Indonesian government seeks loans of up to $ 125 billion to modernize military

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JAKARTA (The Jakarta Post / ANN): The Defense Ministry is about to embark on a multibillion-dollar buying spree to modernize the country’s aging defense equipment as part of a new plan to 25-year defense supply, reveals a draft presidential regulation.

But the lack of transparency has once again overshadowed the ministry’s plans to strengthen Indonesia’s defense system, with military experts pointing to possible conflicts of interest.

The move comes amid renewed calls to replace older military vehicles out of concern for safety, following the tragic sinking of the 44-year-old KRI Nanggala-402 in a military exercise in April, which cost the world. life to the 53 sailors on board.

The draft regulations, of which The Jakarta Post obtained a copy, stipulate a new military procurement plan of $ 125 billion for the period 2020-2044, which will be financed almost exclusively by foreign loans.

Some $ 79 billion, or 63% of the planned budget, was spent on purchasing new defense equipment, while an additional $ 32.5 billion was earmarked for maintenance and emergency funds.

An additional $ 13.39 billion has been set aside for fixed interest payments. The budget is expected to be fully disbursed by the ministry by 2024, according to the draft regulation.

The Post was unable to independently verify this delay or the possibility that it was a clerical error.

Defense Ministry spokesman Dahnil Anzar Simanjuntak said the draft settlement was still under discussion and that $ 125 billion was not the “final” figure in the budget.

“The Ministry of Defense has proposed several options in the formulations of expenditure and financing to modernize [our] primary weapon systems, ”Dahnil told The Post on Tuesday.

“[We] will discuss this further with the Ministry of Finance, the National Development Planning Agency [Bappenas] and the Ministry of Public Enterprises, because it concerns the development of local defense industries.

The ministry’s director general of defense strategy, Major General Rodon Pedrason, said modernizing defense equipment was “a necessity” and that for a country as large as Indonesia, its defense posture should ideally be to be “modern and strong”.

He also defended the price, saying it would be primarily funded by foreign loans, as the nation couldn’t rely solely on state funds to upgrade its equipment.

“When we talk about defense, we also have to talk about technology, which is expensive but can be used to defend our sovereignty and our territorial integrity in the long term,” he told the Post.

“Given the limited annual budget [for defence spending], how could we modernize our primary weapon systems [to meet] Our needs?”

While the Ministry of Defense enjoys the second largest state budget allocation this year after the Ministry of Public Works and Housing, spending still lags behind other countries.

Last year, government defense spending amounted to 0.9 percent of the country’s gross domestic product (GDP), according to 2020 data from the Stockholm International Peace Research Institute (SIPRI).

This was the lowest defense spending as a percentage of GDP in Southeast Asia, with the exception of Laos, for which data was not available.

The spending plan came under scrutiny amid questions surrounding a leaked letter signed by Defense Minister Prabowo Subianto late last year, which revealed the creation of a company controlled by the ministry and chaired by a member of the Minister’s Gerindra party.

The revelation sparked speculation that the company, PT Teknologi Militer Indonesia (TMI), would exclusively handle all purchases, as outlined in the upcoming plan.

According to a copy of the letter obtained by the Post, the ministry-controlled TMI was established in December and is headed by retired Army General Glenny Kairupan, a member of Gerindra’s supervisory board.

The company was formed to “accelerate, implement and accelerate” priority acquisitions in defense technologies, including “equipment imports, technology transfer and countertrade transactions,” the letter said. .

After languishing for years in efforts to modernize defense equipment, complicated by annuity seekers and lobbyists scrambling for procurement projects, Prabowo has sought to centralize defense spending to meet needs. from the country.

It has, however, faced growing criticism for its lack of transparency, especially in light of the new procurement plan.

Indonesian Institute of Science (LIPI) researcher Muhammad Haripin said TMI’s potential involvement raised questions about the plan.

“The potential [involvement] people close to the defense ministry’s elite made the procurement plan vulnerable to conflicts of interest, ”Haripin said on Tuesday.

Such a scenario, if it were to materialize, would contradict the principles of accountability and transparency in defense procurement, as required by the 2016 Defense Industry Law.

In a press release obtained Tuesday, TMI General Secretary Wicaksono Aji said the company never signed any supply contracts sent by the ministry and said it specializes in technology transfers from Indonesian defense partners.

“TMI is not assigned to [handle] purchase or supply [of defence equipment] by the Ministry of Defense, ”Wicaksono said.

“The purpose of TMI’s presence is to solve the problems linked to technology transfers, which are still not optimized because some of the main [partners] have not yet fully [commit to] technology transfer in Indonesia.

Another defense analyst, Connie Rahakundini Bakrie, said it was not difficult to think TMI would be called upon to handle future defense purchases, even if the ministry and the company itself had snubbed the issue.

The leaked letter came out around the same time that the draft presidential rulebook began to circulate.

“It is very clear that [the Defence Ministry] established TMI to manage this [plan], considering the company was only founded last year, several months before the proposed regulation itself, ”Connie told The Post on Wednesday.

Connie said she was recently invited by one of TMI’s directors to their office for interviews. During the meeting, the director explained that the company would deal with purchases of Dassault Rafale submarines and fighter jets from France.

Based on her discussion with the director and informed by the detailed budget allocations of the draft regulation, she concluded that the ministry had already determined what types of defense equipment it wanted. Connie called on the ministry to be transparent in its dealings.

“Increased defense spending to strengthen the Indonesian military’s defense position is inevitable, but it should be done in a responsible and transparent manner,” she said.

“At the very least, the public should know what kind of equipment the state plans to acquire over the next 2.5 years, or why is the procurement process being expedited?

She also criticized the ministry for setting the deadline of 2024 for spending on a 25-year supply plan, which “does not make sense.”

Minister Prabowo met with lawmakers on Wednesday in a closed-door hearing to discuss details of the procurement plan.

As of this writing, there has been no update on the issues discussed.

Meanwhile, LIPI’s Haripin said the procurement plan also raised questions about the fate of the Minimum Essential Force (MEF) plan, which partially overlaps the schedule of the new plan.

The MEF plan is a 15-year supply plan signed by then-President Susilo Bambang Yudhoyono in 2010, with the aim of purchasing defense equipment for the army to meet the country’s needs for essential forces. minimum.

Rather than formulating a new defense procurement plan, Haripin said the government should instead focus on efforts to complete the latter part of the MEF plan to ensure program consistency and continuity. middle term. – The Jakarta Post / Asia News Network

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