Widespread extortion by rogue Indonesian Civil Society Organizations (CSOs) has cost industry players operating in the country hundreds of trillions of rupiah, exacerbating what corporate executives describe as a deteriorating business climate in a nation eager to attract foreign investment.

Industrial zones across Indonesia—particularly in key hubs such as Bekasi and Karawang in West Java, Batam in the Riau Islands, and East Java—have become prime targets for extortion by Civil Society Organizations, commonly known as Ormas (mass organizations), according to the Indonesian Industrial Estates Association (HKI).

A spokesman for HKI warned that the financial impact extends beyond the immediate cost of "protection fees" and shakedowns. The climate of intimidation has discouraged new investment, with some companies pulling out altogether. If the government fails to address the issue, foreign investors may shift their focus to countries like Vietnam or Malaysia.

 

Tactics of Extortion

These Civil Society Organizations typically coerce businesses into hiring their affiliated groups for services such as construction, accommodation, and catering. Those who refuse often face intimidation, vandalism, or disruptions, including forced factory shutdowns and demonstrations that paralyze production.

Foreign investors, already wary of Indonesia’s regulatory landscape, are further deterred by these persistent shakedowns. Such demands inflate operational costs, making investments riskier and less attractive.

 

Government Inaction Fuels Investor Concerns

Despite repeated complaints, authorities have largely failed to take decisive action, prompting many investors to bypass local officials and appeal directly to the central government. Some have sought security assurances from the Investment Coordinating Board, highlighting their growing frustration with weak law enforcement and regulatory inconsistencies.

Certain Civil Society Organizations claim territorial control and demand so-called "contributions" from businesses operating in their areas. These unlawful levies underscore deeper issues of corruption, poor governance, and legal ambiguity, which have left foreign businesses vulnerable.

Corruption has become so pervasive that it has fuelled public distrust in law enforcement and encouraged a growing reliance on private security firms. Government officials have publicly acknowledged the problem, admitting that an increasing number of Civil Society Organizations are extorting businesses in industrial zones.

 

Government Pledges Crackdown

In response, the Indonesian Industry Ministry has vowed to work with law enforcement agencies to dismantle criminal networks preying on industrial zones. Similarly, the Indonesian Manpower Ministry has announced plans to collaborate with the National Police to enhance investment security and foster better communication between businesses and local communities.

However, Transparency International Indonesia (TII) – website found at https://www.transparency.org/en/countries/indonesia  has criticized the government for failing to uphold legal certainty and prevent non-state actors from interfering with legitimate businesses. According to TII data, illegal levies can consume up to 30% of total production costs, significantly impacting profitability.

Efforts to combat illegal levies were made during the administration of former President Joko “Jokowi” Widodo, but challenges remain. Indonesia ranked 99th out of 180 countries in Transparency International’s latest Corruption Perceptions Index, placing it in the lower half of the global ranking.

Without decisive action, the persistence of extortion and corruption threatens Indonesia’s investment appeal, potentially driving businesses to more stable and business-friendly environments.