The Indonesian Armed Forces (Tentara Nasional Indonesia / TNI) have historically played a significant role in business, and had substantial business assets at its disposal. Initially, this was to ensure that there were sufficient funds available to the TNI in order to function. The state budgets were notoriously lacking in appropriate funding for the TNI and consequently the TNI developed very significant business assets in order to make up any shortfall in the budget allocations. However, with the advent of the reform movement there has been a considerable push to see that the TNI is properly funded and any business interests that the TNI have are “acquired” by the state.
It is clear from Article 76 of Law No. 34 of 2004 that the TNI are required to allow their business interests to be acquired by the state. However, it is also clear that for this process of acquisition to move forward their needed to be a Presidential Regulation to make this happen. That regulation has now been issued. Regulation No. 43 of 2009 sets out how the TNI businesses are to be acquired.
The regulation defines business activities as any commercial activity that is owned and managed by the TNI either directly or indirectly. Direct ownership and management are self-evident. However, indirectly controlled businesses are also subject to acquisition. These indirectly owned and managed businesses include those held by cooperatives and foundations in conjunction with third parties. The regulation is aimed at preventing the practice of the TNI in utilizing state owned assets in a manner that is not consistent with the duties and functions of the TNI. Nevertheless, the regulation also envisages that the acquisitions will ensure greater fairness, legal certainty, participation, transparency, and accountability.
The Minister of Defense and the Minister of Finance are responsible for making the acquisitions. These acquisitions can be conducted jointly or individually in accordance with the relevant authorities for each Minister.
The regulation requires that a Business Activity Control Team be established. This team will report to the Minister of Defense. The primary function of the team is to take an inventory of all the business activities under the control of the TNI. The team will also monitor acquisitions and report to the minister. The team has a broad mandate with respect to requesting documents and making use of expert assistance.
The team will include, among others, members from the Department of Defense, the Department of Finance, the Department of Law and Human Rights, TNI Headquarters, and the Headquarters of the Army, Navy, and Air Force. The team is to be established within 30 days of this regulation being enacted.
The regulation has been in force since 11 October 2009.
The Indonesian Armed Forces (Tentara Nasional Indonesia / TNI) have historically played a significant role in business, and had substantial business assets at its disposal. Initially, this was to ensure that there were sufficient funds available to the TNI in order to function. The state budgets were notoriously lacking in appropriate funding for the TNI and consequently the TNI developed very significant business assets in order to make up any shortfall in the budget allocations. However, with the advent of the reform movement there has been a considerable push to see that the TNI is properly funded and any business interests that the TNI have are “acquired” by the state.
It is clear from Article 76 of Law No. 34 of 2004 that the TNI are required to allow their business interests to be acquired by the state. However, it is also clear that for this process of acquisition to move forward their needed to be a Presidential Regulation to make this happen. That regulation has now been issued. Regulation No. 43 of 2009 sets out how the TNI businesses are to be acquired.
The regulation defines business activities as any commercial activity that is owned and managed by the TNI either directly or indirectly. Direct ownership and management are self-evident. However, indirectly controlled businesses are also subject to acquisition. These indirectly owned and managed businesses include those held by cooperatives and foundations in conjunction with third parties. The regulation is aimed at preventing the practice of the TNI in utilizing state owned assets in a manner that is not consistent with the duties and functions of the TNI. Nevertheless, the regulation also envisages that the acquisitions will ensure greater fairness, legal certainty, participation, transparency, and accountability.
The Minister of Defense and the Minister of Finance are responsible for making the acquisitions. These acquisitions can be conducted jointly or individually in accordance with the relevant authorities for each Minister.
The regulation requires that a Business Activity Control Team be established. This team will report to the Minister of Defense. The primary function of the team is to take an inventory of all the business activities under the control of the TNI. The team will also monitor acquisitions and report to the minister. The team has a broad mandate with respect to requesting documents and making use of expert assistance.
The team will include, among others, members from the Department of Defense, the Department of Finance, the Department of Law and Human Rights, TNI Headquarters, and the Headquarters of the Army, Navy, and Air Force. The team is to be established within 30 days of this regulation being enacted.
The regulation has been in force since 11 October 2009.
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