Reading Material

English for Profession

Seventh meeting
Dept. of Administration Science

CORRUPTION IN INDONESIA

The abbreviation 'KKN' is a familiar one to Indonesian people. Whenever there are anti-government
protests this abbreviation can be heard shouted by the protesters or seen written on banners. The
abbreviation stands for corruption (korupsi), collusion (kolusi) and nepotism (nepotisme) and - much to the
dismay of the majority of the Indonesian population - has been an intrinsic part of Indonesian governments,
probably culminating during president Suharto's New Order regime (1965-1998).

The issue of political corruption in Indonesia continues to make daily headlines in the Indonesian media
and generates much heated debate and fierce discussion. In academic circles scholars have continuously
searched for answers to the question whether this corruption has its roots in traditional precolonial
societies, the Dutch colonial era, the relatively short Japanese occupation (1942-1945) or the subsequent
independent Indonesian governments. However, an unequivocal answer is yet to be found. For the
foreseeable future it just has to be accepted that corruption in Indonesia's political, judicial and corporate
domains just ìs (although there are some signs - which are discussed below - that point towards an
improvement of the situation).

Historical Framework of Corruption in Indonesia

Although there are great examples of corruption in Indonesia's earlier history, we take as our starting point
president Suharto's authoritarian New Order regime (1965-1998) that was characterized by impressive
rapid and sustained economic growth (with Gross National Product averaging 6.7 percent annually
between the years 1965 and 1996) but also well-known for its corrupt nature. Suharto utilized a system of
patronage to ensure loyalty of his subordinates, leading members of the national elite and critics. In
exchange for business opportunities or political positions Suharto could count on their support. With the
Armed Forces (including its intelligence apparatus) and huge resources (stemming from the oil booms in
the 1970s) at his disposal, he became the apex of the national political and economic system, resembling
the patrimonial power of traditional rulers in the pre-colonial past.

Regarding economic policy-making Suharto relied on the advice and support from a narrow group of
confidants around him. This group consisted of three categories: USA-trained technocrats, economic
nationalist (who supported the idea of a large role for the government in the economy) and capitalist
cronies (consisting of his family members and some rich ethnic Chinese conglomerates). At times all these
categories were accused of being corrupt but most emphasis went to the small circle of capitalist cronies
(particularly Suharto's children) who were - much to the dislike of national businesses and society at large -
the major beneficiaries of state privatization schemes and often ran large business monopolies that
operated with little oversight or monitoring.

One important characteristic of corruption during Suharto's New Order was that is was rather centralized
and predictable. Investors and businessmen could more-or-less predict the amount of money they had to
put aside for these 'extra' costs and knew which people they were expected to bribe. But there was also the
tactic of including a Suharto crony in business activities in order to reduce uncertainties caused by
bureaucratic red tape. This same pattern existed on a local level where governors and local army
commanders enjoyed the same privileges but were always aware of repercussions from higher up if they
would push it too far. With the new era of Reformasi, that started after the fall of Suharto in 1998, this
situation was about to change.

Decentralization of Indonesian Corruption

The situation changed drastically when after the fall of president Suharto in 1998 an ambitious regional
decentralization program was started in 2001 which foresaw the transfer of administrative autonomy away
from Jakarta to the districts (not to the provinces). This new course was in line with demand of the people
but had negative side effects on the distributional pattern of corruption. Bribe-taking was no longer
'coordinated' as it had been in the past but became fragmented and unclear. Decentralization meant that
local governments started to produce new local regulations (often not tightly designed) which made it
possible for more officials from multiple levels of the government and other agencies to mingle and request
for financial extras.

Realizing the urgent need to tackle corruption (as it harms investments and - generally - fosters the
existence of continued injustice in society), a new government agency was established in 2003. This
government agency, the Corruption Eradication Commission (Komisi Pemberantasan Korupsi, abbreviated
KPK), is envisaged to free Indonesia from corruption by investigating and prosecuting cases of corruption
as well as monitoring the governance of the state (for which it received extensive powers).

However, opinions regarding its achievements are divided. Critics point out that the KPK is more focused
on tackling lower profile figures, although in recent years there has been a series of high profile cases,
particularly towards the end of former president Susilo Bambang Yudhoyono's government, involving
ministers, high-ranked police officials, judges and the party treasurer of Yudhoyono's Democratic Party.
This partial success and courage of the KPK have triggered counteracts - mostly from persons that have
been prosecuted or interrogated - claiming that the KPK itself is a corrupt agency. In recent years a number
of scandals have emerged in which members of the KPK were - reputedly - framed by senior police officers
and arrested in order to undermine the KPK's authority.

Corruption during the Susilo Bambang Yudhoyono Administration

During the elections of 2004 and 2009 Yudhoyono profiled himself as being devoted and determined to
tackle corruption in Indonesia, in particular regarding corruption within government circles. This made him
particularly popular around the time of the elections of 2009. However, the ongoing persistence of political
corruption and several high-profile graft cases within the government have caused his approval ratings to
free fall after 2010.

Another blow to Yudhoyono's prestige was the departure of Sri Mulyani Indrawati, Indonesia's Finance
Minister from 2005 to 2010. Sri Mulyani, who enjoys a reputation of integrity (although slightly sullied by the
Bank Century scandal), was tasked to reform Indonesia's corrupt tax and customs office. She had
considerable success and could count on the support of many Indonesians. But her performance also
created enemies. In May 2010 she left Indonesian politics to become a managing director at the World
Bank Group. Widespread speculation, however, was that her resignation was due to political pressure from
businesses with high political connections. In particular, the Bakrie Group was often mentioned in
Indonesian media in connection herewith (Aburizal Bakrie being then-chairman of the Golkar party; a
coalition member of Yudhoyono's government). Critics say that Yudhoyono should have supported her.

Moreover, various corruption cases - involving members of Yudhoyono's party and ministers in his cabinet -
emerged toward the end of his presidency and have seriously damaged the allure of both his Democratic
Party and Yudhoyono himself (who became regarded by some as a weak leader because of the
emergence of these corruption scandals in his party and cabinet). In the last two years of his presidency,
the Minister of Youth & Sport Affairs (Andi Mallarangeng) and Minister of Religious Affairs (Suryadharma
Ali) stepped down after being named suspects in corruption cases. This means that after a promising start,
the emergence of many high profile corruption cases near the end of his second term, Yudhoyono will not
be remembered as the big corruption fighter he seemed at the beginning.

Corruption during the Joko Widodo Administration

Since 2014 Joko Widodo leads the nation. Similar to previous presidents and presidential candidates he
has called for a battle against the widespread corruption in the country, urging the need for a 'mental
revolution' that includes a stop to greediness and corruption in society. It is a daunting task but Widodo has
undertaken several important efforts, for example by moving many government services online (implying
bribe-hungry bureaucrats have fewer chances to obtain some extra money).

So far, President Widodo can enjoy a clean, graft-free image (although he was criticized for supporting a
police chief nominee who was once a suspect in a graft case). Also within his cabinet there have not
occurred any scandals. However, Widodo will need to remain careful not to suffer the same fate as his
predecessor.

Positive Developments in Indonesia's Fight against Corruption

Despite this mostly negative overview, there are some positive signs. First of all it needs to be mentioned
that there is a big urge from the Indonesian people to eradicate corruption in Indonesia and the free media
provide ample room to deliver their voices on a national scale (although some media institutions - owned by
politicians or businessmen - have their own agenda for doing this). But the popular urge to tackle corruption
means that being anti-corrupt is actually an important vote-gainer for aspiring politicians. Being involved or
mentioned in a graft case can seriously damage a career as popular support declines. A negative side
effect (for the country's economy) of this public scrutiny is that government officials are currently very
prudent and hesitant to disburse their government budget allocation, being afraid to become a victim in a
graft scandal. This careful behaviour can be called the success of the influence of the KPK that is watching
the money flow, but also causes slow government spending.

The Berlin based politically non-partisan Transparency International publishes an annual Corruption
Perceptions Index (based on polls) which assesses "the degree to which corruption is perceived to exist
among public officials and politicians" in all countries around the world. It uses a scale from one up to ten.
The higher the outcome, the less (perceived) corruption there is. In their latest list (2015) Indonesia
occupied the 88th place (out of a total of 175 countries). However, it needs to be stressed that there is not a
100 percent accurate method to measure corruption because of the nature of corruption (often hidden to
the public). The numbers below, therefore, only show the perceived degree of corruption by the
participating voters in the poll of that particular country. But because a population usually has a good sense
of what is happening in the country, these numbers do indicate something interesting.

Corruption Perceptions Index 2015:

1. Denmark 9.1
2. Finland 9.1
3. Sweden 8.9
4. New Zealand 8.8
5. Netherlands 8.7
- Norway 8.7
88. Indonesia 3.6

Source: Transparency International

These numbers indicate that - in accordance with the text above - there is a rather negative public view of
the degree of political corruption in Indonesia. However, when we take previous results in account the index
shows a more positive trend:

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Indonesia 2.2 2.4 2.3 2.6 2.8 2.8 3.0 3.2 3.2 3.4 3.6

Source: Transparency International

Indonesia is actually one of the few countries in the Corruption Perceptions Index that shows a steady and
marked improvement, coinciding with the Yudhoyono administration (2004-2014) and continued by Widodo.
But it needs to be stressed that - although representing an actual development - these numbers should be
handled carefully as the methodology used in the polls changes from year to year.

Regarding corruption there is still a long reform road ahead for Indonesia. Corruption hinders the country
from realizing its economic potential and causes significant injustice in Indonesia's society as some people
are disproportionally benefiting from a corrupt society. But credit has to be given to Indonesia's free media
and the KPK as both play a vital role in the reduction of corruption.

Source: http://www.indonesia-investments.com/business/risks/corruption/item235