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.