on order to increase cooperation in achieving the development of Navy’s power pursued through several technical policy.
First, it requires the user to wear domestic product (Weapons and non- weapons) from domestic defense industry, referring to Presidential Decree No.54 Year 2011 as PT Kodja Bahari, PT PAL and PT Palindo.
Other policies are related to the purchase of defense equipment from the Navy could be done if the foreign domestic production has not been able to meet the technical specifications.
Purchases from abroad should not dictate politically against the state in the purchase of military equipment.
The defense ministry also provides an opportunity for the national defense industry to be able to export their products abroad. For example, PT PAL is able to make corvette, warships and tankers..
In order to revitalize the defense industry, Defence Industry Policy Committee (KKIP) have to sync to the fulfillment of the minimum essential Navy force through strategic cooperation with the defense industry.
To improve the ability of the defense industry the government needs Transfer of Technology, research, and policy preparation of skilled human resources.
Related to the state budget allocation for meeting the needs of the MEF to 2014, Soeparno (Former Chief of Naval Staff) said that the Navy will prioritize self-fulfillment.
Indonesia should gradually reduce dependence brave defense equipment of foreign products. For example, 10 years having submarines, now South Korea managed to make their own submarine.
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In the other hands, Indonesia is already 30 years having submarine. Indonesia should be able to make its own submarine. 133
b. The Open, Clean and Fair Procurement134 As we know that the process of procurement of goods and services in the military posture is through auctions. Most of the needs of the Navy already have tendered using the Electronic Procurement System. It is certainly easier for local supplier to participate in fulfilling the needs of the military. This makes the procurement process to be open, clean and fair so as to avoid any auctions that set (cheating) which could harm the state and lead to corruption, collusion, and nepotism.
c. Give Moral Support and Feedback to Local Defence Industry 135 Defense agencies, in this case the Indonesian Forces is the single market of the local Strategic Industries in Indonesia. In addition to national events through defense exhibition in Indonesia to promote the products, sometimes the provider of the product will ask for courtesy call to the users (Indonesian Forces). It is a form of exposure that is useful as an introduction to the product. Indonesian navy open the chance for all the domestic providers to present their products. The exposure will be attended by the relevant authorities or an expert in the field. In the exposure the provider can exchange ideas with the user in Indonesian Forces posture. Several inputs for developing the products can be the spirit to the providers to continue develop the main tools of weapons systems for our military.
133 Laksamana Muda TNI Didit Herdiawan M.P.A. , M.B.A. Operations Assistance of Navy’s Chief Staff. Personal Interview. Jakarta. 23rd of January 2014. 11.30 a.m. 134Head of Planning Department Security Service of the Navy.Personal interview. Jakarta. November 14th, 2013 135 Laksamana Pertama Teguh Prihantono. Head of Suppy of the Navy.Personal Interview. Jakarta. February 26th , 2014. 2.00 p.m. 83
CHAPTER V
CONCLUSION
As the biggest maritime country in the world, Indonesia has several security challenges. Security challenges facing Indonesia is divided into three categories : Internal Securities (Free Aceh Movement, Free Papua Movement, Communal and Religious Violence, Terrorism Non Traditional Security (Natural Disaster) External Security Problems (Sovereignty, Territorial Disputes, Border Security, and Regional Uncertainty)
Related to the realism theories, the thinker placed the national defense as the main priority. It concludes that there are no harmonization among states, so the concept of self-help is very crucial. If the state has great power, the state will have more power and can fulfil their national interest.
The effort of Indonesia in increasing National Strategic Industry Development is one of the ways to reach the power in the international anarchy system. It is influenced by strong military capability of our neighboring states that significantly exceeds the defense capability of the Republic Indonesia. It has weakened the bargaining position of Indonesia. Therefore Indonesia should build the minimum essential forces to bring out the effect of deterrence in the regional and international.
In addressing security challenges in the defense sector Indonesia recognizes the importance of national security strategy. It is reflected in our national defence policy. The objective of our national defense policy is “protect and uphold state sovereignty, maintain territorial integrity of the Unitary Republic
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of Indonesia, and ensure the safety of Indonesian people from all forms of threats and disturbances.”136
Indonesian Defence Force (Tentara Nasional Indonesia) is the main component of state defence through war operation and military operation other than war. The Indonesian Navy carry out military duties in the field of naval defence. The duties are maintaining security in the sea area of national jurisdiction in accordance with the provisions of International Law that has been ratified, Navy task diplomacy in support of foreign policy set by the government, carry out military tasks in the construction and naval forces, and implement empowerment sea defence area.
PT PAL Indonesia Persero is one of the Naval Industry which is producing warships and commercial vessels, providing ship repair and maintenance services, as well as general engineering with a particular specification based on order.
PT PAL Indonesia Persero Contributes to the Modernization of Weapons System in Indonesian Navy in Addressing the Security Challenges PT PAL Indonesia Persero contributes to the modernization of weapons system in Indonesian Navy in addressing the Security Challenges through several ways.
a. Product Innovation For fulfilling the needs of the Navy in addressing Indonesian Security Challenges, PT PAL Indonesia continues to innovate their products. From the data attached about the details of the ships that have been produced by PT PAL Indonesia Persero (2007-2012), it can be concluded that PT PAL Indonesia is continue to innovate the Naval Industry. b. National Corvette Program
136 Act No.3/2002 on State Defence, Article 4. 85
In supporting the Navy, PT PAL Indonesia Persero has planned and developed program of the National Corvette production plans. It is supported by private industry and national strategic industry, including : PT Pindad, PT. DI, PT. KS, PT. LEN, PT. INTI, PT. Texmaco, PT. Maspion, and PT. Tadakara. The goals of this National Corvette program is to reach the independence on national defence equipment, the development of defense industry, and to increase the ability of engineering, design, and system integration. One of the example of the product from National Corvette Program is the National Corvette Ship Watchtower Missile Destroyer (PKR). c. Defence Industry International Collaboration The Defence Industry International Collaboration is expected to boost Indonesia’s defence market and make it one of the fastest-growing in the world. Indonesia collaborate its defence ties with many perspective countries. The collaboration can be through Transfer of Technology or Joint Production with other country and by running the Offset Policy. Transfer of Technology between South Korea and Indonesia and Joint Production between Netherland and Indonesia are the examples of Defence Industry International Collaboration. d. Facing the Challenges of Naval Industry There are several challenges faced by PT. PAL in order to meet the needs of security sector in Indonesia, such as : political policy, economic policy, bureaucracy factors, pressure from abroad, and lack of readiness of the defense industry itself. However all challenges can be faced if there is self-confidence to our national strategic industry. Of course with the support from the government from the political and economical sector. Besides, the user (Indonesian Forces) must give the positive respond too to National Strategic Industr
In the period of 2007-2012, PT PAL Indonesia Persero gave significant contribution to the modernization of Indonesian Navy Weapon System. It proved by the number of the warship that have been produced by PT PAL Indonesia
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Persero. In five years PT PAL Indonesia has built 4 corvette ship, 1 Frigate Ship, 3 Fast Missile Boat, 14 Fast Patrol Boat, and 4 Landing Platform Dock. In addition, the Submarines are still ongoing process start from the year of 2012.
Actually, the numbers of the ship are still very low if it is compared with the number of the needs of Navy’s Weapons system. However, with the challenges that PT PAL Indonesia Persero face in meeting the needs of naval sector in Indonesia, this company has given the significant contribution.
The development of PT PAL Indonesia Persero also brings positive impacts to Indonesia :
a. Bring Progress and Independence of National weapons system It was explained by the Chief of Naval Staff, Admiral Dr. Masertio, that PT PAL Indonesia which is located in Surabaya entrusted to make a Diesel Electric Submarines of three similar submarines ordered by the Navy. The third Submarine will be built at the shipyard PT. PAL Indonesia. In addition, The Navy also ordered defense equipment domestically in the form of 3 unit Patrol Boat 43 meters, 3 unit Fast Ship Missile 60 yards, 2 unit Auxiliary Ship Liquid Petroleum, 1 unit Trimaran, 3 unit KCR 40 meters, 3 unit Transport Tank. b. Respected by other countries Indonesia is a large country with 17,000 large and small islands from Sabang to Merauke, as well as the world’s longest sea area. However, because of the ability of Indonesia in the field of defense has not been able to meet the standards, Indonesia is often abused by other countries including neighboring countries. If Indonesia has strong political will, Indonesia actually has the potential to build defense equipment, to meet the minim standards essential force. Developed countries such as the United States, Russia, Brirmed forces.tain, and China are focusing on economy sector and defense sector. They promote their independence of armed forces. The defence sector gets
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special attention from the government. If a country has powerful armed force, the other countries will respect. Singapore is one of the examples. Singapore is a country with small population and area if it is compared with Indonesia. However, Singapore has strong armed forces and defense equipment support, so that Singapore is respected by other countries. c. Create Job Opportunities for the society National Defense Industry has got so many job orders from the government in achieving the Minimum Essential Force. Of course this conditions take a lot of people to join the manufacturing process. For example, PT PAL open lot of job opportunities to the society. d. Reduced the foreign exchange The progress of strategic Industry growth in Indonesia will automaticallu reduce the amount of imports quota from abroad to Indonesia. e. Reduce the country’s dependence on other countries By importing military equipments need from abroad will surely make Indonesia continue to rely to other countries. Moreover, if the tools that are imported categorized as special equipment needs, such as intelligence. This can be dangerous because Indonesia’s intelligence activities or military activities can be monitored by other countries (supplier countries).
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Website PT PAL Indonesia (Persero). Perusahaan, Berita : Kunjungan Wartawan DEPHAN dalam Rangka Kemampuan PT PAL Indonesia (Persero) dalam Memperkuat Alutsista TNI: Rincian kapal yang telah diproduksi. http://www.pal.co.id/v5/news/index.php?id=nws2008111815455329. Accessed January 10th, 2014.
Website PT PAL Indonesia (Persero). Perusahaan, Berita : Kunjungan Wartawan DEPHAN dalam Rangka Kemampuan PT PAL Indonesia (Persero) dalam Memperkuat Alutsista TNI: Jenis, Tipe, dan Alutsista. http://www.pal.co.id/v5/news/index.php?id=nws2008111815455329. Accessed January 10th, 2014
PT. PAL Indonesia (Persero). Perusahaan, Berita : Kunjungan Wartawan DEPHAN dalam Rangka Kemampuan PT PAL Indonesia (Persero) dalam Memperkuat Alutsista TNI: Program Korvet Nasional. Retrieved January 10th, 2014.http://www.pal.co.id/v5/news/index.php?id=nws2008111815455329.
Lembaga Keris Official Website. Indonesia Defence Jurnal : Alih Teknologi dan Pengembangan Alutsista. Retrieved February 3rd, 2014.http://lembagakeris.net/2013/10/alih-teknologi-transfer-of-technology- pengembangan-alutsista/.
Inovasi Produk PT PAL INDONESIA (Persero). Retrieved March 10th, 2014 from http://www.pal.co.id/v5/company/index.php?page=E_3_8
Full Block Outfitting System PT PAL INDONESIA (Persero) Retrieved March 10th, 2014 from http://www.pal.co.id/v5/company/index.php?page=E_3_8
Arah pengembangan produk rekayasa umum. Retrieved March 10th, 2014 from http://www.pal.co.id/v5/company/index.php?page=E_3_8
PAL Indonesia Ikuti Pelatihan Perubahan Format Portal BUMN untuk Peningkatan Corporate Image. Retrieved March 10th, 2014 fromhttp://www.bumn.go.id/pal/publikasi/berita/website-bumn-tampilan- corporate-image-masa-kini/
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Perwakilan PT PAL Indonesia Persero. Retrieved March 10th, 2014 from http://www.bumn.go.id/pal/publikasi/berita/website-bumn-tampilan-corporate- image-masa-kini/
Level Manager PT PAL INDONESIA Songsong BUMN Bersih. Retrieved March 11th , 2014 from http://www.bumn.go.id/pal/publikasi/berita/website-bumn- tampilan-corporate-image-masa-kini/
Pelatihan Program Continuous Improvement. Retrieved March 11th, 2014 from http://www.pal.co.id/v5/news/index.php?id=nws2013071109160219
Tujuan Program Continuous Improvement. Retrieved March 11th, 2014 from http://www.pal.co.id/v5/news/index.php?id=nws2013071109160219
PT PAL INDONESIA (Persero) Libatkan karyawan dalam improvement perusahaan. Retrieved March 11th, 2014 from http://www.pal.co.id/v5/news/index.php?id=nws2013071109160219
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