Government Transfer of Indonesian Military Businesses Moves Forward

By webadmin on 11:36 pm Oct 14, 2009
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The transfer of military businesses into civilian hands, part of the armed forces’s reform agenda, moved forward with a government announcement on Wednesday that President Susilo Bambang Yudhoyono had issued a decree providing the legal umbrella for the transfer.

Speaking from his office, Defense Minister Juwono Sudarsono said presidential decree No. 43/2009 was signed on Sunday.

“This decree will guarantee the military’s transparency in its commitment to good governance, ensuring that its past dominance gradually comes under the civilian government,’ he said.

Juwono said a special team would immediately be formed consisting of representatives from his office, the Finance Ministry, the State Enterprises Ministry and the Justice and Human Rights Ministry, as mandated by the decree.

“We will thoroughly review the management of all military businesses in a transparent, accountable and responsible way,” he said.

Muhammad Said Didu, secretary of the State Enterprise Ministry, said the team would decide how the government will manage all of the Indonesian Armed Forces’ (TNI) businesses in the future.

The latest audit of military businesses found that the military manages 1,321 cooperatives and foundations with net assets worth Rp. 2.2 trillion ($235.4 million).

“The team will decide on the transfer mechanism for all businesses directly managed by the military, some cooperatives and foundations, and state assets commercialized by the military,” Didu said.

Deputy Cabinet Secretary Lambok V Nahatan said the team would decide which military businesses would be transferred to the government.

“There is a common perception that the government can easily take over all TNI businesses, whether they are foundations, limited companies, or cooperatives,” he said.

“Remember that such businesses are also governed by specific regulations. A limited company, if we want to liquidate it, must have a general meeting of shareholders as stipulated in the Law on Limited Companies.”

Analysts have criticized the proposal to place the military’s businesses under the Ministry of Defense. They argue that because most officials at the ministry were active members of the military, a conflict of interest would persist.

But Lambok denied the existence of any conflict of interest in the takeover, saying that the takeover was intended to improve the operations of all the businesses.

However, Hari Prihartono, an analyst with ProPatria, a think tank concerned with defense issues, said the order did not cover all military-linked businesses.

“The new presidential decree only covers the visible TNI businesses. The problem is, how about the invisible businesses?”

He cited “side businesses” such as illegal mining or logging operations supported by military officers, and security services for such as at Freeport-McMoRan Copper and Gold’s giant mine in Papua. “Income from those sectors is very substantial but unaccountable,” Hari said.