Coal Oligarchs of Indonesia: Business, Politics, and Environmental Impact
Indonesia's coal industry is a significant economic force, yet it presents a complex web of environmental and social challenges. This article examines the key players, their business and political connections, and the broader implications of Indonesia's reliance on coal.
The Rise of Indonesian Coal
Indonesia's coal sector gained momentum in the 1970s and 1990s. In 1976, then Indonesian president Soeharto issued a decree to prioritize the rehabilitation of mining facilities to boost national coal production. Global coal demand was on the rise following the 1973 Arab oil embargo. However, the real momentum came in the early 1990s after Soeharto reopened Indonesia’s coal mining sector for foreign investment. Kalimantan and Sumatra islands are Indonesia’s “supermarket” of coal.
Indonesia uses its own coal to fuel steam power plants and various domestic industries. As of 2021, the capacity of the nation’s power plants reached 74 gigawatts (GW), of which 37 GW, or 50%, came from coal facilities. In spite of all this, Indonesia today still puts a premium on coal, which is seen as the cheapest energy source. The coal business is deemed essential by the government, as it helps boost non-tax state revenue and ease the country’s trade deficit.
Environmental and Social Costs
Coal burning generates a large quantity of harmful pollutants and chemicals. According to a 2015 study by Harvard University and Greenpeace, Indonesia’s coal power stations caused an estimated 6,500 premature deaths annually. Moreover, coal mining activities pose a threat to health and environment. Examples include Muara Enim, a regency with the largest coal reserves in South Sumatra, where state-owned coal miner PT Bukit Asam mainly operates.
Key Players in the Coal Industry
In 2020, Indonesia’s five biggest coal holding companies or business groups were PT Bumi Resources, run by the Bakrie family, Sinar Mas Mining Group, owned by the Widjaja family, PT Adaro Energy, controlled together by the Thohir and Soeryadjaya families, PT Indika Energy, steered by the Sudwikatmono family and PT Bayan Resources, led by Low Tuck Kwong. State-owned mining holding firm Mining Industry Indonesia (MIND ID) only sat sixth place. At least eight oligarchs now control those six coal business groups, namely Aburizal Bakrie, Fuganto Widjaja, Sandiaga Uno, Edwin Soeryadjaya, Garibaldi “Boy” Thohir, Erick Thohir, Agus Lasmono, and Low Tuck Kwong. In addition, there are other businessmen with relatively low coal production volumes, yet with strong networks in circles of tycoons, politicians, military officers, and government elites.
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1. The Bakrie Family and PT Bumi Resources
Aburizal Bakrie, familiarly called Ical was born in Jakarta on November 15, 1946. Ical is the eldest son of Achmad Bakrie, the founder of the Bakrie Group business. Ical entered his father’s business in 1972 by serving as an assistant to the board of directors of Bakrie Group’s holding company PT Bakrie & Brothers. The Bakrie Group itself started venturing into the coal business in 2001, the year when PT Bumi Resources acquired the majority of shares of PT Arutmin Indonesia, the country’s fourth-biggest coal producer.
The Bakrie Group’s coal business was highly successful, turning Ical and the Bakries into the richest family in Indonesia in 2007 according to Forbes Asia, with a total wealth of US$5.4 billion. Fast forward to 2008, Globe Asia named Ical the richest man in Southeast Asia, with a total wealth of US$9.2 billion. PT Bumi Resources’ stock price stood at only Rp 67 (less than one US cent) at the end of December 2021, though it once reached Rp 8,750 in June 2008. The company’s steep decline in the stock market has primarily been caused by the company’s piled-up debt, forcing the Bakrie family to release their stocks to creditors. The Bakrie Group has previously been trapped in a debt worth billions of US dollars due to the 1997 Asian financial crisis. Nevertheless, PT Bumi Resources still retains its status as the biggest coal holding company in Indonesia, with production amounting for 81.1 million tons throughout 2020. Ical has no longer played a direct role in company management.
Political Connections
It’s impossible to talk about Ical without at the same time bringing up the Golongan Karya (Golkar) Party, the political group once defined by the Soeharto dictatorship. Ical once served as the party’s chairman for the 2014-2019 term. He currently leads the party’s advisory board, for the 2019-2024 period. Golkar’s chairman Airlangga Hartarto, for instance, currently serves as Coordinating Minister for Economic Affairs. He is affiliated with two coal companies: PT Bara Hanyu Kapuas and PT Multi Harapan Utama. Golkar board of advisors chairman, Luhut Binsar Pandjaitan, meanwhile, currently serves as Coordinating Minister for Maritime Affairs and Investment. He owns a coal company called PT Toba Sejahtra. His nephew, Pandu P.
These prominent names aside, there’s also Tri Hanurita, another Golkar cadre who is the daughter of Sudwikatmono, the nephew of former President Soeharto. Tri is the older sister of Agus Lasmono, the boss of yet another mining giant PT Indika Energy. Tri’s husband is Maj. Gen. (ret.) Dessano Indrasakti, a staff members serving as Defense Minister Prabowo Subianto’s economics expert.
Connections with Sinar Mas Group
The Bakrie Group also has connections with the Sinar Mas Group, established by tycoon Eka Tjipta Widjaja. The connection seems to be a strong one considering the fact that Nirwan Bakrie, Ical’s younger brother, is rumored to have a close friendship with Franky Oesman Widjaja, one of Eka’s sons. At least during the recent decade, the Sinar Mas Group has seemed very eager to take over Bakrie Group’s assets, including property, palm oil and mining assets, while the latter appeared to be catching their breath in the midst of a tangle with debt. On the other hand, the Bakrie Group crown prince Anindya also has a very close connection to the State-Owned Enterprise Minister Erick Thohir, who once served as the general director of TV One, owned by the Bakrie family.
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Rosan and Sandiaga Uno, the Tourism and Creative Economy Minister, are both alumni of the Pangudi Luhur High School. Both of them founded financial company PT Recapital Advisors in 1997.
2. The Widjaja Family and Sinar Mas Mining Group
Fuganto Widjaja, born on Oct. 29, 1981, is a third-generation member of tycoon family Widjaja. His grandfather Eka Tjipta Widjaja, who died in January 2019, is the founder of the Sinar Mas Group business empire. Nobody knows for sure the exact number of Eka’s wives, children and grandchildren. At the end of the 1990s, it was estimated that he had at least eight wives and more than 40 children.
The Sinar Mas Group is divided into several main divisions. Four of Eka’s children - Teguh Ganda Widjaja, Indra, Muktar Widjaja and Franky Oesman Widjaja - handle different divisions, along with their sons and daughters. Teguh handles the paper and pulp business while Indra and Fuganto supervise the financial and mining businesses. Muktar controls the property business while Franky leads the agribusiness, telecommunications and energy sectors. Now, Fuganto leads the Sinar Mas Mining Group as its CEO. Within the group, there are Golden Energy and Resources Limited and PT DSSE Energi Mas Utama, two big holding companies for at least 39 companies, which have coal concessions or produce coals in Indonesia and Australia. In total, the Sinar Mas Mining Group produced 60 million tons of coal in 2020.
Aside from serving as the Sinar Mas Mining Group CEO, Fuganto also holds an important position in several of the group’s companies. For one, he is the executive chairman of the Golden Energy and Resources Limited, president commissioner of PT Roundhill Capital Indonesia, as well as the commissioner of PT Golden Energy Mines and PT Borneo Indobara.
Relationship with the Bakrie Group
Indeed, the Sinar Mas Group has a special relationship with the Bakrie Group. Nirwan Bakrie, Aburizal Bakrie’s younger brother, is rumored to have close connections with Franky, one of Eka’s children.
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Military Connections
The Sinar Mas Group assigns some influential people in various strategic positions in a number of its companies. One of them is Gandi Sulistiyanto. He is a friend to Gibran Rakabuming Raka and Kaesang Pangarep, President Joko Widodo’s sons. He once served as the managing director of the Sinar Mas Group and the chief commissioner of PT Berau Coal Energy. In addition to Gandi, there are also figures with military backgrounds. Suwandi, the executive director of PT Berau Coal Energy and PT Borneo Indobara, had a long career in the Army. His last rank was Major General. Meanwhile Marsetio, the deputy chief commissioner of PT Berau Coal Energy, used to be the Navy chief of staff for the 2012-2015 period with the last rank of admiral.
3. The Thohir and Soeryadjaya Families and PT Adaro Energy
Sandiaga Salahudin Uno was born in Riau on June 28, 1969. His father Razif Halik Uno once worked for Caltex, a joint venture launched by two American oil companies: Texaco and Chevron (they merged in 2001). In 1990, Sandi, as he is familiarly called, obtained an undergraduate degree in business from Wichita State University in the US. He then worked for a year in Bank Summa, owned by tycoon William Soeryadjaya’s family, while also being mentored by the founder of the conglomerate Astra Group. He also received a master’s degree in 1991, on scholarship, for the same major at George Washington University and graduated two years afterward.
Sandi lived a privileged life, but 1997 changed everything. A financial crisis hit the world and gave his employers no choice but to cease operations. In 1998, Sandi was asked by Edwin Soeryadjaya, one of William’s sons, to help him seal an investment deal with a foreign company in Indonesia. The transaction was completed smoothly, paving the way for Sandi to join Edwin’s business full-time, helping him develop the investment company PT Saratoga Investama Sedaya. Sandi’s business grew rapidly. In 2002, Saratoga started to invest in the Adaro Group, which is currently led by Garibaldi “Boy” Thohir, the older brother of State-Owned Enterprises Minister Erick Thohir. As of 2020, Saratoga owned 58.46% of PT Adaro Energy - Adaro Group’s coal holding company - comprising direct and indirect ownership.
Sandi also once served as the executive director of Saratoga and director of Adaro Energy. But, he resigned from both positions not long after he joined the Grand Indonesia Movement Party (Gerindra) led by Prabowo Subianto in April 2015. According to 2020 data, Sandi still owned 21.51% of Saratoga’s direct shares. His older brother, Indra Cahya Uno, served as a commissioner there. Meanwhile, his longtime partner Edwin owned 65.82% of the company’s direct and indirect shares while serving as Saratoga’s president commissioner.
Recapital and PT Berau Coal Energy (BCE)
On the other hand, Recapital acquired coal company PT Berau Coal Energy (BCE) on Dec. 30, 2009. After 12 days, BCE’s subsidiary PT Berau Coal (BC) formed a partnership with Velodrome Worldwide, based in Seychelles, a tax haven island nation in the Indian Ocean. BC agreed to pay US$2 million per month for the business and operational consultancy services provided by Velodrome, without any detailed explanation regarding the provided services. According to a Panama Papers investigation released by the International Consortium of Investigative Journalism in 2016, Sandi was Velodrome’s sole shareholder and director between October 2007 and May 2009. Sandi also served as BC’s commissioners board member from March 2010 to June 2013. Meanwhile, his close friend Rosan served as BC’s executive director from August 2010 to March 2013. Therefore, the two of them had total control over BC when that company paid millions of US dollars to Velodrome. For what kind of service, nobody knows exactly.
In December 2011, the majority of BCE’s shares was taken over by Bumi PLC, which at that time was collectively owned by the Bakrie family, tycoon Samin Tan, prominent British businessman Nathaniel Rothschild, as well as Recapital.
Political Career
Sandi became a household name when he and Anies Baswedan were running for office in the 2017 Jakarta gubernatorial election. They won. Yet, after serving as Jakarta deputy governor for only a year, Sandi resigned from his position to become Prabowo’s running mate in the 2019 presidential election. The two lost, but each got a slot in the cabinet. Currently, Sandi also serves as the board of advisors’ deputy chairman for the Gerindra Party, which Prabowo still leads.
4. Edwin Soeryadjaya and Saratoga Investama Sedaya
Edwin Soeryadjaya was born in Jakarta on July 17, 1949, the offspring of William Soeryadjaya and Lili Anwar. Edwin joined Astra in 1978. He developed his career there until eventually he was trusted to serve as the company’s deputy executive director. in 1979. He acquired Bank Agung Asia in 1988, then changed the company’s name into Bank Summa. William came to his son’s rescue by taking over Bank Summa’s ownership, using his share ownership in Astra as a collateral, before ultimately selling 100 million of Astra’s 242 million stock options at an affordable price to help settle Bank Summa’s responsibilities to its customers. Astra signed the debt restructuring deal in 1999.
During the difficult period, Edwin met Sandiaga Uno, who was also going through some financial troubles after the company which he worked for in Canada collapsed. In 1998, they agreed to develop Edwin’s investment company PT Saratoga Investama Sedaya. In 2002, Saratoga started to invest in the Adaro Group, which Garibaldi “Boy” Thohir currently leads. Boy is the older brother of State-Owned Enterprises Minister Erick Thohir. As of 2020, Saratoga’s ownership of PT Adaro Energy - Adaro Group’s coal business holding company - was reported to account for 58.46% of the company, both directly and indirectly. As of 2020, Edwin owns 65.82% of direct and indirect shares and serves as the president commissioner of Saratoga, which controls Adaro Energy.
Political Influence and Policy
The presence of a number of coal oligarchs with strong networks and political influence in the government led to a policy flip-flop on some crucial energy and mining measures in the past several years. The government canceled a plan to cap annual coal production at 400 million tons starting in 2019. Indeed, Indonesia has Airlangga Hartarto, Surya Paloh, and Hary Tanoesoedibjo, chairmen of three different political parties who also have coal businesses. However, the size of their coal businesses is relatively small as they earn a bigger fortune in other sectors. Despite his current post as Coordinating Minister for Economic Affairs, Airlangga does not have a strong military network like Prabowo and Luhut.
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