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What’s Next for Indonesia’s Shipbuilding Ambitions in 2018?
A picture of one of the two Indonesia-built ships handed over to the Philippines.

What’s Next for Indonesia’s Shipbuilding Ambitions in 2018?

 
 

Earlier this week, the head of Indonesia’s state-owned shipbuilder PT PAL Budiman Saleh charted out some ambitious goals for the firm for 2018, which were widely publicized in local media outlets. Though his comments reflect Indonesia’s stated desire to advance the country’s shipbuilding ambitions over the next few years, they also belie the significant challenges that need to be addressed if these ambitions are to be realized.

As I have noted previously, Indonesian President Joko “Jokowi” Widodo has signaled early on since taking office in November 2014 his desire to boost the country’s domestic shipbuilding industry as part of a broader effort to strengthen the country’s maritime capabilities as well as to revolutionize its domestic defense industry (See: “An Indonesian Defense Revolution Under Jokowi?”).

PT PAL has been a major part of this effort, which includes not just servicing the Indonesian military but also targeting export opportunities in Southeast Asia and beyond. But, as I have noted previously, despite some initial successes, PT PAL has faced a range of problems that are tied to broader challenges for Indonesia’s shipbuilding industry, from a comparatively low level of expertise and technology to corruption to low production capacity. Indeed, last year, PT PAL was rocked by bribery allegations linked to the sale of Strategic Sealift Vessels (SSVs) to the Philippines, which was a significant development as it constituted the inaugural export of locally-built warships (See: “Indonesia: A Shipbuilding ‘Magnet’ from ASEAN to Africa?”).

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On Monday, following consultations with Vice President Jusuf Kalla in Jakarta, Saleh said that PT PAL was hoping for a significant growth in revenue for 2018. He told state-run news agency Antara that after a “difficult time” in 2016, with revenues last year doubling to 1.2 trillion rupiah (around $96 million), he hoped that in 2018 revenue could be doubled once again to 2.4 trillion rupiah.

Part of this revenue for PT PAL, Saleh said, will be from work done for the Indonesian military. In 2018, that is expected to include the construction for the Indonesian Navy of a submarine, landing platform docks, and four additional KCR-60 guided missile fast attack craft following the three that it had already produced, in addition to other routine repair and maintenance requests.

But Saleh also pointed out that a big part of this projected increase in revenue could be exports. As he has been saying for the past few months, Saleh said that given that Indonesia has already had some success with deliveries to Southeast Asian states such as the Philippines and Malaysia, in 2018 it would look to other emerging markets, including African countries such as Senegal, Congo, Burkina Faso, and Guinea Bissau.

Though he was not specific in terms of numbers of new vessels that could be in the pipeline, his comments that were reported in local media outlets suggested that at least seven would be set for 2018 – four domestic, three for export to Malaysia and Thailand, along with an unspecified number to African countries. He also said that the value of new contracts being targeted for 2018 was around 4 trillion rupiah, which, when added to the carry over contracts from 2017 of 3 trillion rupiah, would add up to around 7 trillion rupiah.

Though these targets sound promising and would constitute gains for Indonesia’s shipbuilding ambitions in 2018, the key question is whether or not they can be achieved. Indonesian officials, including Kalla and Saleh, have spoken about the significant challenges the country faces as well as a whole series of steps that would be needed to realize its true potential, including investing in skilled manpower, lowering prices, and improving quality and delivery times. As we hear more about new prospects in this realm, it is important to remember these old issues that continue to remain.

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