Defence Industrial Policy Research Articles

Offset Multipliers and Defence Industrial Policy Efficiency

ABSTRACT Mandatory offsets are policy instruments to leverage defence procurement projects to conduct industrial policy. The prime contractor commits to generate new business in mutually acceptable sectors equivalent to a large percentage of the project value. Offset multipliers “relax” this constraint by discounting the prime contractor’s offset obligations if investments flow to sectors prioritized by the purchasing country’s industrial policy objectives. This endogenizes the relationship between the original project and the offset contracts. This paper provides a new theoretical analysis of the following three questions that have gone unaddressed in the literature. First, the efficiency of such policies depends on the absorption capacity of a targeted industry. If this capacity is low, import substitution is expensive and the prime contractor may rather choose to invest elsewhere in the economy to satisfy the overall mandatory offset constraint thereby thwarting the original objective. Second, whereas a uniform relaxation of offsets through multipliers can reduce distortions introduced by mandated offsets, multipliers may enhance distortions as an unintended consequence. Third, the prime contractor’s response to offset credit incentives may be weak due to transaction costs arising from having to find new domestic partners to satisfy the offset requirements and manage the contracts.

The Ideational Power of Strategic Autonomy in EU Security and External Economic Policies

AbstractThis article undertakes a comparative analysis of European Union security and external economic policies to explore the different trajectories of strategic autonomy (SA) in these two domains. In so doing, it contributes to a better understanding of endogenous drivers of policy change in response to geopoliticising pressures. Drawing on discursive institutionalism, it analyses three dimensions of ideational power: power in, power through and power over. The evidence, based on documentary analysis and interviews, demonstrates that though SA presented a more significant challenge to pre‐established paradigms in external economic relations, the role of the Commission as an ideational entrepreneur, supported by its coercive power, facilitated the adoption of the idea of (open) SA. Conversely, French President Emmanuel Macron was unable to persuade others of the adoption of a sovereigntist conception of SA in security, with the exception of defence industrial policy, where the Commission enjoys budgetary power and competences.

Indonesian Defense Industry Policy in Changes

Indonesia is the country with the strongest military strength in Southeast Asia. A country's military strength is determined by six things, namely military institutions, military policies, military resources, military weapons, national defense industry, and military title capabilities. This paper focuses on defense industry policy. This research uses multi-method research by prioritizing a qualitative approach. The results show that the liberation of business in the defense industry sector is in accordance with business regulation as a strategic industry. Then, the industry is controlled by the state whose control does not mean ownership of the Indonesian defense industry. However, this industry still has weaknesses including the vision of the Indonesian defense industry which is limited to supplying the domestic market, not easy to get capital, insufficient support to enter international markets, constraints in the mastery of technology, and limited human resources.

Strategy, technology, industry and politics: challenges for the 21st Chairman of the Joint Chiefs of Staff

ABSTRACT This article introduces nine essays capturing panel discussions at the Department of Social Sciences at the United States Military Academy on 8–9 February 2023, in support of the Office of the United States Chairman of the Joint Chiefs of Staff. These essays were selected from among 31 panel essays to represent central defense issues: alliance management, technology in conflict, defense industrial policy, and the domestic politics of defense strategy. The participants asked one another how each of these challenges were likely to shape international order and ordering, and how the Office of the Chairman of the Joint Chiefs of Staff could best prepare. The authors of this introductory essay argue that while the constellation of challenges outlined by the nine essays in this special section are clearly daunting, they are not totally unprecedented, and the US and its allies have tools at their disposal to respond effectively. US strategists may need to focus more on the domestic sources of foreign and security policies in allies and adversaries alike and implement emerging technologies alongside time-tested human tools of statecraft, all while rebuilding US and allied defense industrial bases amid complex and conflictual domestic political economies.

Defense industrial policy in a changing international order: rethinking transatlantic burden-sharing

ABSTRACT Though it is a core function of a sovereign state, governments do not navigate defense policy free from outside influences and constraints. The provision of external security requires armed forces to be adequately equipped but the distribution of material resources - defense-industrial capacity – for such equipment is not even but rather concentrated in the international system. How do alliance politics and defense-industrial policy connect? Our contribution highlights the material resources for military alliance effectiveness and emphasizes a strategic view of the relationship between these material factors and alliance burden-sharing. The sudden surge in demand for materiel resulting from Russia’s invasion of Ukraine revealed the defense-industrial fault lines within the transatlantic alliance. We outline existing dependencies and interdependencies, identify trade-offs and connections between industrial policy and defense spending, and formulate policy recommendations based on our findings. Taking a political economy of security perspective, these recommendations are aimed at a better understanding of how industrial politics and alliance stability are intertwined. They suggest pathways to a new and more stable transatlantic defense-industrial bargain in an era of increased great power conflict.

Analysis of the potential development of defense industry policies with the Total Quality Management (TQM) approach at PT. PAL

This article discusses the analysis of potential defense industry policy development with the Total Quality Management (TQM) approach. The defense industry plays an important role in maintaining the security and sovereignty of a country. In the face of increasingly complex and dynamic security challenges, the product quality and competitiveness of the defense industry must be continuously improved. TQM has proven effective in improving performance and quality in various industrial sectors. This approach emphasizes continuous quality improvement and involves all members of the organization in process and product improvement. In the context of the defense industry, TQM is becoming increasingly relevant to achieve industrial independence and improve competitiveness in the global market. This research uses literature study, data analysis, and case studies of defense industries in several countries. This data is used to identify strengths, weaknesses, opportunities, and threats in developing the defense industry with a TQM approach. The results of this analysis are expected to contribute to policy makers and defense industry management in formulating strategies to improve the independence, efficiency and overall quality of the defense industry. By exploring the potential for developing defense industry policies with a TQM approach, the country can strengthen its defense capabilities, increase the contribution of the defense industry in supporting national security, and face the future with greater confidence and resilience. By exploring the potential of integrating the TQM approach into defense industry policies, this research strives to fortify a nation's defense capabilities. It also seeks to amplify the defense industry's role in bolstering national security. Consequently, this comprehensive analysis offers a blueprint for a future that promises increased self-assuredness and resilience, enabling the country to navigate evolving security challenges with confidence and adeptness.

Industrial policy and resident health: Historical evidence from China’s Third Front construction

Understanding the impact of industrial policies on residents’ health is of great significance. This study uses the large-scale national defense industry policy entitled the Third Front construction, which was implemented before China’s reform and opening up, as a quasi-natural experiment to empirically examine its long-term impact on residents’ health. The relevant findings are fourfold. (1) The policy significantly improves local residents’ health in the long term. (2) This improvement effect primarily operated through two channels of increasing residents’ income and improving medical security. (3) The effect is obviously heterogeneous for different genders and hukou, with a greater effect on men than women and significant health improvement effects for residents with agricultural hukou. (4) The findings demonstrate that local residents’ lifestyles and mental health were significantly improved due to Third Front construction.

The Political Economy of Australian Militarism: On the Emergent Military–Industrial–Academic Complex

Abstract Australia is undergoing a process of substantial militarization. This article argues that one of the key forces underpinning Australia’s militarization is an emergent military–industrial–academic complex (MIAC), comprised of increasingly close relationships between universities, defense, and defense industry. The connections between the three have rapidly intensified since 2016 due to changes in defense industry policy, pessimism regarding the strategic environment, the ongoing malaise of the neoliberal university, and the motivations of key individuals. This article demonstrates that each of the three groups is actively seeking closer relationships with the other, driven by a patchwork of competing economic and strategic motivations, and powered by ideals of innovation and the entrepreneurial spirit. Each needs the other—for military advantage, for profits, and for survival. Australia’s emergent but rapidly expanding MIAC raises concerns about the pace, nature, and necessity of Australia’s militarization, the impact on the role of the university in society, and the hollowness of Australian strategic policy. Furthermore, it has substantial implications for strategic competition in the Indo-Pacific, Australia’s alliances, and the Australia-UK-US (AUKUS) partnership.

Defense Industry Policy Analysis Regarding Efforts To Increase Production Of Defense Equipment For National Security (Case Study At The Defense Industry Policy Committee)

Defense Industry Policy Committee (KKIP) is a Committee representing the Government to coordinate national policies in the planning, formulation, implementation, control, synchronization, and evaluation in the defense industry. The Government has made some policies related to human resources, developing technology, collaboration, coaching, financing and marketing. In this study, researchers will focus on policy which has been made by the Government in the field of human resources, cooperation, financing and marketing. The purpose of this research is to know which policy is more dominant in the growing production tool of national defense equipment. The researchers used a method of Analytical Hierarchy Process (AHP) to find a policy which is more dominant, conducting interviews with relevant parties. The results of this research show that the boost in production of defense equipment is the policy in terms of human resources which encompasses training/education, expertise and competence for mastery defense industry technology.
 Key words: Defense Industry Policy, Analytical Hierarchy Process, Defense Industry Policy Committee (KKIP)

Market Structures, Competition and Innovation: Grounds for an Alternative Defence Industrial Policy

ABSTRACT Since the 1980s, most reforms in major arms-producing countries focus on keeping costs under control by either promoting competition between suppliers or by reducing information asymmetry through audits and controls. Indeed, cost escalation represents a challenge but, in fact, these reforms try to adjust the functioning of defence market rather than questioning the institutional features of this latter. The success of defence acquisition structures also explains their limits. The current organisation of defence market was perfectly adapted to the geostrategic context of Cold War and a technological momentum that favours symmetrical arms race between the United States and the Soviet Union. Even if these structures still help deliver advanced capabilities, they can be considered as not sufficient to cover all the operational needs of armed forces. The conception of capabilities needs to go beyond a long-term planning while industrial approaches open the way to more agile development and manufacturing. An alternative defence industrial policy is necessary to complement the existing one. More modular architectures for complex systems provide the opportunity to increase the reactiveness of capability deliveries and to foster both innovation and competition.

Toward a more ‘sovereign’ Europe? Domestic, bilateral, and European factors to explain France’s (growing) influence on EU politics, 2017–2022

In recent years, both inside and outside France, scholars and policymakers have emphasized a small and declining French influence on European politics and the political direction of the European Union (EU). By contrast, in 2022, at the end of President Emmanuel Macron’s first term in office, the EU increasingly follows French preferences and ideas. We argue that this renewed French clout is due to the interplay of factors located at different levels of government: a centralized political system and careful preparation of policy objectives at the domestic level, together with a more balanced bilateral relationship with Germany and several exogenous shocks hitting the EU, enabled the French President to upload national policy priorities to the European level. We combine a longer-term perspective, which considers the formulation and pursuit of national strategies, with moments of crisis altering the EU’s status quo and leading member states to promote change. We demonstrate France’s influence on EU politics based on developments in three policy fields, namely fiscal policy, competition policy, and defense industrial policy.

Defence industries in small European states: Key contemporary challenges and opportunities

This study addresses the challenges and opportunities that small European states face when weighing their defence industrial policy options. The article builds on a technology–based small state industry governance model by adding a defence industry–specific layer. This model is used to analyse how defence industries of small states could contribute to the European Union common defence industrial policy, and how the latter could likewise be beneficial to small member states. The paper discusses defence industrial policy challenges and opportunities both from the wider European Union and small state perspective. Global and regional geopolitical trends are explored among other specific topics, as are aspects of regional and domestic governance like the market structure, procurement, and R&D. The article concludes that small European states could both win and lose with the establishment of a common defence market, depending on the market design. Ideally, it should be combined with the simultaneous creation of an EU defence industrial policy that enables smaller, and especially less developed, member states to maintain and advance their own industries, preferably participating within the value chains of defence industries of the larger countries.

“Unchain My Heart.” A Defense Industrial Policy Agenda for Germany’s Zeitenwende

A Zeitenwende that delivers one of Europe’s most powerful armed forces needs to correct the (non-existent) position of defense industrial issues within German political discourse. This paper therefore develops a defense industrial policy agenda based on four lines of effort: Make daringness Germany’s prime ambition; establish Germany as a defense industrial framework nation; promote German defense industrial diplomacy with foreign partners; solidify a true public-private defense partnership between the German government and the defense industrial base.

Lessons from EU Space Programmes for Collective Defence

The European Defence Fund (EDF) has been interpreted by a number of scholars as a step beyond intergovernmental cooperation and towards the introduction of supranationalism in defence policy. We suggest that past developments in space policy can be a guide for developments in the defence area given the functional dependencies between the two fields and their institutional similarities. Based on this, we believe that the Commission will be unable to convert its new authority over the EDF into actual influence over use of force. On the contrary, the EDF may signal that European defence industrial policy is increasingly motivated by civilian and predominantly commercial considerations, dissociated from the operational objectives of national defence policies. Like the EDF, the European Union’s (EU’s) space programmes involve the supranational financing of militarily relevant capabilities. We argue that Member States have accepted supranationalism in space policy insofar as the Commission was able to civilianize matters of industrial governance and keep them separate from the conduct of military operations. We show that the EU implemented civilian programmes in areas that were otherwise driven by national militaries. In instances where civilianization was impossible, Member States’ security interests are preserved through intergovernmental modes of decision-making, even within purportedly ‘community’-driven processes. Member States have also retained significant control over future developments by exploiting a web of overlapping institutions and hazy task allocation. spillover, neofunctionalism, space policy, European Defence Fund, defence industry, industrial policy

COST-BENEFIT ANALYSIS OF THE PT. PAL’S SUBMARINE PROJECT DEVELOPMENT IN REALIZING DEFENSE INDUSTRY INDEPENDENCE

<p align="justify">Based on Law no. 16 of 2012 and the Decree of the Indonesian Defense Industry Policy Committee, PT. PAL is the lead integrator of the Main Tool of the Navy Weapon System. After the manufacture of 2 (two) submarine units, which are Ardedali-404 and Alugoro-405, at the PT. PAL in collaboration with the South Korean Daewoo Shipbuilding & Marine Engineering Co., Ltd (DSME) the company planned to build the 4th to 12th new submarine units that will be implemented starting in 2021 until 2042. The purpose of this study was to identify and determine the result of the Benefit-Cost Analysis in considering the submarine project's positive effect on PT. PAL is the independent defense industry. The method used is a qualitative method supported by Analytical Hierarchical Process (AHP) tools and Benefit-Cost Ratio (BCR)theory to analyze the result. Based on the results showed that the weight of the highest benefit criteria is B-2 (Independence of PT. PAL as a defense industry) which indicates that the point of realizing independence in Indonesia's Defense Industry can be considered as the main important aspect as it may be followed by other progress or development to support national defense in Indonesia. Then, the weight of the highest cost criteria is C-1 (Transfer of Technology (ToT) is not fully implemented) which means the cost that is need to be considered in realizing the independence of PT. PAL as the defense industry is not fully implemented in Indonesia. Finally, the chosen alternative is A-1, which is to continue cooperation in the construction of the Submarine Project would be better if it is supported by the commitment of the company and government, especially in facing the cost of reaching the benefit as described before. So, the policy that needs to be taken is to continue the next submarine-building project.</p>

The Policy of PT Len As a Main Integrator on Increasing National Income

PT Len's defense industry policy, in collaboration with Thales, is focused on the development of the national radar industry. The cooperation demonstrates the domestic industry's inability to support the defense industry's independence. The research goal is to give advice to PT LEN on military industry implementation and strategy. The goal of qualitative research is to comprehend phenomena from the perspective of the participants. The results showed that the outcomes are consistent with the implementation theory in terms of communication, resources, personnel, budget, and disposition. To anticipate delays in the revitalization process for the defense industry that is not ready to carry out technology transfer, the strategy requires adequate resources, supporting facilities, and infrastructure, as well as an inventory of national companies engaged in the industrial defense sector.

Analisis Pengadaan Alutsista Sebagai Perkembangan Industri Pertahanan Di Indonesia

Strategy in Building the Independence of the Indonesian Defense Industry Based on Law Number 16 of 2012 concerning the Defense Industry includes the establishment and strengthening of the KKIP (Defense Industry Policy Committee), the Defense Industry Policy Committee which is abbreviated as KKIP was formed based on Article 18, which has the task of coordinating national policies in the planning, formulation, implementation, control, synchronization, and evaluation of the Defense Industry. The effectiveness of legislation in Indonesia in the procurement of defense equipment to support the Defense Industry is the achievement of the targets and objectives of the relevant regulations. In this case the indicators of success are contained in Article 3 of Law Number 16 of 2012 concerning the Defense Industry. First, the defense industry is effective, efficient, integrated and innovative, the government has integrated research and development institutions in Indonesia to create an effective and efficient defense industry, then has produced innovations in seven priority programs for the defense industry. However, in the supply of components and raw materials for the manufacture of defense equipment products, the defense industry still lacks because industries producing defense equipment products still import several components from abroad because Indonesia's supporting component industry has not been able to supply all the materials needed for defense equipment production

Implementation of Defense Industry Policy in Supporting National Economic Growth

Implementation of Defense Industry Policy in Supporting National Economic Growth

Implementation of Defense Industry Policy in Supporting National Economic Growth

This study aims to identify and analyze the implementation of defense industry policies in supporting national economic growth. The research method used is literature review research with a descriptive approach. The results of the study show that the defense industry has contributed to national economic growth during the COVID-19 pandemic. This refers to the active role of the defense industry, which does not only focus on the defense of the national border area, but also becomes the support and solution for national economic defense. In addition, the policies implemented to encourage national economic development have multiple effects on the surrounding community, where this will contribute to morale and mobilization contributions from the defense industry to encourage the growth of broad economic awareness.

PERKEMBANGAN KEBIJAKAN INDUSTRI PERTAHANAN INDONESIA

Basis regulation of Indonesia's defense industry is Law No. 16 of 2012. This regulation is supported by Presidential Regulation No. 59 of 2013, Government Regulation No. 141 of 2015, which details defense industry policies in Indonesia. The Omnibus Law 2020 provides changes to several articles of Law No. 16 of 2012. Therefore, it is necessary to study and analyze the development of defense industry policies and changes to the legal basis of the defense industry. This study uses a descriptive-analytical method with a juridical approach to analyze secondary data in legal aspects. Analytical descriptive collects data through literature studies, documents, and archive studies. Based on this research, the defense industry policy in Indonesia has developed from time to time, as well as changes in the basic regulation in several aspects of Law No. 16 of 2012 with the Omnibus Law 2020. Developments and changes are carried out in order to realize the independence of the national defense industry. Changes in the regulations of several articles related to business licensing for private participation in competing in the production of main equipment and capital ownership and reducing the authority of the KKIP (Defense Industry Policy Committee)