Indonesia's military continues to thrive financially on criminal activities, according to a hard-hitting 20-page report from Human Rights Watch. These include protection payments, leasing public land for profit, illegal logging operations and inflating military purchases for profit.

The result of this "damaging and dangerous business empire" is continuing and consistent human-rights violations.

A government report in 2008 suggested that any businesses taken over should be liquidated. HRW acknowledges that a few businesses have been handed over but some have also failed through corrupt practices.

Part of the problem is an absence of clear rules, which allows the military to sell off valuable businesses without adequate oversight. "For example, in 2005 the army independently sold off its stake in Bank Artha Graha, a private company in which it held shares via a foundation for $12.1 million. There were also persistent rumors that the military drained companies of value, transferring assets to private allies in anticipation of an eventual handover."

All military business activity was supposed to have ended by Oct. 16, 2009, as explained in the report "Unkept Promises: Failure to End Military Business Activity in Indonesia." That was the deadline set by the government's 2004 decree stating that the military would hand over its money-making ventures to be civilian run.

But the panic-stricken government of President Susilo Bambang Yudhoyono decreed, as late as Oct. 11, 2009, that the military need not relinquish control. They need only to "provide for a partial restructuring of the entities -- military cooperatives and foundations -- through which it holds many of its investments," the report says.

The Oct. 11 decree was meant to allow for some government and civilian oversight of the military's operations. But again, no details were set out, nor have they been, the report says, literally allowing business as usual for the military.

Even after its selloffs and business failures, the military, at the end of 2007, "maintained 23 foundations and over 1,000 cooperatives, including ownership of 55 companies, as well as leases on thousands of government properties and buildings."

However, the report noted that data for 2008 and 2009 was not available at the time of writing.

Most military-owned companies, 53 of the 55 identified in the review, were held by foundations. The military headquarters and its service branches have at least one foundation each. The army alone has 16 different foundations. Military foundations, in turn, control holding companies through which they invest in individual businesses.

Navy assets over $1 million include the ship chandlers Jala Bhakti Yasbhum and shipping agency Admiral Lines. Among the army's businesses valued at more than $1 million are Meranti Sakti Indah Plywood, Kartika Airlines and the Dharma Medika Hospital. The air force owns the Executive Club Persad, a venue for weddings and other functions as well as having a public swimming pool.

The report lays a large part of the blame on Minister of Defense Juwono Sudarsono, who served from 2004 to October 2009. Although he was the first civilian to hold the post, he had a "lax attitude" and "frequently made excuses" for the military's stonewalling. He argued in 2007 that the military's budget "is still very low, so in order to finance defense and security operations the military institutions must fund themselves through business activities."

He also argued repeatedly that the government take over only the handful of military businesses of high value and leave the rest in military hands. According to him, "The smaller ones will not be taken over. They will still be owned by the TNI (military) to help fulfill the soldiers' needs."

Human Rights Watch recommends that another independent group, complementary to the Oversight Team, set up in November 2009, be created. It should include law enforcement personnel that will crack down on illegal military businesses and report to the government, Parliament and the public.

Also, the process should include more people outside both government and the military. "The ministries and the Oversight Team should actively seek advice and input from independent experts, including members of non-governmental organizations and think tanks, to inform their plans."

The military has reacted to the report by denying that its businesses are corrupt and that they have been involved in human-rights abuses, such as detailed in the report.

Business reforms are ongoing, military spokesman Sagoeom Tamboen told the British Broadcasting Corp. He said most of the businesses owned by the military are now managed by a government that will decide what to do with them by the end of this year.

The task of rolling back military influence is difficult because of decades of Dwifungsi, or the dual-function doctrine, implemented by President Suharto's military-dominated government that came to power in 1966. Dwifungsi was used to justify the military increasing its influence in government, including military-only seats in Parliament and taking top positions in the public service.

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