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Report identifies tycoons controlling site of new Indonesian capital

The blast zone of a coal mine sits just dozens of meters away from a residential area in East Kalimantan. Photo by Tommy Apriando/Mongabay-Indonesia.

  • The site for Indonesia’s planned new capital city overlaps with 162 coal mining and pulpwood plantation concessions, a report by a coalition of NGOs has revealed.
  • The concessions are linked to some of Indonesia’s wealthiest and most powerful businesspeople and politicians, raising concerns over how the government will get them to relinquish the concessions.
  • Moving the capital from Jakarta to the new site in Borneo is also expected to benefit coal companies, which look set to provide the bulk of the electricity for what the government initially slated would be a “zero-emission” city.
  • The government has downplayed concerns about the concessions at the site, saying the $33.5 billion project will be an opportunity to repair the environmental damage done by the companies operating in the area.

JAKARTA — Activists say they’ve identified the business tycoons who control land in the area slated for Indonesia’s new capital and who could potentially benefit from the $33.5 billion mega project.

The site of the new capital on the island of Borneo is home to 162 existing concessions, most of them for coal mining, according to a report from a coalition of NGOs. This contradicts the government’s claim that the city will be built on vacant land, and raises the prospect of the concession holders exploiting the opportunity for profit, said Merah Johansyah from the Mining Advocacy Network (Jatam), one of the NGOs in the coalition.

“If the government says it’s going to be the public who will benefit [from relocating the capital], that’s a big lie,” he said at the launch of the report in Jakarta. “The ones that will benefit are these companies.”

Among the companies with concessions at the site in East Kalimantan province, based on the coalition’s analysis of publicly available land and corporate registration records, are those affiliated to pulpwood and palm oil billionaire Sukanto Tanoto.

Among Tanoto’s many businesses is Asia Pacific Resources International Holdings (APRIL), Indonesia’s second-biggest pulp and paper company. An APRIL subsidiary, PT International Timber Corporation Indonesia Hutani Manunggal (ITCI HM), currently manages a pulpwood plantation at the site of the new capital that overlaps with a 5,644-hectare (13,950-acre) lot where the government plans to build its new office complex.

Sukanto took control of ICTI HM in 2006 from prominent businessman Hashim Djojohadikusumo, the brother of Prabowo Subianto, a two-time presidential candidate and current minister of defense. Hashim still controls 173,400 ha (428,500 acres) of concessions in the same region through his own company, PT International Timber Corporation Indonesia Kartika Utama, representing an area larger than the city of Los Angeles. Those concessions overlap with much of the 42,000 ha (103,800 acres) that the government plans to allocate for residential zones in the new capital.

Other parts of the new capital, which still doesn’t have a name, sit on coal mining concessions held by three companies linked to Rheza Herwindo, the son of former parliamentary speaker and corruption convict Setya Novanto. Luhut Pandjaitan, the senior minister in charge of investment and a close confidant of President Joko Widodo, has also been identified in the report as controlling a mining concession in the area through a subsidiary of his Toba Sejahtra conglomerate. Another Widodo ally named in the report is Yusril Ihza Mahendra, the lead counsel for the president’s 2019 re-election campaign chairman and chairman of a minor party that backed the incumbent.

Also on the list is palm oil billionaire Lim Hariyanto Wijaya Sarwono, who owns the Harita Group conglomerate.

A map showing East Kalimantan province (light red) and two districts: North Penajam Paser and Kutai Kartanegara (deep red). Image courtesy of President Joko Widodo’s Twitter account.

Land swaps

With the permits for some of the concessions not set to expire for another 20 years, the businesses have the upper hand over the government when it comes to negotiating a settlement for relinquishing the land, according to Jatam’s Merah.

“Will these concession holders voluntarily give up their lands? Or will there be compensation?” he said. “What will the compensation be? Who will benefit from this? Who is this new capital for? It’s for these 162 concession [holders].”

In the case of a pulpwood company like ICTI HM, there’s the prospect of getting a new swath of land elsewhere as compensation — and potentially sparking new waves of deforestation in parts of Indonesia still relatively unscathed by the wholesale clearing of forests seen in Borneo and Sumatra.

“If we look at the trend of selective logging and pulpwood businesses, they’re shifting toward eastern parts of Indonesia, to Papua,” said Zenzi Suhadi of the Indonesian Forum for the Environment (Walhi). “There’s a likelihood that they will reduce the size of their concessions in East Kalimantan, and then they’re going to ask [for substitute lands] in Papua.”

Government officials have said there is no legal requirement to compensate either pulpwood or mining concession holders for relinquishing the land, except for property built on the land and trees not yet mature enough to be harvested. The forestry ministry says it may compensate pulpwood companies by connecting them with community-run plantations under the government’s social forestry program, but activists say land swaps are more likely.

The mechanism for swaps was introduced in 2017 for pulpwood and logging companies that had to relinquish their concessions on peatlands in order to conserve and restore the land under a nationwide fire mitigation effort.

People in East Kalimantan help a drowning child in an water-filled crater that was previously mined for coal. Image courtesy of Jatam.

Coal boon

For coal companies, the prospect of token compensation may be offset by the anticipated surge in electricity demand — an estimated 1,555 megawatts, according to the government — that’s expected to be generated by burning more coal.

The government had initially planned to add 691 MW of capacity to East Kalimantan’s power grid by 2024. That leaves a further 864 MW still to be added, according to the ministry of mines and energy.

President Widodo previously said the new capital’s energy would come from renewables and wouldn’t depend on fossil fuels. But the government later announced that only 39% of the new capital’s electricity would come from renewable sources, primarily hydropower.

That’s left activists worried that the bulk will have to come from coal-fired power plants — Indonesia’s go-to for new power generation. At least three coal plants are already planned for construction in East Kalimantan, which will benefit the industry, according to Yuyun Indradi, the executive director of the NGO Trend Asia.

The government has issued at least 1,434 mining permits in East Kalimantan, spanning more than 5 million ha (12 million acres) — an area larger than Belgium.

What makes it highly likely that coal will power the new capital is the tight time line for the project, Yuyun said; the government has said it will move to the new capital from Jakarta by 2024, and coal is the most plentiful and accessible energy source to bring online in such a short time.

“Coal has become the closest source [of energy] for the new capital,” Yuyun said. “When the new capital is predicted to need 1.5 gigawatts of electricity, the surrounding coal businesses will be more than happy to supply, or even build new coal plants to feed the new capital’s electricity demand.”

PT Bumi Resources, Indonesia’s largest thermal coal miner, is already eyeing a slice of the pie by planning to build coal plants in the region. The company also says it’s ready to provide energy for the new capital through its subsidiary, PT Kaltim Prima Coal, which operates a mine 260 kilometers (160 miles) from the site.

This prospect makes it impossible for the government to fulfill its promise of a pollution-free and zero-emission capital city, Yuyun said.

“So a smart city or a green city is just a dream, especially the zero-emission [promise], that’s highly impossible,” he said. “Because opening up new land itself already creates emissions, using cement [for construction] also creates emission.”

There’s also the question of what happens to the abandoned mining pits that companies have neglected to fill in and rehabilitate, as required by law. Luhut’s mining firms, for instance, have left 50 such pits behind. There are 94 of these pits at the site of the new capital, out of 630 across East Kalimantan, according to the NGO coalition. These pits fill up with rainwater over time, turning into deep pools that pose a drowning risk for locals, particularly children. The NGOs have recorded at least 36 people drowning in these pits in East Kalimantan.

“What’s going to happen with these 94 mining pits?” Merah said. “A lot of people have already died there. If they’re going to be rehabilitated, whose money will be used?”

Mining pits like this one near a residential area pose a threat to the safety of residents, especially children. Image by JATAM East Kalimantan.

Shared project

Speaking to reporters during a recent visit to East Kalimantan, President Widodo said it’s inevitable that businesses will play a major role in building the new capital, given that the government can’t afford to pick up the estimated $33.5 billion tab on its own.

“The project has to be shared,” Widodo said as quoted by local media. “There’s no way we could do it by ourselves. The state budget will be dried out [if that’s the case]. It means that the involvement of [parties] outside the government is much needed.”

The forestry ministry, tasked with carrying out a strategic environmental assessment, says the existing concessions and the environmental damage associated with them won’t be a problem. Instead, it will be an opportunity to revitalize the area, according to Laksmi Wijayanti, the ministry’s acting inspector general. She said the government would require concession holders to rehabilitate their concessions, including mining areas.

“The [environmental] problems there are actually a moment [for us] to solve the problems of East Kalimantan, where environmental destruction is already at a chronic level,” she said.

She added the government had earmarked at least 85,000 ha (210,000 acres) of land around the new capital for conservation purposes, including wildlife habitat.

“Parts of these 85,000 hectares are actually already damaged, so we’ll focus on these areas so that they can be restored properly,” Laksmi said. “The government won’t waive [mining companies’ violations], but we’ll accelerate [the rehabilitation of their mining pits] so that they can carry out their obligations quickly.”


Banner image: The blast zone of a coal mine sits just dozens of meters away from a residential area in East Kalimantan. Photo by Tommy Apriando/Mongabay-Indonesia.

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