Arms exports (1/4): Indonesia will she be the new seam of France?

Michel Cabirol | 10/14/2014, 7:03 - 2493 words

The Tribune offers a series of new industrial land conquest of French armaments. This is the case of Indonesia, which has expressed interest in the Rafale and where all industrial comeback after a long eclipse.

Indonesia is again in the strategies of all the French armament groups. It must be said that the Indonesian growth could not go unnoticed (6.2% in 2012 and 5.3% in 2013), although the pace of growth slowed in the second quarter of 2014 to its lowest level in five years, 5.12% yoy. Growth will, however, continue in the short term: 5.6% in 2014, 2015 and 2016 and, according to the OECD, the growth rate of Indonesia between 2014 and 2018 is expected to reach 6%. This would make the archipelago's most dynamic major ASEAN countries (Association of Asian Nations Southeast) economy.

"We have not seized in France the importance and potential of Indonesia", yet says one expert member countries of the G20. A wrong because in ten years, the Indonesian economy has gained 10 places in the global ranking of the most developed countries, from the 27th to 16th. In 2030, it should be in the top 10 world economies (7th), according to McKinsey. "Doing business in Indonesia is something you earn, and you have to win the confidence of Indonesians," he recalls.

A giant unknown in France

"How is it that we do not have that 150 French companies in Indonesia, the fourth most populous country in the world, the 16th world economy, growing very fast, where we had 450 there fifteen years" asks the Senator Senator UMP du Val-de-Marne, Christian Cambon, co-author of "La France face the emergence of Southeast Asia." This is far too little. For comparison, the number of South Korean companies operating in Indonesia amounted to 1,200.

"One of our first weakness is our ignorance of Indonesia, political model, its culture, its projects and its financing channels," says the report. However, to boost diplomatic relations at a high level between the two countries, co-authors of the report Hollande pushing to make a state visit to Indonesia. Because no French president did is moved from ... François Mitterrand. In August 2013, at the headquarters of ASEAN, Foreign Minister, Laurent Fabius, regretted that "relations between the two countries are not yet living up to their potential." Trade relations rely heavily on purchases of Airbus or ATR.

However, the potential of seduction exercised on traffic Jarkarta groups such as Airbus Group, Dassault Aviation, Thales, Safran, DCNS, Nexter, Renault Trucks Defense and the other begins to take effect. Especially as defense budgets in Europe are in steady decline despite a global reset, particularly in Asia. These groups rely more and more on these famous growth emerging markets, including Indonesia which wants to modernize the equipment of his army. Thus, Thales has been present for nearly forty years, estimated that more than 500 million business opportunities (civilian and military) in the next five years, we are assured to La Tribune. According to our information, the Directorate General of Armaments (DGA) has also retried in Jakarta attached arms, who arrived this summer.

Strengthen the defense a priority for Indonesia

Rebuild national defense is the first of nine high on the agenda of the new Indonesian President, Joko Widodo, strengthening national defense to ensure the territorial integrity of the archipelago and establishing itself as a regional maritime power. Hence the desire to increase the defense budget to 1.5% of GDP by 2019 to reach 20 billion (against 7 billion now). Because Indonesia has a real need to modernize its army. "They need to reform their defense industry, said it does it in Paris. Thought must be given to medium term" in this country.

The very long arms embargo of the United States in 1991 as a result of serious violence against the indépendandistes Timor, made a strong Indonesian military. For this particular embargo grounded its F-16 and A-4 Skyhawk, which constitute nearly 80% of its fleet of combat. An American military embargo ended in 2005 In addition, London also imposed an embargo on spare parts for hunters Hawk of the Indonesian Air Force. Indonesia is facing Russia, South Korea and China to procure fighter jets and training. With Seoul, Jakarta has even signed a partnership for the joint development of the KFX / IFX, a fighter of the fifth generation.

Hence today the will of Jakarta to diversify its arms purchases in Europe, Russia, China, the United States but also in countries like Brazil emergens, which sold 16 aircraft including training A -29 Super Tucano. "They have deliberately sharing policy to not be dependent on a region or a country," says a businessman who works in Indonesia.

Skills Development

As often in developing countries, Jakarta wants to reduce defense imports by developing local industrial capacity. To win contracts, says the managing director in charge of international development Thales Pascale Sourisse, "Indonesia must develop local skills with stalled partners, including in services. This is a fundamental dimension."

This is the case already Airbus Helicopters (AH), present in Indonesia since 1976 with the licensed construction of 123 BO 105 helicopters and helicopter manufacturer has signed an industrial partnership since 2008 with the national aircraft manufacturer PT Dirgantara Indonesia / Indonesian Aerospace (IAe) to create an assembly line. It manufactures on behalf of Marignane fuselages helicopters EC725 and EC225 transportation for an amount of EUR 43 million. IAe, who works for Airbus (A380, A350) also produces military transport aircraft Airbus Group, CN-235 and C-295 under license.

Finally, on the site of Subang (Indonesia) Roxel, Eurenco and PT Dahana signed last Friday a cooperation agreement in the presence of Indonesian Defence Ministers and Industry and the French authorities. This Agreement is the establishment on this site in a production plant for the following products: loads EDB and composites for rocket motors (Roxel products) and spherical powders rounds of small and medium caliber (Eurenco products).

Tricolor groups can leverage the strategic partnership between France and Indonesia signed in 2011 the two countries pledged to promote "closer" cooperation in the field of defense and security, "for to establish a dialogue overall defense (...) including regular consultations between defense ministers, deputy ministers, heads of staff and other senior civil and military officials, strategic Cooperation long-term with an emphasis on capacity building, training and exchange of officials responsible for defense matters, defense industry and the operations of peacekeeping United Nations. "

New Eldorado or new mirage for France?

Indonesia is she a new vein for the tricolor arms industry? The market is promising for French groups. In 2013, Divine surprise she came fourth among industrial customers tricolor defense (€ 480 million) countries, certainly far from the first Saudi Arabia ($ 1.9 billion). The return of France in Indonesia is real as evidenced by the gradual rise of traffic arms exports in recent years: 2.9 million euros in 2009, 5.9 million in 2010, 96.3 million in 2011, 151.7 million in 2012.

In 2013, the missile manufacturer MBDA, which is well established in the country thanks to the Dutch shipyard Damen, notably in Jakarta sold for over 200 million euros a weapons-aircraft system at very short range, Mistral 3. Indonesia also bought last year 37 self-propelled artillery systems, Caesar Nexter for 115 million euros. Finally, the small shipyard in Les Sables d'Olonne OCEA sold for an amount of approximately € 80 million support two new buildings of 60 meters, the type of OSV 190 MKII.

And 2014?

In 2014, Thales has already sold to the Department of Defense Indonesian system integrated air defense ForceShield and Starstreak missiles for a total of over 130 million. A contract that will benefit very much the sites' e group. This year, he also won a contract with the Indonesian Navy, via the Dutch shipyard Damen. Thales will provide mission system for both ships PKR class. Either its management system Tacticos Dutch combat, surveillance radar SMART-S Mk2, the fire control system STRI 1.2 mk2 EO, sonar Kingklip, data binding Link-Y and naval communication systems and navigation. Finally, the French group won a civil contract for the construction of a satellite telecoms Telkom-3S.

Airbus Defence Space years (ADS) will in turn supply the army of the Indonesian air systems forefront to ensure identification of aircraft surveillance of the air space, the MSSR 2000 I. This system which will improve the monitoring and air traffic and air defense over the more than 15,000 islands of Indonesia.

Rafale and submarines medium to long term

According to reliable sources, Dassault Aviation has been approached by Jakarta, which has expressed interest in the Rafale. The tricolor manufacturer presented its unit in Indonesia and is now awaiting a request for information (RFI) from Indonesia, which is announced and possibly engaging an RFP (RFP). Dassault Aviation is very attentive to what is happening in Indonesia, says it internally. However, the sources contacted have expressed some reluctance to commit Dassault Aviation in Indonesia Sweden (Gripen) are very active. Anyway, Jakarta, who had bought in late 2011 six Su-30MK2 fighters to Russia would buy 16 fighter jets for the equipment of a squadron, we are assured in La Tribune, and have posted a budget of around $ 1.5 billion. But that was before the presidential election this summer.

DCNS, which opened two years ago about an office in Jakarta, continues meanwhile several projects in Indonesia trying to build a relationship with viable local partners. The maritime group aims to retrofit a submarine South Korean Type U209 in partnership with PT PAL Indonesia. But mostly he discusses with the shipyard to sign a comprehensive agreement of transfer of technology (ToT) program on the submarine Andrasta created for countries wanting to have a submarine force that specializes in coastal combat. DCNS would be willing to give Indonesia the right to export this submarine in ASEAN.

Finally, Airbus Helicopters had the intention to sign orders for a new batch of new Caracal Indonesia who has already bought six and 16 AS565 Panther in the Indonesian Navy. In the field artillery, Nexter continues to offer its equipment to Indonesia. The public group is also promoting his new 6x6 armored vehicle low-cost, Titus. For its part, Thales also proposes the Hawkei a protected 4x4 light 7 tons (Thales Australia). Finally, Indonesia wants to buy patrol.

Endemic corruption

A major French industrial reluctance to engage in Indonesia remains corruption. Particularly in public services where it is common for agents require a pot of wine to individuals to companies in exchange for services that should be provided free. "There is a real awareness of politicians, ministers went to jail, says one expert from Indonesia. Can sell without corruption." Cases of high-level corruption processed by the Commission for Corruption Eradication (KPK), involving politicians and justice are indeed high profile, while corruption at lower levels is more widespread and more difficult to counter.

KPK has announced in early September that the Energy Minister was accused of extortion and abuse of power. Jero Wacik is believed to have inflated the budget of his ministry of nearly 10 billion rupees (646,000 euros) for illegal activities. It is the third government minister involved in a corruption case. In July, the former sports minister was sentenced to four years in prison after being convicted of corruption in a case related to the construction of a stadium. In May, the religious affairs minister has resigned after an investigation by the KPK on suspicion of embezzling funds intended for pilgrims traveling to Mecca.

Furthermore, a female governor at the head of one of the most powerful political dynasties Indonesia was sentenced Monday to four years in prison for paying a bribe, kickbacks to the former President of the Constitutional Court in an electoral dispute. The latter he was sentenced in July to life in prison for accepting bribes, kickbacks in order to influence decisions on electoral disputes.

A new president ready to eradicate corruption

In its latest filing, the NGO Transparency International Indonesia ranked 114th most corrupt country out of 177 nations. Crowned with a victory ... confirmed by the judiciary to take office, the new president Joko Widodo aims to overhaul the first Asian Southeast economy after a meteoric rise in politics. A priority is to restore confidence in the Indonesian political system by eradicating corruption. "Indonesians are very, very cynical about politics. They think it is very corrupt. We need to restore faith" in politics, he told AFP.

An anti-corruption smartphone application offering graphics and games was launched in Indonesia to educate the public and state officials about the risks of accepting bribes, kickbacks in one of the most corrupt countries in the world .