Land acquisition remains a major obstacle to infrastructure development in Indonesia. Full-scale construction of the USD $4 billion Batang plant, a 2 GW coal-fired power plant in Central Java, is waiting for the final ruling of Indonesia's Supreme Court near the year-end. This court case is an important one as it will be the first court case to test Indonesia's Law No.2/2012 on Land Procurement for Development in the Public Interest (known as the 'Land Acquisition Act'). The Batang plant is a public-private partnership (PPP) project.
In 2012 Indonesia introduced the Land Acquisition Act in an effort to speed up infrastructure development. The Southeast Asian nation is plagued by weak quality and quantity of infrastructure and one of the bottlenecks has been land acquisition as local people refuse to sell their land or only sell their land at very high prices. This has led to the delay or cancellation of many infrastructure projects. The Land Acquisition Act aims to speed up the land acquisition process by dealing with the revocation of land rights to serve public interest, putting time limits on each procedural phase and by ensuring safeguards for land-right holders. However, the government has never used this law before as forced selling (perhaps followed by forced eviction) - even though it is for the benefit of the community at large - triggers concern about human right violations and could make the government unpopular in the eyes of the population.
The Batang plant, which is to be operated by Bhimasena Power Indonesia - a joint venture created by Indonesian coal miner Adaro Energy and Japan’s Itochu Corporation and Electric Power Development Co. Ltd. (J-Power) -, was originally planned to see groundbreaking in 2012. However, due to local farmers' refusal to sell their land, construction was delayed until August 2015. Even when Indonesian President Joko Widodo finally launched the construction of the Batang plant in August 2015, not all land in the targeted area had been purchased as dozens of local landowners still refused to sell their land.
As such, the court case is a very interesting one as Indonesia's top court now has to decide whether the Indonesian state can force local landowners to sell their land for the construction of the power plant. Whatever the outcome, it will be complex. If the court says it is legal to force local farmers to sell land for the project, then there may be the need for forced evictions (because the involved farmers have reportedly stated that they will not leave their land under any circumstance). This will immediately raise concerns about human rights issues in Indonesia and the government may see a sharp decline in popular support.
On the other hand, if the court rules in favor of the local landowners, then Indonesia's infrastructure push experiences a setback and undermines investors' confidence in the ability of Widodo to boost much-needed infrastructure development in Southeast Asia's largest economy.