IR/P5 5tacks U |||||| 1 WE7 W= 354 TRATEGIC & DEFENCE STUDIES CENTRE WORKING PAPER NO. 354 THE INDONESIAN MILITARY BUSINESS COMPLEX: ORIGINS, COURSE AND FUTURE INT'L RELATIONS/PACIFIC STUDIES LIBRARY UNIVERSITY OF CALIFOR-A, SAN DIEGO LA JOLLA, CALIFORNIA Bilveer Singh, PhD Working paper (Australian Nations 1 University. Strategic and Defence Studies Centre) IR/PS Stacks UC San Diego Received on: 10–31–21 SDSC Working Papers Series Editor: Helen Hookey Published and distributed by: Strategic and Defence Studies Centre The Australian National University Canberra ACT 0200 Australia Tel: 02 62438555 Fax: 02 62.4808 16 ||||8 | WORKING PAPER NO. 354 THE INDONESIAN MILITARY BUSINESS COMPLEX: ORIGINS, COURSE AND FUTURE INT'L RELATIONS/PACIFIC STUDIES LIBRARY UNIVERSITY OF CALIFOR, A, SAN DIEGO LA JOLLA, CALIFORNIA Canberra Bilveer Singh, PhD February 2001 National Library of Australia Cataloguing in Publication Entry Singh, Bilveer, 1956-. The Indonesian military business complex: origins, course and future. Bibliography. ISBN 0731554035. 1. Military-owned business enterprises - Indonesia. 2. Indonesia. Angkatan Bersenjata. 3. Indonesia. Tentara Nasional. 4. Indonesia - Armed Forces - Finance. 5. Indonesia - Armed Forces - Civic action. 6. Indonesia - Armed Forces - Appropriations and expenditures. I. Australian National University. Strategic and Defence Studies Centre. II. Title. (Series: Working paper (Australian National University. Strategic and Defence Studies Centre); no. 354). 338.47355009598 \lºn | ABSTRACT One of the unique features of the Indonesian military (referred to as Angkatan Bersenjata Republik Indonesia or ABRI in the past and Tentara Nasional Indonesia or TNI at present) is its massive involvement in commercial activities. Even though the military's business activities flourished under the presidency of Suharto, its origins can be traced to the pre-Suharto era. The ostensible reasons for the quantum expansion of the military's business activities were the need to cater for the welfare of the soldiers and to augment the operational budget of the armed forces that were believed to be inadequately provided for in the annual defence budget. As such, every service of the military - namely, the army, navy, air force and the police - established their own foundations, under whose umbrella various business activities flourished, with the army emerg ing as the biggest economic actor from the military. Initially, there was very little opposition to the military's involvement in these activities, stemming from three main factors. First, as the military was a powerful political force in the country and its activities were sanctioned by President Suharto, hardly any opposition was raised. Second, the business activities did play an important role in raising the welfare of the soldiers as well as providing the armed forces with valuable off-budget finances to carry out its activities. Third, the military's business activities had a spill-over and multiplier effect, benefiting various private sector business, developing, as it were, a win-win situation. However, once the Suharto regime was toppled and Indonesia embraced democracy, the calls for greater transparency and accountability eventually took their toll on the military, and it is within these parameters that there has been growing criticisms about the military's involvement in business activities, especially at a time when the country's economy has been hard-hit by multiple crises. It is against this backdrop that this study examines the origins, evolution and fu ture of the Indonesia military's 'business complex'. THE AUTHOR Bilveer Singh, from the Department of Political Science, National Univer sity of Singapore, is currently a visiting fellow at the Strategic and Defence Studies Centre, Australian National University. He has been teaching in Singapore since graduating with Masters and PhD degrees in international relations from the Department of International Relations, Research School of Pacific and Asian Studies, Australian National University in 1987. His re search mainly covers regional security issues in the Asia-Pacific region, with a particular focus on Southeast Asia. He has published widely, with recent works including. Succession Politics in Indonesia: The 1998 Presidential Election and the Fall of Suharto (Macmillan, 2000); ASEAN, the Southeast Asian Nuclear-Weapon Free Zone and the Challenge of Denuclearlisation in Southeast Asia (SDSC, 2000); and ‘Civil-Military Relations in Democratizing Indonesia; Change Amidst Continuity', in Armed Forces & Society (Summer 2000). He is currently re searching on Australian-Indonesian defence relations. ACKNOWLEDGEMENTS I wish to express my heartfelt thanks and gratitude to all those who have given me invaluable advice and encouragement while I was undertaking this study. I am particularly grateful to the Strategic and Defence Studies Centre, Australian National University, for providing the necessary support and en couragement to undertake this study. Here, I would express my sincere grati tude to its Director, Professor Paul Dibb, and Professor Desmond Ball for assist ing in the completion and publication of this work. I also like to thank Alan Dupont for sharing his ideas and materials that has greatly helped me in focus ing on the key issues as far as the subject is concerned. I would also like to thank the Institute for Policy and Community Development Studies, Jakarta and the Bonn International Conversion Center, Germany, for inviting me to an international conference in Jakarta in October 2000 that helped to widen my horizon on the subject. I also wish to thank General Wiranto, General Bambang Yudhoyono, Rear Admiral RMSunardiand Brigadier-General Bambang Sutedjo for the various inputs that have been helpful in my understanding of the Indo nesian military involvement in business activities. However, all the views ex pressed in this paper are solely mine and I take full responsibility for any errors that may have occurred. ACRONYMS AND ABBREVIATIONS ABRI Angkatan Bersenjata Republik Indonesia BULOG Badan Urusan Listrik BUMN Perusahaan-Perusahaan Negara IMBC Indonesian Military Business Complex INKOPAD Induk Koperasi Angkatan Darat INKOPAL Induk Koperasi Angkatan Laut INKOPPOL Induk Koperasi Polri INKOPAU Induk Koperasi Angkatan Udara KOPASSUS Komando Pasukan Khusus KOSTRAD Komando Strategis Angkatan Darat MIC Military Industrial Complex MILBUS Military Business PETA Tentara Sukarela Pembela Tanah Air PX Post Exchange TNI Tentara Nasional Indonesia INTRODUCTION Strictly speaking, as the legitimate manager of violence in a state, the role of the military is rather prescribed and defined - namely, to use its anointed means in the pursuit of the national interest as is agreed and directed by the legally constituted and legitimate government of the day. This role is usually defined in terms of managing external defence even though under certain cir cumstances, internal security could also become the purview of a country's armed forces. In reality, almost all militaries in the developed and developing world have undertaken a role expansion that has gone beyond their narrowly defined ambit, and this role enlargement has covered various areas including politics, economic and social-cultural arenas of the state. In turn, their role enlargement has spurred various debates about civil-military relations, both during and after the cold war, with scholars largely indeterminate about the actual status of the military in a modern political entity. What cannot be de nied, however, is that the military in almost every setting has emerged as a highly complex and sophisticated organisation with its tentacles reaching and by affecting almost every facets of society - the question really being how and what means is this undertaken-in agreement or in opposition to the prevailing views, norms and mores of the society. In this regard, by itself, the military's involvement in business activities is essentially not a problem. In fact, in some areas, it is imperative that the military become involved as deeply and efficiently as possible to ensure that the net effectis the enhancement of national political and security goals. That this is so can be seen from the activities relating to defence industrialisation in various countries, especially in the developed world. If anything, directly and indi rectly, the military is heavily involved in defence industrialisation, leading many to raise various issues and concerns about what this really means for national politics and security policies. In the West, the rise of collusion be tween various agents and agencies involved in defence industrialisation in what has been referred to as the ‘military industrial complex' is a case in point. It took none other than a renowned general and two-term (1953-61) American President, Dwight Eisenhower, to ring the alarm bell in his Farewell Address on 17 January 1961: This conjunction of an immense military establishment and a large arms industry is new in the American experience. The total influence – economic, political, even spiritual- is felt in every city, every State house, every office of the Federal Government. We recognize the imperative need for this develop ment. Yet we must not fail to comprehend its grave implications. Our toil, 6 Strategic and Defence Studies Centre resources and livelihood are all involved; so is the very structure of our society. In the councils of government, we must guard against the acquisition of un by warranted influence,