Subject: Military Maneuvering Behind Dodgy U.S. Deal

Also: PT Ataru Indonesia: Weapons Shopping in a 'Gray Market'Govt tightens arms procurement policies

Tuesday, May 2, 2006

Military Maneuvering Behind Dodgy U.S. Deal

The Jakarta Post, Jakarta

Two Indonesian businessmen are on trial in Michigan, the United States, for attempting to illegally smuggle weapons into Indonesia. The company they were working for was a recognized weapons seller to the Indonesian Air Jakarta Post's Ridwan Max Sijabat and Tiarma Siboro issues behind the case.

During the United States' 15-year ban on the sale of armaments and spare parts to Indonesia, the Air Force's arsenal stayed in surprisingly good shape.

In military exercises in 2002, this air power went on show. At Bawean Island in East Java, military top brass and other dignitaries watched as two pairs of F-16 Falcon bombers blasted into the sky and engaged in a mock dogfight.

A year later, several units of the British (sic) -made OV-Bronco spy aircraft flew over Aceh, while a pair of Falcons gave air support to Scorpion tanks and thousands of soldiers during the offensive against Free Aceh Movement rebels in the conflict-scarred province.

Air Force spokesman First Air Marshall Sagom Tamboen recently admitted to local media that to get around the U.S. ban, Indonesia had sourced aircraft parts from an international "gray market" so its U.S.-made war machines could stay in operation.

Sagom said third-party dealers, who source equipment from U.S. arms manufacturers and international weapons markets, had ensured around 30 percent of the nation's existing Bronco aircraft could remain operational.

According to Sagom, the Air Force had recently ordered a number of radar parts for F-5 Tiger bombers from PT Ataru Indonesia, a recognized government arms contractor and local subsidiary of Singapore-based Indodial PTE Limited, confirming the contracts were made during the 15-year embargo period.

Ataru had won a total of 15 arms procurement contracts from the Air Force, he said.

However, on April 9 this year the United States authorities put a stop to Ataru's lucrative business with the arrests of the company's president director, Indonesian businessman Hadianto Djoko Djuliarso, compatriot Ignatius Ferdinand Soeharli, Ibrahim bin Amran of Singapore-based Indodial PTE Limited and British Singapore resident David Beecroft.

Hadianto and Ibrahim were charged with money laundering and violating U.S. export laws when they were first detained in Hawaii. All four suspects were later moved to a U.S. federal court in Detroit, Michigan, to have their cases heard there.

They are charged with trying to source and ship 245 air-to-air Sidewinder missiles, 882 H&K machine guns, 800 handguns, 16 sniper rifles, 5,000 rounds of ammunition and parts for F-5 Tiger jet bombers to Indonesia without proper U.S. export licenses.

The bulk of the attempted purchases came from a Michigan-based arms company, the reason their trial has been moved there.

U.S. authorities also questioned two Indonesian Air Force officers who had accompanied the brokers to Hawaii, but found no evidence that they had any role in the transactions.

Defense Minister Juwono Sudarsono also claimed the deal was also outside the government's knowledge.

Despite the official denials, the trial of the four men could prove to be an embarrassing sideshow for Jakarta-Washington defense relations. And the timing could not be worse; the United States only lifted the ban on military supplies and training to the country in December, while Hadianto, Ibrahim and associates were allegedly making the weapons deals many months earlier.

The question remains -- with Washington signaling for months last year that it planned to normalize military relations with Indonesia, why didn't the four wait until the arms embargo was lifted and go ahead with the deals when they were legal?

According to Effendy Choirie, a legislator of the National Awakening Party, local corruption involving Air Force generals and their families was behind the deal and meant it could not wait.

Meanwhile, Andi Widjajanto, a military analyst at the Centre for Strategic International Studies said he had long known about the clandestine supply of aircraft equipment from the United States through "gray markets".

During the embargo, he said, the military had no choice but to discreetly buy weapons and parts on international markets to keep its jet fighters and C-130 cargo aircraft operational, he said.

Indria Samego of the Indonesian Institute of Sciences said despite the recent streamlining of government procedures to buy arms, "old players linked to former president Soeharto's cronies and retired and active military officials are still there and they were involved in arms supply in the past few years."

Defense Ministry secretary general Lt. Gen. Sjafrie Sjamsuddin denied any knowledge of the U.S. graft case. He claimed arms deals conducted by all the military's forces were reported to his office, with their budgets audited by the Supreme Audit Agency (BPK).

However, he also said the TNI Headquarters and Defense Ministry had lists of private arms suppliers, many which he said had been struck off for "unprofessional behavior".

This would in part explain the many recent arms deals involving the government, which have been tainted by alleged graft. The last occurred in the ongoing procurement of Mi-17 helicopters from Russia. Only four of the helicopters were bought, and the BPK in its 2004 audit of the deal indicated graft caused the state to lose US$3.24 million. No one has yet been charged in that case.

Legislators have also questioned a 2004 deal between the industry and trade ministry and a government-appointed private company to buy Sukhoi war planes from Russia, although little more is known about the case.

The same year, the London-based Guardian newspaper revealed a British business allegedly bribed Siti Hardiyanti "Tutut", a daughter of former president Soeharto, giving her a 16.5 million pounds sterling "present" to smooth the sale of 100 Scorpion tanks for the Army between 1995 and 1996.

Investigation into the case reached a dead end after both the Defense Ministry and the Corruption Eradication Commission (KPK) said they found no evidence of irregularities in the deal, although Indonesia had to pay two and a-half times the amount that Singapore paid for each of the tanks.

Correction (May 03, 2006)

The statement that Indonesia sourced equipment from an international "gray market" so its U.S.-made war machines could stay in service was mistakenly attributed to Air Force spokesman Air Force Marshall Sagom Tamboen in an article on this page Tuesday. We regret the error.

-- Editor


The Jakarta Post
Tuesday, May 2, 2006

PT Ataru Indonesia: Weapons Shopping in a 'Gray Market'

The Jakarta Post, Jakarta

Two Indonesian businessmen, a Singaporean and a Briton have been charged at a federal court in Michigan with money laundering and conspiring to violate the U.S. Arms Export Control Act.

Hadianto Djoko Djuliarso, president of PT Ataru Indonesia, his compatriot Ignatius Ferdinand Soeharli, Ibrahim bin Amran of Singapore-based Indodial PTE Limited and a British resident of Singapore David Beecroft were arrested on April 9 in Hawaii.

The group had tried to purchase F-5 Tiger parts, 245 air-to-air Sidewinder missiles, 882 machine guns, 800 handguns, 16 sniper rifles and 5,000 rounds of ammunition, which they were planning to export to Indonesia through Singapore.

They, along with Ignatius' wife and two Air Force officials, were arrested on April 9 after meeting in Hawaii with people they thought represented a Detroit-area arms company.

Soeharli's wife was later released and the two Air Force officials were deported after they claimed to know nothing about the deal.

Sources and documents say the Indonesian Air Force had ordered the radar parts in a US$355,519 contract signed by Vice Marshall Herman Prayitno and Hadianto and Ibrahim representing Ataru and Indodial on Nov. 20, 2005 -- a month before the United States arms embargo was lifted in December.

The Indonesian Military has claimed the procurement of the radar parts was legal, although the United States authorities disagree.

While the contract for the deal may have been valid, the authorities said the planned shipment of the aircraft equipment from United States was illegal because Ataru and Indodial had no export licenses.

The reported on April 14 the U.S. prosecutors allege the men were part of an international conspiracy that involved officials and businesses in Indonesia and Singapore and meetings in London, Detroit and Honolulu.

The FBI said the conspiracy began in March last year when a Indodial worker sent an e-mail to the Orchard Logistics Service (CLS) in Detroit seeking to export military parts to Indonesia although it was against the law.

The indictment and affidavit also alleged that in July last year, Amran asked for quotes for prices of aircraft armaments for 245 Sidewinder missiles and 5,000 rounds of strafing ammunition. There is no mention of what action was taken on the request.

In January, 2006, Amran received a quote of $3.3 million from CLS for 882 submachine guns, 800 9mm handguns and 16 sniper rifles. He said he wanted to buy and export the items even if a license for those transactions could not be obtained.

On March 31, Djuliarso and Amran sent $447,000 to CLS as partial payments for military aircraft parts that included a radar system.

Ataru Indonesia is one of many of the Air Force's small "partner" supplier companies. The company has its "main office" in a small shop located in Jl. Pangadegan Raya, No. 24, South Jakarta.

Defense Ministry secretary general Lt. Gen. Safrie Samsjuddin confirmed Ataru had a small office in Jakarta and had previously won 15 arms procurement deals with the Air Force.

"Despite its small office, Ataru managed to successfully swap a Boeing 707 aircraft for a Boeing 727-200 airplane which is still being used by the Air Force," he said. In Singapore, many supplying companies had no official offices, he said.

Air Force spokesman First Air Marshall Sagom Tambun confirmed Ataru had won 15 procurement contracts in 2004 for the purchase of spare parts for British-made OV-10 Bronco fighters. These fighters and other maintained F-16s, were deployed in Aceh on May 2003.

But Sagom would not mention the contracts in detail or their value for because of what he said were "security reasons".

Hoedaifah Koeddah, a relative of Hadianto said the company -- traditionally an Air Force supplier -- had been trying to grow its business with the Army and the Navy.

"For that purpose, Ibrahim of the Indodial and Hadianto Djoko once visited to Detroit to learn about CLS' offer of eight lists totaling 310 total weapon items worth $40 million. The weapons offered included Sidewinder missiles, Maverick missiles, BOMK MK missiles and ammunitions," he said.


The Jakarta Post
Tuesday, May 2, 2006

Govt tightens arms procurement policies

The Jakarta Post, Jakarta

The government plans to enact new policies to minimize corruption in arms deals, an official says.

Defense Ministry secretary-general Lt. Gen. Safrie Sjamsuddin said the 2000 Defense Law and the 2004 Indonesian Military Law regulated weapons procurements by giving the Defense Ministry the sole authority to coordinate purchases with Indonesian Military (TNI) Headquarters, the Army, Air Force and Navy.

The government later issued a presidential decree in 2003 to enforce the two laws.

"We are now campaigning for two new ministerial decrees (to be) issued by the defense minister to ensure transparency in arms procurements both in the Defense Ministry and in the military," Safrie told The Jakarta Post recently.

Ministerial Decree No. 01/2004 regulates the supply of goods and services to the ministry and the TNI through the export credit facility, while Ministerial Decree No. 15 regulates all goods and services bought through other channels. The two decrees require transparency and accountability in arms procurements. All are required to be conducted in public tenders and military chiefs of staff are barred from any involvement.

Safrie said the ministry had adopted a "one-door" system.

However, he said it was proving "impossible and ineffective for us to purchase all spare parts and non-lethal weapons needed by all the forces. The ministry, the TNI Headquarters and forces, therefore, would continue to "have their own lists of private companies who are partners in arms procurements," he said.

The decrees require all arms tenders to be offered to the public. However, in the past most military procurement projects have been won by supplier companies linked to retired military officials or their families.

Safrie said the government had centralized the management of arms procurements because of the Defense Ministry's limited budget.

"We have adopted a one-door policy in arms procurements however, all forces and the TNI Headquarters are still allowed to be involved in procurements and are allowed to buy certain military equipment they need," he said.

Ideally, the Defense Ministry needed funding of around Rp 58 trillion this year but the government had provided it with only half that amount, he said.

This meant the ministry was mostly focused "on routine expenditure to pay servicemen and civilian staff and to finance core military operations," he said.

The country's defense budget -- at only 1.1 percent of the gross domestic product -- was the lowest in Southeast Asia, "Malaysia and Singapore have allocated around 4 percent of their GDP for defense."

Because of the limited defense budget, Indonesia had several times bought weapons, including Russian-made Sukhoi jets and Mi-17 helicopters, under government-to-government export credit facilities, he said.

Separately, ministry director general of arms procurement Rear Admiral Pieter Wattimena said the ministry would follow the directions in two ministerial decrees to clean up future arms deals.

"The supply of weapons, spare parts and other materials will be conducted under the ministry's coordination, and chiefs of staff and other officials in all the forces will no longer be allowed to be involved. We will no longer purchase military equipment at the behest of willing partner companies," he told here recently.

"All tenders will offered to the public. The direct appointment of partner companies will only be allowed in emergency cases and for certain spare parts," he said.


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