Journal of Economics, Management and Trade

27(7): 42-52, 2021; Article no.JEMT.74305

ISSN: 2456-9216
(Past name: British Journal of Economics, Management & Trade, Past ISSN: 2278-098X)

Implementation of Trade-off, Local Component, and

Offset Policy Pt. Pindad (Persero) in Supporting the
Defense Economy
Savira Ayu Arsita1*, Guntur Eko Saputro2 and Aris Sarjito3
1DefenseManagement, Defense University Indonesia, Indonesia.
2Defense
Economics, Defense University Indonesia, Indonesia.
3Lecture of Defense Management, Defense University Indonesia, Indonesia.

Authors’ contributions

This work was carried out in collaboration among all authors. All authors read and approved the final
manuscript.

Article Information

DOI: 10.9734/JEMT/2021/v27i730355
Editor(s):
(1) Dr. Olusegun Felix Ayadi, Texas Southern University, USA.
Reviewers:
(1) Shang-Su Wu, Nanyang Technological University, Singapore.
(2) Dalvinder Singh Grewal, Desh Bhagat University, India.
Complete Peer review History: https://www.sdiarticle4.com/review-history/74305

Received 08 July 2021

Accepted 18 September 2021
Original Research Article
Published 21 September 2021

ABSTRACT

The fundamental problems in economic development in Indonesia are the low level of welfare,
unsustainable economic growth, and the inadequate development process of economic sectors.
Defense Economics is a branch of science that applies economics to national defense issues.
Defense economics as a multidisciplinary study discusses resource allocation, income distribution,
economic growth, and political stability as applied to topics related to defense. One of the efforts of
the Indonesian government in increasing the capability of the defense industry is to implement a
trade-off, local component, and offset policy also known as IDKLO. The Indonesian government in
carrying out this mechanism has formed a cooperation with various industrial bodies, locally and
internationally such as PT. Pindad (Persero). In carrying out its duties, PT. Pindad (Persero)
experienced several obstacles for instance the limitations on the company's high technology
mastery in building defense equipment, the availability of funding, and inadequate human resources
regarding technical and academic matters. The purpose of this study was to find out how the
implementation of the IDKLO policy was carried out by PT. Pindad (Persero) in developing the
defense industry. The data collection process is carried out through a literature review method on
_____________________________________________________________________________________________________

*Corresponding author: E-mail: [email protected];

 Arsita et al.; JEMT, 27(7): 42-52, 2021; Article no.JEMT.74305

scientific articles, laws and regulations, as well as PT Pindad's (Persero) annual report related to the
IDKLO for the procurement of defense equipment. The results show that the implementation of PT
Pindad's (Persero) (IDKLO) is divided into 3 main activities, namely the Ministry of Defense contract
with the principal, the principal contract with the defense industry, and the completion of the local
component and offsets (KLO) contract. Several variables to support the implementation of PT
Pindad’s (Persero) IDKLO are the ability to communicate, its resources, the bureaucracy, and the
disposition which could improve the capability of the defense industry of the Republic of Indonesia.

Keywords: Policy implementation; defense industry; IDKLO Mechanism; PT. Pindad (Persero).

1. INTRODUCTION defense industry to compete in the international

environment [2].
Indonesia’s strategic territory does not only
provide geopolitical advantages but also invites The non-military defense layer is composed of
actual and potential threats. Based on Ministry of security functions for public safety which includes
Defense Regulation KEP/104/M/I/2020 actual the handling of natural disasters, and other
threats include military threats, non-military humanitarian operations in many aspects such
threats, and hybrid threats. Both of the threats as socio-culture, economics, defense
harm the safety of the entire nation which has to psychology. It is related to the thinking of state
be considered as the central concern for the defense awareness and technological
defense sector to make decisions regarding the development. National defense in facing non-
national defense strategy. The development of a military threats places ministries and institutions
national defense strategy must be aligned with outside the field of defense as the main
the global security environment. The national elements. Here it demands the main role of the
defense of Indonesia also develops a strategic ministries and institutions involved in supporting
plan based on the empirical needs of the defense non-military defense, especially in the economic
system regarding minimum essential force (MEF) field [3].
fulfillment. It shows how the vision and mission of
national development in sectoral defense align The effort to develop Indonesia's military
with inherent needs amidst changes in the industrial-strength certainly focuses on
strategic environment (Luthfiyanah, Jupriyanto, & increasing the capability of the defense industry.
Adjo, 2017) [1]. MEF is designed accordant with A national industry consisting of state-owned and
capability-based planning paradigm which private-owned enterprises which form either
formed in the process of dealing with dynamic independently or in groups, determined by the
and massive threats, whether carried out by state government to partially or wholly produce
or non-state actors, to maintain the welfare and defense and security equipment, and
nation peace. MEF’s target is developing maintenance services to fulfill national strategic
Indonesian National Armed Forces (TNI) main interests (Law no. 16 of 2012 article 1 paragraph
weapon system equipment by analyzing types 1). The defense industry is held with the aim of
and product need assessment, prepare a budget, realizing a professional, effective, efficient,
and planning procurement. integrated, and innovative defense industry, as
well as creating independence in the fulfillment of
Based on Law no. 3 of 2002 article 1 paragraph defense and security equipment, increasing the
2, the state defense system is a universal ability to produce equipment and maintenance
defense system that involves all citizens, services that will be used in order to build a
territories, and other national resources, and is reliable defense and security forces (Law no. 16
prepared early by the government and carried of 2012 article 3). An adequate defense and
out in a total, integrated, directed, and continue security equipment procurement management is
to enforce state sovereignty, territorial integrity, necessary to fulfill the national mission. To
and the safety of the entire nation from all increase the capability of the defense industry,
threats. The three main foundations of the Indonesian government implements trade-off,
Indonesia’s defense system to maintain national local component, and offset policy mechanism. It
security are human resources (both military and aims to increase the independence and
non-military sector), the existence of an capability of the defense industry which is
independent defense industry supported by the embodied in various industry bodies that have
latest technology, and the capability of the

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been built by the government namely PT. Pindad (Army Industrial Command), but returned to
(Persero). Pindad on April 28, 1976. On February 11, 1983,
in accordance with Indonesian Government
PT. Pindad (Persero) focuses on production lines Regulation No. 4 of 1983, Pindad officially
in various fields that continue to be developed, became a state-owned enterprise [5].
such as weapons, munitions, special vehicles,
and explosives. The majority of PT. Pindad Compared with other companies such as IPTN
(Persero) contract acquisitions are in the and PT. PAL, PT. Pindad (Persero) is working on
munitions and special vehicle fields (Indriyanto, a variety of products as part of the defense offset
2017) [4]. mechanism. In this modern era, PT. Pindad
(Persero) is one of the central companies in the
PT. Pindad (Persero) was founded in 1808 under development of the Indonesian defense industry
the name Conctructie Winkel (CW) by the Dutch [6].
Governor General William Herman Deandels in
Surabaya. Deandels also established a large- Despite its duties to develop the defense
caliber ammunition workshop, namely the industry, PT. Pindad (Persero) has several
Projectiel Fabriek (PF) and the Chemical obstacles. These constraints arise with the
Laboratory in Semarang. In 1850, the Dutch limitations on the mastery of technology in
government set up a workshop for the building main equipment and defense system
manufacture, repair of ammunition, and which happens due to several problems. First,
explosives for the navy named Pyrotechnische PT. Pindad (Persero) has limitations in
Werkplaats (PW) in Surabaya [5]. ownership of advanced technology. They have
outdated technology which affects the
On January 1, 1851, the name CW was changed production’s capacity. Second, regarding the
to Artillerie Constructie Winkel (ACW). A decade availability of funding which still relies on bank
later, ACW and PW merged to become ACW. In financing. The number of operational costs
mid 1914, the ACW factory moved to Bandung causes a problem because the materials,
due to World War I. In 1932, the PW factory components, and production facilities depend on
moved to Bandung and merged with ACW. Four imports. Third, inadequate human resources
installations namely ACW, PF, Chemistry especially in technical and research affect the
laboratory, and Geweemarkerschool were company’s ability to develop. Fourth, the existing
merged under Artillerie Inrichtingen (AI). Japan's formal business process or system support in PT
position in Indonesia only tends to change the Pindad (Persero) is no longer adequate to handle
name or term of the Factory. However, on current business conditions [4].
October 9, 1945, Laskar Pemua Pejuang
succeeded in seizing ACW and naming it the Nonetheless, PT. Pindad (Persero) has great
Pabrik Senjata Kiaracondong (PSK). When the potential in developing the defense industry to
Dutch returned its power, PSK was divided into build an independent defense industry, especially
two factories. The first factory consisted of ACW, in the procurement of Indonesia’s defense and
PF, and PW which were merged into Leger security equipment and main weapon system
Produktie Bedrijven (LPB). The second factory, equipment. Regarding IDKLO policy
Geweemarkerschool, was converted into Central implementation, PT. Pindad (Persero) has
Reparatie Werkplaats (CRW) [5]. become the main subject in providing various
weapons, equipment, and various other defense
After the Dutch recognized Indonesian needs for the advancement of the Indonesian
sovereignty on 27 December 1949, the Dutch defense industry. As a part of the strategic
handed over the assets of LPB to the Indonesian defense industry, PT. Pindad (Persero) can fulfill
government. Then the Indonesian government nation security needs and affect the national
changed the name of the LPB to the Pabrik economy. Security stability, strategic industrial
Senjata Mesiu (PSM) which was managed by the growth, and macroeconomic stability
Indonesian National Army (TNI-AD) [5]. simultaneously influence economic growth
(Saputro) [7]. Partially, macroeconomic stability
On December 1, 1958, PSM changed its name to is more influenced by the significant positive
the Pabrik Alat Peralatan Angkatan Darat (Pabal effect of strategic industry growth than security
AD). In 1962, Pabal AD was changed to stability. Increasing the growth of strategic
Perindustrian TNI Angkatan Darat (Pindad). In industries supported by the role of more effective
1972, Pindad had changed its name to Kopindad security stability, by taking into account the

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linkages between the two, has the ability to Eugene Bardach conceptually presented the
improve macroeconomic stability [8]. PT. Pindad policy implementation process as a socio-political
(Persero) started the export activity in 2006 when phenomenon [14] or commonly called the
it started exporting assault rifles to Cambodia political game as well as the first era of policy
and Nigeria, Malaysia and Australia for riot implementation studies [12].
control, ammunition shipments to South Korea,
Singapore, Timor Leste, and the Philippines. The Implementation is considered the main form and
ambitious plan to distribute Medium Tank a very decisive stage in the policy process. This
products is expected to enter the international view is corroborated by the statement that
market in 2023. Export activities are a form of without effective implementation, policy makers’
commitment to present a state-owner enterprise decisions will not be successfully implemented.
globally that brings in foreign exchange and There are four important variables that must be
multiplier economic effects, such as empowering considered to see the various factors on the
local suppliers and absorbing labor [9]. failure and success of public policy
implementation, namely: communication factors,
2. THEORETICAL FRAMEWORK resources, bureaucratic structure, and attitude or
disposition of implementers [14].
2.1 Policy Implementation
2.2 The Trade-Off, Local Component and
The concept of implementation is increasingly Offset Policy Implementation
being discussed along with many experts who
contribute ideas about policy implementation as Many international countries see the offset policy
one of the stages of the policy process. Some as a way to increase the country's ability to build
authors place the policy implementation stage in a strong and independent defense industry which
a different position, but in principle, every public could raise the nation’s profile in international
policy is always followed up with policy political contests. Offset policy can help the
implementation [10]. Policy implementation is an national defense independence because offset
activity that is seen after the issuance of a valid requires transfer of technology and reciprocity, to
direction from a policy which includes efforts to joint production with major manufacturers of
manage inputs to produce outputs for the world defense and security equipment. Another
community. The implementation process begins reason to choose the defense offset mechanism
when the goals and objectives have been set, is that the production capacity of the weapon-
the program’s activity has been structured, and producing country is excessive, so the pattern
the funds are ready and distributed to achieve that is built to sell its production is the transfer of
the targets. According to Van Meter and Van technology in the form of mutually beneficial
Horn, the process of policy implementation which cooperation between countries or weapon-
is directed at the locus and focus (change) is an producing companies and weapon-consuming
action taken by the government and private countries.
organizations, both individually and in groups
intended to achieve goals [11]. Referring to the description above, the definition
of defense offset is basically a reciprocal
Policy implementation as a concept can be purchase or investment process that is agreed
divided into two parts, namely implementation upon by the manufacturer or supplier of weapons
seen in terms of its similarity to the function of in return for an agreement to purchase military
intent, output and outcome [12]. The goods and services. There are two types of
implementation formula is a function consisting of offset, namely direct offset and indirect offset [5].
the intent and purpose, the result as a product
and effect. Furthermore, implementation is a Direct offsets are defined as goods or services
functional equation of policy, formator, that are directly related to the military equipment
implementer, initiator, and time. Van Meter and being sold. Direct offset consists of 3 forms. First,
Van Horn further explained that the role of policy the purchase of a production license which
implementation is to build a network that allows means that the arms manufacturing industry
public policy objectives to be realized through the agrees to transfer its technology to the buying
activities of government agencies involving country. Second, joint production (co-production).
various interested parties. Implementation is a Buyers and sellers not only seek to procure
general process of administrative action that can military goods, but also sellers together with
be investigated at a particular program level [13]. buyers seek to make goods and services of

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military equipment, and market them together by b. realizing the independence of the domestic
observing the various agreements of the defense industry;
contract. Third, joint development (co- c. realizing the domestic defense industry as
development). In joint development, armament- a mode for development and transfer of
producing countries with buying countries seek to technology as well as national economic
develop various defense equipment that has growth;
been produced by the selling country, with the d. realizing mastery of technology that can be
hope that a better product will be obtained than used to improve the capabilities of the
the previous product. The advantage of co- defense industry and national industry;
development is that the buying country actively e. build competitiveness and encourage the
adopts and transfers various weapons participation of the national defense
technologies directly or indirectly so that the industry in the global industrial chain; and
increase in human resource capabilities in the f. increase the absorption of manpower and
buying country can be measured gradually and the development of human resources that
properly [5]. have strategic functions.

Indirect offset is defined as goods and services 2.3 Determinants of Successful

that are not directly related to purchases of Implementation According to Edward
military products but are attached as an III
agreement in the process of buying and selling
military and defense equipment. There are at According to Edward, there are four factors that
least four types of indirect offsets. First, barter, a also influence the execution of policy
process of buying and selling by two countries or implementation. These factors are in the form of
producers and consumers of weapons and communication factors, implementation
accompanied by an agreement that the seller of resources, bureaucratic structure, and attitude or
the defense equipment is willing to pay for the disposition of implementers [15].
non-military products of the buying country with
nominally equivalent to the price of defense Communication Factor: The first requirement
equipment. for effective implementation is communication as
a process of delivering messages from
Second, counter purchase, in which weapons communicators to communicants. In the context
suppliers agree to buy non-military products or of policy implementation, the communication in
find buyers for these non-military products with question is about information from the policy
an agreed nominal value of the price of weapons itself. Some of the important dimensions of
supplied. Third, counter-investment, in which communication include the transmission
weapons suppliers agree to be involved or find a dimension, the clarity dimension, and the
third party willing to invest directly in the buyer's consistency dimension.
country with a certain value from the buying and Resource Factor: Resources refers to capital in
selling process. The form of return on investment the procurement of policies that include human
can be in the form of the establishment of resources, budgetary resources, as well as
factories, transfer of non-military technology, and equipment resources and authority such as
so on. Fourth, buyback, the process is similar to human resources, budget resources, equipment
return on investment, the only difference is that resources, and authority resources.
weapons suppliers agree to buy back or find a
third party to buy military products that sell them Disposition: Disposition shows the willingness
for a certain period of time. of policy actors to achieve policy goals.
Implementers not only have knowledge of what
Minister of Defense Rule No. 74 of 2014 will be done in implementing policies, but also
concerning the Countertrade Mechanism in the need serious will. Disposition in policy
Procurement of Defense and Security Equipment implementation is also influenced by the
from Abroad explains that the objectives of appointment of a bureaucracy that should
procuring defense and security equipment from choose dedicated people and incentives from
abroad through the mechanism of trade-off, local policy implementers.
component, and offset policy are:
Bureaucratic structure: The bureaucratic
a. creating the independence of the national structure shows the efficiency of policy
defense and security equipment; implementation that departs from the division of

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authority and relationships between using the main equipment and weapon systems
organizational units. SOPs or operationalization of domestic production. The law also encourages
standards and fragmentation, aka the distribution the transfer and development of technology as
of responsibilities, are important, especially in well as funding in the form of offsets and trade
relation to internal developments in time offsets for products of defense and security
management, resources, and the work equipment imported from abroad. PT. Pindad
organization mechanism itself. Harmonization of (Persero) is similar to other strategic Indonesian
relationships within the organization becomes companies running the offset mechanism in
important. several stages, namely: Pre-Implementation,
Implementation, and Post-Implementation.
3. METHODOLOGY
The pre-implementation stage consists of five
This research was carried out through a literature activities, namely local content and/or offset
review. Snyder explained that through the (KLO) requirements, determination of KLO
literature review methodology we can get an activities, determination of multipliers,
explanation in the process of investigating the communication between KLO stakeholders, and
influence or relationship between two or more determination of KLO values. In order for KLO to
specific or widespread variables. A literature be applied, the procurement of main equipment
review can be used in the researcher's goal to and weapon systems is a procurement from
obtain an explanation of the issue or research abroad and there is an analysis of the
problem formulation. A literature review with the applicability of the KLO.
case study is the main methodology of research
on the process of implementing trade-off, local The implementation stage is divided into 3 main
component, and offset policy (IDKLO) by PT. activities, namely the Ministry of Defense
Pindad (Persero). The author carried out this contract with the principal, the principal contract
research by doing an in-depth reading of various with the defense industry, and the completion of
writings about the IDKLO implementation the KLO contract. The post-implementation stage
process and also various publications regarding is the last stage and is the expected long-term
IDKLO activities carried out by PT. Pindad effect in the offset procurement process. In terms
(Persero) in the development of the Indonesian of technology, defense offsets are expected to
defense industry. Through this methodology, the create new products, increase knowledge and
authos able to establish relationship between expertise, improve methods, facilities, tools,
various factors involved in implementation of certification, and so on [2].
various processes and has explained the issue if
implementation of these factors in supporting the 4.2 Factors Influencing IDKLO
Indonesian Defense economy. Implementation PT. Pindad (Persero)

4. DISCUSSION There are four important variables that must be

considered to see the various factors on the
4.1 IDKLO Implementation by PT. Pindad failure and success of policy implementation,
(Persero) namely: communication factors, implementation
resources, bureaucratic structure, and attitude or
Initially, trade-off, local component, and offset disposition of implementers [14].
policy (IDKLO) has been running since the
1960s, but has begun to experience significant Communication factor: The important key in
development and progress through PT. Pindad communication consists of the transition
(Persero), IPTN and PT. PAL in cooperation with dimension which shows that the message is also
weapons producing countries and strategic conveyed to other parties outside the interested
industries in the 1970s [5]. The offset policy parties, then the clarity dimension which has
implemented by PT. Pindad (Persero) is closely implications for the meaning of the message so
related to the development of defense that it can be conveyed and carried out
technology. IDKLO Policy by PT. Pindad is one effectively, and the consistency dimension which
form of effort to develop the independence of avoids confusing information.
Indonesia's defense.
PT. Pindad (Persero) can be seen from its ability
Law No. 16 of 2012 concerning the Defense to collaborate with its partners. Several forms of
Industry Explains the interests and obligations of cooperation carried out by PT. Pindad (Persero)

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regarding cooperation on defense offset

mechanisms. One of the important stages is the maintenance
of defense equipment, but unfortunately in
According to the Bisnis news page [16], the form Indonesia, the maintenance of weapons system
of communication shown by the government was equipment with technological requirements is an
the Deputy Minister of Defense M. Herindra obstacle in the field of procurement. Another big
asked PT. Pindad (Persero) to develop products obstacle is the realization of concrete efforts in
so that the defense industry can compete with technology transfer so that defense equipment
products from abroad. Parties involved in cannot be used optimally. This shows that
encouraging this sector have an important role in technology-driven resources are important in the
the global market, so there needs to be further defense industry [17].
communication in forming regulations related to
the production of the defense industry. The According to the Bisnis news page [16], the
government also provides protection for business Ministry of Industry noted that PT. Pindad’s
expansion and increased production capacity of (Persero) Defense and Security Equipment
the defense industry. The Ministry of Industry's (Alpalhankam) products that meet the Domestic
encouragement to optimize countertrade, local Component Level (TKDN) certification are light
content and/or offset (IDKLO) policies for the weapons such as machine guns of 5.56-7.62 mm
development of upstream industry capabilities in caliber that use 87.71-91.12% local components.
supplying the needs of the defense industry can Other light weapons are 7.62 mm-388 inches
support PT. Pindad (Persero) in developing an caliber sniper rifles, 38 mm caliber anti-riot rifles,
independent defense industry. The and 60-81 mm caliber mortars. The production of
communication factor is also related to other MV2 4x4 tactical vehicles is expected to
factors, including the bureaucratic factor. penetrate the ASEAN defense industry market as
well as to meet the needs of modern operations.
According to Detik news page, similar order also This shows how resources can determine the
came from the Deputy Minister of Defense offset implementation.
(2019) namely Saktu Wahyu Trenggono. He
encourages the cooperation of PT Pindad and PT. Pindad (Persero) plans the readiness of
Partica (pembuat kendaraan tempur) from human resources who excel in developing
Ukraine to become a serious production to technology to create innovation and respond to
compete globally as a part of the Indonesia's global market opportunities. The basis for HR
President Vision in building independent defense planning is based on Article 29 of Law no. 16 of
equipment. 2021. Referring to Article 48 of Law no. 16 of
2012, PT Pindad (Persero) must be committed
Resource factor: The independence of the and consistent in investing in technology.
defense industry begins with an offset policy as a According to Kompas news, the recruitment of
form of countertrade, which is shown by one of human resource of PT. Pindad (Persero) is
the capabilities of resources. The resources carried out by registering a BUMN (state-owner
referred to in the implementation of countertrade, enterprise) test which is usually announced
local content and/or offset (IDKLO) PT. Pindad through the official website. The four formations
(Persero) is staff, information, authority, and of the job vacancies are security, operator,
facilities. drafter, and driver with a minimum education of
Vocational High School graduates[18]
PT. Pindad (Persero) requires the development
of its products to adapt to the operational needs Disposition factor: Indonesia basically needs
of the Indonesian National Army (TNI-AD) with the government's commitment to fund the
the latest technology. The development of development of the defense industry. The offset
increasingly advanced technology encourages mechanism and the development of defense
PT. Pindad (Persero) to stand as an independent technology encourage the independence of the
National Defense Industry through an offset defense industry. The attitude of the implementer
policy. The embodiment of the technology that is important in supporting the implementation
development of PT. Pindad (Persero) cannot be of offsets is commitment. The disposition factor
separated from its fundamental resources, shows the embodiment of commitment because
namely human resources (HR) that are adaptive it relates to the compliance of the implementers
and have in-depth research on the development in implementing the policies that have been set.
of defense technology [17]. Disposition is the willingness, desire, and

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tendency of policy actors to carry out policies possible. PT. Pindad (Persero) has a role in the
seriously. Disposition in policy implementation priority of modernization of Main Equipment and
depends on the factors of bureaucratic Weapons Systems which is carried out by
appointments and incentives. empowering the State-owned Corporation of The
Strategic Industries (BUMNIS) as the first step
Companies, including those in the defense towards the independence of defense equipment
industry, are increasingly facing the Techno- which is in line with the MEF fulfillment plan. To
Business Environment in the future. The digital support this, PT. Pindad (Persero) has a
era encourages the defense industry to also bureaucratic structure consisting of directors,
develop in terms of technology in order to be directors and committees, to the ranks of staff,
competitive and superior in the business each of which has duties and responsibilities in
environment. The embodiment in terms of accordance with their portion.
technological development appears in
technological convergence. This shows that The bureaucratic structure at PT. Pindad
there is an effort to combine traditional (Persero) can be arranged to support the findings
technologies with new ones that can open up of research and development results which
other opportunities for convergence should be followed up to the production stage
development. The Defense Industry in Indonesia even though it requires large funds. This is
in the field of technology includes the design related to import cooperation in the Defense
process, materials, equipment and machinery, Industry sector, which is usually an option
testing and maintenance, building design, and because it is cheaper but can cause
information systems [19]. dependence. Imported defense equipment does
not necessarily meet the needs of users in
The technology developed is technology that can Indonesia because the country that
contribute profits to the company. Based on the manufactures the defense equipment has a
main priority strategy for technology leadership different geographical location from Indonesia.
from the Ministry of SOEs for the Defense Thus, it encourages the bureaucracy in PT.
Industry Cluster in the Defense Cluster Pindad (Persero) ranging from military officials,
Masterplan 2020, PT. Pindad (Persero) as one of industry experts, to defense technology experts
the Defense Industry Clusters is committed to to work together in order to build high-tech and
developing and institutionalizing independent defense equipment through the
technology/digital capabilities on a general scale, implementation of offset policies.
creating value from big data, artificial intelligence,
and supporting Indonesia to be at the forefront of As the embodiment of the bureaucracy,
strategic technology areas [19]. institutions can support the development of
defense equipment with the support of a strong
PT. Pindad (Persero) in the government's priority commitment from the government. One form of
program manages the APC Medium Tank, institutional cooperation as well as the
Recovery Medium Tank, and the R-Han 122B embodiment of the bureaucratic structure in PT.
Rocket as a form of technological convergence. Pindad (Persero) is the result of a meeting with
PT. Pindad (Persero) involved PT Len Industri, KKIP (Komite Kebijakan Industri Pertahanan or
PT Inti, and PT Inuki, PT Dirgantara Indonesia, Defence Industry Policy Committee).
PT Dahana, and LAPAN. Collaborative efforts
drive cost strategies and process technology According to the official website of PT. Pindad
changes so that they can become investment (Persero) (2021) [19], the Director of Technology
targets. The form of technology leadership and and Development of PT. Pindad (Persero)
technology patenting strategies are needed to received a visit from the Head of the KKIP
make decisions based on leadership endurance Headquarters, TNI Admiral (Ret.) Darwanto, and
factors, the advantages of first-actors, and other KKIP officials at the Pindad Headquarters,
disadvantages as first-actors [19]. Bandung. The form of the visit can be a meeting
to facilitate bureaucracy as well as
Bureaucratic structure factor: The communication, for example related to studying
bureaucratic structure factor is related to the national program activities on Medium Tanks and
division of labor, authority, and responsibility, Munitions products. The two products will be
which will affect the achievement of policy used as a policy reference for the development
objectives. To make it happen, the policies that of the defense industry. KKIP's visit is a form of
have been set must be implemented as well as

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follow-up related to the development of the Caesar 155 cannon is the result of a
defense industry and policy implementation. collaboration between PT. Pindad (Persero) with
Nexter System France. The CAESAR cannon
The meeting that connects the bureaucracy as includes the Armed GS (Self-Movement) cannon
well as a form of stakeholders carried out by and can operate in a wide range of terrain. Since
discussion becomes important in PT. Pindad’s 2015, this cannon has been operationalized in
(Persero) development of the defense industry. Yonarmed 9/2/1 Kostrad Purwakarta and
All bureaucracies need a similar paradigm which Yonarmed 12/1/2 Kostrad units in Ngawi [20-21].
manifested in their vision to aligned themselves
with the goals of national economic development Comparison of CAESAR in international realms
such as growing a trade industry. It shows the as a self-propelled howitzer, for example, to
collective commitment to build the national those produced by the French army namely the
economy together within every stakeholder. CAESAR 6x6 since 2008. The major asset of
CAESAR is the mobility which can be airlifted
The legal umbrella is also important to set and easily deployed to any operations. The
regulations related to the PT. Pindad (Persero) CAESAR is available in two versions, a 6-wheel
with KKIP. drive version (6x6) and an 8-wheel drive version
(8x8). The latter addresses the demand for a
4.3 The role of PT. Pindad (Persero) in heavier armament system with a longer range in
Improving the Defense Industry some countries [22].

Through the defense offset mechanism, PT. With a weight of about 18 tons, the CAESAR
Pindad (Persero) cooperates with foreign cannon is capable of changing positions rapidly.
industries in the acquisition of technology. Even This cannon is capable to set in 51 seconds and
so, Muradi explained that PT. Pindad (Persero) unloading in 36 seconds, moving at speeds of up
initially became an Indonesian strategic company to 80 km/h on flat terrain and has a cruising
that carried out production cooperation as part of range in all terrains (off road) of up to 600 km
the least defense offset, compared to IPTN and without refueling fuel. Furthermore, this cannon
PT. PAL [5]. can pass through water fields with a depth of up
to 1.2 M. The CAESAR cannon's firing capability
While the offset mechanism is also carried out by reaches more than 40 KM with a firing speed of 6
PT. Pindad (Persero) outside of defense, such as rounds per minute.
the purchase of a generator license from
Siemens, Germany. In 2004, PT. Pindad Policy Implementation through IDKLO by PT.
(Persero) also cooperates with Hyundai Motor to Pindad (Persero) provides supplies of Indonesian
develop Armored Vehicles in the form of joint equipment and weapons. Furthermore, the
production [5]. Even so, PT. Pindad (Persero) IDKLO policy has strengthened the Indonesian
continuously develops itself as a defense defense industry.
industry that is ready to support the task of
increasing the independence of the Indonesian 5. CONCLUSION
defense system. This is realized by the ability of
PT. Pindad (Persero) which is capable of The conclusion from the results of this study
producing at least 80 units of armored vehicles indicates that there are several factors that
per year. influence PT. Pindad’s (Persero) mechanism of
IDKLO in carrying out the growth and
Apart from that, PT. Pindad became the lead development of the Indonesian Defense Industry.
integrator in collaboration with PT. Lundin Invest, Factors influencing PT. Pindad’s (Persero)
PT Len Industri (Persero), and PT Hariff in the implementation of IDKLO based on Edward III
Antasena Tank Boat project. The Tank Boat can (1984) [14] consists of four things, namely
carry 60 personnel and 5 crew members, has a communication, resources, bureaucratic
maximum speed of 40 knots and a cruising range structure, and disposition. In terms of
of up to 600 Nautical miles [19]. communication as a form of achieving messages
to institutions and internally, it is marked by forms
Through the defense offset mechanism, PT. of cooperation or partners. Starting from 1983
Pindad (Persero) also plays a role in the when he first bought a license abroad to the
procurement of the Caesar 155 Cannon Main encouragement of the Deputy Minister of
Equipment and Weapon Systems (Alutsista). The Defense to PT. Pindad (Persero) to develop

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 Arsita et al.; JEMT, 27(7): 42-52, 2021; Article no.JEMT.74305

products, especially in terms of technology to offset PT. Pindad (Persero). The commitment to
compete globally. In terms of resources, it covers build independent defense industry is shown
various aspects such as human resources, trough the export activity which held since 2006.
budget, equipment, to authority. Resources It aimed to bring this state-owner enterprise
owned by PT. Pindad (Persero) requires the globally into foreign exchange and multiplier
ability to understand the latest technology, economic effects such as empowerment of local
especially in terms of research so that production suppliers and employment.
development for offset implementation can run
forward. Likewise with the presence of a budget DISCLAIMER
supported by the government and the ability of
superior human resources to innovate. In terms The products used for this research are
of disposition, PT. Pindad (Persero) shows a commonly and predominantly use products in our
commitment to building an independent defense area of research and country. There is absolutely
industry through the implementation of offsets as no conflict of interest between the authors and
a form of adaptation to changes in the digital era producers of the products because we do not
and technological advances. In terms of intend to use these products as an avenue for
bureaucratic structure, the emphasis on support any litigation but for the advancement of
in the R&D to procurement is realized by knowledge. Also, the research was not funded by
implementing the organizational structure of PT. the producing company rather it was funded by
Pindad (Persero) in accordance with their personal efforts of the authors.
respective duties and authorities. Bureaucratic
relations with internal parties are also important, COMPETING INTERESTS
for example cooperation with KKIP which is
wrapped with a shared commitment. Authors have declared that no competing
interests exist.
The embodiment of PT. Pindad (Persero)
through the procurement of various Main
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