Trouble in Paradise — Impact of the Paradise Papers in Indonesia
The thought piece I wrote below was first published on Datarama’s media page.
Yesterday —on 5 November 2017— the International Consortium of Investigative Journalists (ICIJ) released the so-called Paradise Papers — a collection of 13.4 million documents related to offshore investment originating from Appleby, one of the world’s largest providers of offshore legal services. Like the release of the Panama Papers by the ICIJ approximately one year earlier, the publication of the Paradise Papers has been making waves all around the world. These documents shed light on how the rich and powerful around the world exploit offshore tax havens to hide their fortunes from the prying eyes of financial regulators and the general public. Considering the prominence of the individuals and companies that make up Appleby’s client list and the public significance of their actions, the Paradise Papers are likely to leave behind far-reaching repercussions worldwide.
Repercussions in Indonesia
The Paradise Papers garnered immediate media attention in Indonesia since the leak contains information on three individuals who have long been familiar figures in Indonesian politics.
The first individual is Mamiek Suharto, the youngest daughter of Suharto, the country’s long-reigning former president. The Paradise Papers show that Mamiek was the vice president and beneficial owner of two Bahama-registered companies. Both companies were managed by Maher Algadri, an Indonesian businessman whose vehicle, Kodel Group, was one of the largest conglomerates in Suharto era. Apart from insinuations of possible tax evasions, so far, no media outlet has reported anything explicitly amiss about Mamiek’s Bahama-based companies or her connection to Maher. Given the innocuousness of these revelations, it is unlikely they would shift the public sentiment on Mamiek, who has hitherto managed to avoid major scandals that had beleaguered her siblings.
The second individual is Tommy Suharto, Suharto’s youngest son and the most notorious of Suharto’s children. Tommy’s lavish lifestyle and his numerous criminal convictions have long been a staple for the media. Earlier this year, the Indonesian media was abuzz with the possibility of Tommy running in the 2019 presidential election — which he denied a few months later. Considering Tommy’s checkered background, his appearance in the Paradise Papers should not come as a surprise to anyone. In fact, the leaked documents provide little additional insights, if any, into what we already know about Tommy. According to the Appleby data, Tommy was connected to two Bahama-registered firms, one of which was a former shareholder of the Italian luxury carmaker Automobili Lamborghini SpA. Interesting as it may be, this revelation is a non-story as Tommy’s former interest in Lamborghini is widely known. A possibly more detrimental revelation relates to a Bermuda-based joint venture between Tommy’s Indonesian vehicle Humpuss Group and a now-defunct Australian billboard-advertising firm NLD Pty Ltd. The now-defunct joint venture, which held concessions to erect billboards in a number of countries, was highlighted by Appleby as a “bad debtor.” While such a label would be a red flag for many, it is unlikely to cause further dent to Tommy’s already tainted reputation.
The third individual — for whom the leaks possibly have the most significant repercussions — is Prabowo Subianto. Prabowo is a former general and the former husband of Titiek Suharto, yet another child of Suharto. Like Tommy, Prabowo harbors ambition to become the country’s next president. Unfortunately for Prabowo, his appearance in the Paradise Papers might pose a roadblock to that end. The documents name Prabowo as a director and the deputy chairman of Bermuda-registered Nusantara Energy Resources Ltd. Although no explicitly negative information concerning the company has been uncovered, Prabowo and his allies have been quick to distance themselves from it. They denied that Prabowo had established the Bahaman firm to evade taxes and stated that the company had not been active since its foundation. For now, the long term consequences of the leaks on Prabowo’s political career remain to be seen.
The leaks elicited a swift response from the Indonesian authorities. The day following the leak, Finance Minister Sri Mulyani announced that the government would investigate all Indonesians whose names appeared on the Paradise Papers and impose harsh sanctions to those caught hiding their wealth to avoid tax liability. She added that the government would work together with authorities from other countries to facilitate the investigation. This investigation is still ongoing.
Making sense of data via Datarama’s mapping tool
It is worth noting that legitimate reasons for using offshore companies exist and that not everyone who use them is unethical or fraudulent. For instance, investors might establish offshore subsidiaries to trade in risky securities without having to deal with regulatory barriers. Some large multinationals might use offshore subsidiaries to raise capital in an expedited manner. Another use offshore jurisdictions is to register international joint ventures: joint venture partners hailing from different jurisdictions might take this option to render their ventures jurisdiction-neutral.
The opacity of offshore companies, coupled with the fact that they can be used legitimately, makes it difficult to ascertain if the ultimate beneficial owners of these companies have committed any wrongdoing. In order to arrive at a firm conclusion, one would need to assemble numerous elusive puzzle pieces, including the identities of the ultimate beneficial owners, the source of the fund with which these offshore firms are founded, the objective of the foundation of these companies, and so on. Against the backdrop of this complexity, the use of artificial intelligence and data visualization are invaluable. These technologies are among the tools that the journalists at the ICIJ used to make sense of the gigantic leaks.
Advanced data analytics and data visualization are the bread-and-butter of our work at Datarama. Our team has successfully ingested the information from the Paradise Papers and uploaded it onto our platform. These troves of new information, coupled with the existing analyses we have on these individuals, form the basis of the insights presented in this article.
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