Indonesia Defence and Security Report Q3 2009

Official results of the Indonesia’s April national parliamentary election released on May 9, confirmed the centrist Democratic Party the winner. It gained 21% of votes compared with around 14% for the main opposition party.

Indonesia will hold a presidential election on July 8. The current Indonesian President Susilo Bambang Yudhoyono will look to secure a second term in office. Yudhoyono, a retired military general colloquially known as SBY, is well ahead in opinion polls. He has chosen respected central bank governor Boediono as running mate. The other two presidential candidates are Vice President Jusuf Kalla, leader of the Golkar Party, and former president Megawati Sukarnoputri, leader of the Indonesian Democracy Party of Struggle (PDIP). Golkar, the vehicle of Indonesia’s former dictatorship, and PDIP each gained about 14% of the vote in April.

There were angry protests during the April elections in Papua, the largest province of Indonesia, aimed at the election commission’s poor management, but security was maintained and the results generally accepted.

President Yudhoyono is considered Indonesia's most competent political leader in many years, but he has largely failed to carry out much-needed reforms to boost Indonesia's economic growth to levels comparable with China or India. Although Indonesia has a presidential system, the 550-member Dewan Perwakilan Rakyat (DPR, or parliament) is a powerful body, and thus the outcome of the April election will have a big impact on the next presidential administration.

The threat from Islamist group Jemaah Islamiah (JI), responsible for the 2002 Bali bombings, has retreated although several recent reports have suggested there is no room for complacency. Nevertheless, many experts say the risk of further large-scale attacks in Indonesia has diminished with the arrest of hundreds of Muslim militants as suspects. There has been no decision announced on the proposals in December 2008 to authorise the Indonesian Military (TNI) to take over the command from police in the nation's fight against terrorism. Cooperative approaches between the military and the National Police in dealing with terrorism threats are still being considered.

Indonesia's economic risks appear greatest in 2009, owing to severe weakness in its main trading partners.

However, domestic demand should remain solid as inflation and interest rates come down. At the start of 2009, President Yudhoyono proposed a reduction in the defence budget to IDR35tn (US$3.3bn), down from IDR36tn in 2008.

Parliament has approved a IDR33.6tn defence budget for 2009; Defence Minister Juwono Sudarsono had asked for IDR460bn in extra funds to help the Indonesian Military (TNI) conduct operations related to maintaining territorial integrity, and many had expected the president to increase funding. Sudarsono previously said that if the nation wanted to develop its military satisfactorily, the budget would have to be at least US$10bn.

In a speech in London in late May, Sudarsono told the International Institute for Strategic Studies that Indonesia was working together with fellow members of ASEAN (Singapore, Malaysia, Thailand, the Philippines, Laos, Cambodia and Myanmar) to provide the ASEAN security community with ‘security in a wider sense. Political, economic, as well as military.’ He said this would lay the framework for economic development.

Looking into the future, we expect the Indonesian government will increase defence spending 9% annually, in real terms, over the coming years. Absolute increases will depend on how the country’s economy fares in the face of the global financial crisis and on the future direction of commodity prices.

This quarter, we have introduced a significant new aspect to BMI's Defence reports, which is the City Terrorism Rating (CTR). This assesses the risk of a terrorist attack. The CTR takes into account the overall BMI Terrorism Rating for the country in question. It also incorporates the ‘prevalence’ of terrorism, which recognises the frequency of attacks, and whether the city is a target for terrorists. The CTR is created via an integration of the state-wide threat, with an evaluation of the city-specific characteristics and level of activity. The CTR also recognises the ‘threat’ of terrorism in terms of the likely numbers of victims and the ability of groups to launch sustained campaigns.

In Indonesia, we put the CTR for the capital Jakarta at 60.