STUDY OF INDONESIAN GOVERNMENT’S

POLICY IMPLEMENTATION IN SEPARATING

MILITARY FROM BUSINESS
2004 - February 2009

THESIS

Writing Submitted as Partial Fulfillment of the Requirements

for Obtaining Master Degree from
Bandung Institute of Technology

By
FITRIANI
NIM : 24007031
(Defense and Security Studies)

BANDUNG INSTITUTE OF TECHNOLOGY

2008
 Chapter I
INQUIRY ON
INDONESIA’S MILITARY BUSINESS

I. 1. Background
Indonesia’s political reform (Reformasi) occurred in 1998 brought about changes
to many sectors of nations’ power structures, including how the country manages
its defense apparatus. From the time the Indonesian armed force had been
established in 1945, it positioned itself as a significant pillar using argument that
the country would not gain independence without weaponry fight, despite there
were also ongoing diplomatic and global situation supports. The military was also
the one that possessed coercive strength to ‘nationalize’ the business that before
had been owned by colonial powers to be taken over by the states 1, but the
strength, along with the special position it obtained by help freeing the country,
had in turn hamper government to fully obtain control on business sector and
putting them in the right place: out of civilian lives.

Business has been part of Indonesian military’s culture since the very beginning 2
which then made it as activity that is not uncommon conducted by armed forces
personnel under the argument of lacking government budget. The institution
originally composed by modern armed forces constructed by the Dutch (Dutch
Indies Royal Armed Forces - KNIL) and the Japanese (Home Country Defenders -
PETA) alongside with local guerrillas, which brought up the tendency to create its
self-sufficiency also in terms of funding. In the management of freedom, the
military soon got involved in managing the state’s petroleum company Pertamina
and also in the country’s rice and logistic storage Bulog in the 1960s malaise era.

1
Nationalist demonstration on 1957 created window period for Indonesian military to takeover
foreign companies settled in the country. Starting with Dutch owned companies in 1957, then
United Kingdom’s in 1964 and Unites States of America’s a year after. Angel Rabasa et al., The
Military and Democracy in Indonesia, (Pittsburgh: Rand, 2002), p. 71.
2
Eric Hendra, “The Business of Indonesian Armed Forces”, in Beni Sukadis (ed.), Almanac
Indonesia 2007 Security Sector Reform, (Jakarta: Lesperssi and DCAF, 2007), p. 101.

1
Practices of seeking self fund continued with reasoning that budget given by the
state only fulfill minimum needs and even less. For years officials said that the
defense budget only covered 25-30% of actual military expenditures 3 and the
remainder was paid by off-budget funds, but after the Reformasi these estimates
were dismissed as outdated and inaccurate. Recent estimation which placed this
figure around 50% 4 is also unreliable, since the defense ministry had not
undertaken analysis of the extent of off-budget activity. Indonesian defense expert
Kusnanto Anggoro portrayed the source of military funding in table I.1.

Table I.1. Sources of Indonesia’s Military Funding

Defense Non-Defense
Official • Defense sector in state budget • Defense and security sector
• Contingency and/or additional budget in provincial/local budget
• Discount and other
privilege
Not • Constitutional business (cooperation • Illegal activities (individual
Official under military foundation) in national and institutional) in national
and local and local
Source: Kusnanto Anggoro in Institute for Defense Security and Peace Studies, Seri 9 Penjelasan
Singkat (Backgrounder) Bisnis Militer, June 2008

World Bank, an international financial organization on development expressed

their concern about off-budget activity by acknowledging that “no one quite
knows how much of military and police expenditure are met from allocations in
the government budget”. 5 However insufficient government funding is, ideally the
military should not be seeking its own funding. When military’s revenue and
spending are coming outside the government, it is hard for civil authorities to
conduct oversight to the organization. The impact is government then loses power
to control the armed forces and demand accountability. Therefore taking military
out of business activity is one of the security sector governance goals in
Indonesia.
3
Eric Hendra, Op. Cit., p. 106.
4
Minister of Defense Juwono Sudarsono in an interview with Human Rights Watch in February
2005 estimated 46% military budget covered of actual spending, with the rest raised
independently. Lisa Misol, Too High a Price: The Human Rights Cost of Indonesian Military’s
Activity, (Jakarta: Human Right Watch, 2006), p. 92.
5
World Bank, Combating Corruption in Indonesia: Enhancing Accountability for Development,
(Washington DC: World Bank, 2003), p. vii.

2
Effort to pull military from business had been regulated in President Soeharto era
through government regulation PP No. 6/1974. It was a way to restrain corruption
and badly managed corporations because they were poorly handled by people that
main occupation is to defend the country and not having the skill to run
companies 6. It is stated in the regulation that active soldier is prohibited to carry
out business. Unfortunately, it only converted the form of military business from
nationalized companies to foundation and cooperation, for example Kartika Eka
Paksi Foundation, Military Head Quarter Foundation, Panglima Sudirman
Foundation that had opened the National Building University; Army, Navy and
Air Force Cooperation Systems; and also military transport car rental. At that
time, the momentum to change was not significant; moreover the country
leadership was run by an ex military officer Soeharto that had been investigated in
his colonel year for corruption case of sugar plantation 7.

Under President Soeharto, Indonesian military business grew stronger under the
doctrine of dwifungsi (dual functions) which supported military socio-political
role along with its defense role. In this time, structure of territorial command was
established to make military present throughout the country down to village level
and made it more possible to take on economic opportunities both formal,
informal, even illegal. 8 By the end of Soeharto power, the combined turnover of
military business in Indonesia was IDR 2.9 trillion (US$348 million) 9. Still, it was
not clear whether the amount provide subsidy to that year national defense budget
of IDR 7.5 trillion (US$900 million) 10 since there was no report on how the profit
was distributed. Indonesia Corruption Watch reported that most of the money

6
There was big scandal in state’s oil company Pertamina when headed by Colonel Ibnu Sutowo in
the 1970s, the oil boom made oil price goes up but after it returned to normal the company was in
big debt because of the rampant corruption inside. “Ibnu Sutowo: the Notorious Corruptor”, New
Internationalist, Issue 116, October 1982.
7
For further reading read “Soeharto Inc.”, Time Asia, May 24, 1999.
8
Experts in general classified Indonesian military business to two main types: formal institutional
and non-formal non-institutional, but there is one more type that exists but not much exposed
which is “criminal economy”. In Danang Widoyoko, et.al., Bisnis Militer Mencari Legitimasi,
(Jakarta: Indonesia Corruption Watch, 2003), p. 9-10.
9
Cited in World Bank, Accelerating Recovery in Uncertain Times: Brief for the Consultative
Group on Indonesia, (Washington DC: World Bank, 2000), p. 29.
10
Cited in Danang Widoyoko, Op. Cit., p. 38.

3
obtained from military business was allocated for senior officers that had linkages
to the business, not to military institution in general. 11

The 1998 reform era brought more civilian awareness and movement compared
with the political orders change in the 1960s. This can be seen in the judicial
system where there are more regulations issued to structure the state to govern
itself more efficient and effective. Particularly in regulating military business and
its funding there are four main state legal articles:
• First, the State Defense Law UU No. 3/2002 in article 25(1) that affirmed
“national defense is funded by State Income and Expenditure budget
(Anggaran Pendapatan dan Belanja Negara - APBN)”. Therefore it
implies that all military expenditure is already given by government, if the
budget provided is still lacking then appropriate means should be taken to
make it sufficient, and not by finding another source of funding.
• Second, the Indonesia Military Law UU No. 34/2004 in chapter II on
Military Identity in article 2(d) stated:
“Professional military is military that is trained, educated, well
equipped, does not involved in practical politics, conduct
business, and guaranteed its welfare, and also followed state’s
political policy that is under the principles of democracy, civil
supremacy, human rights, national law regulation, and ratified
international law.”
• The third regulation is in the same law UU No. 34/2004 in chapter VII on
Soldier in article 39 stated:
“Soldier is prohibited to involve in:
1. activity as member of political party
2. activity in practical politics
3. activity in business, and
4. activity to be voted as legislative member in election and other
political ranks.”
• And because there is civil awareness of the rampant military business
exist, the fourth regulation is on the conduct of taking over military
business which is stated in the same law UU No. 34/2004 in chapter X on
Regulation on Alteration in article 76:
“(1) In 5 (five) years time since the implementation of this bill,

11
Ibid., p. 59.

4
 Government must take over all military business activities
owned and run by TNI both direct and indirect.
(2) Guideline and further regulation on the execution of clause
(1) are regulated in President Decree.”

In sum, the four law articles are about legal source of military funding,
professionalism of military personnel prohibition from business activity, and
implementation of government taking over military business.

Although the legal basis for government taking over military business exists, the
execution is not well run. After the bills came out, team of data collection and
verification were made by the president. 12 These teams worked inefficiently. They
started late in August 2005, and composed mostly by military people, which made
them crammed with subjectivity and interest. President Susilo Bambang
Yudhoyono (SBY) then issued decree Keppres No. 7/2008 on April 2008 to create
another team named Tim Nasional Pengalihan Aktivitas Bisnis TNI (Timnas
PAB). At last civilian and experts were included in this team and in October 2008
they managed to issue recommendations on how the government could takeover
military business. By then, the time left until deadline was only a year, but not a
single military business had been declared to be taken. Another problem that
hampers this process is that until now (February 2009) there is no institution
appointed with real power to takeover military controlled business.

Indonesian government’s action to takeover military business is considered slow

compared to other countries that were also conducting the same process, for
example China. The Asian giant started the reform of its military business on July
1998. In that time, the tentacle of China military over the business sector was so
widespread it had made the institution so corrupt and inefficient. Only five months
after it started, the government succeeded to takeover around 5000 military owned
companies with assets reaching US$ 6.02 billion. 13 The President Jiang Zemin
himself led the team that conducted this process. Even though the initiative had its

12
Actual name of the team is Tim Supervisi Transformasi Bisnis TNI (Indonesian Military
Business’ Reformation Supervision).
13
Institute for Defense Security and Peace Studies, Seri 9 Penjelasan Singkat (Backgrounder)
Bisnis Militer, June 2008, p. 6.

5
own share of problems but reform in the defense sector in China, especially the
exit of military from the business sector, was done in a more efficient and faster
way.

I. 2. Aim and Objectives

The purpose of this study is to analyze the efficiency and effectiveness of
Indonesian government’s policy implementation for transferring military control
of commercial enterprise to the civil sector. This objective will be delivered by
exposing evidences of military business facts, policy execution delays and on
going process of military business transformation.

Based on the aim formulated, the writing is conducted in order to accomplish

these objectives:
• Explain the condition of Indonesian military in terms of funding
and history on how it involves in business sector (historic
overview, secondary data)
• Explain the process of how the government of Indonesia separate
military from business activity (descriptive, official docs)
• Assess the efficiency and effectiveness of the government’s policy
implementation in separating military from business (stakeholders
and media analysis)
• Give alternatives on how to improve the government’s policy
implementation from the assessment conducted and also from other
country’s experience in military funding (analysis)

I. 3. Research Questions
The above aim and objectives devised in the form of research questions for the
reader to have more grasp of the issue. The questions framed in this research
cover:
1. Why did Indonesian military involved in the business sector?

6
 2. Why is it significant for the government to separate military from
business activity?
3. How is Indonesian government’s process in separating military
from business?
4. How efficient and effective is Indonesian government in
implementing policy for transferring military control of
commercial enterprise to the civil sector?
5. What are the alternative solutions to improve Indonesia’s policy
implementation learning from other country’s experience?

I. 4. Study Significance
The study significance focuses on two issues. Firstly, the work is directed towards
evaluating theory in the discourse on sources of military funding, moreover in the
involvement of military in to the business sector. Therefore in the bigger picture,
it can be use as one of literatures on the subject of managing security sector
governance and economic of defense.

Secondly, in terms of policy relevance, this writing will provide knowledge for
Indonesia’s government, TNI and people at large to know how the process of
military funding and its participation in the business sector in the country. The
analysis part will explain the government action in implementing policies to curb
military involvement in business sector, the problems arising from the
implementation and alternative solutions to those problems. Thus this thesis can
be use as one of the reference on how to improve Indonesia’s defense reformation.

I. 5. Conceptual Model
In the conceptual model shows concepts and processes elaborated within this
thesis. The concepts definition and details will be discussed in Chapter 2, along
with literature review, are military as part of government apparatus, military
funding, reformation in military funding, and military business. Then in Chapter 3

7
the thesis will answer why Indonesian military involved in business and how the
reform era brought change. It also will explain origins, benefits, costs and
comparative evaluations of military business. In Chapter 4, how is the effort in
separating military from business and what have been achieved so far in the
process will be shown, then the author can measure how efficient and effective the
policy implementation performed. It will also detect the problems which hamper
the policy implementation and give alternative options to tackle them or other
options in military funding. In Chapter 5 will be suggestion of alternatives on how
to improve efficiency and effectiveness for government in separating military
from business. The conceptual model in this research is depicted in Figure I.1.

Figure I.1. Conceptual Model for Reseach of Indonesian Government

in Separating Military from Business

Military Funding: the why

(Rationale of Military in Business)

Funding
Funding Reformasi:
the alternatives
(Alternative Funding
Options: the viability of
reforming Military
Business)
Source: Ron Matthews, 2009
Military
MB
Military Reformasi:
the how and the what
(Efficiency - how reforms
Reformasi have been implemented;
Effectiveness- what has been
achieved)

I. 6. Research Methods
This thesis is written as one of the requirements to obtain master degree from
Faculty of Architecture, Policy Planning and Development of Bandung Institute of
Technology (SAPPK-ITB) in the major of Defense Management. Therefore it
serves research purpose. The focuses of research purpose are on understanding;

8
gaining insight into what is going on; and why is it happening. 14 In conducting the
research, author abides the study methodology existed. The term methodology
refers to the overall approaches and perspective to the research process as whole,
and it gives background on why collect the data, what data were collected, where
to collect the data, how the data being collected, and how to analyze the data. 15 To
give clear categorization of the research conducted, author employed the
definition of Patrick McNeil and Steve Chapman from their book Research
Methods (Routledge, 2005). In sum, the research methods used in this thesis can
be seen in Table I.2.

Table I.2. Research Categories

Approaches Qualitative X case study
Quantitative
Theory Basic
Applied X
Explorative
Research Analytical X stakeholder analysis, media
Categories Types analysis, comparative analysis
Descriptive
Predictive
Qualitative
Data analysis Quantitative
Mix X
Primary X interviews, official documents
Data source Secondary X literature studies (journals, books,
research, newspapers, etc)
Source: Author. Elaborated from Patrick McNeil and Steve Chapman from their book Research
Methods (Routledge, 2005).

Approach used in this thesis is qualitative in attempt to see the world through the
eyes of individuals participating in the case being observed. It further can be
classified as qualitative case study approach in which investigator explores a
bounded system (a case, which is military being separated from business by the
government of Indonesia) over the time through detailed, in-depth data collection

14
Joseph A. Maxwell, Qualitative Research Design: An Interactive Approach, (London: Sage
Publication Inc., 1996), p. 15.
15
John W. Creswell, Research Design: Qualitative and Quantitative Approaches, (Jakarta: KIK
Press, 2002), p. 6.

9
involving multiple source of information (e.g. observations, interviews,
audiovisual material, documents and report) and reports a case description. 16

Data collected are both in qualitative and quantitative form. Qualitative data
concentrates on the quality of case description in form of word-by-word
quotation, while quantitative data is more statistics and numbers, mostly in form
of systematized and standardized tabular or graphic information. 17 The data
examined are on Indonesian government’s policy implementations in taking
military controlled business from TNI which run in the period of 2002 to February
2009. The time span observed was chosen on the ground that the year 2002 is the
time when first legal article on military funding came out after Reformasi era.
Meanwhile the end time is selected because February 2009 is the most recent
seminar on TNI reformation that was held by the Parliament. 18 It was also 6
months behind the deadline given in TNI Law Article 76, which means 90% time
already spent so far. The author decided not to wait for the deadline (October
2009) because she must finished her magister study in July 2009 due to
scholarship limitation. Research time for collecting data was done over the course
of nine months (October 2008-June 2009) by examining the government policy
implementation process of military business takeover of Indonesia.

In terms of data source, both primary and secondary data are collected. Definition
of primary data is data that is collected first hand by the researcher through
research methods such as surveys, interviews and participatory observation.
Secondary data is evidence used by researcher which has been produced
beforehand, usually takes form of official statistics and various documents. 19 The
data is collected from official documents released by the government and teams
on TNI business takeover; interviews of the stakeholders (Ministry of Defense,

16
Elaborated from John W. Creswell, Op. Cit., p. 265 and Patrick McNeil and Steve Chapman,
Research Methods, 3rd Ed., (Routledge: Oxon, 2005), p. 18
17
Patrick McNeil and Steve Chapman, Op. Cit., p. 17, 20.
18
Seminar Reformasi TNI Pasca 2009, February 26th, 2009 in Nusantara Building, Parliament
Complex, Senayan, Jakarta. Paper in Bahasa Indonesia was published in http://www.pk-
sejahtera.org/v2/main.php?op=isi&id=6940 and http://m-ula.blogspot.com/2009/03/catatan-
penting-reformasi-tni-pasca.html accessed on March 1st, 2009, 15.05 (GMT+7).
19
Patrick McNeil and Steve Chapman, Op. Cit., p. 131.

10
TNI headquarter, civil society organizations, military experts); media reportages;
published research and unpublished materials to support this thesis.

The author does not impose any prior assumption on the subject matter and allow
any theory to emerge from what is observed. Therefore the theories used are
applied concepts in framing the issue of government taking over military business
and describing the meaning of the situation. 20 This thesis will not address
discourse of theory but more in finding the suitable “best practice” of military
funding in Indonesia.

Analytical methods used in this work are stakeholder and media analyses.
Stakeholder analysis is done by tabulating the interviews and looking at the
stances of each stakeholder. From collected stand points will be derived what are
the problems hampering Indonesia’s process in taking over military business.
Meanwhile, media analysis is content analysis which counted the frequency of
particular issue coverage and also focuses on the meanings, both literal and
hidden, lie behind the news. 21 Media analysis is done by tabulating the subject
reportages in Indonesian media to create perspectives diagram to shown the
dynamic of the process, which in turn shapes the course of the military business
taking over. Literatures on other countries experience in taking over military
business are also included as reference. The linier process in the writing is shown
in Figure I.2.
Figure I.2. Flow of Research

Theory Design Data Findings

Topic Analysis
Collection
Military SSR Methods Literature, Conclusion &
Stakeholders Recommenda
business & Defense & outline interview, & Media
Economics officl doc tion

Source: Author

20
Further explanations on theory usages see Patrick McNeil and Steve Chapman, Op. Cit., p. 118.
21
Elaborated from “Analysing and Evaluating Media Reports”, Patrick McNeil and Steve
Chapman, Op. Cit., p. 160-161.

11
One important thing for scientific research that determines whether the finding
credible or not is validity. Validity means how far the accuracy and precisely of
measurement tools in doing their functions. Validity issue might arise when there
are inaccurate data and/or incorrect data interpretation, therefore in research,
validity needs to be checked. According to Maxwell, there are several ways to do
validity test, such as modus operandi approach, searching for discrepant evidence
and negative cases, triangulation, feedback, quasi-statistics and comparison. 22
Validity methods chosen by the author to be used in this writing are (1)
triangulation – comparing findings from two or more different research methods
enables the researcher to conclude whether an aspect of a phenomenon has been
accurately measures 23, and (2) readers feedback. Validity through triangulation
that will be done in the thesis is illustrated in Figure I.3.

Figure I.3. Validity through Triangulation

interviews – publications –
stakeholder analysis media analysis

VALIDITY

secondary data – official

documents, archival research

Source: Author

I. 7. Scope and Limitation

Scope of observation of this thesis is limited to military institution in Indonesia,
it’s funding and economic managerial, its involvement in the business sector, and
also the government’s policies and efforts to take the business out of military

22
Joseph A. Maxwell, Op. Cit., p. 92-96.
23
Judith Sleney et al., “Triangulation and Integration: Processes, Claims and Implications”,
Journal of Qualitative Research, Vol. 6, 2006, p. 47.

12
participation. Since the military undergo transformation after the Reformasi, the
author will also cover the armed forces organizational restructuring and paradigm
shift, especially in the issue of funding.

In order to focus the research, observation is bounded on the implementation of

the four current policies issued by Indonesian government after Reformasi on the
subject of taking military out of the business sector. The policies also cover issues
on military funding source, professionalism, and time constrain given to the
government to takeover military business.

Observation time on the issue is limited to February 2009 when the most recent
seminar on TNI reformation that was held by the Parliament. The time constraint
also imposed by the limitation of author’s length of study to finish her master
degree in mid 2009.

I. 8. Structure
This thesis is organized into five chapters. Chapter 1 contains a brief introduction
on the issue being studied along with problem statement that is elaborated into
research question. Furthermore, it provides the objective and significance of the
study conducted, using selected research methods in the limitations which bind
the subject of research.

Chapter 2 presents relevant literatures on security sector governance especially in

conducting military reform in the business sector. They cover the definition, scope
and limitation of military business and funding, with also lesson learned from
other country that had faced the same issue, such as China. These literatures bring
about the basic arguments why business must be taken over from the military by
the government and formulated to a concept mapping to produce analytical
framework. The framework will be further contextualized into particular issue of
separating military from business in Indonesia.

13
Chapter 3 describes the historical background on how military business grows in
Indonesia, including its characteristic and troubles surfaced from it. The chapter
progress on how the country’s 1998 Reformation bring about the needs of
separating military from business activity. It includes official documents of
National Defense Law, Indonesian Military (TNI) Law and state decrees of teams
forming on military business takeover process.

Chapter 4 oversees Indonesia’s policy outcomes and their implementation process

on separating military from business activity in the country. The chapter provides
data collection on government efforts in taking over the military business and
official reports of teams formed for the issue. Next, media analysis is done to see
the power play inside the taking over process. The data then combined with the
stakeholder analysis to find the problems that hamper the efforts’ effectiveness.
Finally, this chapter brings alternative solutions to solve the challenges derived
from the analysis and also include lesson learned from other countries’
experience.

Chapter 5 is the conclusion of the thesis which consist summary of the writing,
findings and recommendations. These recommendations can be use as policy
development and also further research on the subject of military business takeover

14
 Chapter II
THE LOGIC AND PROCESS
SEPARATING MILITARY FROM THE GOVERNMENT

II. 1. Introduction of Military Business Literature Review

This chapter gives conceptual foundation for the thesis following research. The
concepts are derived from relevant literature review on the logic and process
separating military from the government. As one of security actors, military is a
state institution that provides public service to protect the population without
pursuing its own interest, both in economic or political terms. Unfortunately,
Indonesian history had shown the contrary. Its military was much involved in the
public sector using the doctrine of dual function up until Reformasi era; it has
seats provided in parliament and highly engaged in business. Despite the reform
efforts, government is not able to fully control its armed forces when the military
still has access to off-budget income to support its operation.

The study of Security Sector Reform (SSR) with basic of democratic values
provides groundwork on why and how military business should be handled in
order not to undermine the power of government and civil supremacy. The flow of
structure is illustrated in Figure II.1.

Figure II.1. Structure of Chapter 2

Security Sector Reform

Security Sector Reform in Indonesia

Military Reform

Military Business Reform

Identify the gap in literature review

Source: Author

15
II. 2. Security Sector Reform
Concept of Security Sector Reform (SSR) was introduced in 1990s when the
world experienced changing politic and security environment with Cold War
came to an end. Reform was needed as response of emerging new issues, such as
democratic consolidation and non conventional threats. The importance of SSR
studies grow from the awareness that neither people nor states are able to achieve
sustainable development or run their daily life without adequate security. In SSR
framework, the secure environment must come from a democratic situation where
there is good governance that respect and manage the protection of human rights
and where power is in civilian hands. 24 In order to abridge the explanation on
SSR, author illustrates its scope in Figure II.2.

Figure II.2. Scope of Security Sector Reform

Good Governance: Democratic Value Framework

Security Sector Reform

Actors/
MoD Military Police Gov Inst Civil Soc Def Indust Institution

Rule of Law
Policy Dev, Planning & Implement
Professionalism Entry Point
Oversight Issues
Management of Security Expenditure

Activities/
Structural Reform & Capacity Building Actions
Source: Author

The definition of SSR as described by security and defense expert Ann M. Fitz-
Gerald is “The practice of institutional and operational change programmes across

24
For further explanation about good governance, read Jeff Haynes, “The Principles of Good
Governance”, in Laura R. Cleary and Teri McConville (eds.), Managing Defence in a Democracy,
(London: Routledge, 2006), p. 17-31.

16
a national security sector (reinforces by regional efforts) to provide an enabling
environment for citizens to go about their daily lives in a safe and secure way” 25.
The way of achieving this, according to Indonesian defense and security expert
team ProPatria Institute is by establishing democratic control of civilian over the
security actors so that they can conduct their roles effectively, legitimately and
responsibly in providing guaranteed security to its nation. 26

For actors in security sector, Indonesian defense expert Kusnanto Anggoro,

identified those as all the organizations or institutions that own legal authority to
use or enforce physical power or threat in order to protect the state and its people,
such as military and police; and also civil institutions responsible in the forces
management, such as President, Ministry of Defense and parliament. 27 Expert on
SSR from Washington DC Center for International Policing, Nicole Ball, gave
reason why security actors need to be reformed; it is when they contribute to
insecurity, instability and various forms of conflict. 28 The problems range from
politicized security bodies, war as means of resolving disputes, disregard for the
rule of law on the part of security bodies, serious human rights abuses by security
bodies and high security budgets.

Security bodies that are badly managed and engage in politic and economic affairs
tend to be professionally weak and therefore unable to properly protect people and
the state against aggression, criminality or other security problems. Ball believes
that security is obtained from democratic governance manage issues in the
security sector, such as operational effectiveness of the security forces and legacy
of past conflict, whether they have to run disarmament; demobilization and
rehabilitation, or whether they have problem with small arms and light weapon or
needed support from international peace operation. These are basically issues
25
Ann M. Fitz-Gerald, Security Sector Governance Introduction, Module ITB-Cranfield, February
2008.
26
Tim ProPatria, Reformasi Sektor Keamanan Indonesia, (Jakarta: ProPatria, 2004), p. 18.
27
Kusnanto Anggoro, “Reformasi Sektor Keamanan: Kewenangan Negara dan Partisipasi Publik”,
in Andi Widjajanto (Ed.), Reformasi Sektor Keamanan Indonesia, (Jakarta: ProPatria Institute,
2004), p. xviii.
28
Nicole Ball, Dilemmas of Security Sector Reform: Response to “Security Sector Reform in
Developing and Transnational Countries, (Berghof Research Center for Constructive Conflict
Management, 2004), p. 2.

17
faced differently by every country. Therefore every state has its own way in
conducting SSR because each has its distinct situation within the security issues
although countries can also learn from others’ similar SSR experiences.

To deal with SSR issues the country must realized which problems they are facing
before it is able to be addressed; this is what Ball and team identified as entry
points. 29 These entry points show where the problem might exist, which are
1) Rule of law
Government regulations should be made and provisioned
whether it operate effectively.
2) Policy development, planning and implementation:
The process should be transparent and participatory. The
policies should be well developed through right assessment,
have comprehensive strategy and should be well
implemented.
3) Professionalism of the security bodies
They need to stick to their function, received adequate
resources, have expertise and support democratic governance.
4) Oversight
Oversight of the security actors should be done both internal
and external by state officials and also civil society.
5) Management of security expenditure.
Expenditure should be prepared with strategy, defense
policies must be affordable, prioritization of resources
allocation and used in efficient and effective measure.

These points are considered keys for a well-governed security sector and can be
use to further conduct reform activities of SSR, so they can be easily directed.

Activities in SSR can be done by two ways: structural reform and capacity
building. 30 The activities are ranging from institutional capacity building, defense
reviews, education, training, rule of law, human rights, management,
procurement, to human resources, although not limited in only those. The actions
in SSR are conducted by actors or stakeholders of the security sector. Because
SSR is highly political in nature, improving democratic security sector reform

29
Nicole Ball, Tsjeard Bouta, Luc van de Goor, Enchancing Democratic Governance of the
Security Sector: An Institutional Assessment Framework, (The Hague: Clingendael Institute for the
Netherland Ministry of Foreign Affairs, 2003), p. 12-23.
30
Ann M. Fitz-Gerald and Dick Baly, Security Sector Governance Review, Module ITB-Cranfield,
February 2008.

18
cannot be addressed solely by technical measures or work conducted by only one
actor. Rather, it is essential to understand crucial political relationship among key
actors, how and why the decisions are made, and the stimulus and blockages for
change. So what is important is not only the actors but also the dynamic relations
between them in order to effectively conduct SSR activities.

II. 3. Security Sector Reform in Indonesia

As Nicole Ball put it, every country has unique position that allows it to perform
SSR in its own specific way according to its need. Indonesia experienced SSR in
1998 after the country endured economic crisis which overthrown a 32 years long
standing ex military president Soeharto from leadership. Indonesian political
expert Rizal Darma Putra stated that security sector reform is part of national
reform which was generated from the spirit to recover from multidimensional
crisis caused by authoritarian and corrupt government. 31 Prior to 1998 Reformasi
era, security actors or stakeholders, such as Indonesian military, police and
intelligence were the backbone of the regime. Just as what had happened in
authoritarian countries, the security institution did not run professionally and acted
as “the ruling class” for political elites.

The national reforms demanded by people movement in 1998 were covering

issues of President Suharto removal from power; eradication of practices of
corruption, collusion and nepotism which were rampant in the state’s institutions;
and abolition of the armed forces involvement in civil sector. Within the security
sector, the reform progressed in more specific action demands, which were the
separation of police and military forces; annihilation of economic and political
roles of security actors; accountability of violent acts, human rights abuses and
other law breaking conducted by security actors and government; also
professional security actors that are regulated under civil authority. 32 Overall the

31
Beni Sukadis and Eric Hendra, Perjalanan Reformasi Sektor Keamanan Indonesia, (Jakarta:
Lesperssi and DCAF, 2008), p. v.
32
Mufti Makarim and S. Yunanto (eds.), Efektivitas Strategi Organisasi Masyarakat Sipil dalam
Advokasi Reformasi Sektor Keamanan di Indonesia 1998-2006, (Jakarta: IDSPS, 2008), p. 11.

19
main characteristic of Indonesian SSR is on regulating civil-military relations that
were for many years had been disarray.

The origin of SSR to happen in Indonesia was that the reform needed to restore
negative image haunting Indonesian armed forces ABRI. Cumulative reaction
toward bad roles of the security actor was started in the changing of Soekarno
presidency to Soeharto in 1965 with its support to execute Indonesia Communist
Party PKI. 33 ABRI was also seen to be involved in private business, agrarian
conflicts which took over people lands, and also political and economic conflicts.
Civil activists also believed that human rights abuses perpetrated by the state were
supported by the armed forces, such as in Udin journalist killing, massacre of
Tanjung Priok, case of Kedung Ombo land confiscation, and military actions with
human right abuses against separatist group in East Timor, Aceh and Papua. 34
These activists shaped the public opinion of foreign actors and Indonesian
population that seen the country’s worsening situation due to Asian economic
crisis 1997, which in turn forced the government to reform itself, in order to avoid
chaos and fleeing investors. Activities of SSR run in Indonesia for ten years now.
Although it had been quite sometime, the progress is not fast and there are still
problems to be solved. Nevertheless Indonesian parliament member Suripto
(2004-2009) had noted achievements that the country accomplished so far, which
are: 35
a) Removal of military and police from legislative body
b) Institutional separation between Indonesian military (TNI) and police
force (POLRI) under Parliament Decree TAP MPR VI/2000
c) Separation of roles between TNI-POLRI where TNI is managing defense
and POLRI is in security under Parliament Decree TAP MPR VII/2000
d) Formulation of Law on Indonesian Police Force (POLRI) UU No. 2/2002
e) Formulation of Law on Management of Defense Sector UU No. 3/2002
f) Formulation of Law on Indonesian Military (TNI) UU No. 34/2004
g) Prohibition for military member to involve in politic and business as
regulated in Article 39 UU No. 34/2004
h) Existing time limit for military business takeover

33
Danang Widoyoko, et.al., Bisnis Militer Mencari Legitimasi, (Jakarta: Indonesia Corruption
Watch, 2003), p. 26-27.
34
Mufti Makarim and S. Yunanto (eds.), Op. Cit., p. 12.
35
Suripto, “Refleksi Satu Dasawarsa Reformasi Sektor Keamanan di Indonesia”, in Beni Sukadis
and Eric Hendra, Op. Cit., p. 137-138.

20
 i) Existing statement that State Income and Expenditure budget (APBN) as
the sole source of defense budget and positioning of State Audit Bureau
BPK as institution that has the right to conduct audit on the budget

II. 4. Military Reform

According to the norms of democracy, military is the guarantor of good
governance and honest civilian rule 36, unfortunately not every state runs the ideal
function of this body, therefore reform is needed. Military reform is a part of SSR
considering that the military institution is one of the institutions in the security
sector and it also holds access to coercive power enforcement. In authoritarian
rules, military generals are commonly installed in the parliament or other strategic
bodies to support the corrupt government policies. In return, military elites are
secured in their position and finance.

When transition occurred, wave of conducting good governance then pushed

military to conduct change as their old supporting regime change. Political
scientists Cottey, Edmunds and Foster classified military reform in two
generations of change. 37 The first generation is done by initiation of democratic
reform after periods of military-backed authoritarian regime. It changes
institutional framework by abolition of security institution associated with the old
regime, establish new civilian bodies controlling armed forces, changes command
system, and empowerment of parliament. The focus of this stage is to dismantle
old power structures and defining end goal of democratic transition.

The second generation reform is addressing the capacity problem of the newly
created institution and to control the remaining powers of armed forces. The
second generation strengthen framework for oversight by political institutions and
civil society groups that play the role as watchdogs. Challenge of this stage is on

36
Amos Perlmutter, The Military in Politics in Modern Times, (New Haven: Yale University
Press, 1977), p. 111.
37
Andrew Cottey, Timothy Edmunds and Anthony Foster, “The Second Generation Problematic:
Rethinking Democratic Control of Armed Forces in Central and Eastern Europe”, accessed from
http://www.bris.ac.uk/Depts/GRC/CMR/TCMR%20Papers/TCMR%201.7.htm in December 8,
2008.

21
capacity building that seeking right combination of expertise, experience, funds,
infrastructure, supporting staff, technology and information. The flow of military
reform is illustrated in Figure II.3 with the area covered marked in grey.

Figure II.3. Flow of Military Reform

Framework
Good Governance: Democratic Value

Security Sector Reform

Actors/
MoD Military Police Gov Inst Civil Soc Def Indust Institution

Rule of Law
Policy Dev, Planning & Implement
Professionalism Entry Point
Oversight Issues
Management of Security Expenditure

Military
First generation reform : Structural Reform Reform
Second generation reform : Capacity Building Actions
Source: Author

In the research conducted by political analyst Marcus Mietzner, it briefly showed

different success level of military reform that occurred in developing countries of
the world. For example several states in post-Soviet Central Asia and sub-Saharan
Africa have not yet begun their civil-military reforms. Meanwhile countries like
Ghana, Nigeria, Turkey and Russia were conducting their first generation military
reforms, although the armed forces still highly politicized and act as privileged
institution. Indonesia is viewed to be in the same level as this batch of countries. It
shown stable results addressing first and second generation reforms but not really
successful because of the weakness of the state and renewed conflicts. 38 Mietzner
also views that there are countries that more advance from Indonesia in
conducting military reform, such as South Africa, Taiwan and South Korea.

38
Marcus Mietzner, The Politics of Military Reform in Post-Suharto Indonesia: Elite Conflict,
Nationalism and Institutional Resistance, (Washington: East West Center, 2006), p. 59 & 66.

22
Nevertheless, after ten years of Reformasi, the most leading part of Indonesia’s
SSR progress is the military reform compared to civil bureaucracy and
administration. 39

II. 5. Military Business Reform

Military business reform is a part of military reform in the subject of the body’s
funding by the state and its management. In order to define the reform action
needed in military business, author first need to define the term of military
business. Definition of military business as written in The Military as an
Economic Actor: Soldiers in Business, a study carried out by Bonn International
Center for Conversion (BICC) in 2003 is “economic activities falling under the
influence of the armed forces, regardless of whether they are controlled by the
defence ministries or the various branches of the armed forces or specific units or
the various branches of the armed forces or specific units of individual officer.” 40

The BICC definition is considered not able to cover the illegibility and non-
transparency of military business. Ayesha Siddiqa, for example, came with her
own definition when writing about Pakistan’s military business. She defined the
term as all activities that transfer resources and opportunities from the public and
private sectors to an individual or a group within the military, without following
the norms of public accountability and for the purposes of personal gratification.41
The transfer of resources can take many forms, such as state land transferred to
military personnel, diverting business opportunities to armed forces personnel or
the military organization by flouting the norms of free market economy, even
resources spent on providing perks and privileges for retired armed forces
personnel, such as provision of support staff, membership of exclusive clubs,
subsidies on utility bills and travel, and subsidized import for vehicles for personal
use by senior officials.

39
Beni Sukadis and Eric Hendra, Op. Cit.
40
Jorn Brornrnelhorster and Wolf-Christian Paes (eds.), The Military as an Economic Actor:
Soldiers in Business: Soldiers in Business, (Basingstoke: Palgrave, 2003), p. 4.
41
Ayesha Siddiqa, Military Inc.: Inside Pakistan’s Military Economy, (London: Oxford Press,
2007), p. 5.

23
Cornelis Lay, in his comparative study between Indonesia and China military
business, stated that the form of military business is ‘shadow economy’ or
institutionalized corruption, which often only discovered on big cases of arms
procurements. 42 In terms of its form, in Indonesia, Danang Widoyoko et al
categorized three forms of military business: 43
• Formal business: involved military as an institution in the business.
Example of this form is in the foundations under certain military divisions
or headquarters. This form of business is not only run in the central but
also in military districts. Other example is cooperative exist in military
environment.
• Informal business: does not involve military as institution but military
individuals, even those who are inactive or retired. Widoyoko stated that
this form of business is initiated since the military personnel still active
and employed by state or private companies.
• Criminal economy: usually in a form of support given by military
personnel to the practice of illegal business. For example drugs business,
illegal logging, supplier for demonstration protesters and backing of
gambling activities. This form of military business also includes security
money demand when there is security turmoil.

The argument for military business activity to run is because the state defense
budget does not cover military expenditure. In the words of Jorn Brommelhorster
and Wolf-Christian Paes, military business is a part of extra-budgetary income
that subsidizes the lack of government provided funding. The gap can be a result
of economic mismanagement, or really the result of cash-flow crisis, the armed
forces have often turned to private enterprises to make up the shortfall. 44 This
usually occurs in transition economy where state sector is in structural adjustment.

42
Cornelis Lay, “Menata Bisnis Serdadu: Mencari Ilham di Negeri Tirai Bambu”, in Jaleswari
Pramodhawardani and Andi Widjajanto (eds.), Bisnis Serdadu: Ekonomi Bayangan, (Jakarta: The
Indonesian Institute, 2007), p. 30-31.
43
Danang Widoyoko, et. al., Op. Cit., p. 9-10.
44
Jorn Brornrnelhorster and Wolf-Christian Paes (eds.), Op. Cit., p. 14.

24
The diagram of how military business filled defense budget deficit is depicted in
Figure II.4.

Figure II.4. Military Business as Part of Military Expenditure

Source: Jorn Brornrnelhorster and Wolf-Christian Paes (eds.), The Military as an

Economic Actor: Soldiers in Business: Soldiers in Business, (Basingstoke: Palgrave,
2003), p. 12.

In her own terms, author defines military business as “all activities conducted by
military personnel, both active and inactive, under its institution or not, for
achieving economic gain”. Author understands the difficulties in applying
accountability mechanism and measuring government action to the broad and
shadowy nature of her military business label, since not all the business are listed.
Therefore to make the attempt on assessing government policy implementation on
the subject, author uses practical boundaries given by National Team of TNI
Business Activity Transfer (Timnas PAB TNI) 45. The team defines Indonesian
military business as business activities that cover foundations, cooperatives, thw
usage of state assets, and other activities outside the main tasks and function of
TNI. 46 This is the definition and scope of military business that will be researched
by author, and which is the object of reform.

45
Actual name is Tim Nasional Pengalihan Aktifitas Bisnis Tentara Nasional Indonesia.
46
The definition includes businesses under military foundations in sectors of social, education,
housing advance payment, health support, and commercial activities such as farm, construction
and trading. It also handles the military foundations that make deal with business partners to

25
In the study of SSG, one of the points on how to work good governance is from
the economic of defense. In Enhancing Democratic Governance of the Security
Sector: An Institutional Assessment Framework, Nicole Ball et al explained what
does one country need to manage security sector expenditure: “Budgets should be
prepared against a sectoral strategy; defence policies must be affordable;
resources must be allocated according to priorities both within the defence sector
and between defence and other sectors; and resources appropriated must be used
efficiently and effectively. Key principles of public expenditure management such
as accountability, transparency, and contestability are as relevant in the security
47
sector as in other sectors.” It can be seen that the democratic rules clearly did
not advice one country’s military to seek its own funding through military
business.

Military business need to be reformed and taken over by the government because
it gives ways to the military to seek its own funding in non-transparent way.
Because military is a state tool, in democratic ideal its financial support should
come entirely from the government. There are several reasons why military
should not seek its own funding. Indonesian Corruption Watch put forward three
arguments 48:
1. The freedom gained by the military by having independent source of fund
weakens government capacity in implementing national objectives and
mean of achieving them.
2. Time and effort absorbed in seeking self funding (business) diverts
soldiers and military members from their state tasks, which are defending
the country from external threats and strengthening domestic security.
3. Military business activity creates distortion in national economy and
hampers its development by lowering productivity and misallocation of
scarce resource.

achieve benefits. From Timnas PAB TNI Final Report Recommendation given to author on
February 3, 2009.
47
Nicole Ball, Tsjeard Bouta, Luc van de Goor, Enchancing Democratic Governance of the
Security Sector: An Institutional Assessment Framework, (The Hague: Clingendael Institute for the
Netherland Ministry of Foreign Affairs, 2003), p. 33-34.
48
Danang Widoyoko, et. al., Op. Cit., p. 68-69.

26
Other consideration of why state military ought not to seek its own funding is
from the transparency. Defense funding should be part of public spending because
it is not commercial good, therefore the transparency of budget must be
accountable. When the body acquired off-budgetary income, it will be harder for
civil government to conduct transparency assessment. These disputations should
be strong enough for the government to reform military business.

II. 5.1. Boundaries of Military Business Reform

Based on the issue, boundaries are set in the scope of restructuring necessary for
consideration. Experts from The Indonesian Institute gave four restructuring
issues in conducting military business reform. 49 Firstly is law-based restructuring,
which the government takeover military business with considering the form of
business recognized by the state. Indonesia distinguishes three form of business:
state-owned company, private company, and foundation and cooperation.
Secondly is ownership-based restructuring, which the government takeover
military business by considering the ownership composition of the military
business. In Indonesia, for instance, the business ownership is complex, military
can own the whole company, or part of it, or have shares, or even manage the
business. The complexity is shown in Table II.1 for illustration.

Table II.1. The Complexity of Military Business Activity

Military Ownership (100% or partial) Management
Business Activity
Direct Indirect Direct Indirect
Legal Institutional 1.Foundation
2.Cooperation
3.Commercializati Shares
on of Military inclusion Based on Indonesian
assets Military Law Article
4.Commercializati 39 and 47 this activity
on of security cannot be done by
service active TNI personnel,
Non- Not included in Nepotism = therefore out of law
Institutional the Indonesian Law hand
Military Law upholding

49
The Indonesian Institute, “Academic Paper: The Takeover of TNI’s Business Activity”, in
Jaleswari Pramodhawardani and Andi Widjajanto (eds.), Op. Cit., p. 117-118.

27
 mandatory
Illegal Criminal = Law Enforcement
Source: with minor modification from The Indonesian Institute Team, “Academic Paper
The Takeover of TNI’s Business Activity “in Jaleswari Pramodhawardani and Andi
Widjajanto (eds.), Bisnis Serdadu: Ekonomi Bayangan, (Jakarta: The Indonesian
Institute, 2007), p. 128.

Thirdly is functional-based restructuring which the government takeover military

business by considering the benefit given to military personnel, it can be divided
to two types: (a) business that only benefited limited elites military high ranks,
and (b) business that give benefit to all personnel. In the team perspective, type
“b” military business function does not need to be taken over because this type of
business is also occurred in other countries. Fourth is sustainability-based
restructuring which the government takeover military business by considering the
profitability/non-profitability of the business. This consideration is needed to
make planning for the business future after taking over process.

Parameter of the government takeover military owned business ideally must be in

the corridor of transparency, accountability, efficiency and also weighting state’s
budgetary ability. In the early stage, government must conduct assessment on the
business with listing, verification and assets audit which then be used as bases to
map the path of separating military from its business activity. Subsequently, all
the stakeholders should formulize the stages of military separation from business
using the assessment report. Parallel with the action, government also must
prohibit commercialization of military assets and security services, and enforce
law on the illegal military business.

It is understandable that the parameters of military business reform made by

countries are blurred, since the nature of military business is shadowy.
Nevertheless efforts must be made to keep the process of reform transparent and
accountable. Political expert Mohammad Fajrul Falaakh stated the prerequisite

28
operational regulations in order to have more applicable parameter of military
business reform. 50 They are:
a) Working definition on military business activity
b) Takeover regulations
c) Time limit and stages of takeover
d) Assignment of high echelon at least at minister level as the person
responsible and also technical operational echelon to manage military
business take over
e) Coordination with audit bureau in terms of military business asset
f) Regulations on investigative audit for all the military business that are
subject of takeover
g) Coordination in data providing of government assets owned by MoD and
the military
h) Coordination between all ministers involved and head of military to
formulate management and limitation of military business activity
i) Obligation for all government staff engaged to make report and implement
principles of transparency and accountability in taking over process
j) Regulations on layered oversight mechanism conducted by internal
military, MoD, parliament and civil society organizations.

II. 5.2. Comparative Study Military Business Reform

Military business is not a new phenomenon noted by international political
scientist Charles Tilly.51 In the Middle Ages, military leaders were entrepreneurs
that gather resources for fighting wars. Then before French Revolution, military
lived from resources gained by feudal landowners that made partnership with
monarchs. Ottoman Empire, Sweden and Soviet Union armed forces also used to
extract public taxes to raise finance for war-making. In the modern history,
according to expert Peter Lock, the conceptual root of military involvement in
business grew in Germany after World War I 52. The ideology originated from
“total war” concept that had been introduced by Ludendorf in 1922 following the
lost of German armed forces in WW I. It evaluated that German had lost because
it had not had sufficient support in politic and resources, which based from the
lack of military power over resources. This concept then justified the positioning
of all national resources under military command in order to win the war.
50
Mohammad Fajrul Falaakh, “Telaah Hukum Pengambilan Bisnis TNI”, in Jaleswari
Pramodhawardani and Andi Widjajanto (eds.), Op. Cit., p. 70-71.
51
Charles Tilly, Coercion, Capital and European States, (Oxford: Blackwell, 1992), p. 87.
52
Peter Lock, “Exploring the Changing Role of the Military in the Economy”, accessed from
http://www.peter-lock.de/txt/mileconl.html in February 11, 2009.

29
The “total war” concept that put national resources as integral part of the military
subsequently spread to many third world countries. Firstly it got to Latin America
then to all over the world. Common rationale of the concept acceptation is that the
government is unable to provide sufficient defense budget to fulfill military
spending, even to provide basic welfare for its soldiers. Therefore military
involved in business because the state has failed to met the most basic military
necessity. The defense establishment then generated capital for personal and
organizational benefit in partnership with the ruling party. With such involvement,
the military is expected to play larger role in governance, which in turn
strengthens their economic grasp. This occurred in countries like China, Syria,
Cuba and Iran.

For example, the military business grew rampant in Turkey where its army
conducting self funding which made the organization enhanced its power. The old
country leader Kemal Ataturk had legalized military role as defender and
protector of the constitution and national integrity from outside threat as well as
corrupt civilian rule. 53 Since defense establishment is one of political and
economic key players, Turkey capitalist elite built partnership with the military to
jointly exploit resources. This condition is bad for other economic actors and
disturbing the way of free market. It also did not allow people to question defense
budget and military business outlays, which undermined principle of transparency.
Turkey armed forces then need to reform its politic and business roles since the
country is enrolling for membership in the European Union. 54 The military must
prove that they are inline with democratic value, although it still acts as privilege
institution.

Like the Turkish armed forces, Pakistan’s also facing the same problem with
military business. Civilian have difficulties accessing information of the business
conducted by military personnel. There are even laws that regulate military

53
Amos Perlmutter, The Military in Politics in Modern Times, (New Haven: Yale University
Press, 1977), p. 111.
54
Marcus Mietzner, Op. Cit., p. 65.

30
business foundations to be listed as private entities so government auditor cannot
get access to examine their reports. 55 Civil bureaucracy and business
entrepreneurship are bound to cooperate with military fraternity to bring about
safety to their business and position. Although the collaboration benefited all
parties involved but it gives negative impact to democracy. General-President
Pervez Musharraf when got elected in 2002 pledged to establish good
governance 56, but until now there is no significant change in reforming military
domination in economy and politic.

Since military business can be done without institutional approval, there were
some incidents of military act independently in looting resources. For example
this happen in Russia post Cold War when the restructuring occurred and soldiers
lack of sufficient funds led them to engage in looting and plundering. In the
western countries, defense restructuring in countries such as the United States,
France, and the United Kingdom forced retired officials to form military training
and equipment companies 57 although if these practices done without using their
military network and cronies, they do not harm democratic values. Therefore the
military business can be done in various ways and not always destructive when it
is regulated and controlled by civil oversight.

II. 5.3. Cost and Benefit of Military Business Reform

There are problems arising from military involvement in the business sector that
the author had observed. First, the involvement of military personnel allows the
exploitation of resources and even for them to run their own business untouchable
because of the coercive power support. Secondly, scarce resources then made
unhealthy competition between military personnel which benefited the elites and
made them unfocused in their main function as guardian of the state. Thirdly, the
capital generated from military business is out of the hand of state auditor which
made it non-transparent to which the assets came from and what the profit used

55
Ayesha Siddiqa, Op. Cit., p. 21.
56
Hasan Abbas, Pakistan’s Drift to Extremism, (New York: M.E. Sharpe, 2005), p. 227.
57
Ayesha Siddiqa, Op. Cit., p. 12.

31
for. Worst the capital can be allocated in operations that are against democratic
values. Regulating how military conduct business therefore should be done with
initially pondering the cost and benefit of reforming.

Apart from the clear costs that need to be done in conducting reform, such as extra
effort and work from all the stakeholder of security sector and necessity of
regulating laws and infrastructures, there are some other costs that need to be
considered. The biggest cost of conducting military business reform according
analysts Lex Rieffel and Jaleswari Pramodhawardani is that illegal activities of
moonlighting will be larger when the personnel suddenly stopped from getting
their usual income from military business. 58 It has security risk when the country
pushed its armed forces to go out of business without considering their welfare
since they had access to coercive power and military abilities. This risk can be
managed by adding personnel’s salary and benefits. But it turn, the action will
bring another cost to the state budget and competition with other budget priorities,
such as health and education.

Meanwhile the benefit of conducting military business reform under the umbrella
of SSR is to be consistent with democratic norms and sound principles of good
governance, and thus contributes to a well-functioning security framework. 59 It
means the state can provide security for citizens to go about their daily lives, not
only for those who are privilege to make linkage with the military through
business but also for the military personnel itself not to compete with one another.
Therefore the reform also builds professional military that work within its
function. Rieffel and Pramodhawardani also put forward the reasons to conduct
military business reforms, which are strengthening civil supremacy; for the
military to follow regulations and not to conduct operation in secrecy; making
way for transparency and accountability; and strengthen the government bodies’

58
Lex Reiffel and Jaleswari Pramodhawardani, Menggusur Bisnis Militer: Tantangan Pembiayaan
TNI Melalui APBN, (Bandung: Mizan, 2007), p. 30.
59
Herbert Wulf, Op. Cit., p. 9.

32
coordination for security sector power sharing. 60 In form of table, the cost and
benefit of military business reform can be seen in Table II.2.

Table II.2. Cost and Benefit of Military Business Reform

Cost
1. extra effort and work of stakeholder
of security sector
2. regulating laws and infrastructures
3. chance that illegal military business
grew larger
4. security risk
5. higher state defense budget to
compensate
Source: Compiled by author
Benefit
1. consistent with democratic norms
and principle of good governance
2. enabling safe and security to all
citizens
3. military personnel need not to
compete in business
4. build professional military
5. strengthen civil supremacy
6. military follow regulation and not
to conduct secret operations
7. making way for transparency and
accountability
8. strengthen government bodies’
coordination for security sector
power sharing

II. 5.4. The Need to Reform Military Business

Necessity to reform military business increase in many countries in the world
since they had experienced increasing negative impact of the activity. Military
business can be corrupt organizations because they do not open themselves to
public audit, this weaken the condition of the armed forces, which then
undermined the government as the body that should managed its military tools.
When government lost public trust and military acted in its own way, the state is
on its way to failing. Even country as big as People Republic of China felt the
urgency to reform its military business.

People’s Liberation Army (PLA) of China had been involved in business since
1930s Mao Zedong era. Their business extend from agriculture, trading, mining,
manufacture factory, entertainment security, infrastructure building, land
reclamation, to opening state farming. Reason behind China’s military business
was the cliché government inability to fulfill defense budget. This was resulted

60
Lex Reiffel and Jaleswari Pramodhawardani, Op. Cit., 29.

33
from General Mao doctrine of “people’s war” which adopted huge armed forces. 61
Military business thus became very huge, with merger of enterprises into
conglomerates. But military business grandiosity started to kickback the
government, soldiers lost their integrity and involved in illegal business, they
carried out ventures without permission, therefore weaken leadership and filled
with rampant corruption. 62

Tiananmen Square incident in 1989 and Deng Xiaoping leadership in 1992

brought the country to realize the necessity of military professionalism that cannot
be achieved with the institution involvement in the competitive world of business.
Deng slowly reform military business nature but it grown more corrupt until in
1998 he declared military business divestiture in public. The decision already
made a year before so the military personnel already aware of the issue, though
the major military business takeover were not fully set until three years later in
May 2000. 63 The divestiture was made in three phased. First was establishing the
bodies which responsible for the action, second was formal registering and
assessing assets, and lastly was going through the PLA business accounts and
transforming them to state-owned companies. Up to March 1999, China
government had taken over 150 large enterprises formerly owned by the military
and police. 64

Another place where military business reform held necessary occurred in Turkey.
It is a developing nation of predominantly Muslim but moderate in religious
fervor with secular regime, and the military have been continually involved in the
political affairs since its beginning. The country’s military owned Armed Forces
Mutual Assistance Fund (OYAK) which was one of the largest business
conglomerates. The way of military business grow in Turkey was supported by
political moves, such as 1961 and 1982 amendments that institutionalized

61
Ellis Joffe, “The PLA and the Chinese Economy: The Effect of Involvement”, Survival Journal,
Vol. 37, No. 2, Summer 1995, p. 26.
62
Ibid., p. 34-36.
63
James Mulvenon, Soldiers of Fortune: The Rise and Fall of the Chinese Military Business
Complex 1978-1999, article from Bonn International Center for Conversion, October 1999, p. 13-
20.
64
Ibid., p. 20.

34
National Security Council as the highest non-elected decision-making. 65 The raise
of power was followed by partnership with business elites that need support for
their industry. Turkish military personnel and civil staff in MoD were also
burdened with its involvement in business because government imposed 10
percent tax on their basic salary to raise fund for investment of OYAK and profit-
making venture. 66 It was aimed to help national economic growth, promote
private sector and place the military closer to business people.

Since Turkey enrolled membership to the European Union, military business in

the country needs to be reformed because it hamper democratic environment to
grow. Military business reform was run under government body overall
restructuring given by EU requirement. 67 Although there were efforts to reform,
OYAK had not been stopped but its management was opened to public and even
invited international investor which reaped assets as big as US$9 billion. 68 Turkey
armed forces are still in strong position despite security sector governance actions,
nevertheless it gained more accountability and transparency.

Learning from the experience of China and Turkey, general policies in conducting
military business reform must address the five entry points of SSR, which are rule
of law; policy development, planning and implementation; professionalism of the
security bodies; oversight; and management of security expenditure. Although all
points are interconnected, the most important boundary in military business
reform is managing security sector expenditures. It should be prepared with
strategy, defense policies must be affordable, prioritization of resources allocation
and used in efficient and effective measure. The key principles of managing
public expenditure are accountability, transparency and contestability in managing
resource. If all these are included, the military business reform then can be
conducted.

65
Tim Jacoby, Social Power and the Turkish State, (London: Frank Cass, 2004), p. 145-148.
66
William Hale, Turkish Politics and the Military, (London: Routledge, 1994), p. 174.
67
“Turkey Reform Targets Army Power”, BBC World, July 30, 2003.
68
“Turkey: Planning for Profit”, The Banker, May 2005.

35
II. 5.5. Hurdles of Reforming Military Business
In the military business reform conducted in several countries, challenges still
exist. There are serious problems in bureaucratic and political levels, which
mostly concerning the issues of resource allocation, discipline and commitment of
conducting the military business reform. How well the country deals with these
issues will determine the success or failure of the government in separaring
military from business. Indonesia is one of the countries that conduct military
business reform since the fall of Soeharto authoritarian regime in 1998 up until
now. Some writings had been made about the topic, such as Bisnis Serdadu:
Ekonomi Bayangan edited by Jaleswari Pramodhawardani and Andi Widjajanto69;
Too High a Price: The Human Rights Cost of the Indonesian Military’s Economic
Activities written by Lisa Misol 70; and Bisnis Militer Mencari Legitimasi (Military
Business Seeking Legitimacy) by Danang Widoyoko, Irfan Muktiono, Adnan
Topan Husodo, Barly Haliem N. and Agung Wijaya 71. Most of the writings
focused on how the military business grows in the country, its impact in
undermining civil supremacy and democracy.

So far from the literature review conducted, there is a gap relating the reform of
military business in Indonesia, especially on the subject regarding to government
policy implementation in taking over military business. Therefore in this thesis,
author will specify her study in studying the efficiency and effectiveness of
government policy implementation on separating military from business with the
time length from 2004 to February 2009. The period is taken since the country
established regulation in taking over military business to the last parliament
meeting concerning the subject.

II. 6. Summary of Literature Review

Security sector reform is a response to changing political and social situation in
order for state to be able to provide adequate security for its people. In conducting

69
Jakarta: The Indonesian Institute, 2007
70
Jakarta: Human Rights Watch, 2006.
71
Jakarta: Indonesia Corruption Watch, 2003.

36
SSR, the measurements and actions must be based on democratic values with
good governance that respect human rights and have civil supremacy.

The conduct of SSR that had taken place in Indonesia since its transition from
Soeharto authoritarian regime up to now made it advance consolidating
democratic country in South East Asia. From the many facets of SSR conducted,
one of the most leading reforms is in the area of military reform. Some of its many
achievements are the removal or military and police from legislative body;
institutional separation between military and police; and also the creations of
national laws to manage the security actors.

Although Indonesia had achieved big progress in military reforms, there are some
issues that are still lagged behind. Military business reform is one of them.
Although many writings are made on the subject, there is not yet any
comprehensive study that focuses on the implementation of the military business
reform especially in how government taking over business from the control of the
armed forces. Therefore author take this chance to further elaborate on Indonesia
government policy implementation in separating military from business activity
since the country established national laws on the issue in 2004 to the last
parliament meeting in February 2009.

37
 Chapter III
MILITARY BUSINESS IN INDONESIA:
HISTORY AND CHARACTERISTIC

This chapter observes Indonesia military business historical background,

characteristic and troubles surfaced from it. The activity in already started in the
early formation of the Angkatan Bersenjata Republik Indonesia (ABRI) armed
forces in 1945. The activity had grown steady under first President Soekarno
governance because he was too busy managing state multi party politics.
Indonesia’s second President Soeharto afterward created more conducive
environment for military business to prosper and reached its peak in the 1980s.
Asian financial crisis in 1997 had invoked people movements which forced
Soeharto to put down his throne a year later. The situation brought streams of state
restructuring in Reformasi era, including military institution that separated from
police force and changed its name to Tentara Nasional Indonesia (TNI). In the
reform, legal based to takeover military business was made in 2004, which given
government five year target to solve the issue. From the illustration, sub chapters
will be done chronologically and wrapped up with characteristic of Indonesian
military business and problems arose from it. Author will also give explanation on
the state defense budget in order to portray Indonesian defense economic
condition that commonly use as argument of keeping military business. The
structure of Chapter 3 is depicted in Figure III.1.

Figure III.1. Structure of Chapter 3

The Making of Indonesian Military (1945-1966)

The Growing of Military Business (1966-1998)

Reformasi impact to Military Business (1998-2004)

Military Business in Current Government (1998-2004)

Indonesia Military Business Characteristic and Problems

Source: Author

38
Besides giving background on military business growth in Indonesia, this chapter
answers two out of five inquiries given in Research Question section stated in
page 6-7 of this thesis. Firstly why did Indonesian military involved in the
business sector. And secondly, why is it significant for the government to
takeover military controlled business.

III.1. Indonesian Military: Its Making and Jumping to Business (1945-1969)

Different from other countries, Indonesian military did not form by the base of
strong government to start with. Embryo of its armed forces came from three
sources: first, ex military personnel hired by Dutch colonial Koninklijk
Nederlandsch Indisch Leger (KNIL). Second, the armed forces made by Japan
military occupation Pembela Tanah Air (PETA). And third, guerrilla groups from
parts of Indonesia that were supporting independence. 72 The three were united by
state under the name Tentara Keamanan Rakyat (TKR) in October 5, 1945.
Although there were series of name change 73, Indonesian military before
Reformasi was commonly called by its acronym ABRI.

The nature of Indonesia military background, especially guerrillas, had been to

seek its own funding with made them inclined to jump in the business sector.
Producing revenue to pay soldier salary was important in the early years of
countering Dutch efforts to take Indonesia back up to 1949. Each fighting unit
must seek its own funding because the government had not had enough finance to
support its operations. Smuggling of rubber and natural goods, even selling drugs

72
Danang Widoyoko, et.al., Bisnis Militer Mencari Legitimasi, (Jakarta: Indonesia Corruption
Watch, 2003), p. 17-18.
73
From TKR, it changed its name to Tentara Keselamatan Rakyat in January 1, 1946, then to
Tentara Rakyat Indonesia in January 24, 1946. In 1963 there was unification of army, navy, air
force, and national police force under the name of Angkatan Bersenjata Republik Indonesia
(ABRI). Further explanation read Indria Samego, et. al., Bila ABRI Berbisnis: Buku Pertama yang
Menyingkap Data dan Kasus Penyimpangan dalam Praktik Bisnis Kalangan Militer, (Bandung:
Mizan, 1998), p. 47 and Lex Reiffel and Jaleswari Pramodhawardani, Menggusur Bisnis Militer:
Tantangan Pembiayaan TNI Melalui APBN, (Bandung: Mizan, 2007), p. 212.

39
like opium, are some activities which generated the highest income. 74 Military
business did not seen as unusual at that time because the revolution against
colonial power was still going on and considered to require non-conventional
support. The experience gave Indonesian military a taste of economic freedom
from civil government and access to corruption practice. But by merit of the
struggle, ABRI gained public image of the guardian of state’s revolution spirit.

In 1950 the Dutch was willing to negotiate with government of Indonesia and let
the country gain full sovereignty. However, the security situation then changed to
a period of internal tension from 1950 to 1959. Euphoria of freedom started to
dilute, political parties were fighting to gain power and separatism revolted in
local areas due to uneven distribution of welfare that was seen to prioritize the
Island of Java. Military business which was firstly to fund military operations then
started to support more basic need, such as soldier wellbeing. For example the
Easter Indonesian Head of Military Colonel Warouw and North Sulawesi Head of
Regiment Mayor Worang in 1954 gave permission to huge smuggling of copra to
fund housing program. Another example is North Sumatra Head of ABRI
Simbolon in 1956 sent large amount of coffee and rubber abroad to pay his
personnel’s salary. 75

Under the pressure of internal disturbances, government was forced to implement

Urgency Law in May 1957 which gave the military access to control the state. Its
influence expand in to economic sector by nationalizing foreign companies
situated in Indonesia, starting from those who belong to the Dutch in December
1957, then the British owned in 1964, and then followed by United States of
America owned in 1965. 76 The era of huge military power was also influenced by
Indonesia effort to takeover West Papua from Dutch colony, with government
allocated 60% of state spending for defense 77 although in the end, Indonesia

74
Faisal H. Basri, “ABRI dan Bisnis”, dalam Anas Machfudz and Jaleswari Primodhawardani,
Military without Militarism: Suara dari Daerah, (Jakarta: LIPI, 2001), p. 279.
75
Danang Widoyoko, et.al., Op. Cit., p. 23-24.
76
Harold Crouch, Militer dan Politik di Indonesia, 2nd edition, (Jakarta: Pustaka Sinar Harapan,
1999), p. 37.
77
Lex Reiffel and Jaleswari Pramodhawardani, Op. Cit., p. 210.

40
obtained West Papua in peaceful mean by referendum. In the era of military huge
role on state politic, Head of Army in 1958, General Abdul Haris Nasution made a
speech on how military should take ‘middle way’. It should not be a dominant
force and not just a tool for the civil government. 78 His speech started the
dwifungsi (dual functions) doctrine where military involved in defense-security
and social-political fields, including economy and politics. His idea created
argument for active and non-active soldiers to hold position in the government. It
is worth to be remembered that military involvement in business in this period is
caused by weak civil society, the inability of government to generate enough
income to support the population and create difficulty in defense budget.

According to Reiffel and Jaleswari, there were three big forms of military
business that were born in this period. 79 They are consignation between military
elites with business people which mostly Chinese; cooperation in every
commando to secure basic supply of logistic; and foundation created by military
elites in the form of holding companies for every aspect of business. Even so, the
growth and expansion of military business was not as gigantic as the period when
Indonesia was headed by President Soeharto. In his career background, he had
been repositioned from Diponegoro Division in Central Java because he was
discovered to request some money from local business people. 80 He was mutated
to Staff College in Bandung, West Java before the acted as the main person to act
upon communist party revolt in 1965, which generated his way to the presidential
seat.

III.2. Growing Military Business (1966-1998)

This phase of Indonesia history was in stable political condition with strong
economy supported by many foreign funding. Since President Soeharto ruled this
period, military business also flourished. In the early stage, the two cash cows for

78
Salim Said, Soeharto’s Armed Forces: Problems of Civil Military Relations in Indonesia,
(Jakarta: Pustaka Sinar Harapan, 2006), p. 121.
79
Lex Reiffel and Jaleswari Pramodhawardani, Op. Cit., p. 68.
80
“Soeharto Inc.”, Time Asia, May 24, 1999.

41
military were state companies Pertamina that operates in oil and gas, and state’s
logistic bureau Bulog. 81 In these two companies, military installed their high rank
personnel to obtain off-budget funding for the institution, such as president’s
personal assistant General Tirtosudiro that held Chief of Bulog position started in
1972. Meanwhile in Pertamina, the former Dutch oil company that were made by
concession of Caltex; Stanvac; and Shell, military Colonel Ibnu Sutowo ruled
since its nasionalization in 1957 to 1975. His power was so big even when the
Mining Minister Slamet Bratanata tried to restructure Pertamina by suggesting
open tender contract in 1967, the minister got dismissed. In the end Col. Ibnu
Sutowo was mutated because the company was so mismanaged it could not pay its
US$10 billion debt to foreign lenders. 82

After the Pertamina incident, Government Regulation PP No. 6/1974 on the

Limitation on Government Employees’ Activities in the Private Sector was issued.
The regulation banned active military and police personnel to take part in private
business activities except under certain circumstances. In Article 2, military
officer with rank of second lieutenant or higher were prohibited from owning
shares in private company; taking part in such company management, including as
advisor; or engaging in provit-driven ‘trade activities’, whether formally or on a
freelance basis. 83 In article 3 (1) there was exception which say they may work in
various positions in state-owned or private enterprises belonging to official
institutions which have a non-profit goal and function. Whereas Article 5 stated
that superior officers should reject or revoke request of permission to accept
positions with non-profit companies if the work would interfere officer’s
performance of his/her duties or harm military reputation.

Based on PP No. 6/1974, officers were permitted to work for private companies
set up by non-profit institutions. This created window of opportunity for military

81
Indria Samego, Op. Cit., p. 76-77.
82
For details about military in Bulog and Pertamina read Danang Widoyoko, Op. Cit., p. 28-33.
83
The regulation permitted lower-ranked soldiers to be part of companies (both profit and non-
profit) with the permission from their superiors. Soldiers that were preparing to retire, temporary
suspended or on leave were exempted. Wives of military personnel should also ask for permission
to work for companies. Read Article 2, 4 and 8 PP No. 6/1974.

42
foundations and cooperatives, set up with charitable purposes, to develop into
commercial channel for the military. Another flaw of the regulation is that it did
not specify enforcement mechanism. 84 The lack of enforcement PP No. 6/1976
made public and media put pressures on the government. Under the stress,
commitment was reassert in 1979 by General Muhammad Yusuf with statement:
“All active officers are forbidden to enter the world of commerce … No matter
how big you expand, that is your own concern. But if you are still serving, forget
about trading if you want to be a good soldier … To those who breach the rules
will be dismissed or will be retired earlier” 85.

The reinforcement of military business regulation forced up to 300 personnel to

resign 86 but military business still survived using its changing form. The military
foundations and cooperatives then controlled various companies that vastly
expand because they were backed by military political power. Researcher Robert
Lowry found that the peak of military business in Indonesia occurred in 1980s. 87
Author compiled list of more than 100 companies run under military foundations
and cooperation, or where they own the shares. The list can be seen in Table III.1.
Meanwhile the official data on military owned companies obtained from national
team of military business takeover also attached in the Appendix part of this
thesis.

Table III.1. Companies under Military Foundations in Indonesia

Military foundation Company name Type of business
Yayasan Kartika Eka Tri Usaha Bhakti General commerce
Paksi Adi Kartika Satria LPG distributor
(foundation under the PT Purna Sadhana General commerce
army) PT Bakti Wira Husada Pharmacy trade
PT Sinkona Indonesia Lestari Kina trade
Truba Raya Trading Shoe company
PT Cilegon Fabricators Steel industry
PT Indotruba Tengah Palm oil plantation
PT Indotruba Timur Palm oil plantation
ITCI Kartika Utama Logging & plywood
PT Sumber Mas Timber Logging

84
Lisa Misol, Too High a Price: The Human Rights Cost of the Indonesian Military, (Jakarta:
Human Rights Watch, 2006), p. 17.
85
Indria Samego, Op. Cit., p. 100, quoting Info Bisnis, Edition 7, Year I/1995.
86
Ibid, p. 101.
87
Robert Lowry quoted in Lex Reiffel and Jaleswari Pramodhawardani, Op. Cit., p. 69.

43
 PT Taliabu Luna Timber Logging
PT Meranti Sakti Indonesia Logging
Palopo Timber Company Logging
PT Sumber Mas Indah Plywood Wood industry
Kayan River Indah Plywood Wood industry
PT Meranti Sakti Indah Plywood Wood industry
PT Panca Usaha Palopo Plywood Wood industry
PT Truba Jaya Konstruksi Construction service
PT Truba Jurong Engineering Construction service
Marabunta Transport service
Wahana Bhakti Utama Auto repair service
Griya Kartika Dharmawangsa Health service
Telekomindo Primabhakti Telecommunication
Kartika Airlines Airline
Kartika Iqra Utama Travel bureau
PT Aerokarto Indonesia Survey/mapping service
PT Aerografia Pratama Survey/mapping service
PT Asuransi Cigna Indonesia Insurance
PT Bank Artha Graha Banking
Universitas Ahmad Yani University
AMIK Kartika Yani Computer academy
AKPER Ahmad Yani Nurse academy
Buanagraha Artha Prima Property
Wisma Kartika Hotel
Trubaindo Coal Mining Coal mine
Yayasan Putra Pakarti Yoga Export-import trade
Kostrad Dharma Kencana Sakti Capital trade & invest
(foundation under the Marga Bharata Distributor & general trade
army) Santi Yoga Yuasa battery distributor
Sinar Inti Telaga General trading
Tirta Mukti Indah Bottling Co. Coca Cola beverage industry
Aica Indonesia Chemical & glue industry
PT Perindustrian Karung Plastic bag factory
Nasional Automotive industry
Federal Motor Steel industry
Pakarti Jaya Steel industry
Pakarti Riken Indonesia Accu industry
Yuasa Battery Indonesia Gas lighter producer
Tokai Dharma Indonesia Airline & cargo
PT Mandala Airlines Transport & storage
Dharma Karya Persada Shipping
Pan Asia Express Lines Transport service
Pakarti Tata Insurance
Asuransi Beringin Sejahtera Insurance
Asuransi Wahana Tata Banking
Indosuez Indonesia Bank Forestry & logging
Hela Nusantara Cemerlang
Yayasan Adi Upaya Aerokarto Indonesia Aerial photo
(foundation under the Angkasa Puri Construction, hotel, property
air force) Angkasa Wana Wood production
BP Padang Golf Golf & sports center
Chandra Dirgantara Construction, wood, trade
Dirgantara Air Service Airline
Dirgantara Husada General trading & pharmacy
Green Delta Forestry & logging
Jasa Angkasa Semesta Airport management & cargo
Konstruksi Dirgantara Construction
Kresna Puri Dirgantara Construction, courier,

44
 Persada Purnawira agribusiness
(Persada Executive Club) General commerce
Upaya Guna Dirgantara Export import club
Air cargo
Yayasan Sosial Jala Bhakti Yashbum Holding company
Bhumyamca Pelayaran Admiral Lines Shipping
(foundation under the Trisilia Laut Crossing ferry
navy) Yala Mina Yashbum Fishery
Yala Gada General commerce
ETMI Construction & machinery
EMKL Yla Githa Dwi Air & sea cargo
Bhumyamca Sekawan Cilandak industrial area &
Yala Trada property
Samudera Gunadharma Utama General commerce
Yala Persada Angkasa Construction & general service
Bhumyjala Wigantara Timur Construction & ports
Geger Halang Ship repair & navigational equip
Bhumyyala Wigantra Agribusiness
Jalakaca Mitraguna Ship repair & navigational equip
Jala Wirahatama Plane repair, air transport &
Yala Githa Tama school
Jala Buanamas Pan Construction & timber
Forwarder & sea expedition
Expedition
Induk Koperasi AD Kartika Plaza Hotel Hotel
(cooperation under the Duta Kencana Tours & Travels Tour & travel bureau
army) Kartika Aneka Niaga General commerce
Kartika Bhuana Niaga General commerce
Duta Kartika Cargo Service Cargo
Mina Kartika Samudera Shipping
Orchid Palace Hotel Hotel
Kartika Cipta Sarana Transport service
Hotel Kartika Plaza Bali Hotel
Rimba Kartika Jaya Transport service
Mitra Kartika Sejati Transport service
Kartika Inti Perkasa Construction
Kartika Summa Construction
Mahkota Transindo Indah Transport service
Duta Kartika Forwarder Forwarder
Yamabri PT Manunggal Air Service Air cargo
(foundation under PT Bangkit Adhi Sentosa Mining
military headquarter) PT Kadya Caraka Construction
PT Yamabri Dwibakti Utama Freeway business
PT Fajar Multi Dharma Plantation
PT Primasel Communication
Balai Sudirman Meeting & function hall lease
Source: Yayasan Kartika Eka Paksi (2002), Yayasan Putra Kostrad data from Indonesia Business
Directory (2000), Yayasan Adi Upaya data from Indonesia Business Directory (2002), Yayasan
Sosial Bhumyamca data from Industry and Trade Ministry (2002), Induk Koperasi AD and
Yamabri data from Danang Widoyoko, et.al., Bisnis Militer Mencari Legitimasi, (Jakarta:
Indonesia Corruption Watch, 2003), p. 121.

Formal military business then transformed, from corporate or state-owned

companies to foundations and cooperatives, but other than those, some soldiers
were still conducted informal business activities, such as providing security

45
backing and commercial use of military assets. The issue of military personnel
giving commercial security service was highlighted in the case of copper and gold
mining of Freeport-McMoRan in West Papua with the company reported to pay
million of dollars every year to Indonesian military and police force in order to get
security for its mining operation. 88 And also Exxon-Mobil in Aceh reported to pay
around US$5 million every year for protection. 89 These case illustrated how
security, that ideally is a public good, through practices of military business can
be turned to market good which needed continuation of capital to be obtained. But
because this type of military business is informal, therefore action to terminate it
is harder.

Another type of military business occurred in Indonesia is criminal economy. The

military criminal economy can be in the form of illegal business in conflict areas
for example by providing private security service, backing for illegal activities
such as marijuana plantation in Aceh, and weapon trading. 90 Other forms of
illegal business that was suspected to be conducted by Indonesian military are
drugs trade; gambling; and fuel and luxury goods smuggling. 91 This type of
military business is difficult to trace, prove and handle because access to data is
not open to public therefore it is harder to scrutinized.

III.3. Reformasi: Reform of the Military Institution and Business (1998-2004)

Wave of Reformasi was triggered by financial crisis proliferated from Thailand in
July 1997 which reached Indonesia in October the same year. The crisis got
worse and destabilized not only financial-economic sectors in the country, but
also its political system, which in turn forced Soeharto to lose his power in 1998.
He was replaced by President B.J. Habibie. In Habibie leadership, Indonesia
conducted referendum for East Timor and lost the area in the voting. With his

88
The amount is reaching US$20 million. Jane Perlez and Ray Bonner, “Below a Mountain of
Wealth, a River of Waste,” New York Times, December 27, 2005.
89
Van Zorge, Heffernan and Associates, “The Tentacles of the Octopus: The Business Interest of
the TNI and the Police”, in Van Zorge Report on Indonesia, Juli 16, 2003, p. 14.
90
Lesley McCullough, Trifungsi: The Role of Indonesian Military in Business, (jakarta: 2000), p.
30.
91
Danang Widoyoko, et.al., Op. Cit., p. 46-52.

46
unpopular action, he gave way to Abdurrahman Wahid to be the forth president of
Indonesia after 1999 election. President Wahid then handed over his presidency to
Megawati Soekarnoputri in 2001, which was his vice president at the moment,
because he lost the support from his cabinet and the parliament due to his
eccentric leadership. The firth Indonesia President Megawati ruled until she was
defeated in the 2004 election.

Although this was a relatively unstable era marked with shifting of presidents,
Reformasi brought positive changes to Indonesia’s political situation. Civil
supremacy was rising and gained momentum to conduct SSR in the field of
military reforms. There was sense of pressure that national military should be
under strong government control or it will lack central planning, coordination and
transparency which can give impact to blurred aims it supposed to achieve,
therefore military reform was needed. It included extensive changes in military
institutional framework, its judicial system, electoral mechanism, composition of
representative bodies, and responsibilities of security actors. In his research on
Indonesia military reform, Marcus Mietzner summarized the military institutional
reform conducted in this era and its accomplishment level which can be seen in
Table III.2.

Table III.2. Indonesia Military Reform Achieved

Year Reform Status
1998 Withdrawal of active military personnel from civilian posts Completed
1999 Separation of police from the armed forces Completed
1999 Extensive electoral reforms, marginalizing the military from Completed
formal politics
1999 Declaration of political neutrality; withdrawal from Golkar Completed
Political Party
1999 Reorganization of Department of Defense and security into Completed
Department of Defense
1999 Appointment of civilian minister of defense Completed
1999 Empowerment of Parliament vis-à-vis TNI partly
completed
2000 Revocation of “Dual Function” doctrine completed
2000 Definition of external defense as TNI’s main task completed
2000 Disbandment of sociopolitical offices at the Department of the completed
Interior
2000 Disbandment of military-coordinated domestic security agency completed
(Bakorstanas)

47
2000 Passing of Law on Human Rights Courts completed
2002 Passing of State Defense Act completed
2004 Passing of Armed Forces Act completed
2004 Extraction of non-elected military members from Parliament completed
2004 Extraction of military faction from parliament (MPR); abolition completed
of indirect election of the president and local government heads
2004 Subordination of military courts to the Supreme Court partly
completed
Source: Marcus Mietzner, The Politics of Military Reform in Post-Suharto Indonesia:
Elite Conflict, Nationalism and Institutional Resistance, (Washington: East West Center,
2006), p. 70.

Addition to the military reforms above, there are other actions that were not
conducted within the Reformasi era, some remained unsolved and some needed
more time to be implemented. Such as TNI position under Ministry of Defense,
transformation of territorial command system, civilianization of Ministry of
Defense staff, creation of civilian-led national security and defense council, and
amplification of human rights court. One issue that is not resolved is the
separation of military from the business sector. After 32 years of ex-general
dictatorship, civil society wanted to have more power over the military by
reducing off-budget financing, especially by cutting the vastness of their business.
Local NGO Kontras highlighted the military ability to conduct abuses using off-
budget money with reference of human rights violation cases in conflict areas
such as Poso and Boven Digoel. 92 Another Indonesian military experts, Danang
Widoyoko and team stated their stances on why military should not conduct
business because it weakens government capacity, lessen the military professional
focus and distort national economic. Their full arguments can be seen in this
thesis chapter II, page 25. Other political experts are quoting Samuel P.
Huntington “professional military” as an ideal with military should be free of all
activities of seeking economical incentives. 93

92
Kontras, When Gun Point Joins the Trade: Military Involvement in Bojonegoro, Boven Digoel
and Poso, (Jakarta: Commission for Disappearances and Victims of Violence Kontras, 2004), p.
21.
93
For example Jaleswari Pramodhawardani and Andi Widjajanto (eds.), Bisnis Serdadu: Ekonomi
Bayangan, (Jakarta: The Indonesian Institute, 2007), p. 3-5, and Samuel P. Huntington, Tertib
Politik di dalam Masyarakat yang sedang Berubah, (Jakarta: Rajawali Pers, 1981) quoted in
Iswandi, Bisnis Militer Orde Baru, (Bandung: Remaja Rosdakarya,1998), p. 5-6.

48
The pressure to reform military business was so strong that the parliament had
succeeded to produce regulation on the issues. The regulations are first, the State
Defense Law UU No. 3/2002 article 25(1) that affirms national defense is funded
by state budget. Second, the TNI Law UU No. 34/2004 in article 2(d) on
professional military that does not conduct business. Third regulation is in the
same law article 39 which prohibits military personnel involved in business
activity. And fourth regulation is also in TNI Law article 76 that gives five years
deadline to the government to takeover military business after the law
implemented with further guidelines explained by president decree. 94 The four
regulations are the base for government to carry out actions of military business
takeover.

As a note, there was polemic on the last regulation, TNI Law article 76. The
instruction is considered as the strongest because it bluntly avowed government
deadline, which is rare in Indonesian laws. The polemic was also because in the
parliament commission discussion for defense issues, the article was not in the bill
draft to be discussed. It arose from the suggestion by Partai Kebangkitan Bangsa
representation in the parliament commission. 95 Therefore the article did not get
through proper debate in parliament nevertheless it managed to be included in
TNI Law. After the law had been issued on October 2004, President Megawati
was not reelected to run the next period of Indonesia’s leadership. Like most
political move done by previous administration, there was concern whether the
policies will be implemented or not by the successor ruling government.

III.4. Military Business and the Current Government (2004-February 2009)

In election 2004, Susilo Bambang Yudhoyono (popularly known by his initial,
SBY) was elected as the seventh President of Indonesia. He was inaugurated two
weeks after TNI Law was implemented, which made military separation from
business as one of his homework. As stated in its Article 76(2), president decree

94
The precise quote of laws concerning military business takeover can be seen in Chapter I, page
4-5 of this thesis.
95
Jaleswari Pramodhawardani and Andi Widjajanto (eds.), Op. Cit., p. viii-ix.

49
will give further instructions on government taking over military business. Finally
after long struggle the decree was out in April 2008, around a year and a half
before the deadline. Nevertheless, author will look at the efforts that had been
taken by SBY government in implementing policy of keeping military out of
business activity up to February 2009.

Early 2005, Defense Minister Juwono Sudarsono gave order to TNI head to
prepare the organization business activity list that were considered important to be
taken over by the government. Then in August the same year, a ministerial team
to deal with the issue was created through Defense Minister Decision Letter. The
team was named Tim Supervisi Transformasi Bisnis TNI (TSTB TNI) which
literally means team that supervises military business transformation. The
ministries involved were Ministry of Defense, Ministry of Finance, Ministry of
Law and Human Rights, and Ministry of State-Owned Company. The team was
headed by Said Didu, secretary of Ministry of State-Owned Company with vice
Lt. Gen. Sjafrie Sjamsoeddin, secretary of Ministry of Defense. In its operation,
TSTB had clashes of arguments with civil society organizations because the team
did not have clear working definition regarding military business. 96

The TSTB lacked of working definition made it difficult for them to select the
data of military business to be taken over by the government. In Head of TNI
letter No. B/3385-05/15/06/Spers issued in September 2005, stated that military
has 25 foundations with 916 business units, and 1071 cooperatives with 604
business units. 97 In the end 2005, Defense Ministry gave information of the
number military business existed as many as 219. 98 In March 2006, TNI
spokesman May. Gen. Suganda stated that there were 1520 business units ran by
military. 99 And in December 2006, there were researchers that there were 354

96
“Perjalanan Panjang Pengalihan Keppres Pengalihan Bisnis TNI, Newsletter Media dan
Reformasi Sektor Keamanan, Edition II, May 2008, p. 3.
97
Quoted in “Gurita Bisnis TNI dan Dampaknya”, in Newsletter Media dan Reformasi Sektor
Keamanan, Edisi II, May 2008, p. 4.
98
In Ministry of Defense letter to Human Rights Watch, December 22, 2005, in Lisa Misol, Op.
Cit., p. 26-27.
99
“TNI Commits to Reform: Uphold Supremacy of Law” opinion editorial, Jakarta Post, March
15, 2006.

50
military business units. 100 The different data of military business can be seen in
Table III.3.

Table III.3. Military Business Units According to Various Sources

Sources & Head of TNI letter Defense TNI Lex Reiffel &
Time No. B/3385- Ministry spokesman Jaleswari
05/15/06/Spers letter to May. Gen. Pramodhawardani
(September 2005) Human Suganda (December 2006)
Rights (March 2006)
Watch
(December
2005)
Cooperatives 1071 (no data) (no data) 172
Business 604 105 (no data) 52
Units under
Cooperatives
Foundations 25 25 (no data) 23
Business 916 89 (no data) 107
Units under
Foundations
Total 2616 219 1520 354
Source: “Gurita Bisnis TNI dan Dampaknya”, Newsletter Media dan Reformasi Sektor
Keamanan, Edisi II, May 2008, p. 4., Ministry of Defense letter to Human Rights Watch,
December 22, 2005, quoted in Lisa Misol, Too High a Price: The Human Rights Cost of
the Indonesian Military, (Jakarta: Human Rights Watch, 2006), p. 26-27. “TNI Commits
to Reform: Uphold Supremacy of Law” opinion editorial, Jakarta Post, March 15, 2006,
Lex Reiffel and Jaleswari Pramodhawardani, Menggusur Bisnis Militer: Tantangan
Pembiayaan TNI Melalui APBN, (Bandung: Mizan, 2007), p. 116.

There were also doubts of TSTB neutrality because it was composed by military
personnel and bureaucrats. Therefore it was seen to make compromise in order to
satisfy many interests, and in return, caused TSTB work slowly. The time length it
took also created distrust that the team only prolonged formulation of presidential
decree so military business could be dissolved or sold before the government can
get them. For example the selling of Mandala Airlines that was before under army
cooperative Kostrad in October 2005. The Army Strategic Head of Command Let.
Gen. Hadi Waluyo stated, “(We) will not wait for presidential decree (on taking
over military business) because this is trade matter, not politics.” 101 The airline
selling is said to be because it had created lost around IDR9 billion (around US$

100
Lex Reiffel and Jaleswari Pramodhawardani, Op. Cit., p. 116.
101
Quoted in “Pangkostrad: Mandala Airlines Dijual Tanpa Perpres”, in Indonesia newspaper
Tempo, October 7, 2005.

51
9million) per month. There was also selling of shares owned by military
foundation YKEP in Bank Artha Graha, which amounted IDR 121 billion (around
US$ 12.1million) without being reported to the authorities handing military
business takeover although it was acknowledge by the press and got reaction from
parliament. 102

The team at last succeeded to came into real value of military business in July
2006 of around IDR 1.5trillion (US$ 150million) 103 which was regarded low
compared to the earlier independent team research shown value around IDR
50trillion (US$ 5million) 104. But because TSTB already had bad reputation,
President SBY called the team to and end. He issued the long awaited Presidential
Decree No. 7 in April 2008 to create national team on military business takeover
called Tim Nasional Pengalihan Aktivitas Bisnis Tentara Nasional Indonesia
(Timnas PAB TNI). It has representative from interlink ministries but compared
with TSTB, the team is more an independent body, not attached of any ministry
and headed by civil expert Erry Riyana Hardjapamekas that had the experience as
vice head of Corruption Eradication Commission. The team task is relatively same
with TSTB, to create recommendation of what should the president do in order to
takeover military’s business.

Timnas PAB TNI proved to work more efficiently because in only six month after
it was formed, it already verified the value of military business and submit its
recommendations. The team investigated military owned business which consisted
of 23 foundations which run 53 companies and 1,098 cooperatives that run 2
companies, and came out with assets value around IDR 3.2trillion (US$
320million). 105 Although there were also complaints on the way the team worked

102
“Military Allowed to Sell Assets from Business Ventures”, in Jakarta Post, September 29,
2005 and “The House Urge Gov’t to Acquire Artha Graha”, in Bisnis Indonesia, February 17,
2005.
103
Human Right Watch, “Indonesia: Reformasi Bisnis Militer”, accessed from
http://www.hrw.org/legacy/indonesian/docs/2007/02/16/indone15349.htm in January 7, 2009 and
“Bisnis TNI Sekarat” in Tempo, July 27, 2006.
104
The amount was derived from research conducted by Ridep Institute in 2004 and since then
many of the military business got divested or sold. “Tidak Habis-Habis Meneliti Aset Bisnis TNI”,
in Kontan, Week III, August 2008.
105
“Timnas Bisnis Pertahankan Koperasi”, in Republika, December 30, 2007.

52
by sending questioner to be filled by military business units which was considered
not to recognize the possibility of selling their assets before verification had
occurred, the team was shown improvement than TSTB.

The national team work had been completed in October 2008. Up to four months
after, there was no publication on government action, no regulation issued by
President SBY or other ministries in managing military business. Only seminar
held in parliament created by fraction Partai Keadilan Sejahtera in February 26,
2009 titled “TNI Reformation Future Post 2009” that discussed openly about
issues regarding Indonesian military, including its business. 106 The meeting which
involved parliament members, experts and representative from TNI reminded the
government to solve its unfinished homework before the term ends this mid year.
Author sees this seminar was more of a political move to lower President SBY
cabinet performance and raise one political party activity record for election
campaign that started in March 2009, than to really conduct TNI reform actions.
Further analysis on whether the government is efficient and effective in
implementing the policy in taking over of military business units will be discussed
in Chapter IV.

III.5. Characteristic and Problems Arise from Military Business in Indonesia

Indonesian military characteristic is formed by its history as unification of
colonial power armed forces and guerrilla fighters. This combination then
established territorial command structure as the power base of armed forces in the
country’s regions, allowing them to tap into economic resources at the grassroots
and defend their role as significant player in local politics. 107 Later on, General
Nasution’s doctrine of “dual function” issued in the 1950s then came as the basic
of military involvement in both defense and civil sectors, which used as argument
for them to conduct business activity.

106
“Masa Depan Reformasi TNI Pasca 2009”, accessed from http://m-
ula.blogspot.com/2009_03_01_archive.html in March 4, 2009.
107
Marcus Mietzner, The Politics of Military Reform in Post-Suharto Indonesia: Elite Conflict,
Nationalism and Institutional Resistance, (Washington: East West Center, 2006), p. 38 & 41.

53
Insufficient government defense budget is a common issue that developing
countries face, including Indonesia, which then used by the military to seek its
own funding through business. The “gun-vs-butter” contest in allocation of state
budget 108 usually make way for public welfare to come first, unless if there is
special situation, such as war or high tension inside or between nations. Therefore
it is understandable for a developing country like Indonesia to provide less than
6% of its state expenditure for defense budget.109 But then again soldier welfare
came into question. With huge span of territory, it is understandable that
Indonesia has the largest armed forces in Southeast Asia with total TNI personnel
of around 390,000 and reservists of 400,000 personnel (shown in Figure III.1).110
The big number of military personnel brings consequence to bigger burden in
providing their welfare, education and moreover weapons to be use for training
and work. Finance necessity for armed forces development then became another
argument in keeping military business running.

Figure III.2. Indonesian Troops Strength

Source: “A State of Unreadiness” in Van Zorge Report, April 1, 2008, p. 12.

Military independence to seek its own funding created problems. Human Rights
Watch in 2006 publicized report on the relation of military business activities with

108
More of “gun-vs-butter” explanation in Steve Chan and Alex Mintz (eds.), Defence, Welfare
and Growth, (Routledge: New York, 1992), p. 7-35 and 211-240.
109
Author got the figure from Indonesia defense budget tables in Indonesia White Book 2003 and
2008.
110
“A State of Unreadiness” in Van Zorge Report, April 1, 2008, p. 11-12.

54
human rights violations in Indonesia. 111 These violations were related with the
usage of repression ability that was supposed to be utilized only in defense tasks
but misused in strengthening military business emporium. This condition can
make unfair situation in national business and economy. With its coercive
capability, armed forces then can also involved in illegal business, such as illegal
logging, drugs trade, smuggling, gambling backing and even weapon selling. 112

Reformasi 1998 brought civil society awareness of how military power needs to
be supervised and controlled. These oversights will not able to fully conducted if
the military still have access to self fund that is not transparent, therefore its
business should be reformed under good governance democratic values. Forces to
reform military business faced typical argument of government inability to
provide financial support necessary, which was said to fulfill only 30%-50% of
defense budget inquired 113, so military need extra income from business activities
to maintain their survivability.

But was that really the case? If the allocation percentage of defense budget with
state budget and GDP (in Table III.4) is compared to the peak time of military
business that boomed in 1980s and its graying time in late 1990s due to economic
crisis 114, there is no correlation on how much the government spent on defense
with the growing or declining of the business. Even when government put higher
percentage of defense budget, military business still soared, and vice versa. This
comparison can be arguable of course, since military business is not a transparent
subject therefore expert can only estimated its high and low period without real
profit numbered.

111
Lisa Misol, Too High a Price: The Human Rights Cost of the Indonesian Military, (Jakarta:
Human Rights Watch, 2006).
112
Danang Widoyoko, et.al., Op. Cit., p. 38-42.
113
In Indria Samego, Op. Cit., p. 100, and “Indonesia: Next Steps in Military Reform”, ICG Asia
Report, No. 24, Jakarta, Oktober 2001.
114
Researcher Sukardi Rinakit estimated that only about one-third of the military companies
survived the crisis. Donald Greenles, “Indonesia Wants its Army Out of Business” in International
Herald Tribune, May 4, 2005.

55
 Table III.4. Percentage of Defense Budget with State Overall Budget and GDP
Year Percentage with Overall Government Budget Percentage with GDP
1970 23.5 % -
1975 16.9 % 3.6 %
1980 11.3 % 2.9 %
1985 10.6 % 2.5 %
1990 7.0 % 1.5 %
1995 7.7 % 1.6 %
2000 4.3 % 1.0 %
2005 5.6 % 1.0 %
Source: Mas Widjaja Paper quoted in Lex Reiffel and Jaleswari Pramodhawardani,
Menggusur Bisnis Militer: Tantangan Pembiayaan TNI Melalui APBN, (Bandung:
Mizan, 2007), p. 168 with mark made by author. Darker gray area marked the highest
and lighter gray area marked the lowest military business activities.

Another argument to keep military business is that it is needed to help Indonesian

armed forces development. Because of the insufficient government defense
budget, national military readiness is low, therefore sources of off-budget funding
is needed. In the Figure III.3 is displayed how much percentage of Indonesia’s
TNI readiness.

Figure III.3. Indonesia Military Readiness

Source: “A State of Unreadiness” in Van Zorge Report, April 1, 2008, p. 12. The
percentage shows operational readiness capability.

Nevertheless, this argument is also not acceptable because if seen from the
defense spending budget statement given in Table III.5 and Figure III.4, the
biggest part goes routine cost. It means that mostly the government budget goes

56
for personnel salary, maintenance and official trips, and only some part goes to the
development side, such as developing system, personnel, facilities and
equipments.

Table III.5. Indonesia Defense Budget 1999-2002

Year Development Routine Total % % Development
Budget (in Budget (in Amount GDP National /Routine
IDR billion) IDR (in IDR Budget Budget
billion) billion) Comparison
1999/2000 1,756.76 8,307.43 10,064.00 0.89 4.43 1 : 4.73
2000 1,945.31 6,594.42 8,339.73 0.85 3.80 1 : 3.39
2001 2,520.85 9,150.97 11,671.82 0.60 3.29 1 : 3.63
2002 2,880.11 9,874.83 12.754.94 0.76 3.71 1 : 3.43
Mean/Year 2,275.76 8,481.91 10,722.67 0.78 3.79 1 : 3.73
Source: Ministry of Defense Indonesia, Indonesia White Book 2003, Chapter 6, (Jakarta:
MoD, 2003). Development/routine budget comparison is calculated by author.

Figure III.4. Defense Budget Allocation 2000-2009

25,000.00

20,000.00

15,000.00 Routine Budget

10,000.00 Development Budget

5,000.00

0.00
05

06

07

08
00

01

02

03

04

20

20

20
20

20

20

20

20

20

Source: Data from RoI Ministry of Defense, Defense White Book 2003 & 2008, chart
made by Author

Therefore what really hampers the readiness of Indonesian military is not the
small budget but how the budget is managed and allocated, because seen from the
defense budget (Figure III.5), the amount is regularly raised every year. Moreover
seeing from the year 2000 to 2009 the amount quadruple from IDR 8.5trillion
(US$ 850million) to IDR 33.6trilion (US$ 3.36billion), so there should be no
reason not to reform military business. To increase military readiness, the
government should allocate more to development budget rather to the routine
budget but of course, there should be a consideration not to expand, or even to
lessen, the number of military personnel so their welfare will not be affected.

57
 Figure III.5. Indonesia Defense Budget Graphic (in billion IDR)
35,000.00
30,000.00
25,000.00
20,000.00
15,000.00
10,000.00
5,000.00
0.00
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source: Data 2000-2002 from Indonesia White Book 2003, data 2003-2004 from
Ministry of Finance quoted in Lisa Misol, Too High a Price: The Human Rights Cost of
the Indonesian Military, (Jakarta: Human Rights Watch, 2006), p. 86, data 2004-2008
from Indonesia White Book 2008, Ministry of Defense and data 2009 from Defense
Minister Juwono Sudarsono statement in Media Indonesia, May 25, 2009. Graphic made
by author.

According to Indonesian defense expert Andi Widjajanto, military business does

not have a strong base to be kept. His estimation of military business profit was
around US$ 60-120milion per year, which only adds around 3-5% of the budget
needed, and will not be able to cover the lack of 40-60% of defense budget that is
claimed not being provided by the state. 115 Widjajanto also negated the frequent
used arguments in prolong military business life, such as “gun-vs-butter”; lack of
government system especially public taxation; ruling regime low commitment in
defense issue; absent of strategic planning in defense; to the corruption practice in
weapon procurement which resulted to the short of budget as not being solid
enough. He then quoted expert Edi Prasetyono opinion on changing the way to see
defense budget. Prasetyono advised that defense budget should be seen as
predictor variable not response variable. Therefore with this view, the state will
determine its defense policy according to its budget and not vice versa. 116 The
budget driven defense policy can be a way to reform Indonesia military business.

115
Andi Widjajanto, “Reformasi Militer, Ekonomi Pertahanan, dan Bisnis Militer di Indonesia” in
Jaleswari Pramodhawardani and Andi Widjajanto (eds.), Op. Cit., p. 24.
116
Ibid, p. 8-9.

58
 Chapter IV
GOVERNMENT POLICY IMPLEMENTATION
IN DIVORCING MILITARY FROM BUSINESS

This chapter describes and analyses how far Indonesian government implemented
its policy in taking over military owned business. Since 1998 Reformasi, the
government had stated its commitment to conduct military business reform by
issuing policies, which are (1) State Defense Law UU No. 3/2002 article 25(1)
that affirms national defense is funded by state budget, (2), TNI Law UU No.
34/2004 in article 2(d) on professional military that does not conduct business, (3)
TNI Law UU article 39 which prohibits military personnel involved in business
activity, and (4) TNI Law UU article 76 that gives five years deadline to the
government to conduct military business reform. Especially referring to the last
regulation, five years period is almost ended with limit of October 2009. Author
will examine government efforts in taking over military business with tools of
media and stakeholder analysis, and will further give advice to improve by
learning from other countries’ experience, which is China and the US. The
structure of Chapter 4 is depicted in Figure IV.1.

Figure IV.1. Structure of Chapter 4

Indonesia Military Business Takeover up to Feb 2009

Military Business Takeover Reported in the Media

Military Business Takeover Seen by Stakeholders

The Future of Indonesia Military Business Takeover

Lesson Learned from Other Country &

Alternative Solution on Indonesia Military Business

Source: Author

59
Main purpose of this chapter is answering the three out of five inquiries given in
Research Question section stated in page 6-7 of this thesis. Firstly, how is
Indonesian government’s process in separating military from business. Secondly,
how efficient and effective is Indonesian government in implementing policy for
transferring military control of commercial enterprise to the civil sector. And
thirdly, what are the alternative solutions to improve Indonesia’s policy
implementation learning from other country’s experience. Then will be closed by
alternative solutions in managing Indonesia military business generated from the
process conducted in the chapter.

IV.1. Winning the Battle: Indonesia‘s Effort in Separating Military from

Business up to February 2009
After the four regulations on military business takeover issued, the first policy
implementation conducted by Indonesian government was Defense Minister
Juwono Sudarsono order to the head of TNI to prepare the organization business
activity list in the beginning of 2005. Then in August 2005, with Defense Minister
Decision Letter SKEP/450/M/V/2007, Tim Supervisi Transformasi Bisnis TNI
(TSTB TNI) is created to deal with the issue and prepare draft for president
decree. This ministerial team was filled with interests and lacked of working
which caused TSTB to work lengthy. It produced estimation of military business
assets in July 2006 with amount of IDR 1.5 trillion but parliament, experts and
NGOs doubted the accuracy. 117

Due to TSTB failing progress, President SBY issued a Decree No. 7/2008 in April
2008, one and a half year before deadline, to create national team to takeover
military owned business. The team was called Tim Nasional Pengalihan Aktivitas
Bisnis Tentara Nasional Indonesia (Timnas PAB TNI), worked independent as
opposed to be under certain ministry, and headed by civil professional. Timnas

117
TSTB came with amount of IDR 1.5 trillion (US 150 million) while other researches concluded
that military assets were bigger. Some of the research are “Bisnis TNI 1 Triliun DIDR Kaget dan
Kecewa” in Rakyat Merdeka, July 20, 2006, “Diragukan, Kinerja Tim Supervisi Bisnis TNI” in
Jawa Pos, July 24, 2006, and Human Right Watch, “Indonesia: Reformasi Bisnis Militer”,
accessed from http://www.hrw.org/legacy/indonesian/docs/2007/02/16/indone15349.htm,

60
PAB TNI then created four criteria for military business that should be stopped,
which are 118 (a) business activity owned, controlled, and run directly by TNI
personnel or institution, (b) business activity owned, controlled, and run indirectly
by TNI personnel or institution, (c) business activity that has the potency to create
clashes of interest what able to disturb TNI work, and (d) business activity that
use, run, control or utilize state asset conducted by TNI institution or active
personnel. In six month this team had succeeded to verify the value of military
business, which covered 23 foundations which run 53 companies, and 1,098
cooperatives that run 2 companies. 119 The total 1,176 business units’ asset can be
seen in Table IV.1.

Table IV.1. Position of Military Business in 2007

Asset Obligation Net Asset
Type of Activity
(IDR Billion) (IDR Billion) (IDR Billion)

Foundations 1.872,92 434,57 1.438,35

Cooperatives 1.320,55 536,31 784,24
Total 3.193,47 970,88 2.222,59
Source: Tim Nasional Pengalihan Aktivitas Bisnis TNI Report given to author
March 11, 2009

Despite the successful military business asset clarification, Timnas could not do
more in the takeover process. No authority was given to the team to conduct
takeover activity, only to create recommendation of what the president should do
on the matter. Therefore Timnas PAB TNI issued three alternatives as option to be
chosen by the president. The alternatives are: 120
1. Until the government can provide military welfare, primary cooperatives that
directly support military personnel welfare can still allowed to run but other
forms of cooperatives must be taken oven and for awhile their assets can be given
to primary cooperatives. Advisable that people that run the cooperatives are not
active soldiers. Foundations must be taken over by various mechanisms and put
under Ministry of Defense, or for higher degree education foundation to be put
under Ministry of Education, or liquidated. Assets should be given to Ministry of

118
Wisnu Dewabrata, “Upaya Hapus Status Tentara Niaga TNI” in Kompas, November 27, 2008.
119
“Timnas Bisnis Pertahankan Koperasi”, in Republika, December 30, 2007.
120
Tim Nasional Pengalihan Aktivitas Bisnis TNI Report given to author March 11, 2009, included
in this thesis as appendix.

61
 Finance, or if they are still in use or rented should be regulated under Finance
Minister and state regulations so the revenue will be submitted to the state,
including business such as hospital. Government need to create team to arrange
the takeover which consists of Ministry of Defense, TNI and institutions linked.
This alternative is pragmatic, considering condition in the field and able to
conduct the takeover wholly.

2. Similar with alternative 1 but primary cooperative roles to provide soldier welfare
is handle by working units created under Ministry of Defense. The working units
made by considering input from experts, practitioners, and experiences of other
country such as Port/Base Exchange in USA that gives services on soldiers’ main
needs and managed under MoD. This alternative will make military focus on its
task. This alternative is realistic, able to conduct the takeover wholly with
considering realization and implementation.

3. The military foundations and cooperatives are fused with similar foundations and
cooperatives under Ministry of Defense in corridor with the existing regulations.
In the future, the foundations and cooperatives under MoD should be adjusted,
ran through financial and legal audits, and for the capital to be returned to the
state (for foundation) or the members (for cooperatives). The alternative opposed
the spirit of bureaucracy reform in managing good governance. This is a very
conservative alternative which consider the easiness of takeover implementation.

Timnas PAB TNI completed in October 2008, exactly one year before the
deadline. No further activity in separating military from business was told to the
public. Although the implementation of government policy in taking over military
business was left to President SBY hand, he did not issue any regulation or make
another body to execute the practice. In February 2009, parliament fraction Partai
Keadilan Sejahtera held a seminar of TNI reformation that noted homework on
military reform, including reforming its business. 121 The meeting pushed the
government to solve its unfinished agenda before the term ends in mid year. No
comment came from government up to March 16, 2009, when Defense Minister
Juwono Sudarsono stated in newspaper that the military business transfer will be
settled in October this year. This statement is worthy to note but the real activity
to implement government takeover policy is also needed to be check. Efforts
conducted so far can be one of the measures to project government success in
fulfilling the deadline. In Figure IV.2 can be seen the activities to separate military
from business being done so far and the time consumed.

121
“Masa Depan Reformasi TNI Pasca 2009”, accessed from http://m-
ula.blogspot.com/2009_03_01_archive.html in March 4, 2009.

62
 Figure IV.2. Military Business Takeover Process and Time Frame

No activity since UU 34/2004

issued (Oct 2004)

TSTB TNI (Aug 2005 - Apr

2008)

Indonesia Timnas PAB TNI (Apr 2008 -

6.67
Military Oct 2008)
16.67 53.33 10 13.33
Business
Takeover No activity reported in the
media (Oct 2008 - Feb 2009)

Time left before deadline

(Feb 2009 - Oct 2009)
0% 20% 40% 60% 80% 100%

Source: Calculated by Author

From the percentage of time consumed, the lengthiest was used by TSTB TNI
team with 53.33% or more than 2.5 years out of five years deadline. The second
longest time used is after the law issued, with 16.67% or around ten months the
government idled to proceed with implementation. Because the verification result
used as base for the action is Timnas PAB TNI finding, which only took 10% or
around 6 months, it then can be said that 70% of the time had been wasted
unfruitful. This condition worsens by no statement from government up until
February 2009, a limit posed by the author on this research. From February 2009,
there is only eight months time left (around 13.33%) before the issue reaches its
deadline.

Can the government fulfill the target considering there had been no military
business units transferred, or even, no statement on which alternative chosen to be
the guideline to conduct the takeover process? Is it true, as like what political
expert Marcus Mietzner had stated 122, that the post-Suharto governments have not
seriously tackled the issue of military self-financing which made the process to
establish effective and democratic civilian control over the military cannot be

122
Marcus Mietzner, The Politics of Military Reform in Post-Suharto Indonesia: Elite Conflict,
Nationalism and Institutional Resistance, (Washington: East West Center, 2006), p. 49-62.

63
completed? Author will further analyze Indonesian government’s efficiency and
effectiveness in implementing policy for transferring military control of
commercial enterprises using media analysis followed with stakeholder analysis.

IV.2. News Buzz: What the Media Says on the Divorce of Military from
Business
The importance of media reportage can be seen in the words of former US
President Franklin Delano Roosevelt, “The only sure bulwark of continuing liberty
is a government strong enough to protect the interest of the people, and a people
strong enough and well enough informed to maintain its sovereign control over its
government”. 123 News in public media is the portrayal of what happened in state
and society. It shapes public mind as well as informing the how the government
work, and more importantly whether they work well, so people will be able
conduct oversight in their activities, which in this context, in measuring military
business takeover policy implementation.

As there are many theories on media analysis, author had chosen discourse
analysis on the content of media reportages. 124 Discourse is how a certain issue is
being debated in both elites and public area which brought about several effects to
the society. With discourse analysis, these effects are investigated. In military
business issue, there are two effects that had been created by media publication,
first is the social cognition and second is the socio-cultural change. The social
cognition explained how the society recognized the issue that is being brought
about by the media and making it a communal problem. Meanwhile, socio-
cultural change explained how the society change its position toward the issue, for
example from not knowing, to know and aware of the issue, and then making a
stance on it. In this way, discourse can produce and reproduce status quo and then
transform it. 125 Military business reform is an issue that had been publicly

123
Robert Norris and Patrick Merloe, Media Monitoring, (Washington DC: National Democratic
Institute, 1954), p. 1.
124
For reference on media analysis, read Eriyanto, Analisis Wacana: Pengantara Analisis Teks
Media, (Yogyakarta: LKiS, 2001).
125
Eriyanto, Op. Cit., (Yogyakarta: LKiS, 2001), p. 17-18.

64
discoursed since Reformasi era, alongside with other reform demands. It is
especially heavily publicized after the TNI Law issued in October 2004 and
continues to catch public interest due to five years deadline for the government to
takeover military owned business.

Author conducted media analysis on news about military business given to public
from 2004 to February 2009 using content analysis of the media. 126 The analysis
was conducted in series of:
1. Collecting publication
2. Tabulating collected publication according to (a) date of publication and
media; (b) title; (c) spokesperson; (d) statement; and (e) type of news
whether it support the military business take over, partially support, does
not support, or neutral considered from the writing and statements quoted.
Author given the assessment of the type of news to two people to decide
the type of news, and given her opinion if they do not reach consensus.
3. Calculating issue of the publication, and
4. Analyzing the calculation result in form of chart and qualitative analysis.

From the research, author had collected 103 news on government taking over TNI
business from fifteen publications in Indonesia (the full table of media coverage
can be seen in the Appendix Table of Media Coverage on Military Business in
Indonesia 2004 – Februari 2009). There are 49 news which support government
taking over military business, 9 news that partially support, 16 news that does not
support and 29 news that is neutral to the issue. What author classified as neutral
is news on military business takeover that had only explanation on how the
process run or will be conducted, without statement or comment that either
support or does not support the government to conduct military business takeover.
From the publication gathered over the chosen period, author had summarized the
stances of the news which can be seen in Figure IV.3 below.

126
Author used the same content analysis with what is applied by Shahzad Ali and Khalid, “US
Mass Media and Muslim World: Potrayal of Muslim by Newsweek and Time (1991-2001)” in
European Journal of Scientific Research, Vol. 21, No. 4 (2008), p. 554-579.

65
 Figure IV.3. Stance of Media Coverages on Government Taking Over Military
Business in Indonesia (2004-Feb 2009)
70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2004 2005 2006 2007 2008 2009 (up Average
to Feb)

Support Support Partially Does Not Support Neutral

Source: created by Author, 2009

From the statistical figure, it can be seen that in general government takeover
military business is supported by the media and the stakeholders which statements
had been quoted in the news and over the year, resistance to for the government
conduct the takeover is slowly declining. Support of the takeover since TNI Law
issued is already 45.45%, and reaching its peak in 2007 with 63.63 % with
average of 47.57%. While the news that is not supporting government taking over
military business reached its highest when the law is starting in 2004 with 27.27%
and gradually lowering to 8.33% with average of 15.53%. Using the discourse
analysis theory, it can be said that Indonesian society is supporting government to
takeover military business and the minority that in the beginning refuse the
change is little by little accept it. But this of course, has not explained how the
policy implementation is conducted.

From the content analysis conducted, the news shown that government had not
progressing well in taking over TNI business. The discourse in the news until end
of 2004 is in one side TNI wanting to keep military business (Head of TNI Gen.
Endriartono Sutarto: “We still run the business because the real budget is far from
sufficient”, Kompas, Nov 11, 2004); civil society expert that wants reformation
(Researcher for Center Strategic and International Studies (CSIS) Philips

66
Vermonte: “One of the bad excesses of military business is shifting loyalty of the
soldier, from TNI that is main state defense tool to economic interest of few, or
even only of the person itself… For this we need more fundamental things,
including transparent investigation and rule of law principle”, Sinar Harapan Dec
16, 2004); and Ministry of Defense that is trying to find middle ground (Defense
Minister Juwono Sudarsono: “The smaller ones (of TNI business units) will not be
taken over. They will still be owned by the TNI to help fulfill the soldiers' needs,
but the government will take over military business enterprises that have assets
worth IDR 5 billion. This is still discussed”, Jakarta Post, Sept 12, 2004).

In 2005, the issue is shifting more on how the takeover process will be conducted.
There were debates on which military business units should be taken over by the
government (Defense Minister Juwono Sudarsono: “Only ten out of 219 business
unit under TNI inventory that will be taken over because only those fulfilling
criteria, from the capital to the management side, that have assets around IDR 25
million, the others are more in form of social,” Tempo Interaktif, Oct 20, 2005).
There is issue in who will later manage military business (Former Vice of TNI
Chief of Staff and Commissioner in Bank Artha Graha a military owned business
Kiki Syahnakri “The military holding company should be under TNI. In the US,
military has business units, but the management is handled by professional
therefore it is accountable and transparent” in Bisnis Indonesia, Feb 15, 2005).
There is question on who will be responsible to the indebted business units
(Economic Coordinator Minister Aburizal Bakrie: “The plan to transfer military
business to state-owned company is still being analyzed because government does
not want the transfer to be a burden to state budget,” Republika, April 18, 2005).
And most importantly, who will investigate the assets (Director of Pro Patria
(NGO) Hari Prihartono: “Because the business include active military personnel,
it is not easy to inventory them,” Sinar Harapan, March 5, 2005).

In 2006, the debate on separating military from business is more on the formation
TSTB team and the NGOs pushing forward urgency to reform military business
because it created human rights violations and if it takes too long, the assets will

67
be dissolved. The debate even attracts international attention so the military had
forced to give explanation (TNI Spokesperson Maj. Gen. Kohirin Suganda
Saputra: “As to Misol’s hope that the U.S. should put pressure on the Indonesian
government to end military business activities, in fact the transfer of military
business is underway”, Jakarta Post, March 15, 2006). This year, the government
talks had reach agreement that only TNI business that has state assets will be
taken over (Head of TSTB TNI & Assistant to the Ministry of State-Owned
Company Said Didu: “There is grey area that needs to be redefined. Only TNI
business with government assets will be taken over”, Kompas, July 20, 2006).

What interesting in 2005-2006 is that because of the public opinion in the media
was blaming TNI as the actor of business. Head of TNI determined to cooperate
by making a roadmap (TNI Spokesperson Maj. Gen. Kohirin Suganda Saputra:
“According to plan, Head of TNI wants to finish the matter of military business in
two years, which means in October 2005 already had a policy, so that the
execution will be in October 2005 to October 2006. Then in November 2006 to
November 2007 will be evaluated and expected to conclude by 2007”, Koran
Tempo, September 25, 2005). They cooperated to give data asked by takeover
teams, which in 2006 Head of the TNI Djoko Santoso then replied when asked on
the process that it is not their problem anymore (“For the takeover process is
considered not progressing, it is no more the problem of TNI”, Kompas, October
5, 2006). Nevertheless, there is no explanation whether TNI discussed this
timetable with the government and also no respond from MoD or the team on this
statement.

Year 2007 passed without meaningful military business reform process conducted
because TSTB slow work and the president has not issue decree regulating TNI
business, as it is mandated in UU No. 34/2004. The state secretary stated that draft
for president decree was not suitable therefore given back to MoD for revision
(Cabinet Secretary Sudi Silalahi: “After being accepted from the MoD, -the draft-
turned out to be less harmonized and not synchronic therefore returned back”,
Sinar Harapan, Feb 10, 2007). This situation even made Defense Minister Juwono

68
Sudarsono pessimist (“I’m not sure that TNI business can be submitted in 2009,
like what is mandated by UU No. 34/2004” Bisnis Indonesia, June 12, 2007).

In 2008, after four years no explanation to public on how government conducts

takeover of military business, parliament started to push the government
(Parliament Member of Commission 1 Yuddy Chrisnandi: “I’m suspecting there
is ‘batting eye’ between government and TNI because they both do not have
strong political will to finish this (TNI business) issue. Now the part that has
physical business assets is TNI, while government has regulation. Both factors
must exist so that the takeover can run… I’m afraid that since TNI Law
implemented until deadline, all business units taken over are only the non
performed while the profitable had been sold” Kompas, January 18, 2008). Then
President Decree No. 7/2008 was out in April but it does started government
takeover action, only making a new team Timnas PAB TNI. The new team
succeeded to produce three takeover recommendations in October 2008 and put
the decision to the government which one will be implemented.

In the beginning of 2009, Defense Minister Juwono Sudarsono stated his

preference on Timnas recommendations (“We still recommend keeping primary
cooperative and foundation, according to existing laws, this is considering the
necessity of low rank soldier”, Antara News, January 1). Parliament gave another
push (Parliament Member of Commission 1 Bagus Suryama: “President needs to
take decisive approach in takeover TNI business. The key to the problem is the
president has to decide soon which option to take because it had been too long.
The three options had been reported to the president two-three months ago but no
decision until now”, Kompas, January 7) but until end of February 2009, President
SBY did not issue any regulation. The last statement worth notice was from
Assistant to the Ministry of State-Owned Company Said Didu (“Ministry of
Finance will take care of TNI business assets. Ministry of Cooperative and Small
Business Units will takeover TNI cooperative, Ministry of Law and Human
Rights will manage TNI foundation, and Ministry of State-Owned Company will
takeover TNI business units that can be transformed to state-owned companies.

69
The qualifications for the units to be state company are having asset more than
IDR 15-20 million and do not burden state economy… The handing over will be
done by Ministry of Defense, not by TNI,” Kontan, Feb 13, 2009).

From the media analysis conducted, the government policy implementation to

takeover military business is not efficient and effective because (1) President SBY
has not issue regulation in executing takeover process, which impacted to (2) no
clear body that can be held responsible in conducting the takeover, because (3)
there are too many ministries involved without coordination, because (4) the
president has not given authority to certain body to conduct takeover. Author had
succeeded to obtain statement from the president on the issue, which will be
further discussed in the next sub chapter.

IV.3. Stakeholders Perceptions on Government’s Progress in Separating the

Military from Business
The second tool that the author uses to measure government effective and
efficiency in taking over military business is stakeholder analysis. The
measurement is assessed from stakeholder statements whether they see the
government work is efficient and effective or not. The effectiveness is considered
from whether the government can reach the goal to takeover military business as it
stated in TNI Law Article 76. While the efficiency is considered from whether the
government utilize time efficiently or not, and from how much it can takeover
from total IDR 3.2trillion military business assets verified.

Stakeholders, defined by Meri Williams, are people who hold a stake in the
project, the people who care about the project’s outcome. 127 It is important to
identify the stakeholder to understand their point of view and to analyze these
views to map the situation, which in this case is measuring how they see the
process of government taking over TNI business so far and whether they see that
the deadline can be reach. The analysis will be conducted in several steps:

127
Meri Williams, The Principles of Project Management, (Cambrige: SitePoint, 2008), p.33.

70
 1. Identifying the stakeholders
2. Defining the questions shaped to answer how is the efficiency and
effectiveness of government policy implementation in taking over military
business
3. Compiling the stakeholder stances
4. Analyzing the stances
5. Concluding the stakeholder analysis to assess government policy
implementation in taking over military business

Firstly in identifying the stakeholders, researcher for Center for Strategic and
International Studies, Edy Prasetyono, highlighted three stakeholders in TNI
reform, which are the government, TNI itself and the civil society. 128 Author sees
that the classification is too general therefore she came out with five categories of
stakeholder: (a) the government or executive that is divided to President as the
highest authority, Ministry of Defense that is the executor of president command,
and the takeover team, (b) TNI as the side which business will be taken over, (c)
the legislative of Commission 1 that manage defense and security issues; (d) civil
society in Indonesia, that is divided to NGOs and experts as the advocator and
think tank that push for military reform to be done after Reformasi; and (e)
international donor in Indonesia security sector reform that has the influence to
shape national policy. Secondly, in defining question to assess how well
government policy implementation in takeover military business and whether it
can fulfill deadline, author proposed several questions for the stakeholders, which
are:
a. How does the stakeholder see government efficiency and
effectiveness in implementing military business takeover?
b. Does the stakeholder think that the government can fulfill deadline
of takeover in October 2009?
c. What does the stakeholder did/do/will do in the issue of Indonesia
military business takeover?

128
Edy Prasetyono, “Jalan Panjang Reformasi TNI”, Kompas, February 11, 2008.

71
In conducting the third step, which is compiling the stakeholder stances, author
obtained the stances from interviews, official documents and publication in the
media. Author had collected 14 stakeholders stance through interview,
official document and reportage given by the media. The stakeholders
represented is 5 from the government, 2 from the TNI, 1 from the
legislative, 5 from the civil society and 1 from the international donor. The
compilation of stakeholder stances in answering the proposed questions is stated
in Table IV.2.

Table IV.2 Stakeholder Stance in Answering Questions on

Indonesia Military Business Takeover
Stake Stakeholder Name of the How does the Does the What does the
holder Institution Person and stakeholder see stakeholder stakeholder
Category Posituon government think that did/do/will do
efficiency and government in the the issue
effectiveness in can fulfill of military
implementing deadline of business
military business takeover in takeover?
takeover? October 2009?
(a) Susilo “Of course the “From the “In the
govern President Bambang takeover must be timeframe that meantime
ment Yudhoyono well formulated is still present team (of TNI
129
/ on which and I see it business
President of consider still sufficient takeover) will
RoI unsuitable enough to work
business in TNI solve this.” intensively to
and which is not. fulfill the
For example target like
soldier what is
cooperative for mandated by
daily needs, it law to
exists in every conclude this
institution like TNI business
stated in takeover
Cooperative Law issue.”
and Constitution
1945, surely that
is not consider as
TNI business.
What is clear that
TNI and MoD
have prepare to
restructure

129
Compiled from the Official Press Release of President Talk in Ministry of Defense, February 4,
2009 (see Appendix Presentasi dari Menteri Pertahanan RI di Gedung Departemen Pertahanan)

72
 (business)
according to
law”

Juwono “We are striving “All (TNI “The state

Ministry of Sudarsono to continue business secretariat was
130
Defense / settling this transfer) will preparing
Defense problem on time, be already be recommendati
Minister democratically resolved ons on the
and accountably before Oct. 16, issue in
in accordance 2009, at the response to a
with the law.” latest.” report from
the national
team handling
the
management
transfers of
TNI
businesses to
the state. It’s
(content) still
a state secret.”

Col. Bayu “It is “Defense “We are

Setiawan 131 progressing, it Minister working on it.
/ Law needs time. Do Juwono stated But the data
Bureau of not worry, we that we have cannot be
MoD are working at it. to finish the open to public
TNI business and issue in yet. It will be
military court are October. We disclose after
two main issues will.” it is done.”
that we are
seriously dealing
right now”

Said “Government “The target “Our (TSTB

Takeover Didu 132 / through TSTB will be like TNI) work had
Team Head of TNI is being stated in the been reported.
TSTB TNI careful for not law. Do not Now Timnas
& Assistant given the worry, PAB
to the authority to October 2009 continues the
Ministry of conduct the will be finish.” work of TSTB
State- takeover to (Media TNI team and
Owned Timnas PAB Indonesia) the national
TNI, so that in team can work
the future, better because

130
Statement in “TNI Business Transfer to be Settled by October”, Jakarta Post, March 17, 2009.
131
Interview March 17, 2009
132
Said Didu decline author interview request stated that he is no longer taking care of the team
after it finished working in April 2008. Therefore author took his statement from media
publication namely “Bisnis Militer Diambil secara Hati-Hati”, Kompas, 29 April 2008 and
“Ditelaah Pengurus Yayasan TNI yang Melanggar Aturan”, Media Indonesia, April 28, 2009.

73
 government will it has better
not be legal base.”
burdened.” (Media
(Kompas) Indonesia)

Erry Riyana “Our team had “I cannot “The executor

Hardjapame worked hard to really say. It team of
kas 133 / collect data on depends on Timnas PAB
Head of TNI business how fast the TNI work had
Timnas units, and I am conduct will finished, now
PAB TNI in sure this is the go. Our team it is left in the
Executor only accurate can work in hand of
Team and factual data.” six months. So guidance
there is a team, which is
chance.” Defense
Minister to
conduct
takeover
execution, but
before it must
be stated how
will the
takeover
conducted.”

(b) Djoko “I think why the “For the “Since the

military TNI Santoso 134 / government takeover head of TNI
Head of takes time in this process is still held by
TNI Mars. issue is because considered not Gen (Ret.)
they are being progressing, it Endriartono
careful. What is is not the Sutarto,
clear is that TNI problem of internally TNI
had given all of TNI already
our business to anymore.” committed to
be managed. So give their
there should be business to be
no accusation taken over
that TNI according
hampers the what is
process. We mandated by
don’t want to be the law. By
blame.” that time the
Head of TNI
even
committed to
speed up TNI
business

133
Interview and data given by Erry R. Hardjapamekas personal assistant Sonny Wibisono
February 7, 2009.
134
Since it is difficult to arrange interview with Head of TNI Djoko Santoso, author took his
statement from media publication namely “HUT ke-61TNI: Menyoal Kembali Reformasi TNI”,
Kompas, 5 October 2006.

74
 handing over
from 5 years,
like stated in
Article 76 UU
34/2003, to
only 2 years.”

Major “We cannot “Let see what “It is not a

Muhammad really say. But the TNI matter
Aras TNI has been government anymore
Razak 135 / cooperative with will do. As because we
Information the government TNI cannot had handed all
Center Staff in takeover really say.” the business
of TNI issue” inventory to
MoD. You
should ask the
MoD”

(c) Commission Abdillah “I do not see any “I do not “We keep

legis 1 of the Toha 136 / progress on the know. Let see, asking about
lative Parliament National issue of military but seeing the takeover
Mandate business from the every time
Party takeover.” deadline, I there is a
Fraction kind of doubt meeting with
it.” MoD but still
no progress. It
is hard for
Commission 1
to follow the
issue because
we only have
one expert
staff.”

Institute for Mufti “The government “I doubt that “IDSPS

Defense, Makarim 137 is slow in the takeover conduct two
Security and / Executive implementing can be done in ways of
Peace Director takeover. The October 2009, actions. Which
Studies time is mostly because the are research
(NGO) spent on regime is base to give
negotiating given big alternative
because I see the importance to policies and
(d) SBY regime is obtain power raising social
civil not confidence stability and awareness on
society and having no does not want the issue by
clear signal of to make risk.” making
direction. In discussion,
China, military press release,

135
Phone interview June 1, 2009
136
Interview March 17, 2009
137
Interview January 20, 2009

75
 business SSR training
takeover settled and event,
in one year.” such as
commemorati
ng 10 years of
reform in Mai
2008.”

Pro Patria 138 Hari “The government “TNI business “ProPatria

(NGO) Prihartono is not giving not will be conduct
139
/ clear mandate on taken over in seminars,
Director how the takeover October 2009 working group
should run and whoever the discussions
who has the president is. and researches
authority to do it. Indonesia on defense
There is no defense issue issues. We
courage to do it. is more also think
We need complex than about what
decisive political only taking will happen
attitude from the over military when the issue
government.” business. We is not finish
need to see the within
big picture, deadline. Will
the linkage we need to
between amend the
budget, soldier whole TNI
welfare and Law or only
TNI business.” Article 76 and
how will it
be.”

Indonesian Jaleswari “The takeover “I doubt that it “I, with a

Institute Pramodhaw process is on will be finish team, is
(NGO) & ardani 140 / going although like what had currently
Indonesia Researcher in my opinion it been asked in making a
Science is very slow. in the law. research on
Institute After the reform, Because TNI off
(LIPI) TNI new seeing from budget. Not
paradigm only the amount of really in the
succeeds to make military field of
them out of business of military
politics but not IDR 3 trillion, business
of business.” it is nothing if takeover but it
it divided to is a part of
around 800 reform issue.”
thousand
troops, but
imagine if
only, let say

138
Interview March 17, 2009
139
Interview March 17, 2009
140
Interview January 13, 2009

76
 25 people
enjoy the
money. These
people are
elites that hold
TNI business,
and they have
power, which
make the
practices hard
to be erased.”

National Fajrul “How do I can “It is “I and friends

Law Falaakh 141 / say whether it is hypothetical, I in the civil
Commision Member of efficient and mean it is society that
(KHN) & KHN & effective while it probable. But concern to the
Gajah Mada Lecturer in has not been any I’m sure if it military
University UGM implementation? can, it will not business
(UGM) I mean, no TNI takeover all takeover will
business had TNI business. not let the
been taken over, I’m sure issue
at least none had government dissolved by
been told to has following time. We will
public.” scenario for keep
after Oct. advocating.”
2009 that had
not been
disclose.”

Indonesia Ikrar Nusa “The takeover is “Until “The civil

Science Bhakti 142 / not working. We whenever society, like
Institute Research will soon enter military me, can only
(LIPI) Professor legislative business talk in seminar
election and they takeover will or like this,
are busy not be finish if but the one
campaigning, so the president who has the
no progress from is still SBY. authority is the
the government He prolonged government.”
and no push from the problem. If
the parliament he is serious in
until now (March takeover TNI
2009).” business, the
issue will not
be
continuously
handed over
from one team
to another”

141
Interview March 17, 2009
142
Interview March 17, 2009

77
(e) Friedrich Artanti “I see that the “I do not “We tried to
intl Ebert Wardhani 143 government is know whether push the issue
donor Stiftung / Head of lacking political it will be by publishing
Security will because the finish, I do not books and
Sector process is not think it will. It support
Reform & clear. There are is either that seminars on
Conflict efforts of military the topic. But
Resolution implementation business will surely the
Program in but it is not metamorphose actor with
FES effective. About , but not gone, authority is the
efficiency, I or the government.”
cannot say government
because they will extend the
never stated the time limit. The
amount of Article 76
military business might be
to be taken over amended or ,
openly and no like many
real action takes expired law in
place, so Indonesia,
therefore the maybe it will
efficiency is still left like it is,
zero.” people will
forget and
government
will stop do
anything about
TNI business.”

Source: compiled by Author

After compiling stakeholder stances, the fourth and fifth step are conducting
analysis of the stance to evaluate government policy implementation in taking
over TNI business, then concluding whether it is efficient and effective or not.
From the answers, it can be seen that government is carefully handling the
takeover issue which make them working in slow pace, but they are committed to
solve the issue before the deadline. The military also realizes the sluggish business
takeover process but they did not make direct comment and stated that the
problem is not in their side, but in the MoD. Legislative uttered that they asked the
government about the issue and regret why there is no progress. The civil society
represented by NGOs and experts are the most vocal to assert that President SBY
regime has no courage to execute military business take over because it prefer

143
Interview March 18, 2009

78
power stability, has no clear direction, and does not disclose information to the
public which hamper oversight. Meanwhile international donor saw the
government is lacking political will to conduct takeover which make it not
effective because the goal is more difficult to be reached. Because almost all five
stakeholders seen the takeover process is slow or even not progressing, hence
author conclude that government the policy implementation is not effective
because of low political will and no clear direction.

Author analyses the effectiveness of government policy implementation from

whether the goals of taking over can be reach in October 2009 or not. From the
answers, only government that is sure that it can takeover military business
according to deadline mandated in Article 76 UU TNI No. 34/2004. The military
itself is being neutral by declining to answer. Whereas the legislative, civil society
and international donor uttered their doubt that TNI business can be taken over by
the government, there even some believes that the business merely change form.
One stakeholder judged that the goal will be reached versus three that do not
believe makes author conclude the government policy implementation in taking
over military business is not efficient, time wise. Also using the logic put forward
by international donor, because no TNI assets had been declared taken over by
government, therefore it is also considered not efficient in the money/capital wise.
Nevertheless, before the real deadline time is reach, no sure statement can be
made, so this is only a hypothetical answer up to the writing of this thesis (June
2009).

IV.4. Uncertain Future of Indonesia Military Business Takeover

Up until now government that is in this case represented by Ministry of Defense
and takeover teams, had not issue report on what are TNI business that had been
takeover. The discussion is still on which business will be taken over and which
will not. This can be regarded tardy, considering it is almost four and half years of
the five years time mandated to the government by Article 76 TNI Law No.
34/2004. This means that around 90% of time had been consumed in making

79
category for the takeover, which are TNI business that is over IDR 20 million and
not providing soldier daily needs. 144 Even so these criteria are not final because
government has not stated it in official policy or regulation, therefore the actual
takeover conduct still unforeseeable.

Seeing the stakeholder answer, author is pessimist that TNI business takeover will
be fully completed by October 2009 as mandated in the law. There are three
stakeholders that doubt that government can implement takeover policy according
to deadline, one stakeholder is neutral, and one is sure that the time is still
adequate for action. However, it is need to be considered that not every
stakeholder has the same importance and influence to TNI business takeover
process. Author deliberates stakeholder conditions by making the matrix shown in
Figure IV.4.

Figure IV.4. Stakeholder Power Position in TNI Business Takeover Policy

Implementation

Degree of Influence: influence the policy implementation

High Influence & High Importance Low Influence & High Importance

Degree (a) government; takeover can (b) TNI; neutral (0)

of be fulfilled in Oct 2009 (3) (c) legislative; takeover can not
Importance: be fulfilled in Oct 2009 (-2)
directly
affected by Value: 3 Value: 2
the policy
High Influence & Low Importance Low Influence & Low Importance
implementati
on
(e) international donor; ; (d) civil society; takeover can
takeover can not be fulfilled not be fulfilled in Oct 2009
in Oct 2009 (-2) (-1)

Value: 2 Value: 1

Source: Crop Post-Harvest Reform, Guidance Note Stakeholder Analysis Form, accessed
from http://www.cphp.uk.com filled and valued by Author

144
Stated by Said Didu, Assistant to the Ministry of State-Owned Company and Head of TSTB
TNI team, to the press. “Empat Departemen akan Tangani Aset Bisnis TNI”, Kontan, February 13,
2009.

80
For the deliberation to be more visible, author gave value to each box according to
its degree of importance and influence, the higher the degree, the higher the
number. From the matrix, can be calculate that the total power in position in
assessing TNI business takeover is -2 or in other word, it is more distrust that the
policy is implemented well and the goal can be achieved within the deadline.

As for the long future of military business takeover post October 2009, there are
several possibilities. Hari Prihartono from ProPatria came up with the possibility
for amending the TNI Law but it will need hard work. Artanti Wardhani from
Friedrich Ebert Stiftung stated that amending of law more likely will be limited
only to the Article 76 which stated the deadline or like many expired law, the law
will be left with no action until the public forgot about the issue. This can be one
of the prospect, because like what Indonesian Institute researcher Jaleswari
Pramodhawardani said, only elites that profited from TNI business and these
people have high power that make it hard to be stopped. There is also a chance
that the government will be committed to conduct the takeover, and prolonging to
implementation is a way to get support to be reelected in 2009 general election.
But this last opportunity can realize only when President SBY won for the second
time, although LIPI research professor Ikrar Nusa Bhakti and IDSPS director
Mufti Makarim doubt his credibility to lead as having no confidence and .not
serious in taking over military business.

From interviews conducted with the stakeholders, author derived several problems
on government implementation policy in taking over military business. They are:
1. Military personnel, especially those in the low ranks, still need primary
cooperatives to support their welfare and daily life
2. The government is not giving clear mandate on how the takeover should
run and who has the authority to execute. In other words, the government
does not give decisive political attitude in taking over military business.
3. No real action of government taking over military business had been done,
in terms of taking over assets. If it was, no formal information disclose to
the public.
4. Because the government action in taking over military business is slow,
there is assumption that military business will simply transform its shape,
like in the Suharto Era.

81
Author will propose policy recommendations in the last chapter of this thesis to
give alternative solution for the government in regards of military business.
Before coming to the conclusion, author suggests that Indonesia can also see how
other countries in the world manage their military business in order to make their
armed forces more transparent and accountable.

IV.5. Learning Military Business Management from China and the US

Indonesia can learn from other countries experience in managing military
business. Country proposed to be a referral of its successfulness in managing
military business is China, which conducted divestiture in 1998 commenced by
President Jiang Zemin. China armed forces, the PLA, was having over 15,000
enterprises, employed over 600,000 civilians and had yearly total revenue around
US$18 billion. 145

President Jiang decided to conduct military business divestiture because of several

reasons (1) the business made PLA unable to work professionally because of it
shifting focus; (2) it increase the cases of corruption and bribery; and (3) China’s
tradition of the military being subordinate and subservient to the Communist Party
was changing because the president did not have military background to earn
enough respect, and the only means to control PLA through budget cannot be
done because they were in some degree financially independent. Therefore in July
1998 President Jiang directed the armed forces to completely close down all their
business operations. This order disallowed the PLA of any involvement in any
form of economic enterprise and also directed the military and other law enforcing
agencies to surrender their existing business operations before the end of the year.
Despite the limited time given, the government succeeded to takeover military
business assets reaching US$ 6.02 billion. 146

145
Swaran Sigh, “Rise and Fall of the PLA’s Business Empire: Implication for China’s Civil-
Military Relations”, in Strategic Analysis, May 1999, Vol. XXIII, No. 2, p. 1.
146
Institute for Defense Security and Peace Studies, Seri 9 Penjelasan Singkat (Backgrounder)
Bisnis Militer, June 2008, p. 6.

82
China government takeover the military own business in three phased. First was
establishing the bodies which responsible for the action. China created the State
Commission on Trade and Economy, a super-ministry under the State Council, to
supervise the transfers to run according to given time limit. The second was
formal registering and assessing assets. Lastly the third phase was going through
the PLA business accounts and transforming them to state-owned companies. Up
to March 1999, China government had taken over 150 large enterprises formerly
owned by the military and police. 147 What Indonesia can learn from China in
taking over military business is several points:
ƒ The president stated the government determination to takeover military business
and he himself led the team.
ƒ The government gave promise to compensate the losses that the armed forces
experience by giving contribution to military budget. The statement was given by
high official Vice President Hu Jintao and directly the budget raise Rmb 30
billion (US$ 4.4billion) per year from 1998 to 2000, and also for the local
government were given Rmb 5 million (US$ 732 thousand) per province to
manage people that were fired by the military business takeover. 148
ƒ The government was also not afraid to take the losses of the poor performing
military companies, defense related industrial activities are kept running, and
they were attempts of opening slots of vacancies in the armed forces to employ
workers that lost their job caused by the takeover. 149

Second country that Indonesia can learn from is the United States of America. The
US members of a Uniformed Service (Army, Navy, Marines, Air Force, etc.) on
active duty may not receive pay from another government position, except during
terminal leave, or unless specifically authorized by law. 150 Enlisted personnel may
be employed part-time during off-duty hours in Department of Defense non-
appropriated fund activities. Members of the Armed Forces Reserves and

147
James Mulvenon, Soldiers of Fortune: The Rise and Fall of the Chinese Military Business
Complex 1978-1999, article from Bonn International Center for Conversion, October 1999, p. 13-
20.
148
“Adjusting Salaries to Appease the PLA”, Inside Mainland China, Vol. 21, No. 1, January
1999, p. 31.
149
Swaran Sigh, Op. Cit., p. 10 & 12.
150
“Moonlighting Law and Legal Definition”, accessed from
http://definitions.uslegal.com/m/moonlighting/ in May 30, 2009.

83
members of the National Guard may receive military pay and allowances in
addition to pay from another Government position. The regulation is stated in
soldier hand book, for example in the army:

“Off duty employment, or moonlighting, is permissible if it does not

interfere with official duties, does not bring discredit upon the Army and
does not violate basic ethical considerations… Working for a bookie
(security guard) is an example of an off-duty job that could discredit the
Army. You must obtain written permission from your commander to
work off duty for non appropriated-fund activities…” 151

With certain rules and supervision, troops are allowed to have a second job. For
soldier welfare issue, US Department of Defense is encouraging personnel to
conduct economic consultation, giving food discount, bank loan and scholarship
for the person or his/her family by cooperating with third parties, such as bank,
economic organization or pension fund. Even after the troops retired, the veterans
are encourage in establishing business and are given supports by priority in
military or government outsource business tender. 152 What Indonesia can learn
from the US is in regulating its armed forces with clear legal guideline; conduct
supervision with written prove for military business activity so it can be
administered; and also giving support to the soldiers and retirements that have
economic difficulties.

Learning from the experience of China and the US, there are two alternatives
solution that can be use by Indonesia in managing military business. It is either
really conduct military business takeover or regulates how military personnel
doing business activity through appropriate set of laws and government bodies.
These options are given back to the government to be deliberated on which one
suitable with the country condition and resources.

151
The United State Department of Army, Legal Guide for Soldiers, (Washington DC: US
Department of Army, 1991), p. 1.
152
“The Directory of Small Businesses Owned by the United States Military Veterans”, accessed
from http://www.veteranownedbusiness.com in May 30, 2009.

84
 Chapter V
CONCLUSION

V.1. Summary
Indonesia military had been involved in business since the early stage of state
making. The definition of military business is “all business activities that cover
foundations, cooperatives, the usage of state assets, and other activities outside the
main task and function of TNI” 153. Historically, the country’s armed forces were
composed by combination of colonial made troops and local guerrillas that
brought about the tendency of seeking their own funding. The fund was used for
military operations against the return effort of the Dutch, and also to pay soldier
welfare because state was too poor to finance its armed forces in the early days of
the republic. But this activity run continuously even after Indonesian government
is established which makes it hard for the civil authorities to have control of the
military if their funding does not come solely from the state budget.

One of the off-budget incomes obtained by the military is through business. In

Indonesia, issue of military owning and running business activity gained critic
after 1998 Reformasi era. Civil society pushed government to conduct taking over
of military business that covers almost all business sectors, from hospital; hotel;
transport service; logging; to higher education body. Within the spirit, this writing
is conducted in order to accomplish these objectives:
• Explain the condition of Indonesian military in terms of funding
and history on how it involves in business sector
• Explain the process of how the government of Indonesia takeover
military owned business up until February 2009
• Assess the efficiency and effectiveness of the government’s policy
implementation in separating military from business

153
From Timnas PAB TNI Final Report Recommendation given to author on February 3, 2009

85
 • Give alternatives on how to improve the government’s policy
implementation from the assessment conducted and also from other
country’s experience in military funding

Military business was accepted in Soekarno era because in the beginning, it is still
needed for the military to have resources to fight for the country sovereignty.
After that, in 1958 an Army General named Abdul Haris Nasution developed
“Dual function doctrine” which formalized the armed forces involvement in both
military and civilian fields, including economy and politics. This doctrine
formalized the armed forces personnel to conduct business activity. In the New
Order era under President Soeharto leadership, military business grew more
rampant. This smiling general allowed the armed forces to involve in business as
an exchange of power support for his regime. Although in his era there was an
effort to limit military business, the action was mild and only changed its shape
from state owned companies to cooperatives and foundations with business units
of various forms. As result, by the end of Soeharto power, the combined turnover
of military business in Indonesia was IDR 2.9 trillion (US$348 million) 154.

Economic downturn brought the momentum of Reformasi in 1998 with civil

society demanded their power in establishing democratic country, including the
demand of taking military out of politics and economy. The process of security
sector reform then started by separation of police and military forces and creation
of legal bases of the soldier professionalism. One of the ways to create
professional armed forces is by controlling their budget so military operation and
task can be regulated by civil oversight. There ways are cutting off-budget
funding, stopping military business activity and taking over their business units.

Legislative had issued four regulations as the legal base to carry out actions to
reform military business. The regulations are first, the State Defense Law UU No.
3/2002 article 25(1) that affirms national defense is funded by state budget.

154
Cited in World Bank, Accelerating Recovery in Uncertain Times: Brief for the Consultative
Group on Indonesia, (Washington DC: World Bank, 2000), p. 29.

86
Second, the TNI Law UU No. 34/2004 in article 2(d) on professional military that
does not conduct business. Third regulation is in the same law article 39 which
prohibits military personnel involved in business activity. And fourth regulation is
also in TNI Law article 76 that gives five years deadline to the government to
conduct military business takeover after the law implemented with further
guidelines explained by president decree. 155 After the legal foundation established
in 2004, it is left for government, or in specific political term, the executive, to
implement these policies.

In the beginning there are arguments why the military business should be kept,
such as the government only fulfilled 30-50% of the defense budget needed 156
therefore if the business is taken over, military readiness will be worst than the
already low condition which only around 50% of Indonesia defense equipments is
ready for use. But in fact there is no correlation on how much the government
spent on defense with the growing or declining of the business. The biggest
defense budget was in the 1970s when the country was fighting to win East Timor
and West Papua, while the highest military business activity was around 1995 in
Soeharto era. In the other hand, government already raised defense budget from
IDR 8.3 trillion in 2000, to IDR 21.4 trillion in 2004, to IDR 33.6 trillion in
2008. 157

The problem is actually not about amount of budget but how the budget is spend,
because Indonesia defense allocation is more for routine budget, that fund soldier
welfare, than development budget that fund for new equipment. The other
problem is that because military is a government tool, ideally the state should be
the one that determines defense spending according to the limited fund existed,
not the other way around. This means that the military should make do with
whatever the government budget given to them.

155
The precise quote of laws concerning military business takeover can be seen in Chapter I, page
4-5 of this thesis.
156
Indria Samego, Op. Cit., p. 100, and “Indonesia: Next Steps in Military Reform”, ICG Asia
Report, No. 24, Jakarta, Oktober 2001.
157
The list of Indonesia defense budget data can be seen in page 55-58 of this thesis.

87
Up to February 2009, Indonesian government under President SBY had conducted
action in taking over military business in terms of making verification of the
assets amount and creating teams of taking over. The timeline of the process is
stated as:
™ October 2004 - The TNI Law issued. Article 76 gave 5 years deadline for
government to takeover military business
™ August 2005 - Creation of TNI Business Supervision Team (TSTB TNI)
by Defense Minister Decision Letter
™ July 2006 - TSTB TNI report finding TNI business assets of IDR 1.5
trillion (US$ 150 billion)
™ April 2008 - Creation of National Team of TNI Business Activity
Transfer (Timnas PAB TNI) by President Decision
Letter
™ October 2008 - Timnas PAB TNI execution team report verification of
TNI business assets of IDR 3.2 trillion (US$ 320
billion) and give recommendations
™ February 2009 - No formal statement from the government on how
military business takeover is conducted so far
although there was pressure from the legislative

There is a need for assessing how efficient and effective Indonesian government,
under President SBY leadership, in conducting the action of separating military
from business after nearly 4.5 years the policy had been issued. In this thesis,
author had looked at the publications in the media and also conducted stakeholder
analysis which brought about the conclusions in evaluating actions taken by the
government.

V.2. Conclusions
Author had assessed how well President Susilo Bambang Yudoyono government
implemented policies on military business takeover using tools of media and
stakeholder analysis. Research findings show that up until February 2009 the
implementation was still in the process of formulizing criteria of TNI business
takeover, such as which companies targeted and how will it be conducted. In the
statement of Said Didu, Assistant to the Ministry of State-Owned Company and
TSTB takeover team head, the take over will be run as: 158

158
“Empat Departemen Bakal Kelola Aset TNI”, Kontan, February 16, 2009.

88
 ƒ Ministry of Finance will take care of TNI business assets
ƒ Ministry of Cooperative and Small Business Units will takeover TNI
cooperative
ƒ Ministry of Law and Human Rights will manage TNI foundation
ƒ Ministry of State-Owned Company will takeover TNI business units that
can be transformed to state-owned companies
ƒ The qualifications for the units to be state company are having asset more
than IDR 15-20 million and do not burden state economy
ƒ The handing over will be done by Ministry of Defense, not by TNI

There is no clear statement from higher ranking government staff or official

policy released to the public on military business takeover which made it difficult
for civil society to conduct oversight. This condition also created difficulty to
assess government effectiveness and efficiency in implementing takeover policy.
Measure of effectiveness is by how the action progressing, while measure of
efficiency is by how the time spent in implementing the action and the amount of
TNI business taken over so far.

From the media analysis conducted in period of 2004 to February 2009, it is

shown that the government spent time in gaining support to conduct the takeover
process. Author examined 103 news and found 49 news that support government
to takeover military owned business, 9 news that partially support, 16 news that
do not support, and 29 that are neutral. The average of news classification can be
seen in Table V.I.

Table V.1. Stance of Media Coverages on Military Business Takeover

Average of 2004-Feb 2009

50.00%
40.00%
30.00%
20.00% News of military business 2004-
Feb 2009
10.00%
0.00%
Support Support Does Not Neutral
Partially Support

Source: Created by Author

From the stakeholder analysis, author had collected the stances from stakeholders,
which are divided to five categories: (a) government, (b) TNI, (c) legislative, (d)

89
civil society, and (e) international donor. Result of the analysis finds that
government policy implementation so far is running ineffectively because it does
not conduct taking over of any military business unit; and the process is going
slow which until February no real action of taking over had been executed.
Majority of the stakeholders do not trust that the takeover can be fulfilled within
deadline of October 2009 as it mandated by Article 76 UU TNI No.34/2004.

From the media and stakeholder analysis in government policy implementation in

taking over TNI business, author came to the findings of:
1. The government of Indonesia works reluctantly and burdened by
bureaucracy. This condition is shown by how the government made
more than one takeover team and involving too many ministries
without giving enough authority and clear mandate of leadership.
2. The government hampers civil society to conduct the oversight by
not giving enough information. This condition can be seen from the
deliberation process and progress reports that are not open to public.
This hardens the people to give feedback of takeover alternatives,
which is regrettable because Indonesia has many NGOs and expert on
defense issue that can be valuable to improve the process.
3. TNI position itself supportive to the takeover and neutral on its
opinion toward the government. Nevertheless because the
government slow work, TNI is pressured by civil society as one side
that hampers the takeover, after all it is their business that will be taken
over. The chances are if the TNI push the government to solve it faster,
it will make the government look bad and conduct rebuttal by lowering
the defense budget. As a note, from 2008 to 2009 budget had been
lowered because all the ministries budgets were cut 15% for budget
efficiency 159.
4. The time spent to make criteria of the takeover is suspected by
NGOs to give chance for military to divest or sell their business
assets. This is also a result of government not giving enough
159
Defense Minister Juwono Sudarsono interview in BBC Radio Indonesia, May 26, 2009 in 7pm
news. Recording sent to author in May 27, 2009.

90
 information, which in the end make the government loses credibility. If
it stated openly, the public can understand that it takes time to “buy-in”
the TNI so they agree of takeover to happen.
5. Pressure of the legislative did not give effect to the government
work.. Although the legislative had given inquiries on the issue, the
government did not show progress on their work. Only in early 2008,
when parliamentary members raise pressure through media
publication, president issue Keppres No. 7/2008 to create another team
of takeover.

After conducting media and stakeholder analysis, author finally concluded that
Indonesian government is not efficient and effective in implementing policy of
taking over military business. President SBY government is seen as having too
many considerations and trying to keep the power stability. The empirical fact is
that up until almost 4.5 year out of five years time line (around 90%) had been
spent only in negotiating the takeover but not really executing it. Therefore
government does not succeed separating military from business activity.

V.3. Policy Recommendations

From the conclusions above and from the problem found in interviews conducted
with the stakeholders, author generated several policy recommendations in order
to improve government action in taking over military business. They are:
¾ The government should show determination in taking over military
business. There should be a clear mandate on how the takeover should run
and who has the authority to execute. If the government chose a team to
conduct the takeover process, it should have real power to takeover, not
like the previous team.
¾ The government should make time table in taking over military
business. Time table is needed for the government to measure its work
advancement and also for other stakeholders to know the next move of the
government so they can give support and oversight the conduct.

91
¾ The government should disclose information to the public on their
effort in taking over military business. This way the government can
obtain more input from the civil society. It is also a way to make the
government more transparent in their conduct, so they can be reasonable
enough to demand transparency and accountability from other state actors,
in this case is the military.
¾ TNI should give more pressure to the government to finish the
takeover. If the TNI keep being neutral, they will be the one that are given
bad credit by the civil society for hampering the process. Nevertheless, the
TNI should conduct this strategically and not putting shame to the
government.
¾ The legislative should raise the issue through media to keep the
government reminded. Because the government get their mandate from
the civil representative, they should be responsible to legislative inquiries.
The media pressure was proven successful to make President SBY issued
decision letter to create another team of TNI business taking over.
¾ The legislative and civil society should oversight government in
implementing military business takeover and give inputs. If there is no
oversight conducted therefore the military business can be transformed to
other form of business, just like what had happened in New Order era.
These stakeholders are also should give input of alternative of managing
military business and defense budget in a certain way that is not burdening
the state.
¾ Indonesia can also learn from other country on how to manage
military business. There are no country in the world can fulfill the all the
budget demand on military expenditure because there is always conflict of
“breads-vs-guns”. Nevertheless there are some countries that are
successful in managing their military business to make their armed forces
more transparent and accountable.

92
From lesson learned from other countries, namely China and the US, author gave
alternative recommendations that can be use by the government to manage
military business:
ƒ It will be better for the government to show determination to really
takeover military business or proposed policy of military business
management if it can not see that the takeover will be successful
ƒ It will be better for the government to act decisively with real actions, such
as by creating team to conduct takeover and supervise with authority,
compensate losses by allocating more military budget, not afraid to be
responsible of the non performing military company, etc
ƒ It will be better for the government to regulate its armed forces with clear
legal guideline; conduct supervision with written prove for military
business activity so it can be administered; and also giving support to the
soldiers and retirements that have economic difficulties.

V.4. Further Research Suggestion

Problem in the field of military funding is not only about how the government
manage military business but there are many interconnected matters, such as
defense budget allocation; government and military relations; military equipment
preparedness; soldier welfare; etc. Because author understands that her work
cannot cover all the complexity of military funding reform issue, she proposed
further research suggestions to be conducted so there will be more knowledge to
solve problems of Indonesia security sector finance. Those researches are:
# How to determine the ideal budget given to the military?
# How to regulate military business to make it transparent and
accountable?
# How to make the government work more efficient and effective in
implementing state policies?
# How to simplify government bureaucracy especially in the security
sector?
# How to create effective coordination between military and
government?

There are certainly many more issues to be uncovered. The task cannot be
achieved by only one thesis. These recommendations and further researches
proposals are our responsibility to solve if we want to bring better future for
Indonesia security sector reform.

93
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“Business Transfer to be Settled by October”, Jakarta Post, March 17, 2009.

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“Diragukan, Kinerja Tim Supervisi Bisnis TNI”, Jawa Pos, July 24, 2006
“Ditelaah Pengurus Yayasan TNI yang Melanggar Aturan”, Media Indonesia,
April 28, 2009.
“Empat Departemen akan Tangani Aset Bisnis TNI”, Kontan, February 13, 2009.
“Gurita Bisnis TNI dan Dampaknya”, in Newsletter Media dan Reformasi Sektor
Keamanan, Edisi II, May 2008.
“Upaya Hapus Status Tentara Niaga TNI” in Kompas, November 27, 2008.
“HUT ke-61TNI: Menyoal Kembali Reformasi TNI”, Kompas, 5 October 2006.
“Ibnu Sutowo: the Notorious Corruptor”, New Internationalist, Issue 116, October
1982.
“Indonesia: Next Steps in Military Reform”, ICG Asia Report, No. 24, Jakarta,
Oktober 2001.
“Jalan Panjang Reformasi TNI”, Kompas, February 11, 2008.
“Military Allowed to Sell Assets from Business Ventures”, Jakarta Post,
September 29, 2005
“Pangkostrad: Mandala Airlines Dijual Tanpa Perpres”, Tempo, October 7, 2005.
“Perjalanan Panjang Pengalihan Keppres Pengalihan Bisnis TNI, Newsletter
Media dan Reformasi Sektor Keamanan, Edition II, May 2008.
“Soeharto Inc.”, Time Asia, May 24, 1999.
“The House Urge Gov’t to Acquire Artha Graha”, Bisnis Indonesia, February 17,
2005.
“Tidak Habis-Habis Meneliti Aset Bisnis TNI”, Kontan, Week III, August 2008.
“Timnas Bisnis Pertahankan Koperasi”, Republika, December 30, 2007. “TNI
“Turkey: Planning for Profit”, The Banker, May 2005.
“Turkey Reform Targets Army Power”, BBC World, July 30, 2003.
“TNI Commits to Reform: Uphold Supremacy of Law”, Jakarta Post, March 15,
2006.
Antara News
Ali, Shahzad and Khalid, “US Mass Media and Muslim World: Potrayal of
Muslim by Newsweek and Time (1991-2001)” in European Journal of
Scientific Research, Vol. 21, No. 4 (2008).
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Cakra Buana
Fitz-Gerald, Ann M., Security Sector Governance Introduction, Module ITB-
Cranfield, February 2008.
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ITB-Cranfield, February 2008.
Gatra
Greenles, Donald, “Indonesia Wants its Army Out of Business” in International
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Harian Surya
Institute for Defense Security and Peace Studies, Seri 9 Penjelasan Singkat
(Backgrounder) Bisnis Militer, June 2008.
Jakarta Post
Jawa Pos
Joffe, Ellis “The PLA and the Chinese Economy: The Effect of Involvement”,
Survival Journal, Vol. 37, No. 2, Summer 1995.
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New York Times, December 27, 2005.
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Business Interest of the TNI and the Police”, in Van Zorge Report on
Indonesia, Juli 16, 2003.
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pasca.html accessed on March 1st, 2009

97
 APPENDIX 1

Table of Media Coverage on Military Business in Indonesia

2004 – February 2009

Year Date & News Title Spokes Statement Type of

Media Person news
2004 September Government to Defense “The smaller ones (of TNI Support
12, 2004, Takeover Minister business units) will not be military
Jakarta Post Military Juwono taken over. They will still business
Business Sudarsono be owned by the TNI to takeover
help fulfill the soldiers'
needs, but the government
would take over military
business enterprises that
have assets worth IDR 5
billion. This is still
discussed.”

“The main problem in the

Senior TNI was not the amount of
researcher for money it received but rather
Center transparency and
Strategic and accountability in the way it
International spent this money.”
Studies (CSIS)
Kusnanto
Anggoro

October 6, “Closing the Head of TNI “Military business is done Does not
2004, Sinar Book” of Gen. because soldier welfare had support
Harapan Military Endriartono not been fulfilled. If it military
Business Sutarto fulfilled, TNI will not business
conduct business and takeover
fulfilling that is government
obligation. Because of it is
not yet fulfilled, I am forced
to help for soldier welfare.”

October 6, Military Elites Political expert “The ones benefited (from Support
2004, are the ones from Indonesia military business) are those military
Kompas Benefited from Science on high ranks. Not the business
Business Institute (LIPI) military body as whole.” takeover
Indria Samego

November Military Head of TNI “We still run the business Does not
11, 2004, Conduct Gen. because the real budget is support
Kompas Business Endriartono far from sufficient. military
because Budget Sutarto Therefore we should find business
Cannot Provide solution to fulfill all needs takeover
Welfare appropriate with what
conveyed in laws”

98
November Transparency Defense “Roughly, we need IDR 46 Support
4, 2004, will be Minister trillion (US$ 5.06 billion) military
Jakarta Post Instituted in Juwono per year if we want to build business
Defense Sudarsono a decent professional force, takeover
Ministry but in reality TNI only gets
IDR 18.21 trillion per year,
so forget about achieving an
ideal budget. Regarding
military owned firms,
cooperatives and
foundations, such practices
have been carried out by the
military forces since the
1950s as the government
never provided large
enough budget for security
and defense affairs do to
limited funds. Now, I’d like
to rearrange and convert all
the military’s foundations,
cooperatives and firms into
military-owned state firms
as practiced in China,
Thailand, India and
Pakistan, where state budget
for the military budget is
supported by lawful funds
obtained from military-
owned state firms.”

November Defense Defense “I’m sure that military Support

20, 2004, Minister is Sure Minister business management will military
Kompas that Military Juwono give welfare for soldier. business
Business Sudarsono Because our soldier welfare, takeover
Management just like teacher and nurse,
will Give is still far from
Welfare for satisfaction.”
Soldier

December 8, Defense Defense “Business belong to the Neutral

2004, Minister: Minister military will be taken care
Kompas Military Juwono by special state-owned
Business will be Sudarsono company, but this is still in
Taken Care by the discussion with Finance
Special State- Minister, Law and Human
Owned Rights Minister, and State
Company Owned Company Minister.”

December 9, Defense Defense “So military businesses that Support

2004, Minister Minister worth more than IDR 5 military
Kompas Proposed Juwono million will be transformed business
Military Sudarsono as state-owned company takeover
Business to and manage professionally. partially
become State- But if it is smaller, let it
Owned exist to fulfill soldier needs.
Company But this is still a discourse.”

“Ministry of Defense must

99
 count military business
Parliament assets so it can fulfilled
Member of MoD/TNI budget need,
Commission 1 which is in 2005 is as much
Effendi Choirie as IDR 45 trillion.”

“TNI business is not a

business that spanned
Head of TNI everywhere. It is a normal
Gen. business with normal profit
Endriartono and the income is used to
Sutarto increase soldier welfare.”

December Head of TNI: Head of TNI “Just dismiss all (military) Support
10, 2004, Dismiss All Gen. business! As long as state military
Kompas Military Endriartono budget can provide welfare business
Business Sutarto to the minimum level… If takeover
the soldier dies, his/her partially
pension is only few percent
from his salary. While still
living, the salary is not even
enough.”

December Problems of Researcher for “One of the bad excesses of Support

16, 2004, Military Center military business is shifting military
Sinar Business Strategic and loyalty of the soldier, from business
Harapan International TNI that is main state takeover
Studies (CSIS) defense tool to economic
Philips interest of few, or even only
Vermonte of the person itself… For
this we need more
fundamental things,
including transparent
investigation and rule of law
principle.”

December Profit of Army Head of Army “Army business is not big, Does not
18, 2004, Business is Not Staff only around IDR 30 million support
Jakarta Post Big Ryamizard per year. Who said it military
Ryacudu reached trillions?” business
takeover

2005 February 15, Defense Defense “The ownership of TNI Does not
2005, Bisnis Minister: Minister foundation will still be the support
Indonesia Military Juwono same but the form is a military
Holding Sudarsono holding company and its business
Company is responsibility will be given takeover
Still Hold by by corporate, as a company
TNI Foundation and will be made as legal
law body. Then the profit
will be given for soldier
welfare.”

“The military holding

100
 Former Vice of company should be under
TNI Chief of TNI. In the US, military has
Staff and business units, but the
Commissioner management is handled by
in Bank Artha professional therefore it is
Graha (one of accountable and
military transparent… I predict
business) Kiki military business profit is
Syahnakri not more than IDR 100
million per year, it’s peanut
for the government.”

February 22, Four Ministries Defense “The joint team composed Support
2005, Koran Manage Minister by Finance Ministry, State- military
Tempo Military Juwono Owned Company Ministry, business
Business Sudarsono Law and Human Rights takeover
Ministry and Ministry of
Defense. This team will
work to discipline the
accountability and
transparency of company
managed by military…
Because the profit (of
military business) is only
felt by elites.”

March 5, The Blurred Director of Pro “Although TNI Law already Neutral
2005, Sinar Military Patria (NGO) given mandate to takeover
Harapan Business Made Hari Prihartono military business. Because
Defense the business include active
Ministry military personnel, it is not
Uneasy to easy to inventory them.”
Conduct
Inventory

April 18, Military Economic “The plan to transfer Neutral

2005, Business to be Coordinator military business to state-
Republika State-Owned Minister owned company is still
Company is Aburizal being analyzed because
Analyzed Bakrie government does not want
the transfer to be a burden
to state budget.”

May 25, Military Institutional “We are making paper on Neutral

2005 Cooperatives Deputy of military cooperatives. In
Bisnis Should not be Ministry of which tries to give
Indonesia Erased Cooperative description so that
and Small cooperatives in military not
Business Unit to be erased in referral to
Guritno UU TNI No. 34/2004.”
Kusumo
May 25, Military Institutional “TNI cooperatives are not Does not
2005 Cooperatives Deputy of the same with other military support
Bisnis are not Similar Ministry of business because the military
Indonesia with Other Cooperative cooperatives only serve business

101
 Military and Small their members” takeover
Business Business Unit
Guritno
Kusumo

May 25, Credit Offer is Institutional “The most utilized service Neutral
2005 the Most Deputy of of TNI cooperatives is
Bisnis Utilized Service Ministry of credit offer.”
Indonesia in TNI Cooperative
Cooperatives and Small
Business Unit
Guritno
Kusumo

May 25, Cooperatives Institutional “Reformasi should not be Does not

2005, Need Assurance Deputy of too far to eliminate support
Bisnis in TNI Business Ministry of cooperatives.” military
Indonesia Takeover Cooperative business
and Small takeover
Business Unit
Guritno
Kusumo

September Military Researcher on “Military business only Support

19, 2005, Business military gives maximum profit of military
Kompas Compensation business from IDR 100 million per year business
LIPI Jaleswari from each corp. If there is a takeover
Pramodhaward need to increase defense
ani budget every year, military
need not be worry because
the government had done
it… But it is necessary for
president to give political
commitment with clear
framework of action.”

September Military Operational “Almost all of the 1,200 Support

23, 2005, Business: Worker in member needs are fulfilled military
Gatra Asking for Kodiklat by this cooperative.” business
Professionalism Cooperative in takeover
Promise Military School partially
Bandung Sutan

Pelamonia
Hospital (in “If active TNI soldier got
Makassar, hospitalized, the cost is
owned by free.”
army) nurse

First Lt.
Bintang (not “We are glad we can still
real name) that use TNI army facility… I
is a patient in don’t mind military
Pelamonia business erased, as long as
Hospital the government fulfilled its
promise to provide TNI
welfare.”

102
 September TNI TNI “According to plan, Head of Support
25, 2005, Headquarter Spokesperson TNI wants to finish the military
Koran Speed Up in Maj. Gen. matter of military business business
Tempo Regulating Kohirin in two years, which means takeover
Military Suganda in October 2005 already had
Business Saputra a policy, so that the
execution will be in October
2005 to October 2006. Then
in November 2006 to
November 2007 will be
evaluated and expected to
conclude by 2007.”

October 20, Defense Defense “Only ten out of 219 Neutral

2005. Minister: Only Minister business unit under TNI
Tempo 10 TNI Juwono inventory that will be taken
Interaktif Business will be Sudarsono over because only those
Taken Over fulfilling criteria, from the
capital to the management
side, that have assets around
IDR 25 million, the others
are more in form of social.”

November TNI Business Researcher on “The deadline of five years Support

24, 2005, Takeover 5 military is too long and can be military
Tempo Years is Too business from delayed if there is no business
Interaktif Long LIPI Jaleswari technical guideline for it. takeover
Pramodhaward China can do it in one year”
ani

Parliament “Parliament had pushed for

Member of the presidential decree (on
Commission 1 TNI business takeover) to
Theo be issued. Even the Head of
Sambuaga TNI had committed to solve
this in two year. Let see.”

2006 February 23, Government Senior “Decision to takeover the Neutral

2006 took Wrong researcher for (military) business is not all
Kompas Strategy Center inclusive to consider all
Strategic and deliberations.”
International
Studies (CSIS)
Kusnanto
Anggoro

February 23, Difficult to use Researcher on “Difficult to use UU Support

2006 Law of UU military 19/2003 on State-Owned military
Tempo 19/2003 on business from Company to takeover business

103
Magazine State-Owned LIPI Jaleswari military business because takeover
Company to Pramodhaward the regulation stated that
Takeover ani state-owned company is a
Military business unit that all or
Business most of its capital owned by
government by direct
funding … So there should
be other way to takeover
military business …
Nonetheless the effort to
transfer military business
share to private ownership
need to be prohibited.”

March 3, Military Economic “Military business takeover Neutral

2006, business Coordinator alternatives are by creating
Tempo takeover Minister specific state-owned
Interaktif alternatives Aburizal company or merger it with
Bakrie the existing; sold which the
profit then returned to
government; given back to
TNI or for cooperative and
foundation given to
members according to the
law implemented.”

March 14, U.S. Aid to Human Rights “Pumping aid to an Support

2006, Corrupt TNI Watch Activist unreformed Indonesian military
Jakarta Post Risks More Lisa Misol military would serve only to business
Rights Abuses encourage further rights takeover
abuses and undermine
civilian governance.”

March 15, TNI Commits to TNI “As to Misol’s hope that the Support
2006, Reform, Spokesperson U.S. should put pressure on military
Jakarta Post Upholds Maj. Gen. the Indonesian government business
Supremacy of Kohirin to end military business takeover
Law Suganda activities, in fact the transfer
Saputra of military business is
underway. Although Law
No. 34/2004 on TNI
requires the settlement of
military business within
period of five years (2009),
the TNI Commander has
proactively set a target of
resolving the military
business in two years.”

104
20 April, War Business Defense “The military is badly in Support
2006, Minister need of extra income due to military
Jakarta Post Juwono limited defense budget, business
Sudarsono which covers only one-third takeover
of the actual military partially
spending. As the (military
business) practice has lasted
for decades, however,
efforts to minimize it were
the most realistic objective.”

June 21, Military Human Rights “TNI had dark record in Support
2006, Suara Business Must Watch Asia human rights field. And military
Pembaruan Be Stopped to Regional those violations are business
Guarantee TNI Director Brad triggered by military takeover
Professionalism Adams business practices that were
being done under the
argument of fulfilling
institutional need that
cannot be fulfilled by state
budget.”

June 22, Govt Urged to Human Rights “The military’s money Support
2006, Curb TNI Watch Activist making creates an obvious military
Jakarta Post Business Ties Lisa Misol conflict of interest with its business
proper role… Military takeover
reform means getting
soldiers out of business and
prosecuting those who
broke the law.”

Director “I agree with this report (on

General of TNI business published by
Defense HRW). We must find the
Strategy of best way to overcome
Defense obstacles to military reform.
Ministry Maj. But I think it is not simple.
Gen. Dadi It’s the problem of the
Susanto budget.”

July 7, 2006, Military Human Rights “The government's budget Support

Jakarta Post Business Watch Activist constraints are no excuse for military
Lisa Misol allowing military units free business
rein to raise funds. Instead, takeover
officials should focus on
developing an appropriate
and affordable military
budget, monitor it to
eliminate waste and
corruption, and ensure it
provides a decent living
standard for defense

105
 personnel.”

July 7, 2006, State will not Minister of “If it is not strategic and has Neutral
Republika Takeover All State-Owned no relation with UUD 45, I
TNI Business Company think, we will let go and the
Sugiharto money will be submitted to
state registry.”

July 27, TNI Business is Secretary of “All TNI businesses are Neutral
2006, Dying Ministry of dying and cannot be
Tempo Defense and expected to give support to
Interaktif Vice Head of soldier welfare not like
TSTB, Lt. Gen. before when there was
Sjafrie special policy and
Sjamsoeddin monopoly. But nevertheless,
the amount of the asset must
be audited.”

July 20, Effort to Erase Defense “What they (NGO) said on Support
2006, Soldier Minister TNI business is now only military
Kompas “Moonlighting” Juwono left 6-7 companies, not like business
Sudarsono TNI business tentacle in the takeover
70s when business and arms
united.”

“There is grey area that

Head of TSTB needs to be redefined. Only
TNI & TNI business with
Assistant to the government assets will be
Ministry of taken over. ”
State-Owned
Company Said
Didu

First Lt. Badu “On managing the schedule

(not real name) between official work and
moonlighting schedule is
the job of the commandant.
What important is we have
fair turn.”

July 20, From Shovel to Head of TSTB “TSTB TNI does not have Does not
2006, Airplane TNI & strong legal base. We do not support
Kompas Component Assistant to the have budget allocation for military
Ministry of this heavy task… We are business
State-Owned paid zero rupiah.” takeover
Company Said
Didu

July 20, TNI Business to Head of TSTB “Military Business Neutral

2006, be Taken Over TNI & Management Body
Antara by Special Body Assistant to the (BPBTNI) will be set up in
News Ministry of pursuance of a stipulation in
State-Owned Law No.34/2004 on the
Company Said Indonesian Military (TNI).
Didu The BPBTNI will assume

106
 command over all business
entities in the TNI which is
so far being exercised by
the TNI commander. But
the BPBTNI would be
different from the former
National Banking
Restructuring Agency
(BPPN) which shifted all of
its losses to the state. The
BPBTNI would bear any
losses by itself.”

July 27, The Leftover Defense “Until the takeover (military Neutral
2006, Media Asset will be Minister business) to state-owned
Indonesia Managed by Juwono company, there are two
PPA Sudarsono alternatives solution to
manage TNI business asset
leftover. First, create a new
transformation body.
Second, give it to PPA. We
prefer the second option.”

July 31, TNI Business Secretary of “Ministry of Finance is not Neutral

2006, Koran Takeover Ministry of willing to take over the debt
Tempo Hampered by Defense and (of failing TNI business).
Debts Vice Head of The debt is still a problem;
TSTB, Lt. Gen. we (Ministry of Defense)
Sjafrie will also not take over the
Sjamsoeddin debt.”

August 2, TNI Business Secretary of “Job description of PPA is Does not

2006, Cancelled to be Ministry of different, it is managerially support
Republika Under PPA Defense and unfeasible.” military
Management Vice Head of business
TSTB, Lt. Gen. takeover
Sjafrie
Sjamsoeddin

Political expert “This is a law problem.

from Indonesia There is a law connection
Science (in business) that is not easy
Institute (LIPI) to break. There is not yet
Indria Samego sincerity. If it handed over
to the state owned company,
is it better? There are many
state-owned companies that
experience loss.”

August 2, Finance Finance “PPA (Perusahaan Neutral

2006, Minister Refuse Minister Sri Pengelola Aset, Asset
Kompas PPA Mulyani Management Company)
“Burdened” Indrawati was created for different
TNI Business purpose. It cannot be
burdened. That is a big task.
But, we will see the need of
the Defense Ministry. If

107
 they really need to have
certain institution to manage
TNI business unit we will
think of it better … I think
if the institution to manage
TNI business need to be
design specifically.”

October 3, Managing TNI Head of TSTB “I’m confused with what is Neutral
2006, Business, Last TNI & TNI business.”
Tempo Homework for Assistant to the
Interaktif President Ministry of
State-Owned
Company Said
Didu

Secretary of
Ministry of “The TNI business criteria
Defense, Lt. to be taken over are all the
Gen. Sjafrie business, no exception.”
Sjamsoeddin

Researcher on “The homework for

military president now is only to
business from separate TNI from
LIPI Jaleswari business.”
Pramodhaward
ani

October 5, The 61st TNI Head of TNI “Since the head of TNI still Does not
2006, Anniversary: Mars. Djoko held by Gen (Ret.) support
Kompas Review TNI Santoso Endriartono Sutarto, military
Reformation internally TNI already business
committed to give their takeover
business to be taken over
according what is mandated
by the law. By that time the
Head of TNI even
committed to speed up TNI
business handing over from
5 years, like stated in
Article 76 UU 34/2003, to
only 2 years. For the
takeover process is
considered not progressing,
it is not the problem of TNI
anymore.”

October 6, Jaleswari Researcher on “Law demands in five years Support

2006, Koran Pramodhawarda military TNI free from business... military
Tempo ni: I Do Not business from But so far, I haven’t seen business
Want Soldier to LIPI Jaleswari political will from the takeover
Keep Being Pramodhaward president to realize the TNI
Blame ani Law. Almost two years the
law had been left out.”

November Business as Economic “Another important Support

108
 28, 2006, Usual in Lecturer in revelation from the IMF's military
Jakarta Post Indonesia University of report is that the Indonesian business
Despite the Fall Indonesia Military (TNI) and National takeover
of Suharto Djamester A. Police are continuing their
Simarmata old practice of using
cooperatives and
foundations to raise money
from the public… These
practices violate a 2004 law
stating that all TNI business
must be transferred to the
government. This is only
one of the appropriate laws
and regulations that have
not been implemented. The
persistence of such practices
in the military proves the
unwillingness of the
institution to reform its
businesses.”

December TNI Defense “TNI will let go of its Support

28, 2006, Cooperative Minister business but cooperative military
Tempo will not be Juwono and foundation will not be business
Interaktif Bothered Sudarsono bothered because they takeover
support lower rank soldier partially
welfare. But they will be
managed not to be like
military business units that
grew rapidly in the 70s.”

2007 January 11, Business As Researcher for “The (central) government Support
2007, Usual for Center should immediately ask military
Jakarta Post Military, Says Strategic for regional administrations to business
Group International take an inventory of military takeover
Studies (CSIS) businesses in their
and Professor respective regions. Military
in University businesses outside Jakarta
of Indonesia are more difficult to detect
Edy Prasetyono because they are often
divided into smaller
business entities… ”

Program “Although the law has been

Director of in effect for three years,
Ridep (NGO) military businesses keep on
Muradi running as usual in regions
outside Jakarta… But fewer
than 100 of these business
units are healthy. The
military has reduced its
shares in companies to less
than Rp 20 billion, in order
to keep a lower profile and
act more behind the scenes.
the military has also

109
 ""eliminate"" assets by
selling them or putting the
business units into
bankruptcy. It then transfers
the units other parties, while
still maintaining actual
control of the businesses.”

February 10, Draft of Cabinet “What related to that Neutral

2007, Sinar Presidential Secretary Sudi (presidential decree draft)
Harapan Decree on TNI Silalahi after being accepted from
Business the MoD, turned out to be
Returned to less harmonized and not
MoD synchronic therefore
returned back … I don’t
want to come into the
substance.”

February 10, Military Coordinator “Military business is not for Support

2007, Bisnis Business is Commission fulfilling the gap cause by military
Indonesia Difficult to be for low state budget and the business
Erased as Disappearances profit is not all used for takeover
Target and Victim of soldier welfare… It is
Violence suspected that the number
(Kontras) given (of military business)
Usman Hamid is not the real value
considering lack of
transparency and
accountability of TNI
finance management. TNI
also never disclose other
source of funding outside
defense budget.”

February 11, Military Coordinator “TNI is actually open for Support

2007, Business Commission reform, including going out military
Kompas Hamper Human for of business, as long as their business
Rights Disappearances need fulfilled. But civil takeover
Enforcement and Victim of elites keep the business
Violence running.”
(Kontras)
Usman Hamid

110
June 8, Military Researcher on “There are still confusions Support
2007, Sinar Business: military (on military business military
Harapan Challenge to business from takeover) inside the business
Make “Off LIPI Jaleswari government, between takeover
Budget” Pramodhaward concept and tools that were
become “On ani on the lower level are not
Budget” united.”
Researcher on
military “Differences between
business Lex Indonesia and China, in
Rieffel China there are many data
on profit, assets, working
procedure and who are
involved in business. All
data are open.”

June 12, Presidential Defense “I cannot stated when will Does not
2007, Decree on TNI Minister the president decree issued. support
Republika Business Juwono It is still being jointly military
Management is Sudarsono discussed by Ministry of business
Unclear Defense, Ministry of takeover
Finance, Ministry of Law
and Human Rights, and
Ministry of State-Owned
Company. Then it will be
discussed in Cabinet
Secretary and State
Secretary Offices… So far
there will still be foundation
and cooperation maintained,
as long as they do not seek
profit or create company.”

June 12, TNI Business Defense “I’m not sure that TNI Does not
2007, Bisnis Cannot be Minister business can be submitted in support
Indonesia Submitted 2009 Juwono 2009, like what is mandated military
Sudarsono by UU No. 34/2004. But the business
fact is, until 2005, we are takeover
still conducting between
ministries consolidation.
TNI operational budget
from the government is still
low so to fund security and
defense operation, the
military institution must
seek its own funding from
business activity.”

“The prohibitions are

demands of national
Parliament reformation. TNI cannot
Member of involve in politics and
Commission 1 business.”

111
 Theo
Sambuaga

June 12, Disciplinary of Researcher on “The blurredness of TNI Support

2007, TNI Business is military business takeover, which is military
Kompas Not Yet business from still on going, can be seen business
Regarded LIPI Jaleswari from the never ending takeover
Transparent Pramodhaward process of the presidential
ani decree as mandated in
Article 76 UU 34/2004.”

July 27, Violence is Parliament “Head of TNI must be strict Support

2007, Jawa Threatening Member of and issue instruction to military
Pos Civilian Commission 1 work part time as security business
Andreas guard or trainer. The takeover
Pareira arguments of low welfare
and insufficient government
funding cannot be reason
for breaching.”

October 30, Military Earns Senior “The military should not be Support
2007, Praise for Role researcher for involved in business, military
Jakarta Post in Democracy Center because it could divert their business
Strategic and focus from safeguarding the takeover
International nation. In fact, TNI
Studies (CSIS) businesses only contribute 1
Kusnanto percent to their budgetary
Anggoro needs. It is therefore
unreasonable if the TNI
does not want the
government to take over its
businesses, as it may
indicate illegal dealings
behind their real
businesses.”

November TNI Businesses: Defense “It (presidential regulation Neutral

26, 2007, Constricted Minister draft on TNI business
Tempo State Funds Juwono takeover) has already been
Magazine Stalls Takeover Sudarsono approved by the drafting
team and is waiting for the
final word from the Palace.”

“It (presidential regulation

Presidential on TNI business takeover)
Spokesman is not late. Everything is
Andi running according to plan.
Mallarangeng President Yudhoyono will
think about this matter
before signing the
regulation on cleaning up
TNI businesses.”

“The funds from those sales

(of TNI business) are not
enough to guarantee the

112
 Former CEO of fulfillment of the needs of
PT Tri Usaha the soldiers. In the past, we
Bhakti could give scholarships for
(military the children of soldiers who
business unit) did well in school. Now that
Maj.Gen. (ret) is no longer true.”
Joko Subroto,
2008 January 17, Strange, SBY Researcher on “Similar like other policy Support
2008, Postponed to military drafts, government seems to military
Kompas Issue President business from cover sensitive issues, that business
Regulation on LIPI Jaleswari supposedly can be solved takeover
TNI Business Pramodhaward ‘under the table’. I still
Disciplining ani remember when the MoD
through Secretary of
Ministry of Defense, Lt.
Gen. Sjafrie, once said that
he is sure the president
regulation will be issued
February 2007 and all the
process will be done in
2008.”

January 18, Dark Asset Can Head of TSTB “What is difficult is to Support
2008, Media Hamper Legal TNI & conduct legal audit for TNI military
Indonesia Audit Assistant to the assets that is not listed as business
Ministry of state assets, but it is takeover
State-Owned expected that in the future
Company Said TNI do not engage in
Didu business”

January 18, President Head of TSTB “We had finish president Does not
2008, Regulation in TNI & regulation on the creation of support
Kompas TNI Business is Assistant to the national team, now we are military
in Question Ministry of still waiting for the joint business
State-Owned discussion on the concept. takeover
Company Said We expect the President
Didu will soon issue the
regulation so the team can
work immediately.”

January 18, President Must Parliament “I’m suspecting there is Support

2008, Shown Integrity Member of ‘batting eye’ between military
Kompas on TNI Commission 1 government and TNI business
Business Yuddy because they both do not takeover
President Chrisnandi have strong political will to
Regulation finish this (TNI business)
issue. Now the part that has
physical business assets is
TNI, while government has
regulation. Both factors
must exist so that the
takeover can run… I’m
afraid that since TNI Law
implemented until deadline,
all business units taken over
are only the non performed
while the profitable had
been sold.”

113
 “I insist President
Yudhoyono to issue
Parliament president regulation (on
Member of TNI business) by the latest
Commission 1 mid 2008 so the takeover
Andreas process can run before the
Pareira given time is up.”

February 5, TNI Burdened Head of TSTB “In the past military asset is Neutral
2008, with Status of TNI & intangible asset of power. It
Kompas Still Conducting Assistant to the is not like that anymore
Business Ministry of with military power access
State-Owned minimized after reformasi.
Company Said Government is investigating
Didu military business with state
assets in it and will take
them over to state registry.
For cooperative and
foundation without state
asset will be given back.
But TNI must manage and
restructure them so they run
according to existing law.”

February 6, TNI Business Head of TSTB “I am optimist that the Neutral

2008, Takeover is on TNI & takeover can be done before
Kompas Schedule Assistant to the the deadline, October 2009.
Ministry of Government is trying to be
State-Owned careful in the process. If we
Company Said want to be easy,
Didu government can takeover all
business with their assets
and debts, then given to
MoD. But that is the easiest
way and does not solve the
real problem.”

February 8, Government Researcher on “Government seriousness Support

2008, Should Not military can be measure by the military
Kompas Only Talk business from presidential decree. If it business
About Takeover LIPI Jaleswari kept being postponed, when takeover
TNI Business Pramodhaward will it be issued. Now is
ani already a year before
general election. Next year
people already busy with
the election. Early this year
should be the latest time for
presidential decree to be
issued.”

February 11, The Long Road Researcher for “TNI welfare that is still Support
2008, of TNI Reform Center considered low is opening military

114
Kompas Strategic for window for them to involve business
International in politic and business in takeover
Studies (CSIS) various ways and levels.
and Professor Therefore, TNI reform
in University needs support from inside
of Indonesia its own body.”
Edy Prasetyono

April 25, Government Secretary of “The new team (Timnas Support

2008, VHR Formulate Ministry of PAB TNI) is formulating military
Media Regulation for Defense, Lt. guidelines of takeover business
Military Gen. Sjafrie process… Insyaallah can be takeover
Business Sjamsoeddin made before the deadline”
Takeover

April 29, TNI Business Head of TSTB “Government through Does not
2008, will be Taken TNI & TSTB TNI is being careful support
Kompas Over Carefully Assistant to the for not given the authority military
Ministry of to conduct the takeover to business
State-Owned Timnas PAB TNI, so that in takeover
Company Said the future, government will
Didu not be burdened.”

May 9, TNI Business Researcher on “To discipline military Support

2008, Disciplining military business need to take drastic military
Kompas Need to Take business from measures, such as takeover business
Drastic Measure LIPI Jaleswari all cooperatives, takeover
Pramodhaward foundations and their
ani business units. But there
should also be
compensation. Such as
making new cooperatives
that function to really fulfill
soldier welfare not like what
the (TNI) foundation and
cooperative are doing now.”

May 28, President is Researcher for “I am worried that the Support

2008, Media Considered Indonesia government slowness can military
Indonesia Slow in Defense and make military business business
Managing TNI Strategic assets change hands to the takeover
Business Studies Body private sector.” partially
(Lesperssi)
Henwira Halim

Head of TNI
Public “Reform demands for
Information erasing dual function is
Sagom done. Currently TNI only
Tamboen function as state tool in
defense. But I admit, the
reformation still needs

115
 continual improvement…
So far the foundations that
had not been taken over are
Kartika Eka Paksi
Foundation from Army, Adi
Upaya Foundation from Air
Force, and Bumi Hamka
from Navy. After the
reformation, lower rank
soldier (bintara and
tamtama) is still allowed to
conduct business as long as
he/she does not neglect
main job.”

June 11, Military Head: Head of TNI “Please go ahead with the Support
2008, Go Ahead Take Gen. Djoko takeover (of TNI business) military
Antara TNI Business Santoso as long as proper with UU business
News As Long As 34/2004 … The takeover takeover
Soldier Welfare that will be done will not
can be using compensation pattern,
Guaranteed but fitting with government
capacity that had the
mandate of the law to
guaranteed the
professionalism and welfare
of TNI soldier. For TNI, the
ball (of takeover) is in the
government hand.”

July 16, Head of TNI Head of TNI “Please go ahead with TNI Support
2008, Decline TNI Gen. Djoko business takeover. But not military
Republika Business Santoso us to be compensated. business
Compensation According to UU 34/2004 takeover
please conduct takeover, but
the state will provide TNI
welfare, such as health,
education, insurance,
housing and so on.”

August 11, TNI Assets 'Far Director “The figure was too small Support
2008, Higher' than Imparsial considering the TNI military
Jakarta Post IDR 2.1 Trillion (NGO) Rusdi business has been in business
Marpaung operation since the New takeover
Order era. We also noticed a
disclaimer in the report
stating that neither a
financial nor a legal audit
had been conducted on the
TNI business. The issue
about the businesses being
useful to meet soldiers'
needs should not impede us
from fulfilling the mandate
of the law on TNI. The
people want TNI to get out
of politics and business and

116
 thus TNI must obey the
law”

August 11, Recommendatio Director of “TNI Law that regulates Support

2008, VHR n of TNI CSIS Rizal military business has much military
Media Business Sukma weakness. One of them is business
Takeover will not stating the sanction if takeover
be Finish in government broken the time
October limit given. The law only
regulate political sanction
trough parliament. I hope
the awaiting presidential
decree on military business
will include good planning
and budgeting so the gap
between state ability and
necessary fund (in defense)
is smaller, therefore the
military business can be
erased.”

August 12, Keep Eye on Researcher on “When the draft (of TNI Support
2008, TNI Business military business takeover made by military
Kompas Takeover business from Timnas PAB TNI) given to business
LIPI Jaleswari the government, there is no takeover
Pramodhaward guarantee President Susilo
ani Bambang Yudhoyono will
follow up as fast as we
want… We know TSTB
TNI made and started
working in 2005. But need
three years for President
Decree No. 7/2008 to be
issued.”

October 12, Military Cash Head of “We are making our own Support
2008, Sinar Bag That are Timnas PAB initiative to finish our task military
Indonesia Still Thick TNI, Erry in October 2008. Now we business
Riyana only report them to the takeover
Hardjapamekas president and wait for
further policy from
President SBY so the
takeover process can run.”

October 13, Dissolving TNI Defense “We have to see how is the Does not
2008, Foundation and Minister reality, in the condition of support
Tempo Cooperative Juwono soldier needs for them (of military
Interaktif should be Done Sudarsono TNI foundation and business
Selectively cooperative). The dissolve takeover
should be thought carefully.
Let us be more flexible for
might be in 5-10 years after
October 2009, there can be
possibility for cooperative

117
 and foundation units to
serve basic needs of lower
rank soldiers.”

October 14, TNI Business Director of “Profit from military Support

2008, Does Not Defense business can only help military
Tempo Guarantee Planning for soldiers in specific things, business
Interaktif Soldier Welfare Institute of like buying Ied present, but takeover
Defense and not for fulfilling soldier
Securities welfare.”
(IODAS) Andi
Widjajanto

Researcher on “Government must conduct

military military business takeover
business from because it is mandated in
LIPI Jaleswari the law.”
Pramodhaward
ani

October 19, Recommendatio Head of Public “We are open for the Support
2008, Jawa n on Military Information of takeover… Currently military
Pos Business TNI cooperatives in TNI are still business
Regulation is Headquarter active to operate but not takeover
Done Col. Ahmad conducting business like
Yani Basuki before. Only for soldier
necessity and credit
lending.”

October 27, Small Budget Head of TNI “In principle TNI had given Neutral
2008, Does Not Gen. Djoko the government and TSTB
Antara Reduce TNI Santoso TNI team to inventory (TNI
News Professionalism business) assets and
takeover… On TNI
cooperative, it is still
necessary because it is
needed, but surely it should
be well regulated so it does
not misuse.”
.
October 28, TNI Business Head of TSTB “From (TSTB) Neutral
2008, will be Taken TNI & investigation, total TNI
Kompas Over Carefully Assistant to the business asset is not more
Ministry of than IDR 1 trillion. We have
State-Owned to be careful, so we do not
Company Said takeover indebted business
Didu that can be as big as IDR 5
trillion.”
Vice Cabinet
Secretary of “The current team (Timnas
the State PAB TNI) is not working
Lambock V. from zero, but to continue
Nahattand TSTB TNI work. On the
concern of assets that had
been sold or taken away,
they had been noticed and
control by the team before.

118
 Don’t worry.”
Head of
Timnas PAB “Recommendation to be
TNI, Erry produced will be about
Riyana which business that is able
Hardjapamekas to be takeover, which needs
to be manage before
takeover, or which one need
to be liquidated.”

October 28, TNI Parliament “As citizen, TNI soldier has Neutral
2008, Cooperative and Member of the right to run cooperative
Kompas Foundation that Commission 1 which are meant to support
Conduct Andreas primary needs and TNI
Business Must Pareira welfare. But the principle of
be Taken Over TNI or its soldier not to
conduct business and seek
profit, like what is stated in
TNI Law, is also must be
kept.”

October 31, TNI Want to Head of TNI “For soldiers that work in Support
2008, Keep Mars. Djoko secluded area, cooperative military
Kompas Cooperative Santoso can be the institution to business
depend on in fulfilling their takeover
daily lives needs… partially
According to Cooperatives
Law every citizen can make
cooperative, therefore we
also have the rights to have
cooperative.”

November National Team Secretary of “The executing team of Neutral

3, 2008, of Military Ministry of Timnas PAB TNI had given
Antara Business Give Defense, Lt. recommendations on
News Recommendatio Gen. Sjafrie October 31, 2008.”
n to the Sjamsoeddin
President
Head of Public “Cooperative and
Relation of foundation are still kept,
Defense especially those that support
Ministry Brig. soldier welfare. If the
Gen. Slamet cooperative and foundation
Hariyanto conduct business, the
business will be stopped.”

November Timnas PAB Head of “The team proposed three Support

4, 2008, TNI Proposed Timnas PAB recommendations for military
VHR Media Military TNI, Erry military business takeover business
Business Riyana to be chosen to be takeover
Reposition Hardjapamekas implemented by the
president.”
Defense
Minister “There is no objection on
Juwono the recommendation. I will
Sudarsono chose one and given to the
president.”

119
 Head of TNI
Gen. Djoko “In principle, we agree with
Santoso the recommendations.”

November TNI Business Director “The lack of mandate (to Support

7, 2008, Takeover: Imparsial conduct legal and financial military
Sinar Parliament (NGO) Rusdi audit) had made executing business
Harapan Need to Marpaung team of Timnas PAB TNI takeover
Supervise can not trace TNI business
assets that were dissolved…
But we respect the (Timnas)
finding, considering the
time given to start the
research is 2007. Now the
Parliament should conduct
oversight to the probability
that there were (TNI)
business that had been sale
before 2007 because they
can demand audit.”

November Imparsial Director “Imparsial sees that the Support

7, 2008, Stance on Imparsial proper TNI business military
Cakra Timnas Report: (NGO) Rusdi takeover are cooperatives, business
Buana TNI Business Marpaung hospitals and other similar takeover
Takeover is businesses that give service
Momentum for to soldiers and their family
Progress in TNI can be kept up to 5 years by
Defense Budget slowly taken over … We
hope that President SBY
can execute Timnas PAB
recommendation under
parliament supervision.”

November Not Like Head of “Total net assets of TNI Neutral

17, 2008, Regular Timnas PAB business is IDR 2.1 trillion.
Koran Cooperative TNI, Erry TNI Cooperative is divided
Tempo Riyana to three, head cooperative,
Hardjapamekas central cooperative and
primary cooperative. One of
the alternatives is to keep
only the primary
cooperative that fulfilled
soldiers need”

Researcher on “The other cooperatives that

military is not fulfilled soldier
business from welfare are supposed to be
LIPI Jaleswari taken over. But if primary
Pramodhaward cooperative is taken over
ani too, it can cause
disturbance. Although I’m
not totally agree with the
TNI cooperative
management merged under
MoD because there are

120
 earlier issues that had not
been solved.”

Director “Maintaining primary

Imparsial cooperative will ensure it
(NGO) Rusdi will provide soldier welfare,
Marpaung but it must not go on into
business.”

November Effort to Erase Head of “Even in limited condition, Support

27, 2008, TNI “Soldier Timnas PAB our team kept trying to military
Kompas Doing TNI, Erry conduct maximum work… business
Business” Riyana In the end, executing team takeover
Status Hardjapamekas (of Timnas PAB TNI)
estimated total assets of
military foundation IDR 1.8
trillion and military
cooperation IDR 1.3
trillion.”

December Recommendatio Defense “The ministers (that Does not

15, 2008, n on Military Minister involved in military support
Koran Business Juwono business takeover) are busy military
Tempo Takeover Will Sudarsono because there are many business
Wait Until New problems, such as fuel and takeover
Year gas, matters that important
for many people. There is
still time, hopefully we can
meet after new year.”

“The lengthy time taken to

Researcher on state which
military recommendation taken
business from should be inquired. Where
LIPI Jaleswari is government political will
Pramodhaward in solving TNI business
ani takeover?”

December National Team Defense “We still recommending to Neutral

30, 2008, of TNI Business Minister kept primary cooperatives
Republika Takeover Kept Juwono and foundations, according
Cooperative Sudarsono to the suitable laws, for the
sake of lower rank
soldiers.”

“There will be control

Secretary of mechanism using
Ministry of Cooperative Law, internal
Defense, Lt. supervisor to the top level
Gen. Sjafrie and civil oversight. So what
Sjamsoeddin should be improved is the
running of the
cooperatives.”

121
2009 January 1, National Team Defense “We still recommend to Support
2009, of TNI Business Minister keep primary cooperative military
Antara Takeover will Juwono and foundation, according business
News Keep Sudarsono to existing laws, this is takeover
Cooperative considering the necessity of partially
low rank soldier”

“If TNI cooperative supply

Secretary of material for development
Ministry of ouside (its body) it is not
Defense, Lt. allowed, but if it buy and
Gen. Sjafrie sell material for its member,
Sjamsoeddin in this case TNI soldiers and
families, it is allowed…
Fund that is given to state
registry can be asked back
for fulfilling TNI needs, and
the requirement need to
refer to the regulated law
based on Ministry of
Finance decision.”

January 2, Keeping TNI Executive “Keeping the (TNI) Support

2009, Koran Foundation is Director foundation and cooperative military
Tempo Conservative Institute for is conservative and business
Decision Defense controversial decision. We takeover
Security and had guessed it, because it partially
Peace Studies was the most subtle option
Mufti Makarim between th three
recommendations (given by
Timnas PAB TNI)… It
should be affirmed that
cooperative and foundation
are business.”

“We chose the alternative to

Secretary of keep the cooperative”
Ministry of
Defense, Lt.
Gen. Sjafrie
Sjamsoeddin
“Foundation is not
Minister of business… The guideline on
Law and foundation will be regulated
Human Rights in other law.”
Andi Mattalata

January 3. Next Week Defense “As long as they are inline Does not
2009, Joint Statement Minister with the law, foundations support

122
Kontan Letter on Juwono will be kept, also for military
Military Sudarsono cooperatives because they business
Business are need by lower rank takeover
Regulation Will soldiers. For which business
be Issued that will be managed is state
secret.”

January 5. TNI Researcher on “If government decided to Support

2009, Cooperative and military keep TNI cooperative and military
Republika Foundation will business from foundation, it does not align business
be Keep LIPI Jaleswari with the recommendations takeover
Pramodhaward (given by Timnas PAB
ani TNI). It should be inquired
what is behind the
decision.”

January 6, President Must Parliament “We ask the president to Support

2009, Media Decide Soon the Member of decide soon. This needs to military
Indonesia Matter of TNI Commission 1 be handled fast and not to business
Foundation Bagus Suryama make it piled. After this is takeover
done, KPK (corruption
commission) can enter if
this is seen as priority.”

Parliament “On the matter of TNI

Member of foundation, this is still on
Commission 1 process. So it is better if we
Slamet Effendi wait it to finish and then
Yusuf continue walking.”

Parliament
Member of “KP will not be afraid to
Commission 1 investigate TNI business.
Jansen Hutasoit But maybe now there is no
evidence. If there is, KPK
can enter to investigate.”

January 7, President Must Parliament “President needs to take Support

2009, be Decisive in Member of decisive approach in military
Kompas Settling TNI Commission 1 takeover TNI business. The business
Business Bagus Suryama key to the problem is the takeover
Destiny president has to decide soon
which option to take
because it had been too
long. The three options had
been reported to the
president two-three months
ago but no decision until
now.”

123
January 10, Future of TNI Head of “The existing of cooperative Support
2009, Koran Cooperative Indonesia should consider the need of military
Tempo Cooperative soldiers. In other word, let business
Study TNI cooperative transform takeover
Djabaruddin itself from commando
Djohan cooperative to real
cooperative, which is the
economic body that is
democratic like cooperative
in general… Maybe we can
learn from Malaysia
military cooperative that is
under the Ministry of
Defense and employ retired
soldier and civil people. It
gains
US$ 20.944.000 turn over
and US$ 233.144.000
assets, so that International
Cooperative Alliance rank
the cooperative in 32
position among achiever
cooperative in developing
countries”

January 22, Citizen Brought People that rent “I pay retribution to District Support
2009, Siliwangi in military land Military Command military
Kompas District Military Wiwi Siti III/Siliwangi as much as business
Head: Fruit of Aisyah IDR 280.000 per year.” takeover
Bad Military
Asset Head of Public “The head of military
Management Information of district committed to
District regulate all TNI assets
Military because it is mandated by
Command the TNI Army Head.
III/Siliwangi Therefore he is ready to
Lt. Col. Isa take legal path.”
Haryanto

Defense expert
from “There are two things
Parahyangan shown in military business
University management, which are no
Anak Agung clear regulation and the
Bayu Perwita letting go politics that
triggered insider
misbehavior that resulted to
social conflict.”

Head of TSTB “For (TNI) business units

TNI & that already had contract
Assistant to the with private dealings, they
Ministry of cannot be taken over and
State-Owned transformed to state-owned,
Company Said but (the profit) will be
Didu submitted to state income.”

124
 January 13, TNI Business Defense “So far the mechanism of Neutral
2009, Management is Minister takeover will be using
Kompas Hold by Private Juwono Cooperative and Foundation
Law Sudarsono Law. But if other regulation
needed, government will
soon established it,
including regulation in Non-
Tax State Income”
January 13, TNI Business Defense “TNI business that had Neutral
2009, Management is Minister contract with private parties
Harian Stumped by Juwono bumped with private law.
Surya Private Law Sudarsono Law interpretation between
Foundation and Cooperative
Law and Company Law has
not reach finalization. We
have to see one by one. So
there will not be legal
problem, including law
interpretation.”

February 13, Four Ministries Head of TSTB “Ministry of Finance will Neutral
2009, will Manage TNI & take care of TNI business
Kontan TNI Assets Assistant to the assets. Ministry of
Ministry of Cooperative and Small
State-Owned Business Units will
Company Said takeover TNI cooperative,
Didu Ministry of Law and Human
Rights will manage TNI
foundation, and Ministry of
State-Owned Company will
takeover TNI business units
that can be transformed to
state-owned companies. The
qualifications for the units
to be state company are
having asset more than IDR
15-20 million and do not
burden state economy…
The handing over will be
done by Ministry of
Defense, not by TNI.”

February 23, Defense Defense “This process adopted the Neutral

2009, Minister: Minister alternatives given by
Antara Recommendatio Juwono executing team of Timnas
News n for TNI Sudarsono PAB TNI and aligned with
Business inputs from related
Takeover is Still ministries.”
on Progress

Total 2004=11 Support military Support Does not support military Neutral =
2005=13 business military business takeover = 16 news 29 news
2006=23 takeover = 49 business
2007=11 news takeover
2008=33 partially = 9
2009=12 news

125
 Total news
= 103 news
Source: Compiled by Author

NOTES:

Sources of news
Antara (6 news)
Bisnis Indonesia (7 news)
Cakra Buana (1 news)
Gatra (1 news)
Harian Surya (1 news)
Jakarta Post (12 news)
Jawa Pos (2 news)
Kompas (32 news)
Kontan (2 news)
Media Indonesia (4 news)
Republika (7 news)
Sinar Harapan (6 news)
Suara Pembaruan (1 news)
Tempo (18 news)
VHR Media (3 news)

Total media: 15

Statement quoted:
(a) Executive 9 people
Defense Minister Juwono Sudarsono (24 statements)
Secretary of Ministry of Defense, Lt. Gen. Sjafrie Sjamsoeddin (10 statements)
Head of Public Relation of Defense Ministry Brig. Gen. Slamet Hariyanto (1 statements)
Minister of State-Owned Company Sugiharto (1 statements)
Finance Minister Sri Mulyani Indrawati (1 statements)
Economic Coordinator Minister Aburizal Bakrie (2 statements)
Minister of Law and Human Rights Andi Mattalata (1 statements)
Presidential Spokesman Andi Mallarangeng (1 statements)
Cabinet Secretary Sudi Silalahi (1 statements)
Institutional Deputy of Ministry of Cooperative and Small Business Unit Guritno
Kusumo (4 statements)
Vice Cabinet Secretary of the State Lambock V. Nahattand (1 statements)
Total statements from executive 47

(b) TNI 10 people

Head of TNI Gen. Endriartono Sutarto (5 statements)
Head of TNI Gen. Djoko Santoso (6 statements)
Head of TNI Public Information Sagom Tamboen (1 statements)
Head of Public Information of District Military Command III/Siliwangi Lt. Col. Isa
Haryanto (1 statements)
Head of Army Staff Ryamizard Ryacudu (1 statements)
Director General of Defense Strategy of Defense Ministry Maj. Gen. Dadi Susanto (1
statements)

126
Former Vice of TNI Chief of Staff and Commissioner in Bank Artha Graha (one of
military business) Kiki Syahnakri (1 statements)
TNI Spokesperson Maj. Gen. Kohirin Suganda Saputra (2 statements)
First Lt. Badu (not real name) (1 statements)
First Lt. Bintang (not real name) (1 statements)
Total statements from TNI 20

(c) Team of Military Business Takeover 2 people

Head of TSTB TNI & Assistant to the Ministry of State-Owned Company Said Didu (12
statements)
Head of Timnas PAB TNI, Erry Riyana Hardjapamekas (5 statements)
Total statements from takeover teams 17

(d) Legislative 7 people

Parliament Member of Commission 1 Effendi Choirie (1 statements)
Parliament Member of Commission 1 Bagus Suryama (2 statements)
Parliament Member of Commission 1 Slamet Effendi Yusuf (1 statements)
Parliament Member of Commission 1 Jansen Hutasoit (1 statements)
Parliament Member of Commission 1 Andreas Pareira (3 statements)
Parliament Member of Commission 1 Theo Sambuaga (2 statements)
Parliament Member of Commission 1 Yuddy Chrisnandi (1 statements)
Total statements from legislative 11

(e) Civil Society 18 people

Human Rights Watch Asia Regional Director Brad Adams (1 statements)
Human Rights Watch Activist Lisa Misol (3 statements)
Coordinator of Kontras (NGO) Usman Hamid (2 statements)
Program Director of Ridep (NGO) Muradi (1 statements)
Director Imparsial (NGO) Rusdi Marpaung (4 statements)
Director of Pro Patria (NGO) Hari Prihartono (1 statements)
Executive Director IDSPS (NGO) Mufti Makarim (1 statements)
Researcher on military business from LIPI Jaleswari Pramodhawardani (15 statements)
Senior researcher for CSIS Kusnanto Anggoro (3 statements)
Researcher for CSIS and Professor in University of Indonesia Edy Prasetyono (2
statements)
Economic Lecturer in University of Indonesia Djamester A. Simarmata (1 statements)
Political expert from LIPI Indria Samego (2 statements)
Director of IODAS Andi Widjajanto (1 statements)
Researcher for CSIS Philips Vermonte (1 statements)
Defense expert from Parahyangan University Anak Agung Bayu Perwita (1 statements)
Researcher on military business Lex Rieffel (1 statements)
People that rent in military land Wiwi Siti Aisyah (1 statements)
Worker in Kodiklat Cooperative in Military School Bandung Sutan (1 statements)
Pelamonia Hospital (in Makassar, owned by army) nurse (1 statements)

Total statements from civil society 43

Total statements: 138

Total people quoted: 49

127
2004
Support military business takeover: 5
Support military business takeover partially: 2
Does not support military business takeover: 3
Neutral: 1
Total: 11 news

50.00%

40.00%

30.00%

20.00% News of military business 2004

10.00%

0.00%
Support Support Does Not Neutral
Partially Support

2005
Support military business takeover: 4
Support military business takeover partially: 1
Does not support military business takeover: 3
Neutral: 5
Total 13 news

40.00%

30.00%

20.00%
News of military business 2005
10.00%

0.00%
Support Support Does Not Neutral
Partially Support

2006
Support military business takeover: 9
Support military business takeover partially: 2
Does not support military business takeover: 3
Neutral: 9
Total 23 news

40.00%

30.00%

20.00%
News of military business 2006
10.00%

0.00%
Support Support Does Not Neutral
Partially Support

128
2007
Support military business takeover: 7
Support military business takeover partially: 0
Does not support military business takeover: 2
Neutral: 2
Total 11 news

70.00%
60.00%
50.00%
40.00%
30.00%
News of military business 2007
20.00%
10.00%
0.00%
Support Support Does Not Neutral
Partially Support

2008
Support military business takeover: 19
Support military business takeover partially: 2
Does not support military business takeover: 4
Neutral: 8
Total 33 news

60.00%
50.00%
40.00%
30.00%
20.00% News of military business 2008
10.00%
0.00%
Support Support Does Not Neutral
Partially Support

2009 (up to February)

Support military business takeover: 5
Support military business takeover partially: 2
Does not support military business takeover: 1
Neutral: 4
Total 12 news

50.00%
40.00%
30.00%
20.00% News of military business 2009
10.00%
0.00%
Support Support Does Not Neutral
Partially Support

129
From 2004 to February 2009
Support military business takeover: 49
Support military business takeover partially: 9
Does not support military business takeover: 16
Neutral: 29
Total 103 news

50.00%
40.00%
30.00%
20.00% News of military business 2004-
Feb 2009
10.00%
0.00%
Support Support Does Not Neutral
Partially Support

The statistic data above can be compiled to provide chart on how the news in mass media
portray military business.

70.00%
60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
2004 2005 2006 2007 2008 2009 (up Average
to Feb)

Support Support Partially Does Not Support Neutral

130
 APPENDIX 2

PRESENTASI DARI MENTERI PERTAHANAN RI DI GEDUNG

DEPARTEMEN PERTAHANAN
Senin, 04 Februari 2008
KETERANGAN PERS
PRESIDEN REPUBLIK INDONESIA
PADA
ACARA PRESENTASI DARI MENTERI PERTAHANAN RI
DI GEDUNG DEPARTEMEN PERTAHANAN, JAKARTA
TANGGAL 4 FEBRUARI 2008

Assalaamu’alaikum warahmatullahi wabarakaatuh,

Salam sejahtera untuk kita semua,

Saudara-saudara,
Hari ini saya bersama Wakil Presiden dan sejumlah Menteri berkunjung ke Departemen
Pertahanan untuk pertama mendengarkan laporan dari Menteri Pertahanan tentang evaluasi
program kerja tahun 2007 dan kedua, prioritas serta agenda kegiatan Departemen Pertahanan
pada tahun 2008. Meskipun saya sudah berkunjung ke Markas Besar TNI beberapa waktu yang
lalu, tentu saja masalah-masalah pertahanan negara yang tadi dilaporkan oleh Menteri Pertahanan
juga terkait erat dengan apa yang dilakukan oleh jajaran TNI, termasuk TNI Angatan Darat,
Angkatan Laut, dan Angkatan Udara. Masalah penting yang perlu saya sampaikan kepada
Saudara, pertama Departemen Pertahanan terus mengaktualisasikan, melakukan pemutakhiran
kebijakan dan strategi pertahanan negara, merespon perkembangan lingkungan strategis dan
persepsi ancaman, yang kemudian dari kebijakan itu dituangkan dalam kebijakan pembangunan
dan modernisasi kekuatan pertahanan, yang akhirnya muara atau konsekuensi dari situ adalah
anggaran yang diperlukan untuk pembangunan kekuatan dan modernisasi sistem persenjataan
yang dilakukan oleh jajaran Departemen Pertahanan dan TNI.

Saudara-Saudara,
Dari situ Menteri Pertahanan melaporkan kebijakan, rencana dan program untuk pengadaan
alutsista, alat utama sistem persenjataan, yang tentunya sesuai dengan yang diperlukan oleh TNI
saat ini untuk kepentingan penangkalan, kepentingan tugas-tugas nyata di waktu damai, dan
tentunya apabila ada contingency dan TNI harus bertugas mempertahankan kedaulatan dan
keutuhan negara, apa yang dibangun ini bisa dikembangkan secara cepat untuk betul-betul bisa
mengemban tugas mempertahankan kedaulatan dan keutuhan negara tersebut. Oleh karena itu,
yang menjadi orientasi dan sasaran adalah membangun, yang kita sebut dengan minimum
essential force, kekuatan minimal yang bisa mengemban tugas-tugas tadi. Dengan situasi ekonomi,
dengan keadaan anggaran negara yang dimiliki dewasa ini, maka tentu saja ada skala prioritas di
dalam membangun kekuatan, memodernisasi persenjataan, termasuk pengadaan alat peralatan
yang diperlukan.

Dalam kaitan ini, maka penggunaan anggaran lebih diprioritaskan pada, untuk kepentingan tugas-
tugas nyata, operasi nyata. Dewasa ini, baik operasi militer untuk pertahanan maupun operasi
militer selain perang, yang kita kenal dalam undang-undang kita. Kedua untuk kepentingan
pendidikan dan latihan, yang ketiga untuk kepentingan kesiagaan, readiness, yang keempat untuk
kepentingan pemeliharaan secara menyeluruh, dan yang kelima untuk memberikan kesejahteraan
yang layak kepada prajurit kita. Dari semuanya itu tentunya masih diperlukan sejumlah anggaran

131
untuk memodernisasi sistem persenjataan yang kita perlukan. Tentu saja disesuaikan dengan
kemampuan anggaran yang dimiliki, khususnya alokasi anggaran untuk sektor pertahanan.

Saudara-Saudara,
Dalam rapat kabinet terbatas hari ini juga, saya berikan arahan untuk melanjutkan,
mendayagunakan industri pertahanan dalam negeri dalam pengadaan alutsista. Oleh karena itu,
kita putuskan sekaligus bahwa kebijakan kredit ekspor yang menjadi sandaran utama pembiayaan
pengadaan alutsista di waktu yang lalu akan kita geser menjadi lebih menggunakan komponen
dalam negeri, rupiah murni utamanya, agar lebih dicapai efisiensi dan kecepatan di dalam
pembiayaan alutsista tersebut. Ini tentu memerlukan pengaturan khusus yang tengah dimatangkan
untuk bisa masuk scheme pembiayaan di dalam negeri. Kemudian mendengarkan presentasi dari
Direktur Utama PT. Pindad, Direktur Utama PT. DI, Direktur Utama PT. PAL, maka ke depan akan
lebih ditingkatkan sinkronisasi, koordinasi dan sinergi antara apa yang dilakukan oleh industri
pertahanan tersebut, dengan yang diperlukan oleh jajaran TNI kita, TNI Angkatan Darat, TNI
Angkatan Laut, dan TNI Angkatan Udara, agar di satu sisi kebutuhan militer kita bisa dipenuhi oleh
industri kita. Di sisi lain, industri kita juga tumbuh berkembang sebagai layaknya sebuah
perusahaan yang tentunya memerlukan pendapatan yang makin baik.

Saudara-Saudara,
Kita juga menggarisbawahi meskipun ini masa damai bukan masa perang, tapi tugas-tugas
keamanan dalam negeri harus dilaksanakan dengan baik, termasuk tugas-tugas TNI untuk
melaksanakan bantuan bagi penanggulangan bencana yang selama ini berjalan baik akan tetap
dipertahankan. Dengan demikian kita bisa mengelola keadaan apabila bencana terjadi, terutama
pada masa-masa tanggap darurat. Kita juga akan terus mempertahankan partisipasi kita dalam
peace keeping missions, misalnya ada sejumlah pelibatan TNI dan Kepolisian di berbagai medan
konflik di dunia, kita masih mempertahankan pelibatan kita di Lebanon, dan dalam waktu dekat
Kepolisian kita akan ikut melaksanakan tugas di Darfur, di Afrika. Ini menunjukkan bahwa kita,
Indonesia, akan terus mempertahankan partisipasi dan kontribusi kita dalam berbagai tugas
pemeliharaan perdamaian di seluruh dunia.

Saudara-Saudara,
Kita juga membahas tadi langkah-langkah yang dilakukan oleh TNI, terutama saya garisbawahi,
gerakan penghematan yang sungguh-sungguh untuk pemakaian listrik, pemakaian bahan bakar
minyak dan termasuk pemakaian air. Karena semua itu bergantung atau berkoneksi langsung
dengan anggaran yang kita keluarkan, dengan subsidi listrik dan BBM yang dikeluarkan oleh
pemerintah, saya ingin jajaran TNI memberi contoh, sebuah institusi dan instansi yang betul-betul
hemat dalam penggunaan listrik, dalam penggunaan BBM, dan penggunaan air.

Dan kemudian hal terakhir yang kami bahas tadi adalah menyangkut bisnis TNI. Ada amanah
Undang-Undang agar pada akhir tahun 2009 dilakukan penyelesaian yang disebut dengan Bisnis
TNI. Tentu saja, harus dirumuskan dengan tajam, mana yang dikategorikan bisnis yang tidak tepat
dilakukan di lingkungan TNI, dan mana yang sebetulnya tidak berkategori itu. Sebagai contoh
koperasi untuk anggota, untuk kebutuhan sehari-hari, yang juga itu ada di instansi mana pun,
sesuai dengan Undang-Undang Koperasi, sesuai juga dengan Undang-Undang Dasar 1945,
tentunya hal seperti itu tidak berkategori dengan yang disebut dengan bisnis TNI. Yang jelas TNI
sendiri, Dephan sudah siap untuk menata kembali semuanya itu sesuai dengan amanah Undang-
Undang dan akhirnya yang dilakukan TNI ke depan tentunya sesuatu yang tidak akan mengganggu
tugas pokok, namun membantu prajurit dan keluarganya dalam memenuhi kebutuhan sehari-
harinya. Seterusnya akan dilanjutkan dengan tim yang akan bekerja penuh untuk merumuskan
bagaimana penyelesaian dari bisnis di lingkungan TNI.

Itulah hal-hal yang kita bicarakan pada hari ini, Saudara-Saudara. Apakah ada pertanyaan?

(dilanjutkan dengan tanya jawab dengan para wartawan)

132
Wartawan:

Siang Pak. Wisnu Dewabrata dari Kompas, Pak. Mau menanyakan mungkin yang terakhir, Pak
SBY. Soal bisnis TNI, selama ini juga masih dipertanyakan soal kelanjutan PP Penertiban Bisnis
TNI yang masih belum tuntas. Kemarin dari TSTB juga Pak Saidi juga mempertanyakan deadline
sudah dekat tapi Timnas belum bisa dibentuk karena PP-nya sendiri belum selesai dari Presiden.
Bagaimana Pak? Terima kasih Pak.

Presiden :
Sebenarnya bukan pada PP atau Perpres-nya tetapi konsep, desain dan arah dari penyelesaian
bisnis TNI itu seperti apa. Tahapan sekarang ini sudah cukup gamblang sebenarnya bagaimana
arah dan konsep penyelesaian bisnis TNI ini. Oleh karena itu dari kerangka waktu yang masih ada
dan saya pandang masih cukup tersedia waktu untuk menuntaskan ini, dan dalam waktu dekat tim
akan bekerja sekali lagi penuh, akan bekerja intensif untuk memenuhi target waktu sesuai dengan
amanah Undang-Undang untuk menyelesaikan permasalahan bisnis TNI ini.

Wartawan:

Saya Luhur dari Detik.com. Mungkin saya tujukan kepada Pak Juwono, Pak Menhan. Begini Pak,
terkait dengan yang disampaikan Pak Presiden mengenai penghematan di dalam anggaran
pembelanjaan alutsista tadi Pak, apakah untuk tahun 2008 ini ada rescheduling terhadap
pengadaan alutsista?

Presiden:
Nanti Pak Juwono akan saya persilakan untuk menjawab. Kalau tidak ada yang ditujukan kepada
saya, masih ada? Silakan.

Wartawan:
Saya Marcus Junianto dari Media Indonesia Pak. Kemarin baru saja ada berita duka, enam prajurit
marinir kita tewas dalam latihan Pak, karena kendaraan amphibi mereka terhempas ombak.
Selama ini dan sudah berkali-kali sebenarnya masalah alutsista menjadi satu permasalahan bagi
TNI kita. Masalahnya, kalau kita perhatikan sampai sejauh ini belum ada arah dari pemerintah yang
kelihatan jelas, apakah akan terus mempertahankan pola lama, pola peremajaan, karena misalnya
kendaraan amphibi yang kemarin itu sebenarnya kan sudah tua, sejak tahun 60-an, Pak. Apakah
dalam pertemuan tadi tidak ada sama sekali, misalnya jangka waktu tertentu bahwa semua
kendaraan-kendaraan tua tidak boleh dipakai lagi. Apakah tidak akan ada kebijakan semacam itu,
karena kalau tidak akan ada banyak lagi prajurit-prajurit kita yang berkemampuan handal akan
tewas hanya karena peralatan yang seharusnya sudah tidak dipakai lagi. Terima kasih Pak.

Presiden:

Baik. Arah pemerintah jelas ada, dan sebetulnya beberapa waktu yang lalu sudah kita keluarkan
kebijakan kita kepada pimpinan TNI dengan jajarannya, agar alat utama sistem persenjataan, kapal
laut, pesawat, yang sudah sangat tua untuk di-grounded, untuk di-base out, termasuk misalkan C-
130 Hercules tahun 60-an, termasuk tank amphibi yang umurnya kurang lebih sama. Dan tadi kita
bahas, kita putuskan, dan saya perintahkan sekali-lagi untuk betul-betul menghentikan, bahkan
saya akan memberikan sanksi bagi pimpinan-pimpinan jajaran TNI yang tidak mengindahkan
perintah ini. Karena itu berkaitan dengan safety, dengan nyawa prajurit, yang tentu harus kita
letakkan dalam letaknya yang tinggi.

Oleh karena itulah kita tata semuanya, mana yang harus masih kita pertahankan, mana yang harus
kita adakan baru dengan mengutamakan pengadaan dalam negeri, kita hitung anggarannya.
Saudara tahu bahwa ekonomi dunia, ekonomi Indonesia sekarang ini tidak terlalu cukup tersedia
banyak ruang untuk mengeluarkan anggaran yang besar bagi memodernisasi sistem persenjataan
TNI. Namun bagaimanapun, policy kita sangat jelas yang sudah sangat tua, yang derajat

133
keselamatan dan keamanannya rendah atau rendah sekali kita hentikan, dan kita masuk pada
scheme yang baru untuk peremajaan atau pun pengadaan peralatan yang baru. Demikian. Terima
kasih Pak Juwono saya persilakan.

(Menhan:

Kami membahas masalah anggaran berkaitan dengan alokasi untuk Dephan maupun Mabes TNI
terkait dengan keadaan ekonomi seperti yang dikatakan oleh Bapak Presiden. Kita menerima
apapun yang kita peroleh dari Menteri Keuangan karena kita paham bahwa kalau keadaan
sekarang, perhatian utama pemerintah adalah pada masalah pembangunan ekonomi dan masalah
kesra. Oleh karena itu, kami di jajaran Polkam, termasuk Dephan, Menteri, apapun yang kita terima
dari pemerintah, dalam hal ini, Departemen Keuangan, untuk melakukan penajaman prioritas
tentang penggunaan alutsista, termasuk pengadaan yang baru, sejauh kemampuan anggaran.)

Baik Saudara, sebelum saya tutup, terima kasih Pak Juwono, untuk Saudara ketahui, Pemerintah
bersama DPR-RI sedang menghitung, sedang menyelaraskan bagaimana langkah-langkah
penyelamatan APBN kita dari beban yang berat dari perkembangan ekonomi dunia, utamanya
harga minyak, utamanya lagi subsidi yang besar pada listrik dan BBM, termasuk kepentingan untuk
memberikan bantuan kepada rakyat akibat kenaikan harga pangan.

Konsekuensi dari ini semua tentu harus ada penghematan, bukan hanya unsur pemerintah, tapi
unsur negara. Oleh karena itulah sedang kita hitung penghematan seperti apa dan yang jelas
belanja-belanja barang yang sungguh tidak produktif yang bisa ditunda sekian tahun belakangan
mesti kita hentikan, kita tunda. Kita fokus untuk menyelamatkan APBN kita dan mengarah terutama
untuk mengatasi kesulitan rakyat akibat kenaikan pangan ini dan BBM ini, dan juga untuk
melanjutkan tugas-tugas peningkatan kesejahteraan rakyat, seperti pendidikan, kesehatan, usaha
kecil menengah dan lain-lain. Ini sekaligus saya kaitkan dengan yang disampaikan oleh Menteri
Pertahanan tadi, ini policy nasonal, kebijakan kita untuk mengatasi keadaan, APBN-nya selamat,
pembangunan terus berjalan, dengan penghematan atau efisiensi yang harus kita lakukan. Terima
kasih.
Assalaamu’alaikum warahmatullahi wabarakaatuh.

Biro Naskah dan Penerjemahan,

Deputi Mensesneg Bidang Dukungan Kebijakan,
Sekretariat Negara RI

134
 APPENDIX 3
Hasil Seminar DPR, 23 Februari 2009

Catatan Penting Reformasi TNI Pasca 2009

Fraksi-PKS(Hasil Seminar DPR, 23 Februari 2009): Tidak terasa saat ini kita telah memasuki
satu dekade reformasi TNI. Telah banyak yang berubah dalam diri TNI. Hal ini ditandai dengan
pemisahan diri Polisi dari ABRI, dihasilkannya UU Nomor 3 Tahun 2002 tentang Pertahanan
Negara dan Pengaturan Organisasi TNI dalam UU Nomor 34 Tahun 2004.

TNI telah dilepaskan dari kegiatan politik praktis dan ada upaya unuk menjadikan TNI lebih
profesional baik dari aspek doktrin, kultural dan postur. Namun persoalan reformasi TNI masih
belum banyak menyentuh akar persoalan. Reformasi yang diamanatkan oleh Undang-Undang
Dasar 1945 dan Undang-undang Reformasi ternyata berjalan semakin lamban dan bila tidak
dikawal dengan sungguh-sungguh bisa mengalami stagnasi.

Presiden SBY dalam HUT ke-63 TNI, Selasa 14 Oktober 2008 di Dermaga Ujung Madura,
Markas Komando Armada Kawasan Timur, Surabaya mengatakan bahwa selama satu dasawarsa
ini, reformasi internal TNI telah berlangsung dengan baik. Panglima TNI, Jenderal TNI Djoko
Santoso dalam amanat tertulisnya dalam ulang tahun TNI ke-63 pada 10 Oktober 2008 lalu
mengatakan bahwa refomasi TNI telah berjalan dengan lancar dan berhasil walau masih perlu
kajian dan evaluasi. Bahkan, Menteri Pertahanan Juwono Sudarsono pun mengklaim reformasi
internal TNI telah berjalan 85 persen.

Kekuatan TNI

Postur ril Pertahanan Indonesia bisa dilihat dari kondisi kekuatan hari ini. Kondisi kekuatan
personel TNI hingga saat ini mencapai 383.870 orang (0,17%) dari 220 juta penduduk Indonesia,
yang terdiri dari 298.517 orang TNI Angkatan Darat, 60.963 orang TNI Angkatan Laut, 28.390
orang TNI Angkatan Udara, dan 68.647 PNS TNI. Jumlah kekuatan personil TNI tersebut jika
dibandingkan dengan luas wilayah Indonesia masih belum seimbang.

Kekuatan Alutsista TNI Angkatan Darat sebagian besar masih bertumpu pada aset lama yang
meliputi 1.261 unit Ranpur, namun yang siap operasi 799 unit, 59.842 unit Ranmor namun yang
siap operasi 52.165 unit, 538.469 pucuk senjata dengan berbagai jenis yang siap operasi 392.431
pucuk. Dan pesawat terbang 53 unit dari bebagai jenis yang siap operasi 27 unit.

Kekuatan Alutsista Angkatan Laut meliputi pertama, unsur kapal terdiri dari Striking force 18 unit,
Patrilling Force 58 unit, supporting force 67 unit, dan KAL 317 unit yang siap operasi 76. Dua,
unsure pesawat udara terdiri dari 65 unit dari berbagai jenis yang siap operasi 39. Ketiga ranpur
marinir 410 unit yang siap operasi 157 unit.

Kekuatan Alutsista Angkatan Udara bertumpu pada pesawat tempur, pesawat angkut, pesawat
helikopter, maupun jenis pesawat lainnya serta peralatan rudal dan radar yang meliputi 234 unit
pesawat berbagai jenis dengan kondisi siap operasi 57%, radar 17 unit dengan kondisi siap operasi
88,8%, rudal QW-3 untuk operasional Paskhas dengan kondisi siap operasi 100%.

135
Ringkasnya, kondisi TNI kita baik dari segi SDM maupun sarana dan prasarana termasuk Alutsista
masih jauh untuk menjadi postur pertahanan negara yang memiliki minimum essential forces.
Apalagi dengan luas wilayah dan besarnya jumlah penduduk.

Walau secara Alutsista TNI kita masih jauh dari kriteria profesional, ada hal yang membuat TNI
kita pantas dibanggakan yaitu TNI kita memiliki semangat juang yang tinggi. Keterbatasan
Alusista tidak membuat para prajurit TNI menjadi kehilangan semangat juang. Man behind the
Gun kita telah memiliki militansi berjuang yang tidak kalah dengan tentara negara lain yang hanya
semata-mata profesional. TNI kita menjadi garda terdepan dalam mempertahankan NKRI sesuai
dengan doktrin TNI bahwa tentara kita tidak semata-mata tentara profesional tetapi juga tentara
rakyat dan tentara pejuang.

Persoalan dalam Reformasi TNIAda beberapa faktor yang mempengaruhi lambannya reformasi
TNI. Kendala tersebut antara lain :
1. Negara belum menyediakan anggaran bagi TNI yang memadai.
TNI sebagai pihak yang memiliki tugas dan tanggung jawab dalam bidang pertahanan negara
sangat bergantung pada berapa besar anggaran pertahanan yang dialokasikan Pemerintah. Secara
nasional anggaran pertahanan mengalami kenaikan, namun berdasarkan rasio PDB sejak tahun
2006 terus mengalami penurunan. Bahkan pada tahun 2008 berada pada rasio 0,79% terhadap
PDB sekitar Rp 33,678 miliar (sebagai bahan banding, negara-negara di kawasan Asia Tenggara
pada umumnya memiliki rasio lebih tinggi, anggaran pertahanan bahkan berkisar 4 % - 5 % PDB).
Dari jumlah tersebut sekitar 67 % merupakan anggaran rutin sedangkan 33% untuk pembangunan
pertahanan. Konsekuensi dari rendahnya anggaran pertahanan adalah sulitnya untuk meningkatkan
performance Alusista dan rendahnya tingkat kesejahteraan prajurit. Rendahnya tingkat anggaran
TNI berdamapak sulitnya membentuk prajurit TNI yang profesional yaitu prajurit yang diberi
perlengkapan dengan baik dan dicukupi kebutuhannya.

2. Regulasi yang belum selesai sebagai rule of law bagi TNI.

UU Nomor 34 Tahun 2004 Tentang TNI dan UU Nomor 3 Tahun 2002 Tentang Pertahanan.
Dalam Undang-undang Nomor 34 Tahun 2004 ada beberapa regulasi yang belum dikeluarkan oleh
Pemerintah yaitu pertama, ketentuan operasional hubungan Dephan dengan TNI (Pasal 3), kedua,
prosedur perbantuan TNI kepada Polri (Pasal 7). Ketiga, peraturan pemberdayaan wilayah untuk
kepentingan pertahanan. Keempat, komponen cadangan dan pendukung pertahanan lainnya.
Kelima, peraturan pemerintah tentang kesejahteraan prajurit (Pasal 49 dan Pasal 50). Keenam,
pengaturan operasional gelar TNI (penjelasan 11). Regulasi yang belum selesai dari UU Nomor 3
Tahun 2002 tentang Pertahanan adalah belum membentuk Dewan Pertahanan Nasional. Padahal
dalam Pasal 75 UU Nomor 34 Tahun 2004 tentang TNI mengamanatkan agar segala peraturan
pelaksanan undang-undang TNI ditetapkan paling lambat dua tahun sejak berlakunya undang-
undang.

3. Peningkatan kapasitas politik sipil

Sistem demokrasi yang kita bangun ternyata masih sebatas demokrasi prosedural. Demokrasi kita
baru sebatas pembentukan institusi-institusi baru namun belum dapat mewujudkan demokrasi yang
substansial yaitu kesejahteraan rakyat (welfare state). Manajemen konflik dari partai politik yang
belum matang mengakibatkan lemahnya posisi tawar sipil terhadap TNI.

4. Lambannya Pemerintah dalam menertibkan bisnis TNI

Tim Nasional Pengambilalihan aktivitas bisnis TNI yang dibentuk Pemerintah telah menemukan
bahwa TNI saat ini telah menguasai 23 yayasan yang menaungi 53 perseroan terbatas. TNI juga
mengoperasikan 1.098 unit koperasi yang juga menggerakan 2 perseroan terbatas. serta
memanfaatkan barang milik negara yang dikelola pihak ketiga. Timnas PAB TNI juga menemukan
adanya penguasaan 1.618 bidang tanah seluas 16.544,54 hektare; 3.470 bidang tanah dan
bangunan seluas 8.435,81 hektare; serta 6.699 unit gedung seluas 37,57 hektare.
Timnas PAB TNI merekomendasikan pengalihan aktivitas bisnis TNI dengan cara : Pertama,
penataan dan reposisi semua yayasan, termasuk koperasi dan BMN, kecuali koperasi primer
(primkop). Alasan Timnas tidak mereposisi koperasi primer karena bidang usaha ini ditujukan
untuk meningkatkan kesejahteraan prajurit. "Primer koperasi tetap dipertahankan. Timnas PAB

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TNI akan mengembalikan BMN yang tidak sesuai tugas pokok dan fungsi ke Menteri Keuangan.
Sedangkan BMN yang digunakan oleh pihak ketiga harus ditertibkan mengacu pada penerimaan
negara bukan pajak (PNBP). Kedua, Timnas PAB TNI juga merekomendasikan reposisi dan
penataan bisnis militer dengan menggabungkan yayasan dan koperasi milik TNI dengan bidang
usaha sejenis di bawah Departemen Pertahanan. Kemudian akan diberlakukan legal audit dan
financial audit menyeluruh terhadap yayasan dan koperasi milik TNI. Ketiga, primkop TNI akan
digantikan dengan satuan kerja yang dibentuk di bawah Dephan, sehingga lebih berperan
memberikan pelayanan pada prajurit. Satuan kerja ini bahkan melekat ketika pasukan berada di
medan tempur.
Sampai saat ini Presiden belum menentukan pilihan terhadap ketiga rekomendasi yang dikeluarkan
oleh Timnas PAB. Keterlambatan penentuan pilihan akan berdampak semakin tidak menentunya
masa depan bisnis-bisnis TNI dan dimungkinkanya pengalihan aset-aset bisnis tersebut secara
illegal.

5. Belum jelasnya penyelesaian RUU Peradilan Militer

Saat ini Pansus RUU Peradilan Militer masih belum jelas akhirnya. Pembahasannya terasa sangat
alot di DPR. Pihak TNI masih menolak aspirasi yang menginginkan agar peradilan umum
diterapkan bagi anggota TNI yang melakukan tindak pidana umum. Sistem peradilan militer yang
saat ini menangani tindak pidana umum yang dilakukan oleh anggota TNI sangat tidak memadai.
Baik itu aparat penyidiknya maupun majelis hakim yang akan menyidangkan di pengadilan. Pihak
TNI seolah terbebani secara psikologis bila di diperiksa dalam sistem peradilan umum ketika
melakukan tindak pidana umum.

Momentum Krusial Reformasi TNI Pemilu 2009 dan pemerintahan baru hasil pemilu 2009
menjadi momentum krusial bagi kelanjutan reformasi TNI. Ada beberapa faktor yang akan
mempengaruhi reformasi TNI pasca 2009 yaitu :

Pertama TNI masih menggunakan model internal security dan bukan external security. Hal ini bisa
dilihat dari pengembangan postur pertahanan negara yang di buat Departemen pertahanan dengan
Peraturan Menteri Pertahanan No PER/24/M/XII/2007. hal ini bisa diliat dari rencana
pembentukan Kodam baru yang akan dibentuk di wilayah Kalimantan Barat dan Kaliamntan
Tengah, Sulawesi Utara dan Sulawesi Tengah serta Irian Jaya Barat besarnya gelar kekuatan
kewilayahan membuat struktr TNI tidak akan banyak berubah.

Kedua, pengawalan terhadap reformasi TNI oleh masyarakat sipil semakin melemah. Kejenuhan
terhadap jangka waktu yang lama untuk mengharapkan perubahan terhadap diri TNI, tentunya
berdampak pada posisi yang hopeless bagi masyarakat dan masyarakat sipil akan semakin sulit
mengkonsilidasi diri untuk terus mengawal reformasi TNI.

Ketiga. terjadinya penguatan posisi tawar para purnawirawan TNI. Saat ini banyak purnawirawan
TNI berminat dalam kontestan pemilihan presiden dan pemilihan legislatif. Dengan demikian di
DPR periode depan purnawirawan TNI akan banyak duduk di parlemen. Dengan banyaknya
jumlah para purnawirawan akan sedikit banyak akan mempengaruhi apakah partai politik masih
terus mengawal dan mendesak terlaksananya reformasi TNI atau tidak.

Undang-undang Nomor 3 Tahun 2002 tentang Pertahanan Negara dan Undang-undang Nomor 34
Tahun 2004 tentang TNI masih menyisakan banyak amanat yang harus dijalankan untuk
melaksanakan reformasi TNI. Selain itu kedua undang-undang tersebut belum mampu secara
efektif untuk merubah kultur, pertanggungjawaban hukum dan profesionalisme di tubuh TNI.

Pasca 2009 akan terbentuk pemerintahan yang baru, baik itu di eksekutif maupun di legislatif. Bila
pemerintahan saat ini tidak bisa menyelesaikan persolan-persoalan mendasar yang mengakibatkan
lambatnya reformasi TNI, maka pasca 2009 sangat sulit untuk terjadi perubahan yang signifikan.
Reformasi TNI sangat bergantung pada keputusan politik negara dalam memposisikan dan
mengoperasikan TNI.

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