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Defence spending and the defence industry

As a consequence of the cuts to defence spending that began in the first years of the New Order government, by the late 1970s military hardware, particularly Soviet-bloc systems left over from the Sukarno era, were increasingly no longer functional. To counter this, between 1977 and 1982 budget allocations to the defence department doubled in absolute terms, allowing modest upgrades to equipment in all three military services, including the purchase of F5, A420 and F16 aircraft (between 1978 and 1988), second-hand frigates and destroyers, some tanks, armoured personnel carriers, and artillery. However, although there was an absolute increase in funding, because the economy was running strongly at this time (on the back of the oil price boom) the military share of the budget actually declined.