Indonesia’s National Corvette Program

In early March the Jakarta press were reporting that Indonesia was about to restart the process of acquiring two corvettes as part of its National Corvette program—which had actually started in 2004 but quickly stalled, mainly due to funding issues.
Although the program as it was conceived has actually been in coma for the past few years, the Indonesian Navy still wants to “resurrect” it by purchasing two locally-built SIGMA (Ship Integrated Geometrical Modularity Approach)-based corvettes called Guided Missile Escort 105 M, also known as Perusak Kawal Rudal or PKR.
The Ministry of Defense (MoD) and PT. PAL – the state-owned naval manufacturing company said to be awarded the contract – are in the process of finalizing their future foreign design partner to jointly produce the PKRs. This activity should hopefully lead to the conclusion of the deal within the next few months. Assuming the order is placed later this year, the entire process to launch the first PKR is estimated to take at least four years, with initial delivery by the end of 2012, followed by test trials in 2013, and the final delivery by 2014. The second ship could be delivered within the following six months.
Until an actual final contract is signed with the foreign design partner, sources close to the MoD are still pessimistic about whether the schedule can be achieved – or even if the purchase will actually be made. As a consequence an alternative plan is required and is being privately discussed at senior levels within both the military and Government.
This suggests that while the PKR project may be part of a recent ‘Defense Industrial Revitalization’ drive by the MoD since late 2009, several fundamental problems remain—not just on the uncertain procurement contract for the corvettes, but also relating to the country’s overall defense acquisition strategy and force planning.
From “National Corvette” to “Guided Missile Escort”
The cost of the two PKR project ships has been estimated by PT PAL to reach around EUR 340 million (EUR 170 million each), with an expected local content of 35 percent. In fact, a substantive inward technology transfer deal has been mapped out in this regard. (See Figure 1).
This is in keeping with the spirit of achieving defense self-sufficiency, though a foreign partner is still needed in this regard. While the initial list had included Italy, Russia, the Netherlands, Poland and Germany, recent reports suggest that the MoD has narrowed it down to the first three.
The country’s own chief of R&D said in 2006 that Indonesia’s naval technicians were “already accustomed working with technologies from Italy, Germany, and the Netherlands.” Italy through Orrizonte Sistemi Navali was the original co-designer with PT. PAL of the 80-metre national corvette. Holland’s Damen Schelde Naval Shipbuilding helped built Indonesia’s first ever 4 SIGMA-class corvettes (the last two jointly produced with PT. PAL) and train local technicians as part of the offset deal. And Indonesia has some familiarity with Russian defence technology through a number of activities, including the purchase of the entire former East German navy more than a decade ago.
That said, the character and design of the national corvettes had changed several times; from an initial sketch of Germany’s Meko 100 to Italy’s Commandante class, and from 80 meter to 105 meter in length (See Graphic 1.) The changes mainly reflect the Navy’s requirements to allow the ships execute a wide-range of military and non-military operations—in line with Indonesia’s new doctrinal requirements of “Military and Non-military Defense.”
The stealth-enabled Guided Missile Escort 105 M (PKR) is designed to fight electronic and anti-submarine warfare, as well as surface and anti-air warfare. Though it is likely that the PKR could be deployed mainly for patrols and safeguard the country’s Exclusive Economic Zones, former Defense Minister Juwono Sudarsono has also said that they could be used for humanitarian or disaster relief.
Naval Development and Industrial Revitalization
The MoD had hoped that the locally-built PKRs could be the beginning of Indonesia’s defense transformation journey to reach its Minimum Essential Force (MEF) requirement. Specifically, according to the State Defense Posture document (published in 2007), the Navy’s ideal version of the MEF is essentially a “274-ship” green water navy based on an Integrated Fleet System (SSAT) by 2024.
The future fleet is to be divided into: Striking Force (110 ships), Patrolling Force (66 ships), and Supporting Force (98 ships), based at 59 naval bases under three, and if possible four, Command Regions. This is to be further supported by a naval air force of 137 aircraft and also a Marine Force (2 brigades / 11 battalions). The development of the MEF however is to be done gradually, with financial factors as usual being the main consideration.
In the overall scheme of things therefore, the planned purchase of the two PKRs represents a small, yet significant, step in Indonesia’s force development.
First, the locally-built PKR adopting the SIGMA technology is specifically designed to be a “transformational bridge” for the Navy’s future warships. Officials have even repeatedly stressed that the PKR will become the “basic technological standard” of their future force development.
This search for standardization and platform commonality is crucial because of the Navy’s exisiting complicated web of numerous foreign suppliers, including the Netherlands, the former Yugoslavia, Germany, Russia, U.S., Australia, U.K, Japan, South Korea, China, France, and finally South Africa. Further, the entire Indonesian Military (TNI) itself has over 173 main weapons system (alutsista) coming from 17 different countries.
This has not only caused various inter-operability problems, but has also strained the education, training, and maintenance budget of the Navy. Thus, the PKR program could be the initial pilot project to increase platform commonality in the Navy’s main weapons system.
Second, not only do the SIGMA class corvettes represent the most advanced naval technology that Indonesia has so far acquired, but the initial vision of the national corvette program – and now the PKR project – had actually been modeled on the commendable idea of integrating local supply chains (involving 22 Indonesian companies) while gradually deepening the transfer of foreign technology.
This vision has been taken a step further with the upcoming presidential decree on defense industrial revitalization that includes a full commitment to local industrial development, a multi-year financing model, a “national consortium” of local banks to support the domestic credit line, as well as greater efficiency of the foreign Export Credit (KE) option.
Accompanying the decree is a new “master plan” for defense procurement—as part of a future Defense Industrial Revitalization Road Map—for the next three Strategic Planning periods (renstra) spanning the next 15 years. Additionally, in a recent hearing with the parliament, Defense Minister Purnomo Yusgiantoro announced that for 2010 to 2014, the Ministry intends to spend over IDR 149 trillion (over USD 14 billion) for weapons procurement and maintenance.
Finally, the PKR project represents a growing trend in recent years within the Navy to further deepen their commitment to obtain weapons system through PT. PAL—all apparently in the name of “defense self-sufficiency.” In fact, among the chief rationale to modernize – presented in various policy documents since early 2000 – is not so much the changing regional or global strategic milieu, but the Navy’s age old, rapidly deteriorating fleet.

Prospect and Challenges

Despite the positive trends that the PKR project is meant to represent, unfortunately several fundamental problems remain. Among the most troubling issue has been the financial uncertainty surrounding defense procurement. Aside from the lack of political and financial commitment from the government, bureaucratic red-tape has partly led procurement processes to be bogged down for years.
The uncertainties surrounding government regulations also plays a significant part in muddying the water. For example, financial regulations allowing gradual (yearly) disbursal of allocated funds has led to a low level of actual expenditure—around 30 percent of the USD 3.7 billion allocated Export Credit (KE) for defense procurement in 2004-2009 was actually spent.
Another factor is the reluctance of major local banks to heavily finance the project due to the absence of legal and financial “blanket guarantees” from the government and the uncertainty surrounding the multi-year budgeting process and also the MoD’s legal status as a creditor.
This brings us to managerial uncertainties in Indonesia’s defense acquisition process. The absence of a unified defense procurement and industrial development strategy often leads to confusion as to who gets to do what, when, and how. In the case of the National Corvette program for example, it was initially announced back in 2007 that the National Development Planning Agency (Bappenas), instead of the Navy headquarters or the MoD, was going to be leading actor in the program.
These problems has also eventually led to the under-utilization of local supporting industries, making the production capacity of major strategic state-owned companies like PT. PAL to rely on foreign sources for basic materials, system and technology.
However, there seems to be light at the end of the tunnel. At least, the government realizes that all these issues are serious problems that must be addressed. For example, aside from the multi-year budgeting process and signed MoU to commit the TNI and government to maximize local defense companies, a new Defense Industrial Policy Committee will be formed soon.
All in all however, the fate of the resurrected national corvette program still hangs in the balance. As LT. Gen. Sjafrie Sjamsoeddin said, then MoD’s Secretary General in 2009, “the execution [of the program] is still dynamic. It could go forward, it could go backward.”