In Indonesia, a power plant impasse and a faltering president

Indonesian Presidential Candidate Joko Widodo.
Oscar Siagian | Getty Images
Indonesian Presidential Candidate Joko Widodo.

Indonesia announced with great fanfare in 2011 that it would build Southeast Asia's biggest coal-fired power plant on the island of Java, but the $4 billion project is yet to be launched and President Joko Widodo is on the horns of a dilemma.

After repeated delays and at least two revisions to land acquisition laws holding up the Japanese-backed project, Widodo told investors in Tokyo last month that construction of the desperately needed plant would finally start within weeks.

But to do that he may have to evict dozens of landowners who are refusing to give up their rice paddy fields to make way for the plant - and deal another blow to his declining popularity.

There is no sign yet of what Widodo will do about the coal plant in the Batang region of Java. But his predicament is emblematic of the headwinds he has run into since taking office last October.

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Back then, the hopes of voters and investors alike were high that he would break the mould of old-style politics, root out corruption and start fixing the country's woeful infrastructure. Six months in office, he is increasingly being seen as a throwback to the past.

"There are political pressures dragging down the economic reforms," said a senior official at the presidential office, who asked not to be named. "Because of that we're losing momentum."

Once a little-known furniture salesman, Widodo was propelled to the presidency by popular admiration for his no-nonsense administration and the pro-poor health and education policies he championed as governor of Jakarta, the country's capital.

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The slide in global oil prices handed him an early opportunity to brandish his reformist credentials with a cut in the fuel subsidies that have long weighed on state finances.

But the honeymoon did not last long.

His decision to nominate a chief of police who was later implicated in a corruption probe provoked a political storm that raised doubts about his ability to rise above entrenched vested interests. Meanwhile, an opinion poll taken at the end of January found that his approval rating had plunged to 42 percent from 72 percent just six months earlier.

Investors are hoping he will rise above popularity worries.

"Perhaps it is a little bit of a political courage issue," said Raj Kannan, managing director at the Jakarta-based Tusk Advisory, which focuses on the infrastructure sector.

"Somebody to take the bull by the horns to make it work. The best solution is for the president to get involved himself."

Personal interest

Widodo has taken a keen personal interest in getting the 2,000-megawatt Batang project underway, dispatching his vice president to the site within weeks of being sworn in and demanding regular updates on its progress. He has also introduced regulatory changes that make it easier to seize land and obtain funding for Batang and other major projects.

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But 74 landowners, representing the last 12 percent of the 226 hectares needed for the plant, are still refusing to sell, the group's spokesman said. The state-owned electric company PLN, however, disputes this, saying only one or two hectares are yet to be acquired.

"We've had thousands of visits, sometimes twice a day," said 72-year-old rice farmer Komaidi, who has rebuffed a procession of officials sent to convince him to sell his small plot. Komaidi, who like many in Indonesia goes by one name, says the fields are all he has to raise his family of 11 children.

Batang, like many other large development projects in Indonesia, has been bogged down for years by legal wrangling.

Bhimasena Power Indonesia, a joint venture company set up by Indonesian coal miner Adaro Energy and Japan's Itochu and Electric Power Development (J-Power) to operate and build the plant, sent a force majeure notice to contractors last year due to the land standoff.

The project also faces stiff opposition from local fishermen and environmental groups like Greenpeace, who say pollution from the plant could threaten nearby waters.

The plant, which will supply power to millions of Indonesians in Java and Bali islands, is a central part of the president's five-year plan to add an additional 35,000 megawatts of power capacity to the current 50,000 megawatts.

Construction must start within weeks if the government hopes to meet its 2018 target for the start of operations.

But with the administration unable to seal the deal, Widodo announced this week he would get directly involved and travel to Central Java later this month to meet the farmers.

If negotiations remain deadlocked after the president's visit, a palace official said the government could take the land under new regulations that allow for the procurement of private property when it is in the public interest.

But the farmers insist they won't budge.

"They have been threatening us like this from the start," said Haruji, a 40-year-old rice farmer in Ponowareng village, whose streets are decorated with banners and graffiti opposing the power plant. "We will be united against that. We will hold on for as long as we can."