After an allegation that the government’s decision to take over the Bakrie family’s liabilities in the Lapindo mudflow disaster in Sidoarjo, East Java, was the result of a back room political deal, the government defended its decision on Friday saying that it would ultimately benefit all parties involved in the disaster.
“Here’s why, the people [mudflow victims] are facing hardship. PT Minarak Lapindo Jaya could not pay [the compensation anymore], but it still has assets. Therefore, the government decided to give the loan first to calm the people down,” Vice President Jusuf Kalla said on Friday, referring to a firm controlled by the Aburizal Bakrie family, which had been deemed responsible for the disaster.
Kalla, who served as Golkar Party chairman prior to the leadership of Aburizal Bakrie, said that the public should not debate on whether the government was losing money for the misbehavior of a greedy tycoon and should see the loan as part of a trade deal.
“So the company has purchased 1,000 hectares of land [from the disaster victims]. That land is used as collateral for the government. The company is given four years [to settle the loan]. If it can’t payback the loan, the assets will be taken over by the state. So the state doesn’t give money for free,” Kalla said.
On Thursday, President Joko “Jokowi” Widodo decided to bail out the family to settle the remaining compensation for the mudflow victims by providing a Rp 781 billion (US$62 million) loan to Minarak.
The loan will enable the company to pay compensation that has not yet been received by thousands of victims of the mudflow.
The decision has sparked debates over whether the government should spend more money to help ease the burden for the Bakrie family, after spending more than Rp 6 trillion of taxpayer money to handle the aftermath of the disaster.
Kalla further defended the decision saying that the loan would ultimately benefit the state should the company fail to return the money.
“If the mudflow stops, then the price of land will increase. And I can assure you that it will stop at one point,” he said. “If it doesn’t stop [in near future], then just wait for it. Maybe in the next five years or 10 years, [the mudflow will stop].”
Even at its current price, the total price of the land is already much higher than the loan given, Kalla added.
“The land is 1,000 hectares, or 10 million m2. If the current price is Rp 1 million per m2, then the price of the land is actually Rp 10 trillion,” he said.
Besides benefiting the state and the victims, even the company itself would benefit from the scheme, the senior Golkar politician said.
“The company will not lose money if five times the market price.” It pays back the loans now. They will get their money back. The victims are also happy because they are getting paid for their lands, Kalla said.
Kalla also justified the government’s decision by pointing out that the Constitutional Court had ordered the state to force Lapindo to complete the compensation payments.
Golkar deputy secretary-general Lalu Mara Satriawangsa, who is also an Aburizal’s confidant, applauded the government’s decision given that the Lapindo mudflow had been declared a national disaster.
“The Bakrie family has helped local communities by buying their asset with a price higher than that of the market price. If there is some [financial] shortage, that is the fact,” he told The Jakarta Post.
He said that the family has spent so much in the wake of the disaster, which begun in 2006 after a blowout of a natural gas well drilled by PT Lapindo Brantas.
“The family has spent more Rp 8 trillion [for compensation], just compare this with the remaining Rp 750 billion that we have not paid,” Lalu Mara said.
Political analyst Agung Baskoro of Jakarta-based Poltracking Institute, meanwhile, suggested that the government’s decision to bailout Lapindo was motivated by its increasing need of political support from Golkar, the leader of the opposition Red-and-White Coalition.
“The government has currently been dealing with complicated issues, like fuel-price hikes and the weakening rupiah. They are in dire need to gain support from lawmakers,” he said.