Abstract
A strong national defense system serve to maintain the nation's honor such as creating peace, security, and sovereignty and becomes an effective instrument for bargaining position in relations between nations so that it has broad impacts, including impacts on economic aspects. The research approach used is a qualitative approach. This type of research is a systematic review research. Likewise, the defense industry of a country reflects the economic strength of its country, because in carrying out the defense function, the defense industry has a very important role, including in holding the national Main Tool of the Armament System. However, now not all defense equipment can be produced by the domestic defense industry, so some defense equipment must still be held in cooperation with foreign countries. Law No. 16 of 2012 concerning the Defense Industry mandates that procurement of defense equipment from abroad be permitted if it fulfills several requirements, including trade returns, local content, and offset. Counter trade is one of the mechanisms of cooperation that has been carried out by Indonesia. This mechanism allows reciprocal trade between two countries by buying goods from abroad with payment in the form of goods worth the goods imported. So it is important to analyze the potential for economic improvement for Indonesia that is generated by the mechanism of trade defense equipment from abroad, so that in conducting cooperation, Indonesia can benefit both in the short and long term.
Highlights
National defense is all efforts to maintain the country's sovereignty, the territorial integrity of the nation and the safety of the whole nation from threats and disturbances to the integrity of the nation and state (Elden, 2006)
As in article 43 of Law 16 of 2012, Defense and Security Equipment Tools can be procured from abroad if they meet the requirements: Defense and Security Equipment Tools have not or cannot be made domestically; include Defense Industry participation; technology transfer obligations; guarantee of no potential embargo, political conditionality and barriers to the use of defense and security equipment tools; trade returns, local content and/or offset of at least 85%; local content and/or offset as low as 35% with an increase of 10% every five years
This paper wants to explain the economic opportunities of trade returns by analyzing the current position of Indonesia's defense and mapping of Indonesia's leading commodities that are likely to be exchanged in trade returns
Summary
National defense is all efforts to maintain the country's sovereignty, the territorial integrity of the nation and the safety of the whole nation from threats and disturbances to the integrity of the nation and state (Elden, 2006). A strong national defense system is able to maintain the nation's honor, and becomes an effective instrument for bargaining position in relations between nations To realize these conditions in addition to the demands for the availability of professional soldiers, we need the support of equipment and means of defense that can be relied on in line with technological developments and the estimated level of threats faced (Gunawan, 2017; Till, 2015). Buyer countries need to buy them with commodities to obtain this strategic weapon, such as in the case of Sukhoi purchases between Indonesia and Russia in 2007 (Rangsimaporn, 2009; Dikici, 2015; Puspita, 2018) In such a context, it is known that arms trade on a global scale creates an imbalance in position and a lack of value and financial opportunity that a purchaser country might obtain with an existing trade scheme. In this context, which are owned by Indonesia, can be used as the basis for creating a new scheme in the acquisition of non-financial returns for arms-buying countries
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