TNI’s Gold Mine: Corruption and Military-Owned Businesses in Indonesia

The Grasberg Mine, located close to the highest mountain in West Papua, Indonesia, is the world’s largest gold mine and third-largest copper mine. The mine, owned by the corporation Freeport-McMoRan Copper & Gold, has been the site of strings of grave human rights abuses, linked to Indonesia’s own National Armed Forces (Tentara National Indonesia/TNI). TNI’s presence in the territory is ostensibly to protect the mine, and Freeport’s Indonesian subsidiary acknowledges having made payments of as much as US$4.7 million in 2001 and US$5.6 million in 2002 for such government-provided security. A report by Global Witness, however, revealed numerous other payments ranging from US$200 to US$60,000 that Freeport Indonesia allegedly made to individual military officers.

The TNI’s sale of security services to companies like Freeport is only one of the many business ventures conducted by the TNI and its officers. As Human Rights Watch has reported, the Indonesian military has been supplementing its income through both its formally established companies, and through informal and often illicit businesses such as black market dealing. Moreover, the military’s business activities (both lawful and unlawful) are largely shielded from public scrutiny: budgeting for military purposes is generally kept secret, and TNI members generally refuse to answer questions about institutional spending.

Military-owned business in Indonesia are problematic, not only because this private-sector activity impedes military professionalism and distorts the function of the military, but also because it also contributes to crime, human rights abuses, and especially corruption. This problem is greatly compounded by the fact that TNI officers generally enjoy immunity from corruption charges brought by civilian institutions. In fact, the Transparency International’s Defense and Security Program has deemed Indonesia one of the countries most prone to corruption in its defense and security institutions. It is therefore appalling that this issue has not been addressed more seriously by the Indonesian government. Although a 2004 law mandated the transfer of control over TNI businesses to the civilian government within five years, the law did not clearly specify which types of business activities were covered, and this legal loophole enabled the TNI to preserve many of its moneymaking ventures, including TNI’s infamous security services—to say nothing of already-illegal criminal enterprises and illicit corporations. Moreover, despite the five-year timetable in the law, the government has been notably reluctant to enforce the transfer of ownership, making repeated excuses alluding vaguely to the need for the TNI to compensate for the lack of budgeting for security purposes. As a result, despite some efforts to reform the way the TNI is allowed to handle its businesses, military-owned businesses in Indonesia continues to flourish, with the Indonesian people of Indonesia having to pay the price.

The government’s weak response towards the military’s non-compliance with the 2004 law is merely one of the many indicators of how impervious the TNI’s power and seeming impunity. There are factors that contribute to this impunity, along with the corresponding corruption and abuse of power in the operations of military-owned businesses:

  • First, Indonesia’s Corruption Eradication Commission (Komisi Pemberantas Korupsi/KPK), the spearhead of Indonesia’s anticorruption efforts, has limited authority to investigate TNI’s corrupt behaviors. This is due in part to the fact that the Military Law regulates the conduct of TNI members, and cases against TNI members are heard in Military Court, which typically has closed proceedings. It is also due in part to the tendency of information relating to military affairs to be deemed sensitive and therefore classified. Moreover, despite the requirement to submit wealth declarations, high-ranking TNI officials often evade this obligation, and the requirement does not extend to lower-ranked officials.
  • Second, the TNI has effectively cultivated political connections to help protect it from scrutiny. TNI has established strong relationships with Indonesia’s high-ranking national politicians. If former President Soeharto and Susilo Bambang Yudhoyono were members of the military, other presidents have familial, business, or friendly relations to the military. Historically, the TNI has even infiltrated Indonesia’s political realm through its dual role in the country’s politics and security. Furthermore, decentralization in Indonesia has shifted money politics and corruption from the central government to the periphery, and this has made it easier for the TNI to exert its influence on local governments. With a lack of central government’s supervision, the TNI has been able to collude with local governments to exploit strategic resources.
  • Third, the TNI’s organizational structure as a military institution has systemically established a deep-rooted sense of dedication, brotherhood, and loyalty of subordinates to their superiors. This organizational framework and culture of loyalty creates a climate of secrecy and lack of transparency, hindering any investigative efforts into corruption in TNI and discouraging potential whistleblowers.

The government must act more decisively—not only to put a stop to military-owned business as well as the associated corruption and abuse of power, but also to curtail the TNI’s longstanding impunity. The first step in this long-term project should be a focus on ensuring TNI’s accountability and transparency: making military budgeting more transparent to the public, and requiring all TNI members, including high and low-ranking officials, to report their wealth in accordance with the KPK’s guidelines and the law. The government should also extend the KPK’s jurisdiction to include military corruption cases, at the very least those involving proven injuries to civilians. In the longer term, there must be a serious enforcement on the ban on military-owned businesses, with the Ministers of Defense and Finance required to submit regular public reports concerning progress on military business reform, and parliament holding periodic hearings to ensure appropriate oversight of the reform effort to ensure that no legal enforcement officials will be intimidated by the powerful military.

It is time for the government to bring an end to the TNI’s ability to reap the benefits of its numerous businesses and corrupt sidelines. Until it does, the Indonesian people will continue to suffer.

1 thought on “TNI’s Gold Mine: Corruption and Military-Owned Businesses in Indonesia

  1. Pingback: Corruption and Military-Owned Businesses in Indonesia | Anti Corruption Digest

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