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U.S. to Sell $500 Million of Attack Helicopters to Indonesia

The U.S. agreed to sell a fleet of Apache attack helicopters to the Indonesian Army in a transaction valued at as much as $500 million.

Indonesia will buy eight Apaches and the U.S. will provide training to their pilots on tactics, techniques and procedures for operating in Southeast Asia, a U.S. defense official said in an e-mailed statement.

“The U.S. for the first time has agreed to sell Indonesia new AH-64E Apache attack helicopters,” Defense Secretary Chuck Hagel said in a prepared statement from Jakarta where he met his counterpart Purnomo Yusgiantoro.

The helicopters, fitted with Longbow radar, are made by Chicago-based Boeing Co. (BA) Various models of the Apache are flown by the U.S. Army and the military in Egypt, Greece, Israel, Japan, Kuwait, the Netherlands, Saudi Arabia, Singapore, the United Arab Emirates and the U.K., according to its website.

The U.S. in 2005 lifted restrictions on arms sales and military cooperation with Indonesia, which were imposed in 1991 because of the country’s human rights record. A defense cooperation agreement was signed about five years later.

In November 2011 the U.S. agreed to provide Indonesia with 24 refurbished F-16 jet fighters from the Pentagon’s used aircraft inventory. The jets are made by Lockheed Martin Corp. (LMT) of Bethesda, Maryland.

Indonesia has made progress in improving transparency and protection of human rights, according to Hagel. This may “lead to even more momentum in our defense relationship,” he said.

Economic Performance

The U.S. didn’t attach conditions restricting the use of the Apache aircraft, according to Yusgiantoro. Indonesia is buying new helicopters as it hasn’t modernized its armed forces for the past 15 or 20 years because of the 1998 Asian financial crisis, he said at a joint press briefing with Hagel.

“In other countries when economic performance gets better, when there’s good economic growth, some funds can be used to modernize the armed forces,” the minister said. “That is what’s happening with Indonesia.”

President Susilo Bambang Yudhoyono, who is due to hand over power in elections next year, is seeking to shore up his legacy of political and economic stability in the world’s fourth-most populous nation. As he nears the end of a decade in power, the leader faces an economy that is growing at the slowest pace since 2010, a slumping rupiah and the fastest inflation in more than four years.

Gross domestic product increased 5.81 percent from a year earlier in the three months ended June 30, the first time the economy expanded less than 6 percent since 2010. The rupiah fell to the weakest since April 2009 today, while inflation in July climbed to 8.61 percent.

To contact the reporters on this story: Gopal Ratnam in Jakarta at gratnam1@bloomberg.net; Berni Moestafa in Jakarta at bmoestafa@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net

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