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Investors bleed trillions to rampant CSO extortion in industrial zones
Illegal levies can eat up as much as 30 percent of total production costs, with bribes and extortion money flowing to multiple actors, including civil society organizations (CSOs), according to Transparency International Indonesia (TII).
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An undated areal photo shows the Karawang Industrial Area in West Java. (Kerawangtoday.com/Aerial)
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ampant extortion by rogue civil society organizations (CSOs) has cost industry players operating in Indonesia hundreds of trillions of rupiah, exposing what corporate executives say is a worsening business climate in a nation that aspires to woo massive foreign investment under President Prabowo Subianto.
Industrial zones have become prime hunting grounds for extortion by CSOs, commonly referred to as ormas (mass organizations) in Indonesia, including in major hubs like Bekasi and Karawang in West Java, Batam in the Riau Islands and in East Java, according to the Indonesian Industrial Estates Association (HKI).
HKI chairman Sanny Iskandar said the financial toll had gone beyond the direct cost of “protection fee” shakedowns to a chilling effect on investment as some businesses pull out and new investments are scrapped.
“If the government doesn’t crack down on this, investment will go elsewhere,” Sanny told reporters on Feb. 6. “No one wants to operate in a place where they [CSOs] call the shots.”
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Extortion tactics usually include coercing businesses into hiring local groups for construction, accommodation and catering services, he pointed out.
Those who refuse face intimidation, vandalism or disruption through forced factory shutdowns or demonstrations paralyzing production.
