Countertrade Mechanism of Global Arms Trade: Case Study of Indonesia

Zainal Arifin, Agus Suman and Moh. Khusaini

International Journal of Financial Research, 2020, vol. 11, issue 1, 307-317

Abstract: A strong national defense system serve to maintain the nation's honor such as creating peace, security, and sovereignty and becomes an effective instrument for bargaining position in relations between nations so that it has broad impacts, including impacts on economic aspects. The research approach used is a qualitative approach. This type of research is a systematic review research. Likewise, the defense industry of a country reflects the economic strength of its country, because in carrying out the defense function, the defense industry has a very important role, including in holding the national Main Tool of the Armament System. However, now not all defense equipment can be produced by the domestic defense industry, so some defense equipment must still be held in cooperation with foreign countries. Law No. 16 of 2012 concerning the Defense Industry mandates that procurement of defense equipment from abroad be permitted if it fulfills several requirements, including trade returns, local content, and offset. Counter trade is one of the mechanisms of cooperation that has been carried out by Indonesia. This mechanism allows reciprocal trade between two countries by buying goods from abroad with payment in the form of goods worth the goods imported. So it is important to analyze the potential for economic improvement for Indonesia that is generated by the mechanism of trade defense equipment from abroad, so that in conducting cooperation, Indonesia can benefit both in the short and long term.

Keywords: trade; defense equipment; foreign cooperation; exports; superior commodities (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:jfr:ijfr11:v:11:y:2020:i:1:p:307-317

DOI: 10.5430/ijfr.v11n1p307

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