Tanoto’s Suspicious Transactions
The purchase by the Sukanto Tanoto business group of an office building worth trillions of rupiah in Germany has prompted many questions. The proceeds from natural resources exploitation should be returned to Indonesia.
THE purchase of an expensive and prestigious property overseas by Indonesian business groups is nothing new. But when the purchaser is the business group owned by Sukanto Tanoto, who has a shady track record of tax evasion, the Indonesian financial authorities should pay closer attention, especially since there appear to have been attempts to conceal this transaction.
Two years ago, Adler Pacific Investments Sarl and Adler Pacific Holdings Sarl, two shell companies based in the tax haven of Luxembourg, purchased a historic building in the center of Munich, Germany. It subsequently came to light that the two companies were actually owned by Pacific Resources SG Pte Ltd, a company based in Singapore. Although his name is not included in the articles of incorporation, an investigation by the Organized Crime and Corruption Reporting Project, the Süddeutsche Zeitung newspaper and Tempo found that Sukanto Tanoto is the ultimate beneficial owner of the company.
The office building purchased by Sukanto Tanoto is situated on the corner of Ludwigstraβe, one of four avenues built by King Ludwig I of Bavaria in the 19th century. It is strategically located in the heart of the business district. The 27,000-square-meter office building has major corporate tenants such as Allianz and the Boston Consulting Group. Sukanto Tanoto’s company bought the property for the fantastic price of €350 million, or almost Rp6 trillion.
In June 2019, one month before Sukanto Tanoto bought the Ludwig complex, another iconic building in Dusseldorf, around 600 kilometers northwest of Munich, was also sold. The buyer was Andre Tanoto, one of Sukanto Tanoto’s sons. Like the transaction in Munich, the purchase in Dusseldorf used a structure of shell companies. The building, designed by well-known architect Frank Gehry, was bought for €47.6 million, or around Rp800 billion.
Although there is no evidence that Sukanto Tanoto’s transactions in Germany were money laundering, the reports give rise to a number of important questions. It is known that the expansion of Sukanto Tanoto’s business groups, Royal Golden Eagle and Toba Pulp Lestari, has turned hundreds of thousands of hectares of national forests into oil palm plantations and industrial forests. The conversion of these forests has a negative impact on the ability of nature to mitigate the climate crisis.
This damaging impact on the environment or negative externalities cannot be recorded as costs for a company managing natural resources. Moreover, companies owned by Sukanto Tanoto or other corporations in the same business sector do not feel the effects of this expansion. Forest fires, floods, landslides and other natural disasters triggered by the decline in the protection provided by the natural environment affect everybody in Indonesia, especially indigenous people who have been expelled from their forests. Therefore, it is truly ironic that instead of returning them to Indonesia, the trillions of rupiah in profit from Sukanto Tanoto’s businesses have ended up as property investments in Germany.
It is not as if it was impossible to anticipate this. It is the responsibility of the government to ensure that companies managing natural resources contribute to the balance of the ecosystem in this nation. Unfortunately, the regulation stating that foreign currency earned from exports, especially based on natural resources, must be returned to Indonesia has never been effective.
It is as if the government is reluctant to change the regulations concerning free movement of foreign currency that continues almost without any control. Many Indonesian officials still believe in the old myth that if the nation controls the flow of foreign currency, the economy will collapse because nobody will want to invest in Indonesia. However, in other nations such as Thailand or China, control of foreign currency produced by exports has not led to economic calamity.
The weakness of the government in the face of lobbying from major natural resource companies has also made matters worse. For example, the government provided many incentives to forestry and mining companies through a number of regulations such as the Job Creation Law and the Mineral and Coal Law. Recently the government has also provided trillions of rupiah in subsidies for the supply of B30 biodiesel, most of which went to oil palm magnates.
If it really wants to act in the interests of the people, the government should reexamine the regulations that only benefit a small number of tycoons. It should start controlling the exploitation of natural resources and ensuring that the benefits reach the people. Investigating the mysterious transactions carried out by Sukanto Tanoto in Germany would be a good starting point.