Alutsista modernization: Overcoming budget limitations with a masterplan

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Khairul Fahmi Defense observer, Institute for Security and Strategic Studies (ISESS)

IO – Indonesia is an archipelagic state comprising a long stretch of islands, plus sea and air spaces of similar size. Although geopolitically Indonesia is seen as having a strategic position, its limited defense budget has been its vulnerability because the nation’s defense capability and posture is factually weak. 

The tragedy of KRI Nanggala-402 which claimed the lives of 53 sailors provided a valuable lesson that efforts to show that the state is present to protect the entire nation and provide a sense of security for all citizens must not ignore the safety and condition of primary weapon system (alutsista) itself. Development of the defense sector and efforts to safeguard our security and sovereignty cannot be overlooked. On the contrary, it must be taken very seriously and planned carefully. 

The push to evaluate and modernize TNI’s alutsista was once again voiced by a number of parties. Even though we know that Defense Minister Prabowo Subianto has on various occasions expressed his commitment to continue modernizing Indonesia’s defense equipment, we know that this is not easy task to do in the midst of budget constraints. 

In 2021, the Defense Ministry received a budget allocation of Rp136.99 trillion, up by around 14 percent compared to the previous year. This is the largest budget in a decade. The problem is, the majority of this budget is allocated for management support programs which accounts for Rp74,983 trillion or 55.2 percent of the total. 

Meanwhile, the allocation for the alutsista modernization program, non-alutsista, and defense facilities and infrastructure only received Rp39.02 trillion or 29.1 percent. The rest will be used for operational needs, training, and education. What does this mean? Instead of providing adequate fiscal space to meet the public’s expectations for modern, advanced and capable alutsista, this limitation may impact the maintenance and combat worthiness. The government also faces a dilemma between prioritizing the development of public welfare while at the same time maintaining defense capabilities to ward off disturbances and threats to the country’s sovereignty. On the other hand, Covid-19 handling has also resulted in budget reallocation and refocusing, including for defense spending. 

Masterplan as a solution 

Although alutsista modernization has been laid out since 2007 through the Minimum Essential Force (MEF) roadmap, its fulfilment is lagging. The MEF is divided into three five-year phases -Phase I (2010-2014), Phase II (2015-2019), and Phase III (20202024). However, the delay in Phase II has resulted in MEF fulfilment being still below 65 percent of the 75 percent targeted by end of 2019. 

Lack of budget is again the classic problem behind the delay. Limitation requires expertise and discipline in managing expenditure. This means that there needs to be truly comprehensive planning, based on a clear, measurable, sustainable scale of priority and in reference to the projected forms and levels of threats in the future. 

Defense Minister Prabowo revealed that his ministry is developing a masterplan in line with President Joko Widodo’s instruction who wished for the alutsista procurement to be completed within 25 years. 

Although it is still just a design and yet to be known whether the masterplan will replace the MEF as the defense spending guidance, it has fulfilled the public’s hope for a stronger defense sector bolstered by the best primary weapon system. 

However, the masterplan must also be accompanied by a number of steps to ensure its accountability. First, by enhancing the role and function of the Defense Industry Policy Committee (KKIP). Second, strict regulations regarding the involvement of third parties. Third, formulation of clear indicators for the national defense industry self-sufficiency in proportion with needs. Fourth, careful budget planning, continuous and measurable priorities, to scheme of procurement in phases if the budget is limited. Fifth, the provision of proportional budget support to encourage research and development, including involvement of academia, and providing incentives for the domestic defense industry to innovate. 

Why are these steps important? There is news that the alutsista modernization master plan will also include a foreign loan scheme to the tune of Rp1,760 trillion. 

Compared to Indonesia’s GDP in 2020 which amounted to Rp15,434.2 trillion, the figure allocated by the government for the 25-year masterplan will only be around 11.4 percent. Moreover, if that figure is spread out over 25 years, the percentage of GDP will be even smaller, just 0.7 percent annually. 

This means that if the masterplan design is approved by the President, then Indonesia will be able to fulfil defense spending target of around 1.5 percent of GDP per year. The assumption is that 0.78 percent will come from regular budget and about 0.7 percent from external loans. Thus, it is hoped that the perceived dilemma can be solved. Welfare development can continue and the defense development can also be pursued. 

Defense spending: Investment for bargaining power and economic stability 

Indonesia is facing challenges and threats to its sovereignty – challenges that cannot be underestimated, both from within and without. SIPRI military expenditure database notes that the five largest countries – the United States, China, India, Russia and the U.K. – continue to increase their defense spending. Together, they represent about 62 percent of the global military budget. 

China has even recorded a significant increase in its defense budget over the last 26 years. If Indonesia doesn’t have a strong defense, it won’t have a strong bargaining position in facing up to China, which continues to consider North Natuna Sea as its traditional fishing area, even though based on UNCLOS 1982 it is part of Indonesia’s Exclusive Economic Zone (EEZ). 

Meanwhile, the feud between China and Australia is also likely to ratchet up, following the latter’s unilateral cancellation of its part in the Belt and Road infrastructure agreement. Australia is rumored to be increasing the capacity of its military base in the northern part of the country and expanding its joint military exercises with the United States, China’s main rival. 

As a result, China is reportedly monitoring the activities of a number of countries that make up the Comprehensive Strategic Partnership (CSP), cooperation established by Australia with several other countries, namely the US, Japan, Vietnam, India, and of course, Indonesia. 

In light of these geostrategic escalations, the public needs to have  a sufficient understanding that our defense independence is still in a developmental stage. Most of our alutsista are still imported. Therefore, the government must seriously develop research capabilities to ramp up the domestic defense industry, so it can meet the country’s defense needs. We must also promote mutually beneficial schemes in weapons procurement, by improving our negotiation skills regarding technology transfer, joint production cooperation, and even the use of local components. 

The Defense Ministry must also carry out internal improvements, such as regulations for the distribution and dealership of imported products, budget restructuring by strengthening spending on research and education, and most importantly, capacity building, to prevent the potential and recurrence of bad practices in the management of its budgets and activities, whether costbased or not. 

Public support in this regard needs to rallied, so that state investment in the defense sector can go according to plan and be taken seriously, in order to maintain the stability of economic growth and increase Indonesia’s bargaining position. 

After all, this country is situated in a very strategic geographical position. If Indonesia is able to project a strong sovereignty and guard its borders, supported by robust defense spending at least 1.5 percent of GDP, then the nation’s ideal to stand tall and proud on land, sea and air is no longer empty rhetoric and wishful thinking. 

And this starts from solid, practical planning: the MasterPlan crafted by Defense Minister Prabowo and defense strategists at the Defense Ministry is worth a wait.