Indonesia Military Business Takeover, Master Degree Dissertation For Itb

STUDY OF INDONESIAN GOVERNMENT’S POLICY IMPLEMENTATION IN SEPARATING MILITARY FROM BUSINESS 2004 - February 2009

THESIS Writing Submitted as Partial Fulfillment of the Requirements for Obtaining Master Degree from Bandung Institute of Technology

By

FITRIANI NIM : 24007031 (Defense and Security Studies)

BANDUNG INSTITUTE OF TECHNOLOGY 2008

Chapter I INQUIRY ON INDONESIA’S MILITARY BUSINESS

I. 1. Background Indonesia’s political reform (Reformasi) occurred in 1998 brought about changes to many sectors of nations’ power structures, including how the country manages its defense apparatus. From the time the Indonesian armed force had been established in 1945, it positioned itself as a significant pillar using argument that the country would not gain independence without weaponry fight, despite there were also ongoing diplomatic and global situation supports. The military was also the one that possessed coercive strength to ‘nationalize’ the business that before had been owned by colonial powers to be taken over by the states 1, but the strength, along with the special position it obtained by help freeing the country, had in turn hamper government to fully obtain control on business sector and putting them in the right place: out of civilian lives. Business has been part of Indonesian military’s culture since the very beginning 2 which then made it as activity that is not uncommon conducted by armed forces personnel under the argument of lacking government budget. The institution originally composed by modern armed forces constructed by the Dutch (Dutch Indies Royal Armed Forces - KNIL) and the Japanese (Home Country Defenders PETA) alongside with local guerrillas, which brought up the tendency to create its self-sufficiency also in terms of funding. In the management of freedom, the military soon got involved in managing the state’s petroleum company Pertamina and also in the country’s rice and logistic storage Bulog in the 1960s malaise era. 1

Nationalist demonstration on 1957 created window period for Indonesian military to takeover foreign companies settled in the country. Starting with Dutch owned companies in 1957, then United Kingdom’s in 1964 and Unites States of America’s a year after. Angel Rabasa et al., The Military and Democracy in Indonesia, (Pittsburgh: Rand, 2002), p. 71. 2 Eric Hendra, “The Business of Indonesian Armed Forces”, in Beni Sukadis (ed.), Almanac Indonesia 2007 Security Sector Reform, (Jakarta: Lesperssi and DCAF, 2007), p. 101.

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Practices of seeking self fund continued with reasoning that budget given by the state only fulfill minimum needs and even less. For years officials said that the defense budget only covered 25-30% of actual military expenditures 3 and the remainder was paid by off-budget funds, but after the Reformasi these estimates were dismissed as outdated and inaccurate. Recent estimation which placed this figure around 50% 4 is also unreliable, since the defense ministry had not undertaken analysis of the extent of off-budget activity. Indonesian defense expert Kusnanto Anggoro portrayed the source of military funding in table I.1. Table I.1. Sources of Indonesia’s Military Funding Non-Defense • Defense and security sector in provincial/local budget • Discount and other privilege Not • Constitutional business (cooperation • Illegal activities (individual Official under military foundation) in national and institutional) in national and local and local Source: Kusnanto Anggoro in Institute for Defense Security and Peace Studies, Seri 9 Penjelasan Singkat (Backgrounder) Bisnis Militer, June 2008 Official

Defense • Defense sector in state budget • Contingency and/or additional budget

World Bank, an international financial organization on development expressed their concern about off-budget activity by acknowledging that “no one quite knows how much of military and police expenditure are met from allocations in the government budget”. 5 However insufficient government funding is, ideally the military should not be seeking its own funding. When military’s revenue and spending are coming outside the government, it is hard for civil authorities to conduct oversight to the organization. The impact is government then loses power to control the armed forces and demand accountability. Therefore taking military out of business activity is one of the security sector governance goals in Indonesia. 3

Eric Hendra, Op. Cit., p. 106. Minister of Defense Juwono Sudarsono in an interview with Human Rights Watch in February 2005 estimated 46% military budget covered of actual spending, with the rest raised independently. Lisa Misol, Too High a Price: The Human Rights Cost of Indonesian Military’s Activity, (Jakarta: Human Right Watch, 2006), p. 92. 5 World Bank, Combating Corruption in Indonesia: Enhancing Accountability for Development, (Washington DC: World Bank, 2003), p. vii. 4

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Effort to pull military from business had been regulated in President Soeharto era through government regulation PP No. 6/1974. It was a way to restrain corruption and badly managed corporations because they were poorly handled by people that main occupation is to defend the country and not having the skill to run companies 6. It is stated in the regulation that active soldier is prohibited to carry out business. Unfortunately, it only converted the form of military business from nationalized companies to foundation and cooperation, for example Kartika Eka Paksi Foundation, Military Head Quarter Foundation, Panglima Sudirman Foundation that had opened the National Building University; Army, Navy and Air Force Cooperation Systems; and also military transport car rental. At that time, the momentum to change was not significant; moreover the country leadership was run by an ex military officer Soeharto that had been investigated in his colonel year for corruption case of sugar plantation 7.

Under President Soeharto, Indonesian military business grew stronger under the doctrine of dwifungsi (dual functions) which supported military socio-political role along with its defense role. In this time, structure of territorial command was established to make military present throughout the country down to village level and made it more possible to take on economic opportunities both formal, informal, even illegal. 8 By the end of Soeharto power, the combined turnover of military business in Indonesia was IDR 2.9 trillion (US$348 million) 9. Still, it was not clear whether the amount provide subsidy to that year national defense budget of IDR 7.5 trillion (US$900 million) 10 since there was no report on how the profit was distributed. Indonesia Corruption Watch reported that most of the money 6

There was big scandal in state’s oil company Pertamina when headed by Colonel Ibnu Sutowo in the 1970s, the oil boom made oil price goes up but after it returned to normal the company was in big debt because of the rampant corruption inside. “Ibnu Sutowo: the Notorious Corruptor”, New Internationalist, Issue 116, October 1982. 7 For further reading read “Soeharto Inc.”, Time Asia, May 24, 1999. 8 Experts in general classified Indonesian military business to two main types: formal institutional and non-formal non-institutional, but there is one more type that exists but not much exposed which is “criminal economy”. In Danang Widoyoko, et.al., Bisnis Militer Mencari Legitimasi, (Jakarta: Indonesia Corruption Watch, 2003), p. 9-10. 9 Cited in World Bank, Accelerating Recovery in Uncertain Times: Brief for the Consultative Group on Indonesia, (Washington DC: World Bank, 2000), p. 29. 10 Cited in Danang Widoyoko, Op. Cit., p. 38.

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obtained from military business was allocated for senior officers that had linkages to the business, not to military institution in general. 11

The 1998 reform era brought more civilian awareness and movement compared with the political orders change in the 1960s. This can be seen in the judicial system where there are more regulations issued to structure the state to govern itself more efficient and effective. Particularly in regulating military business and its funding there are four main state legal articles: •

First, the State Defense Law UU No. 3/2002 in article 25(1) that affirmed “national defense is funded by State Income and Expenditure budget (Anggaran Pendapatan dan Belanja Negara - APBN)”. Therefore it implies that all military expenditure is already given by government, if the budget provided is still lacking then appropriate means should be taken to make it sufficient, and not by finding another source of funding.

•

Second, the Indonesia Military Law UU No. 34/2004 in chapter II on Military Identity in article 2(d) stated: “Professional military is military that is trained, educated, well equipped, does not involved in practical politics, conduct business, and guaranteed its welfare, and also followed state’s political policy that is under the principles of democracy, civil supremacy, human rights, national law regulation, and ratified international law.”

•

The third regulation is in the same law UU No. 34/2004 in chapter VII on Soldier in article 39 stated: “Soldier is prohibited to involve in: 1. 2. 3. 4.

•

activity as member of political party activity in practical politics activity in business, and activity to be voted as legislative member in election and other political ranks.”

And because there is civil awareness of the rampant military business exist, the fourth regulation is on the conduct of taking over military business which is stated in the same law UU No. 34/2004 in chapter X on Regulation on Alteration in article 76: “(1) In 5 (five) years time since the implementation of this bill,

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Ibid., p. 59.

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Government must take over all military business activities owned and run by TNI both direct and indirect. (2) Guideline and further regulation on the execution of clause (1) are regulated in President Decree.”

In sum, the four law articles are about legal source of military funding, professionalism of military personnel prohibition from business activity, and implementation of government taking over military business.

Although the legal basis for government taking over military business exists, the execution is not well run. After the bills came out, team of data collection and verification were made by the president. 12 These teams worked inefficiently. They started late in August 2005, and composed mostly by military people, which made them crammed with subjectivity and interest. President Susilo Bambang Yudhoyono (SBY) then issued decree Keppres No. 7/2008 on April 2008 to create another team named Tim Nasional Pengalihan Aktivitas Bisnis TNI (Timnas PAB). At last civilian and experts were included in this team and in October 2008 they managed to issue recommendations on how the government could takeover military business. By then, the time left until deadline was only a year, but not a single military business had been declared to be taken. Another problem that hampers this process is that until now (February 2009) there is no institution appointed with real power to takeover military controlled business.

Indonesian government’s action to takeover military business is considered slow compared to other countries that were also conducting the same process, for example China. The Asian giant started the reform of its military business on July 1998. In that time, the tentacle of China military over the business sector was so widespread it had made the institution so corrupt and inefficient. Only five months after it started, the government succeeded to takeover around 5000 military owned companies with assets reaching US$ 6.02 billion. 13 The President Jiang Zemin himself led the team that conducted this process. Even though the initiative had its

12

Actual name of the team is Tim Supervisi Transformasi Bisnis TNI (Indonesian Military Business’ Reformation Supervision). 13 Institute for Defense Security and Peace Studies, Seri 9 Penjelasan Singkat (Backgrounder) Bisnis Militer, June 2008, p. 6.

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own share of problems but reform in the defense sector in China, especially the exit of military from the business sector, was done in a more efficient and faster way.

I. 2. Aim and Objectives The purpose of this study is to analyze the efficiency and effectiveness of Indonesian government’s policy implementation for transferring military control of commercial enterprise to the civil sector. This objective will be delivered by exposing evidences of military business facts, policy execution delays and on going process of military business transformation.

Based on the aim formulated, the writing is conducted in order to accomplish these objectives: •

Explain the condition of Indonesian military in terms of funding and history on how it involves in business sector (historic overview, secondary data)

•

Explain the process of how the government of Indonesia separate military from business activity (descriptive, official docs)

•

Assess the efficiency and effectiveness of the government’s policy implementation in separating military from business (stakeholders and media analysis)

•

Give alternatives on how to improve the government’s policy implementation from the assessment conducted and also from other country’s experience in military funding (analysis)

I. 3. Research Questions The above aim and objectives devised in the form of research questions for the reader to have more grasp of the issue. The questions framed in this research cover: 1. Why did Indonesian military involved in the business sector?

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2. Why is it significant for the government to separate military from business activity? 3. How is Indonesian government’s process in separating military from business? 4. How efficient and effective is Indonesian government in implementing

policy

for

transferring

military

control

of

commercial enterprise to the civil sector? 5. What are the alternative solutions to improve Indonesia’s policy implementation learning from other country’s experience?

I. 4. Study Significance The study significance focuses on two issues. Firstly, the work is directed towards evaluating theory in the discourse on sources of military funding, moreover in the involvement of military in to the business sector. Therefore in the bigger picture, it can be use as one of literatures on the subject of managing security sector governance and economic of defense.

Secondly, in terms of policy relevance, this writing will provide knowledge for Indonesia’s government, TNI and people at large to know how the process of military funding and its participation in the business sector in the country. The analysis part will explain the government action in implementing policies to curb military involvement in business sector, the problems arising from the implementation and alternative solutions to those problems. Thus this thesis can be use as one of the reference on how to improve Indonesia’s defense reformation.

I. 5. Conceptual Model In the conceptual model shows concepts and processes elaborated within this thesis. The concepts definition and details will be discussed in Chapter 2, along with literature review, are military as part of government apparatus, military funding, reformation in military funding, and military business. Then in Chapter 3

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the thesis will answer why Indonesian military involved in business and how the reform era brought change. It also will explain origins, benefits, costs and comparative evaluations of military business. In Chapter 4, how is the effort in separating military from business and what have been achieved so far in the process will be shown, then the author can measure how efficient and effective the policy implementation performed. It will also detect the problems which hamper the policy implementation and give alternative options to tackle them or other options in military funding. In Chapter 5 will be suggestion of alternatives on how to improve efficiency and effectiveness for government in separating military from business. The conceptual model in this research is depicted in Figure I.1.

Figure I.1. Conceptual Model for Reseach of Indonesian Government in Separating Military from Business Military Funding: the why (Rationale of Military in Business)

Funding

Military MB

Funding Reformasi: the alternatives (Alternative Funding Options: the viability of reforming Military Business)

Reformasi

Military Reformasi: the how and the what (Efficiency - how reforms have been implemented; Effectiveness- what has been achieved)

Source: Ron Matthews, 2009

I. 6. Research Methods This thesis is written as one of the requirements to obtain master degree from Faculty of Architecture, Policy Planning and Development of Bandung Institute of Technology (SAPPK-ITB) in the major of Defense Management. Therefore it serves research purpose. The focuses of research purpose are on understanding;

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gaining insight into what is going on; and why is it happening. 14 In conducting the research, author abides the study methodology existed. The term methodology refers to the overall approaches and perspective to the research process as whole, and it gives background on why collect the data, what data were collected, where to collect the data, how the data being collected, and how to analyze the data. 15 To give clear categorization of the research conducted, author employed the definition of Patrick McNeil and Steve Chapman from their book Research Methods (Routledge, 2005). In sum, the research methods used in this thesis can be seen in Table I.2.

Table I.2. Research Categories Qualitative case study Approaches X Quantitative Theory Basic Applied X Explorative Analytical stakeholder analysis, media X Research analysis, comparative analysis Categories Types Descriptive Predictive Qualitative Data analysis Quantitative Mix X Primary interviews, official documents X Data source Secondary literature studies (journals, books, X research, newspapers, etc) Source: Author. Elaborated from Patrick McNeil and Steve Chapman from their book Research Methods (Routledge, 2005).

Approach used in this thesis is qualitative in attempt to see the world through the eyes of individuals participating in the case being observed. It further can be classified as qualitative case study approach in which investigator explores a bounded system (a case, which is military being separated from business by the government of Indonesia) over the time through detailed, in-depth data collection

14

Joseph A. Maxwell, Qualitative Research Design: An Interactive Approach, (London: Sage Publication Inc., 1996), p. 15. 15 John W. Creswell, Research Design: Qualitative and Quantitative Approaches, (Jakarta: KIK Press, 2002), p. 6.

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involving multiple source of information (e.g. observations, interviews, audiovisual material, documents and report) and reports a case description. 16

Data collected are both in qualitative and quantitative form. Qualitative data concentrates on the quality of case description in form of word-by-word quotation, while quantitative data is more statistics and numbers, mostly in form of systematized and standardized tabular or graphic information. 17 The data examined are on Indonesian government’s policy implementations in taking military controlled business from TNI which run in the period of 2002 to February 2009. The time span observed was chosen on the ground that the year 2002 is the time when first legal article on military funding came out after Reformasi era. Meanwhile the end time is selected because February 2009 is the most recent seminar on TNI reformation that was held by the Parliament. 18 It was also 6 months behind the deadline given in TNI Law Article 76, which means 90% time already spent so far. The author decided not to wait for the deadline (October 2009) because she must finished her magister study in July 2009 due to scholarship limitation. Research time for collecting data was done over the course of nine months (October 2008-June 2009) by examining the government policy implementation process of military business takeover of Indonesia.

In terms of data source, both primary and secondary data are collected. Definition of primary data is data that is collected first hand by the researcher through research methods such as surveys, interviews and participatory observation. Secondary data is evidence used by researcher which has been produced beforehand, usually takes form of official statistics and various documents. 19 The data is collected from official documents released by the government and teams on TNI business takeover; interviews of the stakeholders (Ministry of Defense, 16

Elaborated from John W. Creswell, Op. Cit., p. 265 and Patrick McNeil and Steve Chapman, Research Methods, 3rd Ed., (Routledge: Oxon, 2005), p. 18 17 Patrick McNeil and Steve Chapman, Op. Cit., p. 17, 20. 18 Seminar Reformasi TNI Pasca 2009, February 26th, 2009 in Nusantara Building, Parliament Complex, Senayan, Jakarta. Paper in Bahasa Indonesia was published in http://www.pksejahtera.org/v2/main.php?op=isi&id=6940 and http://m-ula.blogspot.com/2009/03/catatanpenting-reformasi-tni-pasca.html accessed on March 1st, 2009, 15.05 (GMT+7). 19 Patrick McNeil and Steve Chapman, Op. Cit., p. 131.

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TNI headquarter, civil society organizations, military experts); media reportages; published research and unpublished materials to support this thesis.

The author does not impose any prior assumption on the subject matter and allow any theory to emerge from what is observed. Therefore the theories used are applied concepts in framing the issue of government taking over military business and describing the meaning of the situation. 20 This thesis will not address discourse of theory but more in finding the suitable “best practice” of military funding in Indonesia.

Analytical methods used in this work are stakeholder and media analyses. Stakeholder analysis is done by tabulating the interviews and looking at the stances of each stakeholder. From collected stand points will be derived what are the problems hampering Indonesia’s process in taking over military business. Meanwhile, media analysis is content analysis which counted the frequency of particular issue coverage and also focuses on the meanings, both literal and hidden, lie behind the news. 21 Media analysis is done by tabulating the subject reportages in Indonesian media to create perspectives diagram to shown the dynamic of the process, which in turn shapes the course of the military business taking over. Literatures on other countries experience in taking over military business are also included as reference. The linier process in the writing is shown in Figure I.2. Figure I.2. Flow of Research

Topic

Theory

Design

Military business

SSR & Defense Economics

Methods & outline

Data Collection Literature, interview, officl doc

Analysis Stakeholders & Media

Findings Conclusion & Recommenda tion

Source: Author

20

Further explanations on theory usages see Patrick McNeil and Steve Chapman, Op. Cit., p. 118. Elaborated from “Analysing and Evaluating Media Reports”, Patrick McNeil and Steve Chapman, Op. Cit., p. 160-161. 21

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One important thing for scientific research that determines whether the finding credible or not is validity. Validity means how far the accuracy and precisely of measurement tools in doing their functions. Validity issue might arise when there are inaccurate data and/or incorrect data interpretation, therefore in research, validity needs to be checked. According to Maxwell, there are several ways to do validity test, such as modus operandi approach, searching for discrepant evidence and negative cases, triangulation, feedback, quasi-statistics and comparison. 22 Validity methods chosen by the author to be used in this writing are (1) triangulation – comparing findings from two or more different research methods enables the researcher to conclude whether an aspect of a phenomenon has been accurately measures 23, and (2) readers feedback. Validity through triangulation that will be done in the thesis is illustrated in Figure I.3.

Figure I.3. Validity through Triangulation

interviews – stakeholder analysis

publications – media analysis

VALIDITY

secondary data – official documents, archival research Source: Author

I. 7. Scope and Limitation Scope of observation of this thesis is limited to military institution in Indonesia, it’s funding and economic managerial, its involvement in the business sector, and also the government’s policies and efforts to take the business out of military 22

Joseph A. Maxwell, Op. Cit., p. 92-96. Judith Sleney et al., “Triangulation and Integration: Processes, Claims and Implications”, Journal of Qualitative Research, Vol. 6, 2006, p. 47. 23

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participation. Since the military undergo transformation after the Reformasi, the author will also cover the armed forces organizational restructuring and paradigm shift, especially in the issue of funding.

In order to focus the research, observation is bounded on the implementation of the four current policies issued by Indonesian government after Reformasi on the subject of taking military out of the business sector. The policies also cover issues on military funding source, professionalism, and time constrain given to the government to takeover military business.

Observation time on the issue is limited to February 2009 when the most recent seminar on TNI reformation that was held by the Parliament. The time constraint also imposed by the limitation of author’s length of study to finish her master degree in mid 2009.

I. 8. Structure This thesis is organized into five chapters. Chapter 1 contains a brief introduction on the issue being studied along with problem statement that is elaborated into research question. Furthermore, it provides the objective and significance of the study conducted, using selected research methods in the limitations which bind the subject of research.

Chapter 2 presents relevant literatures on security sector governance especially in conducting military reform in the business sector. They cover the definition, scope and limitation of military business and funding, with also lesson learned from other country that had faced the same issue, such as China. These literatures bring about the basic arguments why business must be taken over from the military by the government and formulated to a concept mapping to produce analytical framework. The framework will be further contextualized into particular issue of separating military from business in Indonesia.

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Chapter 3 describes the historical background on how military business grows in Indonesia, including its characteristic and troubles surfaced from it. The chapter progress on how the country’s 1998 Reformation bring about the needs of separating military from business activity. It includes official documents of National Defense Law, Indonesian Military (TNI) Law and state decrees of teams forming on military business takeover process.

Chapter 4 oversees Indonesia’s policy outcomes and their implementation process on separating military from business activity in the country. The chapter provides data collection on government efforts in taking over the military business and official reports of teams formed for the issue. Next, media analysis is done to see the power play inside the taking over process. The data then combined with the stakeholder analysis to find the problems that hamper the efforts’ effectiveness. Finally, this chapter brings alternative solutions to solve the challenges derived from the analysis and also include lesson learned from other countries’ experience.

Chapter 5 is the conclusion of the thesis which consist summary of the writing, findings and recommendations. These recommendations can be use as policy development and also further research on the subject of military business takeover

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Chapter II THE LOGIC AND PROCESS SEPARATING MILITARY FROM THE GOVERNMENT

II. 1. Introduction of Military Business Literature Review This chapter gives conceptual foundation for the thesis following research. The concepts are derived from relevant literature review on the logic and process separating military from the government. As one of security actors, military is a state institution that provides public service to protect the population without pursuing its own interest, both in economic or political terms. Unfortunately, Indonesian history had shown the contrary. Its military was much involved in the public sector using the doctrine of dual function up until Reformasi era; it has seats provided in parliament and highly engaged in business. Despite the reform efforts, government is not able to fully control its armed forces when the military still has access to off-budget income to support its operation.

The study of Security Sector Reform (SSR) with basic of democratic values provides groundwork on why and how military business should be handled in order not to undermine the power of government and civil supremacy. The flow of structure is illustrated in Figure II.1. Figure II.1. Structure of Chapter 2 Security Sector Reform Security Sector Reform in Indonesia Military Reform Military Business Reform Identify the gap in literature review Source: Author

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II. 2. Security Sector Reform Concept of Security Sector Reform (SSR) was introduced in 1990s when the world experienced changing politic and security environment with Cold War came to an end. Reform was needed as response of emerging new issues, such as democratic consolidation and non conventional threats. The importance of SSR studies grow from the awareness that neither people nor states are able to achieve sustainable development or run their daily life without adequate security. In SSR framework, the secure environment must come from a democratic situation where there is good governance that respect and manage the protection of human rights and where power is in civilian hands. 24 In order to abridge the explanation on SSR, author illustrates its scope in Figure II.2. Figure II.2. Scope of Security Sector Reform Good Governance: Democratic Value

Framework

Security Sector Reform

MoD

Military

Police

Gov Inst

Civil Soc

Def Indust

Actors/ Institution

Rule of Law Policy Dev, Planning & Implement Professionalism Oversight Management of Security Expenditure

Entry Point Issues

Structural Reform & Capacity Building

Activities/ Actions

Source: Author

The definition of SSR as described by security and defense expert Ann M. FitzGerald is “The practice of institutional and operational change programmes across

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For further explanation about good governance, read Jeff Haynes, “The Principles of Good Governance”, in Laura R. Cleary and Teri McConville (eds.), Managing Defence in a Democracy, (London: Routledge, 2006), p. 17-31.

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a national security sector (reinforces by regional efforts) to provide an enabling environment for citizens to go about their daily lives in a safe and secure way” 25. The way of achieving this, according to Indonesian defense and security expert team ProPatria Institute is by establishing democratic control of civilian over the security actors so that they can conduct their roles effectively, legitimately and responsibly in providing guaranteed security to its nation. 26

For actors in security sector, Indonesian defense expert Kusnanto Anggoro, identified those as all the organizations or institutions that own legal authority to use or enforce physical power or threat in order to protect the state and its people, such as military and police; and also civil institutions responsible in the forces management, such as President, Ministry of Defense and parliament. 27 Expert on SSR from Washington DC Center for International Policing, Nicole Ball, gave reason why security actors need to be reformed; it is when they contribute to insecurity, instability and various forms of conflict. 28 The problems range from politicized security bodies, war as means of resolving disputes, disregard for the rule of law on the part of security bodies, serious human rights abuses by security bodies and high security budgets.

Security bodies that are badly managed and engage in politic and economic affairs tend to be professionally weak and therefore unable to properly protect people and the state against aggression, criminality or other security problems. Ball believes that security is obtained from democratic governance manage issues in the security sector, such as operational effectiveness of the security forces and legacy of past conflict, whether they have to run disarmament; demobilization and rehabilitation, or whether they have problem with small arms and light weapon or needed support from international peace operation. These are basically issues 25

Ann M. Fitz-Gerald, Security Sector Governance Introduction, Module ITB-Cranfield, February 2008. 26 Tim ProPatria, Reformasi Sektor Keamanan Indonesia, (Jakarta: ProPatria, 2004), p. 18. 27 Kusnanto Anggoro, “Reformasi Sektor Keamanan: Kewenangan Negara dan Partisipasi Publik”, in Andi Widjajanto (Ed.), Reformasi Sektor Keamanan Indonesia, (Jakarta: ProPatria Institute, 2004), p. xviii. 28 Nicole Ball, Dilemmas of Security Sector Reform: Response to “Security Sector Reform in Developing and Transnational Countries, (Berghof Research Center for Constructive Conflict Management, 2004), p. 2.

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faced differently by every country. Therefore every state has its own way in conducting SSR because each has its distinct situation within the security issues although countries can also learn from others’ similar SSR experiences.

To deal with SSR issues the country must realized which problems they are facing before it is able to be addressed; this is what Ball and team identified as entry points. 29 These entry points show where the problem might exist, which are 1)

2)

3)

4)

5)

Rule of law Government regulations should be made and provisioned whether it operate effectively. Policy development, planning and implementation: The process should be transparent and participatory. The policies should be well developed through right assessment, have comprehensive strategy and should be well implemented. Professionalism of the security bodies They need to stick to their function, received adequate resources, have expertise and support democratic governance. Oversight Oversight of the security actors should be done both internal and external by state officials and also civil society. Management of security expenditure. Expenditure should be prepared with strategy, defense policies must be affordable, prioritization of resources allocation and used in efficient and effective measure.

These points are considered keys for a well-governed security sector and can be use to further conduct reform activities of SSR, so they can be easily directed.

Activities in SSR can be done by two ways: structural reform and capacity building. 30 The activities are ranging from institutional capacity building, defense reviews, education, training, rule of law, human rights, management, procurement, to human resources, although not limited in only those. The actions in SSR are conducted by actors or stakeholders of the security sector. Because SSR is highly political in nature, improving democratic security sector reform 29

Nicole Ball, Tsjeard Bouta, Luc van de Goor, Enchancing Democratic Governance of the Security Sector: An Institutional Assessment Framework, (The Hague: Clingendael Institute for the Netherland Ministry of Foreign Affairs, 2003), p. 12-23. 30 Ann M. Fitz-Gerald and Dick Baly, Security Sector Governance Review, Module ITB-Cranfield, February 2008.

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cannot be addressed solely by technical measures or work conducted by only one actor. Rather, it is essential to understand crucial political relationship among key actors, how and why the decisions are made, and the stimulus and blockages for change. So what is important is not only the actors but also the dynamic relations between them in order to effectively conduct SSR activities.

II. 3. Security Sector Reform in Indonesia As Nicole Ball put it, every country has unique position that allows it to perform SSR in its own specific way according to its need. Indonesia experienced SSR in 1998 after the country endured economic crisis which overthrown a 32 years long standing ex military president Soeharto from leadership. Indonesian political expert Rizal Darma Putra stated that security sector reform is part of national reform which was generated from the spirit to recover from multidimensional crisis caused by authoritarian and corrupt government. 31 Prior to 1998 Reformasi era, security actors or stakeholders, such as Indonesian military, police and intelligence were the backbone of the regime. Just as what had happened in authoritarian countries, the security institution did not run professionally and acted as “the ruling class” for political elites.

The national reforms demanded by people movement in 1998 were covering issues of President Suharto removal from power; eradication of practices of corruption, collusion and nepotism which were rampant in the state’s institutions; and abolition of the armed forces involvement in civil sector. Within the security sector, the reform progressed in more specific action demands, which were the separation of police and military forces; annihilation of economic and political roles of security actors; accountability of violent acts, human rights abuses and other law breaking conducted by security actors and government; also professional security actors that are regulated under civil authority. 32 Overall the

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Beni Sukadis and Eric Hendra, Perjalanan Reformasi Sektor Keamanan Indonesia, (Jakarta: Lesperssi and DCAF, 2008), p. v. 32 Mufti Makarim and S. Yunanto (eds.), Efektivitas Strategi Organisasi Masyarakat Sipil dalam Advokasi Reformasi Sektor Keamanan di Indonesia 1998-2006, (Jakarta: IDSPS, 2008), p. 11.

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main characteristic of Indonesian SSR is on regulating civil-military relations that were for many years had been disarray.

The origin of SSR to happen in Indonesia was that the reform needed to restore negative image haunting Indonesian armed forces ABRI. Cumulative reaction toward bad roles of the security actor was started in the changing of Soekarno presidency to Soeharto in 1965 with its support to execute Indonesia Communist Party PKI. 33 ABRI was also seen to be involved in private business, agrarian conflicts which took over people lands, and also political and economic conflicts. Civil activists also believed that human rights abuses perpetrated by the state were supported by the armed forces, such as in Udin journalist killing, massacre of Tanjung Priok, case of Kedung Ombo land confiscation, and military actions with human right abuses against separatist group in East Timor, Aceh and Papua. 34 These activists shaped the public opinion of foreign actors and Indonesian population that seen the country’s worsening situation due to Asian economic crisis 1997, which in turn forced the government to reform itself, in order to avoid chaos and fleeing investors. Activities of SSR run in Indonesia for ten years now. Although it had been quite sometime, the progress is not fast and there are still problems to be solved. Nevertheless Indonesian parliament member Suripto (2004-2009) had noted achievements that the country accomplished so far, which are: 35 a) Removal of military and police from legislative body b) Institutional separation between Indonesian military (TNI) and police force (POLRI) under Parliament Decree TAP MPR VI/2000 c) Separation of roles between TNI-POLRI where TNI is managing defense and POLRI is in security under Parliament Decree TAP MPR VII/2000 d) Formulation of Law on Indonesian Police Force (POLRI) UU No. 2/2002 e) Formulation of Law on Management of Defense Sector UU No. 3/2002 f) Formulation of Law on Indonesian Military (TNI) UU No. 34/2004 g) Prohibition for military member to involve in politic and business as regulated in Article 39 UU No. 34/2004 h) Existing time limit for military business takeover 33

Danang Widoyoko, et.al., Bisnis Militer Mencari Legitimasi, (Jakarta: Indonesia Corruption Watch, 2003), p. 26-27. 34 Mufti Makarim and S. Yunanto (eds.), Op. Cit., p. 12. 35 Suripto, “Refleksi Satu Dasawarsa Reformasi Sektor Keamanan di Indonesia”, in Beni Sukadis and Eric Hendra, Op. Cit., p. 137-138.

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i) Existing statement that State Income and Expenditure budget (APBN) as the sole source of defense budget and positioning of State Audit Bureau BPK as institution that has the right to conduct audit on the budget

II. 4. Military Reform According to the norms of democracy, military is the guarantor of good governance and honest civilian rule 36, unfortunately not every state runs the ideal function of this body, therefore reform is needed. Military reform is a part of SSR considering that the military institution is one of the institutions in the security sector and it also holds access to coercive power enforcement. In authoritarian rules, military generals are commonly installed in the parliament or other strategic bodies to support the corrupt government policies. In return, military elites are secured in their position and finance.

When transition occurred, wave of conducting good governance then pushed military to conduct change as their old supporting regime change. Political scientists Cottey, Edmunds and Foster classified military reform in two generations of change. 37 The first generation is done by initiation of democratic reform after periods of military-backed authoritarian regime. It changes institutional framework by abolition of security institution associated with the old regime, establish new civilian bodies controlling armed forces, changes command system, and empowerment of parliament. The focus of this stage is to dismantle old power structures and defining end goal of democratic transition.

The second generation reform is addressing the capacity problem of the newly created institution and to control the remaining powers of armed forces. The second generation strengthen framework for oversight by political institutions and civil society groups that play the role as watchdogs. Challenge of this stage is on

36

Amos Perlmutter, The Military in Politics in Modern Times, (New Haven: Yale University Press, 1977), p. 111. 37 Andrew Cottey, Timothy Edmunds and Anthony Foster, “The Second Generation Problematic: Rethinking Democratic Control of Armed Forces in Central and Eastern Europe”, accessed from http://www.bris.ac.uk/Depts/GRC/CMR/TCMR%20Papers/TCMR%201.7.htm in December 8, 2008.

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capacity building that seeking right combination of expertise, experience, funds, infrastructure, supporting staff, technology and information. The flow of military reform is illustrated in Figure II.3 with the area covered marked in grey. Figure II.3. Flow of Military Reform Framework

Good Governance: Democratic Value

Security Sector Reform

MoD

Military

Police

Gov Inst

Civil Soc

Rule of Law Policy Dev, Planning & Implement Professionalism Oversight Management of Security Expenditure

First generation reform : Structural Reform Second generation reform : Capacity Building

Def Indust

Actors/ Institution

Entry Point Issues

Military Reform Actions

Source: Author

In the research conducted by political analyst Marcus Mietzner, it briefly showed different success level of military reform that occurred in developing countries of the world. For example several states in post-Soviet Central Asia and sub-Saharan Africa have not yet begun their civil-military reforms. Meanwhile countries like Ghana, Nigeria, Turkey and Russia were conducting their first generation military reforms, although the armed forces still highly politicized and act as privileged institution. Indonesia is viewed to be in the same level as this batch of countries. It shown stable results addressing first and second generation reforms but not really successful because of the weakness of the state and renewed conflicts. 38 Mietzner also views that there are countries that more advance from Indonesia in conducting military reform, such as South Africa, Taiwan and South Korea.

38

Marcus Mietzner, The Politics of Military Reform in Post-Suharto Indonesia: Elite Conflict, Nationalism and Institutional Resistance, (Washington: East West Center, 2006), p. 59 & 66.

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Nevertheless, after ten years of Reformasi, the most leading part of Indonesia’s SSR progress is the military reform compared to civil bureaucracy and administration. 39

II. 5. Military Business Reform Military business reform is a part of military reform in the subject of the body’s funding by the state and its management. In order to define the reform action needed in military business, author first need to define the term of military business. Definition of military business as written in The Military as an Economic Actor: Soldiers in Business, a study carried out by Bonn International Center for Conversion (BICC) in 2003 is “economic activities falling under the influence of the armed forces, regardless of whether they are controlled by the defence ministries or the various branches of the armed forces or specific units or the various branches of the armed forces or specific units of individual officer.” 40

The BICC definition is considered not able to cover the illegibility and nontransparency of military business. Ayesha Siddiqa, for example, came with her own definition when writing about Pakistan’s military business. She defined the term as all activities that transfer resources and opportunities from the public and private sectors to an individual or a group within the military, without following the norms of public accountability and for the purposes of personal gratification.41 The transfer of resources can take many forms, such as state land transferred to military personnel, diverting business opportunities to armed forces personnel or the military organization by flouting the norms of free market economy, even resources spent on providing perks and privileges for retired armed forces personnel, such as provision of support staff, membership of exclusive clubs, subsidies on utility bills and travel, and subsidized import for vehicles for personal use by senior officials. 39

Beni Sukadis and Eric Hendra, Op. Cit. Jorn Brornrnelhorster and Wolf-Christian Paes (eds.), The Military as an Economic Actor: Soldiers in Business: Soldiers in Business, (Basingstoke: Palgrave, 2003), p. 4. 41 Ayesha Siddiqa, Military Inc.: Inside Pakistan’s Military Economy, (London: Oxford Press, 2007), p. 5. 40

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Cornelis Lay, in his comparative study between Indonesia and China military business, stated that the form of military business is ‘shadow economy’ or institutionalized corruption, which often only discovered on big cases of arms procurements. 42 In terms of its form, in Indonesia, Danang Widoyoko et al categorized three forms of military business: 43 •

Formal business: involved military as an institution in the business. Example of this form is in the foundations under certain military divisions or headquarters. This form of business is not only run in the central but also in military districts. Other example is cooperative exist in military environment.

•

Informal business: does not involve military as institution but military individuals, even those who are inactive or retired. Widoyoko stated that this form of business is initiated since the military personnel still active and employed by state or private companies.

•

Criminal economy: usually in a form of support given by military personnel to the practice of illegal business. For example drugs business, illegal logging, supplier for demonstration protesters and backing of gambling activities. This form of military business also includes security money demand when there is security turmoil.

The argument for military business activity to run is because the state defense budget does not cover military expenditure. In the words of Jorn Brommelhorster and Wolf-Christian Paes, military business is a part of extra-budgetary income that subsidizes the lack of government provided funding. The gap can be a result of economic mismanagement, or really the result of cash-flow crisis, the armed forces have often turned to private enterprises to make up the shortfall. 44 This usually occurs in transition economy where state sector is in structural adjustment.

42

Cornelis Lay, “Menata Bisnis Serdadu: Mencari Ilham di Negeri Tirai Bambu”, in Jaleswari Pramodhawardani and Andi Widjajanto (eds.), Bisnis Serdadu: Ekonomi Bayangan, (Jakarta: The Indonesian Institute, 2007), p. 30-31. 43 Danang Widoyoko, et. al., Op. Cit., p. 9-10. 44 Jorn Brornrnelhorster and Wolf-Christian Paes (eds.), Op. Cit., p. 14.

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The diagram of how military business filled defense budget deficit is depicted in Figure II.4.

Figure II.4. Military Business as Part of Military Expenditure

Source: Jorn Brornrnelhorster and Wolf-Christian Paes (eds.), The Military as an Economic Actor: Soldiers in Business: Soldiers in Business, (Basingstoke: Palgrave, 2003), p. 12.

In her own terms, author defines military business as “all activities conducted by military personnel, both active and inactive, under its institution or not, for achieving economic gain”. Author understands the difficulties in applying accountability mechanism and measuring government action to the broad and shadowy nature of her military business label, since not all the business are listed. Therefore to make the attempt on assessing government policy implementation on the subject, author uses practical boundaries given by National Team of TNI Business Activity Transfer (Timnas PAB TNI) 45. The team defines Indonesian military business as business activities that cover foundations, cooperatives, thw usage of state assets, and other activities outside the main tasks and function of TNI. 46 This is the definition and scope of military business that will be researched by author, and which is the object of reform. 45

Actual name is Tim Nasional Pengalihan Aktifitas Bisnis Tentara Nasional Indonesia. The definition includes businesses under military foundations in sectors of social, education, housing advance payment, health support, and commercial activities such as farm, construction and trading. It also handles the military foundations that make deal with business partners to 46

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In the study of SSG, one of the points on how to work good governance is from the economic of defense. In Enhancing Democratic Governance of the Security Sector: An Institutional Assessment Framework, Nicole Ball et al explained what does one country need to manage security sector expenditure: “Budgets should be prepared against a sectoral strategy; defence policies must be affordable; resources must be allocated according to priorities both within the defence sector and between defence and other sectors; and resources appropriated must be used efficiently and effectively. Key principles of public expenditure management such as accountability, transparency, and contestability are as relevant in the security sector as in other sectors.”

47

It can be seen that the democratic rules clearly did

not advice one country’s military to seek its own funding through military business.

Military business need to be reformed and taken over by the government because it gives ways to the military to seek its own funding in non-transparent way. Because military is a state tool, in democratic ideal its financial support should come entirely from the government. There are several reasons why military should not seek its own funding. Indonesian Corruption Watch put forward three arguments 48: 1. The freedom gained by the military by having independent source of fund weakens government capacity in implementing national objectives and mean of achieving them. 2. Time and effort absorbed in seeking self funding (business) diverts soldiers and military members from their state tasks, which are defending the country from external threats and strengthening domestic security. 3. Military business activity creates distortion in national economy and hampers its development by lowering productivity and misallocation of scarce resource.

achieve benefits. From Timnas PAB TNI Final Report Recommendation given to author on February 3, 2009. 47 Nicole Ball, Tsjeard Bouta, Luc van de Goor, Enchancing Democratic Governance of the Security Sector: An Institutional Assessment Framework, (The Hague: Clingendael Institute for the Netherland Ministry of Foreign Affairs, 2003), p. 33-34. 48 Danang Widoyoko, et. al., Op. Cit., p. 68-69.

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Other consideration of why state military ought not to seek its own funding is from the transparency. Defense funding should be part of public spending because it is not commercial good, therefore the transparency of budget must be accountable. When the body acquired off-budgetary income, it will be harder for civil government to conduct transparency assessment. These disputations should be strong enough for the government to reform military business.

II. 5.1. Boundaries of Military Business Reform Based on the issue, boundaries are set in the scope of restructuring necessary for consideration. Experts from The Indonesian Institute gave four restructuring issues in conducting military business reform. 49 Firstly is law-based restructuring, which the government takeover military business with considering the form of business recognized by the state. Indonesia distinguishes three form of business: state-owned company, private company, and foundation and cooperation. Secondly is ownership-based restructuring, which the government takeover military business by considering the ownership composition of the military business. In Indonesia, for instance, the business ownership is complex, military can own the whole company, or part of it, or have shares, or even manage the business. The complexity is shown in Table II.1 for illustration.

Table II.1. The Complexity of Military Business Activity Military Ownership (100% or partial) Management Business Activity Direct Indirect Direct Indirect Legal

Institutional

NonInstitutional

1.Foundation 2.Cooperation 3.Commercializati on of Military assets 4.Commercializati on of security service Not included in the Indonesian Military Law

Shares inclusion

Nepotism = Law upholding

Based on Indonesian Military Law Article 39 and 47 this activity cannot be done by active TNI personnel, therefore out of law hand

49

The Indonesian Institute, “Academic Paper: The Takeover of TNI’s Business Activity”, in Jaleswari Pramodhawardani and Andi Widjajanto (eds.), Op. Cit., p. 117-118.

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mandatory Illegal Criminal = Law Enforcement Source: with minor modification from The Indonesian Institute Team, “Academic Paper The Takeover of TNI’s Business Activity “in Jaleswari Pramodhawardani and Andi Widjajanto (eds.), Bisnis Serdadu: Ekonomi Bayangan, (Jakarta: The Indonesian Institute, 2007), p. 128.

Thirdly is functional-based restructuring which the government takeover military business by considering the benefit given to military personnel, it can be divided to two types: (a) business that only benefited limited elites military high ranks, and (b) business that give benefit to all personnel. In the team perspective, type “b” military business function does not need to be taken over because this type of business is also occurred in other countries. Fourth is sustainability-based restructuring which the government takeover military business by considering the profitability/non-profitability of the business. This consideration is needed to make planning for the business future after taking over process.

Parameter of the government takeover military owned business ideally must be in the corridor of transparency, accountability, efficiency and also weighting state’s budgetary ability. In the early stage, government must conduct assessment on the business with listing, verification and assets audit which then be used as bases to map the path of separating military from its business activity. Subsequently, all the stakeholders should formulize the stages of military separation from business using the assessment report. Parallel with the action, government also must prohibit commercialization of military assets and security services, and enforce law on the illegal military business.

It is understandable that the parameters of military business reform made by countries are blurred, since the nature of military business is shadowy. Nevertheless efforts must be made to keep the process of reform transparent and accountable. Political expert Mohammad Fajrul Falaakh stated the prerequisite

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operational regulations in order to have more applicable parameter of military business reform. 50 They are: a) b) c) d)

e) f) g) h) i) j)

Working definition on military business activity Takeover regulations Time limit and stages of takeover Assignment of high echelon at least at minister level as the person responsible and also technical operational echelon to manage military business take over Coordination with audit bureau in terms of military business asset Regulations on investigative audit for all the military business that are subject of takeover Coordination in data providing of government assets owned by MoD and the military Coordination between all ministers involved and head of military to formulate management and limitation of military business activity Obligation for all government staff engaged to make report and implement principles of transparency and accountability in taking over process Regulations on layered oversight mechanism conducted by internal military, MoD, parliament and civil society organizations.

II. 5.2. Comparative Study Military Business Reform Military business is not a new phenomenon noted by international political scientist Charles Tilly.51 In the Middle Ages, military leaders were entrepreneurs that gather resources for fighting wars. Then before French Revolution, military lived from resources gained by feudal landowners that made partnership with monarchs. Ottoman Empire, Sweden and Soviet Union armed forces also used to extract public taxes to raise finance for war-making. In the modern history, according to expert Peter Lock, the conceptual root of military involvement in business grew in Germany after World War I 52. The ideology originated from “total war” concept that had been introduced by Ludendorf in 1922 following the lost of German armed forces in WW I. It evaluated that German had lost because it had not had sufficient support in politic and resources, which based from the lack of military power over resources. This concept then justified the positioning of all national resources under military command in order to win the war. 50

Mohammad Fajrul Falaakh, “Telaah Hukum Pengambilan Bisnis TNI”, in Jaleswari Pramodhawardani and Andi Widjajanto (eds.), Op. Cit., p. 70-71. 51 Charles Tilly, Coercion, Capital and European States, (Oxford: Blackwell, 1992), p. 87. 52 Peter Lock, “Exploring the Changing Role of the Military in the Economy”, accessed from http://www.peter-lock.de/txt/mileconl.html in February 11, 2009.

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The “total war” concept that put national resources as integral part of the military subsequently spread to many third world countries. Firstly it got to Latin America then to all over the world. Common rationale of the concept acceptation is that the government is unable to provide sufficient defense budget to fulfill military spending, even to provide basic welfare for its soldiers. Therefore military involved in business because the state has failed to met the most basic military necessity. The defense establishment then generated capital for personal and organizational benefit in partnership with the ruling party. With such involvement, the military is expected to play larger role in governance, which in turn strengthens their economic grasp. This occurred in countries like China, Syria, Cuba and Iran.

For example, the military business grew rampant in Turkey where its army conducting self funding which made the organization enhanced its power. The old country leader Kemal Ataturk had legalized military role as defender and protector of the constitution and national integrity from outside threat as well as corrupt civilian rule. 53 Since defense establishment is one of political and economic key players, Turkey capitalist elite built partnership with the military to jointly exploit resources. This condition is bad for other economic actors and disturbing the way of free market. It also did not allow people to question defense budget and military business outlays, which undermined principle of transparency. Turkey armed forces then need to reform its politic and business roles since the country is enrolling for membership in the European Union. 54 The military must prove that they are inline with democratic value, although it still acts as privilege institution.

Like the Turkish armed forces, Pakistan’s also facing the same problem with military business. Civilian have difficulties accessing information of the business conducted by military personnel. There are even laws that regulate military 53

Amos Perlmutter, The Military in Politics in Modern Times, (New Haven: Yale University Press, 1977), p. 111. 54 Marcus Mietzner, Op. Cit., p. 65.

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business foundations to be listed as private entities so government auditor cannot get access to examine their reports. 55 Civil bureaucracy and business entrepreneurship are bound to cooperate with military fraternity to bring about safety to their business and position. Although the collaboration benefited all parties involved but it gives negative impact to democracy. General-President Pervez Musharraf when got elected in 2002 pledged to establish good governance 56, but until now there is no significant change in reforming military domination in economy and politic.

Since military business can be done without institutional approval, there were some incidents of military act independently in looting resources. For example this happen in Russia post Cold War when the restructuring occurred and soldiers lack of sufficient funds led them to engage in looting and plundering. In the western countries, defense restructuring in countries such as the United States, France, and the United Kingdom forced retired officials to form military training and equipment companies 57 although if these practices done without using their military network and cronies, they do not harm democratic values. Therefore the military business can be done in various ways and not always destructive when it is regulated and controlled by civil oversight.

II. 5.3. Cost and Benefit of Military Business Reform There are problems arising from military involvement in the business sector that the author had observed. First, the involvement of military personnel allows the exploitation of resources and even for them to run their own business untouchable because of the coercive power support. Secondly, scarce resources then made unhealthy competition between military personnel which benefited the elites and made them unfocused in their main function as guardian of the state. Thirdly, the capital generated from military business is out of the hand of state auditor which made it non-transparent to which the assets came from and what the profit used 55

Ayesha Siddiqa, Op. Cit., p. 21. Hasan Abbas, Pakistan’s Drift to Extremism, (New York: M.E. Sharpe, 2005), p. 227. 57 Ayesha Siddiqa, Op. Cit., p. 12. 56

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for. Worst the capital can be allocated in operations that are against democratic values. Regulating how military conduct business therefore should be done with initially pondering the cost and benefit of reforming.

Apart from the clear costs that need to be done in conducting reform, such as extra effort and work from all the stakeholder of security sector and necessity of regulating laws and infrastructures, there are some other costs that need to be considered. The biggest cost of conducting military business reform according analysts Lex Rieffel and Jaleswari Pramodhawardani is that illegal activities of moonlighting will be larger when the personnel suddenly stopped from getting their usual income from military business. 58 It has security risk when the country pushed its armed forces to go out of business without considering their welfare since they had access to coercive power and military abilities. This risk can be managed by adding personnel’s salary and benefits. But it turn, the action will bring another cost to the state budget and competition with other budget priorities, such as health and education.

Meanwhile the benefit of conducting military business reform under the umbrella of SSR is to be consistent with democratic norms and sound principles of good governance, and thus contributes to a well-functioning security framework. 59 It means the state can provide security for citizens to go about their daily lives, not only for those who are privilege to make linkage with the military through business but also for the military personnel itself not to compete with one another. Therefore the reform also builds professional military that work within its function. Rieffel and Pramodhawardani also put forward the reasons to conduct military business reforms, which are strengthening civil supremacy; for the military to follow regulations and not to conduct operation in secrecy; making way for transparency and accountability; and strengthen the government bodies’

58

Lex Reiffel and Jaleswari Pramodhawardani, Menggusur Bisnis Militer: Tantangan Pembiayaan TNI Melalui APBN, (Bandung: Mizan, 2007), p. 30. 59 Herbert Wulf, Op. Cit., p. 9.

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coordination for security sector power sharing. 60 In form of table, the cost and benefit of military business reform can be seen in Table II.2. Table II.2. Cost and Benefit of Military Business Reform Cost Benefit 1. consistent with democratic norms 1. extra effort and work of stakeholder and principle of good governance of security sector 2. enabling safe and security to all 2. regulating laws and infrastructures citizens 3. chance that illegal military business 3. military personnel need not to grew larger compete in business 4. security risk 4. build professional military 5. higher state defense budget to 5. strengthen civil supremacy compensate 6. military follow regulation and not to conduct secret operations 7. making way for transparency and accountability 8. strengthen government bodies’ coordination for security sector power sharing Source: Compiled by author

II. 5.4. The Need to Reform Military Business Necessity to reform military business increase in many countries in the world since they had experienced increasing negative impact of the activity. Military business can be corrupt organizations because they do not open themselves to public audit, this weaken the condition of the armed forces, which then undermined the government as the body that should managed its military tools. When government lost public trust and military acted in its own way, the state is on its way to failing. Even country as big as People Republic of China felt the urgency to reform its military business.

People’s Liberation Army (PLA) of China had been involved in business since 1930s Mao Zedong era. Their business extend from agriculture, trading, mining, manufacture factory, entertainment security, infrastructure building, land reclamation, to opening state farming. Reason behind China’s military business was the cliché government inability to fulfill defense budget. This was resulted

60

Lex Reiffel and Jaleswari Pramodhawardani, Op. Cit., 29.

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from General Mao doctrine of “people’s war” which adopted huge armed forces. 61 Military business thus became very huge, with merger of enterprises into conglomerates. But military business grandiosity started to kickback the government, soldiers lost their integrity and involved in illegal business, they carried out ventures without permission, therefore weaken leadership and filled with rampant corruption. 62

Tiananmen Square incident in 1989 and Deng Xiaoping leadership in 1992 brought the country to realize the necessity of military professionalism that cannot be achieved with the institution involvement in the competitive world of business. Deng slowly reform military business nature but it grown more corrupt until in 1998 he declared military business divestiture in public. The decision already made a year before so the military personnel already aware of the issue, though the major military business takeover were not fully set until three years later in May 2000. 63 The divestiture was made in three phased. First was establishing the bodies which responsible for the action, second was formal registering and assessing assets, and lastly was going through the PLA business accounts and transforming them to state-owned companies. Up to March 1999, China government had taken over 150 large enterprises formerly owned by the military and police. 64

Another place where military business reform held necessary occurred in Turkey. It is a developing nation of predominantly Muslim but moderate in religious fervor with secular regime, and the military have been continually involved in the political affairs since its beginning. The country’s military owned Armed Forces Mutual Assistance Fund (OYAK) which was one of the largest business conglomerates. The way of military business grow in Turkey was supported by political moves, such as 1961 and 1982 amendments that institutionalized 61

Ellis Joffe, “The PLA and the Chinese Economy: The Effect of Involvement”, Survival Journal, Vol. 37, No. 2, Summer 1995, p. 26. 62 Ibid., p. 34-36. 63 James Mulvenon, Soldiers of Fortune: The Rise and Fall of the Chinese Military Business Complex 1978-1999, article from Bonn International Center for Conversion, October 1999, p. 1320. 64 Ibid., p. 20.

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National Security Council as the highest non-elected decision-making. 65 The raise of power was followed by partnership with business elites that need support for their industry. Turkish military personnel and civil staff in MoD were also burdened with its involvement in business because government imposed 10 percent tax on their basic salary to raise fund for investment of OYAK and profitmaking venture. 66 It was aimed to help national economic growth, promote private sector and place the military closer to business people.

Since Turkey enrolled membership to the European Union, military business in the country needs to be reformed because it hamper democratic environment to grow. Military business reform was run under government body overall restructuring given by EU requirement. 67 Although there were efforts to reform, OYAK had not been stopped but its management was opened to public and even invited international investor which reaped assets as big as US$9 billion. 68 Turkey armed forces are still in strong position despite security sector governance actions, nevertheless it gained more accountability and transparency.

Learning from the experience of China and Turkey, general policies in conducting military business reform must address the five entry points of SSR, which are rule of law; policy development, planning and implementation; professionalism of the security bodies; oversight; and management of security expenditure. Although all points are interconnected, the most important boundary in military business reform is managing security sector expenditures. It should be prepared with strategy, defense policies must be affordable, prioritization of resources allocation and used in efficient and effective measure. The key principles of managing public expenditure are accountability, transparency and contestability in managing resource. If all these are included, the military business reform then can be conducted.

65

Tim Jacoby, Social Power and the Turkish State, (London: Frank Cass, 2004), p. 145-148. William Hale, Turkish Politics and the Military, (London: Routledge, 1994), p. 174. 67 “Turkey Reform Targets Army Power”, BBC World, July 30, 2003. 68 “Turkey: Planning for Profit”, The Banker, May 2005. 66

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II. 5.5. Hurdles of Reforming Military Business In the military business reform conducted in several countries, challenges still exist. There are serious problems in bureaucratic and political levels, which mostly concerning the issues of resource allocation, discipline and commitment of conducting the military business reform. How well the country deals with these issues will determine the success or failure of the government in separaring military from business. Indonesia is one of the countries that conduct military business reform since the fall of Soeharto authoritarian regime in 1998 up until now. Some writings had been made about the topic, such as Bisnis Serdadu: Ekonomi Bayangan edited by Jaleswari Pramodhawardani and Andi Widjajanto69; Too High a Price: The Human Rights Cost of the Indonesian Military’s Economic Activities written by Lisa Misol 70; and Bisnis Militer Mencari Legitimasi (Military Business Seeking Legitimacy) by Danang Widoyoko, Irfan Muktiono, Adnan Topan Husodo, Barly Haliem N. and Agung Wijaya 71. Most of the writings focused on how the military business grows in the country, its impact in undermining civil supremacy and democracy.

So far from the literature review conducted, there is a gap relating the reform of military business in Indonesia, especially on the subject regarding to government policy implementation in taking over military business. Therefore in this thesis, author will specify her study in studying the efficiency and effectiveness of government policy implementation on separating military from business with the time length from 2004 to February 2009. The period is taken since the country established regulation in taking over military business to the last parliament meeting concerning the subject.

II. 6. Summary of Literature Review Security sector reform is a response to changing political and social situation in order for state to be able to provide adequate security for its people. In conducting 69

Jakarta: The Indonesian Institute, 2007 Jakarta: Human Rights Watch, 2006. 71 Jakarta: Indonesia Corruption Watch, 2003. 70

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SSR, the measurements and actions must be based on democratic values with good governance that respect human rights and have civil supremacy.

The conduct of SSR that had taken place in Indonesia since its transition from Soeharto authoritarian regime up to now made it advance consolidating democratic country in South East Asia. From the many facets of SSR conducted, one of the most leading reforms is in the area of military reform. Some of its many achievements are the removal or military and police from legislative body; institutional separation between military and police; and also the creations of national laws to manage the security actors.

Although Indonesia had achieved big progress in military reforms, there are some issues that are still lagged behind. Military business reform is one of them. Although many writings are made on the subject, there is not yet any comprehensive study that focuses on the implementation of the military business reform especially in how government taking over business from the control of the armed forces. Therefore author take this chance to further elaborate on Indonesia government policy implementation in separating military from business activity since the country established national laws on the issue in 2004 to the last parliament meeting in February 2009.

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Chapter III MILITARY BUSINESS IN INDONESIA: HISTORY AND CHARACTERISTIC

This chapter observes Indonesia military business historical background, characteristic and troubles surfaced from it. The activity in already started in the early formation of the Angkatan Bersenjata Republik Indonesia (ABRI) armed forces in 1945. The activity had grown steady under first President Soekarno governance because he was too busy managing state multi party politics. Indonesia’s second President Soeharto afterward created more conducive environment for military business to prosper and reached its peak in the 1980s. Asian financial crisis in 1997 had invoked people movements which forced Soeharto to put down his throne a year later. The situation brought streams of state restructuring in Reformasi era, including military institution that separated from police force and changed its name to Tentara Nasional Indonesia (TNI). In the reform, legal based to takeover military business was made in 2004, which given government five year target to solve the issue. From the illustration, sub chapters will be done chronologically and wrapped up with characteristic of Indonesian military business and problems arose from it. Author will also give explanation on the state defense budget in order to portray Indonesian defense economic condition that commonly use as argument of keeping military business. The structure of Chapter 3 is depicted in Figure III.1. Figure III.1. Structure of Chapter 3 The Making of Indonesian Military (1945-1966) The Growing of Military Business (1966-1998) Reformasi impact to Military Business (1998-2004) Military Business in Current Government (1998-2004) Indonesia Military Business Characteristic and Problems Source: Author

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Besides giving background on military business growth in Indonesia, this chapter answers two out of five inquiries given in Research Question section stated in page 6-7 of this thesis. Firstly why did Indonesian military involved in the business sector. And secondly, why is it significant for the government to takeover military controlled business.

III.1. Indonesian Military: Its Making and Jumping to Business (1945-1969) Different from other countries, Indonesian military did not form by the base of strong government to start with. Embryo of its armed forces came from three sources: first, ex military personnel hired by Dutch colonial Koninklijk Nederlandsch Indisch Leger (KNIL). Second, the armed forces made by Japan military occupation Pembela Tanah Air (PETA). And third, guerrilla groups from parts of Indonesia that were supporting independence. 72 The three were united by state under the name Tentara Keamanan Rakyat (TKR) in October 5, 1945. Although there were series of name change 73, Indonesian military before Reformasi was commonly called by its acronym ABRI.

The nature of Indonesia military background, especially guerrillas, had been to seek its own funding with made them inclined to jump in the business sector. Producing revenue to pay soldier salary was important in the early years of countering Dutch efforts to take Indonesia back up to 1949. Each fighting unit must seek its own funding because the government had not had enough finance to support its operations. Smuggling of rubber and natural goods, even selling drugs

72

Danang Widoyoko, et.al., Bisnis Militer Mencari Legitimasi, (Jakarta: Indonesia Corruption Watch, 2003), p. 17-18. 73 From TKR, it changed its name to Tentara Keselamatan Rakyat in January 1, 1946, then to Tentara Rakyat Indonesia in January 24, 1946. In 1963 there was unification of army, navy, air force, and national police force under the name of Angkatan Bersenjata Republik Indonesia (ABRI). Further explanation read Indria Samego, et. al., Bila ABRI Berbisnis: Buku Pertama yang Menyingkap Data dan Kasus Penyimpangan dalam Praktik Bisnis Kalangan Militer, (Bandung: Mizan, 1998), p. 47 and Lex Reiffel and Jaleswari Pramodhawardani, Menggusur Bisnis Militer: Tantangan Pembiayaan TNI Melalui APBN, (Bandung: Mizan, 2007), p. 212.

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like opium, are some activities which generated the highest income. 74 Military business did not seen as unusual at that time because the revolution against colonial power was still going on and considered to require non-conventional support. The experience gave Indonesian military a taste of economic freedom from civil government and access to corruption practice. But by merit of the struggle, ABRI gained public image of the guardian of state’s revolution spirit.

In 1950 the Dutch was willing to negotiate with government of Indonesia and let the country gain full sovereignty. However, the security situation then changed to a period of internal tension from 1950 to 1959. Euphoria of freedom started to dilute, political parties were fighting to gain power and separatism revolted in local areas due to uneven distribution of welfare that was seen to prioritize the Island of Java. Military business which was firstly to fund military operations then started to support more basic need, such as soldier wellbeing. For example the Easter Indonesian Head of Military Colonel Warouw and North Sulawesi Head of Regiment Mayor Worang in 1954 gave permission to huge smuggling of copra to fund housing program. Another example is North Sumatra Head of ABRI Simbolon in 1956 sent large amount of coffee and rubber abroad to pay his personnel’s salary. 75

Under the pressure of internal disturbances, government was forced to implement Urgency Law in May 1957 which gave the military access to control the state. Its influence expand in to economic sector by nationalizing foreign companies situated in Indonesia, starting from those who belong to the Dutch in December 1957, then the British owned in 1964, and then followed by United States of America owned in 1965. 76 The era of huge military power was also influenced by Indonesia effort to takeover West Papua from Dutch colony, with government allocated 60% of state spending for defense 77 although in the end, Indonesia

74

Faisal H. Basri, “ABRI dan Bisnis”, dalam Anas Machfudz and Jaleswari Primodhawardani, Military without Militarism: Suara dari Daerah, (Jakarta: LIPI, 2001), p. 279. 75 Danang Widoyoko, et.al., Op. Cit., p. 23-24. 76 Harold Crouch, Militer dan Politik di Indonesia, 2nd edition, (Jakarta: Pustaka Sinar Harapan, 1999), p. 37. 77 Lex Reiffel and Jaleswari Pramodhawardani, Op. Cit., p. 210.

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obtained West Papua in peaceful mean by referendum. In the era of military huge role on state politic, Head of Army in 1958, General Abdul Haris Nasution made a speech on how military should take ‘middle way’. It should not be a dominant force and not just a tool for the civil government. 78 His speech started the dwifungsi (dual functions) doctrine where military involved in defense-security and social-political fields, including economy and politics. His idea created argument for active and non-active soldiers to hold position in the government. It is worth to be remembered that military involvement in business in this period is caused by weak civil society, the inability of government to generate enough income to support the population and create difficulty in defense budget.

According to Reiffel and Jaleswari, there were three big forms of military business that were born in this period. 79 They are consignation between military elites with business people which mostly Chinese; cooperation in every commando to secure basic supply of logistic; and foundation created by military elites in the form of holding companies for every aspect of business. Even so, the growth and expansion of military business was not as gigantic as the period when Indonesia was headed by President Soeharto. In his career background, he had been repositioned from Diponegoro Division in Central Java because he was discovered to request some money from local business people. 80 He was mutated to Staff College in Bandung, West Java before the acted as the main person to act upon communist party revolt in 1965, which generated his way to the presidential seat.

III.2. Growing Military Business (1966-1998) This phase of Indonesia history was in stable political condition with strong economy supported by many foreign funding. Since President Soeharto ruled this period, military business also flourished. In the early stage, the two cash cows for

78

Salim Said, Soeharto’s Armed Forces: Problems of Civil Military Relations in Indonesia, (Jakarta: Pustaka Sinar Harapan, 2006), p. 121. 79 Lex Reiffel and Jaleswari Pramodhawardani, Op. Cit., p. 68. 80 “Soeharto Inc.”, Time Asia, May 24, 1999.

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military were state companies Pertamina that operates in oil and gas, and state’s logistic bureau Bulog. 81 In these two companies, military installed their high rank personnel to obtain off-budget funding for the institution, such as president’s personal assistant General Tirtosudiro that held Chief of Bulog position started in 1972. Meanwhile in Pertamina, the former Dutch oil company that were made by concession of Caltex; Stanvac; and Shell, military Colonel Ibnu Sutowo ruled since its nasionalization in 1957 to 1975. His power was so big even when the Mining Minister Slamet Bratanata tried to restructure Pertamina by suggesting open tender contract in 1967, the minister got dismissed. In the end Col. Ibnu Sutowo was mutated because the company was so mismanaged it could not pay its US$10 billion debt to foreign lenders. 82

After the Pertamina incident, Government Regulation PP No. 6/1974 on the Limitation on Government Employees’ Activities in the Private Sector was issued. The regulation banned active military and police personnel to take part in private business activities except under certain circumstances. In Article 2, military officer with rank of second lieutenant or higher were prohibited from owning shares in private company; taking part in such company management, including as advisor; or engaging in provit-driven ‘trade activities’, whether formally or on a freelance basis. 83 In article 3 (1) there was exception which say they may work in various positions in state-owned or private enterprises belonging to official institutions which have a non-profit goal and function. Whereas Article 5 stated that superior officers should reject or revoke request of permission to accept positions with non-profit companies if the work would interfere officer’s performance of his/her duties or harm military reputation.

Based on PP No. 6/1974, officers were permitted to work for private companies set up by non-profit institutions. This created window of opportunity for military

81

Indria Samego, Op. Cit., p. 76-77. For details about military in Bulog and Pertamina read Danang Widoyoko, Op. Cit., p. 28-33. 83 The regulation permitted lower-ranked soldiers to be part of companies (both profit and nonprofit) with the permission from their superiors. Soldiers that were preparing to retire, temporary suspended or on leave were exempted. Wives of military personnel should also ask for permission to work for companies. Read Article 2, 4 and 8 PP No. 6/1974. 82

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foundations and cooperatives, set up with charitable purposes, to develop into commercial channel for the military. Another flaw of the regulation is that it did not specify enforcement mechanism. 84 The lack of enforcement PP No. 6/1976 made public and media put pressures on the government. Under the stress, commitment was reassert in 1979 by General Muhammad Yusuf with statement: “All active officers are forbidden to enter the world of commerce … No matter how big you expand, that is your own concern. But if you are still serving, forget about trading if you want to be a good soldier … To those who breach the rules will be dismissed or will be retired earlier” 85.

The reinforcement of military business regulation forced up to 300 personnel to resign 86 but military business still survived using its changing form. The military foundations and cooperatives then controlled various companies that vastly expand because they were backed by military political power. Researcher Robert Lowry found that the peak of military business in Indonesia occurred in 1980s. 87 Author compiled list of more than 100 companies run under military foundations and cooperation, or where they own the shares. The list can be seen in Table III.1. Meanwhile the official data on military owned companies obtained from national team of military business takeover also attached in the Appendix part of this thesis.

Table III.1. Companies under Military Foundations in Indonesia Company name Type of business Military foundation Tri Usaha Bhakti General commerce Yayasan Kartika Eka Adi Kartika Satria LPG distributor Paksi PT Purna Sadhana General commerce (foundation under the PT Bakti Wira Husada Pharmacy trade army) PT Sinkona Indonesia Lestari Truba Raya Trading PT Cilegon Fabricators PT Indotruba Tengah PT Indotruba Timur ITCI Kartika Utama PT Sumber Mas Timber

Kina trade Shoe company Steel industry Palm oil plantation Palm oil plantation Logging & plywood Logging

84

Lisa Misol, Too High a Price: The Human Rights Cost of the Indonesian Military, (Jakarta: Human Rights Watch, 2006), p. 17. 85 Indria Samego, Op. Cit., p. 100, quoting Info Bisnis, Edition 7, Year I/1995. 86 Ibid, p. 101. 87 Robert Lowry quoted in Lex Reiffel and Jaleswari Pramodhawardani, Op. Cit., p. 69.

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Yayasan Putra Kostrad (foundation under the army)

Yayasan Adi Upaya (foundation under the air force)

PT Taliabu Luna Timber PT Meranti Sakti Indonesia Palopo Timber Company PT Sumber Mas Indah Plywood Kayan River Indah Plywood PT Meranti Sakti Indah Plywood PT Panca Usaha Palopo Plywood PT Truba Jaya Konstruksi PT Truba Jurong Engineering Marabunta Wahana Bhakti Utama Griya Kartika Dharmawangsa Telekomindo Primabhakti Kartika Airlines Kartika Iqra Utama PT Aerokarto Indonesia PT Aerografia Pratama PT Asuransi Cigna Indonesia PT Bank Artha Graha Universitas Ahmad Yani AMIK Kartika Yani AKPER Ahmad Yani Buanagraha Artha Prima Wisma Kartika Trubaindo Coal Mining Pakarti Yoga Dharma Kencana Sakti Marga Bharata Santi Yoga Sinar Inti Telaga Tirta Mukti Indah Bottling Co. Aica Indonesia PT Perindustrian Karung Nasional Federal Motor Pakarti Jaya Pakarti Riken Indonesia Yuasa Battery Indonesia Tokai Dharma Indonesia PT Mandala Airlines Dharma Karya Persada Pan Asia Express Lines Pakarti Tata Asuransi Beringin Sejahtera Asuransi Wahana Tata Indosuez Indonesia Bank Hela Nusantara Cemerlang Aerokarto Indonesia Angkasa Puri Angkasa Wana BP Padang Golf Chandra Dirgantara Dirgantara Air Service Dirgantara Husada Green Delta Jasa Angkasa Semesta Konstruksi Dirgantara Kresna Puri Dirgantara

Logging Logging Logging Wood industry Wood industry Wood industry Wood industry Construction service Construction service Transport service Auto repair service Health service Telecommunication Airline Travel bureau Survey/mapping service Survey/mapping service Insurance Banking University Computer academy Nurse academy Property Hotel Coal mine Export-import trade Capital trade & invest Distributor & general trade Yuasa battery distributor General trading Coca Cola beverage industry Chemical & glue industry Plastic bag factory Automotive industry Steel industry Steel industry Accu industry Gas lighter producer Airline & cargo Transport & storage Shipping Transport service Insurance Insurance Banking Forestry & logging Aerial photo Construction, hotel, property Wood production Golf & sports center Construction, wood, trade Airline General trading & pharmacy Forestry & logging Airport management & cargo Construction Construction, courier,

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Persada Purnawira (Persada Executive Club) Upaya Guna Dirgantara

agribusiness General commerce Export import club Air cargo Holding company Jala Bhakti Yashbum Yayasan Sosial Pelayaran Admiral Lines Shipping Bhumyamca Crossing ferry (foundation under the Trisilia Laut Yala Mina Yashbum Fishery navy) Yala Gada General commerce ETMI Construction & machinery EMKL Yla Githa Dwi Air & sea cargo Bhumyamca Sekawan Cilandak industrial area & Yala Trada property Samudera Gunadharma Utama General commerce Yala Persada Angkasa Construction & general service Bhumyjala Wigantara Timur Construction & ports Geger Halang Ship repair & navigational equip Bhumyyala Wigantra Agribusiness Jalakaca Mitraguna Ship repair & navigational equip Jala Wirahatama Plane repair, air transport & Yala Githa Tama school Jala Buanamas Pan Construction & timber Forwarder & sea expedition Expedition Hotel Kartika Plaza Hotel Induk Koperasi AD Tour & travel bureau (cooperation under the Duta Kencana Tours & Travels Kartika Aneka Niaga General commerce army) Kartika Bhuana Niaga General commerce Duta Kartika Cargo Service Cargo Mina Kartika Samudera Shipping Orchid Palace Hotel Hotel Kartika Cipta Sarana Transport service Hotel Kartika Plaza Bali Hotel Rimba Kartika Jaya Transport service Mitra Kartika Sejati Transport service Kartika Inti Perkasa Construction Kartika Summa Construction Mahkota Transindo Indah Transport service Duta Kartika Forwarder Forwarder PT Manunggal Air Service Air cargo Yamabri PT Bangkit Adhi Sentosa Mining (foundation under PT Kadya Caraka Construction military headquarter) PT Yamabri Dwibakti Utama Freeway business PT Fajar Multi Dharma Plantation PT Primasel Communication Balai Sudirman Meeting & function hall lease Source: Yayasan Kartika Eka Paksi (2002), Yayasan Putra Kostrad data from Indonesia Business Directory (2000), Yayasan Adi Upaya data from Indonesia Business Directory (2002), Yayasan Sosial Bhumyamca data from Industry and Trade Ministry (2002), Induk Koperasi AD and Yamabri data from Danang Widoyoko, et.al., Bisnis Militer Mencari Legitimasi, (Jakarta: Indonesia Corruption Watch, 2003), p. 121.

Formal military business then transformed, from corporate or state-owned companies to foundations and cooperatives, but other than those, some soldiers were still conducted informal business activities, such as providing security

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backing and commercial use of military assets. The issue of military personnel giving commercial security service was highlighted in the case of copper and gold mining of Freeport-McMoRan in West Papua with the company reported to pay million of dollars every year to Indonesian military and police force in order to get security for its mining operation. 88 And also Exxon-Mobil in Aceh reported to pay around US$5 million every year for protection. 89 These case illustrated how security, that ideally is a public good, through practices of military business can be turned to market good which needed continuation of capital to be obtained. But because this type of military business is informal, therefore action to terminate it is harder.

Another type of military business occurred in Indonesia is criminal economy. The military criminal economy can be in the form of illegal business in conflict areas for example by providing private security service, backing for illegal activities such as marijuana plantation in Aceh, and weapon trading. 90 Other forms of illegal business that was suspected to be conducted by Indonesian military are drugs trade; gambling; and fuel and luxury goods smuggling. 91 This type of military business is difficult to trace, prove and handle because access to data is not open to public therefore it is harder to scrutinized.

III.3. Reformasi: Reform of the Military Institution and Business (1998-2004) Wave of Reformasi was triggered by financial crisis proliferated from Thailand in July 1997 which reached Indonesia in October the same year. The crisis got worse and destabilized not only financial-economic sectors in the country, but also its political system, which in turn forced Soeharto to lose his power in 1998. He was replaced by President B.J. Habibie. In Habibie leadership, Indonesia conducted referendum for East Timor and lost the area in the voting. With his 88

The amount is reaching US$20 million. Jane Perlez and Ray Bonner, “Below a Mountain of Wealth, a River of Waste,” New York Times, December 27, 2005. 89 Van Zorge, Heffernan and Associates, “The Tentacles of the Octopus: The Business Interest of the TNI and the Police”, in Van Zorge Report on Indonesia, Juli 16, 2003, p. 14. 90 Lesley McCullough, Trifungsi: The Role of Indonesian Military in Business, (jakarta: 2000), p. 30. 91 Danang Widoyoko, et.al., Op. Cit., p. 46-52.

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unpopular action, he gave way to Abdurrahman Wahid to be the forth president of Indonesia after 1999 election. President Wahid then handed over his presidency to Megawati Soekarnoputri in 2001, which was his vice president at the moment, because he lost the support from his cabinet and the parliament due to his eccentric leadership. The firth Indonesia President Megawati ruled until she was defeated in the 2004 election.

Although this was a relatively unstable era marked with shifting of presidents, Reformasi brought positive changes to Indonesia’s political situation. Civil supremacy was rising and gained momentum to conduct SSR in the field of military reforms. There was sense of pressure that national military should be under strong government control or it will lack central planning, coordination and transparency which can give impact to blurred aims it supposed to achieve, therefore military reform was needed. It included extensive changes in military institutional framework, its judicial system, electoral mechanism, composition of representative bodies, and responsibilities of security actors. In his research on Indonesia military reform, Marcus Mietzner summarized the military institutional reform conducted in this era and its accomplishment level which can be seen in Table III.2.

Year 1998 1999 1999 1999 1999 1999 1999 2000 2000 2000 2000

Table III.2. Indonesia Military Reform Achieved Reform Withdrawal of active military personnel from civilian posts Separation of police from the armed forces Extensive electoral reforms, marginalizing the military from formal politics Declaration of political neutrality; withdrawal from Golkar Political Party Reorganization of Department of Defense and security into Department of Defense Appointment of civilian minister of defense Empowerment of Parliament vis-à-vis TNI Revocation of “Dual Function” doctrine Definition of external defense as TNI’s main task Disbandment of sociopolitical offices at the Department of the Interior Disbandment of military-coordinated domestic security agency (Bakorstanas)

Status Completed Completed Completed Completed Completed Completed partly completed completed completed completed completed

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2000 2002 2004 2004 2004

Passing of Law on Human Rights Courts Passing of State Defense Act Passing of Armed Forces Act Extraction of non-elected military members from Parliament Extraction of military faction from parliament (MPR); abolition of indirect election of the president and local government heads Subordination of military courts to the Supreme Court

completed completed completed completed completed

partly completed Source: Marcus Mietzner, The Politics of Military Reform in Post-Suharto Indonesia: Elite Conflict, Nationalism and Institutional Resistance, (Washington: East West Center, 2006), p. 70. 2004

Addition to the military reforms above, there are other actions that were not conducted within the Reformasi era, some remained unsolved and some needed more time to be implemented. Such as TNI position under Ministry of Defense, transformation of territorial command system, civilianization of Ministry of Defense staff, creation of civilian-led national security and defense council, and amplification of human rights court. One issue that is not resolved is the separation of military from the business sector. After 32 years of ex-general dictatorship, civil society wanted to have more power over the military by reducing off-budget financing, especially by cutting the vastness of their business. Local NGO Kontras highlighted the military ability to conduct abuses using offbudget money with reference of human rights violation cases in conflict areas such as Poso and Boven Digoel. 92 Another Indonesian military experts, Danang Widoyoko and team stated their stances on why military should not conduct business because it weakens government capacity, lessen the military professional focus and distort national economic. Their full arguments can be seen in this thesis chapter II, page 25. Other political experts are quoting Samuel P. Huntington “professional military” as an ideal with military should be free of all activities of seeking economical incentives. 93

92

Kontras, When Gun Point Joins the Trade: Military Involvement in Bojonegoro, Boven Digoel and Poso, (Jakarta: Commission for Disappearances and Victims of Violence Kontras, 2004), p. 21. 93 For example Jaleswari Pramodhawardani and Andi Widjajanto (eds.), Bisnis Serdadu: Ekonomi Bayangan, (Jakarta: The Indonesian Institute, 2007), p. 3-5, and Samuel P. Huntington, Tertib Politik di dalam Masyarakat yang sedang Berubah, (Jakarta: Rajawali Pers, 1981) quoted in Iswandi, Bisnis Militer Orde Baru, (Bandung: Remaja Rosdakarya,1998), p. 5-6.

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The pressure to reform military business was so strong that the parliament had succeeded to produce regulation on the issues. The regulations are first, the State Defense Law UU No. 3/2002 article 25(1) that affirms national defense is funded by state budget. Second, the TNI Law UU No. 34/2004 in article 2(d) on professional military that does not conduct business. Third regulation is in the same law article 39 which prohibits military personnel involved in business activity. And fourth regulation is also in TNI Law article 76 that gives five years deadline to the government to takeover military business after the law implemented with further guidelines explained by president decree. 94 The four regulations are the base for government to carry out actions of military business takeover.

As a note, there was polemic on the last regulation, TNI Law article 76. The instruction is considered as the strongest because it bluntly avowed government deadline, which is rare in Indonesian laws. The polemic was also because in the parliament commission discussion for defense issues, the article was not in the bill draft to be discussed. It arose from the suggestion by Partai Kebangkitan Bangsa representation in the parliament commission. 95 Therefore the article did not get through proper debate in parliament nevertheless it managed to be included in TNI Law. After the law had been issued on October 2004, President Megawati was not reelected to run the next period of Indonesia’s leadership. Like most political move done by previous administration, there was concern whether the policies will be implemented or not by the successor ruling government.

III.4. Military Business and the Current Government (2004-February 2009) In election 2004, Susilo Bambang Yudhoyono (popularly known by his initial, SBY) was elected as the seventh President of Indonesia. He was inaugurated two weeks after TNI Law was implemented, which made military separation from business as one of his homework. As stated in its Article 76(2), president decree 94

The precise quote of laws concerning military business takeover can be seen in Chapter I, page 4-5 of this thesis. 95 Jaleswari Pramodhawardani and Andi Widjajanto (eds.), Op. Cit., p. viii-ix.

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will give further instructions on government taking over military business. Finally after long struggle the decree was out in April 2008, around a year and a half before the deadline. Nevertheless, author will look at the efforts that had been taken by SBY government in implementing policy of keeping military out of business activity up to February 2009.

Early 2005, Defense Minister Juwono Sudarsono gave order to TNI head to prepare the organization business activity list that were considered important to be taken over by the government. Then in August the same year, a ministerial team to deal with the issue was created through Defense Minister Decision Letter. The team was named Tim Supervisi Transformasi Bisnis TNI (TSTB TNI) which literally means team that supervises military business transformation. The ministries involved were Ministry of Defense, Ministry of Finance, Ministry of Law and Human Rights, and Ministry of State-Owned Company. The team was headed by Said Didu, secretary of Ministry of State-Owned Company with vice Lt. Gen. Sjafrie Sjamsoeddin, secretary of Ministry of Defense. In its operation, TSTB had clashes of arguments with civil society organizations because the team did not have clear working definition regarding military business. 96

The TSTB lacked of working definition made it difficult for them to select the data of military business to be taken over by the government. In Head of TNI letter No. B/3385-05/15/06/Spers issued in September 2005, stated that military has 25 foundations with 916 business units, and 1071 cooperatives with 604 business units. 97 In the end 2005, Defense Ministry gave information of the number military business existed as many as 219. 98 In March 2006, TNI spokesman May. Gen. Suganda stated that there were 1520 business units ran by military. 99 And in December 2006, there were researchers that there were 354 96

“Perjalanan Panjang Pengalihan Keppres Pengalihan Bisnis TNI, Newsletter Media dan Reformasi Sektor Keamanan, Edition II, May 2008, p. 3. 97 Quoted in “Gurita Bisnis TNI dan Dampaknya”, in Newsletter Media dan Reformasi Sektor Keamanan, Edisi II, May 2008, p. 4. 98 In Ministry of Defense letter to Human Rights Watch, December 22, 2005, in Lisa Misol, Op. Cit., p. 26-27. 99 “TNI Commits to Reform: Uphold Supremacy of Law” opinion editorial, Jakarta Post, March 15, 2006.

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military business units. 100 The different data of military business can be seen in Table III.3.

Table III.3. Military Business Units According to Various Sources Sources & Head of TNI letter Defense TNI Lex Reiffel & Time No. B/3385Ministry spokesman Jaleswari 05/15/06/Spers letter to May. Gen. Pramodhawardani (September 2005) Human Suganda (December 2006) Rights (March 2006) Watch (December 2005) Cooperatives 1071 (no data) (no data) 172 Business 604 105 (no data) 52 Units under Cooperatives Foundations 25 25 (no data) 23 Business 916 89 (no data) 107 Units under Foundations Total 2616 219 1520 354 Source: “Gurita Bisnis TNI dan Dampaknya”, Newsletter Media dan Reformasi Sektor Keamanan, Edisi II, May 2008, p. 4., Ministry of Defense letter to Human Rights Watch, December 22, 2005, quoted in Lisa Misol, Too High a Price: The Human Rights Cost of the Indonesian Military, (Jakarta: Human Rights Watch, 2006), p. 26-27. “TNI Commits to Reform: Uphold Supremacy of Law” opinion editorial, Jakarta Post, March 15, 2006, Lex Reiffel and Jaleswari Pramodhawardani, Menggusur Bisnis Militer: Tantangan Pembiayaan TNI Melalui APBN, (Bandung: Mizan, 2007), p. 116.

There were also doubts of TSTB neutrality because it was composed by military personnel and bureaucrats. Therefore it was seen to make compromise in order to satisfy many interests, and in return, caused TSTB work slowly. The time length it took also created distrust that the team only prolonged formulation of presidential decree so military business could be dissolved or sold before the government can get them. For example the selling of Mandala Airlines that was before under army cooperative Kostrad in October 2005. The Army Strategic Head of Command Let. Gen. Hadi Waluyo stated, “(We) will not wait for presidential decree (on taking over military business) because this is trade matter, not politics.” 101 The airline selling is said to be because it had created lost around IDR9 billion (around US$

100

Lex Reiffel and Jaleswari Pramodhawardani, Op. Cit., p. 116. Quoted in “Pangkostrad: Mandala Airlines Dijual Tanpa Perpres”, in Indonesia newspaper Tempo, October 7, 2005.

101

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9million) per month. There was also selling of shares owned by military foundation YKEP in Bank Artha Graha, which amounted IDR 121 billion (around US$ 12.1million) without being reported to the authorities handing military business takeover although it was acknowledge by the press and got reaction from parliament. 102

The team at last succeeded to came into real value of military business in July 2006 of around IDR 1.5trillion (US$ 150million) 103 which was regarded low compared to the earlier independent team research shown value around IDR 50trillion (US$ 5million) 104. But because TSTB already had bad reputation, President SBY called the team to and end. He issued the long awaited Presidential Decree No. 7 in April 2008 to create national team on military business takeover called Tim Nasional Pengalihan Aktivitas Bisnis Tentara Nasional Indonesia (Timnas PAB TNI). It has representative from interlink ministries but compared with TSTB, the team is more an independent body, not attached of any ministry and headed by civil expert Erry Riyana Hardjapamekas that had the experience as vice head of Corruption Eradication Commission. The team task is relatively same with TSTB, to create recommendation of what should the president do in order to takeover military’s business.

Timnas PAB TNI proved to work more efficiently because in only six month after it was formed, it already verified the value of military business and submit its recommendations. The team investigated military owned business which consisted of 23 foundations which run 53 companies and 1,098 cooperatives that run 2 companies, and came out with assets value around IDR 3.2trillion (US$ 320million). 105 Although there were also complaints on the way the team worked 102

“Military Allowed to Sell Assets from Business Ventures”, in Jakarta Post, September 29, 2005 and “The House Urge Gov’t to Acquire Artha Graha”, in Bisnis Indonesia, February 17, 2005. 103 Human Right Watch, “Indonesia: Reformasi Bisnis Militer”, accessed from http://www.hrw.org/legacy/indonesian/docs/2007/02/16/indone15349.htm in January 7, 2009 and “Bisnis TNI Sekarat” in Tempo, July 27, 2006. 104 The amount was derived from research conducted by Ridep Institute in 2004 and since then many of the military business got divested or sold. “Tidak Habis-Habis Meneliti Aset Bisnis TNI”, in Kontan, Week III, August 2008. 105 “Timnas Bisnis Pertahankan Koperasi”, in Republika, December 30, 2007.

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by sending questioner to be filled by military business units which was considered not to recognize the possibility of selling their assets before verification had occurred, the team was shown improvement than TSTB.

The national team work had been completed in October 2008. Up to four months after, there was no publication on government action, no regulation issued by President SBY or other ministries in managing military business. Only seminar held in parliament created by fraction Partai Keadilan Sejahtera in February 26, 2009 titled “TNI Reformation Future Post 2009” that discussed openly about issues regarding Indonesian military, including its business. 106 The meeting which involved parliament members, experts and representative from TNI reminded the government to solve its unfinished homework before the term ends this mid year. Author sees this seminar was more of a political move to lower President SBY cabinet performance and raise one political party activity record for election campaign that started in March 2009, than to really conduct TNI reform actions. Further analysis on whether the government is efficient and effective in implementing the policy in taking over of military business units will be discussed in Chapter IV.

III.5. Characteristic and Problems Arise from Military Business in Indonesia Indonesian military characteristic is formed by its history as unification of colonial power armed forces and guerrilla fighters. This combination then established territorial command structure as the power base of armed forces in the country’s regions, allowing them to tap into economic resources at the grassroots and defend their role as significant player in local politics. 107 Later on, General Nasution’s doctrine of “dual function” issued in the 1950s then came as the basic of military involvement in both defense and civil sectors, which used as argument for them to conduct business activity.

106

“Masa Depan Reformasi TNI Pasca 2009”, accessed from http://mula.blogspot.com/2009_03_01_archive.html in March 4, 2009. 107 Marcus Mietzner, The Politics of Military Reform in Post-Suharto Indonesia: Elite Conflict, Nationalism and Institutional Resistance, (Washington: East West Center, 2006), p. 38 & 41.

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Insufficient government defense budget is a common issue that developing countries face, including Indonesia, which then used by the military to seek its own funding through business. The “gun-vs-butter” contest in allocation of state budget 108 usually make way for public welfare to come first, unless if there is special situation, such as war or high tension inside or between nations. Therefore it is understandable for a developing country like Indonesia to provide less than 6% of its state expenditure for defense budget.109 But then again soldier welfare came into question. With huge span of territory, it is understandable that Indonesia has the largest armed forces in Southeast Asia with total TNI personnel of around 390,000 and reservists of 400,000 personnel (shown in Figure III.1).110 The big number of military personnel brings consequence to bigger burden in providing their welfare, education and moreover weapons to be use for training and work. Finance necessity for armed forces development then became another argument in keeping military business running. Figure III.2. Indonesian Troops Strength

Source: “A State of Unreadiness” in Van Zorge Report, April 1, 2008, p. 12.

Military independence to seek its own funding created problems. Human Rights Watch in 2006 publicized report on the relation of military business activities with 108

More of “gun-vs-butter” explanation in Steve Chan and Alex Mintz (eds.), Defence, Welfare and Growth, (Routledge: New York, 1992), p. 7-35 and 211-240. 109 Author got the figure from Indonesia defense budget tables in Indonesia White Book 2003 and 2008. 110 “A State of Unreadiness” in Van Zorge Report, April 1, 2008, p. 11-12.

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human rights violations in Indonesia. 111 These violations were related with the usage of repression ability that was supposed to be utilized only in defense tasks but misused in strengthening military business emporium. This condition can make unfair situation in national business and economy. With its coercive capability, armed forces then can also involved in illegal business, such as illegal logging, drugs trade, smuggling, gambling backing and even weapon selling. 112

Reformasi 1998 brought civil society awareness of how military power needs to be supervised and controlled. These oversights will not able to fully conducted if the military still have access to self fund that is not transparent, therefore its business should be reformed under good governance democratic values. Forces to reform military business faced typical argument of government inability to provide financial support necessary, which was said to fulfill only 30%-50% of defense budget inquired 113, so military need extra income from business activities to maintain their survivability.

But was that really the case? If the allocation percentage of defense budget with state budget and GDP (in Table III.4) is compared to the peak time of military business that boomed in 1980s and its graying time in late 1990s due to economic crisis 114, there is no correlation on how much the government spent on defense with the growing or declining of the business. Even when government put higher percentage of defense budget, military business still soared, and vice versa. This comparison can be arguable of course, since military business is not a transparent subject therefore expert can only estimated its high and low period without real profit numbered.

111

Lisa Misol, Too High a Price: The Human Rights Cost of the Indonesian Military, (Jakarta: Human Rights Watch, 2006). 112 Danang Widoyoko, et.al., Op. Cit., p. 38-42. 113 In Indria Samego, Op. Cit., p. 100, and “Indonesia: Next Steps in Military Reform”, ICG Asia Report, No. 24, Jakarta, Oktober 2001. 114 Researcher Sukardi Rinakit estimated that only about one-third of the military companies survived the crisis. Donald Greenles, “Indonesia Wants its Army Out of Business” in International Herald Tribune, May 4, 2005.

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Table III.4. Percentage of Defense Budget with State Overall Budget and GDP Year Percentage with Overall Government Budget Percentage with GDP 23.5 % 1970 16.9 % 3.6 % 1975 11.3 % 2.9 % 1980 10.6 % 2.5 % 1985 7.0 % 1.5 % 1990 7.7 % 1.6 % 1995 4.3 % 1.0 % 2000 5.6 % 1.0 % 2005 Source: Mas Widjaja Paper quoted in Lex Reiffel and Jaleswari Pramodhawardani, Menggusur Bisnis Militer: Tantangan Pembiayaan TNI Melalui APBN, (Bandung: Mizan, 2007), p. 168 with mark made by author. Darker gray area marked the highest and lighter gray area marked the lowest military business activities.

Another argument to keep military business is that it is needed to help Indonesian armed forces development. Because of the insufficient government defense budget, national military readiness is low, therefore sources of off-budget funding is needed. In the Figure III.3 is displayed how much percentage of Indonesia’s TNI readiness. Figure III.3. Indonesia Military Readiness

Source: “A State of Unreadiness” in Van Zorge Report, April 1, 2008, p. 12. The percentage shows operational readiness capability.

Nevertheless, this argument is also not acceptable because if seen from the defense spending budget statement given in Table III.5 and Figure III.4, the biggest part goes routine cost. It means that mostly the government budget goes

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for personnel salary, maintenance and official trips, and only some part goes to the development side, such as developing system, personnel, facilities and equipments. Table III.5. Indonesia Defense Budget 1999-2002 Development Routine Total % % Budget (in Budget (in Amount GDP National IDR billion) IDR (in IDR Budget billion) billion) 1,756.76 8,307.43 10,064.00 0.89 4.43 1,945.31 6,594.42 8,339.73 0.85 3.80 2,520.85 9,150.97 11,671.82 0.60 3.29 2,880.11 9,874.83 12.754.94 0.76 3.71

Year

1999/2000 2000 2001 2002 Mean/Year

2,275.76

8,481.91

10,722.67

0.78

Development /Routine Budget Comparison 1 : 4.73 1 : 3.39 1 : 3.63 1 : 3.43

3.79

1 : 3.73

Source: Ministry of Defense Indonesia, Indonesia White Book 2003, Chapter 6, (Jakarta: MoD, 2003). Development/routine budget comparison is calculated by author. Figure III.4. Defense Budget Allocation 2000-2009 25,000.00 20,000.00 15,000.00

Routine Budget

10,000.00

Development Budget

5,000.00

08 20

07 20

06 20

05 20

04 20

03 20

02 20

01 20

20

00

0.00

Source: Data from RoI Ministry of Defense, Defense White Book 2003 & 2008, chart made by Author

Therefore what really hampers the readiness of Indonesian military is not the small budget but how the budget is managed and allocated, because seen from the defense budget (Figure III.5), the amount is regularly raised every year. Moreover seeing from the year 2000 to 2009 the amount quadruple from IDR 8.5trillion (US$ 850million) to IDR 33.6trilion (US$ 3.36billion), so there should be no reason not to reform military business. To increase military readiness, the government should allocate more to development budget rather to the routine budget but of course, there should be a consideration not to expand, or even to lessen, the number of military personnel so their welfare will not be affected.

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Figure III.5. Indonesia Defense Budget Graphic (in billion IDR) 35,000.00 30,000.00 25,000.00 20,000.00 15,000.00 10,000.00 5,000.00 0.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: Data 2000-2002 from Indonesia White Book 2003, data 2003-2004 from Ministry of Finance quoted in Lisa Misol, Too High a Price: The Human Rights Cost of the Indonesian Military, (Jakarta: Human Rights Watch, 2006), p. 86, data 2004-2008 from Indonesia White Book 2008, Ministry of Defense and data 2009 from Defense Minister Juwono Sudarsono statement in Media Indonesia, May 25, 2009. Graphic made by author.

According to Indonesian defense expert Andi Widjajanto, military business does not have a strong base to be kept. His estimation of military business profit was around US$ 60-120milion per year, which only adds around 3-5% of the budget needed, and will not be able to cover the lack of 40-60% of defense budget that is claimed not being provided by the state. 115 Widjajanto also negated the frequent used arguments in prolong military business life, such as “gun-vs-butter”; lack of government system especially public taxation; ruling regime low commitment in defense issue; absent of strategic planning in defense; to the corruption practice in weapon procurement which resulted to the short of budget as not being solid enough. He then quoted expert Edi Prasetyono opinion on changing the way to see defense budget. Prasetyono advised that defense budget should be seen as predictor variable not response variable. Therefore with this view, the state will determine its defense policy according to its budget and not vice versa. 116 The budget driven defense policy can be a way to reform Indonesia military business.

115

Andi Widjajanto, “Reformasi Militer, Ekonomi Pertahanan, dan Bisnis Militer di Indonesia” in Jaleswari Pramodhawardani and Andi Widjajanto (eds.), Op. Cit., p. 24. 116 Ibid, p. 8-9.

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Chapter IV GOVERNMENT POLICY IMPLEMENTATION IN DIVORCING MILITARY FROM BUSINESS

This chapter describes and analyses how far Indonesian government implemented its policy in taking over military owned business. Since 1998 Reformasi, the government had stated its commitment to conduct military business reform by issuing policies, which are (1) State Defense Law UU No. 3/2002 article 25(1) that affirms national defense is funded by state budget, (2), TNI Law UU No. 34/2004 in article 2(d) on professional military that does not conduct business, (3) TNI Law UU article 39 which prohibits military personnel involved in business activity, and (4) TNI Law UU article 76 that gives five years deadline to the government to conduct military business reform. Especially referring to the last regulation, five years period is almost ended with limit of October 2009. Author will examine government efforts in taking over military business with tools of media and stakeholder analysis, and will further give advice to improve by learning from other countries’ experience, which is China and the US. The structure of Chapter 4 is depicted in Figure IV.1. Figure IV.1. Structure of Chapter 4 Indonesia Military Business Takeover up to Feb 2009 Military Business Takeover Reported in the Media Military Business Takeover Seen by Stakeholders The Future of Indonesia Military Business Takeover Lesson Learned from Other Country & Alternative Solution on Indonesia Military Business Source: Author

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Main purpose of this chapter is answering the three out of five inquiries given in Research Question section stated in page 6-7 of this thesis. Firstly, how is Indonesian government’s process in separating military from business. Secondly, how efficient and effective is Indonesian government in implementing policy for transferring military control of commercial enterprise to the civil sector. And thirdly, what are the alternative solutions to improve Indonesia’s policy implementation learning from other country’s experience. Then will be closed by alternative solutions in managing Indonesia military business generated from the process conducted in the chapter.

IV.1. Winning the Battle: Indonesia‘s Effort in Separating Military from Business up to February 2009 After the four regulations on military business takeover issued, the first policy implementation conducted by Indonesian government was Defense Minister Juwono Sudarsono order to the head of TNI to prepare the organization business activity list in the beginning of 2005. Then in August 2005, with Defense Minister Decision Letter SKEP/450/M/V/2007, Tim Supervisi Transformasi Bisnis TNI (TSTB TNI) is created to deal with the issue and prepare draft for president decree. This ministerial team was filled with interests and lacked of working which caused TSTB to work lengthy. It produced estimation of military business assets in July 2006 with amount of IDR 1.5 trillion but parliament, experts and NGOs doubted the accuracy. 117

Due to TSTB failing progress, President SBY issued a Decree No. 7/2008 in April 2008, one and a half year before deadline, to create national team to takeover military owned business. The team was called Tim Nasional Pengalihan Aktivitas Bisnis Tentara Nasional Indonesia (Timnas PAB TNI), worked independent as opposed to be under certain ministry, and headed by civil professional. Timnas 117

TSTB came with amount of IDR 1.5 trillion (US 150 million) while other researches concluded that military assets were bigger. Some of the research are “Bisnis TNI 1 Triliun DIDR Kaget dan Kecewa” in Rakyat Merdeka, July 20, 2006, “Diragukan, Kinerja Tim Supervisi Bisnis TNI” in Jawa Pos, July 24, 2006, and Human Right Watch, “Indonesia: Reformasi Bisnis Militer”, accessed from http://www.hrw.org/legacy/indonesian/docs/2007/02/16/indone15349.htm,

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PAB TNI then created four criteria for military business that should be stopped, which are 118 (a) business activity owned, controlled, and run directly by TNI personnel or institution, (b) business activity owned, controlled, and run indirectly by TNI personnel or institution, (c) business activity that has the potency to create clashes of interest what able to disturb TNI work, and (d) business activity that use, run, control or utilize state asset conducted by TNI institution or active personnel. In six month this team had succeeded to verify the value of military business, which covered 23 foundations which run 53 companies, and 1,098 cooperatives that run 2 companies. 119 The total 1,176 business units’ asset can be seen in Table IV.1.

Table IV.1. Position of Military Business in 2007 Type of Activity

Asset (IDR Billion)

Obligation (IDR Billion)

Net Asset (IDR Billion)

Foundations

1.872,92

434,57

1.438,35

Cooperatives

1.320,55

536,31

784,24

Total

3.193,47

970,88

2.222,59

Source: Tim Nasional Pengalihan Aktivitas Bisnis TNI Report given to author March 11, 2009

Despite the successful military business asset clarification, Timnas could not do more in the takeover process. No authority was given to the team to conduct takeover activity, only to create recommendation of what the president should do on the matter. Therefore Timnas PAB TNI issued three alternatives as option to be chosen by the president. The alternatives are: 120 1. Until the government can provide military welfare, primary cooperatives that directly support military personnel welfare can still allowed to run but other forms of cooperatives must be taken oven and for awhile their assets can be given to primary cooperatives. Advisable that people that run the cooperatives are not active soldiers. Foundations must be taken over by various mechanisms and put under Ministry of Defense, or for higher degree education foundation to be put under Ministry of Education, or liquidated. Assets should be given to Ministry of 118

Wisnu Dewabrata, “Upaya Hapus Status Tentara Niaga TNI” in Kompas, November 27, 2008. “Timnas Bisnis Pertahankan Koperasi”, in Republika, December 30, 2007. 120 Tim Nasional Pengalihan Aktivitas Bisnis TNI Report given to author March 11, 2009, included in this thesis as appendix. 119

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Finance, or if they are still in use or rented should be regulated under Finance Minister and state regulations so the revenue will be submitted to the state, including business such as hospital. Government need to create team to arrange the takeover which consists of Ministry of Defense, TNI and institutions linked. This alternative is pragmatic, considering condition in the field and able to conduct the takeover wholly. 2. Similar with alternative 1 but primary cooperative roles to provide soldier welfare is handle by working units created under Ministry of Defense. The working units made by considering input from experts, practitioners, and experiences of other country such as Port/Base Exchange in USA that gives services on soldiers’ main needs and managed under MoD. This alternative will make military focus on its task. This alternative is realistic, able to conduct the takeover wholly with considering realization and implementation.

3. The military foundations and cooperatives are fused with similar foundations and cooperatives under Ministry of Defense in corridor with the existing regulations. In the future, the foundations and cooperatives under MoD should be adjusted, ran through financial and legal audits, and for the capital to be returned to the state (for foundation) or the members (for cooperatives). The alternative opposed the spirit of bureaucracy reform in managing good governance. This is a very conservative alternative which consider the easiness of takeover implementation.

Timnas PAB TNI completed in October 2008, exactly one year before the deadline. No further activity in separating military from business was told to the public. Although the implementation of government policy in taking over military business was left to President SBY hand, he did not issue any regulation or make another body to execute the practice. In February 2009, parliament fraction Partai Keadilan Sejahtera held a seminar of TNI reformation that noted homework on military reform, including reforming its business. 121 The meeting pushed the government to solve its unfinished agenda before the term ends in mid year. No comment came from government up to March 16, 2009, when Defense Minister Juwono Sudarsono stated in newspaper that the military business transfer will be settled in October this year. This statement is worthy to note but the real activity to implement government takeover policy is also needed to be check. Efforts conducted so far can be one of the measures to project government success in fulfilling the deadline. In Figure IV.2 can be seen the activities to separate military from business being done so far and the time consumed.

121

“Masa Depan Reformasi TNI Pasca 2009”, accessed from http://mula.blogspot.com/2009_03_01_archive.html in March 4, 2009.

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Figure IV.2. Military Business Takeover Process and Time Frame No activity since UU 34/2004 issued (Oct 2004)

TSTB TNI (Aug 2005 - Apr 2008)

Indonesia Military Business Takeover

16.67

53.33

10

6.67 13.33

Timnas PAB TNI (Apr 2008 Oct 2008) No activity reported in the media (Oct 2008 - Feb 2009) Time left before deadline (Feb 2009 - Oct 2009)

0%

20%

40%

60%

80%

100%

Source: Calculated by Author

From the percentage of time consumed, the lengthiest was used by TSTB TNI team with 53.33% or more than 2.5 years out of five years deadline. The second longest time used is after the law issued, with 16.67% or around ten months the government idled to proceed with implementation. Because the verification result used as base for the action is Timnas PAB TNI finding, which only took 10% or around 6 months, it then can be said that 70% of the time had been wasted unfruitful. This condition worsens by no statement from government up until February 2009, a limit posed by the author on this research. From February 2009, there is only eight months time left (around 13.33%) before the issue reaches its deadline.

Can the government fulfill the target considering there had been no military business units transferred, or even, no statement on which alternative chosen to be the guideline to conduct the takeover process? Is it true, as like what political expert Marcus Mietzner had stated 122, that the post-Suharto governments have not seriously tackled the issue of military self-financing which made the process to establish effective and democratic civilian control over the military cannot be

122

Marcus Mietzner, The Politics of Military Reform in Post-Suharto Indonesia: Elite Conflict, Nationalism and Institutional Resistance, (Washington: East West Center, 2006), p. 49-62.

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completed? Author will further analyze Indonesian government’s efficiency and effectiveness in implementing policy for transferring military control of commercial enterprises using media analysis followed with stakeholder analysis.

IV.2. News Buzz: What the Media Says on the Divorce of Military from Business The importance of media reportage can be seen in the words of former US President Franklin Delano Roosevelt, “The only sure bulwark of continuing liberty is a government strong enough to protect the interest of the people, and a people strong enough and well enough informed to maintain its sovereign control over its government”. 123 News in public media is the portrayal of what happened in state and society. It shapes public mind as well as informing the how the government work, and more importantly whether they work well, so people will be able conduct oversight in their activities, which in this context, in measuring military business takeover policy implementation.

As there are many theories on media analysis, author had chosen discourse analysis on the content of media reportages. 124 Discourse is how a certain issue is being debated in both elites and public area which brought about several effects to the society. With discourse analysis, these effects are investigated. In military business issue, there are two effects that had been created by media publication, first is the social cognition and second is the socio-cultural change. The social cognition explained how the society recognized the issue that is being brought about by the media and making it a communal problem. Meanwhile, sociocultural change explained how the society change its position toward the issue, for example from not knowing, to know and aware of the issue, and then making a stance on it. In this way, discourse can produce and reproduce status quo and then transform it. 125 Military business reform is an issue that had been publicly 123

Robert Norris and Patrick Merloe, Media Monitoring, (Washington DC: National Democratic Institute, 1954), p. 1. 124 For reference on media analysis, read Eriyanto, Analisis Wacana: Pengantara Analisis Teks Media, (Yogyakarta: LKiS, 2001). 125 Eriyanto, Op. Cit., (Yogyakarta: LKiS, 2001), p. 17-18.

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discoursed since Reformasi era, alongside with other reform demands. It is especially heavily publicized after the TNI Law issued in October 2004 and continues to catch public interest due to five years deadline for the government to takeover military owned business.

Author conducted media analysis on news about military business given to public from 2004 to February 2009 using content analysis of the media. 126 The analysis was conducted in series of: 1. Collecting publication 2. Tabulating collected publication according to (a) date of publication and media; (b) title; (c) spokesperson; (d) statement; and (e) type of news whether it support the military business take over, partially support, does not support, or neutral considered from the writing and statements quoted. Author given the assessment of the type of news to two people to decide the type of news, and given her opinion if they do not reach consensus. 3. Calculating issue of the publication, and 4. Analyzing the calculation result in form of chart and qualitative analysis.

From the research, author had collected 103 news on government taking over TNI business from fifteen publications in Indonesia (the full table of media coverage can be seen in the Appendix Table of Media Coverage on Military Business in Indonesia 2004 – Februari 2009). There are 49 news which support government taking over military business, 9 news that partially support, 16 news that does not support and 29 news that is neutral to the issue. What author classified as neutral is news on military business takeover that had only explanation on how the process run or will be conducted, without statement or comment that either support or does not support the government to conduct military business takeover. From the publication gathered over the chosen period, author had summarized the stances of the news which can be seen in Figure IV.3 below.

126

Author used the same content analysis with what is applied by Shahzad Ali and Khalid, “US Mass Media and Muslim World: Potrayal of Muslim by Newsweek and Time (1991-2001)” in European Journal of Scientific Research, Vol. 21, No. 4 (2008), p. 554-579.

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Figure IV.3. Stance of Media Coverages on Government Taking Over Military Business in Indonesia (2004-Feb 2009) 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% 2004

Support

2005

2006

Support Partially

2007

2008

2009 (up Average to Feb)

Does Not Support

Neutral

Source: created by Author, 2009

From the statistical figure, it can be seen that in general government takeover military business is supported by the media and the stakeholders which statements had been quoted in the news and over the year, resistance to for the government conduct the takeover is slowly declining. Support of the takeover since TNI Law issued is already 45.45%, and reaching its peak in 2007 with 63.63 % with average of 47.57%. While the news that is not supporting government taking over military business reached its highest when the law is starting in 2004 with 27.27% and gradually lowering to 8.33% with average of 15.53%. Using the discourse analysis theory, it can be said that Indonesian society is supporting government to takeover military business and the minority that in the beginning refuse the change is little by little accept it. But this of course, has not explained how the policy implementation is conducted.

From the content analysis conducted, the news shown that government had not progressing well in taking over TNI business. The discourse in the news until end of 2004 is in one side TNI wanting to keep military business (Head of TNI Gen. Endriartono Sutarto: “We still run the business because the real budget is far from sufficient”, Kompas, Nov 11, 2004); civil society expert that wants reformation (Researcher for Center Strategic and International Studies (CSIS) Philips

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Vermonte: “One of the bad excesses of military business is shifting loyalty of the soldier, from TNI that is main state defense tool to economic interest of few, or even only of the person itself… For this we need more fundamental things, including transparent investigation and rule of law principle”, Sinar Harapan Dec 16, 2004); and Ministry of Defense that is trying to find middle ground (Defense Minister Juwono Sudarsono: “The smaller ones (of TNI business units) will not be taken over. They will still be owned by the TNI to help fulfill the soldiers' needs, but the government will take over military business enterprises that have assets worth IDR 5 billion. This is still discussed”, Jakarta Post, Sept 12, 2004).

In 2005, the issue is shifting more on how the takeover process will be conducted. There were debates on which military business units should be taken over by the government (Defense Minister Juwono Sudarsono: “Only ten out of 219 business unit under TNI inventory that will be taken over because only those fulfilling criteria, from the capital to the management side, that have assets around IDR 25 million, the others are more in form of social,” Tempo Interaktif, Oct 20, 2005). There is issue in who will later manage military business (Former Vice of TNI Chief of Staff and Commissioner in Bank Artha Graha a military owned business Kiki Syahnakri “The military holding company should be under TNI. In the US, military has business units, but the management is handled by professional therefore it is accountable and transparent” in Bisnis Indonesia, Feb 15, 2005). There is question on who will be responsible to the indebted business units (Economic Coordinator Minister Aburizal Bakrie: “The plan to transfer military business to state-owned company is still being analyzed because government does not want the transfer to be a burden to state budget,” Republika, April 18, 2005). And most importantly, who will investigate the assets (Director of Pro Patria (NGO) Hari Prihartono: “Because the business include active military personnel, it is not easy to inventory them,” Sinar Harapan, March 5, 2005).

In 2006, the debate on separating military from business is more on the formation TSTB team and the NGOs pushing forward urgency to reform military business because it created human rights violations and if it takes too long, the assets will

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be dissolved. The debate even attracts international attention so the military had forced to give explanation (TNI Spokesperson Maj. Gen. Kohirin Suganda Saputra: “As to Misol’s hope that the U.S. should put pressure on the Indonesian government to end military business activities, in fact the transfer of military business is underway”, Jakarta Post, March 15, 2006). This year, the government talks had reach agreement that only TNI business that has state assets will be taken over (Head of TSTB TNI & Assistant to the Ministry of State-Owned Company Said Didu: “There is grey area that needs to be redefined. Only TNI business with government assets will be taken over”, Kompas, July 20, 2006).

What interesting in 2005-2006 is that because of the public opinion in the media was blaming TNI as the actor of business. Head of TNI determined to cooperate by making a roadmap (TNI Spokesperson Maj. Gen. Kohirin Suganda Saputra: “According to plan, Head of TNI wants to finish the matter of military business in two years, which means in October 2005 already had a policy, so that the execution will be in October 2005 to October 2006. Then in November 2006 to November 2007 will be evaluated and expected to conclude by 2007”, Koran Tempo, September 25, 2005). They cooperated to give data asked by takeover teams, which in 2006 Head of the TNI Djoko Santoso then replied when asked on the process that it is not their problem anymore (“For the takeover process is considered not progressing, it is no more the problem of TNI”, Kompas, October 5, 2006). Nevertheless, there is no explanation whether TNI discussed this timetable with the government and also no respond from MoD or the team on this statement.

Year 2007 passed without meaningful military business reform process conducted because TSTB slow work and the president has not issue decree regulating TNI business, as it is mandated in UU No. 34/2004. The state secretary stated that draft for president decree was not suitable therefore given back to MoD for revision (Cabinet Secretary Sudi Silalahi: “After being accepted from the MoD, -the draftturned out to be less harmonized and not synchronic therefore returned back”, Sinar Harapan, Feb 10, 2007). This situation even made Defense Minister Juwono

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Sudarsono pessimist (“I’m not sure that TNI business can be submitted in 2009, like what is mandated by UU No. 34/2004” Bisnis Indonesia, June 12, 2007).

In 2008, after four years no explanation to public on how government conducts takeover of military business, parliament started to push the government (Parliament Member of Commission 1 Yuddy Chrisnandi: “I’m suspecting there is ‘batting eye’ between government and TNI because they both do not have strong political will to finish this (TNI business) issue. Now the part that has physical business assets is TNI, while government has regulation. Both factors must exist so that the takeover can run… I’m afraid that since TNI Law implemented until deadline, all business units taken over are only the non performed while the profitable had been sold” Kompas, January 18, 2008). Then President Decree No. 7/2008 was out in April but it does started government takeover action, only making a new team Timnas PAB TNI. The new team succeeded to produce three takeover recommendations in October 2008 and put the decision to the government which one will be implemented.

In the beginning of 2009, Defense Minister Juwono Sudarsono stated his preference on Timnas recommendations (“We still recommend keeping primary cooperative and foundation, according to existing laws, this is considering the necessity of low rank soldier”, Antara News, January 1). Parliament gave another push (Parliament Member of Commission 1 Bagus Suryama: “President needs to take decisive approach in takeover TNI business. The key to the problem is the president has to decide soon which option to take because it had been too long. The three options had been reported to the president two-three months ago but no decision until now”, Kompas, January 7) but until end of February 2009, President SBY did not issue any regulation. The last statement worth notice was from Assistant to the Ministry of State-Owned Company Said Didu (“Ministry of Finance will take care of TNI business assets. Ministry of Cooperative and Small Business Units will takeover TNI cooperative, Ministry of Law and Human Rights will manage TNI foundation, and Ministry of State-Owned Company will takeover TNI business units that can be transformed to state-owned companies.

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The qualifications for the units to be state company are having asset more than IDR 15-20 million and do not burden state economy… The handing over will be done by Ministry of Defense, not by TNI,” Kontan, Feb 13, 2009).

From the media analysis conducted, the government policy implementation to takeover military business is not efficient and effective because (1) President SBY has not issue regulation in executing takeover process, which impacted to (2) no clear body that can be held responsible in conducting the takeover, because (3) there are too many ministries involved without coordination, because (4) the president has not given authority to certain body to conduct takeover. Author had succeeded to obtain statement from the president on the issue, which will be further discussed in the next sub chapter.

IV.3. Stakeholders Perceptions on Government’s Progress in Separating the Military from Business The second tool that the author uses to measure government effective and efficiency in taking over military business is stakeholder analysis.

The

measurement is assessed from stakeholder statements whether they see the government work is efficient and effective or not. The effectiveness is considered from whether the government can reach the goal to takeover military business as it stated in TNI Law Article 76. While the efficiency is considered from whether the government utilize time efficiently or not, and from how much it can takeover from total IDR 3.2trillion military business assets verified.

Stakeholders, defined by Meri Williams, are people who hold a stake in the project, the people who care about the project’s outcome. 127 It is important to identify the stakeholder to understand their point of view and to analyze these views to map the situation, which in this case is measuring how they see the process of government taking over TNI business so far and whether they see that the deadline can be reach. The analysis will be conducted in several steps: 127

Meri Williams, The Principles of Project Management, (Cambrige: SitePoint, 2008), p.33.

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1. Identifying the stakeholders 2. Defining the questions shaped to answer how is the efficiency and effectiveness of government policy implementation in taking over military business 3. Compiling the stakeholder stances 4. Analyzing the stances 5. Concluding the stakeholder analysis to assess government policy implementation in taking over military business

Firstly in identifying the stakeholders, researcher for Center for Strategic and International Studies, Edy Prasetyono, highlighted three stakeholders in TNI reform, which are the government, TNI itself and the civil society. 128 Author sees that the classification is too general therefore she came out with five categories of stakeholder: (a) the government or executive that is divided to President as the highest authority, Ministry of Defense that is the executor of president command, and the takeover team, (b) TNI as the side which business will be taken over, (c) the legislative of Commission 1 that manage defense and security issues; (d) civil society in Indonesia, that is divided to NGOs and experts as the advocator and think tank that push for military reform to be done after Reformasi; and (e) international donor in Indonesia security sector reform that has the influence to shape national policy. Secondly, in defining question to assess how well government policy implementation in takeover military business and whether it can fulfill deadline, author proposed several questions for the stakeholders, which are: a. How does the stakeholder see government efficiency and effectiveness in implementing military business takeover? b. Does the stakeholder think that the government can fulfill deadline of takeover in October 2009? c. What does the stakeholder did/do/will do in the issue of Indonesia military business takeover?

128

Edy Prasetyono, “Jalan Panjang Reformasi TNI”, Kompas, February 11, 2008.

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In conducting the third step, which is compiling the stakeholder stances, author obtained the stances from interviews, official documents and publication in the media. Author had collected 14 stakeholders stance through interview,

official document and reportage given by the media. The stakeholders represented is 5 from the government, 2 from the TNI, 1 from the legislative, 5 from the civil society and 1 from the international donor. The compilation of stakeholder stances in answering the proposed questions is stated in Table IV.2.

Stake holder Category

(a) govern ment

Table IV.2 Stakeholder Stance in Answering Questions on Indonesia Military Business Takeover Stakeholder Name of the How does the Does the Institution Person and stakeholder see stakeholder Posituon government think that efficiency and government effectiveness in can fulfill implementing deadline of military business takeover in takeover? October 2009? “From the “Of course the Susilo takeover must be timeframe that President Bambang is still present Yudhoyono well formulated 129 and I see it on which / still sufficient President of consider enough to unsuitable RoI solve this.” business in TNI and which is not. For example soldier cooperative for daily needs, it exists in every institution like stated in Cooperative Law and Constitution 1945, surely that is not consider as TNI business. What is clear that TNI and MoD have prepare to restructure

What does the stakeholder did/do/will do in the the issue of military business takeover? “In the meantime team (of TNI business takeover) will work intensively to fulfill the target like what is mandated by law to conclude this TNI business takeover issue.”

129

Compiled from the Official Press Release of President Talk in Ministry of Defense, February 4, 2009 (see Appendix Presentasi dari Menteri Pertahanan RI di Gedung Departemen Pertahanan)

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(business) according to law”

Ministry of Defense

Takeover Team

Juwono Sudarsono 130 / Defense Minister

“We are striving to continue settling this problem on time, democratically and accountably in accordance with the law.”

“All (TNI business transfer) will be already be resolved before Oct. 16, 2009, at the latest.”

“The state secretariat was preparing recommendati ons on the issue in response to a report from the national team handling the management transfers of TNI businesses to the state. It’s (content) still a state secret.”

Col. Bayu Setiawan 131 / Law Bureau of MoD

“It is progressing, it needs time. Do not worry, we are working at it. TNI business and military court are two main issues that we are seriously dealing right now”

“Defense Minister Juwono stated that we have to finish the issue in October. We will.”

“We are working on it. But the data cannot be open to public yet. It will be disclose after it is done.”

Said Didu 132 / Head of TSTB TNI & Assistant to the Ministry of StateOwned

“Government through TSTB TNI is being careful for not given the authority to conduct the takeover to Timnas PAB TNI, so that in the future,

“The target will be like stated in the law. Do not worry, October 2009 will be finish.” (Media Indonesia)

“Our (TSTB TNI) work had been reported. Now Timnas PAB continues the work of TSTB TNI team and the national team can work better because

130

Statement in “TNI Business Transfer to be Settled by October”, Jakarta Post, March 17, 2009. Interview March 17, 2009 132 Said Didu decline author interview request stated that he is no longer taking care of the team after it finished working in April 2008. Therefore author took his statement from media publication namely “Bisnis Militer Diambil secara Hati-Hati”, Kompas, 29 April 2008 and “Ditelaah Pengurus Yayasan TNI yang Melanggar Aturan”, Media Indonesia, April 28, 2009. 131

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it has better legal base.” (Media Indonesia)

government will not be burdened.” (Kompas)

(b) military

TNI

Erry Riyana Hardjapame kas 133 / Head of Timnas PAB TNI in Executor Team

“Our team had worked hard to collect data on TNI business units, and I am sure this is the only accurate and factual data.”

“I cannot really say. It depends on how fast the conduct will go. Our team can work in six months. So there is a chance.”

“The executor team of Timnas PAB TNI work had finished, now it is left in the hand of guidance team, which is Defense Minister to conduct takeover execution, but before it must be stated how will the takeover conducted.”

Djoko Santoso 134 / Head of TNI Mars.

“I think why the government takes time in this issue is because they are being careful. What is clear is that TNI had given all of our business to be managed. So there should be no accusation that TNI hampers the process. We don’t want to be blame.”

“For the takeover process is considered not progressing, it is not the problem of TNI anymore.”

“Since the head of TNI still held by Gen (Ret.) Endriartono Sutarto, internally TNI already committed to give their business to be taken over according what is mandated by the law. By that time the Head of TNI even committed to speed up TNI business

133

Interview and data given by Erry R. Hardjapamekas personal assistant Sonny Wibisono February 7, 2009. 134 Since it is difficult to arrange interview with Head of TNI Djoko Santoso, author took his statement from media publication namely “HUT ke-61TNI: Menyoal Kembali Reformasi TNI”, Kompas, 5 October 2006.

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handing over from 5 years, like stated in Article 76 UU 34/2003, to only 2 years.”

(c) legis lative

Major Muhammad Aras Razak 135 / Information Center Staff of TNI

“We cannot really say. But TNI has been cooperative with the government in takeover issue”

“Let see what the government will do. As TNI cannot really say.”

“It is not a TNI matter anymore because we had handed all the business inventory to MoD. You should ask the MoD”

Commission 1 of the Parliament

Abdillah Toha 136 / National Mandate Party Fraction

“I do not see any progress on the issue of military business takeover.”

“I do not know. Let see, but seeing from the deadline, I kind of doubt it.”

“We keep asking about the takeover every time there is a meeting with MoD but still no progress. It is hard for Commission 1 to follow the issue because we only have one expert staff.”

Institute for Defense, Security and Peace Studies (NGO)

Mufti Makarim 137 / Executive Director

“The government is slow in implementing takeover. The time is mostly spent on negotiating because I see the SBY regime is not confidence and having no clear signal of direction. In China, military

“I doubt that the takeover can be done in October 2009, because the regime is given big importance to obtain power stability and does not want to make risk.”

“IDSPS conduct two ways of actions. Which are research base to give alternative policies and raising social awareness on the issue by making discussion, press release,

(d) civil society

135

Phone interview June 1, 2009 Interview March 17, 2009 137 Interview January 20, 2009 136

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SSR training and event, such as commemorati ng 10 years of reform in Mai 2008.”

business takeover settled in one year.”

Pro Patria 138 (NGO)

Hari Prihartono 139 / Director

“The government is not giving clear mandate on how the takeover should run and who has the authority to do it. There is no courage to do it. We need decisive political attitude from the government.”

“TNI business not will be taken over in October 2009 whoever the president is. Indonesia defense issue is more complex than only taking over military business. We need to see the big picture, the linkage between budget, soldier welfare and TNI business.”

“ProPatria conduct seminars, working group discussions and researches on defense issues. We also think about what will happen when the issue is not finish within deadline. Will we need to amend the whole TNI Law or only Article 76 and how will it be.”

Indonesian Institute (NGO) & Indonesia Science Institute (LIPI)

Jaleswari Pramodhaw ardani 140 / Researcher

“The takeover process is on going although in my opinion it is very slow. After the reform, TNI new paradigm only succeeds to make them out of politics but not of business.”

“I doubt that it will be finish like what had been asked in in the law. Because seeing from the amount of military business of IDR 3 trillion, it is nothing if it divided to around 800 thousand troops, but imagine if only, let say

“I, with a team, is currently making a research on TNI off budget. Not really in the field of military business takeover but it is a part of reform issue.”

138

Interview March 17, 2009 Interview March 17, 2009 140 Interview January 13, 2009 139

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25 people enjoy the money. These people are elites that hold TNI business, and they have power, which make the practices hard to be erased.”

141 142

National Law Commision (KHN) & Gajah Mada University (UGM)

Fajrul Falaakh 141 / Member of KHN & Lecturer in UGM

“How do I can say whether it is efficient and effective while it has not been any implementation? I mean, no TNI business had been taken over, at least none had been told to public.”

“It is hypothetical, I mean it is probable. But I’m sure if it can, it will not takeover all TNI business. I’m sure government has following scenario for after Oct. 2009 that had not been disclose.”

“I and friends in the civil society that concern to the military business takeover will not let the issue dissolved by time. We will keep advocating.”

Indonesia Science Institute (LIPI)

Ikrar Nusa Bhakti 142 / Research Professor

“The takeover is not working. We will soon enter legislative election and they are busy campaigning, so no progress from the government and no push from the parliament until now (March 2009).”

“Until whenever military business takeover will not be finish if the president is still SBY. He prolonged the problem. If he is serious in takeover TNI business, the issue will not be continuously handed over from one team to another”

“The civil society, like me, can only talk in seminar or like this, but the one who has the authority is the government.”

Interview March 17, 2009 Interview March 17, 2009

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(e) intl donor

Friedrich Ebert Stiftung

Artanti Wardhani 143 / Head of Security Sector Reform & Conflict Resolution Program in FES

“I see that the government is lacking political will because the process is not clear. There are efforts of implementation but it is not effective. About efficiency, I cannot say because they never stated the amount of military business to be taken over openly and no real action takes place, so therefore the efficiency is still zero.”

“I do not know whether it will be finish, I do not think it will. It is either that military business will metamorphose , but not gone, or the government will extend the time limit. The Article 76 might be amended or , like many expired law in Indonesia, maybe it will left like it is, people will forget and government will stop do anything about TNI business.”

“We tried to push the issue by publishing books and support seminars on the topic. But surely the actor with authority is the government.”

Source: compiled by Author

After compiling stakeholder stances, the fourth and fifth step are conducting analysis of the stance to evaluate government policy implementation in taking over TNI business, then concluding whether it is efficient and effective or not. From the answers, it can be seen that government is carefully handling the takeover issue which make them working in slow pace, but they are committed to solve the issue before the deadline. The military also realizes the sluggish business takeover process but they did not make direct comment and stated that the problem is not in their side, but in the MoD. Legislative uttered that they asked the government about the issue and regret why there is no progress. The civil society represented by NGOs and experts are the most vocal to assert that President SBY regime has no courage to execute military business take over because it prefer 143

Interview March 18, 2009

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power stability, has no clear direction, and does not disclose information to the public which hamper oversight. Meanwhile international donor saw the government is lacking political will to conduct takeover which make it not effective because the goal is more difficult to be reached. Because almost all five stakeholders seen the takeover process is slow or even not progressing, hence author conclude that government the policy implementation is not effective because of low political will and no clear direction.

Author analyses the effectiveness of government policy implementation from whether the goals of taking over can be reach in October 2009 or not. From the answers, only government that is sure that it can takeover military business according to deadline mandated in Article 76 UU TNI No. 34/2004. The military itself is being neutral by declining to answer. Whereas the legislative, civil society and international donor uttered their doubt that TNI business can be taken over by the government, there even some believes that the business merely change form. One stakeholder judged that the goal will be reached versus three that do not believe makes author conclude the government policy implementation in taking over military business is not efficient, time wise. Also using the logic put forward by international donor, because no TNI assets had been declared taken over by government, therefore it is also considered not efficient in the money/capital wise. Nevertheless, before the real deadline time is reach, no sure statement can be made, so this is only a hypothetical answer up to the writing of this thesis (June 2009).

IV.4. Uncertain Future of Indonesia Military Business Takeover Up until now government that is in this case represented by Ministry of Defense and takeover teams, had not issue report on what are TNI business that had been takeover. The discussion is still on which business will be taken over and which will not. This can be regarded tardy, considering it is almost four and half years of the five years time mandated to the government by Article 76 TNI Law No. 34/2004. This means that around 90% of time had been consumed in making

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category for the takeover, which are TNI business that is over IDR 20 million and not providing soldier daily needs. 144 Even so these criteria are not final because government has not stated it in official policy or regulation, therefore the actual takeover conduct still unforeseeable.

Seeing the stakeholder answer, author is pessimist that TNI business takeover will be fully completed by October 2009 as mandated in the law. There are three stakeholders that doubt that government can implement takeover policy according to deadline, one stakeholder is neutral, and one is sure that the time is still adequate for action. However, it is need to be considered that not every stakeholder has the same importance and influence to TNI business takeover process. Author deliberates stakeholder conditions by making the matrix shown in Figure IV.4.

Figure IV.4. Stakeholder Power Position in TNI Business Takeover Policy Implementation Degree of Influence: influence the policy implementation

High Influence & High Importance Degree of Importance: directly affected by the policy implementati on

(a) government; takeover can be fulfilled in Oct 2009 (3)

Value: 3 High Influence & Low Importance (e) international donor; ; takeover can not be fulfilled in Oct 2009 (-2)

Value: 2

Low Influence & High Importance (b) TNI; neutral (0) (c) legislative; takeover can not be fulfilled in Oct 2009 (-2)

Value: 2 Low Influence & Low Importance (d) civil society; takeover can not be fulfilled in Oct 2009 (-1)

Value: 1

Source: Crop Post-Harvest Reform, Guidance Note Stakeholder Analysis Form, accessed from http://www.cphp.uk.com filled and valued by Author

144

Stated by Said Didu, Assistant to the Ministry of State-Owned Company and Head of TSTB TNI team, to the press. “Empat Departemen akan Tangani Aset Bisnis TNI”, Kontan, February 13, 2009.

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For the deliberation to be more visible, author gave value to each box according to its degree of importance and influence, the higher the degree, the higher the number. From the matrix, can be calculate that the total power in position in assessing TNI business takeover is -2 or in other word, it is more distrust that the policy is implemented well and the goal can be achieved within the deadline.

As for the long future of military business takeover post October 2009, there are several possibilities. Hari Prihartono from ProPatria came up with the possibility for amending the TNI Law but it will need hard work. Artanti Wardhani from Friedrich Ebert Stiftung stated that amending of law more likely will be limited only to the Article 76 which stated the deadline or like many expired law, the law will be left with no action until the public forgot about the issue. This can be one of the prospect, because like what Indonesian Institute researcher Jaleswari Pramodhawardani said, only elites that profited from TNI business and these people have high power that make it hard to be stopped. There is also a chance that the government will be committed to conduct the takeover, and prolonging to implementation is a way to get support to be reelected in 2009 general election. But this last opportunity can realize only when President SBY won for the second time, although LIPI research professor Ikrar Nusa Bhakti and IDSPS director Mufti Makarim doubt his credibility to lead as having no confidence and .not serious in taking over military business.

From interviews conducted with the stakeholders, author derived several problems on government implementation policy in taking over military business. They are: 1. Military personnel, especially those in the low ranks, still need primary cooperatives to support their welfare and daily life 2. The government is not giving clear mandate on how the takeover should run and who has the authority to execute. In other words, the government does not give decisive political attitude in taking over military business. 3. No real action of government taking over military business had been done, in terms of taking over assets. If it was, no formal information disclose to the public. 4. Because the government action in taking over military business is slow, there is assumption that military business will simply transform its shape, like in the Suharto Era.

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Author will propose policy recommendations in the last chapter of this thesis to give alternative solution for the government in regards of military business. Before coming to the conclusion, author suggests that Indonesia can also see how other countries in the world manage their military business in order to make their armed forces more transparent and accountable.

IV.5. Learning Military Business Management from China and the US Indonesia can learn from other countries experience in managing military business. Country proposed to be a referral of its successfulness in managing military business is China, which conducted divestiture in 1998 commenced by President Jiang Zemin. China armed forces, the PLA, was having over 15,000 enterprises, employed over 600,000 civilians and had yearly total revenue around US$18 billion. 145

President Jiang decided to conduct military business divestiture because of several reasons (1) the business made PLA unable to work professionally because of it shifting focus; (2) it increase the cases of corruption and bribery; and (3) China’s tradition of the military being subordinate and subservient to the Communist Party was changing because the president did not have military background to earn enough respect, and the only means to control PLA through budget cannot be done because they were in some degree financially independent. Therefore in July 1998 President Jiang directed the armed forces to completely close down all their business operations. This order disallowed the PLA of any involvement in any form of economic enterprise and also directed the military and other law enforcing agencies to surrender their existing business operations before the end of the year. Despite the limited time given, the government succeeded to takeover military business assets reaching US$ 6.02 billion. 146

145

Swaran Sigh, “Rise and Fall of the PLA’s Business Empire: Implication for China’s CivilMilitary Relations”, in Strategic Analysis, May 1999, Vol. XXIII, No. 2, p. 1. 146 Institute for Defense Security and Peace Studies, Seri 9 Penjelasan Singkat (Backgrounder) Bisnis Militer, June 2008, p. 6.

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China government takeover the military own business in three phased. First was establishing the bodies which responsible for the action. China created the State Commission on Trade and Economy, a super-ministry under the State Council, to supervise the transfers to run according to given time limit. The second was formal registering and assessing assets. Lastly the third phase was going through the PLA business accounts and transforming them to state-owned companies. Up to March 1999, China government had taken over 150 large enterprises formerly owned by the military and police. 147 What Indonesia can learn from China in taking over military business is several points: ƒ

The president stated the government determination to takeover military business and he himself led the team.

ƒ

The government gave promise to compensate the losses that the armed forces experience by giving contribution to military budget. The statement was given by high official Vice President Hu Jintao and directly the budget raise Rmb 30 billion (US$ 4.4billion) per year from 1998 to 2000, and also for the local government were given Rmb 5 million (US$ 732 thousand) per province to manage people that were fired by the military business takeover. 148

ƒ

The government was also not afraid to take the losses of the poor performing military companies, defense related industrial activities are kept running, and they were attempts of opening slots of vacancies in the armed forces to employ workers that lost their job caused by the takeover. 149

Second country that Indonesia can learn from is the United States of America. The US members of a Uniformed Service (Army, Navy, Marines, Air Force, etc.) on active duty may not receive pay from another government position, except during terminal leave, or unless specifically authorized by law. 150 Enlisted personnel may be employed part-time during off-duty hours in Department of Defense nonappropriated fund activities. Members of the Armed Forces Reserves and 147

James Mulvenon, Soldiers of Fortune: The Rise and Fall of the Chinese Military Business Complex 1978-1999, article from Bonn International Center for Conversion, October 1999, p. 1320. 148 “Adjusting Salaries to Appease the PLA”, Inside Mainland China, Vol. 21, No. 1, January 1999, p. 31. 149 Swaran Sigh, Op. Cit., p. 10 & 12. 150 “Moonlighting Law and Legal Definition”, accessed from http://definitions.uslegal.com/m/moonlighting/ in May 30, 2009.

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members of the National Guard may receive military pay and allowances in addition to pay from another Government position. The regulation is stated in soldier hand book, for example in the army: “Off duty employment, or moonlighting, is permissible if it does not interfere with official duties, does not bring discredit upon the Army and does not violate basic ethical considerations… Working for a bookie (security guard) is an example of an off-duty job that could discredit the Army. You must obtain written permission from your commander to work off duty for non appropriated-fund activities…” 151

With certain rules and supervision, troops are allowed to have a second job. For soldier welfare issue, US Department of Defense is encouraging personnel to conduct economic consultation, giving food discount, bank loan and scholarship for the person or his/her family by cooperating with third parties, such as bank, economic organization or pension fund. Even after the troops retired, the veterans are encourage in establishing business and are given supports by priority in military or government outsource business tender. 152 What Indonesia can learn from the US is in regulating its armed forces with clear legal guideline; conduct supervision with written prove for military business activity so it can be administered; and also giving support to the soldiers and retirements that have economic difficulties.

Learning from the experience of China and the US, there are two alternatives solution that can be use by Indonesia in managing military business. It is either really conduct military business takeover or regulates how military personnel doing business activity through appropriate set of laws and government bodies. These options are given back to the government to be deliberated on which one suitable with the country condition and resources.

151

The United State Department of Army, Legal Guide for Soldiers, (Washington DC: US Department of Army, 1991), p. 1. 152 “The Directory of Small Businesses Owned by the United States Military Veterans”, accessed from http://www.veteranownedbusiness.com in May 30, 2009.

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Chapter V CONCLUSION

V.1. Summary Indonesia military had been involved in business since the early stage of state making. The definition of military business is “all business activities that cover foundations, cooperatives, the usage of state assets, and other activities outside the main task and function of TNI” 153. Historically, the country’s armed forces were composed by combination of colonial made troops and local guerrillas that brought about the tendency of seeking their own funding. The fund was used for military operations against the return effort of the Dutch, and also to pay soldier welfare because state was too poor to finance its armed forces in the early days of the republic. But this activity run continuously even after Indonesian government is established which makes it hard for the civil authorities to have control of the military if their funding does not come solely from the state budget.

One of the off-budget incomes obtained by the military is through business. In Indonesia, issue of military owning and running business activity gained critic after 1998 Reformasi era. Civil society pushed government to conduct taking over of military business that covers almost all business sectors, from hospital; hotel; transport service; logging; to higher education body. Within the spirit, this writing is conducted in order to accomplish these objectives: •

Explain the condition of Indonesian military in terms of funding and history on how it involves in business sector

•

Explain the process of how the government of Indonesia takeover military owned business up until February 2009

•

Assess the efficiency and effectiveness of the government’s policy implementation in separating military from business

153

From Timnas PAB TNI Final Report Recommendation given to author on February 3, 2009

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•

Give alternatives on how to improve the government’s policy implementation from the assessment conducted and also from other country’s experience in military funding

Military business was accepted in Soekarno era because in the beginning, it is still needed for the military to have resources to fight for the country sovereignty. After that, in 1958 an Army General named Abdul Haris Nasution developed “Dual function doctrine” which formalized the armed forces involvement in both military and civilian fields, including economy and politics. This doctrine formalized the armed forces personnel to conduct business activity. In the New Order era under President Soeharto leadership, military business grew more rampant. This smiling general allowed the armed forces to involve in business as an exchange of power support for his regime. Although in his era there was an effort to limit military business, the action was mild and only changed its shape from state owned companies to cooperatives and foundations with business units of various forms. As result, by the end of Soeharto power, the combined turnover of military business in Indonesia was IDR 2.9 trillion (US$348 million) 154.

Economic downturn brought the momentum of Reformasi in 1998 with civil society demanded their power in establishing democratic country, including the demand of taking military out of politics and economy. The process of security sector reform then started by separation of police and military forces and creation of legal bases of the soldier professionalism. One of the ways to create professional armed forces is by controlling their budget so military operation and task can be regulated by civil oversight. There ways are cutting off-budget funding, stopping military business activity and taking over their business units.

Legislative had issued four regulations as the legal base to carry out actions to reform military business. The regulations are first, the State Defense Law UU No. 3/2002 article 25(1) that affirms national defense is funded by state budget.

154

Cited in World Bank, Accelerating Recovery in Uncertain Times: Brief for the Consultative Group on Indonesia, (Washington DC: World Bank, 2000), p. 29.

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Second, the TNI Law UU No. 34/2004 in article 2(d) on professional military that does not conduct business. Third regulation is in the same law article 39 which prohibits military personnel involved in business activity. And fourth regulation is also in TNI Law article 76 that gives five years deadline to the government to conduct military business takeover after the law implemented with further guidelines explained by president decree. 155 After the legal foundation established in 2004, it is left for government, or in specific political term, the executive, to implement these policies.

In the beginning there are arguments why the military business should be kept, such as the government only fulfilled 30-50% of the defense budget needed 156 therefore if the business is taken over, military readiness will be worst than the already low condition which only around 50% of Indonesia defense equipments is ready for use. But in fact there is no correlation on how much the government spent on defense with the growing or declining of the business. The biggest defense budget was in the 1970s when the country was fighting to win East Timor and West Papua, while the highest military business activity was around 1995 in Soeharto era. In the other hand, government already raised defense budget from IDR 8.3 trillion in 2000, to IDR 21.4 trillion in 2004, to IDR 33.6 trillion in 2008. 157

The problem is actually not about amount of budget but how the budget is spend, because Indonesia defense allocation is more for routine budget, that fund soldier welfare, than development budget that fund for new

equipment. The other

problem is that because military is a government tool, ideally the state should be the one that determines defense spending according to the limited fund existed, not the other way around. This means that the military should make do with whatever the government budget given to them.

155

The precise quote of laws concerning military business takeover can be seen in Chapter I, page 4-5 of this thesis. 156 Indria Samego, Op. Cit., p. 100, and “Indonesia: Next Steps in Military Reform”, ICG Asia Report, No. 24, Jakarta, Oktober 2001. 157 The list of Indonesia defense budget data can be seen in page 55-58 of this thesis.

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Up to February 2009, Indonesian government under President SBY had conducted action in taking over military business in terms of making verification of the assets amount and creating teams of taking over. The timeline of the process is stated as: ™ October 2004 - The TNI Law issued. Article 76 gave 5 years deadline for government to takeover military business ™ August 2005 - Creation of TNI Business Supervision Team (TSTB TNI) by Defense Minister Decision Letter ™ July 2006 - TSTB TNI report finding TNI business assets of IDR 1.5 trillion (US$ 150 billion) ™ April 2008 - Creation of National Team of TNI Business Activity Transfer (Timnas PAB TNI) by President Decision Letter ™ October 2008 - Timnas PAB TNI execution team report verification of TNI business assets of IDR 3.2 trillion (US$ 320 billion) and give recommendations ™ February 2009 - No formal statement from the government on how military business takeover is conducted so far although there was pressure from the legislative There is a need for assessing how efficient and effective Indonesian government, under President SBY leadership, in conducting the action of separating military from business after nearly 4.5 years the policy had been issued. In this thesis, author had looked at the publications in the media and also conducted stakeholder analysis which brought about the conclusions in evaluating actions taken by the government.

V.2. Conclusions Author had assessed how well President Susilo Bambang Yudoyono government implemented policies on military business takeover using tools of media and stakeholder analysis. Research findings show that up until February 2009 the implementation was still in the process of formulizing criteria of TNI business takeover, such as which companies targeted and how will it be conducted. In the statement of Said Didu, Assistant to the Ministry of State-Owned Company and TSTB takeover team head, the take over will be run as: 158 158

“Empat Departemen Bakal Kelola Aset TNI”, Kontan, February 16, 2009.

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ƒ ƒ ƒ ƒ ƒ ƒ

Ministry of Finance will take care of TNI business assets Ministry of Cooperative and Small Business Units will takeover TNI cooperative Ministry of Law and Human Rights will manage TNI foundation Ministry of State-Owned Company will takeover TNI business units that can be transformed to state-owned companies The qualifications for the units to be state company are having asset more than IDR 15-20 million and do not burden state economy The handing over will be done by Ministry of Defense, not by TNI

There is no clear statement from higher ranking government staff or official policy released to the public on military business takeover which made it difficult for civil society to conduct oversight. This condition also created difficulty to assess government effectiveness and efficiency in implementing takeover policy. Measure of effectiveness is by how the action progressing, while measure of efficiency is by how the time spent in implementing the action and the amount of TNI business taken over so far.

From the media analysis conducted in period of 2004 to February 2009, it is shown that the government spent time in gaining support to conduct the takeover process. Author examined 103 news and found 49 news that support government to takeover military owned business, 9 news that partially support, 16 news that do not support, and 29 that are neutral. The average of news classification can be seen in Table V.I. Table V.1. Stance of Media Coverages on Military Business Takeover Average of 2004-Feb 2009 50.00% 40.00% 30.00% News of military business 2004Feb 2009

20.00% 10.00% 0.00% Support

Support Partially

Does Not Support

Neutral

Source: Created by Author

From the stakeholder analysis, author had collected the stances from stakeholders, which are divided to five categories: (a) government, (b) TNI, (c) legislative, (d)

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civil society, and (e) international donor. Result of the analysis finds that government policy implementation so far is running ineffectively because it does not conduct taking over of any military business unit; and the process is going slow which until February no real action of taking over had been executed. Majority of the stakeholders do not trust that the takeover can be fulfilled within deadline of October 2009 as it mandated by Article 76 UU TNI No.34/2004.

From the media and stakeholder analysis in government policy implementation in taking over TNI business, author came to the findings of: 1. The government of Indonesia works reluctantly and burdened by bureaucracy. This condition is shown by how the government made more than one takeover team and involving too many ministries without giving enough authority and clear mandate of leadership. 2. The government hampers civil society to conduct the oversight by not giving enough information. This condition can be seen from the deliberation process and progress reports that are not open to public. This hardens the people to give feedback of takeover alternatives, which is regrettable because Indonesia has many NGOs and expert on defense issue that can be valuable to improve the process. 3. TNI position itself supportive to the takeover and neutral on its opinion

toward

the

government.

Nevertheless

because

the

government slow work, TNI is pressured by civil society as one side that hampers the takeover, after all it is their business that will be taken over. The chances are if the TNI push the government to solve it faster, it will make the government look bad and conduct rebuttal by lowering the defense budget. As a note, from 2008 to 2009 budget had been lowered because all the ministries budgets were cut 15% for budget efficiency 159. 4. The time spent to make criteria of the takeover is suspected by NGOs to give chance for military to divest or sell their business assets. This is also a result of government not giving enough 159

Defense Minister Juwono Sudarsono interview in BBC Radio Indonesia, May 26, 2009 in 7pm news. Recording sent to author in May 27, 2009.

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information, which in the end make the government loses credibility. If it stated openly, the public can understand that it takes time to “buy-in” the TNI so they agree of takeover to happen. 5. Pressure of the legislative did not give effect to the government work.. Although the legislative had given inquiries on the issue, the government did not show progress on their work. Only in early 2008, when

parliamentary

members

raise

pressure

through

media

publication, president issue Keppres No. 7/2008 to create another team of takeover.

After conducting media and stakeholder analysis, author finally concluded that Indonesian government is not efficient and effective in implementing policy of taking over military business. President SBY government is seen as having too many considerations and trying to keep the power stability. The empirical fact is that up until almost 4.5 year out of five years time line (around 90%) had been spent only in negotiating the takeover but not really executing it. Therefore government does not succeed separating military from business activity.

V.3. Policy Recommendations From the conclusions above and from the problem found in interviews conducted with the stakeholders, author generated several policy recommendations in order to improve government action in taking over military business. They are: ¾ The government should show determination in taking over military business. There should be a clear mandate on how the takeover should run and who has the authority to execute. If the government chose a team to conduct the takeover process, it should have real power to takeover, not like the previous team. ¾ The government should make time table in taking over military business. Time table is needed for the government to measure its work advancement and also for other stakeholders to know the next move of the government so they can give support and oversight the conduct.

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¾ The government should disclose information to the public on their effort in taking over military business. This way the government can obtain more input from the civil society. It is also a way to make the government more transparent in their conduct, so they can be reasonable enough to demand transparency and accountability from other state actors, in this case is the military. ¾ TNI should give more pressure to the government to finish the takeover. If the TNI keep being neutral, they will be the one that are given bad credit by the civil society for hampering the process. Nevertheless, the TNI should conduct this strategically and not putting shame to the government. ¾ The legislative should raise the issue through media to keep the government reminded. Because the government get their mandate from the civil representative, they should be responsible to legislative inquiries. The media pressure was proven successful to make President SBY issued decision letter to create another team of TNI business taking over. ¾ The legislative and civil society should oversight government in implementing military business takeover and give inputs. If there is no oversight conducted therefore the military business can be transformed to other form of business, just like what had happened in New Order era. These stakeholders are also should give input of alternative of managing military business and defense budget in a certain way that is not burdening the state. ¾ Indonesia can also learn from other country on how to manage military business. There are no country in the world can fulfill the all the budget demand on military expenditure because there is always conflict of “breads-vs-guns”. Nevertheless there are some countries that are successful in managing their military business to make their armed forces more transparent and accountable.

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From lesson learned from other countries, namely China and the US, author gave alternative recommendations that can be use by the government to manage military business: ƒ ƒ

ƒ

It will be better for the government to show determination to really takeover military business or proposed policy of military business management if it can not see that the takeover will be successful It will be better for the government to act decisively with real actions, such as by creating team to conduct takeover and supervise with authority, compensate losses by allocating more military budget, not afraid to be responsible of the non performing military company, etc It will be better for the government to regulate its armed forces with clear legal guideline; conduct supervision with written prove for military business activity so it can be administered; and also giving support to the soldiers and retirements that have economic difficulties.

V.4. Further Research Suggestion Problem in the field of military funding is not only about how the government manage military business but there are many interconnected matters, such as defense budget allocation; government and military relations; military equipment preparedness; soldier welfare; etc. Because author understands that her work cannot cover all the complexity of military funding reform issue, she proposed further research suggestions to be conducted so there will be more knowledge to solve problems of Indonesia security sector finance. Those researches are: # How to determine the ideal budget given to the military? # How to regulate military business to make it transparent and accountable? # How to make the government work more efficient and effective in implementing state policies? # How to simplify government bureaucracy especially in the security sector? # How to create effective coordination between military and government? There are certainly many more issues to be uncovered. The task cannot be achieved by only one thesis. These recommendations and further researches proposals are our responsibility to solve if we want to bring better future for Indonesia security sector reform.

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APPENDIX 1

Table of Media Coverage on Military Business in Indonesia 2004 – February 2009 Year 2004

Date & Media September 12, 2004, Jakarta Post

News Title Government to Takeover Military Business

Spokes Person Defense Minister Juwono Sudarsono

Senior researcher for Center Strategic and International Studies (CSIS) Kusnanto Anggoro

Statement “The smaller ones (of TNI business units) will not be taken over. They will still be owned by the TNI to help fulfill the soldiers' needs, but the government would take over military business enterprises that have assets worth IDR 5 billion. This is still discussed.”

Type of news Support military business takeover

“The main problem in the TNI was not the amount of money it received but rather transparency and accountability in the way it spent this money.”

October 6, 2004, Sinar Harapan

“Closing the Book” of Military Business

Head of TNI Gen. Endriartono Sutarto

“Military business is done because soldier welfare had not been fulfilled. If it fulfilled, TNI will not conduct business and fulfilling that is government obligation. Because of it is not yet fulfilled, I am forced to help for soldier welfare.”

Does not support military business takeover

October 6, 2004, Kompas

Military Elites are the ones Benefited from Business

Political expert from Indonesia Science Institute (LIPI) Indria Samego

“The ones benefited (from military business) are those on high ranks. Not the military body as whole.”

Support military business takeover

November 11, 2004, Kompas

Military Conduct Business because Budget Cannot Provide Welfare

Head of TNI Gen. Endriartono Sutarto

“We still run the business because the real budget is far from sufficient. Therefore we should find solution to fulfill all needs appropriate with what conveyed in laws”

Does not support military business takeover

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November 4, 2004, Jakarta Post

Transparency will be Instituted in Defense Ministry

Defense Minister Juwono Sudarsono

“Roughly, we need IDR 46 trillion (US$ 5.06 billion) per year if we want to build a decent professional force, but in reality TNI only gets IDR 18.21 trillion per year, so forget about achieving an ideal budget. Regarding military owned firms, cooperatives and foundations, such practices have been carried out by the military forces since the 1950s as the government never provided large enough budget for security and defense affairs do to limited funds. Now, I’d like to rearrange and convert all the military’s foundations, cooperatives and firms into military-owned state firms as practiced in China, Thailand, India and Pakistan, where state budget for the military budget is supported by lawful funds obtained from militaryowned state firms.”

Support military business takeover

November 20, 2004, Kompas

Defense Minister is Sure that Military Business Management will Give Welfare for Soldier

Defense Minister Juwono Sudarsono

“I’m sure that military business management will give welfare for soldier. Because our soldier welfare, just like teacher and nurse, is still far from satisfaction.”

Support military business takeover

December 8, 2004, Kompas

Defense Minister: Military Business will be Taken Care by Special StateOwned Company

Defense Minister Juwono Sudarsono

“Business belong to the military will be taken care by special state-owned company, but this is still in the discussion with Finance Minister, Law and Human Rights Minister, and State Owned Company Minister.”

Neutral

December 9, 2004, Kompas

Defense Minister Proposed Military Business to become StateOwned Company

Defense Minister Juwono Sudarsono

“So military businesses that worth more than IDR 5 million will be transformed as state-owned company and manage professionally. But if it is smaller, let it exist to fulfill soldier needs. But this is still a discourse.”

Support military business takeover partially

“Ministry of Defense must

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2005

Parliament Member of Commission 1 Effendi Choirie

count military business assets so it can fulfilled MoD/TNI budget need, which is in 2005 is as much as IDR 45 trillion.”

Head of TNI Gen. Endriartono Sutarto

“TNI business is not a business that spanned everywhere. It is a normal business with normal profit and the income is used to increase soldier welfare.”

December 10, 2004, Kompas

Head of TNI: Dismiss All Military Business

Head of TNI Gen. Endriartono Sutarto

“Just dismiss all (military) business! As long as state budget can provide welfare to the minimum level… If the soldier dies, his/her pension is only few percent from his salary. While still living, the salary is not even enough.”

Support military business takeover partially

December 16, 2004, Sinar Harapan

Problems of Military Business

Researcher for Center Strategic and International Studies (CSIS) Philips Vermonte

“One of the bad excesses of military business is shifting loyalty of the soldier, from TNI that is main state defense tool to economic interest of few, or even only of the person itself… For this we need more fundamental things, including transparent investigation and rule of law principle.”

Support military business takeover

December 18, 2004, Jakarta Post

Profit of Army Business is Not Big

Head of Army Staff Ryamizard Ryacudu

“Army business is not big, only around IDR 30 million per year. Who said it reached trillions?”

Does not support military business takeover

February 15, 2005, Bisnis Indonesia

Defense Minister: Military Holding Company is Still Hold by TNI Foundation

Defense Minister Juwono Sudarsono

“The ownership of TNI foundation will still be the same but the form is a holding company and its responsibility will be given by corporate, as a company and will be made as legal law body. Then the profit will be given for soldier welfare.”

Does not support military business takeover

“The military holding

100

Former Vice of TNI Chief of Staff and Commissioner in Bank Artha Graha (one of military business) Kiki Syahnakri

company should be under TNI. In the US, military has business units, but the management is handled by professional therefore it is accountable and transparent… I predict military business profit is not more than IDR 100 million per year, it’s peanut for the government.”

February 22, 2005, Koran Tempo

Four Ministries Manage Military Business

Defense Minister Juwono Sudarsono

“The joint team composed by Finance Ministry, StateOwned Company Ministry, Law and Human Rights Ministry and Ministry of Defense. This team will work to discipline the accountability and transparency of company managed by military… Because the profit (of military business) is only felt by elites.”

Support military business takeover

March 5, 2005, Sinar Harapan

The Blurred Military Business Made Defense Ministry Uneasy to Conduct Inventory

Director of Pro Patria (NGO) Hari Prihartono

“Although TNI Law already given mandate to takeover military business. Because the business include active military personnel, it is not easy to inventory them.”

Neutral

April 18, 2005, Republika

Military Business to be State-Owned Company is Analyzed

Economic Coordinator Minister Aburizal Bakrie

“The plan to transfer military business to stateowned company is still being analyzed because government does not want the transfer to be a burden to state budget.”

Neutral

May 25, 2005 Bisnis Indonesia

Military Cooperatives Should not be Erased

“We are making paper on military cooperatives. In which tries to give description so that cooperatives in military not to be erased in referral to UU TNI No. 34/2004.”

Neutral

May 25, 2005 Bisnis Indonesia

Military Cooperatives are not Similar with Other

Institutional Deputy of Ministry of Cooperative and Small Business Unit Guritno Kusumo Institutional Deputy of Ministry of Cooperative

“TNI cooperatives are not the same with other military business because the cooperatives only serve

Does not support military business

101

Military Business

and Small Business Unit Guritno Kusumo

their members”

takeover

May 25, 2005 Bisnis Indonesia

Credit Offer is the Most Utilized Service in TNI Cooperatives

Institutional Deputy of Ministry of Cooperative and Small Business Unit Guritno Kusumo

“The most utilized service of TNI cooperatives is credit offer.”

Neutral

May 25, 2005, Bisnis Indonesia

Cooperatives Need Assurance in TNI Business Takeover

Institutional Deputy of Ministry of Cooperative and Small Business Unit Guritno Kusumo

“Reformasi should not be too far to eliminate cooperatives.”

Does not support military business takeover

September 19, 2005, Kompas

Military Business Compensation

Researcher on military business from LIPI Jaleswari Pramodhaward ani

“Military business only gives maximum profit of IDR 100 million per year from each corp. If there is a need to increase defense budget every year, military need not be worry because the government had done it… But it is necessary for president to give political commitment with clear framework of action.”

Support military business takeover

September 23, 2005, Gatra

Military Business: Asking for Professionalism Promise

Operational Worker in Kodiklat Cooperative in Military School Bandung Sutan

“Almost all of the 1,200 member needs are fulfilled by this cooperative.”

Support military business takeover partially

Pelamonia Hospital (in Makassar, owned by army) nurse First Lt. Bintang (not real name) that is a patient in Pelamonia Hospital

“If active TNI soldier got hospitalized, the cost is free.”

“We are glad we can still use TNI army facility… I don’t mind military business erased, as long as the government fulfilled its promise to provide TNI welfare.”

102

2006

September 25, 2005, Koran Tempo

TNI Headquarter Speed Up in Regulating Military Business

TNI Spokesperson Maj. Gen. Kohirin Suganda Saputra

“According to plan, Head of TNI wants to finish the matter of military business in two years, which means in October 2005 already had a policy, so that the execution will be in October 2005 to October 2006. Then in November 2006 to November 2007 will be evaluated and expected to conclude by 2007.”

Support military business takeover

October 20, 2005. Tempo Interaktif

Defense Minister: Only 10 TNI Business will be Taken Over

Defense Minister Juwono Sudarsono

“Only ten out of 219 business unit under TNI inventory that will be taken over because only those fulfilling criteria, from the capital to the management side, that have assets around IDR 25 million, the others are more in form of social.”

Neutral

November 24, 2005, Tempo Interaktif

TNI Business Takeover 5 Years is Too Long

Researcher on military business from LIPI Jaleswari Pramodhaward ani

“The deadline of five years is too long and can be delayed if there is no technical guideline for it. China can do it in one year”

Support military business takeover

Parliament Member of Commission 1 Theo Sambuaga

“Parliament had pushed for the presidential decree (on TNI business takeover) to be issued. Even the Head of TNI had committed to solve this in two year. Let see.”

February 23, 2006 Kompas

Government took Wrong Strategy

Senior researcher for Center Strategic and International Studies (CSIS) Kusnanto Anggoro

“Decision to takeover the (military) business is not all inclusive to consider all deliberations.”

Neutral

February 23, 2006 Tempo

Difficult to use Law of UU 19/2003 on

Researcher on military business from

“Difficult to use UU 19/2003 on State-Owned Company to takeover

Support military business

103

Magazine

State-Owned Company to Takeover Military Business

LIPI Jaleswari Pramodhaward ani

military business because the regulation stated that state-owned company is a business unit that all or most of its capital owned by government by direct funding … So there should be other way to takeover military business … Nonetheless the effort to transfer military business share to private ownership need to be prohibited.”

takeover

March 3, 2006, Tempo Interaktif

Military business takeover alternatives

Economic Coordinator Minister Aburizal Bakrie

“Military business takeover alternatives are by creating specific state-owned company or merger it with the existing; sold which the profit then returned to government; given back to TNI or for cooperative and foundation given to members according to the law implemented.”

Neutral

March 14, 2006, Jakarta Post

U.S. Aid to Corrupt TNI Risks More Rights Abuses

Human Rights Watch Activist Lisa Misol

“Pumping aid to an unreformed Indonesian military would serve only to encourage further rights abuses and undermine civilian governance.”

Support military business takeover

March 15, 2006, Jakarta Post

TNI Commits to Reform, Upholds Supremacy of Law

TNI Spokesperson Maj. Gen. Kohirin Suganda Saputra

“As to Misol’s hope that the U.S. should put pressure on the Indonesian government to end military business activities, in fact the transfer of military business is underway. Although Law No. 34/2004 on TNI requires the settlement of military business within period of five years (2009), the TNI Commander has proactively set a target of resolving the military business in two years.”

Support military business takeover

104

20 April, 2006, Jakarta Post

War Business

Defense Minister Juwono Sudarsono

“The military is badly in need of extra income due to limited defense budget, which covers only one-third of the actual military spending. As the (military business) practice has lasted for decades, however, efforts to minimize it were the most realistic objective.”

Support military business takeover partially

June 21, 2006, Suara Pembaruan

Military Business Must Be Stopped to Guarantee TNI Professionalism

Human Rights Watch Asia Regional Director Brad Adams

“TNI had dark record in human rights field. And those violations are triggered by military business practices that were being done under the argument of fulfilling institutional need that cannot be fulfilled by state budget.”

Support military business takeover

June 22, 2006, Jakarta Post

Govt Urged to Curb TNI Business Ties

Human Rights Watch Activist Lisa Misol

“The military’s money making creates an obvious conflict of interest with its proper role… Military reform means getting soldiers out of business and prosecuting those who broke the law.”

Support military business takeover

Director General of Defense Strategy of Defense Ministry Maj. Gen. Dadi Susanto

“I agree with this report (on TNI business published by HRW). We must find the best way to overcome obstacles to military reform. But I think it is not simple. It’s the problem of the budget.”

Human Rights Watch Activist Lisa Misol

“The government's budget constraints are no excuse for allowing military units free rein to raise funds. Instead, officials should focus on developing an appropriate and affordable military budget, monitor it to eliminate waste and corruption, and ensure it provides a decent living standard for defense

July 7, 2006, Jakarta Post

Military Business

Support military business takeover

105

personnel.” July 7, 2006, Republika

State will not Takeover All TNI Business

Minister of State-Owned Company Sugiharto

“If it is not strategic and has no relation with UUD 45, I think, we will let go and the money will be submitted to state registry.”

Neutral

July 27, 2006, Tempo Interaktif

TNI Business is Dying

Secretary of Ministry of Defense and Vice Head of TSTB, Lt. Gen. Sjafrie Sjamsoeddin

“All TNI businesses are dying and cannot be expected to give support to soldier welfare not like before when there was special policy and monopoly. But nevertheless, the amount of the asset must be audited.”

Neutral

July 20, 2006, Kompas

Effort to Erase Soldier “Moonlighting”

Defense Minister Juwono Sudarsono

“What they (NGO) said on TNI business is now only left 6-7 companies, not like TNI business tentacle in the 70s when business and arms united.”

Support military business takeover

Head of TSTB TNI & Assistant to the Ministry of State-Owned Company Said Didu

“There is grey area that needs to be redefined. Only TNI business with government assets will be taken over. ”

First Lt. Badu (not real name)

“On managing the schedule between official work and moonlighting schedule is the job of the commandant. What important is we have fair turn.”

July 20, 2006, Kompas

From Shovel to Airplane Component

Head of TSTB TNI & Assistant to the Ministry of State-Owned Company Said Didu

“TSTB TNI does not have strong legal base. We do not have budget allocation for this heavy task… We are paid zero rupiah.”

Does not support military business takeover

July 20, 2006, Antara News

TNI Business to be Taken Over by Special Body

Head of TSTB TNI & Assistant to the Ministry of State-Owned Company Said Didu

“Military Business Management Body (BPBTNI) will be set up in pursuance of a stipulation in Law No.34/2004 on the Indonesian Military (TNI). The BPBTNI will assume

Neutral

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command over all business entities in the TNI which is so far being exercised by the TNI commander. But the BPBTNI would be different from the former National Banking Restructuring Agency (BPPN) which shifted all of its losses to the state. The BPBTNI would bear any losses by itself.” July 27, 2006, Media Indonesia

The Leftover Asset will be Managed by PPA

Defense Minister Juwono Sudarsono

“Until the takeover (military business) to state-owned company, there are two alternatives solution to manage TNI business asset leftover. First, create a new transformation body. Second, give it to PPA. We prefer the second option.”

Neutral

July 31, 2006, Koran Tempo

TNI Business Takeover Hampered by Debts

Secretary of Ministry of Defense and Vice Head of TSTB, Lt. Gen. Sjafrie Sjamsoeddin

“Ministry of Finance is not willing to take over the debt (of failing TNI business). The debt is still a problem; we (Ministry of Defense) will also not take over the debt.”

Neutral

August 2, 2006, Republika

TNI Business Cancelled to be Under PPA Management

Secretary of Ministry of Defense and Vice Head of TSTB, Lt. Gen. Sjafrie Sjamsoeddin

“Job description of PPA is different, it is managerially unfeasible.”

Does not support military business takeover

Political expert from Indonesia Science Institute (LIPI) Indria Samego

“This is a law problem. There is a law connection (in business) that is not easy to break. There is not yet sincerity. If it handed over to the state owned company, is it better? There are many state-owned companies that experience loss.”

Finance Minister Sri Mulyani Indrawati

“PPA (Perusahaan Pengelola Aset, Asset Management Company) was created for different purpose. It cannot be burdened. That is a big task. But, we will see the need of the Defense Ministry. If

August 2, 2006, Kompas

Finance Minister Refuse PPA “Burdened” TNI Business

Neutral

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they really need to have certain institution to manage TNI business unit we will think of it better … I think if the institution to manage TNI business need to be design specifically.” October 3, 2006, Tempo Interaktif

Managing TNI Business, Last Homework for President

Head of TSTB TNI & Assistant to the Ministry of State-Owned Company Said Didu Secretary of Ministry of Defense, Lt. Gen. Sjafrie Sjamsoeddin

“I’m confused with what is TNI business.”

Neutral

“The TNI business criteria to be taken over are all the business, no exception.”

Researcher on military business from LIPI Jaleswari Pramodhaward ani

“The homework for president now is only to separate TNI from business.”

October 5, 2006, Kompas

The 61st TNI Anniversary: Review TNI Reformation

Head of TNI Mars. Djoko Santoso

“Since the head of TNI still held by Gen (Ret.) Endriartono Sutarto, internally TNI already committed to give their business to be taken over according what is mandated by the law. By that time the Head of TNI even committed to speed up TNI business handing over from 5 years, like stated in Article 76 UU 34/2003, to only 2 years. For the takeover process is considered not progressing, it is not the problem of TNI anymore.”

Does not support military business takeover

October 6, 2006, Koran Tempo

Jaleswari Pramodhawarda ni: I Do Not Want Soldier to Keep Being Blame

Researcher on military business from LIPI Jaleswari Pramodhaward ani

“Law demands in five years TNI free from business... But so far, I haven’t seen political will from the president to realize the TNI Law. Almost two years the law had been left out.”

Support military business takeover

November

Business as

Economic

“Another important

Support

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2007

28, 2006, Jakarta Post

Usual in Indonesia Despite the Fall of Suharto

Lecturer in University of Indonesia Djamester A. Simarmata

revelation from the IMF's report is that the Indonesian Military (TNI) and National Police are continuing their old practice of using cooperatives and foundations to raise money from the public… These practices violate a 2004 law stating that all TNI business must be transferred to the government. This is only one of the appropriate laws and regulations that have not been implemented. The persistence of such practices in the military proves the unwillingness of the institution to reform its businesses.”

military business takeover

December 28, 2006, Tempo Interaktif

TNI Cooperative will not be Bothered

Defense Minister Juwono Sudarsono

“TNI will let go of its business but cooperative and foundation will not be bothered because they support lower rank soldier welfare. But they will be managed not to be like military business units that grew rapidly in the 70s.”

Support military business takeover partially

January 11, 2007, Jakarta Post

Business As Usual for Military, Says Group

Researcher for Center Strategic for International Studies (CSIS) and Professor in University of Indonesia Edy Prasetyono

“The (central) government should immediately ask regional administrations to take an inventory of military businesses in their respective regions. Military businesses outside Jakarta are more difficult to detect because they are often divided into smaller business entities… ”

Support military business takeover

Program Director of Ridep (NGO) Muradi

“Although the law has been in effect for three years, military businesses keep on running as usual in regions outside Jakarta… But fewer than 100 of these business units are healthy. The military has reduced its shares in companies to less than Rp 20 billion, in order to keep a lower profile and act more behind the scenes. the military has also

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""eliminate"" assets by selling them or putting the business units into bankruptcy. It then transfers the units other parties, while still maintaining actual control of the businesses.” February 10, 2007, Sinar Harapan

Draft of Presidential Decree on TNI Business Returned to MoD

Cabinet Secretary Sudi Silalahi

“What related to that (presidential decree draft) after being accepted from the MoD, turned out to be less harmonized and not synchronic therefore returned back … I don’t want to come into the substance.”

Neutral

February 10, 2007, Bisnis Indonesia

Military Business is Difficult to be Erased as Target

Coordinator Commission for Disappearances and Victim of Violence (Kontras) Usman Hamid

“Military business is not for fulfilling the gap cause by low state budget and the profit is not all used for soldier welfare… It is suspected that the number given (of military business) is not the real value considering lack of transparency and accountability of TNI finance management. TNI also never disclose other source of funding outside defense budget.”

Support military business takeover

February 11, 2007, Kompas

Military Business Hamper Human Rights Enforcement

Coordinator Commission for Disappearances and Victim of Violence (Kontras) Usman Hamid

“TNI is actually open for reform, including going out of business, as long as their need fulfilled. But civil elites keep the business running.”

Support military business takeover

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June 8, 2007, Sinar Harapan

Military Business: Challenge to Make “Off Budget” become “On Budget”

Researcher on military business from LIPI Jaleswari Pramodhaward ani Researcher on military business Lex Rieffel

“There are still confusions (on military business takeover) inside the government, between concept and tools that were on the lower level are not united.”

Support military business takeover

“Differences between Indonesia and China, in China there are many data on profit, assets, working procedure and who are involved in business. All data are open.”

June 12, 2007, Republika

Presidential Decree on TNI Business Management is Unclear

Defense Minister Juwono Sudarsono

“I cannot stated when will the president decree issued. It is still being jointly discussed by Ministry of Defense, Ministry of Finance, Ministry of Law and Human Rights, and Ministry of State-Owned Company. Then it will be discussed in Cabinet Secretary and State Secretary Offices… So far there will still be foundation and cooperation maintained, as long as they do not seek profit or create company.”

Does not support military business takeover

June 12, 2007, Bisnis Indonesia

TNI Business Cannot be Submitted 2009

Defense Minister Juwono Sudarsono

“I’m not sure that TNI business can be submitted in 2009, like what is mandated by UU No. 34/2004. But the fact is, until 2005, we are still conducting between ministries consolidation. TNI operational budget from the government is still low so to fund security and defense operation, the military institution must seek its own funding from business activity.”

Does not support military business takeover

Parliament Member of Commission 1

“The prohibitions are demands of national reformation. TNI cannot involve in politics and business.”

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Theo Sambuaga June 12, 2007, Kompas

Disciplinary of TNI Business is Not Yet Regarded Transparent

Researcher on military business from LIPI Jaleswari Pramodhaward ani

“The blurredness of TNI business takeover, which is still on going, can be seen from the never ending process of the presidential decree as mandated in Article 76 UU 34/2004.”

Support military business takeover

July 27, 2007, Jawa Pos

Violence is Threatening Civilian

Parliament Member of Commission 1 Andreas Pareira

“Head of TNI must be strict and issue instruction to work part time as security guard or trainer. The arguments of low welfare and insufficient government funding cannot be reason for breaching.”

Support military business takeover

October 30, 2007, Jakarta Post

Military Earns Praise for Role in Democracy

Senior researcher for Center Strategic and International Studies (CSIS) Kusnanto Anggoro

“The military should not be involved in business, because it could divert their focus from safeguarding the nation. In fact, TNI businesses only contribute 1 percent to their budgetary needs. It is therefore unreasonable if the TNI does not want the government to take over its businesses, as it may indicate illegal dealings behind their real businesses.”

Support military business takeover

November 26, 2007, Tempo Magazine

TNI Businesses: Constricted State Funds Stalls Takeover

Defense Minister Juwono Sudarsono

“It (presidential regulation draft on TNI business takeover) has already been approved by the drafting team and is waiting for the final word from the Palace.”

Neutral

Presidential Spokesman Andi Mallarangeng

“It (presidential regulation on TNI business takeover) is not late. Everything is running according to plan. President Yudhoyono will think about this matter before signing the regulation on cleaning up TNI businesses.” “The funds from those sales (of TNI business) are not enough to guarantee the

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2008

Former CEO of PT Tri Usaha Bhakti (military business unit) Maj.Gen. (ret) Joko Subroto, Researcher on military business from LIPI Jaleswari Pramodhaward ani

fulfillment of the needs of the soldiers. In the past, we could give scholarships for the children of soldiers who did well in school. Now that is no longer true.” “Similar like other policy drafts, government seems to cover sensitive issues, that supposedly can be solved ‘under the table’. I still remember when the MoD through Secretary of Ministry of Defense, Lt. Gen. Sjafrie, once said that he is sure the president regulation will be issued February 2007 and all the process will be done in 2008.”

Support military business takeover

January 17, 2008, Kompas

Strange, SBY Postponed to Issue President Regulation on TNI Business Disciplining

January 18, 2008, Media Indonesia

Dark Asset Can Hamper Legal Audit

Head of TSTB TNI & Assistant to the Ministry of State-Owned Company Said Didu

“What is difficult is to conduct legal audit for TNI assets that is not listed as state assets, but it is expected that in the future TNI do not engage in business”

Support military business takeover

January 18, 2008, Kompas

President Regulation in TNI Business is in Question

Head of TSTB TNI & Assistant to the Ministry of State-Owned Company Said Didu

“We had finish president regulation on the creation of national team, now we are still waiting for the joint discussion on the concept. We expect the President will soon issue the regulation so the team can work immediately.”

Does not support military business takeover

January 18, 2008, Kompas

President Must Shown Integrity on TNI Business President Regulation

Parliament Member of Commission 1 Yuddy Chrisnandi

“I’m suspecting there is ‘batting eye’ between government and TNI because they both do not have strong political will to finish this (TNI business) issue. Now the part that has physical business assets is TNI, while government has regulation. Both factors must exist so that the takeover can run… I’m afraid that since TNI Law implemented until deadline, all business units taken over are only the non performed while the profitable had been sold.”

Support military business takeover

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Parliament Member of Commission 1 Andreas Pareira

“I insist President Yudhoyono to issue president regulation (on TNI business) by the latest mid 2008 so the takeover process can run before the given time is up.”

February 5, 2008, Kompas

TNI Burdened with Status of Still Conducting Business

Head of TSTB TNI & Assistant to the Ministry of State-Owned Company Said Didu

“In the past military asset is intangible asset of power. It is not like that anymore with military power access minimized after reformasi. Government is investigating military business with state assets in it and will take them over to state registry. For cooperative and foundation without state asset will be given back. But TNI must manage and restructure them so they run according to existing law.”

Neutral

February 6, 2008, Kompas

TNI Business Takeover is on Schedule

Head of TSTB TNI & Assistant to the Ministry of State-Owned Company Said Didu

“I am optimist that the takeover can be done before the deadline, October 2009. Government is trying to be careful in the process. If we want to be easy, government can takeover all business with their assets and debts, then given to MoD. But that is the easiest way and does not solve the real problem.”

Neutral

February 8, 2008, Kompas

Government Should Not Only Talk About Takeover TNI Business

Researcher on military business from LIPI Jaleswari Pramodhaward ani

“Government seriousness can be measure by the presidential decree. If it kept being postponed, when will it be issued. Now is already a year before general election. Next year people already busy with the election. Early this year should be the latest time for presidential decree to be issued.”

Support military business takeover

February 11, 2008,

The Long Road of TNI Reform

Researcher for Center

“TNI welfare that is still considered low is opening

Support military

114

Kompas

Strategic for International Studies (CSIS) and Professor in University of Indonesia Edy Prasetyono

window for them to involve in politic and business in various ways and levels. Therefore, TNI reform needs support from inside its own body.”

business takeover

April 25, 2008, VHR Media

Government Formulate Regulation for Military Business Takeover

Secretary of Ministry of Defense, Lt. Gen. Sjafrie Sjamsoeddin

“The new team (Timnas PAB TNI) is formulating guidelines of takeover process… Insyaallah can be made before the deadline”

Support military business takeover

April 29, 2008, Kompas

TNI Business will be Taken Over Carefully

Head of TSTB TNI & Assistant to the Ministry of State-Owned Company Said Didu

“Government through TSTB TNI is being careful for not given the authority to conduct the takeover to Timnas PAB TNI, so that in the future, government will not be burdened.”

Does not support military business takeover

May 9, 2008, Kompas

TNI Business Disciplining Need to Take Drastic Measure

Researcher on military business from LIPI Jaleswari Pramodhaward ani

“To discipline military business need to take drastic measures, such as takeover all cooperatives, foundations and their business units. But there should also be compensation. Such as making new cooperatives that function to really fulfill soldier welfare not like what the (TNI) foundation and cooperative are doing now.”

Support military business takeover

May 28, 2008, Media Indonesia

President is Considered Slow in Managing TNI Business

Researcher for Indonesia Defense and Strategic Studies Body (Lesperssi) Henwira Halim

“I am worried that the government slowness can make military business assets change hands to the private sector.”

Support military business takeover partially

Head of TNI Public Information Sagom Tamboen

“Reform demands for erasing dual function is done. Currently TNI only function as state tool in defense. But I admit, the reformation still needs

115

continual improvement… So far the foundations that had not been taken over are Kartika Eka Paksi Foundation from Army, Adi Upaya Foundation from Air Force, and Bumi Hamka from Navy. After the reformation, lower rank soldier (bintara and tamtama) is still allowed to conduct business as long as he/she does not neglect main job.” June 11, 2008, Antara News

Military Head: Go Ahead Take TNI Business As Long As Soldier Welfare can be Guaranteed

Head of TNI Gen. Djoko Santoso

“Please go ahead with the takeover (of TNI business) as long as proper with UU 34/2004 … The takeover that will be done will not using compensation pattern, but fitting with government capacity that had the mandate of the law to guaranteed the professionalism and welfare of TNI soldier. For TNI, the ball (of takeover) is in the government hand.”

Support military business takeover

July 16, 2008, Republika

Head of TNI Decline TNI Business Compensation

Head of TNI Gen. Djoko Santoso

“Please go ahead with TNI business takeover. But not us to be compensated. According to UU 34/2004 please conduct takeover, but the state will provide TNI welfare, such as health, education, insurance, housing and so on.”

Support military business takeover

August 11, 2008, Jakarta Post

TNI Assets 'Far Higher' than IDR 2.1 Trillion

Director Imparsial (NGO) Rusdi Marpaung

“The figure was too small considering the TNI business has been in operation since the New Order era. We also noticed a disclaimer in the report stating that neither a financial nor a legal audit had been conducted on the TNI business. The issue about the businesses being useful to meet soldiers' needs should not impede us from fulfilling the mandate of the law on TNI. The people want TNI to get out of politics and business and

Support military business takeover

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thus TNI must obey the law” August 11, 2008, VHR Media

Recommendatio n of TNI Business Takeover will be Finish in October

Director of CSIS Rizal Sukma

“TNI Law that regulates military business has much weakness. One of them is not stating the sanction if government broken the time limit given. The law only regulate political sanction trough parliament. I hope the awaiting presidential decree on military business will include good planning and budgeting so the gap between state ability and necessary fund (in defense) is smaller, therefore the military business can be erased.”

Support military business takeover

August 12, 2008, Kompas

Keep Eye on TNI Business Takeover

Researcher on military business from LIPI Jaleswari Pramodhaward ani

“When the draft (of TNI business takeover made by Timnas PAB TNI) given to the government, there is no guarantee President Susilo Bambang Yudhoyono will follow up as fast as we want… We know TSTB TNI made and started working in 2005. But need three years for President Decree No. 7/2008 to be issued.”

Support military business takeover

October 12, 2008, Sinar Indonesia

Military Cash Bag That are Still Thick

Head of Timnas PAB TNI, Erry Riyana Hardjapamekas

“We are making our own initiative to finish our task in October 2008. Now we only report them to the president and wait for further policy from President SBY so the takeover process can run.”

Support military business takeover

October 13, 2008, Tempo Interaktif

Dissolving TNI Foundation and Cooperative should be Done Selectively

Defense Minister Juwono Sudarsono

“We have to see how is the reality, in the condition of soldier needs for them (of TNI foundation and cooperative). The dissolve should be thought carefully. Let us be more flexible for might be in 5-10 years after October 2009, there can be possibility for cooperative

Does not support military business takeover

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and foundation units to serve basic needs of lower rank soldiers.” October 14, 2008, Tempo Interaktif

TNI Business Does Not Guarantee Soldier Welfare

Director of Defense Planning for Institute of Defense and Securities (IODAS) Andi Widjajanto

“Profit from military business can only help soldiers in specific things, like buying Ied present, but not for fulfilling soldier welfare.”

Researcher on military business from LIPI Jaleswari Pramodhaward ani

“Government must conduct military business takeover because it is mandated in the law.”

Support military business takeover

October 19, 2008, Jawa Pos

Recommendatio n on Military Business Regulation is Done

Head of Public Information of TNI Headquarter Col. Ahmad Yani Basuki

“We are open for the takeover… Currently cooperatives in TNI are still active to operate but not conducting business like before. Only for soldier necessity and credit lending.”

Support military business takeover

October 27, 2008, Antara News

Small Budget Does Not Reduce TNI Professionalism

Head of TNI Gen. Djoko Santoso

Neutral

October 28, 2008, Kompas

TNI Business will be Taken Over Carefully

Head of TSTB TNI & Assistant to the Ministry of State-Owned Company Said Didu

“In principle TNI had given the government and TSTB TNI team to inventory (TNI business) assets and takeover… On TNI cooperative, it is still necessary because it is needed, but surely it should be well regulated so it does not misuse.” . “From (TSTB) investigation, total TNI business asset is not more than IDR 1 trillion. We have to be careful, so we do not takeover indebted business that can be as big as IDR 5 trillion.”

Vice Cabinet Secretary of the State Lambock V. Nahattand

Neutral

“The current team (Timnas PAB TNI) is not working from zero, but to continue TSTB TNI work. On the concern of assets that had been sold or taken away, they had been noticed and control by the team before.

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Don’t worry.” Head of Timnas PAB TNI, Erry Riyana Hardjapamekas

“Recommendation to be produced will be about which business that is able to be takeover, which needs to be manage before takeover, or which one need to be liquidated.”

October 28, 2008, Kompas

TNI Cooperative and Foundation that Conduct Business Must be Taken Over

Parliament Member of Commission 1 Andreas Pareira

“As citizen, TNI soldier has the right to run cooperative which are meant to support primary needs and TNI welfare. But the principle of TNI or its soldier not to conduct business and seek profit, like what is stated in TNI Law, is also must be kept.”

Neutral

October 31, 2008, Kompas

TNI Want to Keep Cooperative

Head of TNI Mars. Djoko Santoso

“For soldiers that work in secluded area, cooperative can be the institution to depend on in fulfilling their daily lives needs… According to Cooperatives Law every citizen can make cooperative, therefore we also have the rights to have cooperative.”

Support military business takeover partially

November 3, 2008, Antara News

National Team of Military Business Give Recommendatio n to the President

Secretary of Ministry of Defense, Lt. Gen. Sjafrie Sjamsoeddin

“The executing team of Timnas PAB TNI had given recommendations on October 31, 2008.”

Neutral

Head of Public Relation of Defense Ministry Brig. Gen. Slamet Hariyanto

“Cooperative and foundation are still kept, especially those that support soldier welfare. If the cooperative and foundation conduct business, the business will be stopped.”

Head of Timnas PAB TNI, Erry Riyana Hardjapamekas

“The team proposed three recommendations for military business takeover to be chosen to be implemented by the president.”

November 4, 2008, VHR Media

Timnas PAB TNI Proposed Military Business Reposition

Defense Minister Juwono Sudarsono

Support military business takeover

“There is no objection on the recommendation. I will chose one and given to the president.”

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Head of TNI Gen. Djoko Santoso

“In principle, we agree with the recommendations.”

November 7, 2008, Sinar Harapan

TNI Business Takeover: Parliament Need to Supervise

Director Imparsial (NGO) Rusdi Marpaung

“The lack of mandate (to conduct legal and financial audit) had made executing team of Timnas PAB TNI can not trace TNI business assets that were dissolved… But we respect the (Timnas) finding, considering the time given to start the research is 2007. Now the Parliament should conduct oversight to the probability that there were (TNI) business that had been sale before 2007 because they can demand audit.”

Support military business takeover

November 7, 2008, Cakra Buana

Imparsial Stance on Timnas Report: TNI Business Takeover is Momentum for Progress in TNI Defense Budget

Director Imparsial (NGO) Rusdi Marpaung

“Imparsial sees that the proper TNI business takeover are cooperatives, hospitals and other similar businesses that give service to soldiers and their family can be kept up to 5 years by slowly taken over … We hope that President SBY can execute Timnas PAB recommendation under parliament supervision.”

Support military business takeover

November 17, 2008, Koran Tempo

Not Like Regular Cooperative

Head of Timnas PAB TNI, Erry Riyana Hardjapamekas

“Total net assets of TNI business is IDR 2.1 trillion. TNI Cooperative is divided to three, head cooperative, central cooperative and primary cooperative. One of the alternatives is to keep only the primary cooperative that fulfilled soldiers need”

Neutral

Researcher on military business from LIPI Jaleswari Pramodhaward ani

“The other cooperatives that is not fulfilled soldier welfare are supposed to be taken over. But if primary cooperative is taken over too, it can cause disturbance. Although I’m not totally agree with the TNI cooperative management merged under MoD because there are

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earlier issues that had not been solved.” Director Imparsial (NGO) Rusdi Marpaung

“Maintaining primary cooperative will ensure it will provide soldier welfare, but it must not go on into business.”

November 27, 2008, Kompas

Effort to Erase TNI “Soldier Doing Business” Status

Head of Timnas PAB TNI, Erry Riyana Hardjapamekas

“Even in limited condition, our team kept trying to conduct maximum work… In the end, executing team (of Timnas PAB TNI) estimated total assets of military foundation IDR 1.8 trillion and military cooperation IDR 1.3 trillion.”

Support military business takeover

December 15, 2008, Koran Tempo

Recommendatio n on Military Business Takeover Will Wait Until New Year

Defense Minister Juwono Sudarsono

“The ministers (that involved in military business takeover) are busy because there are many problems, such as fuel and gas, matters that important for many people. There is still time, hopefully we can meet after new year.”

Does not support military business takeover

Researcher on military business from LIPI Jaleswari Pramodhaward ani December 30, 2008, Republika

National Team of TNI Business Takeover Kept Cooperative

Defense Minister Juwono Sudarsono

Secretary of Ministry of Defense, Lt. Gen. Sjafrie Sjamsoeddin

“The lengthy time taken to state which recommendation taken should be inquired. Where is government political will in solving TNI business takeover?” “We still recommending to kept primary cooperatives and foundations, according to the suitable laws, for the sake of lower rank soldiers.”

Neutral

“There will be control mechanism using Cooperative Law, internal supervisor to the top level and civil oversight. So what should be improved is the running of the cooperatives.”

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2009

January 1, 2009, Antara News

National Team of TNI Business Takeover will Keep Cooperative

Defense Minister Juwono Sudarsono

Secretary of Ministry of Defense, Lt. Gen. Sjafrie Sjamsoeddin

January 2, 2009, Koran Tempo

Keeping TNI Foundation is Conservative Decision

Executive Director Institute for Defense Security and Peace Studies Mufti Makarim

Secretary of Ministry of Defense, Lt. Gen. Sjafrie Sjamsoeddin Minister of Law and Human Rights Andi Mattalata

January 3. 2009,

Next Week Joint Statement

Defense Minister

“We still recommend to keep primary cooperative and foundation, according to existing laws, this is considering the necessity of low rank soldier”

Support military business takeover partially

“If TNI cooperative supply material for development ouside (its body) it is not allowed, but if it buy and sell material for its member, in this case TNI soldiers and families, it is allowed… Fund that is given to state registry can be asked back for fulfilling TNI needs, and the requirement need to refer to the regulated law based on Ministry of Finance decision.”

“Keeping the (TNI) foundation and cooperative is conservative and controversial decision. We had guessed it, because it was the most subtle option between th three recommendations (given by Timnas PAB TNI)… It should be affirmed that cooperative and foundation are business.”

Support military business takeover partially

“We chose the alternative to keep the cooperative”

“Foundation is not business… The guideline on foundation will be regulated in other law.”

“As long as they are inline with the law, foundations

Does not support

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Kontan

Letter on Military Business Regulation Will be Issued

Juwono Sudarsono

will be kept, also for cooperatives because they are need by lower rank soldiers. For which business that will be managed is state secret.”

military business takeover

January 5. 2009, Republika

TNI Cooperative and Foundation will be Keep

Researcher on military business from LIPI Jaleswari Pramodhaward ani

“If government decided to keep TNI cooperative and foundation, it does not align with the recommendations (given by Timnas PAB TNI). It should be inquired what is behind the decision.”

Support military business takeover

January 6, 2009, Media Indonesia

President Must Decide Soon the Matter of TNI Foundation

Parliament Member of Commission 1 Bagus Suryama

“We ask the president to decide soon. This needs to be handled fast and not to make it piled. After this is done, KPK (corruption commission) can enter if this is seen as priority.”

Support military business takeover

Parliament Member of Commission 1 Slamet Effendi Yusuf

“On the matter of TNI foundation, this is still on process. So it is better if we wait it to finish and then continue walking.”

Parliament Member of Commission 1 Jansen Hutasoit

January 7, 2009, Kompas

President Must be Decisive in Settling TNI Business Destiny

Parliament Member of Commission 1 Bagus Suryama

“KP will not be afraid to investigate TNI business. But maybe now there is no evidence. If there is, KPK can enter to investigate.” “President needs to take decisive approach in takeover TNI business. The key to the problem is the president has to decide soon which option to take because it had been too long. The three options had been reported to the president two-three months ago but no decision until now.”

Support military business takeover

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January 10, 2009, Koran Tempo

Future of TNI Cooperative

Head of Indonesia Cooperative Study Djabaruddin Djohan

“The existing of cooperative should consider the need of soldiers. In other word, let TNI cooperative transform itself from commando cooperative to real cooperative, which is the economic body that is democratic like cooperative in general… Maybe we can learn from Malaysia military cooperative that is under the Ministry of Defense and employ retired soldier and civil people. It gains US$ 20.944.000 turn over and US$ 233.144.000 assets, so that International Cooperative Alliance rank the cooperative in 32 position among achiever cooperative in developing countries”

Support military business takeover

January 22, 2009, Kompas

Citizen Brought Siliwangi District Military Head: Fruit of Bad Military Asset Management

People that rent in military land Wiwi Siti Aisyah

“I pay retribution to District Military Command III/Siliwangi as much as IDR 280.000 per year.”

Support military business takeover

Head of Public Information of District Military Command III/Siliwangi Lt. Col. Isa Haryanto

“The head of military district committed to regulate all TNI assets because it is mandated by the TNI Army Head. Therefore he is ready to take legal path.”

Defense expert from Parahyangan University Anak Agung Bayu Perwita

Head of TSTB TNI & Assistant to the Ministry of State-Owned Company Said Didu

“There are two things shown in military business management, which are no clear regulation and the letting go politics that triggered insider misbehavior that resulted to social conflict.” “For (TNI) business units that already had contract with private dealings, they cannot be taken over and transformed to state-owned, but (the profit) will be submitted to state income.”

124

Total

January 13, 2009, Kompas

TNI Business Management is Hold by Private Law

Defense Minister Juwono Sudarsono

“So far the mechanism of takeover will be using Cooperative and Foundation Law. But if other regulation needed, government will soon established it, including regulation in NonTax State Income” “TNI business that had contract with private parties bumped with private law. Law interpretation between Foundation and Cooperative Law and Company Law has not reach finalization. We have to see one by one. So there will not be legal problem, including law interpretation.”

Neutral

January 13, 2009, Harian Surya

TNI Business Management is Stumped by Private Law

Defense Minister Juwono Sudarsono

February 13, 2009, Kontan

Four Ministries will Manage TNI Assets

Head of TSTB TNI & Assistant to the Ministry of State-Owned Company Said Didu

“Ministry of Finance will take care of TNI business assets. Ministry of Cooperative and Small Business Units will takeover TNI cooperative, Ministry of Law and Human Rights will manage TNI foundation, and Ministry of State-Owned Company will takeover TNI business units that can be transformed to state-owned companies. The qualifications for the units to be state company are having asset more than IDR 15-20 million and do not burden state economy… The handing over will be done by Ministry of Defense, not by TNI.”

Neutral

February 23, 2009, Antara News

Defense Minister: Recommendatio n for TNI Business Takeover is Still on Progress

Defense Minister Juwono Sudarsono

“This process adopted the alternatives given by executing team of Timnas PAB TNI and aligned with inputs from related ministries.”

Neutral

2004=11 2005=13 2006=23 2007=11 2008=33 2009=12

Support military business takeover = 49 news

Support military business takeover partially = 9 news

Does not support military business takeover = 16 news

Neutral = 29 news

Neutral

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Total news = 103 news

Source: Compiled by Author

NOTES: Sources of news Antara (6 news) Bisnis Indonesia (7 news) Cakra Buana (1 news) Gatra (1 news) Harian Surya (1 news) Jakarta Post (12 news) Jawa Pos (2 news) Kompas (32 news) Kontan (2 news) Media Indonesia (4 news) Republika (7 news) Sinar Harapan (6 news) Suara Pembaruan (1 news) Tempo (18 news) VHR Media (3 news) Total media: 15

Statement quoted: (a) Executive 9 people Defense Minister Juwono Sudarsono (24 statements) Secretary of Ministry of Defense, Lt. Gen. Sjafrie Sjamsoeddin (10 statements) Head of Public Relation of Defense Ministry Brig. Gen. Slamet Hariyanto (1 statements) Minister of State-Owned Company Sugiharto (1 statements) Finance Minister Sri Mulyani Indrawati (1 statements) Economic Coordinator Minister Aburizal Bakrie (2 statements) Minister of Law and Human Rights Andi Mattalata (1 statements) Presidential Spokesman Andi Mallarangeng (1 statements) Cabinet Secretary Sudi Silalahi (1 statements) Institutional Deputy of Ministry of Cooperative and Small Business Unit Guritno Kusumo (4 statements) Vice Cabinet Secretary of the State Lambock V. Nahattand (1 statements) Total statements from executive 47 (b) TNI 10 people Head of TNI Gen. Endriartono Sutarto (5 statements) Head of TNI Gen. Djoko Santoso (6 statements) Head of TNI Public Information Sagom Tamboen (1 statements) Head of Public Information of District Military Command III/Siliwangi Lt. Col. Isa Haryanto (1 statements) Head of Army Staff Ryamizard Ryacudu (1 statements) Director General of Defense Strategy of Defense Ministry Maj. Gen. Dadi Susanto (1 statements)

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Former Vice of TNI Chief of Staff and Commissioner in Bank Artha Graha (one of military business) Kiki Syahnakri (1 statements) TNI Spokesperson Maj. Gen. Kohirin Suganda Saputra (2 statements) First Lt. Badu (not real name) (1 statements) First Lt. Bintang (not real name) (1 statements) Total statements from TNI 20 (c) Team of Military Business Takeover 2 people Head of TSTB TNI & Assistant to the Ministry of State-Owned Company Said Didu (12 statements) Head of Timnas PAB TNI, Erry Riyana Hardjapamekas (5 statements) Total statements from takeover teams 17 (d) Legislative 7 people Parliament Member of Commission 1 Effendi Choirie (1 statements) Parliament Member of Commission 1 Bagus Suryama (2 statements) Parliament Member of Commission 1 Slamet Effendi Yusuf (1 statements) Parliament Member of Commission 1 Jansen Hutasoit (1 statements) Parliament Member of Commission 1 Andreas Pareira (3 statements) Parliament Member of Commission 1 Theo Sambuaga (2 statements) Parliament Member of Commission 1 Yuddy Chrisnandi (1 statements) Total statements from legislative 11 (e) Civil Society 18 people Human Rights Watch Asia Regional Director Brad Adams (1 statements) Human Rights Watch Activist Lisa Misol (3 statements) Coordinator of Kontras (NGO) Usman Hamid (2 statements) Program Director of Ridep (NGO) Muradi (1 statements) Director Imparsial (NGO) Rusdi Marpaung (4 statements) Director of Pro Patria (NGO) Hari Prihartono (1 statements) Executive Director IDSPS (NGO) Mufti Makarim (1 statements) Researcher on military business from LIPI Jaleswari Pramodhawardani (15 statements) Senior researcher for CSIS Kusnanto Anggoro (3 statements) Researcher for CSIS and Professor in University of Indonesia Edy Prasetyono (2 statements) Economic Lecturer in University of Indonesia Djamester A. Simarmata (1 statements) Political expert from LIPI Indria Samego (2 statements) Director of IODAS Andi Widjajanto (1 statements) Researcher for CSIS Philips Vermonte (1 statements) Defense expert from Parahyangan University Anak Agung Bayu Perwita (1 statements) Researcher on military business Lex Rieffel (1 statements) People that rent in military land Wiwi Siti Aisyah (1 statements) Worker in Kodiklat Cooperative in Military School Bandung Sutan (1 statements) Pelamonia Hospital (in Makassar, owned by army) nurse (1 statements) Total statements from civil society 43 Total statements: 138 Total people quoted: 49

127

2004 Support military business takeover: 5 Support military business takeover partially: 2 Does not support military business takeover: 3 Neutral: 1 Total: 11 news 50.00% 40.00% 30.00% 20.00%

News of military business 2004

10.00% 0.00% Support

Support Partially

Does Not Support

Neutral

2005 Support military business takeover: 4 Support military business takeover partially: 1 Does not support military business takeover: 3 Neutral: 5 Total 13 news 40.00% 30.00% 20.00% News of military business 2005 10.00% 0.00% Support

Support Partially

Does Not Support

Neutral

2006 Support military business takeover: 9 Support military business takeover partially: 2 Does not support military business takeover: 3 Neutral: 9 Total 23 news 40.00% 30.00% 20.00% News of military business 2006 10.00% 0.00% Support

Support Partially

Does Not Support

Neutral

128

2007 Support military business takeover: 7 Support military business takeover partially: 0 Does not support military business takeover: 2 Neutral: 2 Total 11 news 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00%

News of military business 2007

Support

Support Partially

Does Not Support

Neutral

2008 Support military business takeover: 19 Support military business takeover partially: 2 Does not support military business takeover: 4 Neutral: 8 Total 33 news 60.00% 50.00% 40.00% 30.00% News of military business 2008

20.00% 10.00% 0.00% Support

Support Partially

Does Not Support

Neutral

2009 (up to February) Support military business takeover: 5 Support military business takeover partially: 2 Does not support military business takeover: 1 Neutral: 4 Total 12 news 50.00% 40.00% 30.00% 20.00%

News of military business 2009

10.00% 0.00% Support

Support Partially

Does Not Support

Neutral

129

From 2004 to February 2009 Support military business takeover: 49 Support military business takeover partially: 9 Does not support military business takeover: 16 Neutral: 29 Total 103 news 50.00% 40.00% 30.00% News of military business 2004Feb 2009

20.00% 10.00% 0.00% Support

Support Partially

Does Not Support

Neutral

The statistic data above can be compiled to provide chart on how the news in mass media portray military business. 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% 2004

Support

2005

2006

Support Partially

2007

2008

2009 (up Average to Feb)

Does Not Support

Neutral

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APPENDIX 2

PRESENTASI DARI MENTERI PERTAHANAN RI DI GEDUNG DEPARTEMEN PERTAHANAN Senin, 04 Februari 2008 KETERANGAN PERS PRESIDEN REPUBLIK INDONESIA PADA ACARA PRESENTASI DARI MENTERI PERTAHANAN RI DI GEDUNG DEPARTEMEN PERTAHANAN, JAKARTA TANGGAL 4 FEBRUARI 2008

Assalaamu’alaikum warahmatullahi wabarakaatuh, Salam sejahtera untuk kita semua,

Saudara-saudara, Hari ini saya bersama Wakil Presiden dan sejumlah Menteri berkunjung ke Departemen Pertahanan untuk pertama mendengarkan laporan dari Menteri Pertahanan tentang evaluasi program kerja tahun 2007 dan kedua, prioritas serta agenda kegiatan Departemen Pertahanan pada tahun 2008. Meskipun saya sudah berkunjung ke Markas Besar TNI beberapa waktu yang lalu, tentu saja masalah-masalah pertahanan negara yang tadi dilaporkan oleh Menteri Pertahanan juga terkait erat dengan apa yang dilakukan oleh jajaran TNI, termasuk TNI Angatan Darat, Angkatan Laut, dan Angkatan Udara. Masalah penting yang perlu saya sampaikan kepada Saudara, pertama Departemen Pertahanan terus mengaktualisasikan, melakukan pemutakhiran kebijakan dan strategi pertahanan negara, merespon perkembangan lingkungan strategis dan persepsi ancaman, yang kemudian dari kebijakan itu dituangkan dalam kebijakan pembangunan dan modernisasi kekuatan pertahanan, yang akhirnya muara atau konsekuensi dari situ adalah anggaran yang diperlukan untuk pembangunan kekuatan dan modernisasi sistem persenjataan yang dilakukan oleh jajaran Departemen Pertahanan dan TNI.

Saudara-Saudara, Dari situ Menteri Pertahanan melaporkan kebijakan, rencana dan program untuk pengadaan alutsista, alat utama sistem persenjataan, yang tentunya sesuai dengan yang diperlukan oleh TNI saat ini untuk kepentingan penangkalan, kepentingan tugas-tugas nyata di waktu damai, dan tentunya apabila ada contingency dan TNI harus bertugas mempertahankan kedaulatan dan keutuhan negara, apa yang dibangun ini bisa dikembangkan secara cepat untuk betul-betul bisa mengemban tugas mempertahankan kedaulatan dan keutuhan negara tersebut. Oleh karena itu, yang menjadi orientasi dan sasaran adalah membangun, yang kita sebut dengan minimum essential force, kekuatan minimal yang bisa mengemban tugas-tugas tadi. Dengan situasi ekonomi, dengan keadaan anggaran negara yang dimiliki dewasa ini, maka tentu saja ada skala prioritas di dalam membangun kekuatan, memodernisasi persenjataan, termasuk pengadaan alat peralatan yang diperlukan.

Dalam kaitan ini, maka penggunaan anggaran lebih diprioritaskan pada, untuk kepentingan tugastugas nyata, operasi nyata. Dewasa ini, baik operasi militer untuk pertahanan maupun operasi militer selain perang, yang kita kenal dalam undang-undang kita. Kedua untuk kepentingan pendidikan dan latihan, yang ketiga untuk kepentingan kesiagaan, readiness, yang keempat untuk kepentingan pemeliharaan secara menyeluruh, dan yang kelima untuk memberikan kesejahteraan yang layak kepada prajurit kita. Dari semuanya itu tentunya masih diperlukan sejumlah anggaran

131

untuk memodernisasi sistem persenjataan yang kita perlukan. Tentu saja disesuaikan dengan kemampuan anggaran yang dimiliki, khususnya alokasi anggaran untuk sektor pertahanan.

Saudara-Saudara, Dalam rapat kabinet terbatas hari ini juga, saya berikan arahan untuk melanjutkan, mendayagunakan industri pertahanan dalam negeri dalam pengadaan alutsista. Oleh karena itu, kita putuskan sekaligus bahwa kebijakan kredit ekspor yang menjadi sandaran utama pembiayaan pengadaan alutsista di waktu yang lalu akan kita geser menjadi lebih menggunakan komponen dalam negeri, rupiah murni utamanya, agar lebih dicapai efisiensi dan kecepatan di dalam pembiayaan alutsista tersebut. Ini tentu memerlukan pengaturan khusus yang tengah dimatangkan untuk bisa masuk scheme pembiayaan di dalam negeri. Kemudian mendengarkan presentasi dari Direktur Utama PT. Pindad, Direktur Utama PT. DI, Direktur Utama PT. PAL, maka ke depan akan lebih ditingkatkan sinkronisasi, koordinasi dan sinergi antara apa yang dilakukan oleh industri pertahanan tersebut, dengan yang diperlukan oleh jajaran TNI kita, TNI Angkatan Darat, TNI Angkatan Laut, dan TNI Angkatan Udara, agar di satu sisi kebutuhan militer kita bisa dipenuhi oleh industri kita. Di sisi lain, industri kita juga tumbuh berkembang sebagai layaknya sebuah perusahaan yang tentunya memerlukan pendapatan yang makin baik.

Saudara-Saudara, Kita juga menggarisbawahi meskipun ini masa damai bukan masa perang, tapi tugas-tugas keamanan dalam negeri harus dilaksanakan dengan baik, termasuk tugas-tugas TNI untuk melaksanakan bantuan bagi penanggulangan bencana yang selama ini berjalan baik akan tetap dipertahankan. Dengan demikian kita bisa mengelola keadaan apabila bencana terjadi, terutama pada masa-masa tanggap darurat. Kita juga akan terus mempertahankan partisipasi kita dalam peace keeping missions, misalnya ada sejumlah pelibatan TNI dan Kepolisian di berbagai medan konflik di dunia, kita masih mempertahankan pelibatan kita di Lebanon, dan dalam waktu dekat Kepolisian kita akan ikut melaksanakan tugas di Darfur, di Afrika. Ini menunjukkan bahwa kita, Indonesia, akan terus mempertahankan partisipasi dan kontribusi kita dalam berbagai tugas pemeliharaan perdamaian di seluruh dunia.

Saudara-Saudara, Kita juga membahas tadi langkah-langkah yang dilakukan oleh TNI, terutama saya garisbawahi, gerakan penghematan yang sungguh-sungguh untuk pemakaian listrik, pemakaian bahan bakar minyak dan termasuk pemakaian air. Karena semua itu bergantung atau berkoneksi langsung dengan anggaran yang kita keluarkan, dengan subsidi listrik dan BBM yang dikeluarkan oleh pemerintah, saya ingin jajaran TNI memberi contoh, sebuah institusi dan instansi yang betul-betul hemat dalam penggunaan listrik, dalam penggunaan BBM, dan penggunaan air.

Dan kemudian hal terakhir yang kami bahas tadi adalah menyangkut bisnis TNI. Ada amanah Undang-Undang agar pada akhir tahun 2009 dilakukan penyelesaian yang disebut dengan Bisnis TNI. Tentu saja, harus dirumuskan dengan tajam, mana yang dikategorikan bisnis yang tidak tepat dilakukan di lingkungan TNI, dan mana yang sebetulnya tidak berkategori itu. Sebagai contoh koperasi untuk anggota, untuk kebutuhan sehari-hari, yang juga itu ada di instansi mana pun, sesuai dengan Undang-Undang Koperasi, sesuai juga dengan Undang-Undang Dasar 1945, tentunya hal seperti itu tidak berkategori dengan yang disebut dengan bisnis TNI. Yang jelas TNI sendiri, Dephan sudah siap untuk menata kembali semuanya itu sesuai dengan amanah UndangUndang dan akhirnya yang dilakukan TNI ke depan tentunya sesuatu yang tidak akan mengganggu tugas pokok, namun membantu prajurit dan keluarganya dalam memenuhi kebutuhan sehariharinya. Seterusnya akan dilanjutkan dengan tim yang akan bekerja penuh untuk merumuskan bagaimana penyelesaian dari bisnis di lingkungan TNI.

Itulah hal-hal yang kita bicarakan pada hari ini, Saudara-Saudara. Apakah ada pertanyaan? (dilanjutkan dengan tanya jawab dengan para wartawan)

132

Wartawan: Siang Pak. Wisnu Dewabrata dari Kompas, Pak. Mau menanyakan mungkin yang terakhir, Pak SBY. Soal bisnis TNI, selama ini juga masih dipertanyakan soal kelanjutan PP Penertiban Bisnis TNI yang masih belum tuntas. Kemarin dari TSTB juga Pak Saidi juga mempertanyakan deadline sudah dekat tapi Timnas belum bisa dibentuk karena PP-nya sendiri belum selesai dari Presiden. Bagaimana Pak? Terima kasih Pak.

Presiden : Sebenarnya bukan pada PP atau Perpres-nya tetapi konsep, desain dan arah dari penyelesaian bisnis TNI itu seperti apa. Tahapan sekarang ini sudah cukup gamblang sebenarnya bagaimana arah dan konsep penyelesaian bisnis TNI ini. Oleh karena itu dari kerangka waktu yang masih ada dan saya pandang masih cukup tersedia waktu untuk menuntaskan ini, dan dalam waktu dekat tim akan bekerja sekali lagi penuh, akan bekerja intensif untuk memenuhi target waktu sesuai dengan amanah Undang-Undang untuk menyelesaikan permasalahan bisnis TNI ini.

Wartawan: Saya Luhur dari Detik.com. Mungkin saya tujukan kepada Pak Juwono, Pak Menhan. Begini Pak, terkait dengan yang disampaikan Pak Presiden mengenai penghematan di dalam anggaran pembelanjaan alutsista tadi Pak, apakah untuk tahun 2008 ini ada rescheduling terhadap pengadaan alutsista?

Presiden: Nanti Pak Juwono akan saya persilakan untuk menjawab. Kalau tidak ada yang ditujukan kepada saya, masih ada? Silakan.

Wartawan: Saya Marcus Junianto dari Media Indonesia Pak. Kemarin baru saja ada berita duka, enam prajurit marinir kita tewas dalam latihan Pak, karena kendaraan amphibi mereka terhempas ombak. Selama ini dan sudah berkali-kali sebenarnya masalah alutsista menjadi satu permasalahan bagi TNI kita. Masalahnya, kalau kita perhatikan sampai sejauh ini belum ada arah dari pemerintah yang kelihatan jelas, apakah akan terus mempertahankan pola lama, pola peremajaan, karena misalnya kendaraan amphibi yang kemarin itu sebenarnya kan sudah tua, sejak tahun 60-an, Pak. Apakah dalam pertemuan tadi tidak ada sama sekali, misalnya jangka waktu tertentu bahwa semua kendaraan-kendaraan tua tidak boleh dipakai lagi. Apakah tidak akan ada kebijakan semacam itu, karena kalau tidak akan ada banyak lagi prajurit-prajurit kita yang berkemampuan handal akan tewas hanya karena peralatan yang seharusnya sudah tidak dipakai lagi. Terima kasih Pak.

Presiden: Baik. Arah pemerintah jelas ada, dan sebetulnya beberapa waktu yang lalu sudah kita keluarkan kebijakan kita kepada pimpinan TNI dengan jajarannya, agar alat utama sistem persenjataan, kapal laut, pesawat, yang sudah sangat tua untuk di-grounded, untuk di-base out, termasuk misalkan C130 Hercules tahun 60-an, termasuk tank amphibi yang umurnya kurang lebih sama. Dan tadi kita bahas, kita putuskan, dan saya perintahkan sekali-lagi untuk betul-betul menghentikan, bahkan saya akan memberikan sanksi bagi pimpinan-pimpinan jajaran TNI yang tidak mengindahkan perintah ini. Karena itu berkaitan dengan safety, dengan nyawa prajurit, yang tentu harus kita letakkan dalam letaknya yang tinggi.

Oleh karena itulah kita tata semuanya, mana yang harus masih kita pertahankan, mana yang harus kita adakan baru dengan mengutamakan pengadaan dalam negeri, kita hitung anggarannya. Saudara tahu bahwa ekonomi dunia, ekonomi Indonesia sekarang ini tidak terlalu cukup tersedia banyak ruang untuk mengeluarkan anggaran yang besar bagi memodernisasi sistem persenjataan TNI. Namun bagaimanapun, policy kita sangat jelas yang sudah sangat tua, yang derajat

133

keselamatan dan keamanannya rendah atau rendah sekali kita hentikan, dan kita masuk pada scheme yang baru untuk peremajaan atau pun pengadaan peralatan yang baru. Demikian. Terima kasih Pak Juwono saya persilakan.

(Menhan: Kami membahas masalah anggaran berkaitan dengan alokasi untuk Dephan maupun Mabes TNI terkait dengan keadaan ekonomi seperti yang dikatakan oleh Bapak Presiden. Kita menerima apapun yang kita peroleh dari Menteri Keuangan karena kita paham bahwa kalau keadaan sekarang, perhatian utama pemerintah adalah pada masalah pembangunan ekonomi dan masalah kesra. Oleh karena itu, kami di jajaran Polkam, termasuk Dephan, Menteri, apapun yang kita terima dari pemerintah, dalam hal ini, Departemen Keuangan, untuk melakukan penajaman prioritas tentang penggunaan alutsista, termasuk pengadaan yang baru, sejauh kemampuan anggaran.)

Baik Saudara, sebelum saya tutup, terima kasih Pak Juwono, untuk Saudara ketahui, Pemerintah bersama DPR-RI sedang menghitung, sedang menyelaraskan bagaimana langkah-langkah penyelamatan APBN kita dari beban yang berat dari perkembangan ekonomi dunia, utamanya harga minyak, utamanya lagi subsidi yang besar pada listrik dan BBM, termasuk kepentingan untuk memberikan bantuan kepada rakyat akibat kenaikan harga pangan.

Konsekuensi dari ini semua tentu harus ada penghematan, bukan hanya unsur pemerintah, tapi unsur negara. Oleh karena itulah sedang kita hitung penghematan seperti apa dan yang jelas belanja-belanja barang yang sungguh tidak produktif yang bisa ditunda sekian tahun belakangan mesti kita hentikan, kita tunda. Kita fokus untuk menyelamatkan APBN kita dan mengarah terutama untuk mengatasi kesulitan rakyat akibat kenaikan pangan ini dan BBM ini, dan juga untuk melanjutkan tugas-tugas peningkatan kesejahteraan rakyat, seperti pendidikan, kesehatan, usaha kecil menengah dan lain-lain. Ini sekaligus saya kaitkan dengan yang disampaikan oleh Menteri Pertahanan tadi, ini policy nasonal, kebijakan kita untuk mengatasi keadaan, APBN-nya selamat, pembangunan terus berjalan, dengan penghematan atau efisiensi yang harus kita lakukan. Terima kasih. Assalaamu’alaikum warahmatullahi wabarakaatuh.

Biro Naskah dan Penerjemahan, Deputi Mensesneg Bidang Dukungan Kebijakan, Sekretariat Negara RI

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APPENDIX 3 Hasil Seminar DPR, 23 Februari 2009

Catatan Penting Reformasi TNI Pasca 2009 Fraksi-PKS(Hasil Seminar DPR, 23 Februari 2009): Tidak terasa saat ini kita telah memasuki satu dekade reformasi TNI. Telah banyak yang berubah dalam diri TNI. Hal ini ditandai dengan pemisahan diri Polisi dari ABRI, dihasilkannya UU Nomor 3 Tahun 2002 tentang Pertahanan Negara dan Pengaturan Organisasi TNI dalam UU Nomor 34 Tahun 2004. TNI telah dilepaskan dari kegiatan politik praktis dan ada upaya unuk menjadikan TNI lebih profesional baik dari aspek doktrin, kultural dan postur. Namun persoalan reformasi TNI masih belum banyak menyentuh akar persoalan. Reformasi yang diamanatkan oleh Undang-Undang Dasar 1945 dan Undang-undang Reformasi ternyata berjalan semakin lamban dan bila tidak dikawal dengan sungguh-sungguh bisa mengalami stagnasi. Presiden SBY dalam HUT ke-63 TNI, Selasa 14 Oktober 2008 di Dermaga Ujung Madura, Markas Komando Armada Kawasan Timur, Surabaya mengatakan bahwa selama satu dasawarsa ini, reformasi internal TNI telah berlangsung dengan baik. Panglima TNI, Jenderal TNI Djoko Santoso dalam amanat tertulisnya dalam ulang tahun TNI ke-63 pada 10 Oktober 2008 lalu mengatakan bahwa refomasi TNI telah berjalan dengan lancar dan berhasil walau masih perlu kajian dan evaluasi. Bahkan, Menteri Pertahanan Juwono Sudarsono pun mengklaim reformasi internal TNI telah berjalan 85 persen. Kekuatan TNI Postur ril Pertahanan Indonesia bisa dilihat dari kondisi kekuatan hari ini. Kondisi kekuatan personel TNI hingga saat ini mencapai 383.870 orang (0,17%) dari 220 juta penduduk Indonesia, yang terdiri dari 298.517 orang TNI Angkatan Darat, 60.963 orang TNI Angkatan Laut, 28.390 orang TNI Angkatan Udara, dan 68.647 PNS TNI. Jumlah kekuatan personil TNI tersebut jika dibandingkan dengan luas wilayah Indonesia masih belum seimbang. Kekuatan Alutsista TNI Angkatan Darat sebagian besar masih bertumpu pada aset lama yang meliputi 1.261 unit Ranpur, namun yang siap operasi 799 unit, 59.842 unit Ranmor namun yang siap operasi 52.165 unit, 538.469 pucuk senjata dengan berbagai jenis yang siap operasi 392.431 pucuk. Dan pesawat terbang 53 unit dari bebagai jenis yang siap operasi 27 unit. Kekuatan Alutsista Angkatan Laut meliputi pertama, unsur kapal terdiri dari Striking force 18 unit, Patrilling Force 58 unit, supporting force 67 unit, dan KAL 317 unit yang siap operasi 76. Dua, unsure pesawat udara terdiri dari 65 unit dari berbagai jenis yang siap operasi 39. Ketiga ranpur marinir 410 unit yang siap operasi 157 unit. Kekuatan Alutsista Angkatan Udara bertumpu pada pesawat tempur, pesawat angkut, pesawat helikopter, maupun jenis pesawat lainnya serta peralatan rudal dan radar yang meliputi 234 unit pesawat berbagai jenis dengan kondisi siap operasi 57%, radar 17 unit dengan kondisi siap operasi 88,8%, rudal QW-3 untuk operasional Paskhas dengan kondisi siap operasi 100%.

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Ringkasnya, kondisi TNI kita baik dari segi SDM maupun sarana dan prasarana termasuk Alutsista masih jauh untuk menjadi postur pertahanan negara yang memiliki minimum essential forces. Apalagi dengan luas wilayah dan besarnya jumlah penduduk. Walau secara Alutsista TNI kita masih jauh dari kriteria profesional, ada hal yang membuat TNI kita pantas dibanggakan yaitu TNI kita memiliki semangat juang yang tinggi. Keterbatasan Alusista tidak membuat para prajurit TNI menjadi kehilangan semangat juang. Man behind the Gun kita telah memiliki militansi berjuang yang tidak kalah dengan tentara negara lain yang hanya semata-mata profesional. TNI kita menjadi garda terdepan dalam mempertahankan NKRI sesuai dengan doktrin TNI bahwa tentara kita tidak semata-mata tentara profesional tetapi juga tentara rakyat dan tentara pejuang. Persoalan dalam Reformasi TNIAda beberapa faktor yang mempengaruhi lambannya reformasi TNI. Kendala tersebut antara lain : 1. Negara belum menyediakan anggaran bagi TNI yang memadai. TNI sebagai pihak yang memiliki tugas dan tanggung jawab dalam bidang pertahanan negara sangat bergantung pada berapa besar anggaran pertahanan yang dialokasikan Pemerintah. Secara nasional anggaran pertahanan mengalami kenaikan, namun berdasarkan rasio PDB sejak tahun 2006 terus mengalami penurunan. Bahkan pada tahun 2008 berada pada rasio 0,79% terhadap PDB sekitar Rp 33,678 miliar (sebagai bahan banding, negara-negara di kawasan Asia Tenggara pada umumnya memiliki rasio lebih tinggi, anggaran pertahanan bahkan berkisar 4 % - 5 % PDB). Dari jumlah tersebut sekitar 67 % merupakan anggaran rutin sedangkan 33% untuk pembangunan pertahanan. Konsekuensi dari rendahnya anggaran pertahanan adalah sulitnya untuk meningkatkan performance Alusista dan rendahnya tingkat kesejahteraan prajurit. Rendahnya tingkat anggaran TNI berdamapak sulitnya membentuk prajurit TNI yang profesional yaitu prajurit yang diberi perlengkapan dengan baik dan dicukupi kebutuhannya. 2. Regulasi yang belum selesai sebagai rule of law bagi TNI. UU Nomor 34 Tahun 2004 Tentang TNI dan UU Nomor 3 Tahun 2002 Tentang Pertahanan. Dalam Undang-undang Nomor 34 Tahun 2004 ada beberapa regulasi yang belum dikeluarkan oleh Pemerintah yaitu pertama, ketentuan operasional hubungan Dephan dengan TNI (Pasal 3), kedua, prosedur perbantuan TNI kepada Polri (Pasal 7). Ketiga, peraturan pemberdayaan wilayah untuk kepentingan pertahanan. Keempat, komponen cadangan dan pendukung pertahanan lainnya. Kelima, peraturan pemerintah tentang kesejahteraan prajurit (Pasal 49 dan Pasal 50). Keenam, pengaturan operasional gelar TNI (penjelasan 11). Regulasi yang belum selesai dari UU Nomor 3 Tahun 2002 tentang Pertahanan adalah belum membentuk Dewan Pertahanan Nasional. Padahal dalam Pasal 75 UU Nomor 34 Tahun 2004 tentang TNI mengamanatkan agar segala peraturan pelaksanan undang-undang TNI ditetapkan paling lambat dua tahun sejak berlakunya undangundang. 3. Peningkatan kapasitas politik sipil Sistem demokrasi yang kita bangun ternyata masih sebatas demokrasi prosedural. Demokrasi kita baru sebatas pembentukan institusi-institusi baru namun belum dapat mewujudkan demokrasi yang substansial yaitu kesejahteraan rakyat (welfare state). Manajemen konflik dari partai politik yang belum matang mengakibatkan lemahnya posisi tawar sipil terhadap TNI. 4. Lambannya Pemerintah dalam menertibkan bisnis TNI Tim Nasional Pengambilalihan aktivitas bisnis TNI yang dibentuk Pemerintah telah menemukan bahwa TNI saat ini telah menguasai 23 yayasan yang menaungi 53 perseroan terbatas. TNI juga mengoperasikan 1.098 unit koperasi yang juga menggerakan 2 perseroan terbatas. serta memanfaatkan barang milik negara yang dikelola pihak ketiga. Timnas PAB TNI juga menemukan adanya penguasaan 1.618 bidang tanah seluas 16.544,54 hektare; 3.470 bidang tanah dan bangunan seluas 8.435,81 hektare; serta 6.699 unit gedung seluas 37,57 hektare. Timnas PAB TNI merekomendasikan pengalihan aktivitas bisnis TNI dengan cara : Pertama, penataan dan reposisi semua yayasan, termasuk koperasi dan BMN, kecuali koperasi primer (primkop). Alasan Timnas tidak mereposisi koperasi primer karena bidang usaha ini ditujukan untuk meningkatkan kesejahteraan prajurit. "Primer koperasi tetap dipertahankan. Timnas PAB

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TNI akan mengembalikan BMN yang tidak sesuai tugas pokok dan fungsi ke Menteri Keuangan. Sedangkan BMN yang digunakan oleh pihak ketiga harus ditertibkan mengacu pada penerimaan negara bukan pajak (PNBP). Kedua, Timnas PAB TNI juga merekomendasikan reposisi dan penataan bisnis militer dengan menggabungkan yayasan dan koperasi milik TNI dengan bidang usaha sejenis di bawah Departemen Pertahanan. Kemudian akan diberlakukan legal audit dan financial audit menyeluruh terhadap yayasan dan koperasi milik TNI. Ketiga, primkop TNI akan digantikan dengan satuan kerja yang dibentuk di bawah Dephan, sehingga lebih berperan memberikan pelayanan pada prajurit. Satuan kerja ini bahkan melekat ketika pasukan berada di medan tempur. Sampai saat ini Presiden belum menentukan pilihan terhadap ketiga rekomendasi yang dikeluarkan oleh Timnas PAB. Keterlambatan penentuan pilihan akan berdampak semakin tidak menentunya masa depan bisnis-bisnis TNI dan dimungkinkanya pengalihan aset-aset bisnis tersebut secara illegal. 5. Belum jelasnya penyelesaian RUU Peradilan Militer Saat ini Pansus RUU Peradilan Militer masih belum jelas akhirnya. Pembahasannya terasa sangat alot di DPR. Pihak TNI masih menolak aspirasi yang menginginkan agar peradilan umum diterapkan bagi anggota TNI yang melakukan tindak pidana umum. Sistem peradilan militer yang saat ini menangani tindak pidana umum yang dilakukan oleh anggota TNI sangat tidak memadai. Baik itu aparat penyidiknya maupun majelis hakim yang akan menyidangkan di pengadilan. Pihak TNI seolah terbebani secara psikologis bila di diperiksa dalam sistem peradilan umum ketika melakukan tindak pidana umum. Momentum Krusial Reformasi TNI Pemilu 2009 dan pemerintahan baru hasil pemilu 2009 menjadi momentum krusial bagi kelanjutan reformasi TNI. Ada beberapa faktor yang akan mempengaruhi reformasi TNI pasca 2009 yaitu : Pertama TNI masih menggunakan model internal security dan bukan external security. Hal ini bisa dilihat dari pengembangan postur pertahanan negara yang di buat Departemen pertahanan dengan Peraturan Menteri Pertahanan No PER/24/M/XII/2007. hal ini bisa diliat dari rencana pembentukan Kodam baru yang akan dibentuk di wilayah Kalimantan Barat dan Kaliamntan Tengah, Sulawesi Utara dan Sulawesi Tengah serta Irian Jaya Barat besarnya gelar kekuatan kewilayahan membuat struktr TNI tidak akan banyak berubah. Kedua, pengawalan terhadap reformasi TNI oleh masyarakat sipil semakin melemah. Kejenuhan terhadap jangka waktu yang lama untuk mengharapkan perubahan terhadap diri TNI, tentunya berdampak pada posisi yang hopeless bagi masyarakat dan masyarakat sipil akan semakin sulit mengkonsilidasi diri untuk terus mengawal reformasi TNI. Ketiga. terjadinya penguatan posisi tawar para purnawirawan TNI. Saat ini banyak purnawirawan TNI berminat dalam kontestan pemilihan presiden dan pemilihan legislatif. Dengan demikian di DPR periode depan purnawirawan TNI akan banyak duduk di parlemen. Dengan banyaknya jumlah para purnawirawan akan sedikit banyak akan mempengaruhi apakah partai politik masih terus mengawal dan mendesak terlaksananya reformasi TNI atau tidak. Undang-undang Nomor 3 Tahun 2002 tentang Pertahanan Negara dan Undang-undang Nomor 34 Tahun 2004 tentang TNI masih menyisakan banyak amanat yang harus dijalankan untuk melaksanakan reformasi TNI. Selain itu kedua undang-undang tersebut belum mampu secara efektif untuk merubah kultur, pertanggungjawaban hukum dan profesionalisme di tubuh TNI. Pasca 2009 akan terbentuk pemerintahan yang baru, baik itu di eksekutif maupun di legislatif. Bila pemerintahan saat ini tidak bisa menyelesaikan persolan-persoalan mendasar yang mengakibatkan lambatnya reformasi TNI, maka pasca 2009 sangat sulit untuk terjadi perubahan yang signifikan. Reformasi TNI sangat bergantung pada keputusan politik negara dalam memposisikan dan mengoperasikan TNI.

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