The Stockholm International Peace Research Institute (SIPRI) has published a list of the 100 largest defence companies globally by revenue for 2024. SIPRI’s publication indicates that, for the first time, the Indonesian defence industry, DEFEND ID, has ranked among the world’s top 100. Despite this achievement, significant challenges remain to be addressed by the government.
In recent years, the world has witnessed a rise in global defence spending. SIPRI indicates that global defence expenditure rose by 37% from 2015 to 2024. The 9.4% year-on-year (YoY) increase in defence expenditure for 2024 represents the most significant rise since the end of the Cold War. Consequently, revenue from arms sales in the global defence industry has consistently risen. In 2024, the revenue of the world’s 100 largest defence industries reached US$679 billion, a 5.9% increase from 2023. This figure represents the highest record in SIPRI’s history.
2024 marks a significant year for both global defence spending and industry revenue, as well as for Indonesia, specifically. For the first time, the Indonesian defence industry can enter the world’s top 100. DEFEND ID achieved a global ranking of 96th, with arms sales totalling US$1.1 billion. This figure indicates a 39% increase compared to 2023.
A long way to go for Indonesia’s defence industry
However, despite the increase in revenue from arms sales, placing it among the world’s top 100, significant challenges still lie ahead for DEFEND ID and Indonesia. Moreover, this ranking of 96 is still far from the target of being among the top 50 in the world by 2024.
The 39% YoY increase in revenue for state-owned defence industries did not correlate with a notable rise in company profits. The presentation by the President Director of DEFEND ID to the Indonesian House of Representatives in February 2025 indicated a decline in the company’s net profit for 2024. In 2024, the company’s net profit was reported at 699.6 billion Rupiah, a 3.66% YoY decrease. The decrease in net profit, despite a rise in company revenue, is attributed to rising component and raw material costs. Revenue growth without a corresponding increase in net profit could hinder DEFEND ID’s future capabilities.
Beyond maximising profit, building an effective local defence industry supply chain is a significant challenge. According to the Defence Industry Law, the Indonesian defence industry ecosystem comprises four tiers: the raw materials (fourth), components (third), principal components (second), and primary equipment industry (first). Currently, this supply chain is underperforming, as previous reports indicate that inter-tier transactions account for only 9%. This situation reduces the potential spillover effects from the defence industry to the country’s overall economy and industry.
The underperforming domestic supply chain also adversely affects the innovations and production capabilities of the national defence sector, particularly DEFEND ID. This is because every weapon technology produced invariably comprises multiple basic components. If components and raw materials continue to be imported, the local content (TKDN) will remain low. The government and DEFEND ID aim to raise the TKDN of flagship items to at least 50% by 2029, up from 43% in 2024.
Another primary task for the government and DEFEND ID is the revitalisation and improvement of production and Maintenance, Repair, and Overhaul (MRO) facilities. DEFEND ID lacks production facilities for radar and unmanned systems. Nevertheless, these two defensive technologies constitute part of the ten prioritised programmes for the defence industry. Furthermore, submarine manufacturing facilities require modernisation. MRO facilities for aircraft and ships, as well as production facilities for tanks and combat vehicles, require revitalisation.
Another major challenge concerns the certainty and consistency of procurement contracts for weaponry technology developed by DEFEND ID. As an economic entity, DEFEND ID needs revenue to ensure the company’s sustainability and expansion. Especially when the defence industry has already spent on research and development (R&D) costs. However, unfortunately, the current conditions in Indonesia are not yet ideal. For example, the Medium Battle Tank Harimau made by PT. Pindad, of which only 18 units have been purchased to date, and there is no certainty regarding a follow-up purchase contract.
So, what should the government do?
The arms market is a monopsony market, with a single buyer and many sellers. In this context, the state becomes the sole actor as the buyer. Therefore, the government’s role is crucial in addressing the various challenges DEFEND ID faces. Without the support of planned and consistent policies, the national defence industry will find it difficult to compete with global competitors.
Given that the domestic defence industry supply chain is still not optimal, the government must consolidate supporting industries that supply raw materials and components. Without a strong and integrated supply chain, the primary equipment industry will continue to rely on foreign suppliers and risk becoming merely a “final assembler”. Consolidation here is not only understood as an institutional merger but also as the alignment of cross-ministerial policies and long-term industrial planning that link defence needs with supporting industries and research institutions.
Second, budget certainty and procurement consistency are non-negotiable prerequisites. The defence industry will not be able to plan production, invest in technological mastery, or develop human resources without an apparent government demand. Fragmented procurement patterns, short-term contracts, and frequent changes in priorities hinder investment and perpetuate technological stagnation. Therefore, the government must ensure the availability of stable defence budgets and transparent, multi-year procurement contracts as a roadmap for industry growth.
The achievement of DEFEND ID certainly deserves appreciation. However, the government and DEFEND ID need to remain aware that this achievement is only a starting point, not the end. There is still much work to be done to strengthen DEFEND ID’s position as a world-class defence industry and a strong, sustainable national defence industry ecosystem.
Mr Febry Triantama is a defence analyst and lecturer at the Department of International Relations, Paramadina University.
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