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News & Events Does Indonesia really need a land bank?
Does Indonesia really need a land bank?
Does Indonesia really need a land bank?
Does Indonesia really need a land bank?
Does Indonesia really need a land bank?


Original source:

One of the myriad legal changes packed into last year’s controversial Omnibus Law on Job Creation (Law No. 11 of 2020) was a decision to establish a national land bank. This would be a special agency to manage and guarantee the availability of land to be used for economic development, including for public infrastructure, housing, investment, and agrarian reform.

The land bank will essentially handle land the way a regular bank handles bonds. It will collect and hold inactive or unused land, and redistribute it for productive use. According to the Omnibus Law, its main priority is acquiring and distributing land for infrastructure.

But while it is said to be a solution for agrarian reform – as a long-standing agenda of the Joko “Jokowi” Widodo administration – in its current shape it is unclear how the proposed land bank would solve any of the current problems – or whether it could do a better job than existing institutions.

Where will the land come from?

Land acquisition in Indonesia is a very complicated process involving a convoluted bureaucracy, run by officials who are often ineffective in carrying out their duties and unwilling to provide access to land data. This creates a time-consuming process, frequently resulting in the delay or failure of investment projects.

One major problem is how inactive land held by mining or plantation companies under cultivation rights (hak guna usaha, HGU) can be returned to the state. This is difficult because of a lack of transparency around data on land marked for cultivation. It is also complicated by a lack of courage on the part of the Ministry of Agrarian and Spatial Planning and the National Land Agency (ATR/BPN) when it comes to using their powers to repossess and reallocate inactive land held by companies.

Many ongoing land conflicts can be traced back to this problem. From 2015 to 2018, as many as 642 of the 1,771 land conflicts that occurred in the plantation sector involved state and private companies’ cultivations rights (HGU), according to data from the non-governmental Agrarian Reform Consortium (Konsorsium Pembaruan Agraria, KPA). Some of these cases remain unresolved, as the government has chosen to focus on lands that are administratively ‘clean and clear’ in status rather than solving the main problems that cause conflict.

In the context of agrarian reform, inactive cultivation land that has been returned to the state has not been redistributed to communities or landless farmers in any significant way. Under the proposed land bank, these ‘land as objects of agrarian reform’ (Tanah Objek Reforma Agraria, TORA) would not be held for long periods by the state, but redistributed immediately – something that ATR/BPN and the Ministry of Environment and Forestry (Kementerian Lingkungan Hidup dan Kehutanan, KLHK) are already capable of doing, but don’t.

There is also the added risk that rather than distributing unused land to communities and farmers, the land bank would prioritise leasing this land to large investors for infrastructure and development projects. This would put the government’s social forestry goals even further out of reach.

Who will benefit?

Sofyan Djalil, minister for the ATR/BPN, has said that the proposed land bank would prevent excessive land speculation, which is causing land prices to soar. The land bank, he said, would sell land to developers at a low price in the hope that they would, in turn, sell houses at a more affordable price for the poor.

However, he did not explain how developers would be held to account if they instead continued to sell at high prices to increase their margins. He also did not clarify where the land bank would find the funds to reserve the required vast areas of land for long periods of time.

What’s more, it is highly doubtful that a new land bank will be able to do a better job than the existing institutions, as it will be situated in the same bureaucratic culture of corruption and mismanagement. Several state-owned enterprises are mired in corruption cases, providing clear evidence of the weaknesses of the existing land administration system.

Even with the Financial Services Authority (Otoritas Jasa Keuangan, OJK) as a watchdog, corrupt practices (particularly in financial institutions) continue to occur, with indications of poor governance, internal fraud, and a lack of compliance with relevant regulations. Inside the ATR/BPN itself, there have been several cases of forgery, theft, and multiple and overlapping land certificates – as we witnessed, for example, through our research in Sinungrejo village in Kebumen, Central Java.

Given many corrupt practices rampant in most government-run institutions, a new land bank would likely be prone to mismanagement. This would mean low public trust, and an unwillingness to invest in its bonds. The land bank’s establishment would therefore involve the tough task of proving to the public that it can be a credible institution, with solid management, run in the interests of the people.

What are the alternatives?

Agrarian reform can only be achieved in Indonesia if there is political will, accurate and thorough data, reliable bureaucracy, and strong community organisations, among other factors. Reform must be carried out systematically for it to succeed.

But systematic efforts do not have to come from the top down. Efforts to reduce inequality in land access can also start on the smallest scale, at the village level. Our work in Kebumen from 2019 to 2021 on inclusive and fair employment opportunities for rural youth demonstrated this. Our organisation AKATIGA found that village land (tanah kemakmuran desa) could be used for the prosperity of the people. We worked with local communities to encourage the use of village land (tanah kemakmuran desa) to be more inclusive of marginalised groups such as youth, landless farmers, and female-headed families. Marginalised groups were supported to use village land as agricultural land so that it can become a source of income.

Now that the Omnibus Law on Job Creation has been passed, the process of establishing the land bank can begin, based on regulations that need to be issued to implement the new Law. There is still plenty of time to refocus the functions and objectives of the proposed land bank.

In doing so, attention must be given to establishing a land bank that can act as a “benevolent intermediary”, so that land and natural resources can be used by, and benefit, the poor and landless. The working mechanism of the land bank must also be clarified, and monitored by the public to prevent corruption and fraud.

It will require meaningful participation by the community and by nongovernmental organisations to ensure that the land bank is established in line with its grand vision of reducing land inequality and using natural resources for the welfare of the people. It would certainly be a major change to the disappointing history of agrarian policy in Indonesia if this ever happens.