INDONESIA ANNOUNCES LAUNCH OF JOINT MISSILE

C O N F I D E N T I A L SECTION 01 OF 02 JAKARTA 000288

SIPDIS

SIPDIS

DEPT FOR T, PM, EAP, EAP/RSP, EAP/MTS, EAP/MLS
NSC FOR E.PHU

E.O. 12958: DECL: 02/12/2018
TAGS: PREL PARM MASS MARR ID CH
SUBJECT: INDONESIA ANNOUNCES LAUNCH OF JOINT MISSILE
PRODUCTION WITH CHINA

REF: A. JAKARTA 0106

B. 07 JAKARTA 3439

Classified By: Pol/C Joseph Legend Novak, reasons 1.4(b+d).


1. (C) SUMMARY: The GOI has announced that joint production
of missiles with China has begun and will involve several
Indonesian state-owned firms. While cost and technology
transfer are the main considerations, the deal also
ostensibly reflects Indonesia's desire to avoid
over-dependence on Western suppliers. That said,
Sino-Indonesian defense cooperation has a long way to go
before it becomes a serious factor in Indonesia's defense
capabilities. END SUMMARY.


2. (SBU) GOI ENVOY'S REMARKS: The English-language Jakarta
Post reported on February 12 that Indonesia and China had
formally launched the joint production of military equipment
and weapons. Citing the Indonesian Ambassador to China,
retired Major General Sudradjat, the Post described a program
of "long-term cooperation" which would cover production of
military vehicles, tanks and missiles. Sudradjat was in
Jakarta and had just briefed President Yudhoyono on
Sino-Indonesian cooperation more generally, a Department of
Foreign Affairs contact confirmed.


3. (U) MISSILE PRODUCTION UNDER WAY: Sudradjat said the
program for missile production was already under way.
Chinese defense firms would collaborate with Indonesian
companies BPPT to produce missile launchers and B Pindad to
produce the missile's ammunition. BPPT is the state Agency
for the Assessment and Application of Technology, while PT
Pindad, located in Bandung in West Java, is the Indonesian
army's arms maker. Indonesian state shipbuilder PT PAL, in
Surabaya, East Java, might also be involved, according to
Sudradjat. The rest of the production would occur in China.
(Note: Mission called contacts at the Chinese Embassy to
check into the report further, but they were still out on
Lunar New Year break.)


4. (C) DRIVEN BY THIN BUDGET: Theo Sambuaga, Chair of
Commission I of the national legislature (DPR),which handles
foreign, defense and security affairs, welcomed the joint
production announcement. He said it addressed Indonesia's
limited defense budget and its need to replace antiquated
equipment. (Note: President Yudhoyono recently grounded
older defense equipment after a series of accidents caused
the deaths of Indonesian service personnel.) Sambuaga said
that, where possible, Indonesian production was preferable to
the purchase of foreign equipment, which was more expensive.
Sambuaga has told us before that the Indonesian military
needed to carefully economize like other governmental
sectors, to become leaner and more effective.


5. (C) LITTLE TNI INTEREST: Based on our soundings, there
is little interest within the Indonesian defense forces for
Chinese-made or -engineered military equipment. Such
equipment is seen as a pale imitation of what is available
from the West. They note parenthetically that TNI
procurement officials also shun home production, which is
almost entirely state-owned, because such deals contain no
little brown envelopes, as is sometimes the case with foreign
purchases. Deals such as these with China, they say, are the
doing mainly of Indonesia's Defense Department (DEPHAN),
while the TNI would make different choices. The recent
Indonesian test firing of a Chinese C-802 anti-ship missile
failed to reach its target. An added attraction for DEPHAN
and Indonesia's defense industry is the transfer of
technology Indonesia stands to gain through joint production
deals.


6. (C) NOT A SURPRISE: The joint missile production
announcement is no surprise. The two countries have been
moving in this direction for the past three years, beginning
with the announcement of a "strategic partnership" in 2005.
That said, efforts have accelerated in recent months.
Defense Minister Sudarsono signed a defense-related agreement

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in Beijing last November (ref b) and hosted a visit by
Chinese Defense Minister Cao in January, in part to lay the
basis for joint arms production (ref a).


7. (C) Defense expert Ninok Leksono at Kompas newspaper told
Regional Security Unit Chief the missile deal was a
deliberate and long-range policy meant to balance Indonesian
military procurement among a variety of sources, so as not to
become overly dependent on Western supplies. We note that
Defense Minister Sudarsono has made this point in public
statements as well as in meetings with U.S. officials. That
said, Indonesian defense cooperation with China is just
getting off the ground. The Indonesian desire to avoid
over-dependence on any one supplier should limit the
cooperation with China as well.

HEFFERN