Time to turn off the lights on military's businesses<\/p>\n
YOGYAKARTA (JP): Since the early years of its formation, the
\nIndonesian Military (TNI) suffered from financial shortages. It
\nbecame known that officers were fending for themselves, and for
\ntheir men and their families. Their cooperatives have been among
\nthe sources geared to be money-spinning machines.<\/p>\n
A dilemma arises now with public demand for clean governance.
\nMilitary cooperatives and businesses must be subject to reform
\nwhile the government is not yet able to improve the welfare of
\nmilitary personnel, says political economic observer Revrisond
\nBaswir of Gadjah Mada University in Yogyakarta.<\/p>\n
The following are excerpts from The Jakarta Post's interview
\nwith Revrisond last week concerning the military cooperatives,
\nwhich is only one of the many aspects of the military's "dual
\nfunction" (dwifungsi). The military has promised the doctrine
\nwill gradually be phased out.<\/p>\n
Question: You have said that military cooperatives are among
\nthe military's sources of "extra" funds. Please elaborate.<\/p>\n
Answer: It all started with control over cooperatives,
\nfollowed by investments in various other businesses through share
\npurchases, and also by TNI setting up its own businesses. There
\nare dozens of Perseroan Terbatas (PT, limited liability
\ncompanies) set up by forces in TNI (the Army, the Navy and the
\nAir Force) as well as by the National Police. Shares purchased by
\nTNI are spread everywhere ...<\/p>\n
There are at least five cooperatives within TNI; namely the
\nArmy cooperatives under Inkopad, the Navy's cooperatives under
\nInkopal, the Air Force cooperatives under Inkopau and the
\ncooperatives of the headquarters of TNI, as well as the police
\ncooperatives under Inkopol, although the National Police is now
\nno longer part of TNI's structure. Then we still have the
\ncooperatives run by Pepabri, the TNI veterans organization.<\/p>\n
Therefore, TNI has at least six representatives on the
\nIndonesian Cooperatives Council (Dekopin), or seven if the
\nrepresentative of the cooperatives run by Pepabri is included.<\/p>\n
TNI also still has the cooperatives of its respective wives'
\norganizations. TNI thus dominates the council.<\/p>\n
Q: Could you explain?<\/p>\n
A: The membership of the council was 27 parent cooperatives
\nduring (former president) Soeharto's rule. Under minister of
\ncooperatives Adi Sasono (in the Cabinet of Soeharto's successor
\npresident B.J. Habibie) there were 41 parent cooperatives. But
\nTNI does not only have the most representatives compared to the
\nothers; it also virtually controls the country's cooperatives
\nmovement. Election of the chief of village unit cooperatives has
\nin the past experienced intervention from TNI members.<\/p>\n
TNI has many representatives on the council, compared with
\nonly one for civil servants representing some four million
\nmembers (compared to TNI's 500,000 personnel).<\/p>\n
Q: TNI's cooperatives are involved in what business areas?<\/p>\n
A: Among them are the easily procured "orders" (for jobs). One
\nexamples is in trading, particularly the one linked to the
\ntrading system of fuel oil. TNI cooperatives always have their
\nallotment of orders from (the state-owned oil and gas company)
\nPertamina to transport and distribute fuel oil to vendors, to gas
\nstations and so forth. This job is done particularly by Army
\ncooperatives.<\/p>\n
Then the cooperatives run by the Air Force operate, among
\nother things, a taxi business. They monopolize taxi services at
\nall airports, except Jakarta's Soekarno-Hatta International
\nAirport. This is quite bothersome as passengers leaving the
\nairport do not have a choice. They have to take a taxi owned by
\nthe Air Force cooperative at a tariff already set.<\/p>\n
The cooperatives run by the Navy usually operate businesses
\naround seaports, in expectation of obtaining orders from the
\nseaports and also from relevant government agencies without a
\nclear market mechanism. The cooperatives run by the police
\noperate businesses around their own surroundings and also
\nelsewhere as long as they can get an allotment of orders.<\/p>\n
Q: Does this mean the TNI cooperatives have contributed to
\nunhealthy business practices?<\/p>\n
A: Yes, and the damage is brought about not only by these
\ncooperatives, but also by their other businesses. The simple
\ndescription is like this: TNI is an institution which obviously
\nmonopolizes the use of arms and violence. So once it gets
\ninvolved in business, other parties encounter a "terrorization"
\nof sorts... We can imagine how it (TNI) does its business and
\nhow it can get orders. Besides, for many years TNI has assumed a
\ncentral position in our national political arena.<\/p>\n
There is also the factor of coincidence between the business
\ninterests of TNI and its (dual function doctrine including)
\n"doctrine of civilian function", which has in fact helped develop
\nthe "crony" businesses. TNI members -- either those in active
\nservice or already retired -- are scattered across various
\npositions in civilian bureaucracy. They have developed collusive
\nand corrupt relations whenever they come across TNI's business
\ninterests.<\/p>\n
For example, how have TNI cooperatives and businesses acquired
\nlicenses, orders, loans and so forth? I believe there is a
\npreference (for TNI) in this respect and facilities are also
\nextended thanks to the presence of TNI members in many civilian
\npositions, such as governors, regents, subdistrict heads,
\ncommissioners of state enterprises, directors general and so
\nforth.<\/p>\n
If a TNI business needs a loan, you only have to go to a state
\nbank where the commissioner is a TNI member. Such practices have
\nled to TNI members in civilian positions and businesses which
\nsignificantly contributed to the national economic disaster.<\/p>\n
Q: How big are funds contributed by TNI cooperatives and
\nbusinesses?<\/p>\n
A: Roughly, we can say that TNI get its funds from four sources:
\nthe official source from the state budget and three "extra"
\nsources, which are actually illegal, such as from cooperatives,
\nthe establishment of business companies, foundations and stock
\npurchases and also from corrupt, collusive and nepotistic
\npractices, both institutionally and individually.<\/p>\n
These are illegal because the law on the civil service and
\nstate's apparatus does not allow the military to undertake a
\nbusiness.<\/p>\n
The official budget from the government may account for only
\n25 percent of the entire funds amassed by TNI. The remaining 75
\npercent come illegally from various means, including
\ncooperatives. TNI cooperatives alone contribute 20 percent to 25
\npercent of the entire military funds. We can understand then
\nwhere the funds for military operations, especially secret and
\nunofficial ones, have come from. The budget from the government
\nis too small to cover all these operations.<\/p>\n
We can imagine how reluctant TNI would be to let go of 75
\npercent of its financial sources because, individually, TNI's
\nelite themselves also enjoy these "extra" funds. These illegal
\nfunding activities must, of course, be scrapped for the sake of
\ngood governance.<\/p>\n
Q: But isn't the budget for the military too small? Low-ranking
\nTNI members live on very limited means, don't they?<\/p>\n
A: This is another problem in the context of establishing good
\ngovernance. This is more attributable to injustice in the
\ndistribution of funds within TNI. On the one hand, it is true
\nthat the budget from the government for TNI is too small and this
\nmay be distributed equitably on the basis of the existing pay
\nsystem. However, the illegal 75 percent of the financial sources
\nis not distributed fairly and justly, and it is amassed by high-
\nranking TNI members, while the low-ranking ones can get extra
\nmoney from illegal levies.<\/p>\n
So, efforts at seeking unofficial funds also harm TNI because
\nit has created a gap between officers and generals and lower-
\nranking soldiers. Therefore, attempts at promoting the welfare of
\nTNI in general through official sources represents TNI's interest
\nand the proceeds would be distributed fairly and equitably.<\/p>\n
Further, the limited means of lower-ranking TNI personnel must
\nbe viewed proportionally because a greater concern can be found
\namong civilian civil servants, who number about four million
\npeople, or eight times the 500,000 TNI members. TNI members still
\nfare better than civil servants as they are provided with
\nbarracks, simple as they are, and receive a side-dish allowance,
\nthough only to cover the purchase of salted fish. The civil
\nservants get neither.<\/p>\n
Q: In the present condition, how can the government collect
\nenough money to compensate for the loss of TNI's "extra"
\nfinancial sources?<\/p>\n
A: Ours is Asia's most corrupt state and the world's third
\nbecause corruption in Indonesia has systemically involved all
\ninstitutions. Our budget has always been small because, among
\nother things, the bigger part of it goes into the pockets of
\ncorrupt officials.<\/p>\n
Some say that 30 percent of the government's budget leaks
\nevery year because of corruption, but in fact, in terms of value,
\nthat amount is only 30 percent of the total value of corruption.
\nApart from budget-related corruption, corrupt officials also put
\ninto their own pockets nonbudgeted funds and direct funds from
\nthe community and so forth. Obviously, the total value of
\ncorruption equals the total value of our annual budget.<\/p>\n
Therefore, to augment the value of the government's budget at
\nthis difficult time, the financial leakage or corruption has to
\nbe cut down to the minimum. Then nonbudgetary funds must be
\nscrapped and included instead in the government's budget. If
\nthese two things can be done well, the amount of our budget will
\nincrease significantly, so demands to increase the welfare of the
\nmilitary and other state apparatuses could be raised, although
\nthis promotion cannot be substantial.<\/p>\n
The government controls some Rp 75 trillion, and every year it
\nhas to fork out Rp 50 trillion to repay the loans plus the
\ninterest. This leaves a balance of some Rp 35 trillion. This is
\nclearly not enough to promote the welfare of state apparatus
\npersonnel, including in TNI. However, if corruption can be cut
\ndown to the minimum and nonbudgeted funds be included in the
\nbudget, a total of Rp 125 trillion can be collected, or rather Rp
\n75 trillion, after being deducted by loan repayment installments.<\/p>\n
The government will then be able to undertake programs to
\nimprove the welfare of the military and other state apparatus
\npersonnel as one step to good governance. This would be the most
\nrealistic step unless we wish to borrow more from abroad ... We
\nshould try not to make any more loans to improve welfare of the
\nmilitary and other state apparatus personnel because it is they,
\namong other causes, that have contributed to our economic
\nbankruptcy. Only when the needs for decent welfare have been met,
\nor at least when the welfare level has been raised, can we settle
\nproblems related with TNI cooperatives, TNI businesses and other
\ncorrupt behavior of the TNI.<\/p>\n
Q: How should the military cooperatives, businesses and other
\nillegal financial sources be abolished?<\/p>\n
A: The law on the civil service and state apparatus which ban
\nthem from undertaking businesses should be upheld. Of course,
\nwhile all this is being done, the welfare of the military
\npersonnel must also be promoted. Cooperatives are in fact part of
\nthe problem related to the TNI businesses, although most of the
\nTNI businesses now assuming the format of a PT started as
\nmilitary cooperatives. It must be borne in mind that not all the
\nTNI businesses are in the form of cooperatives; some are in the
\nform of foundations or limited liability companies.<\/p>\n
Regarding institutional reform of cooperatives, TNI
\ncooperatives must be dissolved because they violate the principle
\nof cooperatives, namely that membership must be open to all. The
\nLaw No. 12\/1967 on cooperatives should be changed with another
\nthat conforms to the cooperatives principle of open membership.<\/p>\n
Military cooperatives should be dissolved because their
\nmembership is exclusive and is based on their common profession.
\nMembership of a cooperative must be based on common economic
\ninterest, not common profession.<\/p>\n
Therefore, students' cooperatives, civilian civil servants'
\ncooperatives and employees' cooperatives must also be dissolved.
\nWhat must be established are consumers' cooperatives, loan-
\nsavings cooperatives, production cooperatives and the like.<\/p>\n
Q: How did cooperatives begin to be established within the
\nmilitary?<\/p>\n
A: In the final days of the Old Order (until about 1966) the
\nIndonesian Communist Party (PKI) owned a lot of cooperatives, and
\nthese were taken over by TNI during the transitional period to
\nthe New Order. This taking over of cooperatives by TNI was part
\nof the efforts by Soeharto's administration to coopt the popular
\neconomic movement, which actually showed much potential.<\/p>\n
The government later introduced Law No. 12\/1967 with a view to
\n"sterilizing" the cooperatives movement by, among other things,
\nchanging the principle of open membership into exclusive
\nmembership. As a result, "profession-based" cooperatives were set
\nup with people of a common profession as members. This rang the
\ndeath knell for the real significance of cooperatives as a
\npotential popular economic movement.<\/p>\n
The military then fully controlled the Indonesian cooperative
\nmovement by taking control of Dekopin, a council where policies
\non cooperatives are drawn up.<\/p>\n
TNI has controlled the cooperatives movement ever since the
\nminister of cooperatives was in the hands of a retired officer,
\nBustanil Arifin.<\/p>\n
With its control of Dekopin, it became easier for TNI to enjoy
\neconomic gains from this council. Then it set up foundations,
\nlimited liability companies and invested through stock purchase
\nin various business sectors.<\/p>\n
Q: What is the average percentage of the budget allotted for the
\nmilitary?<\/p>\n
A: The official budget for the military has never been bigger
\nthan 5 percent of the total state budget. This is the smallest
\nmilitary budget in Southeast Asia. An increase in the budget for
\nthe military is usually identical with improvement of military
\nfacilities and infrastructure, and is not usually related to a
\nbasic problem like military personnel's welfare. So it is
\nactually irrelevant to talk about how big the military budget
\nshould be, because even the living needs of military personnel
\nhave not been fulfilled.<\/p>\n
Q: Defense minister Juwono Sudarsono has asked for a 62 percent
\nincrease in the 2000-2001 state budget for the military and
\npolice, or an increase of Rp 18.9 trillion (US$2.7 billion) in
\nthe budgetary allocation of Rp 11.6 trillion. He argued it was to
\nimprove professionalism and to reduce the proportion of
\nextra-budgetary sources of income. Your comment?<\/p>\n
A: We cannot jump to figures of an increase; there must be a
\nguarantee that reform within TNI is really taking place after an
\nincrease is agreed upon.<\/p>\n
Second, TNI must realize the government's financial sources
\nare in a very bad condition, while other sectors are also calling
\nfor an increase, such as a hike for civil servants' wages,
\nregions, education and many other things.<\/p>\n
The figure proposed by Juwono therefore becomes relative,
\ndepending on the government's ability to raise funds, such as
\nfrom privatization of state run firms, rescheduling of overseas
\ndebts or maybe also adding offshore loans and more sales of state
\nassets. If the government succeeds, Juwono's proposal may be
\nconsidered not too big, or on the contrary.<\/p>\n
What needs to be done is a kind of "letter of intent", or a
\ntype of work schedule about TNI's reform, among others thing to
\nfree soldiers from business. All this must be drawn up by taking
\ninto consideration the priorities of improvement within TNI,
\nwhile paying attention to the state's priorities of expenses in
\nother sectors.<\/p>\n
Nevertheless, Juwono's proposal is good. It is true that TNI
\nis in a sorry condition with outdated, ill-maintained equipment;
\nso a scale of priorities must be drawn up based on the
\ngovernment's available financial sources.<\/p>\n
In comparison, the House of Representatives once asked for a
\nraise in civil servants' wages of 100 percent, which was then
\nlowered to 25 percent, and the government bargained further for a
\n15 percent raise. (Asip Agus Hasani)<\/p>",
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