Jokowi's US$4b model power plant faces day in court over land

[JAKARTA] Indonesia's top court will rule whether the state can forcibly purchase land from farmers refusing to make way for a power plant, a test of President Joko Widodo's efforts to get stalled infrastructure projects moving.

Construction of the US$4 billion Batang coal-fired station on Java island was supposed to begin in 2012 but has been held up by villagers unwilling to sell their land, a common obstacle to projects in Indonesia.

Mr Joko, better known as Jokowi, formally kicked off work at the site in August, yet three months later full-scale construction has not begun.

Delays on the plant have undermined Mr Joko's image as a can-do reformer, after he was elected last year promising to overhaul Indonesia's power supply and transport network to help revitalise economic growth.

The government announced in June it will apply a never before-used law that allows for compulsory land purchases for projects in the public interest, and villagers backed by Greenpeace are challenging that in the Supreme Court.

"By the end of the year the court case will be settled," said Ganjar Pranowo, the governor of Central Java province, where the plant is located. He predicts the court will toss out the challenge. "And then we will start work. This is very important. It's a model project."

NOT LEAVING

A decision in favor of the government would be a boost to Mr Joko, yet might not signal the end of the saga. Some farmers say they will refuse to leave their land under any circumstances.

That would mean forced evictions, raising human rights concerns that could unnerve lenders and developers, which include Japan's Electric Power Development Co and Itochu Corp, and a unit of Indonesia's PT Adaro Energy.

"We are not negotiating and we are not selling," said Mr Untung, one of 48 landowners insisting on remaining on their fields. "We are staying. We don't want this project."

Mr Joko staked his reputation on delivering Batang, a public-private partnership, after telling businessmen in Tokyo in March that construction could start the following month.

In August, he flew to the site along with ministers to inaugurate the project, even though developers had yet to acquire around 10 per cent of the land they need.

DIFFICULT DECISION

The project will produce 2,000 megawatts of electricity in a country where industries often cite unreliable power supply as a major obstacle to their operations. Regular blackouts are common across the sprawling archipelago of 250 million people.

The government aims to lift the country's electrification ratio, or proportion of people with access to power, from 87 per cent this year to 97 per cent in 2019. That compares to 100 per cent in regional neighbors Malaysia and Thailand, according to World Bank data.

Getting the project started would also send a signal to private investors the government is serious about partnering with them on infrastructure. It would be the first large-scale project to be carried out under a 2005 presidential regulation aimed at encouraging such ventures. The court case is the first use of a 2012 law on acquiring land, which sets timeframes for talks on prices and resolving disputes.

"At the end of the day the government has to make a difficult decision as to what is for the greater good," said John Cheong-Holdaway, a Jakarta-based infrastructure economist. "Does it consider powering Java worth the livelihoods of a couple of hundred farmers?"

BLOOMBERG