The Army Has It All

Indonesia, whose 115 million inhabitants make it the world's sixth most populous nation, is a land of immense resources and seemingly limitless potential. Throughout the 3,000 islands of the sprawling archipelago, however, all too few people seem to be exploiting this potential. An exception is the leadership of the 350,000-man armed forces.

Since 1965, when at least 300,000 Communists were massacred in the wake of an abortive coup and President Sukarno was effectively removed from power, the military has not had a serious political rival. The parties are fragmented, and Parliament is under the army's thumb. In economic enterprise even more than in politics, the army is making its mark--and quite a few fortunes. Generals, colonels and majors serve as governors, industrialists and hotel managers. Occasionally they even serve as soldiers.

Love and Oil. The single most spectacular success story is that of Lieut. General Ibnu Sutowo. He heads Pertamina, the government-owned oil monopoly, which is currently harvesting a fortune in fees from foreign firms for exploration of what may prove to be a huge reservoir of undersea oil off Indonesia's coastline. Pertamina goes its own way, and a very quiet way it is. It does not disclose figures on its operations but hands out lavish financial aid for army-encouraged projects. It also does very well by its own. On a salary of less than $100 a month, Sutowo recently threw a $60,000 wedding for his daughter, prompting one Djakarta newspaper to editorialize: "Crude oil smooths the way for love."

In addition to freewheeling Pertamina, the army is involved in virtually every part of Indonesia's economy--usually less out of greed than sheer need. Under President Suharto's austerity budget, armed forces units are required to provide between 25% and 40% of their own support. To raise funds, the army recently announced plans to commercialize engineering and transport--in effect, hiring itself out as an Indonesian version of Hertz Rent A Car. Some other examples of military business enterprise:

> Djakarta's latest luxury hotel, the Kartika Plaza, is owned by an army cooperative. As far as the army is concerned, this is legitimate, although civilians are troubled by the practice.

> Gambling casinos have been established in Djakarta by the district's military governor, who has found that slot machines and blackjack are sure and legal ways of financing the city and feeding the troops.

> An army unit near Djakarta conserves its monthly ration of gasoline and sells the surplus on the free market. Clearly, this is illegal.

> In northern Sumatra, military authorities illegally sell export licenses to Chinese merchants--and the licenses are not cheap.

Long-Run Dangers. Suharto, a military man himself, has repeatedly ordered an end to many of these practices. "All illegal collections, regardless of purpose, should be stopped," he said late in 1969. "Such collections may look profitable in the short term, but in the long term they undermine our national economy." Beyond demoralizing Indonesians who had hoped for a new order, the military's highhanded role has discouraged foreign investors.

Although more than 100 foreign firms have signed investment contracts since the beginning of 1967--including such U.S. firms as Alcoa, Freeport Sulphur, Goodyear Rubber and ITT--others have been frightened off.

Suharto has made some notable economic progress. Since 1967, he has succeeded in reducing the inflation rate from an appalling 650% a year to roughly 7%, a performance described as "highly remarkable" by Indonesia's major creditors when they met in Amsterdam last month to approve a $600 million loan. The price of rice, a basic indicator, has remained relatively steady, but corruption remains a serious obstacle. "Nothing has really changed," says an American with long experience in the country, "except that the army has it all now."

One reason is that the army has a virtual monopoly on the country's managerial and technological skills. Suharto is trying to encourage more civilian participation, but he is unlikely to get very far by 1971, when general elections are scheduled. As an Indonesian intellectual puts it: "General elections will mean the election of the generals."

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