On 18 March, the Jakarta Metropolitan Police named human rights activists Haris Azhar and Fatia Maulidiyanti suspects in a defamation case brought by powerful Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan.
The defamation complaint related to a YouTube video in which the activists discussed a report that stated that military operations in the Papuan provinces were designed in part to protect mining businesses in the region. In the video, Fatia alleged that Luhut was implicated as a shareholder of one of the companies operating in the region.
This article does not wish to comment further on that case. But there are plenty of other indications of Luhut having serious conflicts of interests when it comes to mining operations.
Back in 2018, Greenpeace, the Mining Advocacy Network (Jatam), Indonesia Corruption Watch (ICW), Auriga and Bersihkan Indonesia released a report titled “Coalruption: Shedding Light on Political Corruption in Indonesia’s Coal Mining Sector”.
The coal mining industry is very lucrative and highly vulnerable to corruption. The sector is characterised by close relationships between coal mining corporations and state officials and bureaucrats. The report described how hundreds of politicians and businesspeople with political connections (which it termed politically exposed persons, or PEPs) have entered the Indonesian coal mining industry since 2000. These PEPs hold or have held senior leadership roles in government, the legislature, judiciary, military, and state-owned enterprises, despite the serious conflicts of interest involved. One of the most prominent of these is former four star general and current minister Luhut Binsar Pandjaitan.
Luhut was a major focus of the ‘Coalruption’ report because of the extent of his conflicts of interest. Luhut is a shareholder in Toba Sejahtra, a company with interests in coal mining and coal-fired power plants that he founded in 2004. Luhut has merged politics and his coal mining interests through his close connections with the presidential palace, and New Order-era oligarchs, especially in the Golkar Party, as well as relationships with local elites and power holders.
As a key member of President Joko “Jokowi” Widodo’s inner circle, Luhut has seen his political and economic power grow during the president’s second period. In Jokowi’s first term, Luhut was coordinating minister for maritime affairs from 2016 to 2019 (he also served as coordinating minister for political, legal, and security affairs, and was briefly acting energy and mineral resources minister).
As current coordinating minister for maritime affairs and investment, Luhut now oversees the Ministries of Transportation, Maritime Affairs and Fisheries, Tourism, and – crucially – Energy and Mineral Resources. As his changed title suggests, in Jokowi’s second term, Luhut’s remit has expanded to also include investment across a broad range of sectors. In practice, Luhut has been on the frontline of a vast range of government policies and programs, such as the massive project to establish a new capital city in East Kalimantan and even Indonesia’s Covid-19 response. Given his reputation as “Lord Luhut” under Jokowi, it is perhaps no coincidence that Luhut has also been one of the loudest voices arguing for postponing the 2024 elections to extend Jokowi’s term in office.
With this sweeping authority, Luhut has major influence over the political and economic direction of the country. While in the New Order era, Indonesians discussed so-called Widjojonomics and Habibienomics, referring to the development policies of technocrats Widjojo Nitisastro and BJ Habibie, Indonesia now appears to be guided by “LBP-nomics”. The major problem with this shift is that policymaking cannot be separated from his serious conflicts of interests, as the ‘Coalruption’ report showed.
A key characteristic of government under the influence of Luhut is a return to the twin policies of developmentalism and extractivism that were a major feature of New Order rule, with a focus on export of primary commodities like coal.
Under developmentalism, economic growth is pursued at all costs, with little regard for the social or environmental consequences. The so-called omnibus Law on Job Creation (Law No. 11 of 2020) and the revisions to the Mining Law (Law No. 3 of 2020) are two concrete examples of how this approach to development plays out in practice. These pieces of legislation have been criticised for weakening environmental protections and putting the rights of workers and local communities at risk.
There are indications that this trend toward developmentalism is not benefiting Indonesians. A study by the Institute for the Development of Economics and Finance (INDEF) and Greenpeace found that in 2014, 3,090 jobs were created for every Rp 1 trillion invested in Indonesia. By 2020, this figure had fallen to just 1,400.
A second and well-established problem with developmentalism and extractivism, particularly in the case of coal mining, is the environmental destruction it causes. For example, deforestation for the expansion of coal mines and oil palm plantations was thought to have exacerbated widespread flooding in South Kalimantan in early 2021. Abandoned mining pits have also been responsible for the drowning deaths of dozens of children in East Kalimantan over the past decade.
In the downstream sector, coal-fired power plants make up some 58% of Indonesia’s electricity generating capacity, creating dirty emissions that contribute to climate change. If operating at full capacity, Indonesia’s 237 coal-fired power plants would emit about 192 million tonnes of CO2 per year, equivalent to the emissions from 90 million cars.
The ‘Coalruption’ report revealed that coal companies affiliated with Luhut have been implicated in environmental damage in East Kalimantan. Data from 2017 found that four of 10 mining pits in the concession of Luhut-linked Kutai Energy had not been rehabilitated or restored. One pit drained directly into the local water supply, which was found to contain high levels of acidity and heavy metal contamination.
Another problem with the expansion of coal mining is that it impedes diversification of the economy and the development of the renewables sector. Currently only about 13% of Indonesia’s energy is derived from renewable sources. Indonesia’s renewable energy target of 23% by 2025 is looking increasingly impossible to achieve.
At the same time as this renewable target is starting to look out of reach, Luhut and others are seemingly pushing to make Indonesia’s energy sector increasingly reliant on coal. In the 2015-2019 National Medium Term Development Plan, the government planned to gradually decrease coal production from 419 million tonnes in 2016 to 400 million tonnes in 2019. But the reality was far different. Instead, Indonesia saw coal production increase to 477 million tonnes in 2019, and 625 tonnes in 2021.
Should Luhut really be responsible for overseeing the energy and resources sector (and for that matter investment in the renewables sector) when a company he founded, Toba Sejahtra, has subsidiaries with interests in coal-fired power plants?
The second main characteristic of governance under Luhut is the increasing influence of oligarchs over policy. One example of this is the revisions to the Mining Law in May 2020. Rating agency Moody’s reported on 11 November 2019 that several Indonesian mining companies were facing large debt maturities in 2022. Moody’s mentioned that these companies were likely to face challenges refinancing their loans because of limited supplies of coal, difficulty renewing their mining licences, and more stringent social and environmental standards. The revised Mining Law helped to solve this problem by ensuring that the companies could renew their licences without major concerns. This was a law that was passed rapidly, in an untransparent manner, with minimal public participation.
One of the most concerning aspects of Luhut’s growing power has been his push to delay the 2024 Presidential Election, and his reporting of activists Haris and Fatia for defamation. Luhut is actively seeking to weaken critical civil society voices and doing serious damage to Indonesia’s democracy.
The cost of Luhut’s conflicts of interest are large, and Indonesians are paying the price. If these trends toward developmentalism, extractivism, and oligarchy are left unchecked, Indonesia will face a multi-dimensional crisis, affecting not just the climate and environment, but also justice and democracy.
Political party leaders, academics, religious organisations, students, workers, and civil society need to work together to put a stop to this trend. How can they make this happen? Ensure that the government of Indonesia is one without Luhut Pandjaitan.
An earlier version of this article was originally published as “Indonesia Tanpa Luhut Pandjaitan” in Tempo Magazine on 26 March. It has been translated and edited with the author’s permission.