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INDONESIAN DEFENSE INDUSTRIAL COOPERATION WITH THE UNITED

ARAB EMIRATES IN A DEFENSE ECONOMIC PERSPECTIVE

Ria Anggun Ariani

, Sri Sundari

, Lukman Yudho Prakoso

Faculty of Defense Management, The Republic of Indonesia Defense University,

Bogor, Indonesia

1,2,3

[email protected]

, [email protected]

ABSTRACT

The implementation of the defense offset mechanism for the procurement of defense equipment has been

going on since the early 1960s, although it was effectively only carried out when IPTN, PT. PAL, and

PT. PINDAD established cooperation with the state of arms producers and strategic industries in the mid-

1970s. The government's policy for cooperation with the United Arab Emirates in the field of defense

industry will be very profitable and also equally build a defense economy and also this cooperation is

centered on Joint Marketing for CN235 and N219 aircraft, as well as Joint Development for upgrading

versions of N219 aircraft and MALE Black Eagle UAVs, along with Engineering, Design & Flight-

Testing Work Package cooperation in each product development. This cooperation demonstrates the

readiness of the domestic industry for the development of defense industry products, through three

Defense Industry SOEs, in the form of Joint Marketing cooperation for CN235 multipurpose transport

aircraft and N219 light passenger aircraft. The method used in this study is a qualitative method based

on the study of in-depth understanding. Qualitative research is a method used to understand the

phenomena experienced by the research subject by describing in the form of language, words, and special

natural contexts.

Keywords; Defense Industry; United Arab Emirates; Defense Economy

INTRODUCTION

Defense economics is a study of resource allocation, income distribution, economic growth,

and stabilization applied to topics that communicate with defense (Wanda et al., 2018). This

includes defense spending, domestic and international spending, as well as macroeconomic

variables such as labor, output, and growth. Other scopes are microeconomic dimensions, such as

analysis of basic defense industries, collaborative programs, shifts, and the formation of prices

and benefits from military contracts. The national security system is built with the approach of

citizen and community participation or security sector reform agreements, the most important of

which is how it affects the Defense-Security Expenditure Structure on security stability in

Indonesia (Saputro et al., 2020) in (Saputro, 2022) The definition of state defense in Law Number

3, Year 2002 concerning State Defense is any effort to defend state sovereignty, the territorial

integrity of the Unitary State of the Republic of Indonesia, and the safety of the entire nation from

threats and disturbances to the integrity of the nation and state. Efforts to develop the country's

defense system are closely related to defense strategic resources consisting of defense budgets,

military infrastructure, defense posture, defense industry, and defense logistics capabilities

(Kusuma et al., 2021). State defense aims to maintain and protect state sovereignty, the territorial

integrity of the Unitary State of the Republic of Indonesia, and the safety of the entire nation from

all threats. The essence of state defense is that any defense effort is universal in nature whose

administration is based on an awareness of the rights and obligations of citizens and a belief in

one's own strength; involving all citizens, territories, and other national resources; prepared early

by the government and held in a total, integrated, directed, and continuous manner (Anakotta &

Disemadi, 2020). Previously, Indonesia and the UAE had entered into a defense cooperation

agreement signed on February 24,2020 in Abu Dhabi.

The bilateral relations between Indonesia and the United Arab Emirates in recent years

have become stronger and more dynamic (Syukron, 2013). The dynamism was marked by the

mutual expetuation of visits between high-ranking officials of the two countries which were very

intense, one of which was the visit of the UAE Minister of Defense to Indonesia in December

2019 (Koerniawati et al., 2023). Responding to the visit, the Minister of Defense of the Republic

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of Indonesia H. Prabowo Subianto on February 23-25, 2020, then carried out a state visit to Abu

Dhabi. There, Prabowo Subianto met with UAE Defense Minister Mohammed Ahmed Al

Bowardi at the United Arab Emirates Ministry of Defense. The arrival of the Minister of Defense

of the Republic of Indonesia was greeted with an honorary jajar ceremony followed by a bilateral

meeting. In a meeting taking place in Abu Dhabi the Minister of Defense of the Republic of

Indonesia said that the UAE is a mecca of political policy in the Middle East The agreement

includes mutual visits between Armed Forces officials at various levels, information exchange,

science and technology cooperation in the field of defense industry, capacity building, HR

development, and other mutually agreed areas.

As an implementation of the agreement, a Joint Defense Cooperation Plan (JDCP) meeting

was held in December 2021, as the first step in discussing the potential for defense cooperation

between Indonesia and the UAE. (Public Relations Bureau of the Secretary-General of the

Ministry of Defense) Indonesia and the UAE through the Ministers of Defense signed the defense

industry development cooperation protocol between Indonesia and the UAE on June 30,2022 at

the UAE Ministry of Defense. Cooperation in the field of defense, especially the defense industry

is very important for the two countries, especially for the future development of the defense

industry (Menteri Pertahanan, 2022). This defense industry development cooperation protocol

aims to provide a way forward to advance and develop bilateral cooperation in the field of defense

industry between the two sides, as well as the planning and development of mutually beneficial

industrial capabilities. In the protocol, there are several scopes, including formulating strategies

to improve alignment of the strategic planning of the defense industries of the two countries and

formulating policies to enable joint research and development, joint production, international

marketing, national offset programs, technology permits, international talent provision, and HR

investment. The cooperation between the three Defense Industry SOEs is PT PAL with the UAE

government, and PT Dirgantara Indonesia with PT Pindad with Calidus LLC, at the UAE Ministry

of Defense, Abu Dhabi.

The cooperation agreement between PTDI and Calidus LLC was confirmed in a

Memorandum of Understanding (MoU) signed by PTDI President Director Gita Amperiawan and

Calidus CEO Faris Al Mazrouei. The cooperation includes Joint Marketing for CN235 and N219

aircraft, as well as Joint Development for upgrading versions of N219 aircraft and MALE Black

Eagle UAVs, along with Engineering, Design & FlightTesting Work Package cooperation in each

joint product development.

RESEARCH METHOD

The method used in this study is a qualitative method based on the study of in-depth

understanding. Qualitative research is a method used to understand the phenomena experienced by

the research subject by describing in the form of language, words, and special natural contexts

(Sugiyono, 2016). The scope of this research focuses on cooperation. The purpose of this study

focuses on Defense Economics in Cooperation between Indonesia and the UAE in the field of

defense industry in 2022. The narrative approach is a method of research approach that is in the

social sciences. Where at the core of this method is the ability only to understand a person's identity

and worldview by referring to stories, stories (narratives) that are heard or utterances in their daily

activities (Schreiber & Asner-Self, 2011).

RESULTS AND DISCUSSION

Law Number 37 of 1999 about Foreign Relations. Foreign Relations is any activity that

concerns regional and international aspects carried out by the Government at the central and

regional levels, or its institutions, state institutions, business entities, political organizations,

community organizations, non-governmental organizations, or Indonesian citizens. According to

Article 2 of the Act Number 37 of 1999 on Foreign Relations, Foreign Relations and Foreign

Policy is based on Pancasila, the 1945 Constitution, and the Outline of the State Direction, which

is organized in accordance with foreign policy, national laws and regulations and international

Indonesian Defense Industrial Cooperation with The United Arab Emirates in A Defense Economic

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laws and customs. Indonesia's foreign policy adheres to the principle of active freedom for

the sake of Communication has a very important role in the delivery of a policy, this is intended

so that the policy to be delivered can be well understood by the implementer. Communication

includes all behaviors, including countermeasures or responses to a stimulus or stimulus. This

means that there is always a link between stimulus and response to human behavior (Lattal &

Rutherford, 2013).

The implementation of the defense offset mechanism for the procurement of defense

equipment has been going on since the early 1960s, although it was effectively only carried out

when IPTN, PT. PAL, and PT. PINDAD established cooperation with armament-producing

countries and strategic industries in the mid-1970s, with a variety of weapons and strategic

industries, from the beginning light armament, rockets, helicopters, fast boats, corvettes, and

aircraft. The practice of defence offset in Indonesia has not been able to meet the needs of defense

weapons integrally, because it is caused by various obstacles that surround, namely: human

resource readiness, budget capabilities, and other resources, such as basic materials for making

weapons such as steel and others. The defense offset mechanism in the procurement of defense

weapons has been carried out with three types of offsets: license purchase, coproduction, and

development, but the offset mechanism has not been sufficiently able to support the needs of

defense equipment in Indonesia, because the types of weapons and defense equipment that utilize

the offset defense mechanism are not specific to urgent needs, such as fighter aircraft, frigates,

tanks, and so on. The practice of new defence offsets is limited to supporting needs, not yet to the

support of the need for procurement of defence equipment (Muradi, 2016). The Republic of

Indonesia (RI) and the United Arab Emirates (UAE) have so far established good bilateral

relations. Since the UAE was proclaimed on December 2, 1971, Indonesia inaugurated diplomatic

relations between the two countries in 1976. After that, on October 28, 1978 the Indonesian

Embassy was inaugurated in Abu Dhabi at the Chargé d'Affaires level. Then since February 2003,

Indonesia has a Consulate General in Dubai. Relations between the two countries then became

closer after June 10, 1991 the UAE officially opened the Embassy of the United Arab Emirates

in Jakarta. Successively after that, the UAE opened the Consular Office in August 2014 and the

Office of the Military Attaché in April 2019. (Mustofa, 2021) Minister of Defense of the Republic

of Indonesia Prabowo Subianto while meeting with the Minister of Defense of the United Arab

Emirates (UAE) H.E. Mohammed Ahmed Al Bowardi, during his working visit to the United

Arab Emirates, Thursday (30/6), witnessed the signing of the cooperation of three Indonesian

Defense Industry SOEs. The three Defense Industry SOEs are PT PAL with the UAE government,

and PT Dirgantara Indonesia with PT Pindad with Calidus LLC, at the UAE Ministry of Defense,

Abu Dhabi. The cooperation agreement between PTDI and Calidus LLC was confirmed in a

Memorandum of Understanding (MoU) signed by PTDI President Director Gita Amperiawan and

Calidus CEO Faris Al Mazrouei. The cooperation takes place in accordance with the rules in

communication signed by the Memorandum of Understanding (MoU) of the Ministry of Defense

of the Republic of Indonesia and the Ministry of Defense of the United Arab Emirates signed on

June 30, 2022.

The content of the agreement is that the two companies agreed on cooperation in terms of

Joint Marketing for the CN235 multipurpose transport aircraft and the N219 light passenger

aircraft. Also, Joint Development for the version upgrade N219 aircraft and MALE drones Black

Eagle, following the cooperation of Engineering, Design & Flight- Testing Work Package on each

product development carried out together. This cooperation is also a form of strengthening

bilateral relations between Indonesia and the UAE which has been going on forl a long time based

on close cultural ties and a shared commitment to enable greater economic development, as well

as the prosperity of the people of the two countries. In particular, Indonesia and the UAE have

also agreed to take steps to increase economic cooperation, trade and investment, including in the

field of defense industry through bilateral mechanisms that have been established (Kementrian

Perdagangan Republik Indonesia, 2022).

Indonesian Defense Industrial Cooperation with The United Arab Emirates in A Defense Economic

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Indonesia's state defense system is organized in a universal defense system. The form of

defense developed involves various components of the state such as citizens, territories, all

resources and national infrastructure that have been prepared by the government from an early

age. The system is also organized in a total, integrated, directed and sustainable manner

(Spaulding et al., 2002). Indonesia's universal defense system integrates military defense and non-

military defense. It aims to build the country's defense strength and capabilities. Indonesia always

encourages the creation of peace, security, stability, and prosperity in the development of the

global world through foreign policy is free to be active and impartial to any country (non-block).

In addition, Indonesia's defense strategy has also been prepared comprehensively by taking into

account three basic points, namely forming, responding, and preparing. Furthermore, a defense

strategy is a strategy that is able to create national and international environmental security so that

it can guarantee national interests and is able to respond to all forms of threats that can hinder

national interests. Defense to face an unpredictable future to protect national interests.

Specifically in the aspect of international relations, Indonesia certainly has a foreign policy that

is a foothold in politics and diplomacy in the international world. The principle of foreign policy

promoted by Indonesia is free-active. In its implementation, Indonesia implements a free-active

foreign policy based on the basis of state ideology, namely Pancasila and the 1945 Constitution.

Basically, Indonesia's state defense system is a representation of the foundation of foreign

policy, namely the idyl foundation, constitutional foundation and operational foundation. This

defense system aims to maintain domestic as well as foreign security. When the domestic aspect

has been fulfilled, Indonesia has the authority to carry out foreign policy, so that it becomes seen

in the global world. When Indonesia is viewed by the international world, then Indonesia can

carry out international security to maintain world peace but still pay attention to the aspect of

neutrality as a country that does not take sides to the left or right.

CONCLUSION

In terms of Communication. In general, communication has no obstacles, the relationship

between the two countries has been established for 44 years, then in 2022 it will be enhanced by

the cooperation of strategic partners, one of which is in the field of defense. This cooperation was

created, because the two countries put a mutual trust in each other. The IUAE-CEPA document

that the two countries have agreed upon at Al Shatie Palace, Abu Dhabi, July 1,2022 provides for

agreements and provisions regarding another memorandum of understanding, for which there is

also an agreement on the Protocol on Cooperation in the field of Defense Industry and

Procurement of military equipment. Through the Three State-Owned Defense Industries, in the

form of Joint Marketing cooperation for CN235 multipurpose transport aircraft and N219 light

passenger aircraft. Also, Joint Development for the upgraded version of the N219 aircraft and the

MALE Black Eagle drone, following the cooperation of Engineering, Design & Flight-Testing

Work Package on each product development carried out together.

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