The big sell-off

by Dinu Gautier - WOZ | 24 Feb 2021
Free trade for Indonesian fishermen and women? They already struggle to compete with imports – and now import duties are set to be removed. Image: Marko Reimann, Alamy

Indonesia rolls out the red carpet for foreign investors. According to local activists and observers, the free trade agreement between Indonesia and Switzerland is part of a strategy that will have dramatic consequences - and it goes way beyond the palm oil question.

Andreas Harsono has seen and experienced many things. For the past forty years, he has been observing the Indonesian human rights situation – previously as a journalist and presently for Human Rights Watch in Jakarta. But the way that the Government is currently shaking up the country has even left a veteran like Andreas rather stunned: “they are passing a law that will change the lives of all Indonesians – and they are doing so with a complete lack of transparency; bureaucrats, politicians and big business, keeping to themselves, without involvement from trade unions, NGOs and without representatives from small-scale farmers or fishing communities”.

The law in question is the so-called Omnibus Law, which, under the cover of the pandemic, was drafted and pushed through parliament in record time, and was subsequently passed in October 2020. It contains over a thousand pages of new regulations, with dozens of existing laws also affected by them. The law only has one objective – to attract foreign investors. The main consequences of the law can be summarised as follows: the dismantling of workers’ rights, the centralisation of power in Jakarta and ending environmental assessments and other requirements for businesses.

For a long time, the draft legislation was not made public at all and most in Parliament were not aware of it, says Andreas Harsono – because the consultations were delegated in a committee. Harsono goes on to say: “this resulted in many parliamentarians approving a law which they had not even read”. All over the country and despite the pandemic, hundreds of thousands came together to protest against the Government’s law – one of the greatest mobilisations since the fall of dictator Suharto in 1998. However, protests were to no avail.

Kartini Samon, a researcher and activist for the NGO GRAIN, who represents the interests of small-scale farmers, summarises: "this is the big sell-off: the rights of the population are being auctioned off as we roll out the red carpet for big business". Here Samon emphasises that the Omnibus Law should not be viewed alone: "it is inextricably linked to the Government's new free trade strategy". With this she also explicitly refers to the free trade agreement with the states of the European Free Trade Association (EFTA), Iceland, Liechtenstein, Norway and Switzerland, which will be voted on, on the seventh of March. According to Samon, Omnibus is the law implementing the commitments made within the free trade agreements. Iqra Anugrah, an Indonesian political scientist at the University of Kioto evaluates the situation similarly: “the Omnibus Law is a change of paradigm which will take the exploitation of natural resources to a new level. The law is the logical consequence of the free trade agreements, like the one currently being negotiated with EFTA”.

The agreement that Switzerland, Liechtenstein, Iceland and Norway negotiated with Indonesia concerns three main areas: the elimination of customs duties for the movement of goods, an improvement of the investment climate for foreign companies and the protection of intellectual property. In Switzerland, the debate has so far primarily focused on the movement of goods and the reduction of customs duties, more specifically on the few tonnes of crude palm oil that reach Switzerland directly from Indonesia. However, when speaking to NGO representatives and experts on the ground in Indonesia, it quickly becomes clear that the other two areas seem to present a much greater concern.

Investments: the scramble for resources

In a number of economic sectors, companies from Switzerland will soon be treated like domestic firms – provided they invest at least $700,000 (USD). This is stated in the free trade agreement, to which the Government has attached a number of so-called positive-lists. These lists define the economic sectors that the regulation will apply to and include the majority of the country’s agribusiness, including: palm oil, the mining industry, coal, oil and gas, cement and fertiliser production and the hotel business (with a minimum of three stars). Up until today, the aforementioned sectors have every now and then given rise to massive conflicts over land and have resulted in expropriation, displacement, environmental destruction and harming people’s health. Many of these sectors previously tolerated only minority shareholdings for foreign companies; some were even reserved for Indonesian actors.

"Until now, investments also had to be approved by regional governments" says activist Kartini Samon. "On the one hand, this led to regional corruption, however, on the other hand, the local population had the opportunity to fight back - and sometimes they were successful in doing so". According to Samon, The Omnibus Law, centralises the approval process in Jakarta and abolishes any kind of environmental assessment. “The message to multinationals is clear: come to Indonesia, don’t worry, we’ll make anything possible for you here”. Yet, officials in Jakarta often have no idea of the situation on the ground and only have poor, contradictory, maps at hand. This has resulted in “land that has been cultivated by local communities for generations being assigned to an investor because the communities are not marked on the map”. She anticipates that even more farmers and fishermen and women will be robbed of their livelihoods and driven to urban areas.

Rachmi Hertanti is the Director of Indonesia for Global Justice in Jakarta, an Indonesian NGO. She believes that several points found in the free trade agreement and the Omnibus Law violate Indonesia's Constitution: "the Constitutional Court has set the maximum permissible shareholdings for foreign companies for various economic sectors - which the government now disregards". And because concessions made to these companies would henceforth be incorporated in international treaties, it would be very difficult to overturn them again in the future.

Patents: the looting of seeds

In their criticism of the free trade agreement, both Rachmi Hertanti and Kartini Samon place particular emphasis on the area of intellectual property, particularly on the issue of seeds. By entering the EFTA agreement, Indonesia is bound to the standards of an international agreement called UPOV 91. With the aim of enforcing intellectual property rights on plant breeding, the agreement goes extremely far. In line with this agreement, farmers will de facto no longer be allowed to exchange or resell seeds and, in some cases, may not even replant them. This means they may not be allowed to use seeds from their own harvest to sow for the next season. From now on, the entire seed trade will have to be handled by licensed traders.

"It will no longer be possible for small farmers to farm legally", says Hertanti, who is particularly bothered by the fact that Switzerland only implements these standards with a range of exceptions, while strictly imposing them on Indonesia.

Kartini Samon is also worried about multinational biopiracy: "They get here, bag local varieties and in the end, farmers have to pay licence fees for their own varieties”. Syngenta, the only Swiss company that is involved in this business on a large-scale, has been present in Indonesia since the 1960s. The company, among other things, sells pesticides with the active ingredient Paraquat, a toxic chemical which has long been banned in Switzerland and the EU, however is used widely on Indonesian monoculture plantations such as oil palm cultivation.

"Sustainable" trade? A good joke

Some members of the Swiss Social Democratic Party (SP) and certain environmental organisations, such as WWF, are in favour of the fair trade agreement with Indonesia as it only grants customs reductions on imported palm oil that is certified as ‘sustainable’ (see WOZ No. 4/2021). However, the amount of palm oil in question is extremely small: Swiss palm oil imports from Indonesia have accounted for only 0.003% of all Indonesian exports over the last few years. Meanwhile, The Swiss Federal Council is proud of the fact that 98% of Indonesian import duties on Swiss products will be gradually phased out. The agreement also contains a chapter that emphasises general sustainability goals. However, tellingly, the content of this chapter is, unlike the other chapters, excluded from the agreement’s dispute settlement mechanisms.

When asked about the sustainability goals, Kartini Samon simply laughs - anyone who has seen oil palm monocultures knows that the term is absurd. "The concept of sustainability in this agreement is an empty formula", something which is already evident in the immediate effects. Due to a lack of papers and financial means, small-scale farmers are unable to certify their products as ‘sustainable’, and no fisherman or woman exports his or her catch. Samon noted that "on the contrary, frozen fish from Iceland and Norway already competes with locally caught produce on local markets - and now custom duties are being reduced as well". For Samon, it is clear: "if real sustainability and the fight against the climate crisis are truly important to us, we don't need more free trade, but much less."

A ray of hope

"Civil society is much more united again", says political scientist Iqra Anugrah when asked if there is also reason to hope. Anugrah goes on: “the Omnibus Law has made it clear to all stakeholders that false hope had been placed in President Jokowi”. According to Anugrah, the streets in particular have shown that a new generation is ready to fight: "the presence of students and even schoolchildren in the protests was very strong ". The challenge now, says Anugrah, is to take this rather loose movement and build a politically powerful coalition.

Human rights activist Andreas Harsono concludes that it is perfectly alright for people to want to trade with each other at eye level. Harsono continues: “but the way things are going, we are endangering the future of our children. We should always remember that money is not everything in life. And that we live in a very fragile world".

Economic development : Gigantic investments

Indonesia is a huge country. The east-west expanse of the archipelago roughly corresponds to the distance from Bern to Kabul. In between: 13 000 to 18 000 islands (the number is disputed) and over 270 million inhabitants. Half of the population live in rural areas. While in 2010 almost 40% earned their living with agriculture or fishing, this figure has fallen to less than 30% in the last ten years.

The island of Java, where more than half of all Indonesians live, is the economic and politically dominant part of Indonesia. President Joko Widodo (also called: Jokowi), who has ruled the country since 2014, has promised to bring economic development to the regions outside of Java. The plans his government are pursuing are gigantic. Between 2020 and 2024, approximately $430 billion (USD) are to be invested into infrastructure alone, with the private sector set to contribute about $180 billion (USD).

For example, an almost 3000-kilometre-long motorway is to be built across the island of Sumatra. Six strategic ‘corridors’ for economic development have been defined: one of them is located in eastern Indonesia, where a war against the local population is currently being waged (see WOZ No. 3/2021). Here, large-scale investments are to be made into food production, fishing, the exploitation of mineral resources and energy production.

Furthermore, the Government is pursuing plans to relocate the capital Jakarta to Kalimantan, the Indonesian portion of the island of Borneo because the megacity Jakarta is sinking. Next to regional free trade and its free trade agreement with the EFTA states, Indonesia is currently striving to enter a free trade agreement with the EU.

Dinu Gautier

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Author: Dinu Gautier - WOZ
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