Mark Drajem, Washington – The Bush administration is calling on Indonesia to rein in the military's financial empire, saying profit-making ventures have allowed the armed forces to become unaccountable to the central government.

The administration is seeking $16 million to train Indonesia's armed forces to fight terrorism, a step some analysts say may also be an attempt to gain leverage over the military, which has been accused of human rights abuses.

As little as half the army's funding comes from the central government, with the rest derived from smuggling, bribes and profits from army-owned industries, analysts say.

"We favor steps to put the military [in the budget], so that they will be accountable to the government," said Matt Daley, deputy assistant secretary of State for East Asian and Pacific Affairs, at a discussion at the United States-Indonesia Society.

The US says the nation of 17,000 islands and 230 million people may become a haven for anti-US terrorists and wants the aid to help the army quell violence in far-flung territories.

The administration is trying to expand ties with the Indonesian police and military to curb the terror threat in the predominantly Muslim nation.

"We've got reasonable indications that international terrorists may use Indonesia as a base of operations," Daley said. "But because of human rights concerns, our contacts [with the army] must be limited."

Mass killings

Congress has kept those ties more limited than the Bush administration would like, since Indonesia's military was accused of mass killings in East Timor three years ago, Daley said.

The US House of Representatives already cut out $8 million of the funds that the White House was seeking for Indonesia's military. The other aid is meant to train and equip an anti- terrorism police unit.

Critics say the US is already moving in the wrong direction by proposing to expand ties with the army.

Indonesia has witnessed a breakdown in law and order since Suharto, who ruled for three decades with the military's backing, was ousted in 1998. The government of President Megawati Soekarnoputri wants the military to scale back its role.

"The US policy towards the army should be one of benign neglect," said Bill Liddle, an expert on the Indonesian military at Ohio State University. "The army is the main short- and medium- term threat to Indonesian unity and democracy."

Formal accounting

Daley said the US tried to push the army in one region to make a formal accounting of its assets, sell most of them to private investors and give the proceeds to the central government, as a demonstration project. "The idea didn't get any resounding applause," he said.

The US, whose alliance with Indonesia frayed after the East Timor killings, has been embracing the country in recent months. It backed $347 million in International Monetary Fund loans last month to the world's most populous Muslim nation.

The Bush administration last year avoided the 1999 congressional restriction on aid, creating a $17.9 million program for counter-terrorism efforts that includes Indonesia, by including the money in a part of the budget not covered by the legislation.

Indonesia is the fifth-largest recipient of US development aid, collecting $194 million in 2000, according to the Organization for Economic Cooperation and Development.

'Less than cooperative'

The US is taking such actions even though the Indonesian government "has been less than cooperative in the war on terrorism, largely neglecting administration requests regarding terrorist suspects and their assets," several interest groups wrote recently to Powell and Rumsfeld.

The letter's 40 signatories were leaders of religious and professional groups including Physicians for Social Responsibility and the Federation of American Scientists.

The proposal to give aid to the army to counter domestic unrest is an end-run around that prohibition, Liddle said.

"You Americans are not patient enough" in relying on the elected government to fight anti-US terrorists, said Salim Said, an analyst on the Indonesian military. "Now you are turning to your old friend, the military."

Still, Said said the US has the correct idea in trying to eliminate the private financial empire the Indonesian army has developed.

"The Indonesian parliament does not control the budget of the military, and so it does not have 100 percent control of the military," Said said. "The only way we can change that attitude is to say 'We pay you, now do what we say.'"