Defense Startups Might be the Next Big Thing for Indonesia

Ever since the Indonesian defense posture suffered due to arms embargoes in 1965 and 1998, there has been a push for the country to be entirely self-sufficient in arms development and production. To achieve this, the Indonesian defence ecosystem in general relied on a number of state owned enterprises (SOE’s) in order to fill the needs required by the armed forces (TNI), the National Police (Polri), and other relevant security bodies. These SOE’s are well known to the general public and are now part of the DEFEND ID holding. Those SOE’s are of course PT. Pindad, PT. PAL, PT. Dahana, PT. LEN, and PTDI. All of whom have produced good products ranging from armored vehicles, small arms, munitions, patrol boats, and transport planes designed for rough field operations.

For decades, these companies have been the backbone of Indonesia’s desire to achieve self-sufficiency in the defense sector while private companies are often relegated as partners for SOE’s, producing components and supplying the necessary materials, supporting maintenance, repair, and overhaul (MRO) of military equipments, and building strategic partnerships with SOE’s to pursue transfer of technology (ToT) and increasing production efficiency. This changed after the 2020 amendement as the private sector has been given more leeway to develop and produce military equipments. This is a positive development as it reduces reliance on SOE’s and if managed correctly, can transform the Indonesian defense industry sector into a dual-use force that can simultaneously hasten the pursuit of self-sufficiency and becoming a major economic driver.

However, this change in policy is still not enough as the Indonesian defense industry sector is still lacking in regards of research and development (R&D) and financial committments/incentives from the government. These two things are just as paramount as revising the law as giving more attention will allow private companies to bear their fangs and come up with products that may fill the performance gap of the TNI. Defense startups has real potential to achieve this because currently we are witnessing a shift in paradigm of modern warfare and how arms are produced by defense industries. In this age, ‘quality over quantity’ has been replaced with ‘plentiful but good enough’ as recent global conflicts have proven that expensive, exquisite military platforms are highly vulnerable to swarms of cheaper, expendable systems like drones, unmanned surface vessels (USVs), kamikaze drones, and loitering munitions. This new strategic imperative forces defense industries to adjust accordingly as weapons with ‘good enough’ technical capabilites and able to be produced en masse in a relatively short period of time became the new name of the game.

This shifting landscape is exactly where private defense startups can fill the critical gap. Unlike massive SOEs, which are often constrained by bureaucratic inertia and traditional heavy-manufacturing mindsets, startups are inherently agile. They thrive in rapid prototyping, software integration, and leveraging commercial off-the-shelf (COTS) technologies. By focusing on disruptive tech such as artificial intelligence, unmanned systems, and advanced communications private defense startups can integrate low-cost weapons with advanced technology to even their odds on the battlefield. They are uniquely positioned to deliver the exact type of asymmetric, cost-effective weapons that the modern armed forces require without the massive overhead costs of traditional defense contractors.

However, in order to harness this potential, the government’s role must evolve from a rigid regulator to an active ecosystem facilitator. Currently, entities like the Directorate General of Defense Potential (Dirjenpothan) under the Ministry of Defense and the National Research and Innovation Agency (BRIN) have the mandate to drive defense technology, but the ecosystem remains difficult for new players to navigate. To reform this, Indonesia should look toward successful international frameworks, such as Turkey’s Presidency of Defense Industries (SSB). The SSB successfully revolutionized the Turkish defense sector by acting as a powerful, centralized agency that coordinates procurement, R&D funding, and strategic planning. It seamlessly integrates massive state-owned conglomerates with nimble private enterprises and universities. By adopting a similar, mission-driven model, Dirjenpothan and BRIN could:

• Streamlining Certification: Create faster tracks for startups to test and certify their technologies.
• Align Funding: Direct R&D grants specifically toward high-need, economy-of-force projects.
• Guarantee Procurement: Offer clear pathways to TNI contracts for private startups that successfully develop functional, indigenous prototypes.