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Opaque deals threatening Indonesia’s resources 3 PRIORITIES FOR A NEW ANTI-CORRUPTION LAW

3 priorities for a new Anti-Corruption Law

The Indonesia’s Corruption Eradication Commission (KPK) is promoting legal reforms to address complex corruption schemes that have been recently highlighted by investigations into alleged cases of corruption in politics, vote buying, bribery in exchange for mining permits, and environmental damages.

Last year, Indonesia finalized the second UNCAC review cycle. On 19-20 March 2019, anti-corruption experts gathered in Jakarta to share their views on priorities for a new Anti-Corruption Law. Addressing complex corruption schemes is one of these.

“We have finalized the UNCAC review cycles. This is a lot of work, we identified our biggest challenges: trading in influence, illicit enrichment, foreign bribery, and corruption in the private sector. We want to accelerate discussions for a new anti-corruption law” Ms. Miranti Martin, KPK

See UNCAC Executive Summaries and our webstory on UNCAC Implementation in Indonesia

Priority 1: Criminalize the corrupt sell-off of land and resources by politicians

“A suitcase full of cash might take a bupati down. But a wire transfer of millions, via a family member, could be clean” explain investigative journalists from The Gecko Project in The secret deal to destroy paradise.

Bupatis, or district chiefs, when elected, can allegedly use their influence to provide wealthy investors access to government contracts or permits. In a recent KPK survey, the KPK has found that the cost of winning a district level election was estimated at up to US$2 million. The survey also highlighted that while 35% of respondents shared that they spend more on campaigns than they are actually able to, 71% acknowledged that the donators expected something in return- in most cases business permits and licenses.

On March 29, in an allegation of a scheme to buy votes in the coming elections reported in Tempo.co, the KPK confiscated 84 boxes of cash totalling more than $500,000, following the arrest of a party politician on an alleged suspicion that he received numerous bribes from a fertilizer distribution deal. “The suspect allegedly collected money from several sources to carry out sengaran fajar in the 2019 elections” said the KPK Deputy Head. Photo@KPK2019

Around 60% of cases today handled by KPK are related to politics. Beyond proving actual cash bribes, another challenge for prosecutors today is that “natural resource conglomerates have also been found to use complex, albeit legal, tax structures to expand their operations in Indonesia”, as per the investigation from International Consortium of Investigative Journalists’ “Paradise Papers”. According to investigations by Mongabay and The Gecko Project, there is a risk that politicians use elaborate schemes with shell companies and proxy owners to sell oil palm plantation permits to some of the world’s largest firms.

"We are constantly facing cases of trading in influence for money or benefits, but we can’t prosecute these cases as such, as it is not criminalized in our law ”, Mr. Laode M. Syarif, KPK Deputy Chairman, speaking at the event
"Criminalizing trading in influence (UNCAC Art. 18) is a priority for Indonesia. It would bring tools for investigators to capture all aspects of undue influence in corruption cases" explained Mr. Francesco Checchi, UNODC Regional Adviser on Anti-Corruption

Priority 2: Account for environmental damages and social costs of corruption

@Ulet Ifansasti/Greenpeace

According to Indonesia’s Anti-Corruption Law, if a suspect has not been caught with sufficient evidence of corruption, investigative agencies, in order to go ahead with a case, must show the allegedly corrupt act resulted in ‘state losses’ of more than US$70,000.

The severity of the charges relies on the estimated ‘state losses’, which are for instance calculated based on the lost royalties and payments from illegal activities. Between 2008 and 2014, the KPK estimated that 77-81% of the timber taken from Indonesia forests was not reported to the State, resulting in $6.5 billion of state losses of revenue.

When companies do pay taxes but falsify their activities, what are the costs? The KPK has developed calculations to identify environmental damages and social costs of corruption since 2009, but the legal basis often make convictions uncertain, as reported by several experts during the seminar.

In 2018 and 2019, the KPK has brought cases to court with state losses attributed to environmental damages. In an illegal mining case in South Sulawesi last year, the KPK argued that more than half of the $312 million in state losses could be attributed to environmental damages, but the judges didn’t recognize environmental costs in their final decision.

Last month, the KPK named a suspect in an illegal mining case in East Kotawaringin that may have caused $415 million in state losses, calculated based on the production of bauxite and environmental damages caused by mining activities. (Photo@Antara Hafidz Mubarak)

During the seminar, key speakers discussed how loopholes in the Anti-Corruption Law are deterring the chances to criminalize environmental crimes.

“The current definition of ‘state losses’ is too vague. As a consequence, it is difficult and uncertain to prosecute these cases; judges have rejected the environmental argument in the past. We are finally prosecuting an illegal logging and wildlife crime case in Papua that we identified in 2017: this is a very challenging process”, Mr. Rasio Rhido Sani, Director of Law Enforcement, Ministry of Environment and Forestry
“How can we use all legal instruments to impose one offense and create a maximum deterrent effect? Illegal logging for instance, or the act of pollution beyond the threshold, could be charged under the Forestry law, but the KPK can’t apply a multi-door approach nor has the authority to investigate and prosecute environmental crimes. It is urgent to amend the anti-corruption law to redefine ‘state losses’ that reflect environmental damages and social costs”, Dr. RB Budi Prastowo, Researcher

Priority 3: Compensate the damages of corruption

Challenges related to strict liability of businesses, citizen lawsuits, class actions and the protection of reporting persons were discussed in the seminar, as important elements to be reflected in a new anti-corruption law.

“Having communities’ rights recognized in corruption crimes with financial penalties imposed on corrupters: victim compensation is not new in Indonesia. The urgency is to make it explicit in our law, otherwise there is room for debate” Mr. Maradona, Criminal Law Expert, University of Airlangga, Indonesia.
Presentation and photos from Mr. Zenzi Suhadi, Head of Advocacy, WALHI

Left: In South-Sumatra, a planned oil palm project will destroy 10,000 hectares of peatland ecosystem, where communities in 5 villages had 58 sources of incomes from the local economy, with a revenue of $1 billion per year.

Right: Houses from Belanti villages used to rely on rice and fish production, supplying food for South-Sumatra, before being damaged by an oil palm project.

Zenzi Suhadi, Head of Advocacy at WALHI, a network of 478 NGOs throughout Indonesia, highlighted that the NGOs witnessed the direct connection between corruption, the destruction of natural resources and poverty. “We have seen that the selling of our resources started with regional elections. Each year, during the elections, the number of permits issued increases by 300% for mining, plantations, or forest exploitation concessionshe stated. “In a recent case, business permits were allegedly signed by a district head while he was still in prison: while the permit issuer is in prison, the negative impacts continue...” he added, reflecting on the importance to recognize the damages of corruption on our lives and economy in the law enforcement process.
“Corruption crimes and damages in Indonesia are purely transnational. Tax heaven countries are often behind the plantation and mining companies operating illegally in Indonesia. There is no timber cut down, natural resources dredged, or rivers destroyed by corporations in Indonesia without a connection with transactions in other countries: international cooperation in law enforcement is crucial.” Mr Zenzi, Head of Advocacy, WALHI.

Executive Summaries on the implementation of the UN Convention against Corruption (UNCAC) in Indonesia are published online

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