This chapter examines the political economy of Indonesia’s military modernisation, focusing on its fiscal sustainability and the role of the domestic defence industry. While Indonesia has historically underinvested in defence, it has begun to step up spending on major weapons platforms. I argue that Indonesia possesses the fiscal capacity to increase defence spending to at least 1% of GDP without jeopardising broader economic goals, as long as political will exists to support such a move. Additionally, the consolidation of state-owned defence firms under DEFEND ID reflects an effort to enhance domestic production, reduce reliance on foreign suppliers and foster technology transfers. However, this approach presents challenges, including interoperability issues and questions about domestic manufacturing capabilities. The chapter concludes that Indonesia’s modernisation strategy is likely to follow a hybrid approach: prioritising local production when feasible but resorting to foreign acquisitions when operational needs demand rapid solutions.