Out of Business and On Budget

The Challenge of Military Financing in Indonesia

The armed forces of Indonesia have been engaged in off-budget business activities since the country declared its independence in 1945. Now, the newly democratic government would like to end that dependence on off-budget income and fully support the military with funding from the governmental budget.

Getting the Indonesian military out of business and on budget is an immensely complex undertaking for a number of reasons. Its business interests are deeply rooted. Other Indonesian ministries and agencies engage in similar off-budget activities, and the military is only one of many priorities competing for resources. But this is an essential step in consolidating democracy and meeting the people's aspirations for good governance.

Lex Rieffel and Jaleswari Pramodhawardani have produced the first comprehensive and systematic study of this daunting challenge facing Indonesia. They describe the evolution of the military's business empire under President Suharto and its decline after Suharto's resignation in 1998. The authors challenge the conventional wisdom that most of the military's financing comes from its business activities, and they cut through the misinformed, muddled thinking that clouds the current debate on military funding requirements. The book identifies thirty policy issues that the government will need to address in building a professional military that has the force structure and operational capacity required to defend the country effectively.