Opinion: Unplanned Spending in the Defense Sector

Jakarta - Defense sector spending funded by Foreign Loans (PLN) for the 2015-2019 Minimum Essential Force (MEF) program received an allocation of US$7.7 billion, a nearly fivefold increase from 2020-2024. Initially set at US$34.4 billion for weapons system procurement, the quota decreased to US$25 billion at the end of November 2023.

However, this figure increased again to US$9.7 billion this year, bringing the total to US$34.7 billion after the Ministry of National Development Planning/Bappenas approved an increase in the PLN allocation for the Ministry of Defense. The fifth revision of the 2020-2024 Medium-Term Foreign Loan List is inextricably linked to the political changes in Indonesia, with Prabowo Subianto's rise from Minister of Defense to President.

The fifth revision of the 2020-2024 Blue Book also marks a growing trend of unplanned spending in the defense sector. During the previous administration, unplanned spending remained relatively manageable because the majority of defense equipment purchased was proven systems from manufacturers with unquestionable credibility.

Unplanned spending did occur at that time, on a limited scale, such as the import of several weapons systems with questionable reliability. Some weapons systems even purchased by Indonesia that had not yet passed the testing phase, even though Indonesia was not involved in their development.

Careful planning in importing war equipment has become rare in recent years, given that weapons system procurement is not simply a matter of buying and selling. From a state financial perspective, long-term debt management becomes questionable when weapons systems are forced to be procured from countries with poor credit ratings, i.e., non-investment grade.

Indonesia is subject to a risk premium clause due to the risk of this credit rating, resulting in higher debt costs. Although the Ministry of Finance has been warning the Ministry of Defense about this risk for several years, it appears that common sense considerations in long-term government debt management have been neglected.

Meanwhile, from a planning perspective, several acquisition programs lack planning at all because the process is top-down, meaning the opinions of potential users are rarely heard. The planning aspect of a defense equipment procurement program is crucial because it examines operational, logistical, and human resource aspects, including the preparation of prospective crew members.

Integration issues become even more challenging when the purchased weapon systems are not sourced from the West, where network-centric integration is like climbing a steep mountain. Like it or not, Western-made defense equipment still forms the backbone of Indonesia's current defense capabilities.

From an operational and logistical perspective, there is no thorough planning related to efforts to maintain the medium- and long-term operational readiness of the purchased weapon systems. This relates to the readiness of Integrated Logistics Support (ILS) and the maintenance and upkeep capabilities of defense equipment imported from abroad.

Procurement of even the most advanced weapon systems is meaningless if the ecosystem to support long-term operational readiness is not established or is established without fully adhering to manufacturer guidelines. In several cases of military equipment purchases during the 2020-2024 period, the ILS package and maintenance and upkeep capabilities were nearly overlooked because the Ministry of Defense was too focused on platform acquisition.

There is a tendency for unplanned spending in the defense sector to continue in the Optimum Essential Force (OEF) period of 2025-2029. Unlike the previous MEF period, defense spending utilizing PLN facilities is strongly influenced by the preferences of decision-makers and not by objective and rational considerations.

Although the PLN allocation for this period is not significantly different from the previous period, the list of spending activities can change at any time according to the wishes of decision-makers. On the other hand, the role of end users in providing input regarding their needs during the planning stage tends to be merely a formality, as planning is top-down.

Referring to Minister of Defense Regulation Number 7 of 2022 concerning the Implementation of the Preparation of Defense and Security Equipment Needs Planning Documents for National Defense within the Ministry of Defense and the Indonesian National Armed Forces, the regulation adopts a hybrid approach, combining top-down and bottom-up approaches.

However, in practice, the top-down approach dominates, placing end users in a difficult position. This difficult position means they will be fortunate if they acquire a tested weapon system that can be integrated with existing defense equipment.

However, end users will be less fortunate if the defense equipment purchased is a completely untested system that is difficult to integrate with existing systems.

This tendency towards defense spending without careful planning can also be seen in the direction of weapons system acquisitions until the end of this decade. Instead of spending PLN allocations proportionally across several countries based on geopolitical and economic considerations, future spending programs are concentrated on a single country, with the reliability of many of its weapons systems questionable.

Similarly, integration with weapons systems currently operated by Indonesia is problematic, as the primary integration issue is not technical issues such as access to Interface Control Documents, but rather political ones.

Issues of technological maturity are also not considered, nor are logistical aspects that will ultimately be linked to the provision of maintenance and upkeep budgets, such as the mean time between overhaul (MTBO) for propulsion systems.

The issue of future debt costs to support weapons system acquisitions should be closely monitored in line with the implementation of the zero Rupiah Murni Pendamping (RMP) policy starting in 2026. Programs affected by this policy will not only cover procurement for the 2025-2029 period, but also purchases for the 2020-2024 period.

As a consequence, lenders will provide 100% loans to the government, theoretically the debt costs the government will bear will be higher than under the 15% RMP policy. Debt costs will become even higher when the majority of PLN's 2025-2029 debt is forced to be spent on countries with poor credit ratings and questionable weapons systems. (Alman Helvas Ali)