Beyond Labels

A 360° Discussion of Foreign, National and Local Policy Issues

Indonesia

Last week, we came up with “Indonesia” as the topic for Monday, 10 April. As I recall, we didn’t come up with any specific questions for discussion, however.

One of the things that interested me most when I lived there (1998-2001) was public sector corruption. One of the first studies of the country that I read after arriving in Jakarta was a World Bank paper describing systematic, highly centralized governmental corruption, including more or less fixed prices for buying appointed governmental offices. For example, governorships of resource-rich provinces (those with oil, teak forests, palm oil plantations, minerals, etc.) were much more expensive than those for relatively poor provinces, based on the expectation by the purchaser that he (at the time, it was pretty much always a man) would recover his investment quickly by siphoning off resource revenues for his own account.

There were also particular ministries where the price for buying an office was higher than others. These were known as “wet” ministries because they offered many opportunities for bribes, kickbacks, and the like through the ability to award or withhold various kinds of contracts and the power to hire lots of employees. Examples of “wet” ministries included the Ministry of Defense, the Ministry of Energy and Natural Resources, the Ministry of Public Works and Construction, and the Ministry of Investment, but not the Ministry of Finance, where I worked.

The World Bank report pointed out that the distribution of bribes paid to government officials was also systematic: Government officials would share the bribe proceeds up and down the chain of command, with lower-level and higher-level officials according to a well-established sliding scale (the higher the office, the larger portion of bribe proceeds he would receive). This system was created deliberately, by keeping officials’ on-budget salaries low, more or less forcing them to demand bribes. According to the report, government officials saw bribery and other forms of corruption as necessary in order to support themselves and their families, and were willing to share with their colleagues the bribes and kickbacks they received so that the system would continue to function to the benefit of all (and also because Indonesia, particularly Java, was and maybe still is in some ways a feudal society). The report also said that ordinary Indonesians accepted the system because the costs to them were kept low enough to be acceptable.

Following the 1998 financial crisis in Southeast Asia, which hit Indonesia particularly hard, the Suharto regime was overthrown and Indonesia moved toward democracy. That included very rapid and comprehensive decentralization. Local governments were given responsibility for a wide array of functions that had previously been highly centralized. One of the results of that decentralization has been the decentralization of corruption, resulting in a much-expanded roster of government officials expecting bribes and kickbacks for performing their ordinary functions, and a much less predictable system of corruption.

Here’s some information I found about corruption in Indonesia:

An article, based on data from 2006 – 2011 about corruption in Indonesia (https://news.gallup.com/poll/157073/corruption-continues-plague-indonesia.aspx

A January 2012 Transparency International report on the causes of corruption in Indonesia (https://www.gov.uk/research-for-development-outputs/causes-of-corruption-in-indonesia#:~:text=In%20the%20case%20of%20Indonesia,quality%2C%20and%20weak%20judicial%20independence)(click on the link in this page for the full report)

A few questions occur to me related to this topic:

Why, in the third largest democracy in the world, is corruption still so persistent and widespread? How could it be reduced? Should reducing corruption be a high priority for Indonesia?

If the government budget is kept low by paying low salaries to government officials and the price of corruption to individuals and businesses is acceptable to them, is it really corruption as we understand it?

Does government corruption have other (unacceptable) negative effects, like distortion of economic or other decision-making?

I also found a 2023 Freedom House report {https://freedomhouse.org/country/indonesia/freedom-world/2023) on the state of political rights and civil liberties in Indonesia in 2022. This might raise some other topics for discussion on Monday.


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