The Indonesian government has retreated from a law aimed at ridding the country's military of its money-making ventures, according to a report from Human Rights Watch released Tuesday. The report criticized the new regulations for failing to dismantle what it called the armed forces' "dangerous" business empire.
The national military, or TNI, currently maintains 23 foundations and more than 1,000 cooperatives. Its business interests include transportation services, real estate and timber concessions, with the 55 companies it owns under those foundations accounting for around $350 million in assets.
Official figures indicate profits of $25 million a year, but the military also pulls in money from protection payments, involvement in criminal enterprises, such as illegal logging, and land and building leases, according to the HRW report.
An earlier report by the New York-based human rights organization details the extent of the military's economic involvement, stating that its businesses ventures "have been a platform for extortion, violence, property seizures, and other crimes against civilians."
"There has been a practice of using military force to oppress the people," said Rafendi Djamin, who heads the human rights working group at the Institute for Defence Security and Peace Studies (IDSPS) and has documented land disputes between villagers and the navy in East Java and protection rackets run by military forces tasked with providing security around US mining giant Freeport McMoRan's copper and gold interests.
The military's self-funding practices have a long history in Indonesia, with the armed forces dominating politics and business during the three decades in which the autocratic general Suharto ruled.
That power diminished as Indonesia began its transition to democracy in 1998, but its business involvement continued to produce human rights abuses, crime and corruption.
In 2004 then-president Megawati Sukarnoputri backed a law that gave the government five years to fully divest the armed forces of its business interests as a means to promote military professionalism and civilian control.
But despite widespread support for reforms, which even the military backed provided the government increase its budget, the current government, led by President Susilo Bambang Yudhoyono, failed to meet the regulation's obligations.
With the deadline having passed, the government issued new measures in October 2009 that the HRW report says do not require the military to give up its businesses, but call for a "partial restructuring" of the cooperatives and foundations - through which the military holds many of its investments.
The government's plans also only include the formal businesses directly owned and managed by TNI, businesses the government says have not existed for many years. "The new regulations do nothing to address the military's many other forms of money-making, including informal and individual activities not registered as businesses," the HRW report states.
"This new plan is a manipulation of what the [original] regulation means," said the executive director of IDSPS, Mufti Makarim Al-Akhlaq, explaining that the informal sector is a massive business the extent of which can only be estimated because it has never been accounted for in an independent audit.
The move comes at a time when Yudhoyono's administration is facing a spate of corruption allegations, with investors increasingly worried about commitment to reform in the world's third-largest democracy.
A presidential spokesperson who responded to the report said reforms took time and the government was intent on making the military more professional.
Meanwhile, Silmy Karim, spokesman for Indonesia's National Team for the Transfer of Military Business told Radio Australia on Thursday that the military has become more transparent and that progress toward reform has been made compared to the end of the Suharto era, when the size of TNI's business empire dwarfed the $350 million military businesses account for today.
According to Lisa Misol, the report's author, the military's involvement in business creates a conflict of interest that undermines civilian control over the armed forces and hinders its accountability.
In the conclusion of its report, Human Rights Watch called on Yudhoyono and his new defense minister, Purnomo Yusgiantoro, to revise government regulation to cover a wider set of businesses and incorporate independent civilian oversight over the transfer process.
Yet the Indonesian government is not entirely to blame for the flouting of previous laws, also culpable are the companies that come in and hire the TNI to provide security services.
"The international community cannot deny these facts - that the attitude has not changed from the past," said IDSPS's Mufti. "The business sector should respect the public and not use the military to provide security, because that gives them the ability to abuse their power."
As long as multi-national companies continue to fund the TNI, Muftie said groups like Human Rights Watch will have a difficult time putting pressure on them to reform.