Indonesia, the world’s fourth most-populated country and third largest democracy, has attracted global media attention for its fight against high-level political corruption. Indonesia’s Corruption Eradication Commission (the Komisi Pemberantasan Korupsi, or KPK), which was established in 2004, has successfully prosecuted officials across the political spectrum and at levels ranging from corrupt city council members to the well-connected relatives of high-ranking central government officials. Yet despite the KPK’s many successes, corruption remains pervasive in resource extraction industries in Indonesia’s outlying islands. This entrenched corruption is a matter of concern not just for Indonesia but for the whole world, because corruption in this sector could kneecap efforts to control greenhouse gas emissions and could threaten the global transition to a green economy. The two sectors where this threat is most serious are nickel ore mining and palm oil farming:

• Indonesia is the world’s dominant producer of nickel ore, accounting for a little over 40% of the mineral extracted in 2023. The process for licensing new nickel mines is riddled with corruption. One local NGO in 2016 found that nearly 40% of mining operations should have been deemed ineligible to operate because of failures to meet required anticorruption and transparency standards, a figure that reached 73% in some regions. Another investigation, in the provinces of Central and Southeast Sulawesi, found that an official opinion “legalizing” a non-compliant mining operation could be purchased for a bribe of about 5.5 billion Rupia (approximately $380,000). Local law enforcement agencies in many nickel mining regions often decline to enforce restrictions on illegal mines thanks to “coordination fees” paid to their offices on a per-ton basis. The spread of illegal mining has taken a heavy environmental toll, with unlicensed mines irreversibly stripping 7,000 hectares of Indonesia of the ability to support forests. The government has begun to prosecute corruption related to nickel mining permits, and in 2023 the government paused the issuance of all nickel mining output quotas while anticorruption investigations are ongoing (see here and here). While this may appear to be progress, it is actually counterproductive. Nickel is absolutely essential to any global low-carbon economic transition, given its central role in the production of batteries and, consequently, electric vehicles. Consequently, halting nickel production entirely, in place of developing a strategy to identify and prosecute specific instances of permitting corruption, has deprived producers of goods needed for a global climate transition of a critical input.

• Indonesia is also the dominant producer of palm oil, accounting for 57% of global production. As in the nickel mining industry, bribery is a baked-in part of the Indonesian palm oil industry (see here and here), and this corruption leads to significant and excessive deforestation to clear space for unlicensed palm plantations (see here and here). This deforestation could have devastating global consequences. Beyond plantations’ well-documented impact on local biodiversity, permitting corruption has allowed plantation owners to push into protected peatlands that contains about 5% of the world’s stored carbon. A single large peatland project can produce carbon emissions equal to Belgium’s entire economy annually.

Despite the fact that corruption in the natural resource sector produces more than three times the amount of state losses as corruption in the Indonesian financial, transportation, and utility sectors combined, as of 2020 cases related to corruption in the resource sector industries represented a little more than 6% of the KPK’s prosecutions. Even fewer of those involved the corporations that serve as the primary instigators of corruption in extractive industries (see here and here). Why has the KPK, which has had so much success in tackling corruption elsewhere in the Indonesian state and economy, failed to adequately address corruption in these globally important extractive industries? The answer to this question may lie in some of the institutional features which have contributed to the KPK’s success elsewhere.

• First and foremost, the KPK is quite risk averse, and is reluctant to bring hard cases that it might not win. Since relatively early in its history, the KPK has focused on quantified performance management, and has come to place great stock in maintaining its near-100% conviction rate. Going after corruption in the natural resources sector would put this figure at risk. Both nickel mining operations and palm oil plantations are often operated through complex, opaque, cross-border shell company arrangements. These cases are much harder to prosecute than cases involving individual officials who demand or receive bribes, and therefore represent a far greater challenge for the KPK’s relatively small (and shrinking!) staff. This problem is exacerbated by the Indonesian legal system itself, which has an underdeveloped, vague, body of law relating to corporate liability, which itself has deterred the KPK from prosecuting natural resources-related corruption perpetrated by corporations. Consequently, in an effort to maintain the appearance of its overall success, the KPK has allowed environmentally damaging natural resources-related corruption to fester.

• Additionally, the KPK’s highly-praised system of recruiting high-performing police officers and prosecutors from across the country to come to the commission’s office in Jakarta may have an inadvertent “brain drain” effect, pulling away the most capable regional law enforcement officers from Indonesia’s geographic periphery—where nickel and palm oil production are concentrated, and where most of the relevant corruption takes place (see here and here).

There is little reason to believe that the KPK or the rest of the Indonesian state will fix these problems on their own. Recent efforts to tie the KPK more tightly to Indonesia’s executive have diminished its once-robust independence and compromised its prosecutorial effectiveness. The Indonesian government appears less interested in expanding the KPK’s ability to tackle new forms of corruption than in restricting its ability to act within its core mandate. Given the potentially catastrophic impact of unresolved corruption in its natural resources sector, this inaction and unwillingness to adapt the KPK’s capabilities to address new forms of corruption should concern both Indonesians and the world.