Across the road from Gambir station, Jakarta’s dilapidated central rail terminal, lies a scene of tenacious celebration. Indonesian flags flutter in the breeze and glossy paint embellishes a pair of old tanks parked at the entrance of a nondescript white building. Kostrad, the strategic reserve command of the Indonesian military, is having a party.

Indeed, it’s birthday time. The Indonesian military (TNI) has just turned 66 and the Kostrad corps, which boasts such luminary alumni as Suharto, Wiranto and Prabowo, is not missing the occasion. There are even presents in store.

Birthday presents for armies are a little like those for normal folk: there are the gifts of pure indulgence and then there are gifts of necessity, wrapped up for the sake of the event. The TNI has a pair of the latter in its lap. The first came in the form of a new draft of the government’s 2012 budget, which promised to raise defence spending by 35% to IDR 66.4 trillion ($US7.5 billion). It’s the second birthday present of this nature, part of President Susilo Bambang Yudhoyono’s multi-year commitment to raise expenditure on a force which has seen chronic underfunding in the last decade.

The statistics tell the story. In 2010, for example, the military submitted a budget proposal for $US14.9 billion and received only $US4.47 billion. According to former Defence Minister Juwono Sudarsono, the approved budget only covered about 30% of the military’s requisite costs. A massive shortfall, or is this a case of the military making greedy requests? Hardly: in 2007, an assessment of Indonesian military readiness ranged from 30-80%. Two defence analysts at S. Rajaratnam School of International Studies in Singapore, Leonard C. Sebastian and Iisgindarsah, argue that this level of force readiness means the TNI’s ability to defend an attack against Indonesia would be “severely compromised”.

Of course, times weren’t always so tough for the TNI. Suharto used the orde baru regime (New Order) to nourish both the military and its leadership, and the armed forces even enjoyed a brief period of respect in ASEAN in the 1960s and 1970s. Local defence companies did not suffer either. The government amalgamated local companies into the Strategic Industry Regulatory Body (BPIS), and the military received copious funding to lavish on purchases, wise or otherwise.

A flurry of procurement in the 1990s was the result. Much of the investment was spent on foreign products to the enrichment of individual TNI officers and the detriment of the local defence industry, which missed the opportunity to build new technical capabilities. And because these purchases were often driven by personal judgment rather than a central strategic directive, the military wound up with an unwieldy tangle of weapons systems — 173 systems from 17 different countries at last count.

Nevertheless, some of the funding did reach local companies and led to the construction of the CN-235 cargo plane, the N-250 passenger aircraft, warships and various other small weapons, all according to a report by The Jakarta Post. These investments helped foster a domestic defence industry and reduced reliance on foreign providers, however minimally. Graft was not absent and the military did not receive the best available hardware, but it was a start.

Then came the Asian financial crisis and the fall of the Suharto regime and with them an abrupt change in the relationship between the Indonesian military and the state. The “Dwifungsi” doctrine, which Suharto established to preserve a specific role for the military in the governance of the state, and TNI control over military businesses — which provided supplementary, extra-governmental income for discretionary spending by the top brass — were both terminated as part of broader military reforms by successive civilian governments. It was a messy divorce. The military had not lost its affection for power, but it no longer had the mandate or the money to impose itself. The civilian government now held the reins, but it could not fully expunge the informal power of the military.

Choking off military funding proved a convenient necessity for the new civilian government. With government finances in a parlous state, it was easy to justify a reduced budget for the TNI. Government expenditure has fallen in most years since the crisis and failed to ever reach the heights allotted by the former dictator.  The IMF also played an indirect role in these decreases through its intervention in Indonesia as part of the financial crisis rescue by stipulating an end to the support of the inefficient local defence industry. The BPIS was dissolved in 2002 and the companies limped on as state-owned enterprises. Today, most domestic defence companies are riddled with debt.

Birthday present No.2 is intended to fix the problem. Evidently, it too a gift of necessity. The gift comes in the form of a bill, recently deliberated by the House of Representatives, which will require the TNI to prioritise procurement from local defence contractors over their international competitors. The bill looks set to pass before the end of the year. Coupled with an increase in government spending, the bill seems like a real boon. More money, emphasis on local manufacturers, a local industry that finally has the guarantee of funds to help build technical capabilities domestically — a good set of outcomes, surely?

Certainly, if those were the likely outcomes. But the reality is far less rosy. According to Marcus Mietzner, a leading academic on the Indonesian military, the procurement bill will entrench the poor standard of local manufactures by removing the incentive for local companies to compete with international producers. It’s protectionism 101. The bill also creates ample space for continued corruption and inefficiency in procurement.

The bigger defence budget also offers little grounds for hope. Even with the increase, the TNI will still only receive roughly 1% of GDP, says Mietzner, far lower than other regional powers. And once the money is in the system, it faces a mass of red tape in the current procurement process. Defence ministry Secretary-General, Air Marshal Eris Haryanto, recently told the Jakarta Post that a major arms order could require 30-months of paperwork simply to decide on which country would receive the contract.

This is a shame not only for Indonesia, but for the region more broadly. A reformed TNI, with its checkered past behind it, would offer a crucial counterbalance to other forces in the region. Certain capitals in the West clearly think so too. Tighter co-operation between the US and Indonesia, reflected in Washington’s sale of F-16A/B jets to Jakarta earlier this year and the renewed relations between the US military and Kopassus, signals that Washington wants Indonesia to add ballast to the US-led alliance against Chinese expansion.

But, for the moment, this remains a dream for the future. The changes at hand will not resolve the dysfunction in the TNI. Graft, inefficiency and insufficient budgets are likely to stay. It’s regrettable, but at least there are obvious things for next year’s birthday list.

*Bede Moore studied Indonesian history at Harvard and Leiden universities, specialising in the Indonesian Independence movement. He writes commentary on contemporary Asian political and business issues and works as a policy and business adviser in Jakarta.

Peter Fray

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