Summary

Five years after the government of Indonesia committed to end the money-making ventures of the Indonesian armed forces, the promise of reform remains unfulfilled. New reform measures will perpetuate military businesses, rather than eliminate them.

Dismantling the military’s independent businesses has long been recognized as a crucial step to make the Indonesian armed forces (Tentara Nasional Indonesia or TNI) fully accountable to civilian authorities. A law passed by the Indonesian parliament in September 2004 required the Indonesian government to shut down or take over all TNI businesses by October 16, 2009. While the 2004 law was flawed, since it did not clearly cover illegal and informal businesses, it represented a landmark commitment. As the five-year deadline drew near, however, the government had not yet implemented the required transfer of businesses. While sell-offs and business failures had reduced the scale of the TNI business empire, the armed forces still retained extensive holdings.

Faced with the impending deadline, President Susilo Bambang Yudhoyono issued a decree on October 11, 2009, which was followed by Ministry of Defense regulations on October 21. Most importantly these new measures do not require the military to give up its businesses, but merely provide for a partial restructuring of the entities—military cooperatives and foundations—through which it holds many of its investments. The government formed an inter-ministerial team on November 11 to oversee the limited transformation of TNI businesses. However, this team has no clear authority over the TNI or its businesses, lacks independence, is not required to report publicly on its work, and faces no deadline to complete its work. Instead, the government’s actions at best set in motion a new process to gradually assert greater government oversight, but not ownership, over TNI business activities. Nor do the new measures address accountability for human rights violations and economic crimes associated with military business activities.

This report assesses the new measures. After describing the nature of the TNI’s involvement in business and the push for reform, it details the lack of progress since 2004 and identifies the TNI’s main business holdings. Next, it analyzes the recent presidential decree and ministerial regulations in detail, noting their positive aspects as well as the ways in which they fall short. The report ends by offering recommendations to the Indonesian government.

In particular, Human Rights Watch calls for changes to the government’s planned reform process so that, at a minimum, it covers a wider set of businesses, incorporates adequate civilian oversight, and provides for needed transparency and accountability.