Development and Aid

Report “Indonesian Coal-fired Power Exposed to Corruption – Cirebon coal-fired power project: problems on environment, human rights, and corruption, and banks’ non-compliance with international norms” was published

Contribution day:December 05, 2019

The UN Climate Change Conference (COP25) is taking place in Madrid, Spain from December 2 to 13. JACSES, in cooperation with other NGOs, jointly published a case study report “Indonesian Coal-fired Power Exposed to Corruption – Cirebon coal-fired power project: problems on environment, human rights, and corruption, and banks’ non-compliance with international norms.”

This report shows the compliance status of international CSR norms in Cirebon coal-fired power project, which is financed by Mizuho Bank, Sumitomo Mitsui Banking Corporation (SMBC), and MUFG Bank. in cooperation with Japan Bank for International Cooperation (JBIC), The Export-Import Bank of Korea (Kexim), and ING Bank. It revealed that 43 non-compliances with the Equator Principles and IFC Performance Standards, 13 with the UN Global Compact, and 10 with the OECD Guidelines for Multinational Enterprises.

Especially since April 2019, allegations of bribery have been raised: a Korean company, Hyundai Engineering and Construction Co., Ltd. (HDEC), which is an EPC contractor for Unit 2, had provided a large amount of illegal money to the former Cirebon Regent. The Indonesian Corruption Eradication Commission (KPK) has already identified the former Cirebon Regent as a suspect of money laundering, including bribery related to the Unit 2 project. In November 2019, KPK has also identified a former General Manager of HDEC as a suspect of bribery related to the permission for the Unit 2 project. In addition, two former senior managements of the project company, in which Marubeni and JERA (joint venture of Tokyo Electric Power Company Holdings and Chubu Electric Power) are investing, have been prohibited to travel abroad. The project company and EPC contractor’s involvement in alleged bribery and the way of doing it are clearly stated in details in the verdict document (May 2019) of another bribery case that the former Cirebon Regent was convicted. Meanwhile, the alleged bribery related to the Unit 2 project got questions at the national parliamentary audit of the Korean Parliament, and the senior executive of HDEC made an answer implying the flow of money related to land disputes.

In addition to the above, this report found issues on lack of appropriate compensation and measures to restore livelihoods; lack of use of the best available technology (BAT) in pollution control; inadequate environmental impact assessment (EIA) and lack of adequate and sufficient public participation in its development process; the administrative lawsuit and the risk of illegality; human rights violations against local residents; and backward movement against measures to climate change. The banks ought to carry out an appropriate due diligence prior to making any further loan disbursement.

The English summary is available at the Fair Finance Guide Japan site.

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