Jakarta – Indonesia's underfunded military should be allowed to hold on to its vast business interests, as long it ensures they are more accountable and transparent, experts and military officials said Thursday.

Speakers at an international conference in Jakarta said the government's 2001 budget would only account for around 25% of the military's operational costs, including salaries.

Continued military involvement in the private sector is inevitable, they argued. "Our country is not yet able to provide funds to fulfill the minimum needs of the military's operational costs and the welfare of its personnel," Defense Minister Mohamad Mahfud said in a speech read by a ministry official. However, he said that military businesses should be restructured so that troops could share the benefits equally.

At 1.1% of gross domestic product, Indonesian military spending is one of the lowest in Southeast Asia. Experts say that 3% of GDP would be an acceptable level.

Lt. Gen. Agus Widjoyo, army territorial affairs chief, acknowledged that engaging in commerce distracted officers from their primary role and called for internal reform. "Give the businesses a professional management and open them up to public accounting," he said.

The Indonesian military run businesses, many of them tax-free, at all levels and in all sectors of the economy, including manufacturing, property, airlines, mining and timber. Many have been accused of mismanagement and corruption. Moreover, critics claim the military use their power to muscle in on illegal activities, particularly in provinces far from the capital.

The business associations of the military date back to the 1945- 49 war of independence, when many army units and militia had to fend for themselves in their fight against Dutch colonizers. The nationalization of former Dutch-owned businesses in 1957 provided the capital for larger ventures.

The finance ministry warned Thursday that it was "hopeless" for the military to expect more funds soon, saying it had to direct money to the country's poor, still suffering from the effects of a vicious economic crisis. "There are no extra funds coming in the next few years," said Mas Widjaya, director of the state treasury and assets.