Indonesia Defense Market Size
| Study Period | 2019 - 2029 |
| Base Year For Estimation | 2023 |
| Market Size (2024) | USD 8.71 Billion |
| Market Size (2029) | USD 9.67 Billion |
| CAGR (2024 - 2029) | 2.12 % |
| Market Concentration | Medium |
Major Players
*Disclaimer: Major Players sorted in no particular order |
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Indonesia Defense Market Analysis
The Indonesia Defense Market size is estimated at USD 8.71 billion in 2024, and is expected to reach USD 9.67 billion by 2029, growing at a CAGR of 2.12% during the forecast period (2024-2029).
Military modernization is one of the key factors driving the defense market in Indonesia. During 2017–24, Indonesia plans to modernize its armed forces and aims to establish “Minimum Essential Forces.” This strategy involves establishing a force structure consisting of key military capabilities to maintain adequate levels of operational readiness and rapidly deploy forces in case of national contingencies.
Most of the procurement plans of the country are aimed at enhancing its indigenous defense manufacturing capabilities. While the local players are investing in the development of newer generation weapon systems and platforms, the government is focusing on enabling technology transfer partnerships between foreign and local players to improve the capabilities of the latter.
Moreover, Indonesia faces several territorial disputes with China over the Natuna Islands and Malaysia over the Ambalat sea block. Also, the recent event of Australian forces violating Indonesia’s sovereignty is concerning. Due to such disputes, the government is increasing investment to strengthen the military and defense sectors.
With many of its defense systems aging, the country is considering large-scale upgrades and replacement of the systems to effectively respond to the ever-changing strategic environment surrounding the country. The push toward modernization is driving the market growth in the country.
Indonesia Defense Market Trends
Ammunition Segment is expected to Witness Highest Growth During the Forecast Period
Indonesia’s defense spending in 2022 was USD 8.91 billion as compared to USD 8.8 billion in 2021, which is a growth of 1% from 2021 to 2022. The current government is facing issues achieving the minimum essential force target by the end of its current term in 2024. The delay in the modernization plan is due to two main factors, i.e., budget constraints and political uncertainties. As of 2021, the government only acknowledged 65% of its MEF target. Over the last two years, the Indonesian Ministry of Defense received only around USD 7.8 billion from the Ministry of Finance.
Indonesia’s military ambitions and growing concerns about regional security pushed the country to increase its defense spending. The country holds a total military personnel strength of about 1,080,000, which includes active, reserve, and paramilitary personnel.
In July 2023, the Indonesian police ordered 1,857 riot guns with a contract value of USD 3.3 million. Similarly, in April 2022, at the Indian Defense Expo, the Indonesian police purchased Turkish Semi-automatic KMR762 pistols developed by Kale Kalip (Turkey). The Indonesian Army also placed the order for KNG-C5 rifles. Moreover, in March 2022, Indonesia also purchased a Semi-automatic sniper KMR 762 rifle.
It is expected that Indonesia will prefer local companies for modernization requirements and look to reduce its dependency on foreign companies for procurement. Also, Indonesia will look to enforce technology transfers and offsets to support its local industry. In August 2023, the Indonesian government invited Saudi Arabia to help develop Indonesia’s defense industry. State-owned arms manufacturers Pinbad, with others, presented tier portfolios to the delegation. Such initiatives will drive the demand for the ammunition segment in Indonesia during the forecast period.
Air-Based Vehicles to Dominate Market Share During the Forecast Period
Indonesia’s presidential office plans to invest USD 125 billion in military modernization through to the mid-2040s. The investment plan highlights Indonesia’s continuing dependency on foreign loans. The document proposes funding of USD 79 billion for defense equipment during these 25 years, USD 32.5 billion for sustainment, and the remaining USD 13.4 billion for interest payments on foreign loans.
According to the Ministry of Finance's documents, the modernization projects, including procurement and sustainment, were expected to receive about 32% of the defense budget in 2022. The country is expanding its fixed-wing aircraft fleet. For instance, in February 2022, Indonesia announced its plan to procure 42 Rafale fighter jets from France as part of a USD 8.1 billion deal. Indonesia also received US approval for the purchase of 36 F-15 fighter jets. The country plans to modernize its military aircraft fleet due to the rising tensions in the South China Sea.
In November 2021, Indonesia placed an order for two Airbus A400M aircraft in multi-role tanker and transport configuration. The KF-21 Boramae jet is a joint development between South Korea and Indonesia. Korea Aerospace Industries plans to manufacture 120 KF-21s by 2032. About 50 KF-21s will be procured by Indonesia. The country also includes T-50, NC212i, C-130J, and KAI KT-1 Woongbi aircraft on order. In the helicopter segment, Indonesia holds eight H225M on order. Such procurement plans will require higher defense budget allocation, which may be a challenge for the current government.
Indonesia Defense Industry Overview
Indonesia's Defense Industry is moderately fragmented. In the past, Indonesia was dependent on foreign defense contractors for the procurement of major military equipment. However, in recent years, Indonesia focused more on developing its state-owned companies. PT PAL Indonesia, PT Pindad, PT Dirgantara Indonesia, Airbus SE, FINCANTIERI SpA, and Daewoo Shipbuilding & Marine Engineering Co. Ltd are some of the prominent players in the market.
Recent multi-million-dollar contracts from the government helped the local companies to prosper. However, budget constraints can hamper the growth opportunities of these companies soon. Close relationships with other Asian countries like Japan and India helped the country's defense industry to grow and even contribute to the economy through exports. Joint defense production plans can further enhance the local defense industry supply chain in the future. Thus, as Indonesia plans for a major modernization of military equipment, there is a significant growth opportunity for defense companies to increase their presence in the Indonesian defense market.
Indonesia Defense Market Leaders
PT Pindad
PT PAL Indonesia
FINCANTIERI S.p.A.
Airbus SE
PT. Dirgantara Indonesia
*Disclaimer: Major Players sorted in no particular order
Indonesia Defense Market News
- January 2024: Indonesia signed a contract to buy 18 Rafale fighter jets from France as part of the contract signed in 2022 to procure 42 such aircraft in total. The first delivery is expected in early 2026.
- February 2022: Indonesia signed a series of agreements with France, including submarine development and ammunition. Indonesia plans to order 42 Rafale fighter jets under a USD 8.1 billion deal. This order would make Indonesia the second state in the Indo-Pacific region after India to rely on the jet produced by Dassault Aviation.
Indonesia Defense Market Report - Table of Contents
1. INTRODUCTION
1.1 Study Assumptions
1.2 Scope of the Study
2. RESEARCH METHODOLOGY
3. EXECUTIVE SUMMARY
4. MARKET DYNAMICS
4.1 Market Overview
4.2 Market Drivers
4.3 Market Restraints
4.4 Porter's Five Forces Analysis
4.4.1 Bargaining Power of Suppliers
4.4.2 Bargaining Power of Buyers/Consumers
4.4.3 Threat of New Entrants
4.4.4 Threat of Substitute Products
4.4.5 Intensity of Competitive Rivalry
5. MARKET SEGMENTATION
5.1 Type
5.1.1 Personnel Training and Protection
5.1.2 Communication Systems
5.1.3 Weapons and Ammunitions
5.1.3.1 Artillery and Mortar Systems
5.1.3.2 Infantry Weapons
5.1.3.3 Missile and Missile Defense Systems
5.1.3.4 Ammunition
5.1.4 Vehicles
5.1.4.1 Land-based Vehicles
5.1.4.2 Sea-based Vehicles
5.1.4.3 Air-based Vehicles
6. COMPETITIVE LANDSCAPE
6.1 Company Profiles
6.1.1 PT PAL Indonesia
6.1.2 PT Pindad
6.1.3 PT. Dirgantara Indonesia
6.1.4 PT Len Industri
6.1.5 PT. Dahana
6.1.6 SCYTALYS
6.1.7 Leonardo S.p.A.
6.1.8 Airbus SE
6.1.9 BAE Systems plc
6.1.10 FINCANTIERI S.p.A.
6.1.11 Kongsberg Gruppen ASA
6.1.12 Daewoo Shipbuilding & Marine Engineering Co Ltd
7. MARKET OPPORTUNITIES AND FUTURE TRENDS
Indonesia Defense Industry Segmentation
The Indonesian defense market covers all the aspects of military vehicles, armament, and other equipment procurements. It provides insights into the budget allocation and spending of the country.
The market is segmented by type into personnel training and protection, communication systems, weapons and ammunition, and vehicles. The weapons and ammunition segment is further segmented into artillery and mortar systems, infantry weapons, missile and missile defense systems, and ammunition. The vehicles segment is segmented into land-based vehicles, sea-based vehicles, and air-based vehicles. The report offers the market size and forecasts in value (USD) for all the above segments.
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| Communication Systems | ||||||
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Indonesia Defense Market Research FAQs
How big is the Indonesia Defense Market?
The Indonesia Defense Market size is expected to reach USD 8.71 billion in 2024 and grow at a CAGR of 2.12% to reach USD 9.67 billion by 2029.
What is the current Indonesia Defense Market size?
In 2024, the Indonesia Defense Market size is expected to reach USD 8.71 billion.
Who are the key players in Indonesia Defense Market?
PT Pindad, PT PAL Indonesia, FINCANTIERI S.p.A., Airbus SE and PT. Dirgantara Indonesia are the major companies operating in the Indonesia Defense Market.
What years does this Indonesia Defense Market cover, and what was the market size in 2023?
In 2023, the Indonesia Defense Market size was estimated at USD 8.53 billion. The report covers the Indonesia Defense Market historical market size for years: 2019, 2020, 2021, 2022 and 2023. The report also forecasts the Indonesia Defense Market size for years: 2024, 2025, 2026, 2027, 2028 and 2029.
Indonesia Defence Industry Report
Statistics for the 2024 Indonesia Defence market share, size and revenue growth rate, created by Mordor Intelligence™ Industry Reports. Indonesia Defence analysis includes a market forecast outlook to 2029 and historical overview. Get a sample of this industry analysis as a free report PDF download.
