Business owner: Why be afraid of thugs, on payment day, it's safe.
A spate of recent media reports about rampant extortion of foreign and domestic companies by so-called social or mass organisations (ormas) is hardily news for anybody familiar with running a business in Indonesia.
A study by Transparency International Indonesia (TII) found that illegal levies can eat up as much as 30 percent of a company's total production costs. While that figure represents extreme cases, even 5 percent can make or break an investment decision.
The issue also extends beyond the actual financial losses incurred as it taints the overall image of Indonesia as a place for doing business. And unlike additional production costs due to wages or materials that can be booked as an official expense, levies and bribes paired to illegal actors are unpredictable and unaccountable.
According to the Indonesian Industrial Estates Association (HKI), industrial estates like those in Karawang, West Java, and Batam, Riau Islands, are prime hunting grounds for extortion. This is particularly troubling because those zones promise legal clarity and cost predictability as key selling points for companies to set up shop there.
The HKI says illicit payments extracted from investors have cost Indonesia hundreds of trillions of rupiah due to projects being cancelled and companies pulling out. Failure to comply with the payment demands can see factories blocked by demonstrations or property vandalised.
And while the government frequently makes tough sounding declarations about eradicating thuggery, and the police have launched several operations against groups implicated in protection rackets and shakedowns, these have been largely symbolic and ineffective as these groups often have close links with influential politicians, the military and police.
One of the largest and most high-profile groups for example is the United Indonesian People's Movement (GRIB), which was established by notorious crime boss "Hercules" in 2013 and has President Prabowo Subianto as head of its advisory board.
GRIB publically backed Prabowo's presidential bids in 2014, 2019 and 2024, and has been able to expand rapidly, opening new branches around the country since Prabowo took office in October last year.
