Indonesia’s Critical Minerals and Rare Earth Ambition

Indonesia is entering a new phase of defence modernisation, driven by rising budget allocations, expanding procurement programmes, and efforts to build domestic defence capability. As regional security challenges intensify, the government under President Prabowo Subianto is pursuing a strategy that balances fiscal prudence, industrial development, and strategic autonomy.

 

The 2026 defence budget has been set at Rp187.1 trillion, up from Rp166.26 trillion in 2025. The figure accounts for 0.8 percent of GDP, still among the lowest in Southeast Asia, and well below 2.5 percent global benchmarks. Lawmakers from the House Budget have voiced support for further increases to meet the Minimum Essential Force (MEF) readiness target, citing the need to strengthen both force structure and the domestic defence industry.

 

Domestic innovation remains a key pillar. The Indonesian Navy will soon test-fire its first homegrown unmanned submarine, developed by PT PAL, making Indonesia the fourth country in the world to achieve such a milestone. Beyond weapon systems, Prabowo’s administration is integrating defence policy with strategic resource control. In August 2025, the President inaugurated the Mineral Industry Agency (MIA) under Presidential Decree No. 77P/2025, appointing Higher Education Minister Brian Yuliarto as its head. The agency manages minerals vital for the defence and green-energy sectors, such as rare earth elements (REEs) and radioactive materials, under three mandates: securing extraction, protecting them as national assets, and accelerating downstream industrialisation to produce high-value. Energy Minister Bahlil Lahadalia has stated that upstream rare-earth operations will remain under state control, while experts warn that limited R&D funding, below 1 percent of the national budget, could slow progress in mapping and refining REE reserves.

 

Indonesia’s procurement drive reflects both ambition and pragmatism. The government plans to acquire 42 Chinese Chengdu J-10 fighter jets, complementing earlier purchases of Rafale aircraft from France and KAAN stealth fighters from Turkey. The Finance Ministry has cleared US$3.1 billion in foreign loans to support these and other acquisitions, including Type 22 Houbei fast-attack craft and CM-302 coastal anti-ship missiles from China. Cooperation with South Korea continues through deliveries of T-50i Golden Eagle trainer jets and possible adoption of KGGB winged guidance kits for precision munitions. Naval modernisation is also advancing, with plans to acquire a retired Italian aircraft carrier, the Giuseppe Garibaldi, primarily for humanitarian and disaster-response operations.

 

Despite these developments, analysts warn that Indonesia’s defence establishment still faces overstretch and inefficiencies. The country’s broad interpretation of defence, encompassing both military and non-military roles such as disaster response, civil assistance, and development support, combined with limited funding and institutional overlap, continues to undermine combat readiness. Experts suggest that structural and fiscal reforms are needed to focus resources on core military capabilities while gradually raising defence spending.

 

At the same time, Indonesia’s modernisation push carries broader geopolitical sovereignty dimensions. By diversifying its arms suppliers and deepening partnerships with several countries, Jakarta seeks to preserve strategic autonomy amid growing rivalry between the United States and China. The emphasis on local production and control of critical minerals further underscores a shift toward defence and resource sovereignty, reducing external dependency while aligning military, industrial, and economic policy. This multidimensional approach positions Indonesia to safeguard its independence and influence within an increasingly competitive Indo-Pacific region.



          

Sources:

 

 

 

 

 

 

 

DEFENSE

October 29, 2025

We need your consent to load the translations

We use a third-party service to translate the website content that may collect data about your activity. Please review the details in the privacy policy and accept the service to view the translations.