Security dilemma for investors

Security dilemma for investors

By Lesley McCulloch

JAKARTA (JP): On Monday at the opening of the Jakarta
International Energy Conference, President Abdurrahman Wahid
stated that the government would use force if need be to protect
the operations of mining companies against disruption from
"outsiders".

Yet on Tuesday, Minister of Defense Juwono Sudarsono lamented
the fact that the government was unable to guarantee the security
of its people due to lack of funds. The deficiencies of the
Indonesian defense budget are nothing new, and have resulted in
the close to obsolete state of much of the equipment belonging to
the Indonesian Military (TNI).

In an interview with this author on July 7, Juwono said that
it would take five to 10 years to even begin to acquire the
desired state of military capability, but that "the process
cannot even really begin until we have tangible economic
recovery." This is a dilemma indeed.

If the government is willing to use scarce resources to
protect foreign investors and their operations, while the
civilian population tolerates increasing crime and violence,
there may be serious political repercussions.

The Jakarta Post reported on Tuesday that Juwono had requested
that mining companies cooperate with the police and the security
forces to ensure the security of their operations.

Many have being doing just that for a long time. The
"security" payments by Freeport -- and other companies -- to
certain services within the armed forces is no secret. Juwono
himself has conceded that the military may in some cases be the
source of insecurity, as some individuals or groups within the
military seek to line their own pockets by participating in
and/or protecting illegal mining operations.

Those few mines which have been forced to temporarily close
down operations are often those who have lost favor with the
military by refusing to pay for protection, have attempted to
stop it "helping itself" or are selling concessions which are not
theirs to sell.

In addition, trouble often comes either from disgruntled
employees; locals who accuse the companies of environmental
damage; or exploitation (even pillaging) of resources and
cultural insensitivity -- with little of the benefits being felt
by them directly.

Given the propensity of the military to engage itself in
economic interests as the "need" and ability arises, one may be
forgiven for thinking that the President's recent order to
"protect" mining operations may actually increase the insecurity
of the very operations they have been dispatched to secure.

Indeed, since the fall of Soeharto the military has become
even more active in areas such as illegal logging and mining, and
also in protection rackets for legal enterprises in these fields.

Information on the scale of involvement is patchy due partly
to the fact that these operations take place in remote areas, but
it has been a common secret for many years. The isolated nature
of these operations make it even more likely that financial
exploitation (with Abdurrahman's inadvertent blessing) will take
place.

Speaking with Juwono on Friday it was apparent that he is
acutely aware of the persistent wheelings and dealings of the
military, and that off-budget financing will continue for some
time. The fact that TNI has little choice but to rely on these
off-budget sources does not concern him per se.

The source of his disappointment is more the knowledge that
"if certain elements within the military were not so intent on
lining their own pockets, our off-budget funding could be double
what it is now".

Juwono is an impressive figure. He is a man with a mission,
and has the backing of his President. "Removing the military from
its economic interests is a big adjustment process ... it must be
steady and comfortable ... we must be willing to tolerate a
degree of corruption for the foreseeable future ... perhaps for
as many as five more years. If we move too quickly there may be
repercussions", he says.

The fact remains, however, that a government policy to send
even more military personnel to these "lucrative" outposts will
give even more business opportunities to the "underfed,
underequipped and undertrained" military. Of course we can
understand the problems the government faces.

It would be very bad for the economy if, for example,
production at Freeport's Grasberg copper and gold mine, deep in
the mountains of the remote eastern province of Irian Jaya were
to be disrupted; it is the country's single largest tax payer.

On the other hand, using scarce military resources, or placing
the military in a position where they are able to "sell" these
military resources for private gain will solve nothing.

Perhaps the government should move to address the concerns of
those who seek to secure more of the benefits of such operations
for local people, and remove those elements within the military
who contribute to the problems in these remote areas.

I would like to ask Juwono whether he really does think it a
wise strategy to "expose" the cash-strapped military to such
lucrative opportunities.

Surely the temptation will be all too much for it to resist?
And if this is so, then what does this say for the desire
expressed by the minister to me on Friday that "in an ideal
Indonesia, the defense budget would be enough and there would be
no off-budget financing". If this is really your long-term goal,
then surely the government should reconsider the policy options
before it to solve this current problem.

The author is conducting a study of Indonesian military
spending for the Bonn International Center for Conversion in
Germany, and is currently a Visiting Fellow at the Centre for
Strategic and International Studies, Jakarta.