Copyrighted material

Indonesian Military Controls Business Empire

by Kafil Yamin

Find other articles in the Monitor archives about the Indonesian armed forces

(IPS) JAKARTA -- Months after Indonesian strongman Gen. Suharto stepped down from office, the institution that helped keep him in power for decades is still a force to reckon with in this country.

Though students and other reform campaigners are demanding the military's immediate removal from parliament in order to neutralize their influence, it does not look like they are about to give up power any time soon.

Sixteen students were shot dead earlier this month by security forces in a fresh wave of violence that rocked the capital as parliament convened a special session to discuss political reforms, including the holding of elections next year.

Becoming increasingly unpopular among activists and the public in general, the military, however, is still very visible and a new political blueprint agreed upon last week is likely to still include a role for the military in Indonesia's political life.

Army has a wide variety of business interests
The only sector where the military seems to be losing a bit of its considerable hold on is in business. But some analysts say they do not see any wholesale retreat of the armed forces in money- making deals anytime soon.

That is hardly surprising, considering that the business assets of the military total at least $8 billion, according to new research by the Indonesian Science Institute. The Armed Forces has a wide variety of business interests, ranging from forestry, to food supply, to real estate.

Some analysts attribute the present economic crisis to the military's meddling in business. For instance, they say, there cannot be "pure" business dealings between politically weak business organizations and military institutions.

Quips economist Faisal Basri of the University of Indonesia:

"You cannot make a genuine and fair business decision (at) gunpoint."

Basri is referring to the complaints of some businessmen who say they could not turn down offers from the military even if these were not "business-like." Ministers and other high-ranking state officials have also grumbled about being put in a spot whenever military-related companies join bidding sessions for projects.

"If a bidding session is going on with some business firms, and a military-related firm (is among) the participants, everybody will know who is going to win," a Public Works official told IPS.

"Sensible businessmen would even know their position and quit the bidding."

He added: "If the official concerned favors a businessman to win the bidding, he should be ready for dismissal or something."

Analysts also say the military's way of running businesses has led to monopoly in many sectors, closing these to private and even state control. According to the experts, this situation only leads to corruption and other nefarious activities.

Having military connections, though, is not the only way to strike it rich in Indonesia. Being ethnic Chinese is also a big boost, say a few observers, as is being part of the First Family -- at least during Suharto's regime.

Observers explain that ethnic Chinese businessmen are seen by officials as very "cooperative" and "full of understanding."

During Suharto's time, First Family members and the military also got special consideration because of their political clout.

The military, however, had the added advantage of being a source of "security", which is why Chinese businessmen also readily took it on as a partner.

But the violent May riots allegedly instigated by members of the military and that made arson and rape victims out of many Chinese Indonesians may be changing that.

Experts also note that a significant number of Chinese entrepreneurs -- including some tycoons -- have fled the country as a result, leaving their military partners with businesses that are essentially lacking real leadership.

Former generals control numerous companies through "foundations"
Even if former patron Suharto is no longer in power, the military still looms large in this Southeast Asian country, and may resist any attempt to strip it off the special status it has enjoyed since 1965, when it crushed a Communist coup attempt and catapulted Suharto into Indonesia's highest office.

In truth, says Basri, the business privileges accorded to the armed forces was aimed at distracting the military officers' attention from politics, thereby avoiding a competition for power, and assuring Suharto of a long reign.

It is not unusual to see military officers to strike it big in business after retirement.

Among the generals- turned- businessmen are Ibnu Sutowo, former director of the state oil firm Pertamina, Brig Gen Sjarnubi Said, Maj Gen Suhardiman, Lt Gen Tahir, Brig Gen Andi Sose and Gen Benny Murdani. Each now heads huge holding companies that have hundreds of subsidiaries.

For their part, each branch of the military controls numerous companies through "foundations." The army has its Kartika Eka Paksi Foundation (YKEP) that runs, among others, the Sudirman Central Business District in the heart of the capital. Construction of the district alone reached $3.25 billion.

YKEP also operates four corporations, two cooperatives and one foundation. The Army Central Cooperatives (Inkopad) has business links with some 13 companies, while the so-called Red Beret Corps foundation (YK Kobame) is in the hotel business.

The navy, meanwhile, has the Bhumyamca Foundation, the Navy Central Cooperatives (Inkopal) and the Navy Prime Cooperatives (Primkopal). The air force has the Adi Upaya Foundation, the Air Force Central Cooperatives (Ikopau) and the Air Force Prime Cooperatives (Primkopau).

Then there are the police business enterprises: the Brata Bhakti Foundation, the Police Central Cooperative (Inkopol) and the Police Prime Cooperative (Primkopol).

Not to be forgotten is the Armed Forces' very own ABRI Headquarters Foundation (Yamabri), as well as the various businesses run by special military units like the Army Strategic Reserves (Kostrad). Even the defense ministry operates the Yudha Bhakti Bank, as well as an insurance company.

Analysts like Basri say the heavy military presence in business has led to huge inefficiencies in the country's economy. Says Basri: "It should be put to an end if we want to get out of the economic crisis soon."

Comments? Send a letter to the editor.

Albion Monitor November 23, 1998 (

All Rights Reserved.

Contact for permission to use in any format.