Tue, Oct 23, 2018 - Page 9 News List

Bribery probe hurts one of Southeast Asia’s biggest projects

Expanding its probe into the Meikarta project, Indonesian officials searched the home of Lippo Group’s vice chairman, sparking concern about the project’s sustainability

By Harry Suhartono and David Yong  /  Bloomberg

Illustration: Yusha

The home of Lippo Group deputy chairman James Riady on Wednesday was searched by anti-graft officials, the latest development in a bribery probe that has entangled one of Indonesia’s leading business conglomerates and thrown into doubt the future of a major development project touted as the “Shenzhen of Indonesia.”

The nation’s Corruption Eradication Commission, known as KPK, conducted a search on 10 locations, including Riady’s home and the house of a senior executive at Lippo Group who was arrested, KPK spokesman Febri Diansyah said in a text message.

The agency secured documents related to permits, financial records and electronic devices.

The moves followed the detention last week of the Lippo Group director, along with another employee, two consultants and government officials from the Bekasi regency in West Java Province in a bribery case related to the development of the project. It is called Meikarta.

“Given all these headlines regarding permits issues, we are concerned about the sustainability of the Meikarta project, both from sales as well as funding concern,” Trung Nguyen, a senior credit analyst at Lucror Analytics Pte, wrote in a report.

Nguyen wrote that the credit bias for the group remains “negative” given the deterioration in its financial profile, as well as issues such as permits and the bribery case.

“We confirm that a search did occur at James Riady’s residence,” Sylvia McKaige, a spokeswoman for Riady, wrote in an e-mailed statement. “There were no documents or items found or seized in relation to the case. Mr Riady remains fully committed to assisting the KPK in their efforts as is necessary.”

The Meikarta bribery case may cause investors to become cautious as it follows KKR & Co’s struggle to protect its investment in Indonesia’s PT Tiga Pilar Sejahtera Food and Goldman Sachs Group Inc’s court battle with PT Hanson International.

The arrests might bolster Indonesian President Joko Widodo’s image as being tough on corruption ahead of a presidential election scheduled for early next year.

This is the second time Lippo has become involved with the anti-corruption agency, which identified the director only as “BS.” Local newspapers Bisnis Indonesia, Jakarta Post and Kompas identified him as Billy Sindoro. Sindoro was sentenced to three years in prison in 2009 for bribing Indonesia’s antitrust agency, according to KPK.

While the alleged bribe of 13 billion rupiah (US$856,444) is tiny compared with the millions in alleged illegal kickbacks in the national electronic identity card contract program in 2010 and the bailout of PT Bank Century in 2008, it highlights the difficulties that companies face in navigating the approval system for projects in Indonesia.

The planned 278 trillion-rupiah development, covering 22km2 of the Bekasi-Cikarang District on the outskirts of Jakarta, is the largest undertaking in Lippo’s 68-year history. It would provide access to what would be the first high-speed train in Southeast Asia and gardens modeled on Manhattan’s Central Park. The group has said the project would be jointly funded by partners such as Mitsubishi Corp, Toyota Motor Corp and Sanko Soflan Holdings.

The project, developed by PT Lippo Cikarang’s unit PT Mahkota Sentosa Utama, has already completed residential towers and pre-sold thousands of units.

This story has been viewed 4752 times.

Comments will be moderated. Keep comments relevant to the article. Remarks containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned. Final decision will be at the discretion of the Taipei Times.

TOP top