Indonesia Defence & Security Report Q1 2008

Indonesia's chief internal security concerns stem from the pressures of attempting to forge a nation-state from a range of archipelagic islands consisting of distinct ethnic groups. Indonesia faces several security concerns from insurgencies including breakaway provinces, maritime and terrorist security threats.

Indonesia's internal security situation is unlikely to improve in the immediate future. The recent low profile of Jemaah Islamiah (JI) in Indonesia has led the Indonesian President, Susilo Bambang Yudhoyono, to claim that the government has successfully cracked down on the organisation. Indeed, the past two years have been free of JI attacks, whether against Indonesians or Indonesia-based overseas interests. However, the victory may be too early to call, as JI are active regionally. In Q407, a number of large-scale armed clashes in the Southern Philippines were linked to the Islamic extremist Abu Sayyaf Group (ASG). ASG reportedly have strong ties to JI, and allegedly provided a safe haven for key leaders of JI. One of the Bali bombers, Dulmatin, was reported to have been injured in a Q407 clash in Maimbung, Jolo Island.

Indonesia's armed forces have a long history of being under-funded, which has compromised the country's ability to purchase affordable defence systems. Further restrictions applied after the US placed Indonesia under arms procurement sanctions following the 1991 violence in East Timor. Indonesia's defence spending traditionally comes in at 1% of GDP, and in 2006 was US$2.8bn. However, the 2007 defence budget is to concentrate on acquiring superior military transport over a 15-year plan.

Indonesia's arms trade composition remained unchanged in the second quarter of 2007. The indigenous defence industry is unable to support the scale of the upgrade programme. Indonesia's defence industry is relatively small, and can only meet 5% of the armament needs of the Indonesian military. However, this has not stopped the industry from enhancing its profile regionally and internationally. 'Indo Defence 2006' was held in November 2006, showcasing products from international and Indonesian defence firms.

Companies that showcased defence items included Pindad, Air Launch, Sukhoi PAL, Lurssen Rosoboronexport, Dirgantana Indonesia, Daewoo, Ferrostal and Kazan Helicopter.

In Q407, Indonesia and Russia finalised a significant arms deal. The Russian government agreed to a US$1.1bn loan to assist in Indonesia's arms procurement. It is reported that Indonesia is interested in acquiring kilo-class submarines, as well as boosting its ageing Sukhoi fleet.