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Indonesian official busted over alleged bribe for palm oil permit

Forest illegally cleared for oil palm in Riau Province. Photo by Rhett A Butler

Forest illegally cleared for oil palm in Riau Province. Photo by Rhett A Butler

  • A district head in Riau, the heartland of Indonesia’s palm oil industry, has been arrested for allegedly taking bribes from a plantation company.
  • The 2 billion ($141,000) payment was allegedly in exchange for the district head, Andi Putra, facilitating the extension of a permit for palm oil company PT Adimulia Agrolestari.
  • Activists say the case is only the tip of the iceberg, with Riau blanketed in illegal plantations and plagued by corrupt officials.
  • They are also worried that corruption in the palm oil industry will become more rampant in the future due to the weakening of the national anti-corruption agency.

PEKANBARU, Riau — Anti-corruption investigators in Indonesia’s palm oil heartland have arrested a local official for allegedly taking bribes from a palm oil company in exchange for extending its business permit.

Officers from the KPK, the national anti-graft agency, have charged Andi Putra, the head of Kuantan Singingi district in Riau province, and Sudarso, general manager of palm oil company PT Adimulia Agrolestari, in the case.

They allege Andi asked for 2 billion rupiah ($141,000) from Sudarso in exchange for facilitating the extension of Adimulia’s right-to-cultivate permit, or HGU, the last in a series of licenses that oil palm companies must obtain before being allowed to start planting. The company operates 6,485 hectares (16,025 acres) of plantations in Kuantan Singigi, and has since 2019 sought to extend its HGU, which expires in December 2024.

One of the requirements for a permit extension is for the company to allocate parts of its concessions to local smallholder farmers, under a scheme known as plasma cultivation. However, Adimulia’s plasma plantations are located in neighboring Kampar district, not Kuantan Singigi.

To meet the requirement, Sudarso allegedly asked Andi to approve Adimulia’s plantations in Kampar as eligible for consideration in the extension of the company’s HGU permit. Sudarso allegedly paid a total of 700 million rupiah ($49,200) in September and October this year, in what were supposed to be the first two installments of the total 2 billion rupiah backhander.

They allegedly transacted the second installment of the bribe on Oct. 18 at Andi’s house in Kuantan Singgi. When KPK investigators raided the house later that day, they found Andi had already left for Pekanbaru, the Riau provincial capital. He later surrendered to police in Pekanbaru that night. Both suspects are now in the KPK’s custody.

KPK’s deputy chair Lili Pintauli Siregar said the bust is part of wider efforts to combat corruption in the plantation industry.

“It is hoped that [the efforts help] optimize tax revenue and make law enforcement in the natural resource sector effective,” she said.

Besides bribery, Adimulia has also been dogged by allegations of tax evasion. An investigation by Riau provincial legislators puts the company’s unpaid taxes at at least 49 billion rupiah ($3.4 million).

Buyers of the company’s palm oil include major traders such as Wilmar, Sinarmas and Musim Mas, which go on to export the commodity worldwide, including to the U.S., Europe and China.

An oil palm plantation in Riau, Sumatra, Indonesia. Image by Rhett A. Butler / Mongabay.

Recurring corruption

District heads, mayors and governors across Indonesia are routinely busted by the KPK in corruption cases, including those linked to plantations. Experts say cases like the one in Kuantan Singingi will continue to occur as long as the country lacks strong safeguards to prevent corruption in the plantation industry.

In a 2016 audit of the palm oil industry, the KPK found a litany of problems in the sector, such as weak monitoring and management in licensing mechanism, which makes the industry prone to graft. This despite the government heavily supporting the plantation industry, touting it as one of the country’s main contributors to the economy; Indonesia is the world’s largest palm oil producer and exporter, responsible for more than half of global supply.

As a result, politicians and officials are often caught red-handed taking bribes from palm oil businesses. A prominent case is that of Annas Maamun, the former governor of Riau province, who was arrested in 2014 for taking 2 billion rupiah in bribes (about $160,000 at the time) from a palm oil businessman to rezone swaths of forest in the province as areas for “other use,” known as APL in Indonesian, where mining and oil palm cultivation are permitted.

The move was meant to legitimize the plantations already operating there.

In 2015, a court convicted Annas of corruption and sentenced him to six years in prison. An appeals court in 2016 upheld the conviction and added another year to his sentence.

Rhomes Irawan, director of Riau-based NGO Kaliptra Andalas, said the latest case, involving Adimulia, is only the tip of the iceberg. He added the province is covered with illegal plantations, and questioned the KPK’s record on battling corruption in Riau.

“We perceive the performance of the KPK, especially in the natural resources sector in Riau, to be sluggish, as if they’re not serious [in combating corruption],” he said as quoted by local media. “It’s been more than 20 years of corruption in the permit issuance process in Riau, [but it] hasn’t been tackled to the core.”

Forest cleared for palm oil production in Indonesia. Rhett C. Butler for Mongabay.

Fight against corruption hobbled

Ramada Febrian, director of the plantations department at environmental NGO Auriga, said corruption in Indonesia’s palm oil industry could become even more prevalent in the future under the hugely controversial omnibus law on job creation that was passed last year in the face of near-universal public opposition.

The law includes an amnesty program that gives palm oil companies the chance to continue operating inside forest areas, which should be off-limits to plantation activities. These companies would only have to pay the requisite fines and obtain the proper permits, including the degazetting of the forest designation, in three years to resume their operations inside forest areas.

Ramada said this mechanism opens up a number of opportunities for corruption.

For one, big companies can claim oil palm plantations surrounding their concessions that are located inside forest areas as their own, and use the mechanism to get these surrounding plantations released from forest areas.

“That’ll be a rent-seeking practice,” Ramada said.

He added that the scheme could also lead to under-the-table dealing for companies to pay less in fines.

Ramada said while the omnibus law and its implementing regulations have laid out the formula to calculate the fines imposed on companies operating illegally inside forest areas, concerns remain over how transparent the whole process will be.

The risk of corruption is also increasing at a time when the KPK’s powers to fight graft, including in the natural resources sector, have been weakened by legislation introduced by the administration of President Joko Widodo. In 2019, lawmakers passed an administration-drafted amendment to the KPK law, which dilutes some of the agency’s powers and potentially undermines the integrity of its investigators.

Under the new law, the KPK is no longer an independent state institution, but is instead a government agency, with its staff required to have civil servant status. That effectively makes them part of the same cadre of officials they were originally tasked with policing. The amendment also puts the KPK under a supervisory board whose members are handpicked by the president and parliament — a constituency that has often been the target of anti-corruption investigations.

The KPK has also been stripped of its authority to carry out independent wiretaps of suspects — one of the key weapons in its war on graft that has helped it achieve a near 100% conviction rate.

At the end of September, 58 KPK staff members were fired after being told they had failed the civil service exam, the results of which they say have been withheld. Those affected include some of the commission’s most experienced and decorated investigators, many of whom have been subjected to threats and intimidation due to their roles in going after highly connected and influential corruption suspects.

All these changes within the KPK have raised concerns that corruption in the natural resources sector, including the plantation industry, will become more rampant in the future, Ramada said.

“The only safeguard [against corruption] that we have is the KPK,” he said. “[But] the KPK law has been revised and lots of its authorities have been diluted.”

Okto Yugo Setyo, a deputy coordinator at Riau-based NGO Jikalahari, said the KPK could still combat corruption in the natural resources sector by ramping up its initiative called the National Movement to Save Natural Resources, or GNP-SDA. The initiative was launched in 2009 to address corruption in the mining, plantation and forestry industries.

However, Okto said it hasn’t made much progress as it’s mostly limited to collecting data. Public involvement in the movement is also limited, especially in Riau.

Okto called on local governments in Riau to draw up definitive borders for the province’s forest areas, to make it clear where oil palm companies are operating illegally. He said this will go a long way in preventing corruption in the natural resources sector.

 

Banner image: Forest illegally cleared for oil palm in Riau Province. Image by Rhett A Butler/Mongabay.

 

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