Military Business and Local Politics In Decentralized Indonesia By: Indra Kesuma Nasution DISSERTATION Submitted in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy In International Development GRADUATE SCHOOL OF INTERNATIONAL DEVELOPMENT NAGOYA UNIVERSITY Approved by the Dissertation Committee: Yuzuru SHIMADA (Chairperson) Sanae ITO Wataru KUSAKA Approved by the GSID Committee: i Contents Summary ........................................................................................................ vi List of Figures ................................................................................................ viii List of Tables ................................................................................................. ix Glossary of Indonesian Term and Acronym .................................................. xi Chapter 1. Introduction ............................................................................... 1 1.1. Background ............................................................................................. 1 1.2. Research Question ................................................................................... 6 1.3. Military and Local Politics in Post Suharto Era ...................................... 6 1.3.1. Oligarchy After Suharto ................................................................ 6 1.3.2. Military Reform …………………….…………………………... 11 1.4. Research Structure .................................................................................. 14 1.5. Analytical Framework ............................................................................ 17 1.5.1. Research Locations ....................................................................... 17 1.5.2. Classical Elite Theory ................................................................... 20 a. Ruling Elite and Violence ....................................................... 20 b. Political Control of Ruling Class…………………...……….. 21 c. Iron Law Oligarchy in Modern Democracy…………………. 22 d. Democracy and Ritual Elite Mechanism……………………. 23 e. Elites in Modern Society………………...…………………... 25 f. Limitations of Classical Elite Theory ……………………….. 26 1.5.3. Contemporary Elite Theory........................................................... 27 a. Three Types of Elites…………………………..…………….. 27 b. Characteristics of Elites in Indonesia………………………… 29 1.5.4. Clientelism Analysis .................................................................... 30 a. Old Clientelism and Exploitative Relations…………………. 30 b. New Clientelism and Market Exchange……………………... 31 1.5.5. Rent Seeking Concept ................................................................ 33 ii Chapter 2. Decentralization and Dynamics of Elites …........................... 37 2.1. Decentralization ..................................................................................... 37 2.1.1. Defining of Decentralization ......................................................... 37 a. Administrative Context: Transfer of The Authority ………... 37 b. Political Context : Elite Negotiation ....................................... 38 2.1.2. History of Decentralization in Indonesia: An Overview ............... 39 a. Law No. 1/1945 ........................................................................ 41 b. Law No. 22/1948 ...................................................................... 43 c. Law No. 1/1957 ........................................................................ 46 d. Presidential Decree No.6/1959 and No. 5/1960 ....................... 47 e. Law No.18/1965 ....................................................................... 48 f. Law No.5/1974 ......................................................................... 50 2.2. The Regional Redistricting Big Bang in Post Suharto Indonesia ........... 51 2.2.1. Decentralization Law in Reform Era ............................................ 51 2.2.2. Budgetary Transfers ...................................................................... 55 2.2.3. Political Elite Interest .................................................................... 62 2.3. The Dynamics of Elites ........................................................................... 63 2.3.1. Local Strongmen ........................................................................... 63 2.3.2. Military .......................................................................................... 68 Chapter 3. Military Business in Indonesia ……………………...……….. 75 3.1. Military Business in Suharto Regime ...... ............................................ 75 3.1.1. Characterizing of Military ............................................................ 75 a. Praetorian ................................................................................ 75 b. Patron Client System ............................................................... 79 3.1.2. Military Business Model .............................................................. 80 a. Land Grabbing ......................................................................... 80 b. State Owned Enterprises ......................................................... 83 c. Foundations and Cooperatives ................................................ 85 3.2. Military Business in Post Suharto Regime ............................................ 92 3.2.1. Collaboration : The Character of Military .................................... 92 a. Habibie : Civil - Military Negotiation .................................... 92 iii b. Abdurrahman Wahid : Failure of Military Reform .................. 95 c. Megawati : Military Consolidation ......................................... 99 d. Susilo Bambang Yudhoyono : Military Revitalization ............ 100 e. Joko Widodo : Power Sharing .................................................. 104 3.2.2. The Changes of Military Business and Regional Redistricting ... 106 3.3 Types of Military Roles in Regional Redistricting ................................. 109 3.3.1. Military-Civilian Collaboration ................................................... 110 3.3.2. Political Party Instruments ........................................................... 111 3.3.3. Groups Mobilization .................................................................... 112 Chapter 4 : Mandailing Natal : Military-Civilian Collaboration ............... 114 4.1. Military and Regional Redistricting ............................................................ 114 4.1.1. Local Strongman in Initiating New District ……………………… 114 4.1.2. Military Control The New District …...………………..…………. 126 4.2. Military Business ........................................................................................ 128 4.2.1. Forest Extraction ............................................................................. 128 4.2.2. Gold Mining Exploration ................................................................. 142 4.3. Military and Rent Seeking Activities .......................................................... 147 4.3.1. Military Protects Illegal Miners ........................................................ 147 4.3.2. Politicization of Grants for Military Training Ground ..................... 149 4.4. Conclusion ................................................................................................... 153 Chapter 5 : Labuhanbatu Utara : Military-Civilian Collaboration, Political Party Instruments and Groups Mobilization .............. 155 5.1. Military and Regional Redistricting Process ............................................... 155 5.1.1. Military and Political Broker Collaboration ..................................... 155 a. Socialization of Redistricting Concept ....................................... 159 b. Building Political Interest ........................................................... 160 c. Redistribution of Local Resources ............................................. 160 5.1.2. Political Party Instruments ................................................................ 161 5.1.3. Mobilizing Groups of Local Community Organization .................. 165 iv 5.2. Military Business ......................................................................................... 175 5.2.1. Protection of Palm Oil Plantations .................................................... 175 5.2.2. Military as Labor Recruting Agent .................................................... 185 5.3. Military and Rent Seeking Activities .......................................................... 187 5.3.1. Military Participates in Determination of Local Regulation ............ 187 5.3.2. Military Intervention for Local Budget Allocation ........................... 189 5.4. Conclusion ................................................................................................... 192 Chapter 6 : Conclusion ..................................................................................... 195 6.1. After The Fall of Suharto Regime, Military Still Has Important Role in Regional Redistricting Process..................................................................... 195 6.2. Military Use the Instruments of Institutional Changes, such as Regional Redistricting to Protect Their Business Even Though Law No.34/2004 Has Banned the Military from Involvement in Politics and Business......... 196 6.3. Military Collaborated with Civilians to Redistricting Mandailing Natal … 199 6.4. The Military Used Military-Civilian Collaboration, Political Parties and Mass Mobilization of Local Community Organization in Regional