TNI commander denies earning huge profits from businesses

TNI commander denies earning huge profits from businesses

Dadan Wijaksana and Musthofid, The Jakarta Post, Jakarta

Indonesian Military (TNI) chief Gen. Endriartono Sutarto has
denied charges that the military's foundations generated enough
profit to cover 70 percent of the TNI's budget requirement.

"Seventy percent (of our budget requirement) means Rp 35
trillion. What company can make that much of a huge annual
profit? Not even Freeport earns that much," Endriartono told
members of the House of Representatives Commission I for
political, security and foreign affairs during a hearing here on
Monday.

"I guarantee that the (non-budgetary) funds are not that huge.
If they are, then why should we ask for a higher budget
allocation each year," he said.

TNI has long been relying on proceeds from its foundations to
help it cope with huge budget constraints. Comprising 300,000
soldiers, TNI needs to get through the year on Rp 9.3 trillion
(some US$840 million) of budget allocations, or 1 percent of the
gross domestic product (GDP). The amount covers some 30 percent
of its actual needs.

In comparison, Malaysia, which has far less area to protect
than that of Indonesia, has an annual defense budget of 2 percent
of its GDP.

This has had severe consequences for military operations.
Soldiers remain underpaid and a lot of TNI's military equipment
does not receive proper servicing. This is combined with huge
shortages in spare parts and inadequate maintenance.

Data shows that TNI owns 117 ships with only 30 percent in
operation, and 220 aircraft with just 45 percent operational.

These are the reasons cited by the military for having its own
businesses.

It remains unclear as to how many companies operate under
TNI's supervision and how much money these companies generate.
However, few would argue that the Army's Kartika Eka Paksi
Foundation (YKEP) is the main moneymaker. The Navy and Air Force
also run businesses under their own foundations.

Covering a wide range of businesses in 33 firms, YKEP is just
one of many owned by the Army. YKEP covers businesses in timber,
plantations, property, insurance, steel and construction
companies, a hotel, a shoe factory and a bank.

"According to an audited financial report by Earns and Young,
YKEP has been able to contribute about Rp 50 billion per year.
And that is the largest profit it has ever generated," said
Endriartono.

"As the foundation is the largest we've got, you can calculate
for yourself how much money we can get from our foundations,"
Endriartono told legislators when asked the actual percentage of
the non-budgetary source.

Legislators said that while they acknowledged the budget
constraints, they urged the TNI to be transparent and accountable
in running its businesses.

Transparency and accountability in running business empires
are crucial to ensure a high degree of monitoring and to avoid
abuses, the legislators said.

Endriarto said that TNI was trying to make all foundations
under TNI supervision ready to undergo a financial audit, adding
that some had even undergone one.

The move came amid intensified calls urging the military to
abandon businesses that were widely regarded as prone to
corruption.

Critics have repeatedly said the lack of transparency should
be attributed to the alleged rampant corruption within TNI's
foundations by military officials for personal gain.

However, legislators said that this should not be an excuse
for the military to abandon transparency and accountability in
its search for alternative funding sources.