The Politics of Business in Lampung, Indonesia

Ward Berenschot and Darmawan Purba

Sugar Group financed the election of Lampung’s new governor in order to secure the renewal of its land leases.


On 9 April Ridho Ficardo became the new governor of Lampung, Sumatra’s southern-most province. At first glance, the 33 year-old seems an odd choice as he lacks charisma as well as government experience. But he does possess another winning feature: he is the son of one of the directors of Sugar Group Companies (SGC), the producer of the omnipresent Gulaku sugar.

Sugar Group’s financial support enabled Ridho to spend lavishly during his campaign. True to his campaign slogan ‘giving and serving to the people of Lampung’, Ridho made the gubernatorial elections a lavish feat. Trucks full of sugar drove up to villages through Lampung to execute a ‘banjir gula’, a massive ‘flood’ of two-kilo sacks of sugar adorned with Ridho’s picture. In addition, music concerts, puppet plays as well as, reportedly, the handing out 50 thousand rupiah per voter ensured that Ridho’s name gradually rose in the polls. In the end he won 44 percent of the votes, well ahead of his competitors. This achievement had cost, according estimates of interviewed observers, up to 500 billion rupiah (43 million USD). This money served to cement SGC’s already considerable political clout. Sugar Group has for long been giving donations to politicians. Since 2011 the company has been bankrolling election campaigns for districtheads, leading to the election of ‘its’ candidates for district head in Tulang Bawang and Tulang Bawang Barat.

It is no coincidence that these districts have large plantations owned by Sugar Group. The company stands to gain considerably from having put their men in power. The main reason for Lampung’s extravagant sugar feast is the expiration this year of the 30-year land lease (HGU) of some of SGC’s plantations. Given the enormous bribes that a renewal of such a land lease usually involves, SGC can probably recoup most of its campaign expenses now that Ridho will be the person to authorize these renewals. Furthermore, SGC is involved in a number of land conflicts with other companies – there is a long-standing legal battle with the Salim group over land and a factory – as well with villagers. In 2012 villagers in Tulang Bawang staged a big protest against SGC for grabbing their land and cutting off the access to their village. With the governor as well as local district heads in their hands, SGC will no longer be bothered by such hassles. It seems likely that SGC will use its politicians to acquire licences for more land to expand its plantations. Given the already conflictuous nature of land tenure in Lampung, this suggests that Ridho’s election will lead to a new wave of land conflicts.

Ridho Ficardo hardly hides his allegiances. The 16-line election program on his website suggests that serving Sugar Group is his main goal: “the potential of the agro-business in Lampung is hampered (…) by weak infrastructure, security concerns and pungutan liar (’wild fees’, i.e. rent-seeking). What should we do to solve this? We need to elect a leader who has the solutions”. That can be taken literally, as for SGC Ridho embodies a solution to another big operational challenge: the rampant rent seeking that has been a plague for the company. Bureaucrats and politicians have been extorting money from the company by threatening to take up (and make up) irregularities in SGC’s land use and production. Due to its predominance in a relatively economic backwater and due to the weak and contradictory legal framework regarding land, SGC is very vulnerable to being used ‘like an ATM’ by enterprising individuals at all levels of government. Ridho is now expected to be more firm in dealing with such practices. In fact, that is what informants sympathetic to SGC have been arguing, that SGC put Ridho in power to ‘clean up’ and ‘professionalize’ state institutions.

Lampung’s sugar-coated elections illustrate how Indonesia’s democratization process is driving business and politicians into each others arms. Doing business in Indonesia had always depended on having good contacts – during the new order tycoons could amass large fortunes by exploiting their connection to Suharto to obtain licences and exemptions. But the hope was that reformasi would change the oligarchic character of Indonesia’s politics and distribute power more evenly. Some early reforms, such as a new forestry law, a law on labour unions and a commitment to recognize common land rights suggested big (agro-) businesses could no longer trample on the rights of Indonesia’s citizens. But, as various observers have pointed out, democratization has merely changed the strategies of Indonesia’s economic elites, not their dominance. While entrepreneurs needed to cultivate contacts with influential bureaucrats during the New Order, now they buy their influence by supporting the election campaigns of politicians – or becoming one themselves. Because of the spiralling costs of running an election campaign, politicians can hardly forego such corporate support. A successful political career requires either being or finding a rich businessman.

This intimate embrace between business and politics is largely self-reinforcing. As businesses realize that political contacts are vital to obtain licences and avoid the ubiquitous pungutan liar, they face strong incentives to engage in secret or not-so-secret deals with political hopefuls. Such considerations drove Sugar Group to support politicians. The company does not really want a more professional bureaucracy when it comes to issuing new licences. A bureaucracy that implements policies and laws in a universal, impersonal way would not enable Sugar Group to recoup the money it spends on election campaigns. To recoup these costs, Sugar Group expects its politicians to intervene in bureaucratic procedures to bend rules and regulation in their favor. In this way these deals are weakening state institutions and the relevance of rules and policies. In order to honour their commitments to supporters and campaign funders, elected leaders need to engage in a constant undermining and evasion of bureaucratic procedures. Provincial and district-level bureaucracies have thus become heavily politicized as bureaucrats can hardly resist political meddling. They would risk their career and an attractive source of income. The resulting weakening of state institutions further reinforces the dependence of entrepreneurs on politicians as they have little assurance that rules and policies will be applied in a predictable fashion if they lack political contacts. In that sense Sugar Group’s business strategy is self-defeating. As long as economic elites (like SGC’s directors) use their contacts to circumvent regulation, their political meddling will not lead to the professionalization of state institutions nor the stamping out of rent seeking practices.

The embrace between politics and business is self-reinforcing in yet another way. Voters have seen the large fortunes that these politico-business coalitions are amassing by granting licences and contracts to each other. They realize the relative futility of promises about making new rules and policies as they see that elected leaders are not abide by these policies when pressurized by their corporate friends. In that context it is not surprising that many voters trade their vote for money (or sugar), sensing that such sweeteners might be the only benefit they can realistically expect from their politicians. Observations of the campaign during the legislative elections of 9 April suggest that vote buying has become very common. Voters are becoming increasingly pragmatic in their dealings with politicians. The irony is that this disillusionment with politics and the resulting expectation of money and gifts is facilitating the continued dominance of economic elites, as the spiralling costs of campaigning makes politicians dependent on them.

At present there is little scope for voters to punish politicians for engaging in backroom deals with companies. Voters generally do not know which companies are funding their candidates. There is official regulation about campaign funding and politicians are required to report on their campaign funds and expenses. Yet as there are no mechanisms to check their veracity, these reports have become meaningless administrative exercises that do not really disclose sources of campaign funds. Furthermore, even while Sugar Group’s involvement in Lampung’s gubernatorial elections was rather blatant, local journalists rarely dared to mention the company explicitly out of fear of reprisals and withdrawal of advertisements.

As a result voters do not really know what business interests they might be supporting with their vote. The farmers who protested against the Sugar Group in Tulang Bawang in 2012 might have voted for Ridho, simply because the role of corporate backers rarely enters public debate. One solution might be, as Marcus Mietzner has been arguing in his recent book on Indonesia’s political parties, to increase state funding for election campaigns. This would reduce the dependence of politicians on corporate donors. But it would hardly eliminate it. Initiatives are also needed to improve the transparency of campaign financing. Latin American countries are showing that this is not impossible. Through a combination of legal reform and painstaking research, a number of Latin American ngo’s are succeeding in publicizing the sources of campaign funding of their politicians. Their websites have become important source for journalists, enabling them expose the privileges granted to campaign donors. A replication of such efforts in Indonesia could enable voters to better scrutinize their politicians and, ultimately, loosen the ties between business and politics.

This article appeared in Inside Indonesia

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s