Kostrad off-loaded business units

Kostrad off-loaded business units

Tiarma Siboro, The Jakarta Post, Jakarta

As the government tries to draw up an inventory of the myriad
business interests of the Indonesian Military (TNI) as part of
the preparations to remove them from military control as required
by law, the Army's Strategic Reserve Command (Kostrad) claimed
that it now only has interests in three business units.

Kostrad Commander Lt. Gen. Hadi Waluyo said recently that the
force owned 100 percent of the shares in commercial aviation company PT
Mandala Airlines and healthcare group Darma Medika General
Hospital, and had a 25 percent stake in cargo company PT Darma
Mandala.

"We're now trying to revamp Mandala Airlines," he said,
pointing out that the company had not performed well due to
mismanagement.

Hadi said that part of the revenue from the three companies
had been used to help improve the welfare of soldiers and their
families, brushing aside criticism that the military businesses
had only benefited the generals as a result of rampant
corruption.

Hadi claimed that Kostrad had gotten out of the timber
business long ago. However, he did not provide any details on
why and when the force had divested its interest in the lucrative
timber sector.

He said that Kostrad had also unloaded its shares in "other
businesses", such as construction companies, as many of them had
not performed well.

He added that the stakes in the "other companies" had been
given to Kostrad by private investors for free. He failed,
however, to explain why private investors should gave Kostrad
shares in their companies.

He pointed as an example to a road construction company in
which Kostrad had shares, which won the contract to build the
Malang-Gempol highway in East Java.

"The project, however, did not proceed well, so of course we
didn't get any money," Hadi said.

Hadi's statement is the first explanation given by a senior
military officer on the state of the TNI's vast business
interests since the Indonesian Military Law passed last year
stipulated that the TNI must relinquish its business interests
within a five-year period to ensure improved professionalism.

TNI Commander Gen. Endriartono Sutarto has claimed that the
divestment of the military's business interests could be
completed within the next two years.

The once supremely powerful TNI obtained its various business
units under the 30-year authoritarian regime of former president
Soeharto. But critics have said that the military's involvement
in business has increased corruption and undermined military
professionalism, while the direct benefits to low ranking
soldiers and their families have been meager.

Hadi, however, rejected the criticism. He said that in the
case of Kostrad, profits from its business units had been partly
used to provide scholarships for soldiers' children and
compensation for the families of soldiers killed on active
service.

"Roughly, we spend Rp 300 million to Rp 400 million on
supporting the education of the children. We also provide Rp 25
million to families whose sons or husbands were killed during
operations," he said.

Other Kostrad spending took the form of housing allowances.

While the mechanism by which the TNI will divest its business
interests remains unclear, some government officials have floated
the idea that the government take over part of the businesses and
turned them into state-owned enterprises.

But a researcher with Indonesian Corruption Watch (ICW),
Danang Widoyoko, has warned the government to be very careful
when acquiring the business units of the TNI since many of them
had been mismanaged.

He was worried that their acquisition would only increase the
burden on the state (and the taxpayers) as a result of the
propping up of loss-making firms.