Jakarta – Though kicked out of parliament, the army is still a force to be reckoned with. When Indonesia's parliament voted recently to abolish the 38 seats it reserves for the armed forces, pundits hailed the move as proof that the chief instrument of repression during the 32-year dictatorship of Suharto had finally been brought under civilian control. But Indonesian human-rights organisations still insist that the army enjoys unhealthy influence over the government, exploits this to pursue shady businesses, and commits abuses with impunity.

This contradiction matters to more than local observers. The United States, too, would like to improve ties with Indonesia's top brass for the sake of the war on terror. But many in Congress are hesitant to resume military aid until it is clear that Indonesia's armed forces have really become servants of the popular will.

Everyone agrees that military influence has declined markedly since the army's heyday under Suharto. Two years ago, it formally renounced its "dual function" as guardian of political probity as well as of national security. The police, once under military command, now report directly to the government. Another reform bars serving officers from posts in the cabinet or civil service, which they used to dominate.

Former soldiers are gradually being removed from provincial governorships, too, as their five-year terms expire. The loss of the army's seats in parliament, with effect from 2004, will mark its final exclusion from any overt political role.

Agus Widjojo, the head of the military caucus in parliament, says that his fellow officers are happy to go. But General Widjojo's notion of civil supremacy seems a little unorthodox. He speaks of "mutual respect" between the civilian and military authorities, and argues that politicians should not meddle in operational affairs.

The humiliating treatment meted out to the top brass by Abdurrahman Wahid, a former president, justified their open defiance of him, in the general's view. Senior soldiers opine loudly and publicly on security policy. And on the whole, they seem to be getting their way: President Megawati Sukarnoputri's stance on Indonesia's many internal conflicts is far more hawkish than Mr Wahid's was.

Efforts to hold the army accountable for its brutal and often counter-productive handling of those conflicts also seem to have ground to a halt.

The special tribunal set up to try those responsible for the devastation of East Timor, a secessionist province that has since become independent, has so far let off all military suspects scot-free. The attorney-general's office says it has no plans to mount more trials.

In other restive provinces, such as Aceh and West Papua, soldiers still run amok, but only a handful of cases has ever come to trial.

The government also seems loth to pry too deeply into military finances. Only about a third of the armed forces' expenditure (no one is sure, since the figures are so opaque) comes from the state budget; they raise the rest themselves, by means both fair and foul. Military foundations run logging concessions, palm oil plantations, hotels, banks, an airline and all manner of other businesses.

The army's presence in every district and village of the country (the so-called "territorial system") gives it leverage over local politicians and officials. The army exploits this influence to win lucrative contracts, muscle in on land deals, run protection rackets, set up wildcat mines, and so on.

But all this is not quite as sinister as it sounds. At the national level, at any rate, the armed forces' apparent ascendancy stems more from a meeting of minds between Miss Megawati and the top brass than from manipulation. She, like her senior officers, is an ardent nationalist, with a hatred of disorder.

Furthermore, even on matters of security, the army does not always get its way: take, for example, the government's recent decision to defer a military escalation in Aceh, a step the high command had demanded for months. What's more, corruption and impunity extend far beyond the army in Indonesia. The government seems just as lenient towards the businessmen who embezzled billions from the central bank, to name just one notorious case.

This week, Akbar Tandjung, the leader of the formerly ruling Golkar party, was found guilty in a large fraud case, but sentenced to only three years in prison – too little, critics said. Some soldiers blame the government for all the armed forces' failings, since it is not pushing harder for reform. That is doubtless a cop-out. But these days, weak civilian leaders do seem a bigger threat to Indonesia than an overbearing army.