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Analysis: Conflict of interest, Minister Bahlil and Fakfak fertilizer industrial area
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Investment Minister Bahlil Lahadalia speaks on April 28, 2023, during a press conference in this screenshot from the Investment Ministry's Youtube account. (YouTube/Investment Ministry)
L
ess than a month after President Joko "Jokowi" Widodo officially initiated the construction of the government's fertilizer industrial area in Fakfak regency, West Papua, controversy has loomed over the National Strategic Project (PSN). At the center of the controversy is Investment Minister Bahlil Lahadalia and his associates, whose ties with the project have raised concerns about conflicts of interest.
Targeted for operation in 2028, the construction of this Rp 30 trillion (US$2 billion) fertilizer industrial area will be the first in Indonesia’s eastern region and the first in the last 40 years after the country last built a fertilizer industrial area in Aceh in 1982. Led by PT Pupuk Kalimantan Timur (Pupuk Kaltim), the Fakfak fertilizer industrial area will use natural gas from the area as raw material and is expected to come on stream in 2028, producing up to 1.15 million tonnes of urea and 825,000 tonnes of ammonia per year.
According to Jokowi, who broke ground in the Fakfak fertilizer industrial area on Nov. 23, the fertilizer industrial area is being built as part of the country’s strategy to achieve food sovereignty. He argued that an increase in domestic fertilizer production could support the independence of Indonesia’s food industry, therefore, should a food crisis occur in other countries, Indonesia would not be affected.
Furthermore, the Fakfak fertilizer industrial area is forecasted to strengthen the food industry of Indonesia’s eastern region. The industrial area’s fertilizer production will support the implementation of future food programs in the region, specifically a food estate in Papua, which is expected to begin development next year. Jokowi had highlighted that without support from the fertilizer industry, it would be a challenge to establish the food estate.
However, controversy has already surrounded this ambitious project as Bahlil, whose ministry is tasked with monitoring the Fakfak fertilizer industrial area together with the State-Owned Enterprises (SOEs) Ministry, has been accused of having a conflict of interest with Pupuk Kaltim independent commissioner Eka Sastra. Eka, who was appointed to this role in 2020, also holds the position of special staffer to Bahlil – a role he has held since 2019 following Bahlil’s appointment as Investment Minister.
According to reports, Eka’s dual roles in Pupuk Kaltim and the Investment Ministry have the potential for him and Bahlil to use their positions of authority to seek maximum benefit through the Fakfak fertilizer industrial area and facilitate the interest and business relations of Pupuk Kaltim.
Bahlil’s alleged conflict of interest in the Fakfak fertilizer industrial area looks to be further exacerbated by reports of Bahlil’s connection with businessman Santoso Banda, whose name is registered as director of PT Papua Jaya, a construction company reportedly hired to help build a part of Siboru Airport located in the Fakfak fertilizer industrial area.
Aside from Papua Jaya, Santoso is also the operational director of PT Bersama Papua Unggul (PT BPU) which, according to the Legal Administration Directorate General of the Law and Human Rights Ministry, has Bahlil as one of its shareholders. Reports have stated that Bahlil owns up to 450 shares of the company, approximately 90 percent of BPU’s entire share.
What’s more
Bahlil, who has provided no statement regarding his supposed conflicts of interest, has said he was proud of Jokowi’s willingness to directly participate in the Fakfak fertilizer industrial area’s groundbreaking, which was forecast to become a new driver for West Papua’s economic growth. According to Pupuk Indonesia, the fertilizer industrial area is expected to contribute up to Rp 15 billion a year toward the regional income and support the growth of local businesses by around Rp 650 billion a year.
The presence of the Fakfak fertilizer industrial area is also said to empower local human resources, as the construction phase is expected to indirectly employ 10,000 people, with an additional 400 for its operations. Bahlil mentioned that the project had received support from the local community, and he assured that the government would continue to ensure the fulfillment of the local community's rights.
Despite Bahlil’s statements, the project has faced criticism from several members of the local community who argue that the forests where the project is being built have not yet been granted a forest release permit. Moreover, it is claimed that the project’s environmental impact analysis had not been completed. According to documents gathered by Tempo, the project’s environmental impact analysis recently commenced on Nov. 15. However, reports suggest that construction work began as early as Nov. 6, indicating that the project started without the required permit.
What we’ve heard
Long before the President laid the first stone of the fertilizer industry development project in Arguni district, Fakfak Regency, West Papua, Investment Minister Bahlil Lahadalia had been going back and forth to Fakfak, asking the community to support this national strategic project.
Beyond asking for support from West Papua Governor Ali Baham Temongmere, Bahlil also asked the local community to accept the PT Pupuk Kalimantan Timur (Pupuk Kaltim) project. Bahlil asked the community not to provoke and obstruct investment. To that end, according to a number of sources, Bahlil asked the local government to help with the land settlement process and all matters relating to indigenous peoples.
The problem is that Bahlil is also suspected of having a conflict of interest in this project. The contractor tasked with clearing 2,000 hectares of land for the fertilizer industry is PT Papua Jaya, a Jayapura-based company allegedly affiliated with Minister Bahlil.
The company has deployed heavy equipment there, including pegging and drilling activites. They’ve begun the land clearing process despite not yet having a forest zone release permit or an environmental impact assessment. Furthermore, PT Papua Jaya was also involved in the work of paving the 1,600-meter runway at the Siboru Airport development project in Fakfak.
One of the directors of PT Papua Jaya is Santosa Banda, who is also listed as the Operations Director of PT Bersama Papua Unggul (BPU). In PT BPU, Bahlil is recorded as having 450 shares or 90 percent of the shares. Santosa often accompanies Bahlil during various visits, such as the reviewing processes the Siboru Airport construction project.
Apart from Santosa, Eka Sastra - Bahlil's special staff at The Investment Coordination Board (BKPM) - sits as an Independent Commissioner at Pupuk Kaltim. Both are listed as volunteers for Jokowi-Ma'ruf's national young entrepreneurs, which has now changed its name to Repnas Indonesia Maju, a supporter of Prabowo-Gibran Rakabuming Raka.
"When asked whose project this is, people in the village know it as Minister Bahlil's project," said a source.
Initially, the fertilizer industrial estate project was to be built in Bintuni Bay. But from the start, Bahlil wanted the project to be built in Fakfak. Born in Banda, Maluku, Bahlil grew up in Fakfak. Since the project’s location was moved, Bahlil's relationship with the Regent of Teluk Bintuni has soured.
Another source said that one of the reasons the government is building the Fertilizer Industrial Estate in Fakfak is because the area is not far from gas supply sources. "The government wants the Tangguh gas project in Bintuni Bay to be easily absorbed," said a senior official at the Ministry of state-owned enterprises (SOEs). So far, the Tangguh Train 3 gas refinery project in West Papua has had difficulty finding buyers. Meanwhile, the finished fertilizer industry is expected to absorb 102 million standard cubic feet per day (MMSCFD) of gas. Energy and Mineral Resources Minister (ESDM) Arifin Tasrif has extended British Petroleum's (BP) contract in the Tangguh Block until 2055.
Disclaimer
This content is provided by Tenggara Strategics in collaboration with The Jakarta Post to serve the latest comprehensive and reliable analysis on Indonesia’s political and business landscape. Access the latest edition of Tenggara Backgrounder to read the articles listed below:
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Business and Economy
- Conflict of interest, Minister Bahlil and Fakfak fertilizer industrial area
- RI frustrated with developed countries' energy transition financing
- BI: RI to grow strong amid global economic slowdown in 2024
