Thursday, December 2, 2004
The four-day Indo Defense Expo 2004 arms show in Jakarta last week turned out to be one of those shindigs where everyone, both buyers and sellers, was a winner. But the future benefit for the people of Indonesia and the Southeast Asian region remains to be seen.
The arms show was held in the Indonesian capital from November 24-27, and foreign arms makers were there in force. This was only to be expected, as the international arms market has been a buyers' market for several years, and no niche is too small be overlooked. The expo, the first to be hosted in Jakarta, featured about 250 participants from around the world.
The largest stand at the expo was Russia's state arms-exporting company Rosoboronexport, which facilitated last year's sale of four Sukhoi fighters to Indonesia. More than 20 other Russian armaments companies also displayed their products there.
During the show, an official of Russia's Sukhoi Air Holding, a military-aircraft-building company, announced that it will be able to export 80-100 "Su" fighters to the Asia-Pacific region in the next five-year period, excluding already concluded contracts. All but completed is a US$250 million contract on the delivery to Indonesia in 2005 of eight fighters - six Su-27SK and two Su-30MK aircraft - an adviser to the company's director general Alexei Poveshchenko told the Russian news agency Itar-Tass. The Indonesian air force will then have 12 such super-modern warplanes.
The Indonesian military also expressed interest in purchasing Russian long-and medium-range air-defense systems, such as the TOP-M1 and BUK-M1-2 systems.
Russia has a long history of weapons trade with Indonesia. In the past, Indonesia has procured 14 submarines, missile carriers and torpedo boats from the country. In 2000, Indonesia bought 12 BTR-80 armored personnel carriers, 16 Mi-2 and four Mi-8 helicopters, 9,000 Kalashnikov submachine-guns and ammunition from Russia.
Moreover, Russia is willing to sell its wares on other than a strictly cash basis. Russian officials have said they are willing to take payment on a counter-trade basis, meaning they would accept goods such as rubber, tin and palm oil that are in high demand in Russia.
And consistent with its no-money-down, easy-financing approach, an official from Rosoboronexport said on Monday that taking into account the interest shown in Russian weapons at the show, Russia could offer Indonesia a special arms sales and military-technical cooperation program.
"We are prepared to draw up a targeted program of military-technical cooperation with Indonesia if that country makes such proposals," Nikolay Dimidyuk from Rosoboronexport told MosNews. "Indonesia showed exceptional and unprecedented interest in the weapons and military hardware on display at the exhibition," he said.
During the show, the Indonesian army also expressed interest in buying artillery cannons from Poland to replace similar weapons that have not been operational since 2003.
Other countries represented at the expo were Canada, France, Germany, Malaysia, the Netherlands, Singapore and South Korea. Other firms that were present included DaimlerChrysler AG, which was exhibiting its Unimog and Atego transport trucks, and Daewoo, which already has carried out a $60 million overhaul of an Indonesian submarine and is in discussions to refit a second such vessel.
Although no specific deals with Indonesia were announced at the show, suppliers won't have long to wait. All deals will be made in January, when Indonesia invites potential weapons suppliers to the island of Bali for a roundtable discussion on the country's future military needs. Invited to the event are suppliers from Russia, the Czech Republic, Poland, Germany, the Netherlands and South Korea.
Indonesia's military has suffered in terms of new equipment and technology upgrades due to the 1999 embargo on arms sales that the United States imposed after Indonesian troops and their proxy militias killed nearly 1,500 people in East Timor. According to officials at the Indonesian Ministry of Defense, 70% of the country's current military equipment was imported from the US. The embargo, which has left US A-4, F-5 and F-16 planes in need of spare parts, has made it difficult for Indonesia to upgrade its military capabilities.
To remedy that, Juwono Sudarsono, Indonesia's new defense minister, is expected to visit the US early next year to lobby for an end to the embargo, part of fresh moves to improve relations. But given the reality of the embargo, Indonesia has been looking for alternative arms suppliers over the past few years, particularly among Eastern European countries and their long-established arms industries, which often offer better terms than US suppliers.
The only US company in the exhibition was the San Francisco-based American Technologies Network Corp, which supplies night-vision goggles and similar products.
While the arms embargo is bad news for US weapons manufacturers, it has been manna from heaven for non-US arms suppliers, both major and minor. Back in May, for example, the Indonesian navy indicated its plans for a counter-trade deal in which it would acquire two submarines from the South Korean navy in exchange for 30 Indonesian-built CN-236 twin-turboprop transport aircraft.
In addition, the United Kingdom has supplied Hawk jets and armored personnel carriers, which have been used in the country's troubled Aceh province despite bilateral agreements designed to ensure that the equipment is not used against separatist forces.
In August then-Indonesian president Megawati Sukarnoputri said the government would buy more Russian warplanes in the near future. Megawati, who visited Russia in 2003 to sign a $192 million deal for four Sukhoi jet fighters and two Mi-35 military helicopters, planned to increase them into one squadron each. Under the terms of that deal, palm oil and other barter transactions were a major part of the payment; Russia was paid only $26 million in cash.
In October the Netherlands shipyard Royal Schelde and Thales announced that it had signed several contracts for the delivery of a wide range of products that are to be installed on the two corvettes Royal Schelde will build for the Indonesian navy. The value of the contracts amounts to approximately $79.7 million.
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