Michael Richardson, Jakarta – When the Indonesian armed forces commemorated their 55th anniversary recently, the display was less elaborate than in past years. There were no air force jets screaming low overhead, no parachutists dropping from the sky for precision landings in front of the military brass and VIPs. Even the marching bands had been cut back.

President Abdurrahman Wahid, who become Indonesia's first democratically elected leader a year ago this month, did not mince words in addressing the gathering in the military's sprawling headquarters at Cilankap, on the eastern edge of Jakarta. "The military has been politicized, not to serve the state and the people, but to serve the power holders," he said. "The military has been used by individuals to further their own interests and this must stop."

Mr. Wahid has cut the power of the army within the military hierarchy and gradually removed army hard-liners and Suharto loyalists from top positions, replacing them with officers he can work with. Another reshuffle of commanders was announced Monday.

Yet the result is not progressive reform but a breakdown in the chain of command and a widespread collapse in military morale and discipline, Indonesian and foreign military officials and analysts say. "The struggle for civilian supremacy is still perilous and uncertain," said Kusnanto Anggoro, an analyst at the Center for Strategic and International Studies in Jakarta. "It remains a big struggle for the president because some officers in the military still reject him."

Long used to being at the center of power in the world's fourth most populous nation, the military has suffered a major loss of political influence since President Suharto was forced to resign amid anti-government riots and economic chaos in 1998, ending 32 years of authoritarian rule backed by the army.

Under pressure from domestic opinion and foreign aid contributors critical of past repression and abuse of power, Mr. Suharto's presidential successors – working with reformers in the armed forces – have sought to make the military more accountable and professional and bring it under civilian government control. The ultimate aim is to get the armed forces to concentrate on defense and leave internal security and law enforcement to an enlarged and better trained police force.

There have been some significant changes already. The military's representation in national and regional legislatures has been reduced.

Serving officers have been barred from taking positions in government, the bureaucracy or state-owned companies. The police have been separated from the military in an attempt to reduce the army's still extensive internal security role. The armed forces have also agreed not to take sides in party politics.

After agreeing to go along with a certain amount of reform, the military establishment is now digging in its heels and refusing to budge, officials and analysts say. "The army is the rotten part of the Indonesian military," said a Western official, speaking on condition of anonymity. "The army has retrenched to protect its money, power and position. That's what it's really all about."

Some officials have accused unnamed reactionary elements in the military linked to supporters of former President Suharto of trying to weaken Mr. Wahid's government and prevent it from bringing to justice military and civilian officials involved in serious corruption or human rights abuses in the past, including Mr. Suharto himself.

Some analysts say that elements in the military old guard are promoting violence in an effort to show that the army is still needed as a major component of the government to maintain stability and prevent national disintegration.

Defense Minister Mohammed Mahfud warned recently that if the military felt "cornered" by unremitting domestic and foreign attacks on its status and reputation, there could be a dangerous backlash. The result appears to be a stalemate in which neither the reformers or the conservatives will gain the upper hand any time soon.

With violence, lawlessness and uncertainty about the future increasing, the private large-scale investment – both foreign and domestic – that is critical to the country's economic recovery remains on indefinite hold.