Jakarta – Indonesia's military, which is undergoing phased reforms intended to bring it under civilian control, may soon lose all its major businesses.

Even so, legislators said on Thursday the move would not go far enough. Defence Minister Juwono Sudarsono, a respected academic and former ambassador, told legislators on Wednesday the government wanted to take over such enterprises and convert them into state-owned companies.

He did not say when the state would move on the targeted firms – military companies worth more than five billion rupiah (S$863,600).

Such companies are a key source of cash for the influential military, which gets only around a third of its funding needs from the state budget.

"The smaller ones will not be taken over. They will still be owned by [the military] to help fulfil the soldiers' needs," the Jakarta Post newspaper quoted Mr Sudarsono as saying.

The idea is part of a long process of reforming the military, an institution that wielded wide powers with little accountability during the 32-year authoritarian rule of President Suharto, which ended amid chaos in 1998. The companies to be taken over include a bank and several timber firms.

Legislators on Thursday confirmed Mr Sudarsono's plan but said it was still in the discussion stage, adding that parliament did not view it as an official proposal.

Either way, some said it fell short of meeting a new law on the military, which bans soldiers from getting involved in business, while making the state budget the sole funder of the armed forces – which are known as the TNI in Indonesia.

"We in parliament are sticking to what is written in the law, which obliges a halt to all TNI's business activities in five years," said the Golkar party's Hajriyanto Thohari, who is also the deputy of parliament's defence commission. "Simultaneously, we have to make sure the budget can fulfil the needs of a professional military. What we have now is clearly insufficient."

The military Bill was enacted just before President Susilo Bambang Yudhoyono, himself a former general, came to power on October 20. It says the state will take over all military businesses within five years. The drafting of the military law – intended to define the armed forces' functions after Mr Suharto's downfall – took years because of criticism from rights groups and politicians.

Under separate reforms, the military lost its 38 reserved seats in parliament this year, but analysts have always said the military's real power came partly from a structure called the territorial command that mimics a civilian administration and which reaches into districts across Indonesia. Dr Yudhoyono has promised to keep that structure in place.

Mr Thohari added that before determining what a sufficient military budget would be, the military should clearly define threats facing Indonesia.

An 18-month offensive to wipe out rebels in restive Aceh province has been a financial drain. But such a campaign could also be used to increase the defence budget as some soldiers have complained about poor quality equipment.