Strengthening Defense Industry Strategies to Enhance Economic Competitiveness and National Defense

Jessica Valentina; Guntur Eko Saputro; Sri Murtiana

doi:10.55227/ijhess.v5i3.1977

Authors

Jessica Valentina Universitas Pertahanan Republik Indonesia
Guntur Eko Saputro Universitas Pertahanan RI
Sri Murtiana Universitas Pertahanan RI

DOI:

https://doi.org/10.55227/ijhess.v5i3.1977

Keywords:

Defense Industry, Economic Competitiveness, Indonesia Emas 2045, National Security, Innovation

Abstract

The defense industry plays a dual role in both safeguarding national sovereignty and driving economic competitiveness, making it a strategic pillar for long-term national resilience. For Indonesia, whose security environment is shaped by dynamic Indo-Pacific geopolitics, strengthening the defense industrial base is not only a matter of security but also a crucial element in realizing the national vision of Indonesia Emas 2045. This study was conducted to address the persistent challenges of technological dependence, fragmented institutional support, and high reliance on imports, which undermine Indonesia’s strategic autonomy and economic competitiveness. The objective is to formulate a comprehensive strategy for defense industry development that simultaneously enhances security and contributes to economic transformation. Methodologically, the research employs a Systematic Literature Review (SLR) complemented by meta-analysis of empirical findings. This dual approach ensures both conceptual depth and empirical robustness by synthesizing global insights and quantitative evidence on the multiplier effects of defense industry development. The findings reveal that a robust defense industry generates significant spillover effects, including technological innovation, high-skilled employment, industrial upgrading, and reduced import dependency. Furthermore, indigenous capabilities strengthen national sovereignty, deterrence, and resilience against both traditional and non-traditional threats. The analysis highlights that aligning defense industrial policy with national economic strategy can create a virtuous cycle of innovation, competitiveness, and security. In conclusion, the strengthening of Indonesia’s defense industry is essential not only to reduce strategic vulnerabilities but also to serve as a catalyst for sustainable economic growth. This study underscores the need for coherent regulation, sustained R&D investment, multi-stakeholder collaboration, and an export-oriented approach to achieve both defense resilience and economic competitiveness.

References

Baysal, B. (2025). Evaluating the advances and challenges in Turkey’s defence industry: a comparative analysis. Southeast European and Black Sea Studies, 25(1), 31–52. https://doi.org/10.1080/14683857.2025.2454722

Biswas, B. (2019). Defense spending and economic growth in developing countries. In Defense spending and economic growth (pp. 223–235). Routledge.

Bitzinger, R. A. (2015). Defense industries in Asia and the technonationalist impulse. Contemporary Security Policy, 36(3), 453–472.

Bitzinger, R. A. (2021). Asian arms industries and impact on military capabilities. In Defence Industries in the 21st Century (pp. 115–131). Routledge.

Borenstein, M., Hedges, L. V., Higgins, J. P., & Rothstein, H. R. (2021). Introduction to meta-analysis. John wiley & sons.

Calcara, A. (2020). The role of experts in the European defence cooperation: Government officials, economic interests and epistemic communities. European Security, 29(4), 449–467.

Damayanti, D., & Ratnasih, C. (2025). Strategic Innovation in Economic Development and Defense Industries: Harnessing Technology for Industrial Growth and Security Policy. In AI-Powered Leadership: Transforming Organizations in the Digital Age (pp. 195–220). IGI Global Scientific Publishing.

Dunne, J. P., & Sköns, E. (2010). Military industrial complex. In K. Hartley & T. Sandler (Eds.), Handbook of defense economics (Vol. 2, pp. 1267–1289). Elsevier.

Franko, P. M., & Herz, M. (2021). Defense industrialization in Latin America. In Defence Industries in the 21st Century (pp. 184–198). Routledge.

Hartley, K. (2017). The economics of arms. Defence and Peace Economics, 28(6), 665–677.

Horowitz, M. C., Allen, G. C., Saravalle, E., Cho, A., Frederick, K., & Scharre, P. (2022). Artificial intelligence and international security. Center for a New American Security.

Ilzetzki, E. (2025). Guns and Growth: The Economic Consequences of Defense Buildups (Kiel Report No. 2).

Kemensetneg RI. (2025). RPJMN 2025-2029: Fondasi Awal Wujudkan Visi Indonesia Emas 2045. https://www.setneg.go.id/baca/index/rpjmn_2025_2029_fondasi_awal_wujudkan_visi_indonesia_emas_2045

Kulve, H. T., & Smit, W. A. (2003). Civilian–military co-operation strategies in developing new technologies. Research Policy, 32(6), 955–970.

Kurniawan, Y., & Prasetyani, D. (2021). Between ambition and reality: Indonesia's quest for a self-reliant defense industry. Asian Security, 17(3), 297–315.

Lee, J. G., & Park, M. J. (2020). Evaluation of technological competence and operations efficiency in the defense industry: The strategic planning of South Korea. Evaluation and Program Planning, 79, 101775. https://doi.org/10.1016/j.evalprogplan.2019.101775

Macaraig, C. E., & Fenton, A. J. (2021). Analyzing the causes and effects of the south china sea dispute. The Journal of Territorial and Maritime Studies, 8(2), 42–58.

Maryanti, S., Widayat, P., & Lubis, N. (2023). Economic Transformation To Get Out of the Middle Income Trap Condition To Reach Indonesia Gold 2045. ADPEBI International Journal of Business and Social Science, 3(1), 63–78. https://doi.org/10.54099/aijbs.v3i1.356

Markowski, S., & Hall, P. (2019). Defence procurement and industry policy: A small country perspective. Routledge.

McGinn, J. (2020). Building resilience: Mobilizing the defense industrial base in an era of great-power competition. The Heritage Foundation.

Raska, M. (2019). Strategic competition for emerging military technologies. Prism, 8(3), 64–81.

Riyadi, F. A., & Dewi, I. M. (2022). The Role of Defense Diplomacy for The Development of The Indonesian Defense Industry. Jurnal Ekonomi, Bisnis & Entrepreneurship, 16(1), 80–91. https://doi.org/10.55208/6nyv7113

Sarjito, A. (2025). Navigating Great Power Rivalry: Indonesia–Russia Defense Diplomacy as Strategic Hedging in the Indo-Pacific. https://doi.org/10.21203/rs.3.rs-6528311/v1

SIPRI. (2023). Trends in international arms transfers 2022. Stockholm International Peace Research Institute.

Sjamsoeddin, S., Yusgiantoro, P., Saragih, H. J. R., & Soepandji, B. S. (2022). The Challenges Of Indonesia Future Defense Capability Advancement. Journal of Positive School Psychology, 6(11).

Snyder, H. (2019). Literature review as a research methodology: An overview and guidelines. Journal of Business Research, 104. https://doi.org/10.1016/j.jbusres.2019.07.039

Solehudin, Rd. H. (2024). Indonesia’s Geostrategic Position in Global and Regional Politics: Government Preparation. Revenue Journal: Management and Entrepreneurship, 1(2). https://doi.org/10.61650/rjme.v1i2.434

Tranfield, D., Denyer, D., & Smart, P. (2003). Towards a Methodology for Developing Evidence‐Informed Management Knowledge by Means of Systematic Review. British Journal of Management, 14(3), 207–222. https://doi.org/10.1111/1467-8551.00375

Wibowo, E. B., Legionosuko, T., Mahroza, J., & Chandra Jaya, Y. (2020). Industry 4.0: challenges and opportunities in competency development for defense apparatus’ human resources. International Journal of Advanced Science and Technology, 29(7), 45–60.

Yulivan, I. (2022). Defense industry strategy in strengthening the Indonesian economy. Journal of Economics, Management and Trade, 28(4), 1–13.