Indonesia's powerful military will have to relinquish its vast business interests. The overhaul of the TNI is an important part of Indonesia's political reform.

Presenter: Sen Lam

Speakers: Bob Lowry, visiting fellow at the Australian Defence Studies Centre in Canberra.

Lowry: Well they own a vast number of businesses, something like over 15-hundred of them through institutions and foundations which are designed to help with the welfare of the military and particularly the generals who run them.

Lam: So how significant is this change, this extracating Indonesia's military from business interests?

Lowry: It's very significant and it's something that's taking quite a long time. When they switched to democracy back in '98 the first step of course was to get them out of politics and then once that was done the new parliament in 2004 passed a bill which required the government to be the sole funder of the military, and for the government to takeover all the military businesses by 2009, and what we're seeing now is part of that process.

Lam: Has there been disquiet within the TNI or do you think the generals are quite ok with this removal of their revenue-generating businesses?

Lowry: Well there would be some disquiet and there's also some genuine questions. For example the American military runs a cooperative or what's called the PX system which is designed to provide goods at remote locations at reasonable prices for their own soldiers, and the Indonesian military also has a cooperative system.

So the question is how do you separate the cooperatives from the genuine businesses that are cooperatives from the foundations that they established to make money and to buy golf courses and hotels and shopping malls etc.? And so that's been quite a complex problem involving several ministries of the government.

And the other problem they've faced of course is because it's taken so many years there is a fear among many legislators that the business assets have been taken or the assets have been stripped from many of these foundations and companies before they've actually got round to taking them over.

Lam: Indeed I was going to ask you what about some of the shadier business dealings, I mean those dealings might be harder to get rid of?

Lowry: Yes well all you're doing now is getting rid of the formal business structures. But as you hinted there there are a lot of informal business arrangements between individual offices, between units and local businesses and that'll take a lot more effort to get rid of and requires the government actually looks at the whole process of military form, including the pay and allowances of the members of the armed forces to ensure that they're given an income which is sufficient to live on.

Lam: And this is all part of President Susilo Bambang Yudhyono's attempts to turn the TNI into a more professional force. Do you think the Indonesian government now will have to increase funding to subsidise the military and also to make sure that the defence force is a professional one?

Lowry: Yes well that's going to take a lot of time, that's what their ambition is but if you recall just recently they had to cut 15 per cent out of the budget because of the blow-out in petroleum subsidies to the population. And it'll take a long time to grow the budget where they can increase the salaries of both public servants and the military and the police to a point where they can expect them to comply with the law as it is in relation to corruption and so on.

So it's not going to be a quick process, it's going to take many more years yet, and we've also got to remember that the President faces an election next year. So he's not going to want to upset the military too much, he's going to take a very cautious and slow approach as he has done in the past.