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IV. Recommendations

Indonesia has paid a high price for allowing military businesses, with their far-reaching corrosive effects, to develop. It can ill afford to allow off-budget military financing to continue. A starting point for real and lasting reform must be acknowledgement of the seriousness of the problem. Policymakers have to face up to the many costs of military self-financing. As argued in this report, independent fundraising activities create conflicts of interest that threaten human rights. Self-financing also fundamentally challenges the authority of the government over the military and, in that way, weakens governance and reinforces military impunity.

Reform of military finance also should recognize the true scope of the military’s economic entanglements and include plans to address the entire, sometimes diffuse network of military business activity. Moreover, the government needs to formulate a comprehensive strategy to withdraw military involvement in business, which will require it to grapple with budgetary and financial management issues. Responsibility for change lies with the government but it cannot hope to succeed if it acts alone. It will also be important to engage the military, the public, and international partners in the effort to finally bring military finance under full and accountable civilian control.

Ensure Accountability

The absence of effective civilian control in Indonesia has long permitted members of the armed forces to avoid accountability for human rights violations. This report has argued that the government must improve the financial accountability of the military if it is to check the TNI’s power and combat impunity for human rights abuses. The Indonesian government must move to ensure that the military becomes a focus of efforts to improve public financial management practices. Areas needing particular attention include the development and implementation of budgets, including the further strengthening of auditing and parliamentary oversight functions.

Accountability also requires action outside the fiscal realm. A major weakness of past efforts to address military business has been a failure to enforce legal and regulatory controls barring involvement in business activity, to investigate allegations of abuse linked to military self-financing, and to bring those responsible to account before the law. Additional measures to increase the accountability of the military to civilian rule would support reform of military financing. Several needed measures to advance human rights accountability, if adopted, would also have a positive effect on the government’s ability to exercise control over military finances. Notably, efforts to place the armed forces under the Ministry of Defense, a key element of the military reform agenda, would increase the prospect of holding soldiers accountable for economic and other crimes. The same is true of steps to improve the justice system in Indonesia. If civilian courts were granted authority to try military personnel for violations of the civil criminal code, this would help combat the persistent impunity of higher-ranking officers. Appropriate justice mechanisms are also needed to address abuses connected to military economic activity, including violence, extortion, and property seizures.

Forceful anticorruption efforts must also be part of the solution. The government should work to root out corruption within the military as part of a wider anticorruption agenda. In particular, the government should require military personnel at the more senior ranks to declare their wealth and any business holdings. Only a handful of military officers are required to submit wealth declarations to the Corruption Eradication Commission or KPK. Moreover, the KPK must be granted authority to audit these reports, and it should not hesitate to investigate prominent cases of military corruption. Military personnel found to have business interests in violation of the 2004 TNI law or to have falsely declared their assets should be subject to serious penalties.

Ban All Military Economic Activity and Enforce the Ban

The military generates considerable independent revenue from irregular and illegal activity that, as shown in this report, facilitates many abuses, undermines accountability, and impedes good governance. Top military leaders have declared that formally-established businesses are barely making money or even are net losers. In many cases, they will be glad to get rid of them. As military-owned businesses shrink in value, the share of off-budget revenue the military derives from other economic activity—alliances with business, criminal businesses, and corruption—is believed to be on the upswing.

Against this backdrop, the government’s exclusive focus to date on restructuring only selected formally-established military businesses seriously weakens the military finance reform effort. The Indonesian government should take steps to clearly and effectively outlaw military self-financing in all its guises. It can do so by issuing regulations or a presidential decree to accompany the TNI law (Law 34/2004) that define “military business” broadly to include the full range of military economic activity and clearly declare these to be illegal. The government also needs to establish—and enforce—strict penalties for violations. As a short-term measure, the TNI leadership can issue unequivocal internal orders barring military business activity and begin cracking down. This would also usefully show that the military intends to cooperate fully with civil authorities to implement the ban on military business activity.

Divest the Military of Existing Military Business Interests

The TNI law’s requirement that the military give up its businesses could mark a major step forward in eliminating military conflicts of interest that endanger civilians. Much depends, however, on whether, when, and how it is implemented. The inter-ministerial TSTB working group is finalizing its plan of how to transfer certain military-owned or -controlled businesses to the government and what to do with them. As described above, there is a danger that the TSTB’s sluggish planning process and the many compromises it has already made will result in a fait accompli that will not advance the cause of reform.

Before it commits to these flawed plans, the government should consult thoroughly with relevant experts. Such experts include not only committed reformers in the military but also independent experts, members of civil society, and parliamentarians. The Ministry of Defense has indicated that the draft regulations or decree will be open to public comment.588 It also said that it intends to seek input from independent experts, although it was unclear whether it would consult directly with critics of military business.589

There also is a role for Indonesia’s international partners to provide input. They can share experiences from other countries that have reduced military economic activity and successfully fought military corruption. They also are in a position to offer relevant technical assistance and associated financing. For example, Indonesia’s development partners could provide financial or business expertise, including experience with the transfer or privatization of military assets in other countries.

The divestment of the military will be a long-term process that will take several years, particularly as it has gotten off to such a late start. To help inform the deliberations of Indonesian decision-makers, we have highlighted below some of the challenges to be considered. Different issues can be expected to arise at different stages of the process.

Prepare for Military Divestment

The first stage, which had not been completed at this writing, was the preparatory period during which the government was meant to inventory existing military businesses and develop a plan to assert control over them. The initial TNI inventory submitted in 2005 identified 219 military entities (foundations, cooperatives, and individual companies owned by foundations) engaged in business. By March 2006, the TNI had handed over information on 1,520 individual business units. Government plans to undertake considerable further verification and review before acting to assert government control over the inventoried companies would only lead to additional delays.

The interim period before plans to transfer military businesses have been approved creates a policy vacuum in which the control of military businesses remains in military hands and, as has already been seen, some holdings may be sold without adequate review or accountability. To counter this problem, the authorities should immediately place all known military businesses under scrutiny, require advance approval for sales, and initiate an independent auditing process. They also should arrange for full forensic audits in cases where wrongdoing, such as corruption and the misuse of state assets, is suspected, as government officials have said they intend to do.590 As a further deterrent, the government should make clear from the outset that unscrupulous behavior—such as raiding valuable assets from military businesses or transferring ownership interests without government oversight and approval—will not be tolerated and will be subject to serious penalty. The rules should apply equally to everyone involved in business restructuring, whether they are military or civilian, officials or private citizens.

In planning for divestment of military businesses, the government and those advising it should be guided by Indonesian laws and best practices governing the handling of state assets and the divestiture of state-owned enterprises. Alongside efforts to address known military businesses, they should work to identify additional military businesses. The reform effort should address the full scope of military businesses covered in the TNI law—those that are owned or controlled to some degree by the military. A full inventory would catalog all businesses in which the military has an economic stake, irrespective of their legal status and ownership structure (i.e., whether through foundations, cooperatives, associated holding companies, hidden partnerships, or another arrangement).591

Remove Military Control over Existing Military Businesses

The control of military businesses has been marred by secrecy, which has created opportunities for mismanagement and corruption and undermined public trust. A central challenge for the government, as it moves to fulfill the requirement that it assume control over these businesses, will be to break this pattern. It must develop and implement a transparent, accountable process by which to transfer control over the military’s business holdings. In September 2005, civil society groups encouraged the government to name an impartial body to monitor the transfer of military business.592 They proposed that this body temporarily oversee the management of these companies while they were thoroughly audited in anticipation of being dismantled or sold off in a transparent manner, or perhaps retained and held in a trust. Much time has been lost, but such a body is still needed. It should be given the authority to review and approve bids and should act to ensure that all proceeds are fully accounted for in the state treasury.

The government also needs to address the question of how it will handle businesses in which the military has only a partial share or that are not legally registered as companies. The government should explore ways to identify and sell off or otherwise dispose of such military holdings. It also must ensure that companies that have benefited from an association with the military, whether formalized or not, give up any facilities to which they have had privileged access (e.g. use of state assets) and compensate the government for their prior use.

Some groups have endorsed the TNI’s proposal that it retain its cooperatives and use them to sell basic goods at a discount to military personnel. That has long been the ostensible purpose of military cooperatives but, as this report has shown, military cooperatives extended their reach and became involved in business activity of different types—from investments in forestry and palm oil interests to the brokering of sales of illegally mined coal—that have been associated with human rights abuses and other problems. On this basis, Human Rights Watch remains concerned that an exception to allow cooperatives to take part in small business enterprises would provide an opening for continued military engagement in the economy beyond simple provisioning of soldiers and their families. The same is true of suggestions that military foundations be permitted to engage in limited business ventures.

Account Fully for the Resulting Revenue

The TNI law that mandates the elimination of military businesses, as well as earlier legislation, states that the military should be funded from the national budget. To achieve that end and secure much-needed financial accountability, it is essential that revenues from military-linked companies be properly accounted for. As these businesses are wound down, sold off, transferred, or held in trust and operated for profit, the question arises as to how to dispose of the resulting proceeds. The proceeds may well be less than anticipated, given that in many cases the value of military businesses has been severely compromised by a combination of poor management, high debt exposure, and deliberate asset-stripping. Even if the sums are modest, they must be properly managed. At a minimum, the management of these revenues must conform to the rules established in regard to proceeds from the disposal of state assets and privatization of state-owned enterprises. Funds entered into the state coffers should be used in accordance with a transparent and accountable budgetary process. (A section further below provides recommendations about improvements to the defense budgeting process.)

It has been suggested that the funds should be designated for spending on the military. Many observers see this as a bargain to secure the cooperation of the military establishment. Others view it as a means to ensure that the revenue, once properly accounted for, is allocated to troop welfare to address difficult conditions. Should this approach be adopted—perhaps as an interim measure until the transfer of businesses out of military hands is complete—it needs to be carefully set up to prevent a recurrence of the serious problems that have marred military business to date. One idea would be for the military to transfer its business interests held through foundations and cooperatives to civilian-managed funds that help finance military pensions. In this way, the proceeds from selling these businesses and the revenue from any that were retained would go to a government account, allowing them to be properly counted as government revenue, and be spent on welfare needs rather than other purposes.

Commit to Full Transparency

Top government officials acknowledge that they do not have a full grasp of the extent, nature, or value of all of the military’s economic interests. As part of the military divestment process, the government should make public the TNI’s inventory of military businesses, associated financial data as verified by the government, and the results of prior financial reviews. These steps would be a good start toward greater openness on military financing issues that, as argued in this report, are an essential component of the sound financial management practices that underpin public accountability.

Other measures are needed to improve transparency, several of which have already been mentioned. For example, the government should make public all resources allocated to the defense function in the budget, including items currently assigned to other budget lines, and disclose actual military spending. Current reporting on spending is incomplete and lacks detail. The government also should continue efforts to improve data gathering and published statistics, with particular attention to military finance. It should ensure that pending legislation on secrecy and on freedom of information leads to maximum transparency, including in relation to military matters.

Steps are also necessary to bolster the ability of the Supreme Audit Agency (BPK) to review military finances in full, including operational spending and off-budget finances until the latter are phased out. Parliament should act to amend the foundations law of 2001 to remove any doubt about BPK’s authority to audit military foundations, or the government could accomplish that aim through an executive order. The government should facilitate prompt and full public dissemination of BPK’s audit findings, including past audits on military finances, consistent with international best practice and the principle of maximum transparency.

Address Financing Concerns

An important finding of our research is that military self-financing has far-reaching corrosive effects that harm the public and also the military itself. The difficulty, as we also have noted, is that military fundraising activities have their origins in a response to acute financial pressures. For reform to be effective, the Indonesian government must work to remove the incentives and opportunities for the military to retain a hold on the economy. This will entail several steps and should involve a range of actors. Efforts to address the financial pressures faced by the military must be well planned so that they promote financial accountability and achieve an appropriate balance that recognizes other spending priorities.

Undertake Strategic Defense Planning

The starting point for military budgeting, like all budgeting, should be strategic planning. To determine the appropriate level of budgetary funding for the military, the government of Indonesia must confront a prior question: what role should the military fill and how? A full defense review would provide such an assessment. Many military experts have commented that such a review is overdue. It would also be welcomed by some in the military. As one indication, Major-General (ret.) Sudrajat, a former director general for defense strategy in the Ministry of Defense, publicly called for a new defense doctrine in September 2005.593

In 2006 an official defense review, led by the Ministry of Defense, was underway with external support from donors.594 For this review to serve as a useful basis for future planning, it would need to evaluate the security needs for which a military response is appropriate (a threat assessment) and then define the role of the military in responding to those needs. A thoroughgoing review would not take for granted existing realities, such as present levels of staffing and the existence of the territorial defense structure that independent experts have declared outmoded and ill-suited for a maritime state and that civil society groups have challenged on human rights grounds. The results of such a review, together with efforts to promote a national dialogue on defense issues, would provide the basis for the government to make decisions on defense spending that are consistent with democratic principles, actual needs, and budget realities.595

Establish a Proper Defense Budgeting Process

Simultaneous with efforts to develop an appropriate and affordable military strategy, the government should address weaknesses in its budgetary processes. The Indonesian government should establish effective expenditure management systems for military finance. In doing so, it should build on existing efforts with respect to other areas of government spending. It should prioritize in particular efficiency and oversight. This recommendation is in keeping with a major theme of this report, namely the importance of financial accountability as an element of broader public accountability and a means to help bring an end to military impunity.

The donor community and international financial institutions should make themselves available to help Indonesia improve its management of defense expenditures, and Indonesian officials should seek out this assistance. Indonesia’s partners are well positioned to share international experience on defense budgeting and other matters. Donors, for example, could support defense efficiency studies to help identify ways on-budget resources can be used more efficiently and effectively. They could begin with pilot projects focused, for example, on the budgeting process and use of funds in the Ministry of Defense or one of the TNI service branches. Donor governments, moreover, can provide assistance to improve the military finance skills of the civilians responsible for military oversight.596 Initiatives to provide specialized coursework in defense management can support this goal.597 Donors also can support independent assessments to understand weaknesses in Indonesia’s military financial management system.598

A number of bilateral donor governments have already supported defense budgeting-related efforts in Indonesia, but there is scope to expand and better coordinate their efforts. The Consultative Group on Indonesia provides an important forum. It formed a working group on security and development that could provide a focal point for enhanced efforts to address security sector reform issues.599 The Partnership for Governance Reform also could facilitate the pooling of donor resources and help promote work on military reform, if it could engage the TNI as it has the police. The Partnership reportedly pursued this idea in 2003 without success, as the TNI was uninterested.600

The Ministry of Finance could take the lead in establishing appropriate cooperation with multilateral and international financial institutions. For example, the government of Indonesia and the World Bank have agreed to conduct a series of public expenditure reviews (PER). One PER, addressing sectoral spending, was due to be finalized in 2006. The Ministry of Finance should request a follow-up review that explicitly addresses security sector financing issues. An example is provided by Afghanistan, where a World Bank-led review that included an in-depth study of the security sector was carried out in 2005.601

Additional specialized reviews are available that would help Indonesia improve its budget processes and outcomes. The World Bank has several instruments to analyze expenditures and build capacity to manage them effectively, one of which is the Country Financial Accountability Assessment.602 Likewise, the IMF is positioned to offer technical expertise. For example, an IMF Report on Standards and Observance of Code (ROSC) stands as a useful tool to evaluate actual financial practices against international standards, identify areas in need of improvement, and set in motion a process to address and monitor those issues. A fiscal transparency ROSC for Indonesia was carried out in March 2006, and the IMF anticipated completing its report by mid-year. Human Rights Watch encouraged the IMF to consider the question of off-budget military financing in Indonesia in its review and resulting report.603 The Indonesian government also should engage actively with the Asian Development Bank. It has expertise on governance issues, including in connection with public financing.

Fund the Military at Appropriate Levels

Considering that budget constraints have provided the impetus and ongoing public rationale for military self-financing, as discussed in this report, adequate on-budget funding must be a centerpiece of the drive to reform the military. As part of wider budgetary improvements addressed above, the government should provide public funding for the military at the level determined to be adequate and consistent with national priorities. For this process to have legitimacy, it should include appropriate measures for consultation and transparency within and outside of government structures.

The donor community could be of assistance in this regard. Bilateral or multilateral donors and institutions can help the Indonesian government identify resources to help make up for budget shortfalls. For example, they could study to what extent the elimination of military business activity, and the dampening effects on the economy caused by this activity, might lead to greater corporate tax revenue. They also could analyze the fiscal impact of the government’s plans to progressively increase defense budgets, as an input into government decision-making. At the same time, donors might be able to advise the government on ways to finance the military while protecting spending on pro-poor government activities. They might consider relieving some of Indonesia’s burdensome debt to free up resources that the government itself can spend on priority areas, once sufficient accountability measures are in place.

Donors also can support civilian authorities responsible for ensuring proper budgeting and oversight, including of military finances. Such support could include trainings and technical assistance for the parliament and civilian-led Ministry of Defense.604 The Organization for Economic Cooperation and Development (OECD), which includes several donors to Indonesia, allows the use of development cooperation funds for some security-related programs, provided they are directed to civilian structures, not to the armed forces of recipient countries.605 Eligible programs include “technical cooperation and civilian support” related to “management of security expenditures through improved civilian oversight and democratic control of budgeting, management, accountability and auditing of security expenditure.”606

Address the Welfare Needs of the Troops

Contrary to those who argue that military businesses are needed to support troops, our research has found that low-ranking soldiers derive little benefit from military self-financing activities, since funds are commonly diverted to other purposes (including lining the pockets of more senior personnel). The troops would be better served by targeted measures funded from government revenue. The government of Indonesia should proceed with plans to increase military salaries (along with those of the police and civil servants) to enhance their ability to earn a decent living and thereby reduce the incentives for corruption and illicit business activity. More broadly, the government should actively explore how to improve soldier welfare through improvements to their conditions of work and compensation, including pensions. It is ultimately the responsibility of the government, not the TNI on its own, to ensure a decent living standard for its troops.

Remove Conflicts of Interest

Efforts to divest the military of its business holdings and improve control over military finances must be complemented by proactive measures to eliminate entrenched military activity of a more informal nature. As documented in this report, the military’s engagement in the economy, particularly its interactions with the private sector, create conflicts of interest and incentives for extortion. Close attention must be paid to how the deployment of government security forces at company sites is financed.

One company, ExxonMobil, has said it routes its security payments to the military through an Indonesian government institution, the oil and natural gas authority BPMIGAS.607 Juwono Sudarsono has said that when he first served as defense minister (1999-2000), ExxonMobil paid for security through state oil and gas firm Pertamina: “Usually, Pertamina plays the role as the funding channel from these mining [sic] companies for the country’s security officers.”608 At least one company, the U.K.-U.S. oil company BP, has pledged to publicly report any payments it makes for security provided by public forces.609 BP sought to develop alternative security arrangements that do not rely as heavily on state security forces, but these have not yet been tested.610

Human Rights Watch maintains that security costs associated with any deployment of public security forces to protect company sites should ideally be covered through appropriate taxation, on the principle that public security forces should be paid with public funds, to ensure that they are held accountable to the Indonesian public and that the flow of funds does not provide incentives for these forces to put the interest of companies ahead of the national interest. That is especially true in Indonesia, where company security arrangements have often been associated with serious allegations of human rights abuses and corruption. Under any system of financing for public security at company sites, certain minimum conditions must be met. The cost of security should be paid from government coffers, the funds directed to this purpose should be independently audited, and they should be publicly disclosed in detail. The Indonesian government also should take firm steps to appropriately train and monitor troops, and to punish those responsible for human rights abuses, including in connection with company security arrangements.

Companies, in turn, should minimize their interaction with the Indonesian military. As a general matter, they should adopt and implement policies on human rights, consistent with the U.N. Norms on Business and Human Rights and international best practice.611 Consistent with the 2004 decree on security for vital national assets and related government announcements, companies should transition public security arrangements to the police at the earliest feasible opportunity. They also should fully adhere to the provisions of the Voluntary Principles on Security and Human Rights and provide for maximum transparency, including by disclosing publicly and fully current and past payments to security forces and taking steps to avoid and appropriately respond to human rights abuses by security personnel.

Companies, whether foreign or domestic, private or state-owned, also must do their part to respect the ban on military business activity, as contained in the 2004 TNI law. Companies that already have a previously established business relationship with the military should disclose it fully, coordinate with the authorities to arrange for the transfer or disposal of military interests in such companies, and take steps to remove active-duty military personnel from corporate positions. Informal partnerships or arrangements with the TNI likewise must end. Companies and other economic actors should cease hiring the TNI to provide services, recognize that payments for “facilitation” services constitute bribes and halt them immediately, and perform due diligence checks to ensure that they do not perpetuate military economic activity in their operations.

[588] Ministry of Defense letter to Human Rights Watch.

[589] The consultations were designed for “practical NGOs” with specific technical expertise. Human Rights Watch interview with Lt. Gen. Sjafrie Sjamsoeddin.

[590] Human Rights Watch interview with Said Didu.

[591] The question of the private economic interests of military personnel is addressed above, in relation to accountability.

[592] Lembaga Studi Pertahanan dan Studi Strategis Indonesia (Lesperssi, Institute for Defense and Strategic Studies), “Rekomendasi Kebijakan Terhadap Penyusunan Peraturan Presiden Tentang Penataan Bisnis TNI (Policy Recommendations on the Issuing of Presidential Regulations on Structuring of TNI Businesses),” September 2005. Another suggestion forwarded by a civil society group (the Indonesian Institute, Center for Public Policy Research) is to give the Ministry of Finance authority over the divestment process. Awan Wibowo Laksono Poesoro, “A look at…,” Jakarta Post.

[593] Ridwan Max Sijabat, “General calls for defense doctrine,” Jakarta Post, September 30, 2005.

[594] Human Rights Watch interview with U.K. Ministry of Defense officials, London, July 11, 2005; Human Rights Watch email communication with U.K. officials, March and April 2006. The defense ministry review was supported by expertise provided by a security sector development advisory team from Cranfield University in the U.K.

[595] Human Rights Watch interview with Abdillah Toha. Military reform experts have noted that a full-fledged strategic defense review would usefully set the framework to formulate a national defense policy, as called for in the 2002 Defense Law. That law stipulates that a National Defense Council be formed and assist in formulating a Grand Policy on State Defense that outlines the government’s vision of state defense management. Neither the council nor the policy existed as of early 2006. Human Rights Watch interview with an Indonesian military reform expert, January 2006.

[596] Some donor governments, notably Germany and the Netherlands, have discussed the inclusion of the security sector in public expenditure work. See, for example, “Incorporating the Defense Sector into Public Expenditure Work,” (report of an international policy workshop hosted by the Federal Ministry for Economic Cooperation and Development (BMZ) of Germany, Bonn, Germany, February 9-10, 2004), report dated June 3, 2004.

[597] The U.K. government supports a specialized course of study in defense management offered at Institut Teknologi Bandung (Bandung Institute of Technology) that draws on teaching staff from Cranfield University. Email communication from a U.K. official to Human Rights Watch, October 24, 2005.

[598] An assessment tool is available to help guide such efforts. Nicole Ball, Tsjeard Bouta, and Luc van de Goor, Enhancing Democratic Governance of the Security Sector: An Institutional Assessment Framework (The Hague: The Netherlands Ministry of Foreign Affairs and the Clingendael Institute, 2003), pp. 74-80.

[599] Email communication from a CGI member to Human Rights Watch, January 2005. Action to form the group had been pending since 2004, and even once formed the group was slow to approve terms of reference. Draft terms of reference shared with Human Rights Watch explicitly identified security sector financing as a topic of interest.

[600] Eduardo Lachica, “Examining the Role of Foreign Assistance in Security Sector Reforms: The Indonesian Case,” Institute of Defense and Strategic Studies (Singapore) Working Paper, no. 47, June 2003.

[601] The study was included at the request of the Minister of Finance of Afghanistan and supported by technical assistance supplied by the U.K. government. “Improving Public Finance Management in the Security Sector,” vol. 5 in World Bank, Afghanistan: Managing Public Finances for Development, no. 34582-AF, (Washington, D.C.: World Bank, 2005).

[602] See Dylan Hendrickson and Nicole Ball, “Off-Budget Military Expenditures and Revenue: Issues and Policy Perspectives for Donors,” Conflict, Security, and Development Group Occasional Paper #1, U.K. DFID and King’s College London, January 2002.

[603] Past fiscal transparency ROSCs on a number of countries have addressed military financing issues. See, for example, the ROSCs on Chile (2001, 2003, 2005), Cyprus (2005), Greece (2005, 2006), Jordan (2006), and Russia (2004), available at: [online]

[604] Some programs are in place. For example, the government of the Netherlands supports trainings for MPs by security sector reform experts. Human Rights Watch interview with an NGO worker, Jakarta, April 2006.

[605] Human Rights Watch, which agrees that donors may provide assistance funds to civilian oversight bodies but that it should not provide funds to the TNI itself. Human Rights Watch objects to international assistance to the TNI in light of its human rights record. In our view, Indonesia’s partners should insist on accountability for human rights abuses as the minimum condition for reinstating or maintaining military ties.

[606] In March 2005, the OECD Development Assistance Committee (DAC) approved a decision to make such programs, among others, eligible for funding from development cooperation funds known as Official Development Assistance or ODA. OECD, “Conflict Prevention and Peace Building: What Counts as ODA?” March 3, 2005.

[607] ExxonMobil spokesperson Deva Rachman was reported to have admitted that the company made payments for security but to have said that the funds were paid to and fully managed by BPMIGAS. Tiarma Siboro and Tony Hotland, “General confirms Freeport payments,” Jakarta Post, December 29, 2005. Prior company statements indicated that security was provided by the Indonesian government under arrangements (without mentioning payments) coordinated by Pertamina, the state oil company, and later BPMIGAS. ExxonMobil Media Statement, “Statement Regarding NGO Human Rights Lawsuit – Aceh, Indonesia,” August 13, 2002; ExxonMobil Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934, “Aceh Security Report," under Shareholder Proposals, Item 6, April 13, 2005.

[608] Sudarsono, who at the time was serving as ambassador to the U.K., said an Exxon executive earlier had told him the company provided support funding to the TNI via Pertamina. It is unclear why Sudarsono referred to mining companies, which presumably would not have the ability to fund payments through an entity working in the oil and gas sector. Unidjaja, “TNI nothing…,” Jakarta Post. The TNI spokesperson in 2003, Maj. Gen. Sjafrie Sjamsoeddin, also said that ExxonMobil paid the military for security but did not specify the funding mechanism. “Freeport confirms allowances…,” Jakarta Post; “The same old story – Military in security business,” Jakarta Post, July 26, 2003.

[609] BP (formerly known as British Petroleum) announced that it was preparing to disclose data on payments made under its Security Field Guidelines from 2003 to mid-2005. BP Response to the Tangguh Independent Advisory Panel’s (TIAP) Fourth Report on Tangguh LNG Project, March 2006, pp. 24-25. 

[610] BP has said it plans to use a community-based security strategy for the Tangguh liquid natural gas facility that is scheduled to open in Papua in 2008, and that it will call on the police if needed and the TNI as a last resort. BP was reassured by the TNI leadership that the military would only provide security for the project if a serious threat arose that the police were unable to address. Tony Ling and Gare A. Smith, “Human Rights and Security Monitoring Assessment and Peer Review of the Tangguh LNG Project,” assessment commissioned by BP, August 5, 2005. As of April 2006, the company had set up a community policing structure, hired and trained company security guards, signed a joint security agreement with the regional police chief in Papua that incorporated the Voluntary Principles on Security and Human Rights, and planned for joint security trainings with the police, and developed procedures to investigate and report any alleged human rights abuses. BP, “Tangguh Project: Security and Human Rights, Handling Community Grievances,” (presentation to TIAP and NGO meeting, London, April 2006). See also “Letter of Joint Decree between the Chief of the Regional Police of Papua and Executive VP Tangguh LNG, concerning Field Guidelines for Joint Security Measures within the Work Area of the Tangguh LNG Project,” April 16, 2004.

[611] The U.N. Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights were adopted by the U.N. Sub-Commission for the Promotion and Protection of Human Rights in 2003. See also United Nations, Report of the United Nations High Commissioner on Human Rights on the responsibilities of transnational corporations and related business enterprises with regard to human rights, E/CN.4/2005/91, February 15, 2005. 

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