Graft scandal rocks Indonesia’s establishment

Watchdog’s claim that politicians embezzled US$173 million from a state scheme would represent parliament’s largest ever skimming scam

Jakarta, March 13, 2017 4:34 PM (UTC+8)
Embezzlement and kick-back allegations in the House of Representatives have rocked Indonesia's political establishment, presenting President Joko Widodo with a political dilemma ahead of general elections in 2019. Photo: Reuters
Embezzlement and kick-back allegations in the House of Representatives have rocked Indonesia's political establishment, presenting President Joko Widodo with a political dilemma ahead of general elections in 2019. Photo: Reuters

It is such an open secret that parliamentary commissions take pay-offs and other incentives to grease the path of legislation and influence key appointments that global graft watchdog Transparency International once again labelled the House of Representatives as Indonesia’s most corrupt institution.

But seemingly on cue, nothing matches the latest scandal in which House Speaker and Golkar Party chairman Setya Novanto, Justice Minister Yasonna Laoly and 37 parliamentarians appear in a long list of political figures suspected of embezzling Rp2.3 trillion (US$173 million) from a Rp5.9 trillion (US$443.6 million) electronic identity card (e-KTP) project.

In what the head of one local watchdog group called “a massive robbery of the national budget,” the revelations of high-level involvement came to light in last week’s Anti-Corruption Commission (KPK) indictment of two senior home ministry officials for facilitating the rip-off. Both Novanto and Laoly have denied involvement, according to local reports.

If proven, it would be by far parliament’s largest graft case, beating out the Rp1.4 trillion (US$105.3 million) stolen from the Hambalang sports complex project in 2012, which led to the jailing of sports minister Andi Mallerangeng and then ruling Democrat Party chairman Anas Urbaningrum.

Urbaningrum and former Democrat treasurer Muhammad Nazaruddin, also serving prison time over the Hambalang case, are both implicated in the 122-page e–KTP indictment as well, along with Central Java governor Ganjar Pranowo, who was home affairs commission chairman from 2004-2009.

According to the KPK, the identity card project was planned as a slush fund long before it was put up for tender six years ago, with at least 60 lawmakers receiving pay-offs, often in mixed Indonesian rupiah and US dollar bundles, to smooth the budget’s passage through parliament.

Funds from the wide-ranging conspiracy also allegedly flowed not only to nine of the country’s 10 political parties and 12 senior Home Affairs Ministry officials, but to a complex web of lawyers, brokers and the business consortium that eventually won the tender.

Golkar party leader Setya Novanto shakes hands with Chairman of the board of Golkar party Aburizal Bakrie in Jakarta, Indonesia, November 28, 2016 in this photo taken by Antara Foto. Picture taken November 28, 2016. Antara Foto/Rosa Panggabean/via REUTERS ATTENTION EDITORS - THIS IMAGE WAS PROVIDED BY A THIRD PARTY. FOR EDITORIAL USE ONLY. MANDATORY CREDIT. INDONESIA OUT.NO COMMERCIAL OR EDITORIAL SALES IN INDONESIA - RTSTZX8
Golkar leader Setya Novanto shakes hands with the party chairman Aburizal Bakrie on November 28 last year. Photo: Antara Foto/Reuters

Prosecutors claim Novanto, then the head of Golkar’s parliamentary delegation, Urbaningrum and Nazarrudin each received Rp574.2 billion (US$58.9 million), Pranowo US$520,000 and Laoly, then one of the 37 legislators on the home affairs commission, US$84,000.

The rest of the alleged laundry list of loot included Rp261 million (US$19,600) for the House of Representatives’ home affairs commission, Rp365.4 billion (US$27.5 million) for the Home Affairs Ministry and a whopping Rp783 billion (US$50.8 million) for what is referred to in the indictment as “work-related benefits.”

Former president Susilo Bambang Yudhoyono’s Democrat Party was the largest beneficiary among the parties, underlining a disturbing pattern of corruption that raises questions about what he knew about the origin of the money flooding his party’s coffers.

Urbaningrum, House Speaker Marzuki Alie and five other party officials all are said to have received a share of the Rp150 billion (US$11.3 million) parceled out to the Democrats, which after the 2009 legislative elections had become the largest party.

The Golkar Party also secured Rp150 billion (US$11.3 million), with six lawmakers sharing in the spoils, and ex-president Megawati Sukarnoputri’s opposition Indonesian Democrat Party for Struggle (PDI-P) raking in Rp80 billion (US$6 million) through Laoly, Pranowo and two other members on the home affairs and budget commissions.

Indonesian President Joko Widodo. Photo: Reuters

President Joko Widodo’s clean record so far is likely to be smeared by his brother-in-law being implicated as a middleman in the case, by his close relations with Novanto, and by Laoly’s membership of his PDI-P, which has had more than its share of corruption cases over the years.

The indictment was issued just days after Transparency International noted in its latest global corruption survey that 65% of Indonesians believed corruption had worsened in 2016 – the second full year of Widodo’s five-year presidency.

KPK figures show 122 lawmakers and regional council members and 14 judges have been arrested for graft in the past two years. But a separate Indonesian Corruption Watch report said its independent research from 2013 to 2016 showed that civil servants were actually the worst offenders.

A four-term legislator, the seemingly teflon-coated Novanto has escaped a string of graft allegations going back to the looting of Bank Bali in 1999, which at the time imperiled Indonesia’s recapitalization program launched in the wake of the 1997-98 Asian financial crisis.

The speaker of Indonesia's parliament, Setya Novanto, leaves an ethics panel hearing in Jakarta, Indonesia in this December 7, 2015 file photo. Indonesia's house speaker resigned on Wednesday in a letter to a parliamentary council charged with determining whether he had committed ethical violations in a meeting with executives from Freeport McMoran Inc's local unit. House Speaker Novanto has been at the centre of a probe into allegations he used President Joko Widodo's name in an effort to extort shares worth $1.8 billion in Freeport Indonesia. Picture taken December 7, 2015. REUTERS/Garry Lotulung TPX IMAGES OF THE DAY - RTX1YYFU
Indonesian parliament speaker Setya Novanto leaves an ethics panel hearing in Jakarta in December 2015. Photo: Reuters

The Bandung-born politician’s history since then tells a lot about Indonesia’s political life, where money and influence and an insidious old-boy network continue to triumph over the public interest 18 years after the fall of dictator Suharto and the birth of democracy.

Many Indonesians do not understand it is their money that is being stolen. But that may be because only 12% of the 170 million-strong work-age populace pay taxes; a government tax amnesty, which ends on March 31, attracted 27,000 new taxpayers, a mere drop in the bucket.

Novanto was forced to resign from the House speakership in December 2015 over a wiretap which appeared to show him conspiring with oil kingpin Muhammad Reza Chalid to shake down Freeport McMoRan Copper & Gold, the country’s largest mining company.

But five months later, then-political coordinating minister Luhut Panjaitan, who had worked with Novanto in bringing Golkar out of the opposition and into Widodo’s PDI-P-led coalition, engineered his elevation to the Golkar chairmanship.

That – and indications Golkar would support his re-election bid in 2019 – gave the greenhorn president a lot more leverage over PDI-P leader Megawati Sukarnoputri, who had continued to treat him like a party functionary rather than the country’s leader.

The leader of the Indonesia Democratic Party of Struggle (PDIP) Megawati Sukarnoputri looks at a booth displaying memorabilia on the sidelines of the 4th PDIP congress at the Inna Grand Bali Beach hotel on the resort island of Bali April 10, 2015 in this photo taken by Antara Foto. REUTERS/Antara Foto/Andika Wahyu ???ATTENTION EDITORS - THIS IMAGE HAS BEEN SUPPLIED BY A THIRD PARTY. IT IS DISTRIBUTED, EXACTLY AS RECEIVED BY REUTERS, AS A SERVICE TO CLIENTS. MANDATORY CREDIT. INDONESIA OUT. NO COMMERCIAL OR EDITORIAL SALES IN INDONESIA.? - RTR4WS5T
Indonesia Democratic Party of Struggle leader Megawati Sukarnoputri could get dragged into the corruption allegations. Photo: Antara Foto/Reuters

Novanto’s redemption, if that’s the word, was completed last January when he won back the speakership from Ade Komarudin – a move that may not have been welcomed in public forums but was pushed by both Megawati and the president himself.

In fact, Golkar insiders said Widodo assigned new political coordinating minister Wiranto to make it happen after Komarudin was seen to be cozying up to Golkar alumni of the Indonesian Muslim Students Association, which played a leading role in last November’s mass protest against Jakarta governor Barsuki Purnama.

One senior Golkar figure said Komarudin was even prepared to open the gates of Parliament for the protestors, invoking images of the occupation which precipitated president Suharto’s downfall in 1998. It was something that would have displeased Widodo, who suspected the protestors were also targeting him.

Novanto could well slip off the hook this time, too, if prosecutors are unable to provide clear evidence he directly benefited from pushing a budget allocation front-loaded in a way that was staggering even by Parliament’s cash-up-front standards.

Novanto could well slip off the hook … if prosecutors are unable to provide clear evidence he directly benefited from pushing a budget allocation front-loaded in a way that was staggering even by Parliament’s cash-up-front standards

Protesting his innocence and flashing a victory sign, Novanto showed up unannounced at the editorial offices of Tempo, influential publishers of a daily newspaper and weekly magazine, the day before the indictment became public in the Jakarta Corruption Court.

He had already read a two-page summary of the indictment, telling bemused editors: “Yeah, it’s enough for us to pray at this point.” He may well have to do a lot of that in the coming months as the full enormity of the scandal becomes known.

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