Defense equipment mark-up practices likely to continue
Tiarma Siboro, The Jakarta Post, Jakarta
The rampant practice of exorbitant mark-ups will likely continue as a senior defense official responsible for equipment procurement has refused to cut out the role of contractors.
Director General of Defense Equipment Procurement Maj. Gen. Aqlani Masa claimed that contractors were still needed for purchasing defense equipment.
"Otherwise, we don't have enough money to pay in cash," he told The Jakarta Post in an interview last Friday.
Aqlani's view was in contrast to those of Maj. Gen. Sudradjat, director general for defense strategy at the Defense Ministry who told the Post last Wednesday that the government must change its procurement policy to prevent the mark-ups.
The current policy dates back to the 1970s and stipulates that all government ministries must use contractors to procure their needs.
Aqlani was also at odds with all chiefs of staff of the military who had urged the government to bypass the contractors and purchase the equipment directly from the manufacturers.
During her visit to the Czech Republic last month, President Megawati Soekarnoputri said that mark-up practices in defense equipment purchasing was rampant in the past.
The Indonesian Military (TNI) has been campaigning to double its budget allocation from Rp 9 trillion (US$1 billion) to Rp 18 trillion next year.
"In the future, I suggest the government find out the exact prices of this equipment from the manufacturers. If only the president knew the prices, I'm sure that she would have seen that other contractors incapable of offering exorbitant contract prices," Aqlani said.
Aqlani, however, acknowledged that many irregularities which caused losses perhaps on the billions of dollars did occur in the past.
"I admit that in the past, the military's procurement partners were mostly relatives of the Cendana clique. What could we say about it?," Aqlani said referring to the street name where the former ruler Soeharto and many of his family members live.
He added that not a cent of the misused money went to any military institution. He did not elaborate.
Aqlani admitted that there were rules and regulations pertaining to the procurement process, but those amounted to nothing when, "the TNI was suddenly contacted by the Cendana's, claiming that they would be making themselves available as contractors."
Many believed that Soeharto had enriched himself in this way -- some estimate his wealth to be in the tens of billions of dollars -- during his 30-year rule, but efforts to recoup that money legally have come to naught.
A military source told the Post that former U.S. president Bill Clinton was peddling a small squadron of F-16 jets to Soeharto to in 1996, after the Congress cut U.S. military ties with Pakistan which at the time was developing a nuclear project.
"The U.S. offer included insurance coverage and Pak Harto agreed to buy nine F-16s at the price of $8 million each, or equal to one third of the price of Indonesian made CN-235s.
"But suddenly the TNI headquarters received a proposal from the company of Bambang and Tutut's husband Indra Rukmana, offering an insurance scheme for the jet planes. We, of course, became confused since it was impossible to reject it at the time," the source said.
The project was canceled due to the human rights violations in the country.
According to the source, the military's outrageous shopping spree was held in the 1990s when Gen. (ret) Eddy Sudrajat and Gen. (ret) Hartono were in charged as Minister of Defense and the Army Chief of Staff respectively.
"At the time, the government set up a team to monitor the projects led by former minister of research and technology B.J. Habibie," the source said.
Members of this team were, among others, Rahardi Ramelan of the National Development Planning (Bappenas) and former Bulog head now on trial in a major graft case, former minister of finance Mar'ie Muhammad, former TNI chief Gen. (ret) Feisal Tanjung and Eddy, the source said.