John McBeth, Jakarta – If anyone should be upset about serving military officers taking part in this year's direct local elections, it should be civilian Defence Minister Juwono Sudarsono.

But the academically trained minister, mindful of striking a balance between reform and pragmatism, takes a sanguine view. 'Many of the political parties are actively trying to recruit officers because there is a dearth of leadership,' he says. 'I don't mind; it's a fact of life.'

Only a handful of servicemen have signed up so far anyway. They are taking advantage of a legislative anomaly in which the Armed Forces Law, which forbids the military from being involved in politics, is effectively trumped by subsequent legislation on regional governments that doesn't expressly bar them from standing as party candidates for governors, district chiefs and mayors.

If they are elected, they must leave the service. If not, they can resume their duties, though probably not in the same positions they occupied before they entered the election. The reason they are running at all is no secret to Dr Juwono. Most of the big political parties, he points out, aren't doing a good enough job building a nationwide network of capable cadres that will generate new leaders.

Reputation prevails

As it is, with civil competence still an issue after eight years of democratisation, the military's territorial structure remains as pervasive as ever. 'My view is that it was necessary through the 1970s and 1980s and is still necessary today,' he says. 'In real terms, effective government is being done by the army.'

Indeed, public opinion surveys have all shown that rural Indonesians prefer it to be retained at the provincial and district level.

For all its flaws, Western mining companies, for example, would far sooner deal with the military than the police. 'You strike a deal with the army and they stick to it,' says one former security manager. 'With the police, you never know where you stand.'

Although the 200,000-strong police force has gained in confidence since separating from the military command structure in 1999, it has still to evolve into a competent, civilian-friendly organisation.

There is no question that Indonesia has gone a long way towards getting the military out of politics. But turning it into a professional force is going to take a lot more than that, which is why Dr Juwono is focusing on a provision in last October's Armed Forces Law that lays out a five-year timeframe for the abolition of military-related businesses. Under the rationalisation process, the minister anticipates the handful of viable surviving enterprises will be corporatised and placed in a holding company.

Dr Juwono's main mission is to ensure that the profits from the company go to the welfare of rank-and-file soldiers. Up to now, an estimated 70 per cent of the money from military businesses has disappeared into the pockets of high-ranking officers.

Armed forces chief of staff Endriartono Sutarto, now close to retirement, actually wants to speed up the process, cutting the deadline from five to two years. But Dr Juwono believes he is in the minority and that there will be resistance from a new generation of officers waiting for their turn at the trough.

At its peak, the military controlled up to 350 businesses, but about two-thirds of them collapsed at the time of the 1997 Asian financial crisis.

Dr Sukardi Rinakit, author of the newly published The Indonesian Military After The New Order, says that with new investment drying up, the decline mostly stemmed from the imposition of compulsory open tenders and an end to the preferential treatment the military enjoyed in the past in bidding for government projects.

State Enterprises Minister Sugiharto says only those companies with a proper balance sheet and readily identifiable revenue and expenditure streams will be given an official government designation.

On a legal basis alone, many of the enterprises won't pass the test because they were established privately outside the jurisdiction of the army, navy or air force. If they don't meet the criteria, then Dr Juwono says they will either have to be sold or disbanded. Officials don't expect more than 20 businesses will make the grade, with their expected annual income of US$200 million being channelled directly into the Defence Ministry budget.

But even then, they are concerned about the many enterprises where the military is only a minority stakeholder. That will make the valuation process difficult and complicate plans to list the holding company. 'These are very early days,' says one ministerial adviser. 'We will have to take a cautious approach.'

Dr Juwono is also well aware of the fact that legal businesses make up only 30 per cent of the military's off-budget income. The rest comes from illicit activities, including protection rackets, illegal logging, drug smuggling, gambling and prostitution.

'I have to confess I have no immediate remedy,' he says. 'The basic issue is that market forces, both official and illicit, are too powerful to be controlled by the guiding hand of the state. If you look at illegal logging, what can I do about captains and majors in Kalimantan or Papua on an official salary of 800,000 rupiah (S$140) who can be tempted with a five billion rupiah bribe just for one haul?'

Dr Juwono believes it won't be until October that he will have a clear picture of Armed Forces Inc. By then, he will be looking to President Susilo Bambang Yudhoyono to issue a decree laying out a road map for the planned changes.

'The President is serious about it,' he says, 'but he also understands it won't be easy, which is partly why he asked me to do it.' If the minister is sensitive to the need to move cautiously, he also realises that the only way to get the military out of business completely is to triple the US $2.4 billion defence budget.

But that depends on the broader issue of Indonesia's economic recovery.