'Balancing China': why Indonesia is on a multibillion-dollar spending spree for US and French fighter jets

Indonesia's recent spending spree on equipment underlines the pressure on the country to modernise its ageing defence arsenal amid rising US-China rivalry in the Indo-Pacific region, but fiscal challenges and a limited budget will make it hard to complete the task, experts have said.

On February 10, Jakarta secured a US$8.1 billion deal to purchase 42 French-made Dassault Rafale fighter jets, with the two countries having already signed the first contract for the purchase of six fighter jets that are expected to be delivered in 56 months. Indonesia also wanted to buy two Scorpene-class submarines from France, Defence Minister Florence Parly said.

A few hours later, the US Department of State approved the sale of 36 F-15EX fighter jets worth US$13.9 billion to Indonesia. These may include the sophisticated Eagle Passive Active Warning Survivability System (EPAWSS), a tool that could boost the pilot's situational awareness as it detects all kinds of threats to the jets. The US deal will require congressional approval.

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The deals will boost Indonesia's waning capability, particularly in air defence, as the Southeast Asian nation currently operates only US-made F-16 fighters and two Russian Sukhoi jets, the Su-27s and Su-30s.

With France, which aims to bolster its ties in the Indo-Pacific following the collapse of a submarine pact with Australia, Indonesia also intends to develop its defence industry beyond buying equipment, Foreign Minister Retno Marsudi said on Monday when she met Parly in Paris.

"Our defence ties will not only focus on defence equipment purchase, but also capacity and research development, as well as [equipment] production and investment, to strengthen our national strategy industry," she said.

Indonesia is also working with South Korea to develop the KAI KF-21 Boramae warplane, with the first test flight expected this year. Indonesia has agreed since 2010 to acquire a 20 per cent stake in the programme, as it hopes to gain valuable technology transfer from South Korea. The two countries aim to deliver at least 40 aircraft by 2028, but the programme has been dogged by Jakarta's tardiness in paying its share of at least 8 trillion won (US$6.6 billion) to build the aircraft. As of September 2020, it was reported that Indonesia had paid only US$10 million on the research stage of the project in 2016.

With South Korea's Daewoo Shipbuilding and Marine Engineering, Indonesia had planned to buy three Nagapasa-class diesel-electric attack submarines, worth an estimated US$900 million, although the delivery for these subs, too, has been in limbo for three years due to lack of down payment from Jakarta.

Defence Minister Prabowo Subianto has a long list of spending, which, according to last year's leaked document on defence equipment planning, will cost up to US$125 billion over the next 22 years. A huge chunk, US$79 billion, will be used to buy equipment.

The former general has scored some deals in the past year, including signing a contract to purchase six new FREMM multipurpose frigates and two used Maestrale-class frigates from Italy and placed an order for a pair of Airbus A400M transport aircraft during the Dubai Airshow 2021.

Domestically, however, that ambition is likely to meet public resistance as the exorbitant amount needed to purchase the equipment comes at a time when the Indonesian economy is struggling to rebound to pre-pandemic levels of growth. The Southeast Asian nation's economy grew 3.69 per cent last year, higher than the 2.07 per cent contraction it posted in 2020 but still lower than 2019's 5.02 per cent growth.

"Challenges to the purchase plans would chiefly be fiscal ones, considering that Indonesia has accumulated a considerable national debt pile, and has multiple funding priorities - not least of all, pandemic response and associated public health care and social security, and the development of new capital city Nusantara," said Collin Koh, research fellow at the Institute of Defence and Strategic Studies in Singapore.

The prospect of using loans to purchase the equipment - to prevent putting a greater burden on the state coffers - would also be controversial, Koh said.

"Whether the loans come from the domestic or foreign debt markets, the fact is that Indonesia will have to face the prospect of intergenerational debt, which may raise public concerns and questions."

As Kevin O'Rourke, author of Indonesia-focused newsletter Reformasi, pointed out in his February 11 edition, the government is legally obliged to bring the fiscal deficit to within three per cent of GDP next year, so "massive outlays for defence equipment appear incongruous".

While budgeting for defence equipment has been a challenge for Indonesia to modernise its ageing equipment, Andrew Mantong, researcher at the Centre for Strategic and International Studies (CSIS) Indonesia said that there was a "special need" now to upgrade Indonesia's arsenal to "balance China's rising influence".

"We have a huge defence gap to fill, but that is a legacy from the [Suharto-led] New Order era, it is not a new problem and it will not be solved in an instant," Mantong said.

"But there is a huge need now to modernise our equipment, considering the situation in the Indo-Pacific that is becoming more uncertain and unstable. We have a big [task] to balance China's power by boosting our deterrence, or anti-access, capability."

Indonesia is a non-claimant state in the South China Sea dispute, but part of its exclusive economic zone in the Natuna Sea falls within China's so-called nine-dash line, and the area has seen a number of incursions from Chinese fishing and coastguard vessels as well as Vietnamese fishermen in recent years.

Koh said Indonesia's purchase of the Rafale jets would make Indonesia the first operator of the state-of-the-art warplane in Southeast Asia, which would be "prestigious" for the administration of Joko Widodo but does not necessarily boost Indonesia's clout in the region.

"This purchase could be deemed as rather belated, long-awaited, and aimed at modernising the ageing TNI [Indonesian armed forces] arsenal," Koh said.

"While it might give China reasons to pause if it ever plans any aggression towards Indonesia over the North Natuna Sea issues, the Rafales may not necessarily be seen as a game-changer of sorts in altering the asymmetry in balance which favours Beijing."

In December the Air Force Chief of Staff, Air Chief Marshal Fadjar Prasetyo, said that Indonesia would abandon its plan to buy Russian Sukhoi-35 jets due to "budget constraints".

However, the Russian ambassador to Indonesia Lyudmila Vorobyova told news agency Antara last week that there was "no official cancellation yet", claiming that Indonesia had backtracked on the deal due to US sanctions on Russia.

Mantong of CSIS Indonesia said Jakarta was probably wary of pursuing another Sukhoi deal with Russia due to Washington's Countering America's Adversaries Through Sanctions Act, which "will affect Indonesia's link with the US". The US is Indonesia's largest defence partner by far, as underlined by, for example, Washington's funding of Indonesia's new US$3.5 million maritime training centre near the South China Sea.

However, Jakarta's moves to bolster its defence ties with France and South Korea did not mean that it would side with the United States against China; it merely underscored the country's intentions to diversify its list of defence partners, Mantong said.

"Jakarta wants to ensure that we have different suppliers and do not entirely rely on one major power," he said.

"Indonesia wants to boost its deterrence capability, so that if there is a conflict flaring up nearby, it will not spill over into Indonesia and that Indonesia will not be used as a battleground for other countries, in accordance with its free and active foreign policy principles."

This article originally appeared on the South China Morning Post (SCMP).

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