Illicit money could be finding its way into campaigns for the 2024 general election, as the Financial Transaction Reports and Analysis Center (PPATK) recently found that money from overseas had flown into the accounts of 21 unnamed political parties. Totaling Rp 195 billion (US$12.4 million), 30 percent of the funds are said to have originated from shell companies.

The PPATK said it had made its discovery following the disclosure of its report on suspicious transactions from the 2024 general election’s final candidate list (DCT) earlier this month. The center’s further findings indicated that the foreign funds or funds channeled through foreign entities or individuals were sent in 2023 to the accounts of the political parties’ treasurers before being dispersed to the parties’ executives and legislative candidates, with its total value coming in higher than in 2022 at Rp 83 billion.

While 70 percent of the million-dollar funds came from individuals, the remaining 30 percent is thought to have come from shell companies due to their addresses in tax haven countries. Other countries reportedly housing the shell companies include the United States, Singapore and the Philippines.

Taking a closer look at shell companies, there are legitimate reasons for their establishment, namely for business purposes such as holding stocks of another business entity and facilitating corporate mergers, as well as security purposes such as protecting trade secrets. However, the opaque ownership and obscure structure have too often enabled illegal activities, such as money laundering and tax evasion, and allowed wealthy individuals to hide undeclared wealth from local tax authorities.

So far, no details have been provided regarding the names of the shell companies, which political parties received the funds and how much of it was used to fund campaigns. The PPATK has only said that it was still exploring these details and had reported its findings to the Elections Supervisory Agency (Bawaslu). However, reports have stated that recipients of the funds are also recorded as shareholders of the shell companies.

Despite the lack of details about the shell companies, the PPATK also said it had a strong suspicion that the source of the foreign funds mostly originated from the wildlife trade, as well as from drug trafficking, gambling and illegal mining.

According to observers, the high cost of politics, lax regulations on campaign fund reporting and weak law enforcement are the root causes of the massive dubious transactions leading up to the 2024 general election. Subsequently, businessmen have become a primary target group as they are most likely to contribute substantial amounts of funds. These businesspeople have an interest in participating in the success of a legislative candidate for the continuity of their business.

In addition to the foreign funds, the PPATK also recorded large sums of foreign exchange transactions allegedly used to fund political campaigns. According to reports, around 177 legislative candidates from the 18 political parties participating in February’s election withdrew up to Rp 764 billion in foreign currencies, while 75 individuals from 15 political parties deposited a total amount of Rp 272 billion.

What’s more

With the government aiming to catch up on its electric motorcycle conversion targets, efforts to increase the adoption of electric cars in the country are also underway.

Recently, President Joko "Jokowi" Widodo revealed that Vietnamese electric car manufacturer VinFast would invest $1.2 billion to build an EV factory in Indonesia. The initial stage of the factory's construction will receive a $200 million injection and is set to commence this year.

Targeted for production in 2026, the factory is expected to have a production capacity of 30,000 to 50,000 vehicles per year, with a targeted workforce absorption of 1,000 to 3,000 people.

According to the Industry Ministry, which will facilitate VinFast's investment plans in Indonesia, VinFast will collaborate with local companies for the production process of its electric cars. Additionally, the company will collaborate with transportation companies as well as technology service providers for the expansion of electric taxis.

In addition to VinFast, Chinese electric car manufacturer BYD is reportedly planning to invest in Indonesia. While the details of the investment value are yet to be disclosed, BYD is poised to enter Indonesia's vehicle market this month with the launch of its Atto 3, Seal, and Dolphin models.

According to Investment Ministry Investment Promotion deputy Nurul Ichwan, BYD is actively searching for the optimal location for its factory, which is expected to begin construction this year. Furthermore, Nurul noted that the factory may exclusively focus on EVs, without incorporating a battery factory, as BYD utilizes Lithium Ferrophosphate (LFP) batteries, which are non-nickel based.

What we’ve heard

Sources in the automotive industry state that the plans for Vinfast and BYD to enter Indonesia are making Hyundai and Wuling uneasy. "Especially for BYD, whatever the government has offered, they are ready," said the source.

BYD is targeting a global sales goal of 6 million units, which is why they are expanding into potential countries, including Indonesia. Globally, they are considered a rival to Tesla. In China, BYD is the number one automotive manufacturer in terms of vehicle sales, reaching nearly 3 million units.

They are also rumored to have a highly potential electric vehicle ecosystem to offer in the IKN project, including not only electric cars but also electric buses, trains, and even solar panel power plants.

In Indonesia, both the Blue Bird Group and the Bakrie business group have already been using electric vehicles made by BYD.

Unlike other manufacturers planning to build battery factories as part of the electric vehicle ecosystem, BYD will first collaborate with local partners to build more charging stations.

BYD is reportedly not planning to build a battery factory because their batteries do not use nickel as a raw material. BYD has developed lithium-iron phosphate battery technology known as the Blade Battery.

In contrast to BYD, Vinfast will sell vehicles in the range of Rp 300 million per unit. However, this does not mean there won't be more expensive options. The market is reported to be broader, especially considering Indonesia's significant market potential. That's why Vinfast is only establishing an assembly plant, however they are prepared to build a battery plant.

Vinfast is rumored to launch at IIMS. According to other sources, the inauguration of dealerships in Jakarta indicates their readiness to start selling. The number of dealerships is expected to increase.

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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