An American Marine loads an M27 Infantry Automatic Rifle magazine with 5.56 mm rounds during the Designated Marksman Course’s culminating event at Range 113, Jan. 28, 2016. (Official Marine Corps photo by Cpl. Julio McGraw/Released)

BEIRUT — The United Arab Emirate’s EDGE Group said Tuesday it will supply Indonesian state-owned enterprise PT Pindad with an ammunition production line in a $27 million deal, a further step in the Gulf defense conglomerate’s expansion into the Southeast Asian market.

According to the Emirati firm’s statement, the agreement says EDGE will supply a production line for 5.56x45mm and 7.62x51mm ammunition, a move “aligned with the Indonesian Ministry of Defence’s objective to increase local job creation and sovereign manufacturing capabilities.”

The statement added that the ammunition facility is scheduled to inaugurate production in 2026. EDGE Group declined to disclose to Breaking Defense the expected production rate for the facility.

The agreement comes as part of a Comprehensive Economic Partnership Agreement (CEPA) signed between UAE and Indonesia in 2022 aiming to boost bilateral trade to $10 billion by 2030.

But Leonardo Jacopo Maria Mazzucco, an analyst at Gulf State Analytics, said that EDGE’s decision to launch a production line with the Indonesian company is unusual compared to its other international moves.

“If anything, since its onset, the UAE defense conglomerate has always striven to localize the manufacturing of weapon systems and secure technology transfer by original equipment manufacturers, not the other way around,” he told Breaking Defense. “Still, the choice to open an ammunition facility in Indonesia reflects the UAE’s steady progress in climbing the so-called ‘ladder of production’ in the defense industry, shedding some light on its capabilities to independently produce less sophisticated weapons and to export technical know-how.”

As Breaking Defense previously reported in February, EDGE Group’s CEO said that Latin America and East Asia will remain hot markets for the firm in the future. Albert Vidal, a research analyst for the Washington-based thinktank CSIS, told Breaking Defense that EDGE has increased its engagement with South Asian markets as well.

“[This] makes sense given that it is home to some of the world’s fastest growing defence budgets. These markets can also provide EDGE with access to differing and complementary IP and technologies, and strengthen its supply chain resilience through co-production ventures abroad,” Vidal wrote to Breaking Defense. “It also aligns well with Emirati efforts to diversify its network of partners.”

The Emirati firm’s step in Indonesia is not its first. In 2022 EDGE subsidiary LAHAB signed a memorandum of understanding with Indonesia’s state-owned PT Dahana to “pave the way for cooperation in the field of manufacturing, and the production of several types of explosives, capitalising on the existing capabilities of both companies, and allowing them to explore joint investment in the construction of a TNT plant at the Dahana Energetic Material Center (EMC) area in Subang,” according to the firm’s statement then.

Looking ahead, Mazzucco said the ammo production line could keep the relationship warm for future, more complex enterprises.

“For instance, with EDGE successfully integrating its precision-guided munition onto the [Turkish] Baykar TB2 UAV in January 2023 and Jakarta purchasing 12 Turkish-made drones in August 2023, it is possible that Indonesia could sign a munition procurement deal with EDGE in the near future,” he concluded.