Indonesia’s National Corvette Program (2)

19 Mei 2010

Sigma 105, candidate from Netherland (photo : Militaryphotos)

In the overall scheme of things therefore, the planned purchase of the two PKRs represents a small, yet significant, step in Indonesia's force development.

First, the locally-built PKR adopting the SIGMA technology is specifically designed to be a "transformational bridge" for the Navy's future warships. Officials have even repeatedly stressed that the PKR will become the "basic technological standard" of their future force development. This search for standardization and platform commonality is crucial because of the Navy's exisiting complicated web of numerous foreign suppliers, including the Netherlands, the former Yugoslavia, Germany, Russia, U.S., Australia, U.K, Japan, South Korea, China, France, and finally South Africa. Further, the entire Indonesian Military (TNI) itself has over 173 main weapons system (alutsista) coming from 17 different countries.

This has not only caused various inter-operability problems, but has also strained the education, training, and maintenance budget of the Navy. Thus, the PKR program could be the initial pilot project to increase platform commonality in the Navy's main weapons system.

Second, not only do the SIGMA class corvettes represent the most advanced naval technology that Indonesia has so far acquired, but the initial vision of the national corvette program - and now the PKR project - had actually been modeled on the commendable idea of integrating local supply chains (involving 22 Indonesian companies) while gradually deepening the transfer of foreign technology.

This vision has been taken a step further with the upcoming presidential decree on defense industrial revitalization that includes a full commitment to local industrial development, a multi-year financing model, a "national consortium" of local banks to support the domestic credit line, as well as greater efficiency of the foreign Export Credit (KE) option.

Accompanying the decree is a new "master plan" for defense procurement—as part of a future Defense Industrial Revitalization Road Map—for the next three Strategic Planning periods (renstra) spanning the next 15 years. Additionally, in a recent hearing with the parliament, Defense Minister Purnomo Yusgiantoro announced that for 2010 to 2014, the Ministry intends to spend over IDR 149 trillion (over USD 14 billion) for weapons procurement and maintenance.

Finally, the PKR project represents a growing trend in recent years within the Navy to further deepen their commitment to obtain weapons system through PT. PAL—all apparently in the name of "defense self-sufficiency." In fact, among the chief rationale to modernize - presented in various policy documents since early 2000 - is not so much the changing regional or global strategic milieu, but the Navy's age old, rapidly deteriorating fleet.

Prospect and Challenges

PKR-105, designed by PT. PAL (photo : Defense Studies)

Despite the positive trends that the PKR project is meant to represent, unfortunately several fundamental problems remain. Among the most troubling issue has been the financial uncertainty surrounding defense procurement. Aside from the lack of political and financial commitment from the government, bureaucratic red-tape has partly led procurement processes to be bogged down for years.

The uncertainties surrounding government regulations also plays a significant part in muddying the water. For example, financial regulations allowing gradual (yearly) disbursal of allocated funds has led to a low level of actual expenditure—around 30 percent of the USD 3.7 billion allocated Export Credit (KE) for defense procurement in 2004-2009 was actually spent.

Another factor is the reluctance of major local banks to heavily finance the project due to the absence of legal and financial "blanket guarantees" from the government and the uncertainty surrounding the multi-year budgeting process and also the Mon legal status as a creditor.

This brings us to managerial uncertainties in Indonesia's defense acquisition process. The absence of a unified defense procurement and industrial development strategy often leads to confusion as to who gets to do what, when, and how. In the case of the National Corvette program for example, it was initially announced back in 2007 that the National Development Planning Agency (Bappenas), instead of the Navy headquarters or the MoD, was going to be leading actor in the program.

These problems has also eventually led to the under-utilization of local supporting industries, making the production capacity of major strategic state-owned companies like PT. PAL to rely on foreign sources for basic materials, system and technology.

However, there seems to be light at the end of the tunnel. At least, the government realizes that all these issues are serious problems that must be addressed. For example, aside from the multi­year budgeting process and signed MoU to commit the TNI and government to maximize local defense companies, a new Defense Industrial Policy Committee will be formed soon.

All in all however, the fate of the resurrected national corvette program still hangs in the balance. As LT. Gen. Sjafrie Sjamsoeddin said, then Mon Secretary General in 2009, the execution [of the program] is still dynamic. It could go forward, it could go backward."

(APDR)