Saturday, May 21, 2016

Indonesia’s anti-corruption drive - the rise and ruin of Indonesia’s Corruption Eradication Commission (KPK)

Indonesia’s powerful ‘Corruption Eradication Commission’ (KPK) has recently been under siege with serious attempts in parliament to revise the KPK law. The anti-corruption agency has not only exposed how Indonesian democracy is funded but also threatened the interests of competing members of Indonesia’s ruling elite.

Since its inception 12 years ago, the KPK’s greatest weapon against ‘corrupt’ deals has been its surveillance function. Wiretapping and ‘sting’ operations allows for rapid collection of evidence and led to arrests of hundreds of national and regional politicians, state managers and officials, judges and businessmen exchanging cash for political favours.

Yet at the very top level of the ruling elite, the KPK’s penetration has been limited. It has been unable to investigate the biggest financial, infrastructure and mining corruption cases. And powerful figures like presidents, their spouses and children as well as political bosses have survived various well-publicised scandals. When KPK does overreach, the backlash is tremendous.

KPK’s Establishment and Elite Conflicts
Why the ‘Corruption Eradication Commission’ (KPK) actually emerged in the first place in Indonesia’s corrupt politico-business environment is a puzzle that has to date confounded pundits. The pressures unleashed by regime change, political legitimation anxieties associated with elections and/or civil society may contribute to necessary conditions, but are insufficient in explaining the inception of a powerful anti-corruption agency.

Fundamentally, Indonesia’s ‘elite settlement’ of 1998 paved the way for a stable and fiercely-contested elite game of procedural democracy and money politics. As such, successive presidents Habibie, Abdurrahman Wahid and Megawati’s ruling cliques accumulated informal slush funds linked to such state centres as the ‘Indonesian Bank Restructuring Agency’ (IBRA). A primary objective of rival elite members was to maintain and enhance political competitiveness. Against this backdrop, the KPK is best understood as an institutional anomaly. Therefore, an accurate explanation of the KPK’s inception must focus on the exact nature of intra-elite conflict at the time and its unintended consequences.

The KPK emerged in the latter part of Megawati Soekarnoputri’s presidency. Although the KPK is often touted as Megawati ‘greatest achievement’, the main reason she decided to bring KPK into existence in late 2003, that is by ratifying the KPK law 30/2002, was to replace the threat of Jusuf Syakir’s Wealth Audit Board (KPKPN) investigating her family’s assets. An interview with the late Jusuf Syakir stressed the critical role of ‘political vengeance’ in the destruction of KPKPN and creation of the KPK.

In her last year as president, Megawati nevertheless constrained KPK’s initial development for two reasons. First, following the logic of highly competitive money politics, the informal behaviours of Megawati’s husband Taufik Kiemas and other powerful members of the ruling elite, were, in Robert Cribb’s terms, ‘exempted’ from the rule of law in practice and criminal penalties. Second, the political selection of KPK’s then chair Taufiequrachman Ruki, retired from police senior rank, was in part an attempt to temper strains caused by changes to power distribution in law enforcement. But alas, these changes burdened elite politics of future periods with a significant division between the KPK and National Police.

Elite attacks against KPK, using ‘criminalisation’ strategies with the objective of curbing KPK’s power, first occurred in the second term of the Susilo Bambang Yudhoyono/SBY presidency (2009-2014). This elite hostility was specifically the result of KPK’s perceived overreach.

On the one hand, SBY’s excessive political ‘image-building’ (pencitraan), geared toward the anti-corruption agenda, gave KPK space to transform into an ‘anti-corruption juggernaut’ in comparison to the National Police and the Attorney General’s office, and internationally was the envy of many countries.

On the other hand, the characterisation of the KPK as some sort of ‘super-body’ is not, however, entirely accurate if we focus on its relationship with presidents, the executive and National Parliament. For example, the then KPK Chair Antasari Azhar in 2008, for a chance at pleasing Megawati and maneuvering for vice president nomination, steered KPK into ‘dangerous political waters.’ The KPK’s incarceration of former central bank deputy governor Aulia Pohan, the father-in-law of SBY’s eldest son, triggered the most extreme example of criminalisation to befall the agency.

According to current and former parliamentarians, Bambang Soesatyo and Sri Bintang Pamungkas, the repercussions were merciless, culminating in a ‘case of manipulation’ against Antasari who was penalised with a 2009 police investigation, manufactured evidence and homicide conviction.

Part of this ‘shock-therapy’ against KPK also helped safeguard the interests of SBY’s ruling clique for two other reasons. First, the emergence of the Bank Century scandal, associated with gifted loans in the form of central bank liquidity relief, highlighted that these funds were used as a source of money politics in SBY’s Democratic Party’s (PD) electoral victory of 2009. Second, based on court testimonies of numerous co-conspirators, SBY’s youngest son Edhie Baskoro Yudhoyono (Ibas), euphemistically called the ‘prince’ (pangeran), was increasingly embroiled in a wide-range of corruption scandals ranging from national sports infrastructure projects (Hambalang) to oil contracts (SKK Migas). Behaviour of the president’s core family was exempted from KPK’s ‘enforcement net’.

Overall, SBY’s reluctance to quickly intervene and settle conflicts between the National Police and KPK was a reflection of his contempt for the KPK. KPK’s investigation into police slush funds and procurement contracts reignited attacks against KPK. Ironically, in the same period, KPK’s positive record of scalps including police general Djoko Susilo and far outstripping the recovery rate of proceeds of crime to total cases handled to that of the National Police and Attorney General’s office, fed into SBY’s political branding. SBY’s reputational gains were, however, eroded with the mounting corruption scandals linked to his political party.

Since 2015, the elite faction that established KPK has been heading the charge to tame it. KPK has become the target of Megawati’s power network including her ‘Indonesian Democratic Party of Struggle’ (PDIP) and senior powerholders in the National Police — long opposed to the rival KPK.

Based on several leaked audio recordings, the latest episode of political attacks against KPK emerged in early 2015. The starting point was when president Joko ‘Jokowi’ Widodo’s political boss and chair of PDIP, Megawati, pressured him to appoint her confidant, Budi Gunawan, as National Police Chief. However, KPK’s chair Abraham Samad, previously rejected by Megawati as Jokowi’s running mate in the 2014 national election, named Budi Gunawan as a suspect in a corruption case involving extraordinary sums in private bank accounts. Supported by public opinion, Jokowi denied Budi Gunawan the top police job and exacerbated tensions with Megawati, who then turned her own governing PDIP party against him.

Although Budi Gunawan was given the position of deputy police chief, he remained the most powerful figure in the National Police and determined to wreck the KPK as best he could. There were two main elements underpinning this line of attack. First, a 2015 plot was hatched to remove Abraham Samad’s leadership team with trumped up charges of forgery, leading a witness and assault.

The second element of Budi Gunawan’s well-executed battle-plan, was through interim chair Taufiequrachman Ruki, in a second stint in the KPK’s top job, to engage in a ‘white anting’ process of the KPK. At the same time, Taufiequrachman and the then head of the National Police’s Criminal Division Budi Waseso helped quarantine and terminate Budi Gunawan’s corruption case by way of pre-trail motion and eventual transfer to the National Police.

Draft Bill
With previous efforts to cripple KPK through parliamentary law-making unsuccessful, the latest attempt gained momentum in the first year of Jokowi’s presidency. Since 2008, the proposal for law 30/2002 revisions has been initiated and led by governing parties, first SBY’s PD and then Megawati’s PDIP. In the current period, outflanking president Jokowi, Megawati instructed PDIP to revive the proposal for law 30/2002 revisions in the National Parliament (DPR). PDIP then mobilised parliamentary support for the proposal, which in late November 2015 became a key legislative item — an objective not difficult to achieve in a setting aptly depicted by constitutional law scholar Saldi Isra as a ‘kampong of thieves’ (kampung maling).

In December 2015, the DPR selected new KPK leaders who accepted a ‘gentlemen’s agreement’ for altering the KPK law on the proviso that proposed revisions would strengthen the KPK’s power. In fact, the proposed revisions were designed to have the opposite effect and lacked necessary constitutional and scholarly foundation.

If the proposed revisions were to be enacted they would have tamed the KPK’s power and surveillance function. An omnipotent supervisory board would determine which cases could be pursued and provide inside information about the KPK’s actions. Some of KPK’s power over corruption cases would be ceded to the police and attorney general’s office with the latter two still the recruitment grounds for KPK investigators.

There would also be greater opportunities for corruption suspects to terminate the legal process against themselves through new special warrants (SP3). This change would ensure KPK powerholders are susceptible to financial inducements. A schedule for expiry of the KPK’s mandate constitutes the ‘death knell’. The president’s spokesperson Johan Budi, as a former member of KPK leadership himself, surprisingly claimed the potential ramifications of proposed revisions were unclear, but if it was later concluded to weaken KPK, the president would withdraw from parliamentary deliberations.

Political Outcome
By mid-February 2016, the Indonesian media had become saturated with news about KPK’s potential fate. Academics, musicians and artists increasingly engaged in peaceful anti-corruption demonstrations, seminars and media interviews. Most observers predicted president Jokowi would either endorse or reject the proposed revisions.

But, confirming his weakness as president, Jokowi’s most effective political strategy is letting elite contests play out in the court of public opinion. Once negative publicity becomes extreme, he ascertains the main direction of public opinion and goes with it. With well-respected former KPK chair Busyro Muqoddas denouncing the proposed revisions and current KPK chair Agus Rahardjo threatening to resign if it received presidential endorsement, Jokowi finally intervened by meeting with parliamentary leaders on the 22 February.

A political compromise allowed Jokowi not to take sides. On the one hand, as an object of intense public derision, the proposed revisions were removed from the following day’s parliamentary deliberations, but kept on legislative agenda for future opportunity to attack the KPK. On the other hand, parliamentary leaders agreed that the tax amnesty bill (a politically useful piece of legislation in light of the Panama tax haven scandal) would remain part of the parliamentary deliberations.

A year-long ‘campaign of terror’ from formidable elite rivals has taken its toll. The new KPK leaders are divided and in retreat. In 2016, despite cases against the former KPK leadership team being discontinued by the Attorney General Prasetyo, there continues to be simmering tension between the KPK and the police, manifesting in deliberate intimidation such as arrests of undercover KPK investigators or those closest to former KPK leaders.

Joint-investigations between KPK and active police officers degrade the independence of investigations. In big cases, levies are also making their way to KPK prosecutors and special court judges. These factors are indicative of the new group of commissioners taking a more hesitant approach, moving away from ‘transparency as the best disinfectant’ by way of disclosures to the media, but pushing ahead with preventive initiatives such as enforcement training and inter-agency collaboration.

This is the second part to Jeremy Mulholland’s series on the KPK. For part one, click here.

In its current weakened state, Indonesia’s Corruption Eradication Commission (KPK) has become increasingly susceptible to political pressure and influence. In relation to the corruption cases now being investigated by KPK, selected targets for investigation and criminal penalties occupy positions of political power and wealth that are not at the top echelon of Indonesia’s ruling elites.

We only need to provide two examples of powerful members of Indonesia’s ruling elite whose behaviours are exempted from KPK’s enforcement net. KPK leaders are evidently keeping clear of the two most powerful members of Jokowi’s cabinet — Vice President Jusuf Kalla and Coordinating Minister of Politics, Law and Security Affairs Luhut Pandjaitan are engaged in a fierce power struggle against each other and their respective power networks are fighting over existing and new lucrative sources of slush funds.

Jusuf Kalla
Jusuf Kalla supported revisions to the KPK law often using the pretext that anti-corruption efforts impede economic growth. However, the Freeport scandal revealed that in 2015 both competing political bosses Jusuf Kalla – heading a faction including Energy Minister Sudirman Said – and Golkar chair Aburizal Bakrie – and his faction including the then DPR chair Setya Novanto and oil tycoon Riza Chalid- vied against each other to dominate informal negotiations with Freeport decision-makers concerning the contentious issue of the renewal of Freeport’s mining contract worth more than US$40 billion.

Bakrie’s faction was also closely aligned with the Luhut Pandjaitan and Coordinating Minister of Maritime Affairs Rizal Ramli faction to gain direct access to and sway president Jokowi. Bakrie’s allies Setya Novanto and Riza Chalid met with the then Freeport Indonesia’s executive director Maroef Syamsoeddin, while Jusuf Kalla’s brother-in-law Aksa Mahmud and nephew Erwin Aksa (Bosowa group) met with the then Freeport McMoRan Chair James Moffett.

A conflict over ‘who gets what spoils’ led to a fully-blown corruption scandal. Even though the degree of complicity of both elite groups was the same, Freeport scandal’s timing and consequences allowed Kalla’s group to win that round of the game.

Fighting between these elite groups has surfaced once again in a corruption scandal centred on the state oil company Pertamina. Kalla’s faction, including the Energy Minister Sudirman Said and Pertamina’s current and former president directors Dwi Soetjipto and Ari Soemarno, directed the KPK to investigate Riza Chalid’s dominance in Indonesia’s oil and gas industry. At the heart of Riza’s dominance is the Singapore-domiciled Pertamina Energy Trading Limited (Petral), which plays a leading role in Pertamina’s international trade. Kalla’s group, through the use of the ‘Integrated Supply Chain’ (ISC) concept, have so far been unable to challenge Riza’s dominance.

In this context, Sudirman Said provided results of a forensic audit to KPK. The results may have been conducted independently by auditors KordaMentha, but were skewed to focus on the period 2012-14 which precluded involvement of Sudirman and his ally former Pertamina president director Ari Soemarno. The financial investigation revealed that Riza Chalid, through Global Energy Resources and Veritaoil, typically inflated the costs of crude oil and oil products to Pertamina thereby collecting extraordinary rents worth US$18 billion.

KPK chair Agus Rahardjo signalled he would not only establish a KPK task-force within Pertamina, but also investigate long term procurement contracts generating revenue streams flowing into Riza’s slush funds. As a result, KPK intensified efforts at investigating a Pertamina based commercial agreement with Riza’s fuel storage terminal, PT Orbit Terminal Merak (OTM). Riza’s ally, the then DPR chair Setya Novanto, officially demanded that Pertamina pay OTM’s (inflated) fuel storage costs.

Luhut Pandjaitan
While consistently supporting revisions to the KPK law and demanding the KPK not monitor the Aceh government bureaucracy and regional budget (APBD), Luhut Pandjaitan and close ally Rizal Ramli have also been rapidly accumulating large-scale slush funds.

According to accounts from Indonesia’s Tempo magazine and scholar Imam Prasodjo, these slush funds are amassed by alignments with palm oil tycoons. These businessmen include Martua Sitorus (Wilmar group), Sukanto Tanoto (Asian Agri), Franky Widjaja (Sinar Mas) and Surya Darmadi (Darmex Agro), who apply the cost-effective and premeditated practice of forest fires to expand their lucrative palm oil plantations.

With the hazardous side-effects of a regional smoke haze constantly attracting intense media scrutiny, public criticism and international condemnation, Luhut’s tight control of law enforcement has enabled him to threaten criminal sanction and land seizures against those companies he classifies as acting ‘illegally’. At the same time, informally, he holds out the ‘olive branch’ of political protection and favour in return for levies and gifted shares.

Luhut’s success is demonstrated by his ability to command ineffective ministers such as Forestry Minister Siti Nurbaya Bakar and Agrarian Minister Ferry Mursyidan Baldan to protect the anonymity of favoured companies involved in 2015 fires and then in 2016 getting many of these companies to join the so-called ‘fire free alliance’.

Second, Luhut and Rizal have also recently gained control over the development of several mega-tourist, electricity and gas infrastructure projects. Informal deals with these projects will translate into a torrent of informal funds flowing into their power network. This is exemplified by Luhut’s glowing appreciation for Rizal’s ‘brilliant’ proposal of the creation of a new tourist region – conveniently in Luhut’s home town of Medan, Sumatra – under the aegis of a single state agency, the Lake Toba Tourist Authority.

In early March, Rizal defeated Kalla’s faction (including Sudirman and a former KPK leader Amien Sunaryadi) by getting president Jokowi’s endorsement for the planned construction of a US$ 16 billion onshore liquefied natural gas refinery and power plant located in Masela, Maluku.

In May, Luhut’s power has been bolstered with the rise of Golkar’s new chair, Setya Novanto. Through the dispersal of informal funds and cars (justified as prizes in a Golkar golf tournament), Setya Novanto defeated Kalla’s preferred candidate Ade Komarudin and realigned Golkar with Jokowi’s government.  This political result, contextualised with Tempo’s ‘Panama Papers’ revelations about an enduring friendship and interlocking shareholdings between Luhut and Jokowi, reinforces the bias associated with the way in which political power is currently used in the allocation of favours and projects. In these cases, the KPK is nowhere to be seen.

This political-economy analysis undermines oft-made claims that the KPK is functioning effectively and resisting the corrupt politico-business environment.

On 10 March 2016, new KPK Chair Agus Rahardjo argued that ‘KPK works independently and is not influenced by any interests… KPK doesn’t work in the political domain or quid-pro-quo (balas jasa). We are law enforcers, whatever data and evidence we receive will definitely be processed’.

However, ‘the ups and downs of KPK’s existence, crushed from every direction’ (to borrow the phrase of the late intellectual Adnan Buyung Nasution) is a product of intra-elite contestation and institutionalised corrupt norms of behaviour at the top of Indonesian democracy.

In this sense, the best analogy for KPK’s evolution and its relationship with successive presidents is Megawati as a mother who never wanted the ‘child’ (read- KPK), SBY as an abusive stepfather who lived through his child’s achievements, and Jokowi as the estranged and feeble uncle.

If the KPK is again perceived as overstepping the mark by investigating very senior powerholders in Indonesia’s ruling elites, the backlash will surely involve renewed attempts to revise the KPK law. The new KPK commissioners have every reason to tread warily because they are ‘on notice’. Over-reach could lead to the KPK’s destruction. The KPK’s mandate has always involved an implicit compromise. It has now become much more explicit.

Jeremy Mulholland is executive director of Investindo International and researcher in International Marketing at La Trobe University). This article is a complementary piece to the following scholarly research; ‘The Politics of Corruption in Indonesia’ co-authored with Professor Howard Dick in Georgetown Journal of International Affairs (Volume 17, Number 1, Winter/Spring, 2016;  

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