How loopholes in Indonesia’s corruption law let environmental crime persist

In the leadup to the release of the second installment of Indonesia for Sale, our series examining the corruption behind Indonesia’s deforestation and land-rights crisis, we are republishing the first article in the series, “The Palm Oil Fiefdom.” 

This is the fifth part of that article. The first part described a secret deal between the son of Darwan Ali, head of Indonesia’s Seruyan district, and Arif Rachmat, CEO of one of Indonesia’s largest palm oil companies. The second part gave Darwan’s backstory, and the third part chronicled the palm oil boom that hit Seruyan after he took office. The fourth part examined the corruption behind that boom. The fifth part focused on Seruyan’s people as they organized against Darwan. The article can be read in full here.

Indonesia for Sale is co-produced with The Gecko Project, an initiative of the UK-based investigations house Earthsight.

The cover image for ‘The Palm Oil Fiefdom.’

To the handful of observers who were aware of what Darwan had done, it was clear that he had abused his office to make money for his family, while inflicting considerable harm on the people he was elected to serve. The KPK investigators circled around the case for years, so why didn’t they pounce?

The investigators involved, who have all since left the agency, were either unwilling or unable to comment for this article. We sought answers through interviews with current KPK officials, NGOs and academics focusing on anticorruption efforts in Indonesia, and our own research on other KPK cases.

The easiest way to prosecute a corrupt official under Indonesian law is to catch them redhanded accepting a bribe, usually after tapping their phone, which the KPK can do without a warrant. In 2012, the agency intercepted a payment to a bupati on the island of Sulawesi. The money came from a businesswoman seeking an oil palm permit. She initially claimed it was a “donation,” and then that she had been extorted.

Both the bupati and the businesswoman were imprisoned, but it is one of the very few licensing rackets the KPK has prosecuted. Tama Langkun, a researcher from Indonesia Corruption Watch (ICW), a Jakarta-based NGO that helped Nordin Abah pursue Darwan, drew a comparison with Seruyan. “In my view it’s the same,” he told us. “The difference is that [in Sulawesi] they caught them in the act.”

Tama Langkun, left, and Lais Abid, researchers with Indonesia Corruption Watch.

Seruyan involved a more complex ruse. Rather than demand cash in exchange for permits, Darwan’s friends and relatives created shell companies that served as vehicles for making money from oil palm firms. This avoided the more obvious offense of bribery. But Indonesian law includes a broader definition of corruption, provided the case can fulfill three criteria. Firstly, the suspect must have abused their power. Secondly, they must have done so with the intention of “enriching” themselves or someone else. Thirdly, they must have caused “state losses,” meaning a monetary cost to the government can be determined.

It seemed self-evident that Darwan had acted with the aim of enriching his family and cronies. They had made more than a million dollars up front from permits he provided them. Similarly, there seemed to be a strong case he had abused his power. The permits Triputra bought from his son were a case in point; there is evidence they may have violated a range of laws during the course of their operations, as a consequence of Darwan’s light-touch regulatory regime.

The third criterion, state losses, may have proved a sticking point. When it comes to skimming money from budgets or contracts, it is easy to calculate the drain on public coffers. Indeed, it is just this sort of crime for which most bupatis are arrested. On the other hand, losses arising from the crooked issuance of a permit to log a forest, plant oil palm or mine coal are harder to measure. If the companies pay taxes, there is no obvious cost to the state. “This is the basic problem of why the number of natural resource corruption cases processed by Indonesian law enforcement is so small,” said Lais Abid, another ICW researcher.

There was another obstacle to prosecution unrelated to the law. Overstretched and understaffed, the KPK’s backlog of complaints topped 16,000 in 2008, the year after Marianto met the whistleblower in Kuala Pembuang. In 2007, it completed investigations of just 19 cases. It is also constantly under attack from rival institutions. In 2009, as Nordin discussed Darwan with the KPK’s top brass, the agency was embroiled in a feud with the national police and attorney general’s office that culminated in its chairman and two of its deputies being framed for murder, extortion and bribery. Dimas Hartono, a Palangkaraya-based activist who worked with Nordin, argued that the campaign to undermine the KPK distracted from Darwan’s case.

A display of public support for the KPK in 2009, the year of the agency’s first big feud with the national police. Photo by ivanatman/Flickr.

The KPK is Indonesia’s most trusted institution, and most feared  —  it has never lost a case it has taken to court. But the agency holds dear to the mystique created by its perfect record, making it reluctant to proceed with any case in which a conviction is uncertain. It also cannot drop an investigation once it has begun, a clause embedded in the law to prevent defendants from paying their way out of trouble. But the rule, ICW’s Langkun believes, has had the perverse effect of scaring the agency away from more complex cases.

In recent years, ICW has reported 18 cases that “resemble Seruyan” that it believes were not processed for lack of a clear kickback to the officials involved. “Frankly, we’re disappointed,” Langkun said. “It’s made things very difficult for us.”

Darwan may also have been perceived as too small a target to merit the resources it would have required to take him down. The KPK focuses more on “big fish” in the capital than bupatis from the outer islands. Whether it deprioritized the case because he was too small a catch, or because the state losses were not clear enough, it highlights a gaping hole in the agency’s ability to prevent precisely the kind of corruption that has the biggest impacts on Indonesia’s forests and its millions of rural people.

In theory, an alternative pathway exists: Darwan might have been reported for nepotism. Nepotism is defined similarly to corruption, but a viable case does not require proof of state losses. The glaring caveat is that the crime falls under the jurisdiction of the police and attorney general’s office, whom Nordin believed would have asked Darwan for money to drop the case. Jimly Asshiddiqie, the founding chief justice of Indonesia’s Constitutional Court, echoed this view. “In practice, we have a problem with these traditional institutions,” he told us. “They are not enforcing the law; they’re actually protecting the companies.”

Jeffrey Winters, a Northwestern University professor who studies oligarchies in Indonesia and elsewhere, compared the legal system outside the KPK to “a light switch that can be turned on or off” by those with money or political clout. If the entire system operated like the antigraft agency, he said, the country would be as corruption-free as Singapore. “The KPK has a relatively narrow anticorruption mandate and capacity,” he said. “A large part of the corruption spectrum is outside the purview of the KPK. And that part of the spectrum is not effectively pursued.”

Whichever combination of flaws allowed Darwan to slip through the net, the fact that he did was symptomatic of a problem that stretched far beyond the borders of Seruyan. Across the archipelago, the control of the office of the bupati over natural resources, combined with the option of using proxies and shell companies to nefarious ends, has attracted politicians with the aim of consolidating power and wealth at the expense of their people.

“It’s a loophole,” said Grahat Nagara, a researcher at Auriga, an NGO that works closely with the KPK. “That’s how all the dynasties in Indonesia make their money.”

Read the entire the story here. And then follow Mongabay and The Gecko Project on Facebook (here and here in English; here and here in Indonesian) for updates on Indonesia for Sale. You can also visit The Gecko Project’s own site, in English or Indonesian. Read the article introducing the series here.

This story first appeared on Mongabay

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