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The seeds of a bribery scandal in
Indonesia
By Bill Guerin
JAKARTA - Though a battle between big
business and environmental concerns in Indonesia
has led to a monetary loss for publicly listed US
agrochemical giant Monsanto for breaking US
anti-corruption laws, there has been no loss of
liberty for any of the company's US nationals
involved in the corruption. The Foreign Corrupt
Practices Act prohibits bribing foreign officials
and can lead to a maximum fine of $2 million per
violation and up to five years' imprisonment.
St Louis-based Monsanto has been forced to
pay $1.5 million in fines after owning up to
spending more than $700,000 on bribes in a country
where it has been losing money for the past few
years, and one which has long been ranked one of
the most corrupt in the world. The Department of
Justice and the Securities & Exchange
Commission (SEC) charged Monsanto with violating
the Foreign Corrupt Practices Act by bribing an
Indonesian government official to waive a strict
environmental requirement needed to plant the
controversial genetically modified (GM) cotton
seeds in Indonesian soil.
The
investigation was sparked by Monsanto itself. The
bribes were financed, at least in part, through
unauthorized, improperly documented and inflated
sales of Monsanto's pesticide products in
Indonesia, the company admitted. Unlike previous
toothless anti-graft bodies, Indonesia's Anti
Corruption Commission (KPK) has the power to
prosecute - a power that was previously in the
hands of the Attorney-General's office and the
police. In May, the KPK began its own
investigation into the allegations. Last Thursday,
as Monsanto shares rose 4.5% to close at $53.30 on
the New York Stock Exchange, Indonesian
investigators were starting to pull in for
questioning those alleged to have been involved in
the graft.
According to the US
authorities, Monsanto made some $700,000 in
illicit payments to at least 140 current and
former Indonesian government officials and their
family members, from 1997 to 2002. The biggest
outlay, $373,990, was to buy land and build a
house in the name of a wife of a senior Ministry
of Agriculture official. Soleh Solahudin, who was
agriculture minister from 1998 to 1999 and visited
the company's US headquarters at its invitation,
confirmed after a meeting with the KPK that both
Monsanto and its local subsidiary, PT Monagro
Kimia, had lobbied him to allow the cultivation of
GM crops in Indonesia.
In September 2000,
amid pressure from the public and non-government
organizations, a planned agreement between the
government and Monsanto to develop 20,000 hectares
(49,400 acres) of GM cotton plants in South
Sulawesi was postponed by Coordinating Minister
for the Economy, Rizal Ramli, hours before it was
due to be signed. Sonny Keraf, Minister of
Environment at the time, told reporters the next
day that he would send a warning letter to PT
Monagro Kimia to stop production as earlier
government regulations 51/1994 and 27/1999, still
in force, stated that the distribution of certain
agricultural products, including Monsanto cotton,
needed an environmental impact assessment (AMDAL).
Five months later, to the surprise and
chagrin of environmentalists, and despite the
controversy over the products, Minister of
Agriculture Bungaran Saragih signed a decree that
gave approval for the limited sale of transgenic
cotton Bt DP 5690B in an experimental project at
plantations in Sulawesi, as "quality crop
varieties" under the Monsanto brand name of Nucotn
35 B or Bolgard.
According to SEC
documents, Monsanto had retained Jakarta-based
consulting company, PT Harvest International
Indonesia, to assist it with obtaining the various
government approvals and licenses necessary to
sell its products there. Lobbying, per se, is
perfectly legal and was common practice by
multinationals during the Suharto era. A Monsanto
manager and the "lobbyist" got Indonesia to
approve "Monsanto's Bollgard Cotton, a GM crop,"
in South Sulawesi, the SEC stated simply.
Saragih denied last week that Monsanto had
offered bribes in exchange for this approval.
After being grilled by the KPK, he admitted to
reporters that representatives from Monsanto, PT
Monagro Kimia and Harvest International Indonesia
had indeed lobbied him to get permits for
cultivation of GM crops, but neither he nor any
ministry officials received any bribes in return.
He challenged the US government to publish the
name of officials who had been bribed by Monsanto.
Officials at the South Sulawesi office of the
agriculture ministry also received approximately
$29,500 from Monsanto, US regulators claimed.
Saragih also argues that accusations of
corruption over his approval are illogical because
the limited release condition meant Monsanto would
lose money as it only permitted GM crops in South
Sulawesi. Monsanto had originally applied for
permission to grow GM cotton throughout Indonesia,
where, according to the Ministry of Agriculture,
there are 100,000 hectares of potential land for
growing cotton.
Local cotton output meets
less than 1% of total annual demand of around 1.5
million tons or the equivalent of 500,000 tons of
cotton fiber. It has a yield of only 401 kilograms
per hectare while the Monsanto cotton was said to
have a yield of two to three tons per hectare.
In June 2001, a massive coalition of 72
NGOs launched a suit against Saragih's decree.
They lost the first and second round of the legal
battle and then appealed, unsuccessfully, to the
Supreme Court in March 2002. The coalition's
lawyers said the decree had been issued by the
minister as a way of legitimizing past violations
by the seed distributors, PT Monagro Kimia. The
subsidiary had already supplied farmers in
plantations in seven regencies (districts) in
South Sulawesi (Takalar, Gowa, Bantaeng,
Bulukumba, Bone, Soppeng and Wajo) with
transgenically modified Bt cotton or Bollgard
cottonseeds for planting in a 500-hectare area.
It was reported that only days after the
decree was announced, a consignment of 40 tons of
the GM cotton seeds arrived in South Sulawesi from
South Africa and was driven under armed guard from
the airport in Makassar in trucks marked "rice
delivery".
Just as the lawyers were
arguing their case in court in Jakarta, Monsanto's
GM cotton, which PT Monagro Kimia had said was
resistant to the pest Helicoverpa armigera,
was being attacked by the very same pest. One
report claimed that hundreds of hectares of GM
cotton fields in Bulukumba district had been
destroyed by the pests by late June but the
remaining crops were harvested. Some of the cotton
was exported and some distributed in local
markets.
But later that year, after a
change of government, the Ministry of Environment
issued a decree that specifically stated the
requirement for an AMDAL for such projects.
Monsanto sought repeal of the new law, and when
lobbying didn't work, it resorted to bribery, the
SEC says. "When it became clear that the lobbying
efforts were having no effect on the Senior
Environment Official, the Senior Monsanto Manager
told the Consulting Firm Employee to 'incentivize'
the official with a cash payment of $50,000," the
SEC suit against Monsanto says.
Sometime
in February 2002, an employee of the consulting
firm visited the senior official at his home and
gave him an envelope containing $50,000 in $100
bills. The official took the money but said he
couldn't promise he could get the law repealed,
the SEC claimed. "This decree was likely to have
an adverse effect on Monsanto's business interests
in Indonesia," the SEC said. The Monsanto manager
then concocted a scheme "involving false invoices"
to hide the bribe. This involved a $66,000 payment
to the consulting company to cover the bribe plus
the taxes it would have to pay on its falsely
reported income. The repeal of the environmental
impact study requirement was never authorized.
Harvest's president-director, US national
Harvey Goldstein, has denied that his company had
a hand in any bribery. "No, never...Harvest has
never been involved in corruption whatsoever," he
told reporters after meeting members of the
commission. Environment Minister Nabiel Makarim,
who had issued the decree, admitted earlier this
month that Monsanto lobbied him to facilitate its
business in Indonesia though he denied any
wrongdoing. "There was lobbying, but it was in
line with the law. It's something common," Makarim
said after a meeting with the KPK. "No money was
offered or requested," he claimed.
Makarim
admitted that he had a close relationship with
Goldstein, but claims that he has no knowledge of
Monsanto paying bribes to employees of the
environment ministry. Goldstein agrees that he
knew both Saragih and Makarim personally, which is
hardly surprising, given the nature of his
consultancy business.
The rise and fall of
Monsanto's biologically engineered products in a
market that generates less than 1% of the
company's global annual revenue came to an end in
2003 when the company closed down its biotech
cotton sales operations, confining its remaining
business in Indonesia to sales of the "Roundup"
brand of herbicide and conventional corn seeds.
Farmers who had bought the experimental
seeds on credit ended up indebted to Monsanto.
Friends of the Earth International quoted a
Sulawesi farmer, Santi, as saying, "The company
didn't give the farmers any choice, they never
intended to improve our well-being, they just put
us in a debt circle, took away our independence
and made us their slave forever. They try to
monopolize everything, the seeds, the fertilizer,
the marketing channel and even our life."
Asia's key biotech research agency, ISAAA,
says GM corn, peanut, soybean, potato and rice are
still under development in Indonesia and limited
field testing has been done on herbicide-resistant
corn, cotton and soybean as well as
insect-resistant corn, cotton and potato. In March
2004, the coalition of environmentalists urged the
Supreme Court to rule against the government's
continued policy of allowing genetically modified
organisms (GMOs) to be planted
Long after
he left government, Keraf staunchly supported the
environmental angle, particularly in recent
controversial cases involving foreign investors,
like the government's decision last year to grant
15 mining companies access to 11.4 million
hectares of protected forest areas and the
controversy over Submarine Tailings Disposal that
saw US-based Newmont in hot water over alleged
pollution of Sulawesi's Buyat Bay
He said
recently that safety of transgenic crops and their
effect on the environment was still a major
concern and it would be advisable for agreements
on the cultivation of the crops to be postponed.
Indonesia had signed the Cartagena Protocol on
biosafety, so the government had to stick with the
precautionary principles over transgenic matters,
he argued. He contended that the issue of
transgenic crops in Sulawesi was merely "trade
politics".
The NGOs want the government to
do more to protect farmers and consumers from the
risks of genetically modified crops. Their efforts
are taking a long time to bear fruit. The House of
Representatives began the process to ratify the
Cartagena Protocol on Biosafety in July 2004 but
it was left in the pending tray, as electioneering
got well under way. The protocol came into force
in September 2003 and commits parties to ensuring
that "the development, handling, transport, use,
transfer and release of any living modified
organisms are undertaken in a manner that prevents
or reduces the risks to biological diversity,
taking also into account risks to human health".
Environmentalists hope that after
ratifying the protocol, Jakarta will consult the
public to draft regulations on GMOs and strengthen
the agencies involved in regulating GMO research
and use. But all eyes in Jakarta are now on the
graft probe rather than the industrialization of
agriculture. President Susilo Bambang Yudhyono has
pledged to tackle head-on the pervasive problem of
corruption, which exists at all levels of
politics, business and society, and has been a
major detriment to urgently needed foreign
investment. International donors had put pressure
on the government to establish the anti-graft
commission as the judiciary was widely seen as
crooked, incompetent and unwilling to deal with
corruption.
In June last year, the
attorney-general's office, using figures from
known cases investigated by the authorities,
claimed Indonesia had lost $2.35 billion in the
previous two years to corruption. None of those
cases are thought to have involved foreign
enterprises. The commission has written to the US
Department of Justice and the SEC, seeking more
information. Representatives from PT Monagro Kimia
as well as former Harvest Vice President Michael
Villareal are expected to face questioning soon,
along with several government officials. Deputy
KPK chairman Erry Riyana Hardjapamekas warned: "We
consider the case serious as it must serve as a
warning to other publicly listed companies not to
bribe state officials."
Bill
Guerin, a Jakarta correspondent for Asia Times
Online since 2000, has worked in Indonesia for 19
years in journalism and editorial positions. He
has been published by the BBC on East Timor and
specializes in business/economic and political
analysis.
(Copyright 2005 Asia Times
Online Ltd. All rights reserved. Please contact us
for information on sales, syndication and republishing.) |
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