Indonesia Defence Industry Size & Share Analysis - Growth Trends & Forecasts (2025 - 2030)

Indonesia Defense Market Analysis

The Indonesia Defense Market size is estimated at USD 9.52 billion in 2025, and is expected to reach USD 10.97 billion by 2030, at a CAGR of 2.89% during the forecast period (2025-2030).

Indonesia's military modernization strategy has entered a transformative phase, with the government implementing comprehensive reforms to enhance its defense capabilities. The country has announced plans to invest USD 125 billion over the next three years in upgrading and modernizing its defense equipment, with nearly two-thirds (USD 79.1 billion) allocated for new military equipment and USD 32.5 billion earmarked for contingencies and maintenance. This substantial investment reflects Indonesia's commitment to developing a robust military defense infrastructure capable of addressing evolving regional security challenges, particularly in response to territorial disputes in the South China Sea.

The Indonesian defense industry is witnessing a significant shift towards indigenous manufacturing capabilities through strategic partnerships and defense technology transfer agreements. The government's focus on developing local expertise has led to successful collaborations between domestic and international manufacturers, particularly in the development of land vehicles, arms, and missile systems. Indonesian state-owned enterprises are actively expanding their production capabilities, with companies like PT Pindad securing major contracts for local manufacturing of military equipment, including a USD 1.3 billion order for 4 billion ammunition units to be delivered by 2023.

The country's military modernization efforts are aligned with its Minimum Essential Force (MEF) initiative, which adopts a capability-based defense approach. This strategic framework has catalyzed several high-profile procurement programs, including plans to acquire 36 Dassault Rafale fighter jets and Boeing F-15EX Advanced Eagle multirole fighters. The air force modernization program also encompasses the procurement of Airbus A330 Multi-Role Tanker Transport aircraft and Lockheed Martin C-130J Super Hercules transports, demonstrating Indonesia's commitment to enhancing its aerial capabilities.

Naval modernization remains a crucial component of Indonesia's defense strategy, with significant investments in maritime capabilities to protect its vast archipelagic waters. The country has initiated several major naval defense procurement programs, including contracts with South Korean shipbuilder Daewoo Shipbuilding and Marine Engineering (DSME) worth USD 1 billion for the construction of three Nagapasa Type 209/1400 diesel-electric submarines. Additionally, Indonesia has engaged in partnerships with European manufacturers for the procurement of advanced defense systems, including negotiations with France for four Scorpene submarines armed with Exocet SM39 missiles and two 2,500-ton Gowind corvettes, highlighting the country's focus on strengthening its maritime military defense capabilities.

Indonesia Defense Market Trends

Growing Military Modernization Plans and Defense Budget

Indonesia has embarked on an ambitious military modernization initiative, with the presidential office announcing a substantial USD 125 billion investment plan extending through the mid-2040s. This comprehensive plan allocates USD 79 billion specifically for military equipment acquisition, while USD 32.5 billion is earmarked for sustainment over 25 years, demonstrating Indonesia's commitment to long-term military capability enhancement. The modernization efforts are evident in recent procurement activities, such as the completion of a 42-aircraft Rafale order in January 2024, with deliveries strategically phased across multiple installments. Additionally, the February 2024 order of three CN235-220 transport aircraft from PT Dirgantara Indonesia (PTDI) for USD 85 million further exemplifies the country's focus on expanding its defense logistics capabilities.

The Indonesian Ministry of Finance's strategic allocation of approximately 32% of the defense budget towards modernization projects in 2022 underscores the government's prioritization of military advancement. This substantial budgetary commitment encompasses both procurement and sustainment initiatives, reflecting a balanced approach to military modernization. The focus on acquiring advanced platforms like the Rafale fighter jets, which offer superior air combat capabilities, and the tactical transport aircraft CN-235, designed for efficient military logistics operations, demonstrates Indonesia's comprehensive approach to military modernization. These investments are particularly significant as they represent a shift towards more sophisticated military capabilities while maintaining operational efficiency through the acquisition of purpose-built platforms like the CN-235, which complements larger transport aircraft such as the C-130 Hercules.

Rising Regional Security Concerns and Force Enhancement

Indonesia's defense strategy is significantly influenced by escalating regional security concerns, prompting substantial investments in force enhancement and capability development. The nation maintains a robust military force of approximately 404,500 personnel across its Army, Navy, and Air Force, equipped with various sophisticated defense weapons systems and platforms. This substantial force structure is continuously being enhanced through strategic procurement initiatives, as evidenced by the acquisition of 1,857 riot guns worth USD 3.3 million in July 2023, demonstrating the country's commitment to maintaining internal security while preparing for external challenges. The revision of the Minimum Essential Force (MEF) target to 70% for the 2019-2024 phase reflects a pragmatic approach to force development, balancing ambitious military objectives with practical constraints.

The enhancement of military capabilities is further demonstrated through the systematic modernization of existing platforms and the acquisition of new systems across all service branches. The Indonesian Air Force's initiative to upgrade its entire fleet of F-16 A/B airframes through the Falcon STAR (Structural Augmentation Roadmap) and enhanced mid-life upgrade (EMLU) program exemplifies this comprehensive approach to force enhancement. These upgrades include structural reinforcement, improved avionics, and enhanced weapon systems, including the integration of sophisticated identification friend-or-foe (IFF) systems. Such modernization efforts are crucial for maintaining operational effectiveness and interoperability with allied forces, particularly in addressing evolving regional security challenges.

Focus on Domestic Defense Industry Development

Indonesia has demonstrated a strong commitment to developing its domestic defense industrial base, implementing policies that prioritize local manufacturers while seeking strategic international partnerships for technology transfer and capability enhancement. This commitment was notably exemplified in August 2023 when Indonesia initiated discussions with Saudi Arabia to strengthen its defense sector, providing a platform for state-owned manufacturers like Pindad to showcase their capabilities and explore collaborative opportunities. The emphasis on technology transfers and offset agreements in defense procurement deals reflects a strategic approach to building indigenous capabilities while maintaining access to advanced defense technology. This focus on domestic industry development is particularly evident in the activities of key state-owned enterprises such as PT PAL Indonesia, PT Pindad, and PT Dirgantara Indonesia, which are actively expanding their product portfolios and manufacturing capabilities.

The government's support for domestic defense manufacturers is further demonstrated through strategic partnerships and production agreements with international defense companies. Local manufacturers have shown significant progress in developing indigenous platforms, from small arms and ammunition to more complex systems like the Anoa armored personnel carrier and CN-235 transport aircraft. The success of PT Dirgantara Indonesia in securing a USD 85 million contract for three CN235-220 transport aircraft in February 2024 demonstrates the growing capabilities and competitiveness of Indonesia's domestic defense industry. These developments are complemented by initiatives to enhance research and development capabilities, establish advanced manufacturing facilities, and create a sustainable ecosystem for defense technology innovation, ultimately reducing dependence on foreign suppliers while building a robust domestic defense industrial base.

Segment Analysis: By Type

Vehicles Segment in Indonesia Defense Market

The defense vehicles segment continues to dominate the Indonesian defense market, accounting for approximately 38% of the total market share in 2024. This significant market position is driven by Indonesia's comprehensive fleet modernization initiatives across land, sea, and air domains. The country has been actively procuring various vehicles, including fighter aircraft, transport aircraft, tanks, frigates, hydrographic survey ships, and submarines. The Indonesian government's focus on developing local manufacturing capabilities through collaboration with foreign players has also strengthened this segment, with state-owned companies like PT PAL Indonesia and PT Dirgantara Indonesia playing crucial roles in defense vehicles production and maintenance.

Weapons and Ammunition Segment in Indonesia Defense Market

The defense ammunition segment is projected to exhibit the highest growth rate of approximately 4.5% during the forecast period 2024-2029. This growth is primarily driven by Indonesia's increasing focus on enhancing its indigenous manufacturing capabilities for small arms and ammunition. The government's encouragement of local manufacturers, coupled with several technology transfer agreements with foreign players, has strengthened domestic production capabilities. Local players are also investing in research and development of advanced weapon systems like missiles and rocket launchers. PT Pindad, the state-owned arms manufacturer, has been expanding its production capabilities and developing new weapon systems to meet the growing domestic demand for defense ammunition.

Remaining Segments in Indonesia Defense Market by Type

The personnel defense training and protection segment and military communications systems segment continue to play vital roles in Indonesia's defense modernization efforts. The personnel training and protection segment focuses on creating a force capable of meeting minimum response requirements for various strategic threats, while the communication systems segment emphasizes developing Network Centric Operations capabilities. These segments are crucial for enhancing interoperability among the armed forces and building a modern, well-trained military force. The implementation of new training programs, acquisition of advanced communication systems, and development of C4ISR capabilities demonstrate Indonesia's commitment to comprehensive military modernization across all defense systems.