IMPACTS OF THE INDONESIAN GOVERNMENT POLICY IN THE FIELD OF DEFENSE INDUSTRY ON THE OPERATIONS AND SUPPLY CHAIN STRATEGIES OF PT. PAL AND PT DAYA RADAR UTAMA IN PRODUCING THE INDONESIAN NAVY’S MAIN WEAPON SYSTEM

NAVY’S MAIN WEAPON SYSTEMS

Syaiful Anwar 1

Indonesia Defense University (morolawe7760@yahoo.com.au)

Abstract - Two Indonesian companies, namely PT PAL and PT. Daya Radar Utama (DRU), have been given the tasks by the Government of Indonesia to produce several warships for the Indonesian Navy. The Government has also issued a policy in the field of defense industry, which among others regulates matters related to the procurement of the TNI’s main weapon systems. This research is intended to examine the impacts of the policy on the operations and supply chain strategies of PT PAL and PT DRU in producing warships. By using descriptive qualitative analysis method, the Researcher analyzed empirical data obtained in the field research supported by several theories, namely theory of strategy, theory of operations and supply chain strategy, theory of public policy, and theory of self- sufficient. From the analysis, there are several findings. The policies have given a certain level of positive impacts on the industries, such as: the improvement of cooperations among them, the improvement of manufacturing process due to the product’s standardization, the improvement of self-reliance level of the industries, and the capability improvement of the companies due to cooperation with foreign parties. However, the policies still give negative impacts to the companies, such as: the low level application of the supply chain management, low level use of the domestic materials and ship’s components, and the low level of fair competition among domestic defense industries.

Keywords: operation strategy, supply chain, warship, PT PAL, PT DRU, Navy, Government of Indonesia, defense industry policy.

Introduction

state, the territorial integrity of the

T Number 3/2002 on the State Defense, it is development of its defense force, the GoI

he Government of Indonesia (GoI) Unitary State of the Republic of Indonesia, continually develops its capacity

and the safety of the nation from threats to defend the state. In the Law

and disturbances. 2 In order to realize the

mentioned that the State Defense is all has determined the policy of building the efforts to defend the sovereignty of the

strength of the main component of the

1 Major General (Ret), Doctor in Human Resource Management, Lecturer of Indonesia Defense University. 2 Dephan RI, Buku Himpunan Perundang-undangan yang Terkait dengan Penyelenggaraan dan Pengelolaan

Pertahanan, (Jakarta: Biro Hukum Sekjen Dephan, 2007), p. 35.

Impacts of The Indonesian Government Policy in The Field of Defense … | Syaiful Anwar | 93

State Defense Force, or TNI. The policy is conducted in various ways, namely: (i) named the Minimum Essential Force

purchasing products from abroad; (ii) (MEF) of the Defense Main Component.

jointly producing with foreign industries; This MEF is defined as a minimum standard

(iii) producing based on technology of the TNI’s strength which is prepared as

transfer; and (iv)producing by several the main prerequisite and fundamental for

domestic shipping industries. 4 Although the effective implementation of the TNI's

the procurement of the navy’s main main tasks and functions in handling the

weapon systems is from domestic actual threats.

sources, but various parties still observe In line with the development of the

various problems that arise. The main TNI's strength, the GoI also develops

problems of the domestic defense continuously the capability of the

industries are the low level of demand supporting component, particularly the

from users, the lack of demand-side defense industry sector. The GoI has

sustainability, and the type diversity of established several principles in the

main weapon systems ordered. This, in fulfillment of the TNI’s main weapon

general, resulted in the low level of systems, which are mentioned in the Law

capacity of these companies in improving No. 16/2012 on the Defense Industry,

their ability, both in the development of namely: (i) the users must use equipment

human resources and in the conduct of which can be produced by the domestic

research and development. industries; and (ii) the procurement of

The operations and supply chain weapon systems from abroad can be

strategy of a company is a elaboration of carried out only if the domestic industries

the business strategy of the company have not been able to produce them. 3 concerned. The strategy is related to the

Various efforts have been made by preparation of broad policies and plans to the GoI to meet the needs of the

use the resources of the company and Indonesian Navy. Some of the fulfillment

must be integrated with corporate of weapon systems in the last period is

4 TNI AL, Alutsista Kebanggaan TNI Angkatan Laut Indonesia Nomor 16 Tahun 2012 tentang

3 Setneg RI , “Undang-Undang

Republik

dari Masa ke Masa, Info Historia, Vol , No 3. 2014. Industri Pertahanan ”, 2012. Downloaded from:

from http://www.setneg.go.id, on 23 January 2018.

Downloaded

http://www.tnial.mil.id/Portals, on 23 January 2017.

94 | Journal of Defense & State Defense | April 2018, Volume 8 Number 1 94 | Journal of Defense & State Defense | April 2018, Volume 8 Number 1

factors which become the subject of deep company's policy of producing equipment

discussion in this research and are made as ordered by the users or customers.

the research problem. Because of the The policies that will be important

important of the problem, the Researcher variables in the analysis are the Law No.

focused on how and how far the impacts 16/2012 on Defense Industry and the

of the government policies on the Minimum Essential Force (MEF) of the

operations and supply chain strategies of Defense Main Component. The policies

PT PAL and PT Daya Radar Utama (DRU). are government decisions that must be

From the explanation of the realized by all stakeholders. The policies

mentioned above, the will of course have profound effects on

problems

Researcher decides that the research the business strategy of the companies

formula is: "What are the Impacts of involved, and will further affect the

Government of Indonesia's Policies in the operations and the supply chain strategies

Field of Defense Industry on the of them. Some of the dimensions of the

Operations and Supply Chain Strategies of GoI policies to be implemented by the

PT PAL and PT Daya Radar Utama (DRU) in defense industry are: (i) cooperation

Producing the Indonesian Navy’s Main between the integrators and the suppliers

Weapon Systems?"

or vendors; (ii) the standard of production PT PAL is a company with the status in accordance with the operational

of State Owned Enterprise (SOE) while PT requirements of the users with the

DRU is a national private company. Both appropriate completion time on request;

companies are selected as the object of (iii) the use of domestic resources in the

this research because the two companies form of raw materials, materials,

are mandated as the lead integrator in the components, human resources, and

series of production of the Navy’s main research and development results; and

weapon systems. Based on the problem (iv) cooperation with foreign parties in the

formulation, the Researcher set four manufacture of certain types of ship.

research questions as follows:

5 F. R. Jacobs and Richard B. Chase, Manajemen Global Edition, (Jakarta: Salemba Empat, 2015), Operasi dan Rantai Pasokan, (Translated) 14 th p. 33.

Impacts of The Indonesian Government Policy in The Field of Defense … | Syaiful Anwar | 95

1. What are the impacts of GoI's argues that strategy is the art of policiesfor internal cooperation on the

disseminating and applying military units companies’operations and supply chain

in order to meet the targets of the policy. strategies?

Goals should be balanced with the number

2. What are the impacts of GoI’s of means available, and the number of policiesfor the output standardization

means used should be balanced with the on the companies’operations and 8 values and purposes of the goals.

supply chain strategies? US Army War College defines

3. What are the impacts of GoI’s policies strategy as a relationship between the for the use of domestic resources on

ends, ways, and means. It has also a the companies’operations and supply

definition that the art of strategy is the chain strategies?

intelligence in formulating, coordinating,

4. What are the impacts of GoI’s policies and applying the objective, the ways, and for cooperation with foreign parties on

the means (supporting resources) to the compa nies’operations and supply

enhance and defend the national chain strategies?

interests. 9 Meanwhile Art Lykke states that strategy = ends + ways + means,

Theoretical Framework

which if unbalanced is assumed will pose a

Theory of Strategy

big risk. 10

According to Clausewitz, strategy is the From some above opinions, it can be use of combat for the purpose of war. He

concluded that a strategy is a way used in further says that a strategist must set a

order to achieve the goals that have been goal for the overall operation of the war

defined by utilizing all available resources. that would be in accordance with the aims

All three elements, i.e. goals, means, and of the war. 6 While Antoine Henri Jomini

resources, must be set in a balanced way conveys that strategy is the art of making

to avoid the substantial risks posed by war on the map, and further applying it to

these imbalances.

the whole battlefield. 7 Basil H. Liddle Hart

6 J. B. Bartholomees, “Theory of War and

8 Ibid.

Strategy 9 ”, Volume 1, US Army War College Ibid, p. 15. Guide to National Security Issues. 13, 2012. 10 Ibid, p. 48-50.

7 Ibid, p.14.

96 | Journal of Defense & State Defense | April 2018, Volume 8 Number 1

Theory of Operations and Supply Chain

effectiveness of operations and the supply

Strategy

chain.

The objectives in the operations and operations and supply chain strategy

According to Jacobs and Chase 11 , an

the supply chain strategy are intended as relates to the preparation of policies and

what is to be achieved related to the broad plan to use the resources of a

product to be produced. There are several company and must be integrated with the

options that can be taken by a company, company's

namely (i) price leadership; (ii) produce according to Rusdiana, an operations

strategy.

Meanwhile,

different products in terms of quality; (iii) strategy is a derivative of corporate

produce products in a faster time; and (iv) strategy that detailing the overall strategy

a mixture of the three previously of the vision and mission of the company. 12 described options (trade-offs). 14 Sumayang argues that an operations

The second element of a strategy is strategy is a shadow or vision of the

the way to be selected to accomplish the operation function, which is the driving

defined mission or goal. Dilworth states force or determinant of direction for

that there are two choices of ways or decision-making. 13 manufacturing processes that can be

From the above various opinions, we selected by a company, namely: (i) job can see that the strategy they convey

shop manufacturing; and (ii) repetitive consists of several issues, namely: (i) a

manufacturing. 15 Meanwhile Rusdiana complete plan of operations and the

states that a company can choose one of supply chain; (ii) the plan is derived from

four production process designs, namely the company's strategy; (iii) the plan

(i) focus on the process; (ii) repetitive regarding matters relating to the use of

process; (iii) continuing process; and (iv) company’s resources; and (iv) the

mass customization. 16

objectives to be achieved by the From the above explanations, it can

be concluded that a company may choose

11 F. R. Jacobs and Richard B. Chase, op.cit, p. 33. 14 F. R. Jacobs and Richard B. Chase, op.cit, p. 34- 12 Rusdiana, Manajemen Operasi, (Bandung:

Pustaka Setia, 2014), p. 42. 15 J. B. Dilworth, Operations Management. 2 nd 13 L. Sumayang, Dasar-dasar Manajemen Produksi

Edition, (New York: McGraw-Hill, 1996), p. 52. dan Operasi, (Jakarta: Salemba Empat, 2003), p.

16 Rusdiana, op.cit, 74-8.

Impacts of The Indonesian Government Policy in The Field of Defense … | Syaiful Anwar | 97 Impacts of The Indonesian Government Policy in The Field of Defense … | Syaiful Anwar | 97

the risk factor where it can generally occur repetitive manufacturing; (iii) mass

due to a gap or a difference between the manufacturing; and (iv) continuous

objective to be achieved and the way to manufacturing.

accomplish the objective as well as the The third element of the strategy

available resources. Jacobs and Chase that needs to be discussed is the resources

argue that supply chain risk is the or means to be used in the production

possibility of interference that will affect process. Dilworth mentions that there are

the ability of a company to continue several resources to consider in

or services. 19 developing strategies, namely: (i) the

supplying

products

Burtonshaw-Gunnstates that the risks of relationship between the company and its

the company can be: (i) technical risk; (ii) suppliers; (ii) production facilities; (iii)

employment risk; (iii) political risks; (iv) quality of human resources; (iv)

social and geographical risks; (v) technology and equipment; and (v)

availability of resources, customs

procedures, import duties, embargoes; and Sureshmention that resources

information systems. 17 Meanwhile Kumar

and (vi) financial risk. 20 include: (i) men; (ii) materials; (iii)

From the above explanations, in the machines; (iv) information; and (v)

context of an operations and supply chain capital. 18 strategy, the risks involved are all possible

From these explanations, the unforeseeable barriers and disturbances resources or means used by a firm in the

that can stop or damage the production operations and supply chain strategy are

process. The risks may include: (i) as follows: (i) human resources; (ii)

technical risks; (ii) financial risk; (iii) risk of technology and machinery; (iii) production

raw material availability; (iv) the risk of facilities; (iv) information systems; (v)

human resource availability; and (v) the production costs; and (vi) raw materials.

risk of changing government policies.

17 Dilworth, J. B, op.cit, p. 53. 20 S. A. Burtonshaw-Gunn, Alat dan Teknik Analisis 18 S.A.

Manajemen, (Translated by Peni Rachmawati), Management,

Kumar and

Suresh,

Operations

(Jakarta: PT Indeks, 2011), p. 234. International, 2009), p.3. 19 F. R. Jacobs and Richard B. Chase, op.cit, p. 40-

1. 98 | Journal of Defense & State Defense | April 2018, Volume 8 Number 1

Theory of Self-reliance

to think and to act according to its own According to Johan Galtung, self-reliance

needs and capacity.

is a principle applied by a country in the economy or in areas that are sub-systems

Theory of Public Policy

of the economy. The basic rule of self- Harold Laswell and Abraham Kaplan reliance is to self-produce what is self-

provide the definition of public policy as a

program projected with certain goals, Godfrey defines self-reliance as the

need by using its own resources. 21 Paul C.

certain values, and certain practices as possession of a person toward a resource

well. 23 Meanwhile Thomas R. Dyestates that goes beyond his or her needs, and a

that public policy is everything the person's ability to acquire and hold that

government does, why they do it, and the resource. Ownership is the external

results that make a life together look output, something that depends on the

different. 24 Another expert, Riant person's internal ability. Self-reliance

Nugroho concludes that public policy is a contains two parts inherent in the ability,

decision made by the state as a strategy to namely the ability to think, and the ability

realize the objectives of the country

to act. 22 concerned. 25

From the above explanations, it can From the opinions we can see that

be summarized that self-reliance is ability public policy contains several elements, of a country to produce its own needs,

namely:(i) public policy is a formal using its own human resources, its own

document or practice of the state; (ii) economic resources, its own natural

public policy is intended to respond the resources, in order to obtain maximum

will of the public or the state; (iii) public gain or benefits from the activities, and

policy is made or done in order to lead to also to obtain maximum level of freedom

better conditions of society or country;

21 J. Galtung, “Towards A New Economics: On the 23 H. Laswell, and Abraham Kaplan, Power and Theory and Practice of Self-Relia nce”, in Paul

Society, (New Heaven: Yale University Press. Ekins (Ed), The Living Economy: A New

1970), p. 71.

Economics In The Making, (London: Routledge, 24 T. R. Dye, Understanding Public Policy, (New 1986), p. 100-3.

Jersey: Prentice Hall, 1995), p. 2. 22 P. C. Godfrey, More Than Money: Five Forms of

25 R. Nugroho, Public Policy, (Jakarta: Elex Media Capital to Create Wealth and Eliminate Poverty,

Komputindo, 2008), p. 55. (Standford: Standford University Press 2014), p. 23-9.

Impacts of The Indonesian Government Policy in The Field of Defense … | Syaiful Anwar | 99 Impacts of The Indonesian Government Policy in The Field of Defense … | Syaiful Anwar | 99

produces the expected effect or not. Such policy.

estimates do not yield definite answers The second issue of public policy is

but only a few possible answers that make policy analysis. According to Dunn, policy

sense. The basic purpose of impact analysis is an intellectual and practical

assessment is to estimate the "net effect" activity aimed at creating, critically

of an intervention. 27

appraising, and

By examining from the micro aspect, knowledge about the policy process. The

communicating

in this case the operations and supply procedures used in analyzing the policy

chain strategy aspect, the Researcher will are: (i) definition; (ii) prediction; (iii)

obtain an answer or can conclude about prescriptions; (iv) description; and (v)

the actual impacts of the policy. The Evaluation. 26 findings in this micro scope will ultimately

If we look at the above explanations, provide input to the macro aspect which is the assessment of the consequences or

the government policy in building the effects of a policy on something falls

capability of the defense industries. With within the scope of the policy analysis. The

reference to the above explanation, the object of this research to be carried out by

efforts to be taken by the Researcher are the Researcher is to examine the impacts

to compare the dimensions of the of the Indonesian government policies on

components (strategy, objectives, types the defense industries and the

of operations, resources, risks, and cost) development of the main defense

before and after the companies obtain component's strengths to the operations

jobs in manufacturing the NMWSs. and supply chain strategies of the defense industries, in particular the companies

Defense Industry Models or Practices in

involved in the manufacture of the navy’s

Some Countries

main weapon systems (NMWSs). Brazil develops its defense industry in The assessment of a policyimpact

order to relinquish its dependence from stated by Rossi and Freemanis intended to

foreign parties, as well as to gain foreign

26 Ibid, p. 131-2. 27 P.H. Rossi and H. Freeman, Evaluation: A Systematic Approach, 2 nd Edition, (California:

Sage, 1993), p. 215.

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BrahMos missile, the manufacture its marketable defense

producing

development of remote missiles, and the equipment at its regional level, namely:

Glonas satellite navigation system. India Super Tucano A-29 fighter, ASTROS II

also cooperates with Israelin the rocket launcher, EE-11 troop carrier, and

PHALCON project, and several types of light weapons. Its export products can

missile. 30

thrive as there is effective support from its

government. 28 The relations between the Government

China develops its defense industry

Policies on Defense Industries and the

in order to meet its military needs, and at

MEF with the Operations and Supply

the same time maintains the status of its

Chain Strategy

defense industry which has a certain The GoI's objectives in developing or degree of autonomy. It still maintains its

building the defense industries are: (i) independence in producing military

realizing a professional, effective, equipment. However, it also develops

efficient, integrated, and innovative cooperation with other countries, such as

defense industries; (ii) realizing self- with Pakistan in designing and producing

reliancein fulfilling the defense and jet combat aircraft JF-17. 29 security equipment; and (iii) improving the

India develops its defense industry in capability to producethe defense and order to meet its military needs. It has

security equipment. The defense industry succeeded in reducing dependence on

is also an integral part of the state defense overseas

system that embraces the people's developing, installing and producing its

defense system. Therefore in the law is re- own equipment. India cooperates with the

emphasized the function of the defense United States in the missile programs, and

industry, namely: (i) strengthening the ToT of F-16 as well as F/A-18 fighter aircraft.

defense

industry;

(ii) developing

28 P. Yusgiantoro, Ekonomi Pertahanan: Teori dan Modern Defense Industry, (California: Praeger Praktik, (Jakarta: Gramedia Pustaka Utama,

Security International, 2009), p. 218-21. 2014), p. 202-5.

30 T. D. Hoyt, Military Industry and Regional 29 J. D. K. Boutin, “Arms and Autonomy: The Defense Policy: India, Iraq, and Israel, (New York: Limits

Routledge, 2007), p. 61-6. Transforma tion”, in Bitzinger, R. A. (Ed), The

of China’s

Defense-Industrial

Impacts of The Indonesian Government Policy in The Field of Defense … | Syaiful Anwar | 101 Impacts of The Indonesian Government Policy in The Field of Defense … | Syaiful Anwar | 101

standardization;(iii) self-reliance; and (v) the state defense and security systems;

outward cooperation. While the second and (v) building and improving human

variable is the operations and supply chain resources capability.

strategy of the studied companies which While the GoI’s policy on the MEF

contains four sub variables, namely: Main Component concerning the

objective, way, resources, and risk. development of the sea power includes

Analysis of impact of a policy is the provisions on the procurement of

conducted by comparing the variables and warships for the Navy. Prior to entering

sub variables of the research object, with into a weapon system purchase contract,

a focus on searching conditions before the organization specifies the standard,

and after the implementation of policy. amount, and time of completion of each

Thus, the analysis of this study will focus ship ordered. The number of ships ordered

on the impact of policy variables in general is aligned to the program plan and budget

on the operations and supply chain that has been made. While the delivery

strategy, and specifically on the impact of time of the ship is adjusted to the plan.

sub variables from the first variable to the In this study, the main variable is the

sub variables of the second variable. The government policy, and the sub variables

relationship of these factors is illustrated are the factors mentioned in the policy,

in Figure 1.

Figure 1. Relation between Variables and Sub variables

102 | Journal of Defense & State Defense | April 2018, Volume 8 Number 1

Previous Relevant Researches

Martono Putra in 2014 with the title of There are three different relevant

“Civil Military Integration in the Field of researches that will be mentioned in this

Technology and Industry in Defense section. The first study is a study of Ivan

Industry of Indonesia. ”This research Yulivan in 2016 under the title “Improving

analyzes the civilians and military Corporate

integration ontechnology and industry Development of Competitive Strategies

Performance

Through

sector in the Indonesian defenseindustry. Driven by Corporate Resources and Market Attractiveness: A Study in

Framework

Indonesia’s Defense Industries Post Law Framework of hypotheses of this research No. 16 Year 2012 about Defense Industry. ”

is illustrated in Figure 2, where the This study analyzes the phenomenon of

Researcher explaines the sequence of defense-based strategic industries that

effort in addressing the research problem currently have not been able to

to the expected output of this study. In thoroughly anticipate the existing

order to build a strong, resilient and high business opportunities, not ready to

deterrence power, the GoI has made compete intently because of limited

efforts to strengthen the state's sea resources, and still difficult to access the

defense component, among others by market due to limited human resource

increasing the capabilities and strengths capabilities and supporting facilities. The

of the navy, in particular the addition of second research is the study of Radhana

the number of the navy’s warships. At the Dwi Wibowo in 2016 with the title “The

same time, the GoI also concerns to build Problems in Realizing Defense Industry

the capability of the defense industry in Self-Reliance. ” This study analyzes three

order to have better capabilities, with issues that arise in realizing the self-

increasing production capacity, as well as reliance of the defense industry, namely:

self-reliance and independence from the defense industry actors, the continuity

foreign parties. To realize these two of ordering equipment for defense and

objectives, the GoI issued a policy in the security equipment, and the ability of the

form of Law No. 16/2012 on Defense defense

Industry and the MEF Development Plan specifications desired by the TNI. The third

of the Defense Main Component. study is the research of Andyawan

Impacts of The Indonesian Government Policy in The Field of Defense … | Syaiful Anwar | 103

Figure 2. Framework of Hypotheses

In responding to these policies, the in general. However, in order to obtain a defense industry prepares a plan or

more detailed picture, then the strategy business strategy that can accommodate

variables need to be spelled out into what the government requests. There are

several sub variables.

several companies appointed by the GoI as Based on the determination of the the main integrator of the manufacture of

relationsamong variables and among sub- the navy’s main weapon systems

variables, then the Researcher can (NMWSs), two of them are PT PAL and PT

determine the information and data DRU. Both companies are made by the

needed for the analysis of this research. Researcher as the research objects. Both

Based on the results of the collection of companies

information and data, then the Researcher production process of the NMWSs have

will conduct the analysis supported by developed operations and supply chain

several theories related to the policy’s strategies in accordance with the type of

impact and also the operations and supply products made. Policy impact analysis is

chain strategy. The output of this analysis carried out on the variables of the

is the impact of GoI ’s policies on the operations and the supply chain strategy

operations and supply chain strategies of

104 | Journal of Defense & State Defense | April 2018, Volume 8 Number 1 104 | Journal of Defense & State Defense | April 2018, Volume 8 Number 1

tests; and (vii) making a conclusion. The primary data source in this study

Research Method

is the competent informants (subjects), Researcher uses qualitative research

who relate to the settings of the problems methodology with case study method.

studied. 32 Therefore, the Researcher will According to Robert K. Yin, case study is

collect data from statements and words an empirical inquiry that investigates

from officials of PT PAL and PT DRU phenomena in the real-life context; when

related to the production process of the the boundaries between phenomena and

NMWSs, the MoD officials and the context are not visibly apparent; and

Indonesian Navy officials. where multi-source evidence is utilized. 31 The field studywas conducted by the The Researcher considers that the

Researcher by visiting PT PAL and PT DRU, characteristics of this research are very

the MoD, and the Navy Headquarters. This suitable with the characteristics of the

field study was conducted in order to carry method of case studies stated by Robert

out direct interviews with informants and K. Yin.Based on the explanation of the

observe the production process of the method used, the approach of this

NMWSs being undertaken by both research will consist of several steps,

companies. The Researcher conducts namely: (i) conducting analysis to find and

structured interviews by applying the establish subvariabel of the government

techniques defined by Moeleong, in which policy variable; (ii) analyzing the second

the Researcher will establish his own variable of the operations and supply

problems and questions to be asked, in chainstrategy; (iii) illustrating the relations

order to find answers to the hypotheses between the variables and between sub

been established. 33 The variables; (iv) collectingprimary and

that have

questions have been strictly conceived by secondary data; (v) conducting a

making an interview protocol. qualitative analysis using the case study

31 R. K. Yin, Studi Kasus: Desain dan Metode, 33 L. Moleong, Metode Penelitian Kualitatif. (Translated by M. Djauzi Mudzakir), (Jakarta:

(Bandung: Remaja Raja Grafindo Persada, 2009), p. 18.

Revision

Edition,

Rosdakarya, 2007), p. 138. 32 Iskandar, Metodologi Penelitian Kualitatif,

(Jakarta: Gaung Persada, 2009), p.113.

Impacts of The Indonesian Government Policy in The Field of Defense … | Syaiful Anwar | 105

The qualitative data analysis Headquarters both in Jakarta. In those according to Bogdan and Biklen is an

places, interviews were conducted by the effort done by working with data,

Researcher to the informants. While the organizing data, sorting

survey that directly observes the manageable units, synthesizing it,

it into

production process of the NMWSs that searching and finding patterns, finding

being produced was done in locations what is important and what is learned, and

where both companies have shipyards, deciding what can be delivered to

namely in Jakarta, Surabaya, and others. 34 Data processing as described

Lampung. The time of the research and above, according to Prastowo is similar to

the writing of research report were Miles and Huberman's model which

conducted in the period of July until divides the activities into three processes:

October 2017.

(i) data reduction process (ii) data display process; and (iii) conclusion and

Research

Result

and Discussion

verification process. 35 Research Result

The validation of data was PT PAL is a State-Owned Enterprise (SOE), conducted with the intention to test the

located in the northern area of Surabaya, validity of data, where in this study the

East Java, Indonesia. The main business Researcher used triangulation technique.

activities of this company include: (i) According to Moleong, triangulation is a

producing warships and commercial technique of checking the validity of data

vessels; (ii) providing ship repair and that utilizes something else outside the

maintenance services; and (iii) providing data for the purposes of checking or as a

engineering with certain comparison of that data. 36 specifications based on client needs. The research was conducted in two

general

Currently the company is developing companies, namely PT PAL and PT DRU

products that will be marketed located respectively in Surabaya and

domestically and abroad, especially Jakarta, and the MoD and the Navy

warships and state ships according to

34 Ibid, p. 248. 36 L. Moleong, op.cit, p. 178. 35 A. Prastowo, Metode Penelitian Kualitatif dalam

Perspektif Rancangan Penelitian, (Yogyakarta: Ar-Ruzz Media, 2012), p. 241-50.

106 | Journal of Defense & State Defense | April 2018, Volume 8 Number 1 106 | Journal of Defense & State Defense | April 2018, Volume 8 Number 1

subsequently ordered by the GoI. and Fishery, the Ministry of Energy and

PT PAL and PT DRU in producing Mineral Resources, the Ministry of

warships orders, cooperate with the Finance, and overseas institutions.

domestic defense industries. This Products that have been mastered by this

cooperation is conducted for the company include: 125 meter Landing

fulfillment of the main components, Platform Dock (LPD), 60 meter Missile

component, and raw Fast Ship, 57 meter Fast Patrol Boat (FPB

supporting

materia ls, as stated by the PT PAL’s Head 57), 1200 GT Survey Ship, Fast Patrol Ship

of Procurement Division: up to 38 meters, Tugboat and Anchor

"Our strategy in procurement is that Handling Tug, Fishing Vessels up to 60

we have 3 philosophies, namely on quality, GRT, and Ferry and Passenger Ships up to

on budget and on schedule. First on 500 pax.

quality, we fit the design and adjust the PT DRU is a private company

new specifications followed on budget established in 1972 at Tanjung Priok Port,

and on schedule."

Jakarta. The company started business as In terms of the employment of

a general trading and services company, human resources, PT PAL and PT DRU also including shipbuilding business. Until now

cooperate with partners who are used to at the age of nearly 50 years, the company

working with them. Some technical has completed the construction of

workers are taken from outside the hundreds of ships in various types and

companies, and also some works are sizes such as Roll on Roll off (RORO) vessel

carried out by the sub-contractors who are type, cargo ship, tanker, navy’s patrol

already partners of these companies. 37 The boat, fast patrol boat, tug boat, and speed

company's strategy in dealing with the boat.Landing Ship Tank (LST) is a product

subvariabel of risk is conducted in its own built in order to strengthen the strength of

way according to the type of risk faced by the fleet of the Navy. The company has

the companies. In relation to financial risk, accomplished one unit of this type of

PT PAL has a strategy of cooperating with vessel by mid 2015, and is now producing

third parties who can assist with funding. 38

37 Interview with PT PAL’s Head of Production 38 Interview with PT PAL's Head of Finance Division, 2017. Division, 2017.

Impacts of The Indonesian Government Policy in The Field of Defense … | Syaiful Anwar | 107

However, PT DRU in this context, does not chain strategies of PT PAL and PT DRU cooperate with other parties, they

toward subvariabel 'inward cooperation' manage the company’s cash flow as best

have been implemented, seen from the as possible so that it can run the

sub- variable ‘objective’ that use 'mix

strategy' or trade-offs; the sub-variable may be faced is the risk of availability of

production smoothly. 39 Another risk that

the Job-shop raw materials for production. PT PAL and

manufacturing strategy; the sub-variable PT DRU have cooperated with raw

of ‘resource’that use contract strategies material suppliers. PT PAL uses long-term

for HR and raw materials; and use contract contracts in cooperation with the

strategies to deal with sub- variable ‘risks’. domestic industries, while PT DRU uses

As a company that produces combat vendors’ database in an effort to address

ships, PT PAL always prioritizes the raw material risks. 40 fulfillment of operational requirements of

the main weapon system. The company is strategies of PT PAL, namely Priority,

There are five

procurement

committed to use raw materials in line Frame Agreement, Contract Priority

with the standards of warship safety. It is System, Stock Level, and the Ministry

also stated by the PT PAL’s Head of Project Standard. 41 Meanwhile, PT DRU

Procurement Division that in every overcomes the availability of raw

procurement, it always adjusts the quality materials by fostering good trade

and standard of material in accordance relations with its suppliers. This was

with the request of the users and the conveyed by the DRU’s Head of Business

standardization of the MoD. PT DRU also Development

undertakes shipbuilding in accordance relationships with suppliers, who are

with the requests from the ship users. For members of the marine community, so

example, for the navy’s ships, because of they know the names of the vendors and

the functions concerned, some parts of the types of goods they have.

the ship’s body need to be thickened. 42 From the above description, it can be

For the production of combat ships, concluded that the operations and supply

there is a constraint for PT PAL, which is

39 Interview with DRU’s Head of Business 41 Interview with PT PAL’s Head of Procurement Development, 2017. Division, 2017.

40 Interview with PT PAL’s Head of Procurement 42 Interview with PT DRU’s Head of Business Division, 2017. Development, 2017.

108 | Journal of Defense & State Defense | April 2018, Volume 8 Number 1 108 | Journal of Defense & State Defense | April 2018, Volume 8 Number 1

owned companies in terms of material cooperation with Daewoo Company of

compliance. PT DRU orders cranes and South Korea, it used a block system where

anchors to PT Pindad, and orders steel the ship construction was divided into

plates to PT Krakatau Steel. In PT DRU, all small parts, therefore it took a longer time

ship production processes are conducted for the completion. In contrast to PT DRU,

in certain level of self-reliance using the the navy’s ship building process is in

Indonesian employees. However, for accordance with the delivery time

certain specialists, they use foreign required by the Navy, therefore PT DRU

workers with a short-term contract. The obtains someother ship orders.

use of human resources from within the In their production activities, the

country is also required by the Indonesian defense industries shall prioritize the use

Navy during the production of LSTs, where of domestic raw materials, materials, and

it is not allowed to use foreign employees. components, including human resources

the context of foreign and the national R & D results. In this case

In

procurement, there will be cooperation PT PAL and PT DRU have used raw

between the domestic defense industries materials and components from inside the

with foreign companies in the form of joint country. The steel for ship platform is

production. Opportunities for cooperation supplied by PT Krakatau Steel. While other

with foreign parties have been taken by PT components, such as engines, and cranes,

PAL and PT DRU by purchasing certain are supplied by PT Pindad, and casting is

components that can not be produced by supplied by PT Barata Indonesia. Other

domestic industries. PT PAL has supporting products such as doors, pipes,

cooperated several times with partners steel furniture, anti-fire curtains on boats

from abroad such as Damen, a company are supplied by various domestic

from Netherlands and Daewoo, a companies that have become partners of

company from South Korea. This PT PAL. 43 cooperation opportunity is utilized to

The DRU’s Head of Business improve the ability of PT PAL in producing Development also states the same

warships.

43 Interview with PT PAL’s Head of Procurement Division, 2017.

Impacts of The Indonesian Government Policy in The Field of Defense … | Syaiful Anwar | 109

The GoI's policies, especially the Law management, the success of government No. 16/2012 on Defense Industry and the

policy implementation can be seen from MEF Main Component are implemented

how SOEs are able to act as lead with the supervision from the MoD as the

integrators, and are capable to foster the regulator in procurement of TNI’s main

second and third tiers of the defense weapon systems. The essence of the

industries. 44

policy is that the fulfillment of main Other forms of oversight of the weapon systems can be carried out by

defense industry policy were stated by implementing two strategies. For main

Major General (Ret) Jan Pieter Ate. For the weapon

equipment procurement manufactured in the country, it is

be military

programs, the oversight is conducted by mandatory for the Indonesian users to

the MoD’s Inspector General, the TNI’s procure and purchase them, while foreign

Inspector General and the State Finance procurement through import can only be

Oversight Agency. Meanwhile, the conducted if the domestic industries have

oversight for the implementation of the not been able to produce such main

defense industry policies is conducted by weapon systems.

the MoD. The supervision to PT PAL and PT The Director of Domestic Industry

DRU is carried out by the Directorate of Technology of MoD, First Marshal Gita

Domestic Defense Industry of MoD, either Amperiawan

directly or through a verification and supervision of the implementation of

monitoring program, or inviting the defense industry policy in general can be

industries to attend various meetings seen from how the progress of

conducted by the MoD. 45 government priority programs.As long as

As the regulator, the GoI’s role is to the priority programs are well underway,

encourage the defense industries to it means that the defense industry is

become lead integrators. The industries developed within the policy corridor.

must be able to determine strategies to While the next supervision is how the

achieve profit for the companies. implementation of off-set rule. In terms of

However, the government also supports supply

fairly all industrial development works,

44 Interview with First Marshal Gita Amperiawan, 45 Interview with MG (Ret) Jan Pieter Ate, 2017. 2017.

110 | Journal of Defense & State Defense | April 2018, Volume 8 Number 1 110 | Journal of Defense & State Defense | April 2018, Volume 8 Number 1

industries, the status of the products is still hours are already paid the government, it

in the engineering phase, which means is expected that SOEs can make profit. 46 they still need to be tested first in various

The advantage possessed by the operational fields. Another obstacle domestic defense industries is that they

perceived by the Navy against the ability are geographically close to the users. For

of the domestic defense industry is the example the Navy’s Eastern Fleet is close

lack of maintenance capability. Not all to PT PAL and the private shipyards in

types of maintenance can be carried out Lamongan, while the Navy Western Fleet

domestically, for example for gas turbines. is close to Tanjung Priok Port. This is an

In addition, the combat vessels that are advantage over imported producers when

not in accordance with the technical there are technical problems, it will take a

specification of the Navy has also been long time to bring in technicians to deal

experienced by the Navy, which is at the with disruptions. Regarding the product

time of construction of KCR 40. The completion, stated by MG Ate that the

company could not install the Combat weakness

of domestic industries, Management System (CMS) desired by especially SOEs, is delivery time. Another

the navy on the ship, because between thing is after-sales service, which should

them cannot be fittedtechnically.

be paid attention by the manufacturers. Furthermore, the ship did not meet the An example of delay in delivery

navy’s operational requirements, because experienced by the Navy is the production

there were stiil several weaknesses, such of LPDs that are two years behind

as: ship speed that still lower than schedule. 47 expected, CMS that did not fit with the

Another issue that the Navy ship space, and spare space in the engine complains about is that the products of

room that was not sufficient for the domestic industries are still in the

operators movements. 48 development phase. It is mentioned by the

MG (Ret) Jan Pieter Ate also states Navy’s Head of Material Division that if the

that the reluctance of TNI in using

46 Interview with First Marshal Gita Amperiawan, 48 Interview with Navy’s Head of Material Division, 2017. 2017.

47 Interview with MG (Ret) Pieter Ate, 2017.

Impacts of The Indonesian Government Policy in The Field of Defense … | Syaiful Anwar | 111 Impacts of The Indonesian Government Policy in The Field of Defense … | Syaiful Anwar | 111

country. Generally, those who obtain a mastering technology, because their

contract from the GoI in the procurement products are not used optimally by the

of the NMWSs are SOEs or domestic TNI. Therefore, TNI is expected to be ready

private companies, which in this case to use domestic products in order to build

implicitly put them as lead integrators. the Indonesia's domestic defense

The government's policy mandates industries. In the event of a war, all

that both SOEs and private companies logistics and overseas procurement lines

which awarded contracts or mandates as will be inhibited by the opposing party,

lead integrators are required to conduct while the domestic defense industry is not

supply chain management. The supply developing, so that Indonesia will find

chain is defined as a group of mutually difficulties to survive.

participating

interconnected companies seeking the added value of a

and

Discussion

modified input stream from their sources The Law Number 16/2012 on Defense

to become the finished product or services Industry arranges several issues, one of

demanded by the end customers to which them is regarding the actors of the

destined. 49 From the production

they

are

understanding of the supply chain, there equipment. The policy regulates coverage

are several companies involved as of actors from the defense industries,

suppliers, suppliers of suppliers, OEMs including: (i) major equipment industries;

(Original Equipment Manufacturer), (ii) main component and/or supporting

distributors, and customers. Therefore, in industries; (iii) component and/or

the context of this research, PT. PAL and supporting industries (supplies); and (iv)

PT. DRU as OEMs or lead integrators, need the raw material industries. The policy

to implement supply chain management. mandates that the conduct of defense

The practice and activities of supply chain industry in producing defense and security