Indonesia's arms budget rose 36 per cent. New research says it will not pay for itself.

Indonesia spent about 15 billion US dollars on defence in 2025, up from 11 billion the year before. That 36 per cent rise is the steepest in Southeast Asia, ahead of Vietnam at 18 per cent and Singapore at 13 per cent, on figures compiled from SIPRI, the Stockholm institute that tracks military budgets. The usual argument for money like this is that it partly pays itself back, in factories and jobs. A new commentary in Fulcrum, the site run by Singapore's ISEAS institute, tests that argument against the data and finds the comfort does not reach this region.

João Tovar Jalles, John Beirne and Donghyun Park looked at what happens to national output after a government raises military spending. Across emerging and developing economies the effect is real but slow: output ends up about 0.7 to 1.0 per cent of GDP higher after eight years, GDP being the total value of everything an economy produces. For East Asia and the Pacific the same test gives a much weaker result, one the authors call not statistically significant, meaning the number is too uncertain to treat as a real effect at all. The payoff also depends on conditions. It is larger where government debt is lower and where banks and financial markets are deeper, and core military spending does better than civil defence or foreign aid, though the authors say even that split should be read with care.

The finding that matters most for a region arming at once comes last. When neighbours all raise their defence budgets together, the authors write, there is little lasting boost for the region, and the medium-term effect may be negative through "crowding out", the way heavy state borrowing and state demand pull money, workers and materials away from other uses. Their conclusion is plain: defence spending is not an economic policy. A country may still need it for security, and it should be argued for on those grounds, with the cost counted as a cost.

Why it matters

Indonesia added roughly 4 billion dollars to its defence budget in a single year, and this research says not to expect that back as growth. That makes it a straight trade against clinics and classrooms, at a time when the budget is already tight. When the next ship or squadron is announced, the useful question is which security problem it solves, because the economic case for it is thinner than it sounds.