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Indonesia defense expenditure to reach $9.7 billion by 2028

Asia Pacific Defense report (APDR) - October 16, 2023

With a total defence budget of $8.8 billion in 2023, Indonesia presently ranks as the second-highest military spender after Singapore in the Southeast Asia region. Driven by ongoing defence modernisation initiatives, the country's defence expenditure is forecast to reach $9.7 billion by 2028, according to GlobalData, a data and analytics company.

GlobalData's latest report, "Indonesia Defense Market Size and Trends, Budget Allocation, Regulations, Key Acquisitions, Competitive Landscape and Forecast, 2023-28," reveals that the country's cumulative defence spending is anticipated to touch $46.6 billion from 2024-28, out of which the acquisition budget share is estimated to be approximately 28.4%, amounting to $13.3 billion. The defense acquisition expenditure is expected to register a compound annual growth rate (CAGR) of 1.5% over 2024-28 and reach $2.7 billion by 2028.

Abhijit Apsingikar, Aerospace & Defense Analyst at GlobalData, comments: "Indonesia's defence budget is majorly driven by the need to mitigate natural disasters and undertake military modernisation initiatives. The country is looking to expand its defence posture as well as augment its indigenous defence manufacturing industrial complex through military modernisation initiatives. Furthermore, increasing fundamentalism has aggravated the threat of terrorism, which coupled with online radicalism, has compelled Indonesia to heavily invest in cybersecurity and counter-terrorism apparatus."

Over the period 2018-23, Indonesia sanctioned several defense deals to modernize its air force fleet, including the acquisition of 42 Dassault Rafale as well as 24 F-15ID multirole strike fighters. The country also invested in modernizing its air lift capability and signed a contract to acquire two units of the A-400M Atlas transport aircraft.

Apsingikar continues: "Although the focus on expanding the domestic defence industry slightly curtails market opportunities for international manufacturers and exporting countries, Indonesia's burgeoning economy, coupled with its expanding defence modernisation needs, offers several opportunities for mutual cooperation."

Indonesia's current cooperation with South Korea over the KF-21 Boramae project offers a template for future engagement with the country. Owing to the need to secure a vast geographic area spread across more than 17,000 individual islands, Indonesia is anticipated to continue investing heavily in defence, especially through joint developments and production of defence equipment. This, in turn, offers an effective option for foreign defense OEMs to enter the Indonesian defence market.

Apsingikar concludes: "Although the Indonesian defence budget is relatively small, the country's robust economy assures a stable outlook for defence expenditure over the next five years. The country has already signed a deal to acquire 24 units of Sikorsky S-70M Black Hawk helicopters over next few years. Indonesia is also anticipated to emulate Philippines and close a deal for the acquisition of the Brahmos missile system. These acquisitions indicate the country's intentions to continue modernising its military fleet, despite budgetary limitations."

Source: https://asiapacificdefencereporter.com/indonesia-defense-expenditure-to-reach-9-7-billion-by-2028