KPK to Investigate Krakatau Steel after SOEs Minister’s Graft Remarks

Jakarta. The Corruption Eradication Commission, or KPK, confirmed on Wednesday they have received complaint of alleged corruption in state-owned steelmaker Krakatau Steel first made public by a government minister.

A day earlier, State-Owned Enterprises Minister Erick Thohir explicitly alleged a foul play in Krakatau Steel as he expressed concern about the highly indebted company.

“Krakatau Steel shoulders a debt of $2 billion because of, among other things, the $850 million investment in a blast furnace project which has been discontinued until today,” Erick said in a webinar.

“This is not good and it certainly indicates corruption.”

The minister vowed to take legal measures and bring those responsible to justice “to correct any unlawful business practice”.

A KPK spokesman said the commission would launch investigation based on the tipoff.

“It’s true the KPK has received the report and we can assure you that any tipoff will get a response,” Ali Fikri said.

“We need to first verify and examine all data mentioned on the report to make sure that the alleged corruption is under our authority to investigate,” the spokesman added.

He didn’t specifically name a person who lodged the complaint, saying that the commission has established an integrated system that allows whistleblowers to confidentially report suspected corrupt practices in government agencies, state companies and municipal companies.

Krakatau President Director Silmy Karim said on Tuesday investment in the blast furnace project was initiated in 2008, with construction starting in 2012. 

He said the current debt had been accumulated in the period of 2011-18 before he took the helm of the company in late 2018.

“Indications of fraudulent practices or corruption in the past certainly get the management's attention. When I joined the company, my focus was how to find solution and make attempts to first rescue Krakatau Steel,” Silmy said in a statement in response to Erick’s remarks.

The debt occurred because some major investments had yet to deliver proceeds, he added.

Silmy claimed that under his leadership, the company managed to restructure its debts, significantly reduce interest payment and improve cash flow.

“We solved problems in Krakatau Steel one by one, because in the past the company was unable to make profit and inefficient while many projects were unfinished,” he said.