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Indonesia's New Oligarchs
The old order in eclipse
President Joko Widodo's second term has witnessed the rise of a "new oligarchy" in which a new group of businessmen and politicians has taken up strategic positions in the power circle, with broad political and business connections. At the same time, some senior politicians have fallen into eclipse, with their influence fading.
Joko, known as Jokowi, became the first leader elected outside of the country's narrow political and military elite, rising to power through the support of the Indonesian Democratic Party of Struggle (PDIP) chaired by Megawati, daughter of Sukarno, the country’s first president. Although he has been positioned as the hope for progressive Indonesians to build a prosperous and tolerant country without corruption, many worry that hope has been dashed with his facilitation of the creation of a new oligarchy of younger, ostensibly cleaner-looking movers and shakers.
Although the new circle is considerably wider, and the old one has shrunk beyond those named here, these are some of the most interesting ones – Erick Thohir, Sandiaga Uno, and Muhammad Lutfi. The circle around former President Susilo Bambang Yudhoyono has arguably shrunk the most.
They are particularly interesting because as Indonesia has assumed the leadership of the G20 Nations on December 1, its Minister of Energy and Mineral Resources Arifin Tasrif launched what was termed the G20 Energy Transition Forum to “accelerate the energy transition process.” If anything, the new oligarchs, however, have deep tentacles into the coal industry, some through direct ownership of the country’s biggest coal mining companies. Coal comprises 12 percent of all export income and contributes to a full 5 percent of GDP. The transition to clean energy obviously has serious implications for both their personal interests and the country’s economic standing.
The new power structure
Erick Thohir, 51, has risen to become one of Jokowi's most prominent ministers. After helping to guide Jokowi to a second term in 2019, he was appointed Minister of State-Owned Enterprises (BUMN), which leads 147 state companies and approximately 800 subsidiaries. He has closed about 70 state-owned companies and appointed new commissioners, 19 of whom were Jokowi supporters.
Thohir is the founder of the Mahaka Group, which manages businesses in the field of mining, finance, and media. After becoming a minister, he gave up his position in his companies. However, his network is everywhere. He is the younger brother of Garibaldi “Boy” Thohir, currently the president director of Adaro Energy, one of the largest coal mining companies in Indonesia.
At the end of 2021, Erick and Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan were accused of conflict of interest in the nation's procurement of Polymerase chain reaction kits used to test for Covid-19 centered on the test service provider PT Genomik Solidaritas Indonesia (PT GSI). A company affiliated with Luhut is reported to have shares in PT GSI, while the Adaro Foundation led by Boy Thohir, also has a stake in the company.
Luhut has acknowledged the business relationship but stressed that he never received any personal gain from PT GSI, which he said he helped to build to help Indonesia's fight against the coronavirus. A spokesperson for the SOE Ministry didn’t deny Erick Thohir's relationship with PT GSI, but said his involvement was so minuscule that it was unlikely to affect the price of the pricing of the test.
Erick Thohir is now often referred to by survey institutions as one of the candidates for the 2024 presidential elections. Even though his electability level is still very small, he is ubiquitous in the news media seemingly daily. Although he isn’t yet registered with any party structure, late last year he was appointed an honorary member of the Barisan Ansor Serbaguna (Banser), the military wing of the Ansor Youth Movement (GP Ansor) affiliated with Nahdlatul Ulama (NU), the largest Islamic organization in Indonesia with more than 90 million members.
Erick is also in the same cabinet with two of his old friends, Muhammad Lutfi as Minister of Trade and Sandiaga Uno as minister of Tourism and Creative Economy. When Uno was appointed by Jokowi to be a minister in December 2020, Erick uploaded their old photos on his personal Instagram, saying the three used to be friends hanging out and working.
If Thohir hasn’t yet clearly expressed political inclinations, Sandiaga, 52, has started by becoming a vice presidential candidate accompanying Prabowo Subianto in the 2019 elections. Even though they lost, they joined the government by becoming ministers. Many argue that Jokowi's move to embrace his political opponents was a maneuver to secure his power and smooth out his policies later.
Uno now serves as deputy chairman of the Gerindra Party's board of directors. Based on a survey by Saiful Mujani Research and Consulting (SMRC) published in December 2021, Gerindra ranks as the third most popular party with 10.8 percent.
Prior to entering politics, Uno was known as a successful businessman through the investment company PT Saratoga Investama Sedaya. Quoted from the 2019 Saratoga Annual Report, Uno still has 21.51 percent of the company. In 2002, Saratoga began investing in the Adaro Group led by Boy Thohir. As of 2020, Saratoga's share ownership in PT Adaro Energy –the parent coal company of the Adaro Group– was recorded at 58.46 percent. In the same year, Adaro Energy became the third largest coal holding company in Indonesia with production of 54.53 million tonnes from mines in Indonesia and Australia.
If Uno and Erick only became ministers during the second Jokowi administration, Muhammad Luthfi, also 52, has been influential since the Susilo Bambang Yudhoyono (SBY) administration. In 2014, he was appointed by SBY to be the minister of trade, the same position he currently holds. Luthfi has also been the Indonesian ambassador to Japan and the United States. The relationship between Thohir and Luthfi was not only close when they were still studying in the United States, but they also co-founded the Mahaka Group in 1994.
Apart from Thohir, another strong figure in the power circle is Luhut Binsar Pandjaitan, older at 74, who serves as the Coordinating Minister for Maritime Affairs and Investment, a position that gives him the authority to coordinate seven ministries and institutions. They are the Ministry of Energy and Mineral Resources (ESDM), Ministry of Maritime Affairs and Fisheries (KKP), Ministry of Transportation, Ministry of Tourism, Ministry of Public Works and Public Housing, Ministry of Environment and Forestry, and the Investment Coordinating Board.
In 2004, Luhut founded PT Toba Sejahtra, the holding company for a number of subsidiaries operating in various sectors including energy, mining, plantations, and property. Luhut was close to Jokowi even when the president served as mayor of Surakarta in central Java in the 2000s. In 2009, PT Rakabu Sejahtra was formed, a joint venture company between PT Rakabu, Jokowi's furniture flagship for the local market, and PT Toba Sejahtra. Jokowi's son, Kaesang Pangarep, now serves as a commissioner at PT Rakabu Sejahtra.
Luhut, a retired general, is known to have great influence both in the government and in his relations with conglomerates. He now serves as chairman of the Advisory Council of Golkar, the second largest party after PDIP. Jokowi often relies on Luhut to handle various important matters such as the Covid-19 handling team and the national economic recovery program as well as assigning him to fill the position of a minister who was ousted for being involved in corruption.
Gerindra party leader Prabowo Subianto, 70, has made an unlikely jump to the power circle after three failed presidential elections. He is the complete package for a figure of great influence; leads a party, has a wide network in both the military and business circles, and is the scion of a powerful family. Some reports say that he is still favored for a fourth run as a 2024 presidential candidate. Several independent survey institutions give hm continued high electability over figures.
Prabowo’s younger brother, Hashim Djojohadikuso, will work on four projects near Jokowi’s new capital in East Kalimantan. In an interview with local media, Hashim, the Chief Executive Officer (CEO) of Arsari Group, claimed to have purchased 265,000 hectares near the new capital’s location as long ago as 2007. He will work on reforestation by planting a variety of trees including oil palm and pine as well as pursue biofuel projects; wildlife conservation; and clean water projects.
Three of the outs
Former vice president Jusuf Kalla has automatically been removed from the circle. He is no longer in the management ranks of Golkar, the party he once led and which made him vice president twice. Although some of his associates are reportedly included in the Golkar structure, he is only listed as the General Chair of the Indonesian Mosque Council (DMI) and the general chairman of the Indonesian Red Cross (PMI).
Aburizal Bakrie's dream of becoming president disappeared in 2014, when Golkar backed presidential candidate Prabowo against Jokowi. Even though he was at that time the chairman of Golkar and had publicly announced his interest in running, Prabowo lost and Bakrie automatically has never again received a position in the government. Whereas in SBY’s government in 2005, he was in the circle of power by serving as coordinating minister for the economy and coordinating minister for people's welfare.
Now the Bakrie Group faces government debt due since 2019, a bailout fund for residents affected by the disastrous mudflow caused by the operations of a subsidiary, the Lapindo Brantas Inc (LBI). The Supreme Audit Agency (BPK RI) put Lapindo's debt at Rp2.23 trillion (US$155.4 million) as of December 31, 2020 and will continue to rise due to fines and interest.