ABSTRAK
Between 2000-2005 period, Malaysia intensively conducting efforts in increasing its military capacity. The country quick recovery from 1997 economic crisis made it possible for this step. On the other hand, Indonesia economic condition yet to recover. This have caused the imbalance of military strenght between both countries. In fact, between Southeast Asian countries, Indonesia defense budgetsare the lowest in the region. With this recognition, along with the increasing amount of security problems faced by Indonesia, this country then consistenly pursue numerous actions in order to fill thegap in the military posture. Slowly, the nation?s defense budget are increased to achieve this objective. But in the process, the military build-up by Indonesia, and Malaysia, appear to shadows the bilateral relations. Each country military build-up actions, are always followed by the other. By few, these trend could induce arms race between Indonesia and Malaysia. The relationship of two nations seems to support this view. Bilateral relations between Indonesia dan Malaysia, historically, cannot be said free from troubles. Until today, there are still numerous issues hampering Indonesia-Malaysia relations, suchas border disputes over several outstanding border problems in Kalimantan, dan the lattest, the ambalat case in 2005. Through depht analysis, the view of arms race between Indonesia and Malaysia, areproven wrong. Beside the absence of hostile intentions, the domestic factors are the biggest reason for Indonesia to achieve better military strenght. This reasons include the increasing transnational crimes activities in Indonesia territorial?s dan modernization of military weaponry for the quest of deterrence capability. FromIndonesia perspective, Malaysia military modernization did not triger the actions. On the other hand, Malaysia military modernization mostly affected by ?Singapore factor?, rather than Indonesia. This shows that the military capability improvement by both countries are cannot be characterize as an arms race. The motives are alsoabsolutely far from competition. Nevertheless, both countries actions in enhancing its military capability, have had an impact for the region. Despite the internal motives and the moderat characterizationof both military build-up, increasing defense budget that followed by weapons purchasing have triger other countries in the region to take the same steps. In the context of good neighbour principles and the importance of confidence and trust building, the enhancement of military capability supposedly conducted in full transparency and openness attitude. And, in order to prevent any disturbance to thepeace and security in Southeast Asia, then, military capability enhancement must be taken in a moderate manner.