World - Indonesia's army going out of business

REFORMING Indonesia’s army, once among the world’s most corrupt and abusive, has been a slow process since the army-backed Suharto regime collapsed ten years ago. A big obstacle to this, and to the country’s democratic progress, has been the forces’ deep involvement in all sorts of businesses, legal and illegal. The income from these sidelines—including plantations, logging, hotels and property development—gave the army an unhealthy degree of independence from the civilian government that supposedly oversees it. With much of the revenue being diverted into senior officers’ pockets, it also allowed them to keep meddling in politics, even after they were stripped of their guaranteed seats in parliament in 2004.

A law passed that same year instructed the army to surrender its businesses to the government by October 2009. Not much happened until earlier this year, when President Susilo Bambang Yudhoyono (himself a liberal ex-general) created a panel of experts to investigate the firms. The panel is due to report to the president this month. The defence minister, Juwono Sudarsono, says it has identified about 1,500 military firms. But most have gone bust, been bought by the private sector or are close to collapse. Only six viable firms with assets over $50,000 have been found.

The businesses date back to the struggle for independence from the Netherlands in the 1940s. Each unit of the nascent Indonesian forces had to finance itself and any method—even smuggling and drug-trafficking—was acceptable. Under Suharto the businesses became huge money-spinners. Many were disguised as “foundations” for the welfare of lower ranks but were really vehicles for the chiefs’ money-laundering and other capers. Recently they have crumbled, as Indonesia’s economy has been progressively liberalised and they lost the monopolies they relied on.

The government panel’s findings concur with those of a recent study by Lex Rieffel and Jaleswari Pramodhawardani for the Brookings Institution, an American think-tank. It found that by 2006 the combined revenues of Indonesia’s military businesses had shrivelled to $185m at most, and put their profits at no more than $73m. These figures are much smaller than military experts had hitherto assumed, and are a fraction of that year’s official defence budget of $2.9 billion. Even so, the Brookings study reckons it will be tough to persuade senior officers to give them up while most other arms of the state have their own sidelines.

The findings undermine one of the army chiefs’ main excuses for keeping their businesses: that they desperately need the revenues to supplement the meagre official budget. Mr Sudarsono agrees that although the defence budget has now been raised to $3.6 billion, it remains inadequate; he compares this sum, spent to defend a nation of 226m people, with the $4.6 billion that tiny Singapore spends to defend 5m people. He believes he has, however, convinced the top brass that spending on public works and anti-poverty schemes must take priority for the next five to ten years, and that by thus building a stronger economy the government will eventually have more money to spend on defence.

Polls show that the army’s reputation among the public has improved. Cases of corruption and abuse still continue (such as in the troubled Papua region) but there is nothing like the top-down organised repression of the Suharto years. A few military strongmen associated with those abuses, such as Prabowo Subianto (son-in-law of the late dictator) and Wiranto, a former army chief, are campaigning for next year’s presidential election, perhaps financed from their past business earnings. But their poll ratings are low. Various other ex-military men are running for parliamentary seats but Pramono Anung, the general secretary of the main opposition Indonesian Democratic Party of Struggle, says he sees no sign of a concerted attempt by the army to return to politics.

The problem, notes Tim Huxley of the International Institute for Strategic Studies, a think-tank, is that, as the army’s image has improved, that of the police has sunk. The police have taken on many of the bad characteristics once associated with the army: corruption, abuses and running illegal sidelines. Mr Sudarsono says that, though the army has officially given up its role in public security, some local authorities still call on it to deal with unrest because they mistrust the police.