November 8, 2022
JAKARTA – Success in the defense business is no longer just about clinching export deals but depends on finding a reliable long-term partner, a British official has told The Jakarta Post.
Mark Goldsack, director of international trade at UK Defense and Security Exports, said the “UK way” never stopped at selling and shipping equipment, and that it also included technology transfers to foster partnership.
“[We] want to lift what was traditionally an export activity into a partnership,” he said. “If you can get the trade moving in both directions, our mutual supply chain becomes more secure, and that mutual cooperation locks it for the long-term.”
In the context of Indonesia-United Kingdom trade, said Goldsack, the ultimate goal of transferring technology was to enable Indonesia to stand on its own feet so the local industry had an opportunity to export back to the UK in a “win-win” for both parties.
Speaking to the press on Wednesday at the 2022 Indo Defense Expo & Forum, which closed on Saturday, President Joko “Jokowi” Widodo said adopting as much new defense technology as possible was vital to Indonesia’s defense industry.
“The development has been very good, because now we provide a lot of space for private companies to help build Indonesia’s defense industry. Whether alone or in cooperation with foreign defense industries, that development is really good,” the President said.
“Our strategic state-owned enterprises [SOEs] have to form as many partnerships as they can, so we can receive transfers of new military technologies,” he added.
Speaking at the biennial event, Defense Minister Prabowo Subianto also noted that, Indonesia still needed help from the international community for certain types of cutting-edge technology.
“The President has instructed our defense industry to take advantage of [the expo] to collaborate with foreign developers of cutting-edge technology. Defense technology is evolving rapidly and we must keep up,” the minister said.
Prabowo added that the government made it obligatory for foreign suppliers to collaborate with local businesses to invigorate partnerships.
Goldsack noted separately that this obligation did not appear to be an issue.
Indonesia’s partnership with the UK had materialized in several ways, he continued, including “a transfer” of the Arrowhead 140 frigate to state-owned shipbuilder PT PAL Indonesia, which manufactures both military and commercial vessels.
Goldsack said skills transfer to build the warship and to maintain it would follow over time, with a view to enabling Indonesian manufactures to develop their own upgrades.
Capability was about “more than just a piece of equipment” and involved training, doctrine, usage and interoperability, he added, noting that a partnership for building capacity needed to match the setup in each individual country.
“Recognizing your own defense industry base is actually part of your own defense capability, because if you want to be able to exercise sovereign control and capability, you need to be able to control and procure your supply chain,” said Goldsack.
“How you look after, curate and encourage your own domestic defense industry is a really important part of any country’s defense program,” he underlined.
Goldsack told the Post that most countries had to work with international partners to design and develop technology: “How we cooperate with other countries is fundamental to curating that design capacity deep inside each other’s defense industries.”
In Indonesia, he added, small and medium enterprises (SMEs) were becoming increasingly important to developing the defense industry because of their greater agility compared to large private enterprises or the government.
If SMEs could be incorporated into the industry, Goldsack said, “then we’ve got a real opportunity here, because tech transfer is always easier when SMEs are working with each other, because they’re selling emerging technology ideas to each other” all the time.
The question is how to do this in an industry like defense, which is under strict state control.
“We don’t sell [defense equipment] to individuals. We partner with other governments to transfer capability, to sell capability, to sell training. That’s how we move it,” said Goldsack, and that this usually meant dealing with “well-established prime businesses”.
“Whether they’re state-owned or private doesn’t matter. But they rely on the ecosystem of SMEs to create the technology, the ideas.”
Curie Maharani, an international relations lecturer from Binus University’s Jakarta campus, said technology transfers could help develop the country’s defense industry, but the domestic market needed to be big enough so the government had a strong bargaining position as regards suppliers.
“[The domestic market] must also have adequate capability to absorb the technology. So far, [Indonesia] has been purchasing [defense] goods from many suppliers in small quantities, and that makes it hard to negotiate for a significant transfer of technology,” Curie told the Post on Saturday.
For all their benefits, however, technology transfer deals also entailed certain risks, such as from differing interpretations of the agreed technology and their transfer.
“This happened when we were licensing [the technology for] a landing platform dock from South Korea. A third-party consultant helped, and the problem was eventually resolved. Now we can export the technology,” she explained.
Curie added that a disparity in technical skills, as was the case in a submarine procurement, could drive up costs related to technology transfers.
“That’s why we need to be selective about technology transfers, [and] not just focus on pursuing technology of high value [that] in reality, is hard to implement.”
Another risk factor were sanctions, Curie said, such as the direct and indirect embargos the United States had imposed on Indonesia in the past.
“A direct embargo happened in the 1990s, making it hard for us to buy Western technology. An indirect embargo has been in place since 2017, making it hard for us to buy Russian technology,” she explained, the latter under the US Countering America’s Adversaries Through Sanctions Act (CAATSA).
Curie noted that the US “can and is imposing limitations for political reasons”, including through prohibitions on chip sales to China. “Under the current conditions of the arms market, Indonesia must be flexible when it comes to [procuring weaponry].”