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Republic of Indonesia - Military Modernization

When Indonesia invaded the newly independent nation of East Timor in 1975, it did so, according to the US State Department, with mostly American-supplied arms. The US has curbed and lifted restrictions on its arms sales to Indonesia many times. Since 1992, the US imposed various restrictions on arms sales due to Indonesia's violation of human rights in East Timor.

Indonesian state-owned strategic enterprises, grouped under the acronym BUMNIS, have produced competitive defense products and supply the military with quality armaments. Pindad, for instance, supplies assault rifles and ammunition to the TNI as well as to the National Police and fulfilled a contract to produce 150 6X6 armored personnel carriers for the Army.

By 1992 virtually all of the army's heavy Soviet- or East European-origin equipment had been eliminated and replaced by equipment produced indigenously or purchased from Western countries. Because of funding constraints, emphasis was placed on maintenance and rehabilitation of older equipment. The mainstay of the armored force was the French-built AMX-13 light tank and AMX-VCI reconditioned armored personnel carriers, mostly acquired in the late 1970s. The nation's small arms industry supplied nearly all of the army's small arms requirements, although a substantial number of M-16 rifles purchased from the United States in the 1980s remained in the inventory. Domestically produced arms included FMC rifles, submachine guns, and machine guns made under Belgian-licensed production. Ammunition was in short supply.

The army was equipped with a variety of weapons systems acquired from several European and Asian countries and the United States, as well as domestically manufactured items. Because of funding constraints, emphasis was placed on maintenance and rehabilitation of older equipment. The mainstays of the armored force are its French-built AMX13 light tanks and the variant AMXVCI reconditioned armored personnel carrier, mostly acquired in the late 1970s. Domestic industry supplies nearly all of the armys small-arms requirements, although a substantial number of M16 rifles purchased from the United States in the 1980s remained in the inventory two decades later. Domestically produced arms include Belgian-licensed FNC rifles, submachine guns, and machine guns. Ammunition was in short supply.

Since 2001, the Republic of Indonesia has undertaken a strong effort to modernize its military in order to technologically match the militaries of its neighbors. To that end, it produces many of its own military technology and armaments, and buys many foreign military supplies. The major foreign military suppliers to Indonesia helping it towards that end include the United States, Russia, and the United Kingdom. Arms sales to Indonesia from foreign countries have varied over time, shifting in volume depending on international perceptions of Indonesia's handling of domestic insurgencies and separatist movements, such as the movement for an inpendent East Timor.

In 1999, the European Union implemented an arms embargo against Indonesia prevented the delivery of several Hawk fighter jets to Indonesia. The European Union embargo was lifted in January 2000, allowing the United Kingdom, to complete the delivery of the Hawk fighter jets to Indonesia and sell other arms to it. In 2000, the US implemented an arms embargo on Indonesia for human rights violations, which increased Indonesian reliance on arms sales from Russia.

Since 2002, the US has contributed to Indonesia's military modernization by allowing Indonesia to participate in the Counterterrorism Fellow-ship Program (CTFP). This DoD program has facilitated education and trainingopportunities for the Indonesian military officers, ministry of defense and security officials, to focus specifically on counter-terrorism courses, seminars, and English-language training to enhance cooperation between the US and Indonesia in US efforts to combate terrorism.

On 25 May 2005 the United States announced resumption of transfers of non-lethal defense articles and services to the Government of Indonesia. These transfers include Foreign Military Sales (FMS) and Excess Defense Articles (EDA). These transfers, as well as full International Military Education and Training (IMET), were discontinued in 1999 after reports of human rights abuses by Indonesian military forces and militia on East Timor. Secretary of State Condoleeza Rice restored full IMET to Indonesia in January 2005. Indonesia recieved $600,000 in IMET in 2005.

On March 22, 2006, the U.S. Department of State issued the Public Notice No. 5354 which stated that the U.S. government would consider on a case-by-case basis application for the export of lethal defense articles and related defense services to Indonesia. The new regulation brought opportunities for U.S. defense manufacturers to export their products to Indonesia again. In June 29, 2006, the US lifted all restrictions on military exports to Indonesia, and restored normal military relations with Indonesia to gain its full assistance in combating terrorism.

Most sales to the military must be carried out through an Indonesian agent. Often the customer will assist in the identification of the proper agent. As of 2009, Indonesia refers to a "Blue Book", a listing of major projects identified by the Government of Indonesia as essential to national development priorities, for its military modernization. The document is published annually by the National Planning Agency (BAPPENAS) and constitutes the official list of projects that are open to foreign official assistance and other sources of external financing. Most of the projects listed in this book require "soft loan" (low interest rate) financing.

The U.S. government does not initiate soft loan financing, and although the U.S. Eximbank offers "matching" soft loans from its "war chest," as of 2009 Indonesia almost never has accepted offers that would displace other donor commitments made through the annual World Bank-sponsored Consultative Group on Indonesia (CGI). Rarely, some U.S. firms have been successful at convincing Indonesian authorities to accept Eximbank matching soft-loans as "add-on's" rather than displacements to another donor's offer. Ad-hoc soft loans offered outside the CGI may offer opportunities for using Eximbank matching loans.

Projects listed in the Blue Book are classified into three categories, A, B, and C, according to their stage of preparation (i.e. feasibility). A Category C project, for example, was one for which feasibility has yet to be established. With such projects, there may be opportunities for foreign firms (especially engineering firms, consultants, etc.) to assist in determining feasibility. Category A and B projects, on the other hand, are ones for which feasibility has been or will soon be established.

In November 2008, 11 Russian defense companies participated in the Indo Defense 2008 Expo and Forum, biennial arms exhibition in Indonesia. Russina companies presented models in information on 450 types of export weaponry, including Su-35 and Su-30MK2 multirole fighters, Mi-35 attack helicopters, BMD-3 airborne infantry fighting vehicles, and T-80 battle tanks. This not only strengthened Russian-Indonesian military-technical cooperation, it also allowed Indonesia to examine several options for upgrading its military technology and armaments.

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