Indonesia: Military Business Threatens Human Rights

Government Must Reform Defense Finances

June 21, 2006

The Indonesian government says it wants to professionalize its military, but we’ve
seen little evidence of real change. Troops are breaking the law, violating human
rights and hiding the money they make on the side. Military reform means getting
soldiers out of business and prosecuting those who broke the law.

Lisa Misol, researcher with the Business and Human Rights Program at Human
Rights Watch

[The latest: Human Rights Watch letter dated July 3, 2006 in The Jakarta Post (Re:
Indonesian Military and rights, by Defense Minister Juwono Sudarsono in The Jakarta
Post, June 28)]

(Jakarta) - The Indonesian government’s plans to reform military-owned businesses do

not sufficiently address the human rights problems fueled by the current system, Human
Rights Watch said in a new report released today. The Indonesian military’s independent
financing undermines civilian control, contributing to abuses of power by the armed
forces and impeding reform.

“The military’s money-making creates an obvious conflict of interest with its proper
role,” said Lisa Misol, researcher with the Business and Human Rights Program of
Human Rights Watch and author of the report. “Instead of protecting Indonesians, troops
are using violence and intimidation to further their business interests. And because the
government doesn’t control the purse-strings, it can’t really control them.”

The 136-page report, “Too High a Price: The Human Rights Cost of the Indonesian
Military’s Economic Activities,” is the most comprehensive account to date of the
harmful effect on civilians of the armed forces’ involvement in business. Human Rights
Watch called on the Indonesian government to ban all military businesses, reform the
budget process and hold military personnel accountable for crimes.

The Indonesian military raises money outside the government budget through a sprawling
network of legal and illegal businesses, by providing paid services, and through acts of
corruption such as mark-ups in military purchases. Many of these businesses are not
controlled by the military’s central command, but they have been allowed to spread as a
flawed response to budget constraints.
Longstanding rules against military profit-seeking have not been enforced. The business
practices of military enterprises have helped sustain the reputation of the Indonesian
military as abusive, corrupt and largely above the law.

“The Indonesian government says it wants to professionalize its military, but we’ve seen
little evidence of real change,” Misol said. “Troops are breaking the law, violating human
rights and hiding the money they make on the side. Military reform means getting
soldiers out of business and prosecuting those who broke the law.”

A 2004 law requires the Indonesian military to withdraw from business by 2009. Civilian
and military leaders have pledged to implement the law. But they have not yet adopted
regulations spelling out how the government will take over military businesses. Officials
say their draft plan may be ready for adoption by August.

“The people of Indonesia pay the price for the military’s economic adventurism,” said
Misol. “It’s past time to do something serious about it.”

Human Rights Watch documented several examples of military involvement in business,

its negative consequences, and the lack of accountability for economic crimes and
associated abuses:

• A series of military-owned businesses in East Kalimantan secured preferred

access to forest concessions on land claimed by local indigenous communities.
Authorities later said the military companies had engaged in over-logging,
illegally exported timber to Malaysia, and contributed to social unrest. The
behavior was so egregious that the companies eventually lost the concessions, but
did not otherwise face any consequences.
• A coal-mining company in South Kalimantan brought in a military-run
cooperative to provide security to help it deal with illegal miners in its concession
area. The military organized the miners, used violence and intimidation to keep
them in line, and brokered sales of the illegally mined coal. Military authorities
declined to crack down on this activity or to punish those involved.
• Companies that use the Indonesian military to provide security for their
installations frequently find that these arrangements have been marked by
allegations of corruption and abuse, as seen in the continuing controversy over the
operations of U.S. mining company Freeport McMoRan in Papua in eastern
Indonesia. Investigations have been opened in the United States into allegations
that the payments might amount to extortion. There are no plans for an
independent investigation in Indonesia to determine whether military officers
committed a crime by accepting cash payments from the company.
• Military involvement in illegal business fuels lawlessness and violent conflict. In
the most notorious example, soldiers mounted a major attack on a police station in
a busy town center in North Sumatra, killing several civilians, over a dispute
allegedly involving local drug-trafficking interests. Hundreds of troops were
involved, but only 19 were discharged and sentenced to jail following the
incident.
 • Soldiers in areas of internal conflict in Indonesia commonly engage in predatory
economic behavior, such as extortion and property seizures. This was the case in
Aceh during the longstanding conflict there. Military demands for bribes have
lessened since the devastating tsunami in 2004 and the signing of a peace accord,
but ongoing military corruption is driving up the cost of reconstruction and adding
to the survivors’ hardship.

Indonesia’s military says that its official budget is sufficient to meet only about half of its
needs, and some estimates suggest that the military raises the remainder independently. In
March 2006, the military declared that it owned more than 1,500 businesses. Many of
them are collapsing after years of mismanagement.

Human Rights Watch acknowledged that Indonesia’s defense budget is low compared to
many of its neighbors, but said the problem was not as severe as is often stated because
the military also draws on additional funds from other government accounts. These funds
are not transparently reported and, Human Rights Watch said, oversight of military
finances is very weak.

“It’s the government’s responsibility to finance the military,” Misol said. “Moonlighting
by the military is not the answer. Indonesia’s leaders need to agree on an appropriate
defense budget that is strictly monitored and reported accurately.”

Human Rights Watch called on the Indonesian government to revamp its plans to take
over military business. Government planners have said they will transform the few
profitable military enterprises into state-owned companies, but they intend to allow the
military to keep the charitable foundations and cooperatives that have been a front for its
commercial interests. Officials have also carved out exceptions to the ban on military
business that dramatically weaken the potential to clean up military finances.

Source: http://www.hrw.org/english/docs/2006/06/21/indone13587.htm