indonesian military business involvement in indonesia create big issues and debt.

http://tbn0.google.com/images?q=tbn:4c5DjjzNJw24gM:http://www.worldsecuritynetwork.com/ArticleImages/indonesiaMilitary_web.jpgINDONESIA: Military Business Interests Fuel Abuses
By Jim Lobe

WASHINGTON, Jun 21 (IPS) – Until the Indonesian military is barred from pursuing its own business interests, civilian control over its activities will be limited, and human rights will suffer as a result, according to a major new report released Wednesday by Human Rights Watch (HRW).

The report, “Too High a Price: The Human Rights Cost of the Indonesian Military’s Economic Activities”, finds that the military’s long-time practice of independent financing has led to a host of abuses, including extortion, property seizures and profiteering, and has sustained violence in conflict areas, such as Aceh and Papua, rich in natural resources.

“The military’s money-making creates an obvious conflict of interest with its proper role,” according to the 136-page report’s author, Lisa Misol, a researcher with HRW’s Business and Human Rights Programme.

“Instead of protecting Indonesians, troops are using violence and intimidation to further their business interests,” she said. “And because the government doesn’t control the purse-strings, it can’t really control them.”

Under a 2004 law, the military, formerly known as the Tentara Nasional Indonesia, or TNI, is supposed to divest itself of all its commercial interests — variously estimated at between 200 and more than 1,500 businesses — by 2009.

But government moves to begin addressing the military’s economic entanglements to date have been “slow, half-hearted, and incomplete”, according to the report, which calls on the government of President Susilo Bambang Yudhoyono to “radically rethink its approach”.

While the reform calls for profitable military enterprises to be made into state-owned companies, for example, it would permit the TNI to retain charitable foundations and cooperatives that long been used as fronts for its commercial interests, the report said.

Daniel Lev, an Indonesia expert at the University of Washington in Seattle, said, “This is the kind of report that needs more currency because the army’s military business enterprises have not gotten the attention they deserve. Not enough has been done about it, in part because people aren’t paying enough attention.”

The report, which is based on two years of research, including more than 200 interviews with government officials, TNI retired and active-duty officers, independent experts, community activists, and businesspeople, comes just weeks after the visit to Jakarta of U.S. Defence Secretary Donald Rumsfeld.

Despite long-standing Congressional curbs on U.S. military aid and sales to Indonesia, including restrictions on certain kinds of aid until the civilian authorities asserted significant control over the TNI and greater transparency regarding its business interests, Rumsfeld’s trip marked the official normalisation of military relations between the two countries. The Pentagon has long sought to improve ties with the TNI in order both to secure closer cooperation in the “global war on terror” and to bolster Jakarta as a friendly counterweight to China.

While many TNI critics have assailed it for a history of serious human rights abuses in East Timor, Aceh, Papua and elsewhere, they have also noted that its financing and commercial activities have played an important role in fomenting those abuses and in ensuring its independence from civilian authorities.

“Since the revolution, the army has never had to defend Indonesia from an outside enemy, so the primary enemy of the Indonesian army is the Indonesian people,” Lev told IPS. “You can’t get rid of the army’s corruption unless you’re willing to change the army itself. You need really strong leadership to do that. SBY (the president) is a smart man and a nice man, but he doesn’t have enough of a will to pull it off.”

For much of the military’s existence, only about half of its budget was provided from the government’s military account. Although some of the rest was obtained through other government accounts, with little or transparency, most of the balance was raised by range of independent operations, including “military-owned enterprises, informal alliances with private entrepreneurs to whom the military often provides services, mafia-like criminal activity, and corruption”, according to the report.

“If your budget provides about one-third or one-half of what you need, you’re going to steal the rest of it. That’s ensured (in Indonesia),” Lev said. “One of the ways you resolve it is to reduce the size of the army. But if you try to do that, they’ll put up a terrific fight because they’ll immediately lose money.”

While the TNI claims that the additional funds are used for the welfare of the troops, much of the revenue goes directly to commanders, specific units, or individual soldiers, and are never monitored or subject to financial controls. The result is a virtual invitation for corruption.

One common method of raising funds is providing security or protection services to private interests, arrangements that lend themselves to rights abuse, as well as corruption.

One of the most notorious examples was the payment by U.S. mining giant Freeport McMoRan to local TNI units in Papua to provide security for its operations. Federal investigations have been opened in the United States to determine whether these payments may have amounted to extortion, and reports that the 2002 ambush and killing of two U.S. teachers near the Grasberg mine may have been intended to extort more money from the company have persisted despite the indictment of alleged rebels for carrying out the attack.

Despite Freeport’s admission that payments were made, however, the Indonesian government has yet to carry out its own investigation as to whether military officers violated any laws in accepting the payments.

In another case, a coal-mining company in South Kalimantan retained a military-run cooperative to deal with illegal miners in its concession area. The military organised the miners through violence and intimidation and then brokered sales of the illegally mined coal for its own benefit.

In a similar case, a series of military-owned businesses in East Kalimantan gained preferred access to forest concessions on land claimed by indigenous communities, over-logged the area, and then illegally exported the timber to Malaysia. Not only were the operations were illegal, the report noted, they also fostered unrest among the indigenous groups. While the concessions were eventually withdrawn, the companies and individuals involved were not prosecuted or otherwise sanctioned.

In areas of civil conflict, soldiers have often engaged in predatory behaviour against local residents, including extortion and property seizures, according to the report. In other cases, the TNI’s involvement or complicity in illicit commerce, including drug-trafficking, has resulted in violence, as in a bloody 2002 incident in North Sumatra, when several civilians were killed during a military attack of hundreds of troops on a police station. While in that case, 19 soldiers were discharged and received jail terms, scores more went unpunished, according to the report.

The report concluded that it is “nearly impossible” to determine the total value of the TNI’s economic activities, and that “no one, including top military leaders, has a full grasp of the sums involved.”

Even the proportion of the total military budget believed to be raised by licit and illicit TNI operations is unclear, according to the report. (END/2006)

Indonesia: Military Business Threatens Human Rights
Government Must Reform Defense Finances
[The latest: Human Rights Watch letter dated July 3, 2006 in The Jakarta Post (Re: Indonesian Military and rights, by Defense Minister Juwono Sudarsono in The Jakarta Post, June 28)]

(Jakarta, June 21, 2006) – The Indonesian government’s plans to reform military-owned businesses do not sufficiently address the human rights problems fueled by the current system, Human Rights Watch said in a new report released today. The Indonesian military’s independent financing undermines civilian control, contributing to abuses of power by the armed forces and impeding reform.

The Indonesian government says it wants to professionalize its military, but we’ve seen little evidence of real change. Troops are breaking the law, violating human rights and hiding the money they make on the side. Military reform means getting soldiers out of business and prosecuting those who broke the law.

Lisa Misol, researcher with the Business and Human Rights Program at Human Rights Watch

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Too High a Price: The Human Rights Cost of the Indonesian Military’s Economic Activities
Report, June 21, 2006

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Audio Clip, June 21, 2006

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“The military’s money-making creates an obvious conflict of interest with its proper role,” said Lisa Misol, researcher with the Business and Human Rights Program of Human Rights Watch and author of the report. “Instead of protecting Indonesians, troops are using violence and intimidation to further their business interests. And because the government doesn’t control the purse-strings, it can’t really control them.”

The 136-page report, “Too High a Price: The Human Rights Cost of the Indonesian Military’s Economic Activities,” is the most comprehensive account to date of the harmful effect on civilians of the armed forces’ involvement in business. Human Rights Watch called on the Indonesian government to ban all military businesses, reform the budget process and hold military personnel accountable for crimes.

The Indonesian military raises money outside the government budget through a sprawling network of legal and illegal businesses, by providing paid services, and through acts of corruption such as mark-ups in military purchases. Many of these businesses are not controlled by the military’s central command, but they have been allowed to spread as a flawed response to budget constraints.

Longstanding rules against military profit-seeking have not been enforced. The business practices of military enterprises have helped sustain the reputation of the Indonesian military as abusive, corrupt and largely above the law.

“The Indonesian government says it wants to professionalize its military, but we’ve seen little evidence of real change,” Misol said. “Troops are breaking the law, violating human rights and hiding the money they make on the side. Military reform means getting soldiers out of business and prosecuting those who broke the law.”

A 2004 law requires the Indonesian military to withdraw from business by 2009. Civilian and military leaders have pledged to implement the law. But they have not yet adopted regulations spelling out how the government will take over military businesses. Officials say their draft plan may be ready for adoption by August.

“The people of Indonesia pay the price for the military’s economic adventurism,” said Misol. “It’s past time to do something serious about it.”

Human Rights Watch documented several examples of military involvement in business, its negative consequences, and the lack of accountability for economic crimes and associated abuses:

A series of military-owned businesses in East Kalimantan secured preferred access to forest concessions on land claimed by local indigenous communities. Authorities later said the military companies had engaged in over-logging, illegally exported timber to Malaysia, and contributed to social unrest. The behavior was so egregious that the companies eventually lost the concessions, but did not otherwise face any consequences.

A coal-mining company in South Kalimantan brought in a military-run cooperative to provide security to help it deal with illegal miners in its concession area. The military organized the miners, used violence and intimidation to keep them in line, and brokered sales of the illegally mined coal. Military authorities declined to crack down on this activity or to punish those involved.

Companies that use the Indonesian military to provide security for their installations frequently find that these arrangements have been marked by allegations of corruption and abuse, as seen in the continuing controversy over the operations of U.S. mining company Freeport McMoRan in Papua in eastern Indonesia. Investigations have been opened in the United States into allegations that the payments might amount to extortion. There are no plans for an independent investigation in Indonesia to determine whether military officers committed a crime by accepting cash payments from the company.

Military involvement in illegal business fuels lawlessness and violent conflict. In the most notorious example, soldiers mounted a major attack on a police station in a busy town center in North Sumatra, killing several civilians, over a dispute allegedly involving local drug-trafficking interests. Hundreds of troops were involved, but only 19 were discharged and sentenced to jail following the incident.

Soldiers in areas of internal conflict in Indonesia commonly engage in predatory economic behavior, such as extortion and property seizures. This was the case in Aceh during the longstanding conflict there. Military demands for bribes have lessened since the devastating tsunami in 2004 and the signing of a peace accord, but ongoing military corruption is driving up the cost of reconstruction and adding to the survivors’ hardship.
Indonesia’s military says that its official budget is sufficient to meet only about half of its needs, and some estimates suggest that the military raises the remainder independently. In March 2006, the military declared that it owned more than 1,500 businesses. Many of them are collapsing after years of mismanagement.

Human Rights Watch acknowledged that Indonesia’s defense budget is low compared to many of its neighbors, but said the problem was not as severe as is often stated because the military also draws on additional funds from other government accounts. These funds are not transparently reported and, Human Rights Watch said, oversight of military finances is very weak.

“It’s the government’s responsibility to finance the military,” Misol said. “Moonlighting by the military is not the answer. Indonesia’s leaders need to agree on an appropriate defense budget that is strictly monitored and reported accurately.”

Human Rights Watch called on the Indonesian government to revamp its plans to take over military business. Government planners have said they will transform the few profitable military enterprises into state-owned companies, but they intend to allow the military to keep the charitable foundations and cooperatives that have been a front for its commercial interests. Officials have also carved out exceptions to the ban on military business that dramatically weaken the potential to clean up military finances.

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