{"id":36375,"date":"2019-07-12T12:00:00","date_gmt":"2019-07-12T12:00:00","guid":{"rendered":""},"modified":"2020-06-16T20:19:31","modified_gmt":"2020-06-16T20:19:31","slug":"11375-corruption-and-coal-dug-up-in-indonesia","status":"publish","type":"post","link":"https:\/\/dialogue.earth\/en\/energy\/11375-corruption-and-coal-dug-up-in-indonesia\/","title":{"rendered":"Corruption and coal dug up in Indonesia"},"content":{"rendered":"

Indonesia\u2019s anti-corruption watchdog has accused the head of the state-owned electricity distribution monopoly of facilitating bribery, linking him to a case that has led to the arrest of nine people, including the ex social affairs minister and another member of parliament.<\/p>\n

The Corruption Eradication Commission (KPK) indicted Sofyan Basir, the suspended chief executive of electricity provider PLN (Perusahaan Listrik Negara) at a hearing in Jakarta on June 24.<\/p>\n

The KPK alleges Sofyan Basir arranged meetings between PLN\u2019s board and two politicians and a businessman who have been found guilty of bribery<\/a>, reports the Jakarta Post.<\/em><\/p>\n

Environmentalists and anti-graft campaigners now want the KPK to dig deeper into the role of China Huadian Engineering Co Ltd, which is a project partner in the US$900 million Riau-1 power plant<\/a> on the biodiverse island of Sumatra. They also hope the high-profile case will stem the expansion of coal-fired power.<\/p>\n

Previously, businessman Johanes Budisutrisno Kotio had been jailed for 32 months after being found guilty of paying more than US$300,000 in bribes to obtain Riau-1 contracts for Blackgold Natural Resources Ltd. The Chinese firm is a project partner of Blackgold\u2019s in Riau-1. <\/p>\n

Golkar Party politician Eni Maulani Saragih was jailed for six years in March for taking bribes, Reuters<\/em> reported. <\/p>\n

\u201cThis is meaningful for Indonesia, but [the KPK] has not yet exposed the full picture of corruption in the power plant business,\u201d said Tata Mustasya, regional climate and energy campaign coordinator with Greenpeace Southeast Asia.<\/p>\n

\u201cThe KPK alleges Sofyan Basir arranged meetings for the convicted to press for contracts. Specifically, it suspects Sofyan Basir ordered one of the directors at PLN to arrange a power purchase agreement between PLN, Blackgold and China Huadian Engineering,\u201d said Mamik, project coordinator for Transparency Indonesia\u2019s mining programme. (Like many Indonesians, she uses only one name.)<\/p>\n

Burning more coal<\/strong><\/p>\n

Coal is a key driver of the Indonesian economy, as the archipelago has one of the world\u2019s largest coal reserves, and is among the top coal exporters<\/a>, alongside Australia. China is the biggest market for Indonesian coal.<\/p>\n

The environmental cost is high. Producers in the primary coal-mining region of East Kalimantan province, on the richly forested island of Borneo, have used environmentally d<\/a>amaging<\/a> open strip-mining techniques. They have also relied on cheap, non-union labour, often migrants from other parts of Indonesia.<\/p>\n

Dirty energy is supported by dirty politics in Indonesia.
\n <\/p><\/blockquote>\n

Waterways across the region have been poisoned<\/a>, productive agricultural regions have been destroyed, and the provincial capital, Samarinda, is now prone to flooding due to loss of tree cover, which has increased water runoff from the surrounding hills.<\/p>\n

Nevertheless, the government has ramped up coal output. President Joko \u201cJokowi\u201d Widodo called for the construction of 117 new coal-fired power plants<\/a> to counter the mine closures and economic pain caused by the recent global coal slowdown. China\u2019s imports of Indonesian coal fell by 49%<\/a> in 2015 alone.<\/p>\n

His plans will add a total of 35,000 megawatts (MW) of power generation capacity.<\/p>\n

Widespread corruption<\/strong><\/p>\n

\u201cWe all know that the risk of corruption is higher when there is a rapid build out of a power sector,\u201d said Melissa Brown, an energy finance consultant at The Institute for Energy Economics and Financial Analysis (IEEFA) in Cleveland, Ohio.<\/p>\n

\u201cMy sense of covering the Asian power sector is that corruption is something that has been a factor for many, many years,\u201d said Brown.<\/p>\n

China\u2019s financial institutions have invested more than US$5.5 billion to help build over 7,000 MW of coal plants in Indonesia, before factoring in projects announced<\/a> at the Belt and Road Forum in Beijing in late April, according to IEEFA<\/a> data. Across Southeast Asia, China\u2019s coal plant funding amounts to US$10 billion for 24,000 MW of coal plants.<\/p>\n

The arrests are the latest sign that the KPK (formed in 2002, shortly after the end of Suharto\u2019s three decades of dictatorship) may focus more on the natural resources sector.<\/p>\n

The KPK regularly ranks among Indonesia\u2019s most popular public institutions and has a near-perfect record<\/a> of convictions in cases that have gone to trial.<\/p>\n

In 2016, the KPK found that 40% of 10,992 coal sector licenses issued in four Indonesian provinces had failed to meet all legal requirements, including the payment of taxes, land rents and other royalties. Over 2,000 of these permits have been revoked or allowed to expire.<\/p>\n

Digging deeper? <\/strong><\/p>\n

However, the Riau-1 case is the first major KPK investigation in the coal power generation sector, which is heavily dependent on foreign investment.<\/p>\n

So far the case has only implicated Indonesian politicians and national companies.<\/p>\n

\u201cWhat we need to do more is bring legal cases involving companies from investing countries,\u201d said Mustasya. \u201cIt will change the game if the KPK can do that in Indonesia.\u201d<\/p>\n

He believes: \u201cDirty energy is supported by dirty politics in Indonesia. You can generate profit easily if you are close with policymakers, or if you are a policymaker yourself.\u201d<\/p>\n

\u201cThere are many similar irregularities that can be found in other power projects that are part of the 35,000-megawatt program,\u201d said Merah Johansyah, coordinator of the Mining Advocacy Network (Jatam) in a press release<\/a>.<\/p>\n

A recent report<\/a> released by Greenpeace, Indonesia Corruption Watch, Jatam and Auriga, highlighted cosy connections between political elites, most notably powerful cabinet member Luhut Binsar Pandjaitan, coordinating minister for maritime affairs, and both ownership and operations of mining companies.<\/p>\n

Authorities have, for now, suspended the Riau-1 plant<\/a>. However, future moves in the mining industry could impact coal production, which domestic plants depend on.<\/p>\n

If the investigation of the 35,000 MW programme deepens, it may implicate many more investors, including Chinese companies and financial institutions.<\/p>\n

Pius Ginting, founder of the Indonesian NGO Aksi Ekologi dan Emansipasi Rakyat<\/a> (Ecological Action and People\u2019s Emancipation), hopes Riau-1 will push China to follow its own public commitments. He cites President Xi Jinping\u2019s statement that China\u2019s foreign investment should be corruption free. \u201cI think that statement should be materialised in practice by reviewing investments in Indonesia that are prone to corruption,\u201d he said.  <\/p>\n

Environmental campaigners also point out the financial risks to investors in the 35,000 MW programme, given the growing evidence of oversupply<\/a> and the potential cost-parity of renewable alternatives.<\/p>\n

\u201cIt doesn\u2019t make any sense to expand coal power plants as we already have overcapacity,\u201d said Mustasya. \u201cIf we continue the expansion it will reach 70% overcapacity, and it will be paid by Indonesian citizens through higher tariffs, or through the government state budget.\u201d<\/p>\n

Of course, environmental NGOs want to see a policy move away from coal and towards renewables.<\/p>\n

Ginting believes China could take the lead by shifting its foreign investment from coal to clean energy, thereby helping Indonesia to meet its Paris Agreement goals: \u201cChina is the biggest investor in renewable energy, and they have the capacity to [invest there] instead of in coal power plants in Indonesia.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

Prosecutors have indicted the head of a national power firm, raising hopes of a dirty energy clean-up<\/p>\n","protected":false},"author":3290,"featured_media":60493,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[758,757],"tags":[520,527,547],"hashtags":[],"country":[],"class_list":["post-36375","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","category-energy","tag-coal","tag-crime","tag-fossil-fuels"],"acf":[],"yoast_head":"\nCorruption and coal dug up in Indonesia | Dialogue Earth<\/title>\n<meta name=\"description\" content=\"Prosecutors have indicted the head of a national power firm, raising hopes of a dirty energy clean-up\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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