Philip Jacobson (US), Tom Johnson (UK)
“The secret deal to destroy paradise”
November 28, 2018
“The secret deal to destroy paradise” is the third installment of Indonesia for Sale, an in-depth series on the opaque deals underpinning Indonesia’s deforestation and land-rights crisis.
The series is the product of 22 months of investigative reporting across the Southeast Asian country, interviewing fixers, middlemen, lawyers and companies involved in land deals, and those most affected by them.
“The secret deal to destroy paradise” is based on a cross-border collaboration between Tempo, Malaysiakini, Mongabay and The Gecko Project.
Prologue: Johor Baru, 2012
In December 2012, at a press conference on the sidelines of an Islamic business forum in Malaysia, a man named Chairul Anhar made a bold claim. His company, he said, held the rights to 4,000 square kilometers of land for oil palm plantations in Indonesia.
If true, it would make Chairul one of the biggest landowners in the country. That land was not just anywhere, but in New Guinea, a giant island that glittered in the eyes of investors. Shared by Indonesia and Papua New Guinea, the island had the world’s biggest gold mine, untapped oil and gas, and the largest remaining tract of pristine rainforest in Asia. For the companies that had steadily logged their way through the rest of Southeast Asia, New Guinea was the last frontier. For the investor who could tame it, a fortune awaited.
Then in his mid-40s, with a stout build, a thin moustache and a buzz cut, Chairul presented himself as such an investor. He claimed to be the president, CEO and owner of a sprawling conglomerate, the Menara Group. He traveled in a Bentley and private jets, and rubbed shoulders with the political elite of Malaysia and his native Indonesia.
The basis of his claim was the Tanah Merah project, a plan to generate billions of dollars by logging untouched rainforests, home to indigenous tribes and a treasure trove of biodiversity, then razing what remained and replacing it with oil palms. If fully developed, it could become the single biggest palm oil plantation in Indonesia. But Chairul’s business, and his connection to the project, was more convoluted than the image he presented.
The rights to the land in Indonesia’s Papua province had been acquired through a maze of shell companies. The shareholders were mostly fronts, controlled like puppets on a string. The companies were a façade, masking whoever was truly set to benefit from the project — whether Chairul or someone else.
By the end of 2012, most of the equity in these shell companies — and with them the rights to the project — had been sold to offshore firms based in the Middle East and Singapore. Those sales channelled at least $80 million, likely several times more, back to the web of shareholders connected to Chairul, and brought a varied cast of new actors into the project: a former Indonesian chief of police, a secretive Yemeni family, a notorious logging firm from Borneo, and a conglomerate connected to a major Malaysian corruption scandal.
By the time of the press conference, Chairul had only a slender claim to the land. He was the business Svengali who had brought these other interests together, generated a fortune, and lit the fuse on an environmental disaster that is only now beginning to unfold.
The threat to the rainforests of Indonesia was very real. Since the turn of the century, only Brazil has lost more rainforest than Indonesia. One of the leading causes of this deforestation was a boom in industrial-scale plantations that began in the early 2000s. Those plantations enabled Indonesia to become the leading producer of palm oil, an edible oil used in an endless array of consumer products. But it also sparked an environmental crisis, as the carbon locked up in rainforests was released into the atmosphere.
The volume of greenhouse gas emissions from Indonesian rainforests has made it a matter of international concern. Norway has pledged $1 billion in an attempt to incentivize reforms to curb them. Since 2015, the administration of President Joko Widodo has sought to rein in the plantation industry, most recently by enacting a temporary ban on any new permits for palm plantations. Though just a small proportion of the Tanah Merah project has been developed, the permits were issued before the ban came into force, and the forest remains slated for destruction.
Today, an area larger than Manhattan has been cleared within the Tanah Merah project. This is only a fraction of the total project area. If the rest is bulldozed as planned, it will release as much emissions as Virginia produces by burning fossil fuels each year. If the giant sawmill that is today being constructed on the land is completed, it will suck in timber for years to come, settling the fate of swathes of rainforest in southern Papua.
In the decade since the inception of the project, the ways in which the rights to it have been obtained and moved have been shrouded in secrecy. The companies involved have employed all of the tools of corporate secrecy that prevent key questions from being answered. Critical aspects of the permitting process that underpin the entire project are being withheld from public scrutiny. The true owners of the companies clearing the forest today remain hidden.
A cross-border investigation involving news organizations from four countries — The Gecko Project, Mongabay, Tempo and Malaysiakini — attempted to pull back the corporate veil. We sought to find out who had obtained the rights to a project of such magnitude, and, perhaps more importantly, how. Our investigation exposes the methods apparently employed to ensure the people who control the fate of these forests — through their money, power and political decisions — have covered their tracks.
Part One: ‘I wasn’t going to issue permits to just anyone’
When Yusak Yaluwo was elected chief of Boven Digoel district in 2005, at the age of 35, he assumed control of an area at the heart of a vast stretch of jungle. The district lies in the very eastern corner of Indonesia, in Papua province. “When you fly over the island, still even today, mostly what you see is unbroken expanses of rainforest,” said Bruce Beehler, a biologist at the Smithsonian Institution, who has spent the last four decades studying the trees and birds of New Guinea.
Across the rest of Southeast Asia, such landscapes have been steadily destroyed over the past half-century. The human activities that drive deforestation tend to work incrementally. First comes logging that fragments and damages the integrity of the forest, bringing roads that act as a conduit for more pressures. The damaged forest becomes prone to fires and, finally, it is clear-cut to be replaced with plantations.
The consequence is that intact or primary forests, which hold the most carbon and support the most wildlife, are increasingly rare. Papua has more of this forest than any other province in Indonesia, with districts like Boven Digoel, among the largest in the country, stretching across 27,000 square kilometers (10,400 square miles) of mostly pristine jungle.
Some of the species that evolved here are iconic, like the brightly colored birds-of-paradise. The island has high levels of endemism, with species found nowhere else on Earth. Many more species remain unknown to science, yet to be discovered by outsiders, Beehler said. “I can assure you that the forests of the Digul [River basin] are super-rich, and have probably millions of species of invertebrates, micro-organisms, and plants,” he said. “They may hold in their chemistry all sorts of odds and ends that could be very useful to humankind in the future if we were to get a grip of them.”
The indigenous peoples of New Guinea, composed of clans speaking hundreds of different languages, have lived in close connection to the forest for millennia. Their identity and culture remain deeply bound to the natural world. By the time Yusak took office in 2005, many of the people under his jurisdiction still pursued livelihoods dependent on hunting, gathering fruit and processing starch from the sago palm. These pursuits have had a light impact on the forest.
Perhaps the most transformative power available to a district chief — known in Indonesia as a bupati — is the authority to issue permits for large plantations. Such plantations can bring investment to districts with basic economies and limited budgets. But if not carefully managed, they can also set the people and environment on a collision course with a form of development that could be both exploitative and destructive.
In 2005, the warning signs were there already. Boven Digoel was the site of the first large-scale plantation in southern Papua, one that predated Yusak assuming office. It had been developed by a South Korean conglomerate and sparked lingering conflicts with the indigenous population, who complained that their land had been taken without adequate compensation and that their food sources and medicinal plants had been destroyed.
But Yusak did not heed these warnings. Government documents show that in December 2007 he exercised his permitting power liberally, issuing permits that covered seven contiguous blocks of forest. The largest of them stretched more than 60 kilometers (40 miles) east to west. Seen on a map, they stacked together to form one single block measuring 2,800 square kilometers (1,100 square miles), some 10 percent of the district. Laid on top of London, it would cover the entire city nearly twice over. In Papua, it would create a giant hole in the rainforest.
The seven permits were issued to seven different companies. Yusak told us these were linked to a Malaysian conglomerate called the Genting Group. But two of its executives insisted that Genting had never incorporated or owned them. Determining who did proved easier said than done.
Corporate records obtained from a public government database in Indonesia reveal the seven companies were all set up within eight days of each other, in February 2007. Based on our investigation, they were registered to what appeared to be fake or front addresses. For some, the address did not exist. Others took us to small shops, where no one had any knowledge of the companies.
Each of the companies had two different shareholders. We tracked down one of these people, a woman in her late 50s, to her home, a room in a boarding house squeezed into a narrow alleyway in the south of Jakarta, Indonesia’s sprawling, smog-choked capital. She insisted she had never been involved in the company, or in such a role in any other company. At the time the company was incorporated, with her name as a founder, she was working as a janitor in a bank. The number on her national ID card proved that she was the same person listed in the corporate records. “I’m just a cleaner,” she said. “There’s no way I could make a company.”
The address of another shareholder, listed in the corporate records, took us to a slum in West Jakarta. The woman wasn’t home, but her father was selling fruit in the street outside. He said he had no idea his daughter had been connected to such a company. She too had been working as a cleaner in a bank at the time the companies were incorporated.
The evidence suggested that whoever formed the companies, it wasn’t the people named in the corporate records. The plantation could one day become the biggest in the country. But its very origins were cloaked in mystery.
The mysterious shell companies lay dormant, the idea of a mega plantation fading. Until, one day, Chairul Anhar turned up. Yusak told us he and Chairul first met in 2009, in a restaurant in Jayapura, the capital of Papua province. He said Chairul had arrived in the city on a private plane, flanked by a man named Dessy Mulvidas, who would play a central role in the scheme that followed. Chairul told him the Menara Group had bought the seven companies, but the initial permits had expired. He needed Yusak to renew them.
Yusak told us he received overtures from “many” investors seeking land in his district, almost all of which he rejected. “I wasn’t going to issue permits to just anyone,” he said, in a recent interview at a Jakarta mall. Chairul’s approach offered him the opportunity to revive a massive investment into the district, providing the bupati brought the permits back to life. But the businessman who had approached him was an unknown quantity. Who was Chairul Anhar?
Chairul’s occasional appearances in the media up to that point show he was not new to pitching grandiose schemes. In January 2007, he was described in news articles as the president of a company named PT Indomal Usahasama, which had plans for a $1 billion “Palm Oil Centre” on a remote island in the Molucca Sea. Four months later, he was identified in a trade publication as the president of PT Destini Marine, a company he claimed had booked orders worth $200 million to build tankers and cargo ships for clients across Europe.
The common threads running through both investments were bold claims, reports of unnamed Malaysian backers, and the fact that they disappeared without trace. Now, two years on, he presented himself as the owner of the Menara Group. The name, with menara meaning “tower,” conveyed the idea of an imposing conglomerate. In fact, there was little evidence to suggest the firm was more than paper thin. It had an office in a Jakarta tower block, but no track record of establishing plantations, no website, no online footprint.
In rural, cash-strapped Indonesian districts like Boven Digoel, local governments seek to rely on major investors to assume responsibilities extending far beyond the confines of their business. Under the umbrella of “corporate social responsibility,” they expect plantation or mining companies to construct roads and provide support for health care and education. In exchange for the riches to be made from palm oil, companies are legally required to plant and hand over plots of land — amounting to a fifth of their licensed area — to local farmers. Yusak told us he saw the Menara Group as a genuine investor that could deliver on these obligations, and that Chairul promised he would do so.
Within months of Chairul taking over the Tanah Merah project, it hit a major roadblock. One night in April 2010, Yusak was arrested by the KPK, Indonesia’s anti-graft agency. The agency had caught wind of a string of suspicious payments out of the Boven Digoel budget and swooped shortly after Yusak landed at Soekarno-Hatta International Airport in Jakarta. It marked a notable fall from grace. The year before, Yusak had led the campaign in Papua province for the eventual winner of Indonesia’s 2009 presidential election. Now, he was shuttled to a top-security prison in Jakarta to await trial.
When Yusak’s offenses were later laid out in court, they were strikingly crude. Barely three months into his first term, he had arranged for the district government to take out a 6 billion rupiah (about $580,000 in 2005) bank loan to buy a 3.5 billion rupiah ($340,000) oil tanker, and had the balance transferred to himself. Over the next two years, he repeatedly instructed a subordinate to withdraw money for him to use. By the time he was finished, according to the KPK, Yusak had siphoned off some 64 billion rupiah, then equivalent to almost $7 million.
Such brazen acts of corruption were not out of the ordinary in Indonesia’s regional politics. From 2003 onwards, as Indonesia embarked on a program of decentralizing power, bupatis, town mayors and provincial governors assumed control of large budgets and pliant bureaucracies. Largely left to their own devices, many found the temptation of corruption too much to resist. Skimming money from budgets and engaging in procurement scams proved to be common models, routinely prosecuted by the KPK. Investors also funded corrupt election campaigns — in which candidates handed out cash to secure votes — in the expectation of receiving business permits once their chosen candidate took office.
The KPK has also caught politicians receiving cash bribes in exchange for issuing permits for mines and plantations. Investigations and research, including by the KPK, show that this type of graft occurs far more widely than prosecutions might suggest. Yusak himself said payments for permits, at all levels of government, were the norm. “That’s the culture of Indonesia,” he told us, though he insisted he had not indulged himself. At the time of Yusak’s arrest in 2010, the NGO Indonesia Corruption Watch said more than 500 requests had been submitted to the KPK to investigate graft among regional leaders.
The Tanah Merah project remained at the early stages of what could be a lengthy permitting process. Chairul needed several permits for each of the seven companies — from the bupati, from the provincial government, and from the minister of forestry. Each of these permits was dependent on the one before. Yusak’s arrest threatened to create a bureaucratic freeze in Boven Digoel that could stall its progress. This was compounded by the fact that his term in office was scheduled to end just four months later, at which point a new politician, one potentially less conducive to such a giant scheme, might be elected to replace him.
Despite his incarceration, Yusak sought to continue his political career as if nothing had happened. Even though the KPK had never lost a case against a person it had charged with corruption, the district electoral commission allowed Yusak to stand for reelection. Though he was detained in Jakarta and unable to campaign in person, his campaign team continued on his behalf, supported on the trail by his wife, Ester Lambey. On Aug. 31, 2010, he won a second term.
In an interview with a reporter carried out in prison two months after his reelection, Yusak credited his victory to his achievements during his first term. “The community chose me because I can fulfil their needs, answer their wishes,” he said. A week after the interview was published, he was convicted of corruption, and sentenced to four and a half years in prison.
On the face of it, Yusak’s arrest should have frozen the permitting process, or at least his role within it. He was suspended from office three weeks before the election. For months, because he was in prison but had won the vote, the bureaucracy did not quite know what to do with him. The district parliament wanted him reinstalled as bupati; others, including the KPK, pushed back against that. The eventual compromise saw him inaugurated, in March 2011, but immediately made “non-active,” to avoid the farce of a district being administered from a prison cell. His running mate, Yesaya Merasi, was appointed acting bupati in his place.
But a trail of government documents we uncovered shows that while he was locked up on the island of Java, 3,600 kilometers (2,200 miles) from the Boven Digoel district capital, Yusak continued to play an active role in pushing through the Tanah Merah project. During this window of time, he signed decrees affirming that each of the seven companies acquired by Chairul had completed satisfactory environmental impact assessments. Yusak denied issuing these specific permits, but admitted to us he had signed documents in prison.
“At the time, I was officially still in office,” he said. “So, when there was a letter, I signed it.”
Read the full reporting: https://news.mongabay.com/2018/11/the-secret-deal-to-destroy-paradise/