olio.co.uk Our World #Indonesia #Asean Monday, October 13 ... · There is a silver lining, though. Lower commodity prices should help to make Indonesian manufacturing more attractive,

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When Indone-sians elected Joko Widodo to the high-est office in

the land, they were casting their votes for change from politics-as-usual. Jokowi, as most Indonesians refer to their president-elect, is the first modern In-donesian leader without roots in the country’s well- entrenched political, busi-ness and military circles, or ties to the previous authoritarian regime of Su-harto, which ruled Indone-sia from 1967-1998.

Unlike his predecessors, Jokowi is known as a man of the people who seeks out their advice and un-derstands their problems, often because he has been through the same issues himself. And he has shown that he has what it takes to transform Indonesia from a country often characterized as corrupt and poor, into one of transparency, equal-ity and progress.

B o r n i n a s l u m i n Surakarta, East Java, Jokowi studied forestry at universi-ty and eventually built up a successful furniture manu-facturing company. As may-or of Surakarta from 2005-2012 he revamped parks, built markets, introduced a healthcare program for residents, made education more accessible, and, pos-sibly most importantly in a country where cronyism and corruption have long been the order of the day, barred members of his fam-ily from bidding for key pro-jects in the city.

In seven years, Jokowi turned Sura ka rt a , a l s o commonly known as Solo, around from a city known for violence, poor govern-ance, high unemployment, and slack economic growth into a recognized cultural and tourism center. Jokowi eased traffic congestion, cut the red tape businesspeople have to deal with, and im-proved living conditions in Surakarta’s slums.

After seven years at the helm in the city, Jokowi was elected governor of Jakarta, and began working his mag-ic there. The capital has been prone to traffic jams and floods for decades but Jakarta has nonetheless had a string of governors who failed to adequately address these issues. That changed with Jokowi’s governship.

He regularly visited poor parts of the city, where he talked with ordinary resi-dents about issues that mat-ter to them, including food prices, housing, flooding and transport. He instituted a merit-based hiring system for civil servants, published his salary and launched re-forms in the education and finance sectors. And the universal healthcare sys-tem he introduced for resi-dents of the sprawling city proved to be so popular that the plan almost backfired

as hospital and other facili-ties struggled to cope with the sharp uptick in patient numbers.

Jokowi was nominated in March to be the Indonesian D e m o c r a t i c P a r t y o f Struggle (PDI-P) candidate for the presidency, and af-ter winning 53% of the vote in July, will take the oath of office on October 20.

The election of the com-mon-man candidate to the highest office is considered a breakthrough in Indonesia’s still young democracy.

Jokowi’s focus on ordi-nary Indonesians and his “can-do style of leadership” will come as “a breath of fresh air from stifling bu-reaucrat ic ineptness in many state institutions,” Brookings Institution sen-ior fellows Joseph Chinyong Liow and Lex Rieffel wrote in a recent analysis.

In foreign policy, Jokowi wants to use Indonesia’s

unique position as a mari-time axis to spur develop-ment that benefits the peo-ple, Rizal Sukma, head of the defense and foreign affairs working group on Jokowi’s transition team, told The Jakarta Post newspaper.

At home, a $7.7 million order for 72 new Mercedes-Benz sedans for government ministers was cancelled this month after Jokowi said he would prefer that officials stick with the cars they al-ready have.

But Jokowi faces numer-ous challenges as president, the greatest being “to as-semble a working majori-ty of political allies while maintaining his own agen-da,” Liow and Rieffel wrote.

That is because Jokowi’s opponents in parliament vastly outnumber his sup-porters, and are expected to place hurdles in the way of any reforms the new presi-dent might want to intro-duce.

A key reform is the re-duction of fuel subsidies and, more broadly, making the country more energy ef-ficient. Introduced in the final years of Indonesia’s first president, Sukarno, fuel subsidies were intended to protect citizens from the impacts of inflation, which at times was running in the triple digits.

Today they eat a large chunk out of the state’s revenues – $20 billion a year, by some accounts. The subsidies have pushed Indonesia’s current account deficit to above 2% of gross national product in the first quarter of 2014, and some Indonesia-watchers predict the deficit could be as high as 3% at year’s end if the sub-sidies remain in place.

The fuel subsidies mean Indonesians pay some of the lowest prices in Southeast Asia for gasoline – a gallon currently goes for the equiv-alent of around $2.11. This makes the subsidies very popular with the people, and politicians are keenly aware of the fate of those who have gone before them who tried to cut the fuel sub-sidies. The end of Suharto’s 32-year presidency in 1998 was heralded by protests af-ter he tried cutting the fuel subsidies and raised prices.

Fuel prices were last raised in Indonesia in June 2013. During his campaign, Jokowi said he would grad-ually cut fuel subsidies over the next few years. A mem-ber of Jokowi’s econom-ic team, Arif Budimanta, told The Jakarta Globe that the price of fuel could go up as early as October. The Deputy Governor of the Central Bank, Mirza Adityaswara, said the price of gasoline has to go up by around 50% for the subsidy cuts to have a positive im-pact on the current account deficit.

Nevertheless, Jokowi’s administration has stated that it would find ways to prevent higher fuel costs from resulting in sharp ris-es in food prices and from impacting public transpor-tation, and would also de-velop plans to allocate cash for poor people.

A s J o k o w i a n d h i s “crowdsourced” cabinet ( Indonesians were g iv-en the opportunity to cast their votes online) turn a new leaf in Indonesia, opti-mism is high that a new era of growth and social inclu-siveness has begun.

With the rise of a new kind of leadership under the ‘common-man’ president elect, Joko Widodo, the archipelago nation and world’s third-largest

democracy enters a new era filled with optimism

I WArmly cOngrATUlATe IndonesIa’s presIdent-elect Joko WIdodo. the people of IndOneSIA UnITed Once AgAIn TO ShOW TheIr cOmmITmenT TO democracy through free and faIr electIons... The UnITed STATeS lOOkS forWard to WorkIng WIth presIdent-elect WIdodo as We deepen our partnershIp, promote our shared obJectIves globally, and expand people-to-people tIes betWeen our nATIOnS”

JOHN KERRY, U.S. Secretary of State

‘A UNITED WORLD SUPPLEMENT PRODUCED BY: barbara Jankovic, project director marko rankovic, project consultant fernando mora, editorial director geoffrey flugge, executive coordinator

Joko Widodo, Indonesia’s president-elect, will take oath of office on October 20, 2014

Monday, October 13, 2014 Distributed by USA TODAY INDONESIA4


The region’s largest economy moves forward

Indonesia has the ‘demographic bonus’ of having a young population – over half of the population is between 15 and 30 years of age

maipark reinsurance (pt reasuransi maIpark Indonesia) mitigates the effects of natural disasters in one of the most disaster-prone countries in the world

Managing disaster risk in the ring of fire Indonesia is a country that does not shy away from the fact it sits in one of the most disaster-prone locations in the world. Volcanic erup-tions and earthquakes have had a devastating effect on the Asian nation in the past, but now it is taking the ini-tiative by accepting these disasters occur and prepar-ing for them to ensure the impacts on its economy and

people are not as severe as they once were.

The Indian Ocean Earth-quake of December 2004 provided a stark reminder of the unpredictable nature of Mother Nature but the effects are now being miti-gated by adequate insur-ance protection such as that offered by forward-thinking Maipark Reinsurance, an award-winning reinsurance

company which faced that disaster in its first opera-tional year.

The Jakarta-based rein-surer was shocked at the way disaster insurance was being addressed and has worked to provide an en-gine for economic recovery if and when disasters hit in the future.

“Our message is that we have to realize that we are living in a catastrophe-prone area and we need to embrace that fact and adapt ourselves,” says Dr. Frans Y. Sahusilawane, President Di-rector of Maipark.

Dr. Sahusilawane was shocked at the insurance set-up to deal with disas-ters and the lack of “proper premiums” to help fund recovery. Learning from Japan, which has a similar history of natural disasters, Maipark has set up its own catastrophe modeling and is working on implanting other models, including one to deal with floods in Jakarta.

Maipark is also involved in other activities to mini-mize the impact of natu-ral disasters. Research and

educating the public is also high up on its list, while the company provides natu-ral disaster prevention and mitigation measures free of charge to small communi-ties. Tsunami early warning towers with loudspeakers have been built to aid com-munication.

“We want to educate peo-ple and help protect them from the impacts of earth-

quakes,” says Dr. Sahusila-wane. “We take fellow insur-ers to important geological sites and teach them about risk and the importance of the environment. We are working to elevate Indone-sia’s overall knowledge of earthquake risks.”

Indonesia cannot escape natural disasters but it is working hard to reduce the impact.

Indonesia is home to some 130 active volcanoes

“ImAgIne ArOUnd 135 mIllIOn IndOneSIAnS jOInIng The mIddle clASS… the Impact on the economy WIll be sIgnIfIcant“

MULIAMAN D. HADAD, Chairman of the Financial Services Authority (OJK)

“The U.S. IS STeAdIly recoverIng, SO IT IS TIme TO refocus on the UnITed STATeS as an export deSTInATIOn“

MIRzA ADITYASWARA, Senior Deputy Governor at the Bank of Indonesia

“there’s a bIg gap In rIsk protectIon that needs to be borne by state budgets”

DR. FRANS Y. SAHUSILAWANE, President Director of MAIPARK

Co m m o d i t i e s have long been the backbone of Indonesia’s economy, ac-

counting for more than 50% of exports from the 16th larg-est economy in the world. But, warns the World Bank, “Indonesia’s commodity ex-ports are facing significant headwinds”, the strongest be-ing falling global commodi-ties prices.

There is a silver lining, though. Lower commodity prices should help to make Indonesian manufacturing more attractive, the World Bank says.

And there’s room for man-ufacturing to grow. The sec-

tor currently contributes just 24% of Indonesia’s GDP, and, as of 2011, employed 14.4 million Indonesians, around 6% of the population of 248 million. International manu-facturing giants, including General Electric, Korea’s LG and Samsung, and Japan’s Toyota, are already knocking on the archipelago nation’s door, drawn by low wages, abundant resources, and a banking and political system that have remained stable, even as political and eco-nomic ructions have rocked other nations in the region.

Up to now, growth in the manufacturing sector has been fuelled largely by do-mestic demand for goods. Indonesia is the fourth most populous country in the world, after China, India and the United States, and has a growing middle class. In fact, global information and mea-surement company Nielsen expects Indonesia’s middle class to double by 2020, and

says it’s time for the rest of the world to pay attention to Indonesian shoppers.

Mirza Adityaswara, the Se-nior Deputy Governor at the Bank of Indonesia, says that to realize the full potential of the manufacturing sector, Indonesia should look be-yond the domestic market, increase exports of manufac-tured goods, and “diversify our export destinations”.

“The U.S. is steadily recov-ering, so it is time to refocus on the United States as an ex-port destination,” he adds.

Meanwhile, Muliaman D. Hadad, Chairman of Indo-nesia’s Financial Services Au-thority (OJK), says the middle class will have a key role to play in growing the economy, beyond purchasing made-in-Indonesia goods.

“Imagine around 135 mil-lion Indonesians joining the middle class… the impact on the economy will be signifi-cant,” he explains.

As more Indonesians move

into the middle class, more of them will be paying more tax, which will also help to boost the economy – but only if the government does a better job collecting those taxes, offi-cials say.

Only around 0.33% of In-donesia’s 1,000 trillion rupiah

in tax revenues comes from personal tax, Deputy Finance Minister Bambang Brodjone-goro says. The overwhelming portion is from corporate and value added tax.

“We need to tackle this disparity, especially as Indo-nesia has been growing from a low-income country into a low-middle income country,” he adds.

There are other issues to be addressed to drive Indo-nesia’s economy forward, the most sensitive of which are fuel subsidies.

Some say the subsidies put a $20 billion a year hole in the nation’s economy, and Indonesia-watchers are warn-ing that if nothing is done about the subsidies soon, the current account deficit could climb above 3% by year’s end.

Yet removing the subsidies is unpopular with the public because it will bump up gas prices and increase infla-tionary pressure. Hardest hit would be the large portion of Indonesians who live just above the poverty line. None-theless, president-elect Joko Widodo is reportedly mull-ing a 14% hike in the price of a liter of gasoline before the year is out. To soften the blow on the poor, he would also widen the country’s social safety net, improving access to healthcare, transportation and education for the poor.

consistent growth of 5 to 6% per year and a strong financial system generate strong economic expansion in Indonesia, the world’s 16th largest economy

fallIng commodIty prIces could help to mAke IndOneSIAn manufacturIng more attractIve, accordIng to the World bank

“geOThermAl Is one of the best reneWable energy SOUrceS because It can supply a constant base lOAd“

RUDY SUPARMAN, President Director of Star Energy

“IndOneSIA needS u.s. support and transfer of knOWledge from the technology sIde, knoW-hoW, theIr experIence, etc., In reneWables”

SURYA DARMA , Vice Chairman of the Indonesian Renewable Energy Society (METI)

Monday, October 13, 2014Distributed by USA TODAY INDONESIA 5


“IncreASIng exploratIon actIvItIes Is expensIve and There Are greATer chAllengeS In fIndIng and UTIlIzIng OIl fIelds, as they are often deep-sea or In forested TerrAIn“

PROF. SUBROTO, Founder and Chairman of The Mines and Energy Society (Bimasena) and former Minister of Energy

“If you consIder ThAT energy reqUIremenTS In 2025 WIll be double What they are noW, We have to develop every optIon We can. the potentIal of geothermal IS clOSe TO 30,000mW”

DARMOYO DOYOATMOJO, Chairman of Sarulla Operations Ltd.

The region’s largest economy moves forward

as Indonesia works to complement its hydrocarbons base with a mix of renewable sources, innovative companies like star energy have risen to the occasion

Geothermal, a powerful new hopeCreated in 2003, Star En-ergy has achieved sustained growth by combining the best practices of major inter-national energy companies, including technical excel-lence, financial prudence, risk management and good governance, while avoiding high overheads, sprawling organizational structures and bureaucratic inefficiencies.

Star Energy boasts a unique portfolio of hy-drocarbon and renewable assets that spans the In-donesian archipelago and represents a sampling of some of the country’s most promising resources. This includes natural gas fields in the Natuna Sea, home to a massive deposit considered to be the largest untapped natural gas field in Asia, with over 46 trillion cubic feet of reserves. Onshore, Star Energy has several sites in development, having se-cured production sharing contracts in the Tarakan and South Sumatra basins.

“With oil and gas prices as they are, we are very com-mitted to expansion,” says Rudy Suparman, Star Ener-gy’s President Director.

“We have excellent op-portunities in our explo-ration blocks and we are preparing to drill two infill wells this year. In 2016 we will drill three or four wells

for exploration, to prove our additional reserves. Our aim is to confirm an additional 127 million bar-rels in reserves by 2016. This sounds ambitious, but we believe that we have significant existing poten-tial that, when utilized, will meet this target.”

In addition to these ex-ploration and production prospects, Star Energy has successfully branched out into geothermal power. In line with its long-term strat-egy of creating value for all

its stakeholders, the com-pany moved into the sector with the acquisition of its first facility in 2004.

A Joint Operation Con-tract (JOC) with the na-tional oil and gas company, Pertamina, gives Star En-ergy the right to develop up to 400MW of electricity in power hungry West Java. “Star Energy took over the Wayang Windu project in West Java to operate geo-thermal assets,” Mr. Supar-man explains. “We have since worked to develop

this site and in February 2009, we had a major break-through when we built our own additional geothermal power unit. As a result, since this time we are oper-ating two units at Wayang Windu, supplying Indonesia with more electricity gener-ated through clean, green renewable means.”

Although the regulatory environment in Indonesia has created some uncertain-ty, thanks to its foresight, Star Energy has positioned itself for long-term growth.

“The good thing is we have some of the best-proven reserves in Indo-nesia and when conditions improve we will be ready to expand our operations,” Mr. Suparman affirms. “Currently we have Unit 1 producing 110MW, Unit 2 producing 117MW and we are planning to build Unit 3 which will generate 60MW. We anticipate that a fourth unit could be developed for a further 60MW.”

As Indonesia looks for-ward to a new era of politi-cal leadership, Star Energy has engaged with policy-makers to continue devel-oping the country’s energy assets.

“More than anything we want consistency from government,” Mr. Supar-man emphasizes. “Every new piece of legislation comes with positives and negatives. The implemen-tation will be the real test, but we are happy so far be-cause there has been good consultation with all the stakeholders. Geothermal energy is logical for Indo-nesia because in the future we cannot afford to rely on fossil fuels.

“But to get the investment levels required to promote change to renewable en-ergies, there needs to be strong political will.”

Star Energy currently has two units producing a total of 227MW of geothermal power

The history of Indo-nesia as a globally important energy supplier dates back nearly 130 years,

when oil was first discovered in northern Sumatra. Since that time, it has risen to become a world leader in the production and export of various energy products, even as its domestic market grew in size to become the largest in Southeast Asia.

Today, Indonesia continues to forge ahead, with a deeper commitment to infrastructure investments and public-pri-vate partnerships, as it works to expand and diversify its overall energy mix to meet the demands of a rapidly develop-ing economy.

Despite its oil production having declined from more than 1.5 million barrels per day (bpd) in the 1990s, to 834,000 bpd last year, Indonesia has continued to play a vital role in regional and global energy markets. It exports more coal than any country in the world, and is also the world’s fourth-largest exporter of liquid natu-ral gas, its third-largest pro-ducer of geothermal energy, and 24th largest producer of crude oil.

Indonesia’s sizeable and geo-graphically diverse territory

holds significant renewable en-ergy resources, such as hydro-electricity, solar and biomass – assets that it will need to capitalize on in order to meet power demand that is forecast to grow at more than 7% annu-ally in the near-term.

“Indonesia depends too much on fossil fuels,” explains Prof. Subroto, the founder and Chairman of Bimasena, The Mines and Energy Society, who once served as Indone-sia’s Energy Minister and also led OPEC from 1988 to 1994. “We only have 4 billion barrels of proven oil reserves. So if we

do not find new reserves in 10-12 years we will run out of oil entirely.”

Indonesia will only see its energy needs multiply in the years to come, Prof. Subroto points out, as total economic activity expands from $800 bil-lion this year to $4 trillion in little over a decade.

“This is a fourfold expansion of GDP,” he emphasizes. As per capita income more than triples over the same time pe-riod, even as the overall popu-lation approaches 255 million, Indonesia will need multiple streams of energy. “At the mo-ment 10% of our energy is from renewable sources,” he says. “By 2025, it needs to more than double, to 26%.”

To meet this challenge, poli-cymakers and business leaders will look to the country’s abun-dant geothermal resources, the world’s largest, with a total generating capacity of 29GW annually. In June, workers there broke ground on the construc-

tion of what will be the world’s largest geothermal power plant, a $1.6 billion initiative known as the Sarulla Geother-mal Power Project.

“When the Sarulla geother-mal plant, with a capacity of 330MW, is up and running, it can meet today’s current de-mand,” affirms Surya Darma, Vice Chairman of the Indone-sian Renewable Energy Soci-ety (METI). As head of METI, Mr. Darma has argued for in-creased regulatory certainty to help the country secure financ-ing for large-scale renewable energy projects.

Rida Mulyana, Director General for New and Re-newable Energy and Energy Conservation, points out that Indonesia has new legislation regarding geothermal invest-

ment. “We developed this law in consultation with investors and bankers, so return on in-vestment is emphasized in the new regulations,” he says.

The Sarulla project counts on Nevada-based Ormat Tech-nologies among its backers. Ormat will supply more than $250 million of equipment, and hold a 13% stake in the finished power plant.

“Geothermal energy is necessary,” says Darmoyo Doyoatmojo, Chairman of Sarulla Operations Ltd., and a commisioner of PT Medco Power Indonesia, the major-ity partner and operator of the Sarulla Geothermal Power Project. “With this project, we are developing a brand new billion-dollar asset. We have government arrange-ments and partnerships that put us in a different league. In Indonesia, we are the premier geothermal player and we can develop our potential further. Energy needs to evolve with economic growth.”

Mr. Mulyana adds that Indonesia needs “greater technological and financial cooperation, as well as better developed human resources to ensure we become more sustainable” and that the country needs “to change the energy mix in favor of renew-able energy”.

proven oil reserves are diminishing at the same time the economy is growing, so Indonesia is turning to renewable sources, especially geothermal, to diversify its energy mix

The challenge to meet Indonesia’s

energy needs

Indonesia is the world’s third-largest producer of geothermal energy and 24th largest producer of crude oil

IndonesIa’s total economIc actIvIty Is expected to groW from $800 bIllIon thIs year to $4 trIllIon by 2025. thIs groWth WIll, of course, cause energy demAndS TO multIply



Linking the archipelago nation by land and by sea

Connecting In-donesia’s 17,000 islands poses a unique chal-lenge but one

that the government of the archipelago nation is taking seriously to help continue its economic growth.

Well-developed transport infrastructure plays a key role in growth and Indonesia’s geo-graphic location means an inter-modal transport infrastructure is essential, especially through land and sea. The government’s National Connectivity Frame-work aims to improve intra-island and inter-island transport links and turn the nation into a gateway to South East Asia and the Pacific.

The government has acted to accelerate the island nation’s transport system by bringing in new laws to facilitate investment while also investing over $35 billion in projects over the next three years.

“Transport plays an essential role in supporting economic growth,” says Evert Ernest Mangindaan, Minister of Trans-portation. “The availability and efficiency of transportation ser-vices are vital in supporting the production and distribution im-perative for economic growth.”

One of the steps taken to strengthen economic growth is the creation, through the state’s Master Plan for Acceleration and Expansion of Indone-sia’s Economic Development (MP3EI), of six ‘economic cor-ridors’ – in Sumatera, Java, Ka-limantan, Sulawesi, Bali-Nusa Tenggara, and Papua-Maluku – that Mr. Mangindaan says will “alleviate various issues with ter-ritorial expansion”.

According to Luky Eko Wuryanto, Deputy Minister for Infrastructure and Regional Development Coordination, the MP3EI is “designed to shift the focus towards the regional areas and create new economic cen-ters based on their potential and unique competitive advantages.”

“This is how we identified the six economic corridors to expand and modernize eco-nomic centers outside of Java,” he comments.

“This intra- and inter-island connectivity is intended to im-prove regional and global con-nectivity. Additionally, these economic corridors are expected to connect Indonesia with re-

one of the steps TAken TO STrengThen ecOnOmIc grOWTh IS The creATIOn of sIx economIc cOrrIdOrS In sumatera, Java, kalImantan, sulaWesI, balI-nutrIa, and papua-maluku

More than $3 billion has been allocated in 2014 to improving the nation’s road capacity

gional economic centers within the Asean region and the world, in an effort to improve national competitiveness,” adds Transpor-tation Minister Mr. Mangindaan, with Mr. Wuryanto pointing out: “We must be mindful of our archipelago-wide perspective.”

Given Indonesia’s island na-ture, sea transport and improve-ment of the country’s ports are key to driving the economy through imports and exports. A National Ports Master Plan,

outlining the planned develop-ment of ports by 2030, includes focus on attracting investment, improving competition and developing human resources. The new port at Tanjung Priok, improvements at the Port of Belawan, and the construction of Makassar New Port, are signs of early success but fresh invest-ment is being sought to continue strides forward.

This year, the Ministry of Public Works has allocated

from sabang in the north-west to Jayapura on the island of papua, Indonesia aims to boost connectivity across its expansive territory of over 17,000 islands

the construction of the capital’s mass rapid transport system will revolutionize life in Jakarta

Rapid transit to move Jakarta more smoothly and quicklyAs a bustling, energetic and thriving capital that is fast ap-proaching a population of 10 million people, Jakarta is a city that will benefit greatly from the construction of its new un-derground transport network. The Jakarta Mass Rapid Transit (MRT) project, which will cost in excess of $3 billion and be fully completed by 2030, aims to reduce congestion, improve quality of life and boost eco-nomic growth not only in Ja-karta but also across Indonesia.

The influxes of people from other provinces into the coun-try’s capital bring with them an increase in car and motorbike use and a decrease in the qual-ity and efficiency of its current public transport system.

“The MRT project is nec-essary,” says Dono Boestami,

President Director of PT MRT Jakarta. “We cannot increase the size of the city and we can-not widen the roads. Even huge inter-city toll roads will not be enough to accommodate the growing number of cars and motorbikes in Jakarta. The Mass Rapid Transit system will not solve all Jakarta’s traffic problems, but it is the first step in the creation of an efficient commuter network.”

The progress so far has been impressive, especially consider-ing the project is the first of its type in Indonesia in terms of size and overall importance to its economy. It is so huge that MRT Jakarta is expected to be a case study in Indonesian infra-structure project management.

The complete MRT Jakarta project will stretch more than 69 miles and consist of two main lines: a north-south line and an east-west line. Phase one of the north-south line is already under construction and is expected to be operational by 2018. Meanwhile, phase two of the construction is expected to start just before the completion of phase one and is targeted for completion by 2020. The feasibility study for the east-west line is in progress, with construction expected to take place between 2024 and 2027 at the latest.

“Our main objective is to complete the South-North cor-ridor by 2020 and by the first semester of 2018 we would like to have testing completed on the first phase of South-North Line (9.8 miles and 13 stations) and make it enter into com-mercial operation,” says Mr. Boestami. “Our next priority is the East-West line.”

Like all huge projects there

are challenges, but those chal-lenges are being met. Land acquisition is the responsibility of the city and Jakarta officials understand the urgency of the project and are aiding its prog-ress. Japanese technology is also being used owing to a large pro-portion of investment coming from Japan; the integration of Indonesian workers alongside experienced Japanese technol-ogy, however, is so far seamless.

Natural disasters have also been taken into consideration, with station entrances being elevated, airtight station de-signs integrated into develop-ment plans and a number of water pumps which will be installed to alleviate risks posed by flooding. Nothing has been left to chance. “The project is proof that Indonesia can man-age a large-scale infrastructure project prudently,” says Mr. Boestami. “Our management of MRT should give investors confidence in the future of in-

frastructure projects in Indo-nesia.”

The construction of the MRT system will provide the residents of Jakarta with a fast-er, safer, reliable and convenient mode of mass transportation, while at the same time encour-aging new economic oppor-tunities in and around MRT stations and along the MRT corridors.

This environmentally-friendly mode of transporta-tion will also help reduce air pollution and traffic jams. Fur-thermore, its presence will en-courage better spatial planning, as it encourages transit-urban integration.

In Jakarta, the construc-tion of the MRT will create thousands of new jobs, with this number increasing once the system is operational. At the national level, it will also encourage infrastructure de-velopment across the archi-pelago.

more than $3 billion to improve Indonesia’s road capacity. Proj-ects such as the Jakarta MRT, Monorail and the Transjakarta Busway have also been imple-mented to improve transport infrastructure and alleviate con-gestion in key areas.

The ambitious volume of both land and sea transport and infrastructure projects means there are a number of oppor-tunities for foreign investors to become involved.

Dono Boestami, President Director of PT Mass Rapid Transit Jakarta

“OUr InTenTIOn IS TO enhAnce The lOgISTIcS performance Index of IndonesIa by ImprovIng servIce levels In the port IndUSTry“

DJARWO SURJANTOManaging Director of Pelindo III

“In The lAST fIve years We have only had one focus: to Improve our cOnTAIner TermInAl operatIons“

BAMBANg E. CAHYANAPresident Director of Pelindo I

“natIonally, We are number one In terms of the number of vessels And The rOUTeS that We servIce“

DANANg S. BASKOROPresident Director of PT ASDP Indonesia Ferry (Persero)

Monday, October 13, 2014Distributed by USA TODAY INDONESIA 7


Central and East Java, Bali, West and East Nusa Teng-gara, and South and Central Kalimantan are the islands that fall under the Indonesia Port Corporation 3’s (Pelindo III) jurisdiction for overseeing port operations and improvements

Pelindo III, at the center of the action

With the relatively unde-veloped Eastern Indonesia seen as the future for many of the vast nation’s sectors – including oil and gas, its largest export – it is no surprise that the country is taking logistical services to this part of the country seriously in order to con-tinue its encouraging eco-nomic growth.

The state-owned Indo-nesia Port Corporation (IPC) was established to develop port operations across the nation’s 17,000 islands and Indonesia Port Corporation 3 (Pelindo III), one of four regional ICPs, looks over the lucra-tive Eastern block of is-lands that include Central and East Java, Bali, West and East Nusa Tenggara and South and Central Kalimantan.

The area’s flagship port is Surabaya, the second largest port in Indonesia and a port that is seen as the gateway to Eastern In-donesia. Although behind Jakarta’s Tanjung Priok in terms of size, Surabaya exceeds it in terms of con-nectivity – highlighting the importance of the Pe-lindo III corridor in terms of logistics.

That connectivity is on the rise, with such plans in place to reduce ship waiting times and dedi-cate terminals to particu-lar cargo and particular types of vessel to improve efficiency. “At Pelindo III we’re doing our best to improve accessibility and connectivity throughout Indonesia and the world,” says Djarwo Surjanto,

Managing Director for Pe-lindo III. “To do this we’ll require a lot of support from inside and outside of the country and this is a lucrative opportunity for international investors.”

Improvements are not limited to Surabaya, with ports at Telok Lamong, Belawan and Bali also among the key players in Indonesia’s logistic per-formance and economic growth. Telok Lamong is anticipating large growth and has acted by building a new terminal dedicated to international cargo. New technologies including re-mote crane facilities also aim to improve efficiency, while the expansion of the newest terminals will allow freight capacity to triple and thus cut costs.

Tourism is an important part of the country’s econ-omy and tourists are not being left out. A new aero-bridge serviced passenger terminal has been installed in Belawan, the first of its kind in the country, while Bali is being made into a special ‘turnaround’ port for cruise ships.

And these improve-ments are being carried out with the environment in mind. “Right from the beginning, Pelindo III has planned for all our new terminals to be green ter-minals,” says Mr. Surjanto. “We’re avoiding diesel generators and fossil fuel power in general and moving towards electric-ity. If we do have to use a diesel engine we choose the most environmentally sensitive ones.”

A redefinition of corporate culture has led to a change of fortunes at ferry company PT ASDP Indonesia Ferry (Persero)

‘One team, one spirit, one goal’ at ASDPIn a country like Indonesia, an archipelago of 17,000 is-lands, sea transportation is vital. Ferry companies are tasked with the difficult challenge of transporting tens of millions of passen-gers and vehicles each year across an intricate collection of islands that span three separate time zones.

For more than 40 years, PT ASDP Indonesia Ferry (Per-sero) has been a key player in Indonesia’s maritime trans-portation industry. Ferrying 7 million passengers and 2 million vehicles annually, it is the largest ferry company in terms of fleet size and number of routes. However, for a period up to 2011 it had been going through some difficult times, when its level of success had not matched its size.

A poorly run state-owned enterprise (SOE) facing stiff competition from several smaller but efficiently man-aged private operators, the company was operating at a loss and had not expanded its fleet for more than 30 years.

In 2011, Danang S. Bas-koro was brought in to turn things around and his achievements so far have been nothing short of phe-nomenal. The former presi-dent director of Merpati Nu-santara Airlines and Jakarta

International Container Terminal, Mr. Baskoro in-troduced a new corporate culture to ASDP, as well as a completely new IT system, a $50 million training pro-gram, and an ambitious five-year strategic plan.

Three years since he took the reins, the company is now making profit and turn-over has more than tripled

from $60 million to $200 million. So effective has the turnaround been that ASDP was officially named Indone-sia’s most successful SOE in Indonesia in 2013 and 2014.

There are plans to increase the fleet from 130 to 250 ves-sels by 2019, as the President sets his sights on expansion across the whole the South-east Asia.

Perhaps the most crucial factor in ASDP’s renaissance has been the redefining of corporate culture. “To start with, I assessed the general managers in each branch of each province and decided to reshuffle the personnel in order to change the com-pany culture,” explains Mr. Danang. “The desire to be a more unified company led to the creation of our new slo-gan: ‘One Team, One Spirit, One Goal’.”

He has also introduced tri-monthly performance reviews which he says have “motivated our employees to be more ambitious”.

Ambition is what defines Danang S. Baskoro: not just satisfied with becoming the number one operator in Indonesia, he envisages the company as the leading operator across the entire region of Southeast Asia.

“Indonesia will become a member of the Asean Eco-nomic Community in 2015 and ASDP will focus on regional expansion. By the end of my term as president director, in 2016, I want ASDP to be the largest play-er in the regional and global ferry business. It is an ambi-tious plan, but I believe that we can achieve our goals even ahead of schedule,” says Mr. Danang.

Focused on the northwestern part of the archipelago, Indonesia Port Corporation 1 (Pelindo I) is engineering the greatest performance upgrade of any Indonesian port in history

The transformation of Pelindo IPelindo I – one of the four state-owned port companies in Indo-nesia, which manages ports in the west of Indonesia – has made significant improvements in the last five years since Bambang Eka Cahyana was named Commer-cial and Business Development Director in 2009 and took over as President Director (PD) in 2013.

Mr. Bambang has strived to turn the state-owned company, once stifled by bureaucracy, into one that resembles a private firm. In the last five years, the PD says that he has overseen “the greatest performance upgrade of any Indonesian port in history”.

“Coming from the private sector, I made sure to make ‘customer focus’ our first new corporate value. This helps us change the business culture to one of a customer-oriented company,” he says.

Mr. Bambang’s efforts to

change the culture have paid off significantly: profits have sky-rocketed from IDR 138 billion ($ 11.8 million) in 2010 to IDR 489 billion in 2013. This year the PD expects the company to make more than IDR 600 billion.

The PD’s first five-year trans-formation plan, which came to a close last year, had one focus: to improve container terminal op-

erations. The second transfor-mation plan, launched this year, is focused on expanding the existing business (with plans to open facilities in Timor Leste), developing Kuala Tanjung Port as West Indonesia’s hub port and container terminal focused on crude palm oil, as well as plans to expand into new areas. These include entering the bio-

diesel industry in a venture with one of Indonesia’s major power companies to build an indepen-dent power plant, and to add subsidiary companies and pro-vide marine services.

“At the end of this five year period, in 2018, I want to achieve an after tax profit of IDR 1.8 tril-lion, “ says Mr. Bambang.

“It’s time for Pelindo I to grow and expand into the international market. In order to effectively in-tegrate into the 2015 Asean Eco-nomic Community, Indonesia needs to improve the ports sector. Before we can compete with the likes of Singapore and Malaysia we need to catch up with them.”

“If you want to succeed in this industry, you need to think out of the box,” says President Director of Perum Damri

Aggressive expansion at Perum DamriWhen Agus Suherman Subrata took over in 2011 as President Director of Perum Damri, Indonesia’s state-owned bus company, “all of my senior managers pushed me to make the best of Damri,” he recalls; and that is certainly what he has done in his first three years.

Mr. Subrata has reinvigo-rated operations, adopting what he calls, an “aggressive expansion policy” at Damri, a public company in a mar-ket where competition is fierce from private firms.

“Innovation and expan-sion is critical to serve this market. If you want to succeed in this industry, you need to think out of the box. Last year we re-placed and reconditioned over 1,000 of our buses and launched 40 of our royal buses. We now have city and inter-city buses, an air-port service, cargo busses, 2,600 total passenger buses and 59 offices across pro-vincial Indonesia.”

The focus in 2014 has been on reaching “aggres-sive strategy targets”, he says. “This year we are drafting a long-term plan. We want to deliver an ex-cellent product and cen-tralize operation control. In 2018 we want to be the leader of land transporta-tion in Indonesia. The po-tential for our business in the future is huge.”

Indeed, better company

performance will be intrin-sically linked to better staff performance. This is why in the last two years the com-pany has sent 63 employees to receive master’s degrees related to the transporta-tion industry.

“I feel now, every year, the business is becoming more complex,” states the Damri boss. “Human re-sources will be critical to helping Damri manage this complexity.”

Increased efficiency of human resources will be coupled with increased ef-ficiency of its buses: moving with the times, the bus firm has plans to change its entire fleet over to much more en-vironmentally friendly gas engines in the long term.

Already, several of its newer buses are running on Korean-made gas engines and Damri is currently con-structing a gas refueling station in partnership with an Indonesian state-owned natural gas company.

Pelindo III is improving efficiency and cutting costs at its ports

Pelindo I’s new corporate culture has brought with it massive financial benefits

Agus Suherman Subrata, President Director of Perum Damri

ASDP was officially named Indonesia’s most successful SOE in Indonesia in 2013 and 2014

There is a renewed sense of optimism within In-donesia’s defense in-dustry, thanks to the State’s series of pro-

grams to not only modernize the Armed Forces of Indonesia (TNI), but also boost indigenous manu-facturers of military equipment. A 2012 law enacted by President Yudhoyono, a retired three-star army general himself, decreed that TNI must purchase the majority of its weaponry and vehicles from Indonesian companies, who in turn are encouraged to negotiate agree-ments and joint ventures with for-eign defense firms in order to gain access to advanced technology.

Defense Minister Purnomo Yus-giantoro speaks with United World about the evolution of the defense industry over the past several years, and his expectations for making it self-reliant.

What is your strategy to mod-ernize the military and improve the efficiency and overall capac-ity of the defense industry? The economic crisis of 1998 did not only mark a change from an old era into a new era in Indonesia; it was also the time when the old govern-ment was transformed into a newly reformed one. Therefore, the crisis also marked the beginning of the new era of democratization in our country and that is very important.

On the economic side, it took us a while to recover from the 1998 cri-sis. Our priority was to focus on the economy and social welfare and it has only been over the last five to 10 years that our economy grew stron-ger. This was also the time for the defense industry to recover.

Our philosophy is that if we want to have a strong country, we need to have strong armed forces. And if we want to have strong armed forces, we need a strong defense industry to support them. That is why it is necessary to strengthen our armed forces in parallel with pushing the defense industry further. That is a key point.

The overall economy has been gradually improving and the gov-ernment has been able to increase the budget allocation for the defense industry and the armed forces. I be-lieve that in this cabinet we have a very good starting point to boost the industry as we received the highest proportion of the budget so far for defense purposes. Our current bud-get is close to 1% of the GDP. From 2000 until now, the budget has in-creased tenfold.

In the 2010-2014 period, de-fense budget allocation experi-enced significant growth. In 2010 the budget ceiling was Rp. 42.31 trillion (0.71% of GDP), whereas in 2014 it is Rp. 84.42 trillion (0.88% of GDP). However the budget that is provided is still far from what we need to realize defense devel-opment, which is somewhere be-tween 1.8%-2.1% of GDP.

In 2010, the government es-tablished the Defense Indus-try Policy Committee (KKIP). What led to the establishment of this committee and what role does it play together with the Ministry of Defense in optimiz-ing the operations of Indone-sia’s armed forces?

In the past, before we formed this Committee, there were several min-istries taking care of the defense industry – the Ministry of Indus-try, the Ministry of State Owned Enterprises, the State Ministry of Research & Technology, and the Ministry of Defense. There were many fingers in the pie, which was not good as it was slowing things down. So I put forward the idea to the President of forming one body to take care of the defense industry. The President agreed and the Com-mittee was formed under a presi-dential decree.

As a result the work in the defense industry has been synchronized and so far, and it has been working very well. The defense industry is grow-

ing; some of the companies can now supply equipment to the army, the navy and the air force. Some have even started exporting which dem-onstrates great progress.

In 2010, the Ministry of Defense elaborated a 15-Year Strategic Plan under which $15 billion was to be spent during the first phase due to end in 2014. Can you tell us more about this plan and its objectives? The 15-Year Strategic Plan is re-lated to how we can empower and strengthen the defense forces. We

have three components in our con-cept – the first is research and de-velopment (R&D) and we have to develop our capacity in this area; the second is the defense indus-try, which has to be supported by R&D; and third are the armed forces which have to be supported by the defense industry.

We have broken the 15 years down into three five-year plans – we call it strategic planning from 2010-2014, 2015-2019, and 2020-2024.

For 2010-2014, the main compo-nents are to emphasize the princi-pal of zero growth and right sizing, meaning not to add to the number of personnel, but to organize and position all personnel according to their competence, and this goes for

every position in the organization. The armed forces development is directed to strengthen interopera-bility among services, in order to en-hance its joint operation on the field.

For the ground force the main focus will be on developing its ca-pability in the field of maneuver-ability and fire support, along with the transformation of its doctrine, training and leadership education system. The main focus for the sea force will be on changing its organi-zation, while the air force will be fo-cusing on the process of adding new combat squadrons.

For 2015-2019 the main focus will be a continuation of the previ-ous five years. The ground force will focus on the enhancement of its air defense, mobility/counter mobility and utilization of nano-technology in combat intelligence. The navy will continue changing its organization with the development of working units. The air force will continue on the previous five years.

For 2020-2024 the main focus of the ground force will be a continua-tion of the previous years. The navy will be focusing on the completion of specially designed software. The air force will continue on the previ-ous years.

What are your priorities in terms of military modernization? Indonesia covers a wide area on land and sea, with a very large popula-tion and abundant natural riches, so the military has a big responsibility. Therefore, modernization of the In-donesian military (TNI) is necessary in order to ensure the sovereignty and integrity of our country, as well as the safety of our people.

We have a program to empower our armed forces. This govern-ment has allocated a budget of $15 billion to develop the equipment for the army, the navy and the air force. The government seeks to el-evate the independence of the na-tional defense industry, so some of this budget will be directed to local companies. If possible, the equip-ment has to be made in Indonesia, but if not, we will ask local compa-nies to create joint ventures with international defense industries. We have a step-by-step approach to ask state companies to join.

The form of cooperation con-cerns increasing local content, technology transfer, and offsets. Offsets means that if we buy from someone, they also have to buy from us. For example, we are co-operating with the South Koreans to develop fighter planes. We have a 20% share, so if the Korean in-dustry makes 250 units of fighters, then we will get 50 units.

The fulfillment of the needs for defense equipment should be sought in the national defense indus-try and our dependency of products from abroad should be minimized. The government gives guarantees to banks and financial institutions that support the funding of the de-velopment and the utilization of the defense industry.

With military modernization, de-velopment of infrastructure is also required. Currently, ship builder PT PAL and Indonesian Aerospace (PT DI) are pioneering the development of infrastructure by manufacturing submarines and jet fighters respec-tively. It is expected, that within two or three years, Indonesia will have its own infrastructure for manufactur-ing submarines and jet fighters with advanced technology.

If possible, we will sign govern-ment-to-government agreements, under the government’s umbrella. We have had a past experience when our country was under an embargo when we had a problem obtaining spare parts. As a result our fighter planes could not fly. Therefore, now we are looking for company-to-company and government-to-gov-ernment cooperation to ensure this does not happen again.


Self-reliant defenseThe government’s strategy to create a strong and self-sufficient defense industry has Indonesian companies increasing production, improving technology and acquiring expertise


Since the declaration of independence of the Republic of In-donesia on August 17, 1945, establishing

and maintaining an effective armed forces for the country has been a key priority for successive governments. The Armed Forces of Indonesia (collectively called Tentara Nasional Indonesia – TNI) was born from local revolu-tionaries who joined the anti-colonial struggle, a conflict which ended in 1949.

Following this period, TNI underwent a series of trans-formations that saw it transit from an organization made up of irregular militia units to a professional, integrated regular military. This shift demanded the importation of vehicles, weapon systems and technology not produced in the country at the time. Additionally the subsequent establishment of the Indo-nesian Air Force (TNI–AU) and Navy (TNI-AL) required the acquisition of aircraft and ships from abroad.

However, dependence on military equipment manu-factured in other countries has twice created debilitating shortages of spare parts dur-ing the last 50 years. This has rendered sections of the mili-tary inoperable and subse-quently reduced TNI’s ability to carry out its core mandate of providing national defense.

Such a situation first oc-curred during the mid-1960s, when the Soviet Union stopped supplying spare parts needed for Russian-made aircraft and naval ves-sels operated by Indonesia. Without these parts, the national air force, could not maintain serviceable aircraft. This same issue affected the navy, which became unable to deploy units as its ships broke down. A similar situa-tion was repeated during the 1990s when a U.S. military embargo and refusal to sup-ply replacement parts led to the grounding of certain air-craft belonging to the nation’s air force.

A tactical turnaroundDue to these lessons of histo-ry, Indonesian governments have worked to establish a local industry capable of sustaining TNI’s operational requirements. By building sophisticated equipment and vehicles locally, the country could mitigate the effect of any external sanctions. Be-fore becoming President, B.J.

A sector is being reborn after recent history has

taught Indonesia that self-reliance in defense is the most strategic way to

ensure its armed forces are well-equipped, while

driving growth in local industry

InDoneSIA’S Seven STrATegIC DeFenSe ProjeCTS

KF-X/ IF-X Fighter jet This is a project to research, develop and produce a generation 4.5 fighter jet in cooperation with South Korea.

209 DSMe Submarines This project will see the construction of three new submarines in partnership with South Korea. One of these will be wholly built in Indonesia.

C-705 Anti-Ship Missile A new missile will be procured for the Indonesian navy and then subsequently built in the country through Chinese transfer of technology.

r-Han 122mm rocket An R&D consortium has been formed to create this new weapon system for the Indonesian military.

Propellant Production This project will see the production of a propellant factory to support national munitions manufacturing.

Medium Tank The country will produce a new medium tank within the framework of Indonesian-Turkish defense partnership arrangements.

national radar This calls for the upgrading of Indonesia’s national radar network for air defense.

1

2

3

4

7 5

6

The Anoa 6x6 armored vehicle prepared for UN service

The CN-235 cargo plane, a PT DI designed and exported product

‘IF PoSSIble, THe equIPMenT HAS To be MADe In InDoneSIA, buT IF noT, we wIll ASK loCAl CoMPAnIeS To CreATe joInT venTureS wITH InTernATIonAl DeFenSe InDuSTrIeS... our DeFenSe InDuSTry SHoulD be SelF-SuFFICIenT by 2029”

PURNOMO YUSGIANTORO, Minister of Defense

Habibie was a key figure in leading the development of this industry as long-serving Minister of Research and Technology. His own back-ground as an engineer for German aviation companies naturally suited the task.

However, efforts by B.J. Habibie under the New Order government of President Su-harto, which included the es-tablishment of effective state-owned defense companies, were devastated by the Asian Financial Crisis of 1998. In order to comply with Interna-tional Monetary Fund (IMF) conditions, defense spending was reduced and Indonesia’s state-owned defense com-panies were downsized. This situation resulted in a massive brain-drain which affected the sector for years to come.

Indonesia’s subsequent transition to democracy fol-lowing the crisis saw a strong focus on areas unrelated to defense, as successive govern-ments worked to build new systems and focused on social and economic issues. It was not until the second term of President Susilo Bambang Yudhoyono, from 2010 on-wards, that a strategic focus was placed on revitalizing the Indonesian defense sector.

As a career officer and for-mer TNI general, President Yudhoyono long understood the country’s strategic vulner-ability due to its dependence on imported military equip-ment. Undoubtedly this in-fluenced his decision to reha-bilitate the sector. This policy has since been spearheaded by Dr. Purnomo Yusgiantoro, Minister of Defense, a distin-guished professor of econom-ics who had served as Minis-ter of Energy and as Secretary General of OPEC.

The core goal of this drive is to achieve minimum essential force by 2024. This effectively means that Indonesia will be able to domestically supply itself with equipment, tech-nology and other products needed to sustain its military. The Defense Industry Policy Committee (KKIP), which is made up of various stake-holders including government ministries, agencies, defense companies and universities, works to realize this policy through a cross-cutting, multi-organizational approach.

Ultimately underpinning the realization of the minimal essential force policy has been a series of significant budget increases and the introduction of legislation aimed at boost-

Monday, October 13, 2014 Distributed by USA TODAY INDONESIA 9


The resurgence of Indonesia’s defense industry

“bASeD on our CAPAbIlITIeS AnD CoMPeTenCIeS, our objeCTIve IS To beCoMe one oF THe leADIng InTegrATorS For rADAr ProDuCTS In THe DeFenSe InDuSTry”

TIkNO SUTISNA, President Director of PT INTI

“our ulTIMATe goAl In THe FuTure IS To beCoMe InDePenDenT In SuPPorTIng THe nATIonAl DeFenSe InDuSTry. For eXAMPle, we Are buIlDIng THe ProPellAnT In orDer To be Able To MAnuFACTure our own roCKeTS Here In InDoneSIA”

F. HARRY SAMPURNO, President and CEO of PT Dahana

“In 2010, THe MInISTry oF DeFenSe SIgneD A ConTrACT wITH SouTH KoreA To buIlD Four lAnDIng PlATForM DoCK SHIPS (lPD). THIS gAve our engIneerS THe oPPorTunITy To leArn AbouT ProDuCTIon ProCeDureS AnD gAIn vAluAble eXPerIenCe”

FIRMANSYAH ARIFIN, President of PT PAL Indonesia

propellant production. Cur-rently the country is depen-dent on imported propellant, which has a wide degree of military applications, includ-ing use in rocket and muni-tions manufacturing. If PT Dahana can establish its own propellant factory, it can guar-antee a domestic supply of this strategic chemical to other de-fense manufacturers.

The construction of a me-dium tank is the sixth project. In this case, the lead integra-tor, Indonesian armaments and vehicle manufacturer PT Pindad is working with FNSS, a leading Turkish defense contractor. The two compa-nies are designing a complete-ly new medium tank, in line with TNI requirements. Al-though PT Pindad currently produces an array of wheeled, armored vehicles, this will be the first time that a tracked armored vehicle is manufac-tured in-country. Once again, this lessens dependence on foreign suppliers.

The final strategic project is designed to enhance, expand and strengthen national radar coverage. Current coverage has been deemed inadequate, due to Indonesia’s extensive land and sea territory. The Ground Control Intercept Ra-dar (GCIR) system used in In-donesia’s air defense will also be dramatically improved by the realization of this project. Neither an international part-ner, nor an integrator from the Indonesian side has been cho-sen yet. However, Indonesia boasts an array of private and public sector companies suit-able for contributing to such a

project, including PT LEN, PT INTI, PT CMI Teknologi and PT Infra RCS Indonesia.

Although the defense re-vival is primarily focused on meeting Indonesia’s defense requirements, there is every expectation that it will eventu-ally lead to a boost in defense exports, as the sector becomes active and innovative again. This is nothing new for the country, which has a history of exporting defense products. PT DI-manufactured CN-235 transport aircraft have been sold to air forces all over the world, and recently PT PAL won a contract to supply the Philippine Navy with Strate-gic Sealift Vessels (SSV). Even Indonesia’s PT Sritex, the larg-est textile company in South East Asia, supplies military uniforms to over 30 countries around the world, including Germany.

A host of private sector companies are coming into being on the heels of Indo-nesia’s defense revival, dem-onstrating innovation, hiring specialists and expanding production lines. These in-clude the Batam-based ship builder PT Palindo Marine, the newly established military vehicle battery producer Gar-da Persada, and the parachute maker, CV Maju Mapan, to name a few.

Ultimately, Indonesia’s min-imal essential force policy is set to not only bolster defense capabilities but also establish a new generation of world class managers, engineers and spe-cialists capable of carrying out sophisticated and complex, large-scale industrial projects.

The LPD vessel, an Indonesian-built export

Indonesian-made patrol ship

The headquarters of PT Dahana, a center of research and technology development

‘THe FulFIllMenT oF THe neeDS For DeFenSe equIPMenT SHoulD be SougHT In THe nATIonAl DeFenSe InDuSTry AnD our DePenDenCy oF ProDuCTS FroM AbroAD SHoulD be MInIMIzeD”

DR. PURNOMO YUSGIANTORO, Minister of Defense

ing both TNI’s capabilities and the technical capacity of Indo-nesia’s defense companies. As a result, recent years have seen the emergence of exciting new developments in the sector.

The magnificent sevenAt the core of these are seven strategic projects, which are set to significantly upgrade In-donesia’s military capabilities while also initiating technol-ogy transfer and developing local R&D and manufacturing ability. These projects are be-ing carried out in partnership

with leading international firms to ensure the delivery of world-class equipment. Such a practice also works to promote the transfer of skills, knowledge and practices that Indonesian defense compa-nies and engineers must emu-late in order to meet interna-tional standards.

First and foremost of the strategic projects is the KF-X/ IF-X Fighter Jet Project. This is a joint venture be-tween Indonesia and South Korea, working to develop a next generation fighter for both countries to utilize for national defense. As Dr. Tim-bul Siahaan, Director Gen-eral for Defense Potential of Indonesia’s Ministry of De-fense explains, “This is a gen-eration 4.5 fighter jet which is equivalent to the F-16++. It is a three-phase project consist-ing of: technology develop-ment, engineering and manu-facturing development, and finally, production”.

Indonesian Aerospace (PT DI) is the lead integrator working to carry out this proj-ect from the Indonesian side. The move to sophisticated fighter jets from its tradition-al manufacturing base of both fixed wing aircraft and heli-copters will require extensive investment in both physical infrastructure and personnel. Such a great technological

leap forward, though chal-lenging, will certainly set a new standard for regional aviation production.

Also conducted in collabo-ration with South Korea is the second strategic project, the procurement of three new submarines from Dae-woo Shipbuilding & Marine Engineering (DSME). The first two 209 DSME subma-rines will be constructed in South Korea. Engineers from state-owned Indonesian ship builder, PT PAL, will observe and participate in this process.

The third submarine will then be constructed by these engi-neers in PT PAL’s shipyard in Suarabaya, East Java. New in-frastructure will also be built in Surabaya to accommodate this. This will be the first time that a submarine has been built in the country.

Working with China, In-donesia is also developing the C-705 Anti-Ship Missile, its third strategic project. This subsonic, long-range missile will be utilized by Indonesia’s navy when completed. A pro-duction facility will be estab-lished in Indonesia, following training of local specialists in China. PT DI will be the lead integrator for this project, making use of its aerospace experience.

The design, development and manufacturing of the R-Han, 122mm rocket is the fourth strategic project. An R&D consortium consisting of the Ministry of Research and Technology (Ristek), the Min-istry of Defense’s Research and Development Agency (Balit-bang Kemhan) and the Na-tional Institute of Aeronautics and Space (LAPAN), is work-ing on this aspect of project. PT DI will also be involved in production once the initial phases are completed.

PT Dahana, best known for producing explosives, is lead-ing the fifth project, related to

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olio.co.uk Our World #Indonesia #Asean Monday, October 13 ... · There is a silver lining, though. Lower commodity prices should help to make Indonesian manufacturing more attractive,