Land ‘mafia’ blamed for driving investors away from Indonesia
ACTIVITIES of land “mafia” have hampered the realisation of a number of major investment projects in Indonesia, including a petrochemical plant to be built by South Korean petrochemical conglomerate Lotte Chemical, Agrarian and Spatial Planning Minister Sofyan Djalil has said.
The Indonesian unit of the South Korean business group, PT Lotte Chemical Indonesia, planned to invest about 50 trillion rupiah ($3.5 billion) to build a chemical plant in Cilegon, Banten, but the company could not realise the project because the land to be used as the site for the chemical plant was claimed by other people, Sofyan said in a press conference at his office in Jakarta last week.
He said such practices of the land cartels had discouraged foreign companies, including those from China, from investing in Indonesia. As reported by the World Bank, between June and August this year, 33 Chinese companies relocated their investments to a number of Asian countries amid the escalation of the trade war between China and the US.
Of the total companies, 23 moved to Vietnam and the remaining 10 to Cambodia, India, Malaysia, Mexico, Serbia and Thailand. None of them relocated their investments to Indonesia.
Nationally, law enforcers have gotten their hands dirty handling at least 60 cases involving so-called land “mafia”, Agrarian and Spatial Planning Ministry’s director-general overseeing land and spatial disputes RB Agus Widjayanto said at the same event.
“If you go to [neighbouring countries] and ask its people if there are land ‘ mafia’, they would probably be confused: ‘Why would there be land mafia?’ Such people only exist in Indonesia,” Sofyan said, adding that the practices of the cartels had also contributed to a decline in foreign investments.
As a result, Indonesia’s net foreign direct investment inflows only accounted for 1.9 per cent of gross domestic product last year, compared with 11.8 per cent booked by Cambodia and 5.9 per cent by Vietnam, the bank’s data show.
“Investors go to Vietnam [because] there is no land ‘mafia’ there,” Sofyan said.
To leave little room for wrongdoers to falsify documents, Sofyan said it would ramp up efforts to digitise land certificates starting from October this year, helping the ministry to reach its aim of certifying all land in Indonesia by 2025. Simultaneously, the police would continue to take stern action against any future land cartel practices in the country, he added.
In a bid to eradicate land cartels, the Agrarian and Spatial Ministry and the National Police signed a memorandum of understanding (MoU) two years ago, paving the way for police to crack down on culprits.
“We want to eradicate the land ‘mafia’ . . . they have been toy ing with law enforcement,” Tito said af ter the MoU signing.
The ministr y’s recent data showed that police has ta ken charge of 54 cases involving land cartels last year, while the figure stood at 61 cases as of this month.
As the government and the police are attempting to eliminate land fraud, Sanny Iskandar of the Indonesian Chamber of Commerce and Industry urged industries to avoid building their factories outside special economic zones to minimise land fraud risks. Otherwise, businesses have to be wary and verify their land certification with local authorities to prevent future fraud, he added.
Institute for Development of Economics and Finance executive director Enny Sri Hartati said he considered measures to digitise land certification as complementary to solve current legal certainty issues for investors.
In a presentation at a focus group discussion last week, he said Vietnam has attracted investors by assuring ease of land acquisition, whether it relates to land status, land use duration or its rental costs.
In contrast, Indonesia has an overflow of ever-changing laws and stringent requirements, forcing investors to go through numerous ministerial bodies for recommendations needed to obtain their land, she added.