Oil Palm Fine Corruption

THIS is what happens if corporate crime is forgiven through fines. As opposed to criminally sanctioning companies that encroach on forests and destroy the environment, the government instead negotiates fines, allowing corruption to happen. The value of fines is viewed as a bargaining chip between businesses and those in power. Investigation into the suspected violation is now at a standstill at the Attorney General’s Office (AGO).

In early October 2024, the AGO investigators searched the Environment and Forestry Ministry (KLHK)—now Forestry Ministry and Environment Ministry. Among the spaces searched was then-KLHK Secretary-General Bambang Hendroyono’s office. The AGO investigated dozens of civil servants, focusing on the involvement of echelon I and II officials. Strangely, not one suspect for the oil palm fine corruption has been announced, although Attorney General Sanitiar Burhanuddin already reported potential names.

The chaos began when Joko Widodo’s administration and the House of Representatives passed the Job Creation Bill into law in 2020. Two additional articles under the law on the prevention and eradication of forest destruction, namely, 110A and 110B, mandate the country to pardon oil palm plantation businesses in forest areas as long as their owners pay an administrative fine as well as the environmental restoration.

The government hopes that this mechanism would be able to generate Rp300 trillion in non-tax revenue. The fines are given to thousands of companies—some of which belong to tycoon-owned corporations. Unfortunately, because of repeated negotiations between the government and many businesses, the government eventually only received no more than Rp600 billion.

One of the root causes is Environment and Forestry Minister Sri Nurbaya’s decree, issued in June 2023. Thanks to lobbying by businesses, the decree gave a loophole for companies to engage in dealings with ministry officials to decrease the recorded size of the forest they had destroyed and to negotiate fines. It was this corruption in the management of oil palm that prompted the AGO to search the KLHK.

So far, it was found that the mechanism for calculating and paying oil palm fines was not transparent right off the bat. Furthermore, the government never announced developments in the process of giving pardons to oil palm companies. The names of companies charged under Article 110A as well as the fines given to them and the forest area they destroyed were never announced to the public. This closed process easily triggered manipulation and evil plots.

Companies’ efforts to influence policies and regulations for their own interests are one trait of state-capture corruption. This phenomenon occurred from the formulation of the Job Creation Law to the formulation of technical regulations at the ministry level. The law was used to as a maneuver to change criminal charges into transaction fines. In fact, if the government is serious about protecting forests, criminal sanctions must be the first option before fines are used to compensate for the destruction of forests.

State capture happens because of oligarchs that use state institutions able to benefit their businesses. By controlling natural resources, they can perpetuate and increase wealth. There is a reciprocal relationship between public and private actors in state capture. Business actors are not the only ones who ‘capture’ the government. It works both ways. This triggers conflicts of interest and diverts the government’s eye from the public. The absence of criminal sanction for the oil palm company and the stagnant AGO case are two examples.

Early this year, President Prabowo Subianto issued Presidential Regulation No. 5/2025, which expanded fines for mining businesses in forest areas. Under this regulation, after issuing a fine, the government would take over the entire land in question, turning the land into government land. The problem is, Forestry Minister Raja Juli Antoni then issued another regulation establishing an understanding on the use of forests that were formerly oil palm plantations and mines for the interests of defense and security.

After being used as a way to steal oil palm fines, forests are now used for militarization. Besides pardoning those who destroy the environment and taking the fines, another faction of the oligarchs is now preparing to assume control of forests to replace ‘old players’ under the guise of state takeover.