Indonesian Businesses Battle 'Premanisme': A Threat to Investment Climate

The Extortion Epidemic Affecting Indonesian Businesses

Indonesian companies are facing a growing challenge from extortion practices known as 'premanisme', which is significantly impacting their operational costs and overall investment climate. According to Vice Minister of Investment Todotua Pasaribu, these illegal practices are estimated to cost businesses between 15% to 20% of their investment and production expenses. This substantial financial burden is creating a challenging environment for both local and foreign investors.

Multiple Actors Involved in Extortion Practices

The premanisme phenomenon involves various actors across different levels of society. Todotua identified that these extortion practices are not limited to organized community groups (ormas) but also extend to government officials and institutions. This broad involvement complicates efforts to address the issue, as it requires coordination across multiple sectors and levels of government.

Economic Impact and Investor Confidence

The financial impact of premanisme is substantial, with research suggesting that it contributes to 15-40% of investment and production costs. This not only affects the bottom line of businesses but also deters potential investors. The case of alleged extortion by Kadin Cilegon against contractor PT Chandra Asri had a particularly negative impact on investor confidence, demonstrating how such incidents can have far-reaching consequences for the national investment climate.

Government Response and Future Directions

The government is taking steps to address this issue, recognizing the need to provide certainty and security for businesses operating in Indonesia. Todotua emphasized that the state must be present to ensure a secure investment environment. The government plans to closely monitor the situation and implement measures to curb these extortion practices, though specific details of the initiatives remain under development.