26 August 2013 by Natalie Sambhi  - Pacific Sentinel

On 21 August, the Indonesian House of Representatives endorsed the candidacy of General Moeldoko, Indonesia’s Army Chief, moving him a step closer to becoming commander TNI. With defence ties a key pillar of the Australia–Indonesia bilateral relationship, it’s worth knowing more about the Indonesia’s future military leader (known as ‘Panglima TNI’) and what this means for Australia.

Moeldoko finished top of his class and is generally considered to be a high-performing officer. If his first public statements can be taken to encapsulate his approach to the military, then expect an emphasis on military professionalism and soldier welfare. Moeldoko has promised to improve soldiers’ welfare by increasing their pay by 15%. He also intends to improve soldier discipline, minimise the import of foreign military equipment in order to support Indonesia’s defence industry and remain neutral during the upcoming 2014 elections.

Of particular interest to Australia is Moeldoko’s background, which is free from incidents of human rights abuse. As such, he’ll set a credible example in military professionalism and soldier discipline. There’s only been one minor controversy so far. There have been allegations that in March 2011, soldiers under Moeldoko’s command at the time were involved in encouraging Muslims to occupy Ahmadiyah Muslim mosques (a minority sect of Islam that is unpopular with many Indonesian Muslim groups) to teach Ahmadis the ‘true path’ of Islam. Despite Moeldoko having reportedly expressed some support for the activities, on 20 August, a Human Rights Commission found no evidence to support his direct involvement in that operation. As all incoming military and police chiefs undergo a human rights background check (called a fit-and-proper test), a positive finding would have jeopardise his chances of getting the top job.

With regards to military culture, Moeldoko wants soldiers to remain humble with civilians. And while he admits it might take some time to achieve this, he intends to make changes to the training and education to address what he calls ‘software bugs’ such as a culture of violence and impunity.

Also important has been Moeldoko’s merit-based appointment. It reflects recognition by the country’s political leadership that TNI needs smart and professional officers. Moeldoko is President SBY’s nomination, but suggestions of nepotism are less tenable in this case: he’s well-known as an ‘ideas man’ and enjoys support from other political figures including the deputy head of the House of Representatives. This contrasts with the appointment of President SBY’s brother-in-law (PDF), General Pramono Edhie Wibowo, as the former Chief of Army, which drew speculation of favouritism. TNI has come a long way (and still has some way to go) but if it’s to continue relations with foreign militaries and continue professionalising, it needs strong leadership.

The only thing to watch is Moeldoko’s request that TNI have a greater role in national security matters like ‘terrorism and communal conflicts’. Advocating a greater role for TNI in domestic matters is a means of increasing its prominence and demanding more resources. But as Indonesian defence analyst Iis Gindarsah has stated, the military should stay out of domestic issues and concentrate on external threats because it’s really the purview of the police.

The fact that Moeldoko is requesting this role is also a reflection of the poor job the Indonesian police are doing. The Cebongan incident in March is a case in point. Kopassus soldiers shot and killed four prisoners in Cebongan prison in Yogyakarta while in police custody. Rather than being condemned for vigilante action, the soldiers were praised by Yogyakarta citizens for ridding the city of gangsters, a task in which the police was seen to have failed. Rather than playing into this, it’d be far better for Moeldoko to rise above this competition so both Indonesia’s police and military can focus on their own challenges. The appointment of a new police chief later this year will provide some idea about the future effectiveness of Indonesia’s civil forces.

Overall, Moeldoko will be good for TNI–ADF relations and for Australia. His commitment to professionalism and soldier welfare make him a positive figure and role model of a post-reformasiTNI. Moeldoko’s current counterpart, Australia’s Chief of Army Lieutenant General David Morrison, is also committed to improving military professional culture—which suggests some natural complementarity in future ADF cooperation with Indonesia’s forces. Despite occasional incidents like the Cebongan case that impair TNI’s image, Moeldoko seems quite serious about its future. A more professional TNI is always going to be more palatable for the broader Australian polity in Australia–Indonesia relations. And perhaps figures like General Moeldoko can help shift outdated Australian perceptions of TNI in the process.

Natalie Sambhi is an analyst at ASPI and editor of The Strategist.

This article first appeared on the ASPI "The Strategist" Blog

26 Juli 2013 Defense Studies

Today in Perth, Indonesian Defence Minister Purnomo and I witnessed the signing of a Memorandum of Sale between Australia and Indonesia for five C 130H aircraft and associated equipment.

During my visit to Jakarta in April this year, I confirmed that the Australian Government was willing to sell five C-130H aircraft, along with a simulator and spare parts, to Indonesia at a discounted rate.

This offer was in addition to the four C-130H aircraft that Australia is currently in the process of transferring to Indonesia following discussions between our respective leaders in November 2011.

The sale of a further five C-130H transport aircraft will further enhance Indonesia’s capacity to respond to natural disasters and humanitarian crisis.

The Memorandum of Sale was signed by Australia’s Chief of the Defence Force, General Hurley, and Indonesia’s Head of Defence Facilities Agency, Rear Admiral Lubis.

The Memorandum sets out the arrangements for the sale of the five aircraft, simulator and spare parts to Indonesia.

Australia is pleased to continue to assist the development of Indonesia’s airlift capability, which will support humanitarian assistance and disaster relief operations.

The sale of these additional aircraft and associated equipment reflects the strength of the bilateral relationship between Australia and Indonesia, and the close ties between the Australian and Indonesian Defence forces.

(Aus DoD)

01 June 2013 American Forces Press Service - Pacific Sentinel

May. 25, 2013 - By BURAK EGE BEKDIL – Defense News

ANKARA — Two Turkish companies are in separate talks with Saudi Arabia and Indonesia to co-produce and sell scores of new-generation battle tanks, officials and industry sources here said.

The deals would signal Turkey’s ability to produce vehicles for export after years of being an arms importer. At the same time, a deal with the Saudis would politically cement ties with Turkey against the Iranian-led Shia bloc of countries, sources said.

They said Turkish armored vehicles maker Otokar could sell hundreds of its third-generation tank, the Altay. Meanwhile, rival manufacturer FNSS Defence Systems is close to inking a deal to co-produce medium tanks with an Indonesian partner.

Otokar designed and is producing prototypes of the Altay in a deal to sell four 250-unit batches to the Turkish military. The Turkish Army has 720 German-made Leopard 1 and 2 tanks, 930 American M-60s and 1,370 M-48s, most of which are Cold War-era tanks and need replacement.

One company source confirmed talks with Saudi Arabia but gave no further details. One senior procurement official familiar with Turkish arms exports said Turkey hoped to cut a future deal with Saudi Arabia for the Altay.

“The Altay is not available for immediate sale but is potentially a powerful export product when you think of a medium-term deal. Saudis are good customers with available cash, good political ties and their need for new tanks. We are hopeful about a future deal [for the Altay],” the official said. He added that other countries were interested in buying the Altay but declined to name them.

Saudi Arabia has 320 elderly French AMX-30 tanks in need of replacement. Saudi Arabia and Turkey, along with Qatar, are spearheading efforts to oust Syrian President Bashar al-Assad. The three Muslim countries, with support from the United States and most Western countries, support rebel forces fighting Assad’s Army in a civil war that has taken nearly 100,000 lives in two years.

“Adding a defense industry dimension to their ties would augment the Turkish-Saudi alliance against Iran,” said a Western military attaché here.

But Turkey could face competition. France has proposed replacing Saudi Arabia’s AMX-30s with the AMX-56 Leclerc. The Otokar official said the 65-ton Altay better meets the Saudi requirement than does the 55-ton Leclerc.

“Also, we have almost excellent government-to-government relations with the Saudis,” the official said.

Industry sources said the Altay is similar to Saudi Arabia’s 400 M1 tanks. Both have a 120mm gun, composite armor and high-end electronics.

In 2008, Otokar signed a US $500 million contract with Turkey’s procurement office. Under the deal, Otokar will build four Altay prototypes this year, two years ahead of schedule. The four prototypes will undergo performance tests throughout 2013.

The procurement office selected South Korea’s Hyundai Rotem for technical support. Turkey’s Aselsan is the subcontractor for the fire control system and command, control and communications information system. Also, state-owned MKEK was selected as the subcontractor for the 120mm primary weapon, while Roketsan will provide the armor.

Procurement officials say the serial-production agreement for the Altay would be effective probably in 2017, and together with the expected foreign orders.

Indonesia

In a separate deal, Turkey and Indonesia agreed during the Turkish arms exhibition IDEF’13 this month to jointly develop medium tanks

Under the deal, Ankara-based, privately owned armored vehicles maker FNSS Defence Systems will work with Indonesia’s state-owned arms maker, PT Pindad.

“Indonesia has chosen Turkey and FNSS because of our internationally acknowledged experience and advanced technology in this field,” one FNSS official said.

He said the co-production project will come into shape in four years. “We are now working to officially submit proposals to jointly design, develop and manufacture the medium tank,” he said.

FNSS has developed technology in a tracked propulsion system while Pindad has technology in wheeled propulsion systems. “Indonesia hopes to learn tracked as well as other technological capabilities with this cooperation,” the procurement official said.

FNSS produces wheeled and tracked armored combat and amphibious assault vehicles, personnel carriers and weapons systems.

The company announced May 21 that it launched its new tracked armored anti-tank reconnaissance vehicle, the Kaplan (Tiger in Turkish).

May. 8, 2013 Defense news (AFP)

BERLIN — Germany has agreed to sell 164 used tanks to Indonesia, the government confirmed Wednesday, after the Dutch parliament last year rejected a similar request over human rights concerns.

Chancellor Angela Merkel’s government has given the green light to Duesseldorf-based weapons maker Rheinmetall AG to sell the tanks to Jakarta, said an economics ministry spokeswoman.

She said the total price tag was about €3.3 million ($4.3 million), suggesting that the more than 100 Leopard 2 battle tanks and other tracked vehicles are second-hand military equipment.

Merkel’s national security council decides on arms export licenses in closed meetings and usually stays tight-lipped about them until details are released in annual defense export reports.

But the government was forced to release information about the Indonesia deal after a formal request by opposition Greens party lawmaker Katja Keul, who published the response on her website.

The shipment includes 104 Leopard 2 tanks and 50 Marder 1A2s infantry fighting vehicles, as well as ammunition. Among the 10 other tanks are vehicles used in mountain terrain, mobile bridge layers and armored earth movers.

Indonesia, Southeast Asia’s biggest economy and the world’s most populous Muslim majority country, had first requested the tanks in 2012 during a visit by Merkel, pledging not to use them against its own people.

Opposition parties in Indonesia’s former colonial power the Netherlands had stopped a proposed tank deal with the country, citing the risk Jakarta would use them to suppress ethnic and religious minorities.

Merkel spokesman Steffen Seibert on Wednesday defended the export and called Indonesia an “important partner country” that had received German defense goods before.

“Indonesia has, in the view of the German government, since about 1998 undergone a deep political change toward a democratic political system,” he said. “The reform efforts of the Indonesian government are continuing.”

He recalled that Merkel had, during a March visit to Berlin by Indonesian President Susilo Bambang Yudhoyono, praised his archipelago nation as a “role model” for religious diversity.

The Merkel government has promoted weapons sales to countries it considers strategic partners and also recently approved controversial arms shipments to Saudi Arabia, Qatar and the United Arab Emirates.

A group of commercial banks has drawn up a loan to fund Indonesia’s purchase of

truck-mounted artillery from French land systems maker Nexter, sources close to the deal said.

Shown is Nexter's Caesar self-propelled guns. (photo EMA)

Mar. 31, 2013 - By PIERRE TRAN  - Defense News

PARIS — A group of commercial banks has drawn up a loan to fund Indonesia’s purchase of truck-mounted artillery from French land systems maker Nexter, sources close to the deal said.

The agreement is the latest in Jakarta’s push to “catch up” on defense procurement after what one analyst called “a long period of atrophy.” And by financing the deal through a bank loan rather than paying cash, Indonesia is part of a growing number of emerging defense markets looking to stretch their buying power as they seek to beef up militaries.

“Indonesia is a key target for everyone,” Grant Rogan, chief executive of Blenheim Capital, a specialist in defense offset deals, said March 26. “Our client base, which includes 25 large aerospace and defense companies, all, without exception, view Indonesia as a prime target.”

Jakarta’s short-term high-interest loan will pay for 34 Caesar 155mm 52-caliber guns, the sources said.

Indonesia required a buyer’s credit for 85 percent of the 108 million euro ($140 million) contract, with funding to be delivered to the Indonesian Finance Ministry in April, an executive said.

Indonesia’s request for bank financing is just one of a number of weapons deals for the Asian country, a European banker said.

The Asian market for bank loans “is concentrated in Indonesia,” as other countries such as India, Malaysia and Thailand pay cash, the banker said. Jakarta is in the midst of a procurement drive after staying out of the arms market for years, due to a lack of money and Western sanctions over human rights abuse. Now, the government is trying to “catch up,” said Richard Bitzinger, senior fellow at the S. Rajaratnam School of International Studies, Singapore.

“Indonesia is in the midst of trying to upgrade its military after a long period of atrophy,” Bitzinger said. Jakarta buys weapons from a variety of suppliers, as it seeks to avoid being too dependent on a major foreign arms producer and to find the best value for money, he said.

Despite the rule of paying cash, a market for bank funding is rising, Rogan said. “Many countries are requesting financing.”

Blenheim has added a specialization in financing that complies with Islamic Sharia law, reflecting the rising demand.

Rogan was speaking from the Langkawi International Maritime and Aerospace Exhibition, Malaysia.

Banks Pursue Deals

The pricing of loans is a sensitive issue, and the sensitivity is heightened by the unusual nature of the Indonesian artillery deal.

A source close to the deal said there are not many banks in this group of lenders, which is expected to be composed mainly of French lenders. The term of the loan is expected to be for a relatively short period, under five years.

The margin on the proposed bank loan is estimated to be below 200 basis points, the source said. Banks set the interest on loans using basis points — 1/100th of a percentage point — which are keyed to official interest rates such as the London Interbank Offered Rate.

A financial specialist said the estimated margin on the Caesar deal is relatively expensive, in view of the short loan period and the fact that the deal is backed by a sovereign guarantee from Indonesia.

The margin and loan period indicate France and the bank lenders are essentially taking a short-term view of Indonesia as a financial risk, with a loan covering production and delivery of the guns, and perhaps after-sales warranty, the specialist said.

A lower margin, on the other hand, would indicate a long-term view of Indonesia’s attractiveness as a client.

Indonesia, which sees itself as a regional power and is undergoing a procurement drive to reflect that role, moved last year to holding tenders for bank lending instead of private trade deals, attracting the attention of international and local banks.

Since then, about a dozen big banks expressed interest in arranging loan finance for eight or nine arms contracts Indonesia signed with Brazil, China, France, Russia, Spain and the United States.

The loans range from large orders to small deals of around $10 million.

For instance, Jakarta relaunched a bank tender this year to raise money to buy the Brazilian Avibras Astros B multiple rocket launcher system.

The Astros is capable of firing cluster submunitions. Western banks likely stayed away because the Oslo convention bans these weapons, forcing Indonesia to reset the tender a couple of months ago.

Indonesia reportedly used that type of munition in East Timor when the local population called for self rule in a 1999 referendum.

Indonesia also has a tender out for bank loans for 25 Bell 412 utility helicopters for the Army. Jakarta is also spending $750 million to upgrade secondhand F-16 C/D fighters provided free by the U.S. government. That upgrade will be a cash deal through the Foreign Military Sales regime.

The Down Side for Lenders

A bank loan for weapons poses problems for commercial lenders, the defense specialist said.

Lending on civil programs such as a nuclear power plant or a highway is relatively simple because they can generate revenue, part of which can be placed in escrow holding accounts to act as security.

But weapons have no power to raise revenue, and what is worse, might be destroyed. If a country loses use of its arms, it might stop repaying the loan. “What security is that?” the specialist said. Banks are also concerned about how the public views lending on arms deals. One large British bank refuses to lend on arms, two sources said.

Given the size of the Indonesian economy, the 108 million euro purchase price for the Caesar guns “is peanuts,” the specialist said.

A striking aspect of the Indonesian artillery loan is what is seen as the relatively long time between the signing last summer and the financing in April.

That long lead time may signal a slowing of arms deals, perhaps delaying some until 2014. Or perhaps it reflects a lower economic growth rate, or simply a bottleneck in the finance and defense ministries as staff struggle to cope with the volume of orders.

A loan for 85 percent of purchase amount is the maximum allowed under trade rules of the Organization for Economic Cooperation and Development, with the 15 percent paid in cash, an export credit executive based in New York said.

Trying To Catch Up

Indonesia has a robust defense and aerospace industry in place, and the government wants to co-produce and co-assemble to build the domestic base, Rogan said.

Malaysia is the leader in that drive to build the defense industrial base, and wants to take a regional approach with Indonesia. The two countries would avoid product competition, and instead, buy from each other.

That approach drew foreigners’ skepticism three years ago, yet Malaysia is buying six-wheeled vehicles from Indonesia, and Indonesia is buying vessels from Malaysia, Rogan said.

Indonesia is rated the 16th largest economy, with an estimated growth rate of 6 percent in 2012, slowing from 6.5 percent in the previous year, the CIA World Factbook said.

The Indonesian government needs to improve poor infrastructure, which impedes growth, while also dealing with labor unrest over pay and cutting a fuel subsidy amid high oil prices, the country report said. Corruption, poverty and unemployment are also big problems, the report said.

Indonesia is expected to become the sixth or seventh largest economy.

Observers see the recent purchases as an “unblocking” of Indonesian procurement after a fallow period of three or four years. The big orders before the quiet spell were mainly Russian deals, financed by Russian banks.

Russian banks have lent money for Indonesia’s purchase of Sukhoi Su-27 and Su-30 fighters, the European banker said. Russian loans have helped Venezuela buy around $4 billion of weapons. The VTB bank is active in Vietnam, and the Russian lender is understood to have funded military purchases.

U.K. Prime Minister David Cameron visited Indonesia in 2012, looking to drum up defense deals after the previous Labour administration halted arms sales on allegations BAE Systems Hawk jets were used to bomb civilians in East Timor in 1999.

BAE and AgustaWestland executives went with Cameron on the visit.

Indonesia is now seen as an attractive market after a Western moratorium because of its human rights record and brutal put-down of movements for self-determination in Aceh, Papua and East Timor.

Jakarta also has close ties with South Korea, and some of the recent deals are financed on a government-to-government basis, the banker said.

These are understood to include Jakarta’s 2012 $1 billion purchase of three attack submarines — the first built in South Korea with Indonesian engineers on site, part of the second built in Indonesia, and the third built by state company PAL in Surabaya.

Jakarta has also bought 17 of the KT-1B basic trainers.

Jakarta and Seoul share similar ambitions.

“I think the Indonesians like working with the Koreans as they are in roughly the same situation: rising, aspiring regional powers with ambitions to play larger roles in their respective regions, and to also create sophisticated arms industries by which to do so,” Bitzinger said.

“The problem is, the Koreans have a level of technological sophistication and organizational production capability that the Indonesians still lack. So any partnerships with the Koreans still leave the Indonesians in a decidedly junior role,” he said.

Indonesia has also bought Damen missile corvettes from the Netherlands, financed by Dutch banks. Some Dutch banks have a policy of no support for military sales but they are quietly funding the deals anyway.

_________

Andrew Chuter in London and Wendell Minnick in Taipei contributed to this report.

October 24, 2012: Strategy Page

India agreed to train Indonesian Su-30 pilots. This makes sense, as India is the largest operator of Su-30s (with over 160 in service). China is second with less than 80 and Russia, which manufactures the Su-30, is third. India will do the training more cheaply and can help Indonesia if there are maintenance or support problems with Russia.

Indonesia knows that India has learned how to deal with shabby Russian support. For example, earlier this year India went public with yet another complaint about the Su-30 fighters it buys from Russia. This time it was an unspecified "design flaw" in the electronic flight control system. This bit of information was made public because India has found that more discreet communications about these matters results in little or no action from the Russians. For example, India has been pressuring Russia for several years to do something about component failures in the Russian designed AL-31 engines that power the Indian Su-30MKI jet fighters. There have been several AL-31 failures because of this in both Indian and Russian Su-30s.

Then there are the exorbitant prices Russia demands for upgrades to the Su-30. Indian engineers have enough experience with aircraft, and the Su-30, to know they are being gouged by the Russians. Moreover, as part of the sales contract, India is not allowed to get upgrades elsewhere without permission from the Russian manufacturer. India can help the Indonesians with this.

India buys bare bones fighters from Russia and equips these Su-30MKIs with Israeli sensors and communications gear. In many respects, the Indian made Su-30s, the Su-30MKI, is the most capable version available, due to its Israeli and European electronics and the well trained Indian pilots. The 38 ton SU-30MKI is most similar to the two seat American F-15E fighter-bomber. Even though equipped with Western electronics, the aircraft cost less than $40 million each, about half what an equivalent F-15 costs. The Su-30MKI can carry more than eight tons of bombs and hit targets over 1,500 kilometers away.

Indonesia has already become disenchanted with its Su-30s and announced last August the six Su-30 jet fighters it ordered from Russia earlier this year (for $78 million each) would be the last Russian fighters purchased. Indonesia already has ten Su-27s and Su-30s and wanted at least 16 of these modern aircraft so they will have a full squadron.

Although expensive, the Russian fighters are modern and look great. They are also relatively cheap to maintain. This was all part of a plan to switch from American fighters (ten F-16s and 16 F-5s) to Russian Su-27s and 30s. But used F-16s are so much cheaper than Su-27s that public pressure forced the Indonesian politicians to hang on to the F-16s and upgrade them. This also saved politicians and air force commanders’ future embarrassment from problems with the Russian aircraft.

source Ria Novisti

January 15, 2012: STRATEGY PAGE

Indonesia has signed a contract to buy six more Su-30 jet fighters from Russia for $78 million each. Indonesia already has ten Su-27s and Su-30s, but wants at least 16 of these modern aircraft so they will have a full squadron. Although expensive, the Russian fighters are modern, and look great. They are also relatively cheap to maintain. This was all part of a plan to switch from American fighters (ten F-16s, and 16 F-5s) to Russian Su-27s and 30s. But used F-16s are so much cheaper than Su-27s, and the public pressure forced the Indonesian politicians to hang on to the F-16s, and upgrade existing F-16s, an expensive proposition that appeals to corrupt Indonesian officials.

Although Indonesia wants to buy 180 Su-27 and Su-30 fighters from Russia, they are now also rebuilding their older force of early model F-16s. In addition, Indonesia has ordered 24 used, but modernized, F-16Cs for $31 million each. The ten older F-16s will also be modernized to the same standard.

Indonesian Air force generals opposed the acquisition of the F-16s because they fear this will lead to a reduction in the procurement of new Russian fighters. The generals believe the Russian fighters are a better match for the 80 F-18Es that neighboring Malaysia is acquiring, and the F-35s that Australia is buying. But the F-16s have a proven combat record that the Su-27s and Su-30s lack.

MOSCOU, 10 janvier - RIA Novosti

Le contrat conclu avec Jakarta en décembre 2011 sur la livraison de six chasseurs russes Su-30MK2 renforce la position de la Russie sur le marché indonésien des armements, a déclaré mardi à Moscou le directeur du Centre d'analyse des stratégies et technologies Rouslan Poukhov.

"Ce contrat (de 500 millions de dollars-ndlr.) est important, parce qu'il renforce la position de la Russie sur le marché indonésien des armements tant convoité par les Américains qui proposent leurs anciens chasseurs F-16 aux Indonésiens", a noté l'expert.

Le contrat jette en outre les bases de la coopération russo-indonésienne dans la construction d'avions civils, notamment de l'avion MS-21, a ajouté M.Poukhov.

En 2012, la Russie doit commencer la livraison de nouveaux moyens-courriers Sukhoi SuperJet-100 à l'Indonésie.

Au total, la Russie a déjà fourni dix chasseurs Sukhoi, dix hélicoptères Mi-35, 14 hélicoptères Mi-17, 17 blindés de transport de troupes TMP-3F, 48 blindés BTR-80A et 9.000 fusils d'assaut Kalachnikov AK-102 à l'Indonésie.