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Land 'mafia’ blamed for driving investors away from Indonesia

  Lotte Chemical could not realize its plan to build a plant in Banten because of a dispute over the ownership of the site of its proposed plant.

Made Anthony Iswara (The Jakarta Post)
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Jakarta
Mon, October 14, 2019

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 Land 'mafia’ blamed for driving investors away from Indonesia Agrarian and Spatial Planning Minister Sofyan Djalil (right) talks to Economic Coordinating Minister Darmin Nasution. Minister Sofyan said that activities of land cartels have discouraged foreign investors from doing business in Indonesia. (Antara/Wahyu Putro A)

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ctivities of land "mafia" have hampered the realization 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 Rp 50 trillion (t(US$3.5 billion) to build a chemical plant in Cilegon, Banten, but the company could not realize 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 on Friday last week.

He said that 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 2019, 33 Chinese companies relocated their investments to a number of Asian countries amid the escalation of the trade war between China and the United States. 

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 [neighboring 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 (FDI) inflows only accounted for 1.9 percent of gross domestic product (GDP) last year, compared with 11.8 percent booked by Cambodia and 5.9 percent by Vietnam, the bank’s data show.

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