Concrete Doubt

Semen Indonesia dispute scares away foreign investors

By Eva Fitriani
Sunday, April 9, 2017

Up to a quarter of foreign investors who have set their eyes on a range of projects in Indonesia have delayed their investment as a series of legal setbacks that cloud the construction of a Semen Indonesia plant in Central Java casts doubt on legal certainty in the country, Indonesian Employers Association, or Apindo, said.

Last year the Supreme Court revoked an environmental permit for the state-owned company's $374 million cement plant project in Rembang, Central Java. Central Java Governor Ganjar Pranowo later issued a new permit for the company, triggering a wave of protests by farmers from the area.

The snafu has raised questions on the government's competence in handling legal disputes involving large companies and local residents.

Foreign investors are asking why such permits were issued in the first place as well as questioning the government's commitment to safeguard any investment in the country.

"Having seen what has happened in Rembang, investors are concerned their investment will come to nothing because of legal issues," Danang Girindrawardana, Apindo's deputy chairman for pubic policy affairs, said on Thursday (06/04).

Indonesia stands to lose foreign direct investment in cement, steel and telecommunication sectors as well as in special economic zones (SEZ), all crucial in supporting the country's infrastructure expansion, because of the long running dispute, which has shown no signs of abating.

"A lot of investment depends on the government's ability to clear land for projects. We have a presidential regulation governing that... but after Rembang, investors are scared off," Danang said.

Bambang Haryo Soekartono, a member of the House of Representatives' Commission VI, which oversees natural resources, said cement is a strategic commodity for Indonesia, so the government should carefully consider the impact of closing down Semen Indonesia's Rembang plant.

Rembang farmers have been cementing their feet in front of the State Palace in Central Jakarta in protest against the government's decision to allow Semen Indonesia to continue construction on its cement plant.

Idham Arsyad, the national council chairman of an advocacy group called The Rising of Central Java Farmers (Gerbang Tani), said the government should comply with the Supreme Court ruling and close down the cement plant.

Idham pointed out that preliminary results of an environmental assessment by a team from the Ministry of Environment had shown the plant sits over a groundwater basin region (CAT) that should never be exploited.

Ahyanizzaman, the director of marketing and supply chain at Semen Indonesia, argued the ruling as it stands now does not forbid the cement company from mining limestone from the region. He also claimed that Semen Indonesia has reduced the size of its Rembang operation to mitigate risks to the environment.

This article first appeared on the Jakarta Globe website on April 7, 2017.

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