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.