Corruption Normalization in the Public Sector:

A Case Study of Indonesia

Dr. Hendi Yogi Prabowo

University of Wollongong 2015

Bio• Name : Hendi Yogi Prabowo• Occupation :

– Lecturer at the Faculty of Economics, Islamic University of Indonesia– Director of the Centre for Forensic Accounting Studies– Research fellow at the School of Accounting, Economics and Finance

• Education– Bachelor of Commerce - Faculty of Economics, Islamic University of

Indonesia– Master of Forensic Accounting – School of Accounting and Finance,

University of Wollongong Australia – Doctor of Philosophy – Centre for Transnational Crime Prevention,

University of Wollongong Australia

About Corruption

• Corruption is a worldwide problem. It is spreading throughout the systems of governments like a cancer.

• For transition and developing economies corruption has become an issue of major political and economic significance which highlights the necessity to tackle it.

• As corruption becomes an intrinsic part of the way state operates in many countries, remodeling the state is next to impossible without the elimination of corruption.

About Corruption• The Organisation for Economic Co-operation and Development (OECD)

defined corruption as the abuse of public or private office for personal gain.

• In Indonesia, as stipulated by the Law No. 31 Year 1999 as amended by the Law No 20 Year 2001 on the Eradication of Corruption, there are seven categories of offences that constitute corruption:

• acts that cause losses to the nation;

• bribery;

• occupational embezzlement;

• extortion;

• deception;

• conflict of interests in procurement of goods and services; and

• gratification.

Corruption in Indonesia

• In the 2014 Corruption Perception Index report Indonesia was ranked 107 in terms of its cleanliness from corruption which basically means that Indonesia is still one of the most corrupt countries in the world.

• The thirty two years of the Suharto regime is particularly known as the most highlighted case of corruption in Indonesia where, unlike in other corrupt nations, rampant corruption seemed to go hand in hand with high growth.

• Suharto’s massive fortune was believed to have come from numerous companies, monopolies and control over vast sectors of economy in particular during the three decades in power.

• Even long after the fall of the regime its signature rent-seeking practices still characterize the Indonesian economy today.

Corruption in Indonesia

• Anti-corruption laws along with an anti-corruption agency, the Corruption Eradication Commission (KPK) are Indonesia’s primary arsenals to bring corruption to its knees.

• The numerous corruption cases with high profile offenders in Indonesia in the past few years suggests more still need to be done in the future.

Big Questions

• What is the current behavioral trend in corruption in the Indonesian public sector?

• What are the behavioral factors that make corruption in the Indonesian public sector so resilient?

Three Behavioral Lenses

• The Schemata Theory

• The Corruption Normalization Theory

• The Moral Development Theory

The Schemata Theory

• Frederic Bartlett (1995) defined schema as an active organization of past reaction, or of past experiences, which must always be supposed to be operating in well-adapted organic response.

• The schemata are living, constantly developing, and are affected by various sensational experience.

A Simple Illustration of Human Schemata

Corruption Normalization

Theory (Ashforth and Anand, 2003)

Moral Development Theory (Lawrence Kohlberg, 1981)

The Corruption Infection Model

Extensive Corruption Normalization in Indonesia (1967 – 1998)

The Concept of Power in the Javanese Culture

• The concept of power in the Javanese culture is very distinct from those of western countries.

• Javanese see power as something “concrete, homogeneous, constant in total quantity, and without inherent moral implications as such”

• In terms of concreteness, Javanese generally believe that power is some sort of intangible, mysterious, and divine energy as a foundation of the universe. Such energy, despite the absence of physical evidence, is very real in the minds of Javanese and does not originate from its users.

• In terms of homogeneity, Javanese generally believe that, being a concrete energy, all power assume the same form that originates from the same source. It does not matter who wields it, be it a farmer or a noble, it will still be seen as the same power by the society.

• In terms of its self-limiting nature, power is perceived by Javanese as always in the same total amount. This means that, despite being wielded by many users, the total amount of power in the universe will never increase or decrease. The only thing that can be changed about power is its distribution which means in order for a power wielder to get stronger at least another power wielder must get weaker.

• In terms of moral implications, the fact that power is perceived as a divine energy emanating from a single homogeneous source makes it free of the questions of legitimacy. This means that it does not matter if a power is based on wealth, military force, or any other means, power will always be admitted as power.

Major Corruption Cases in Indonesia in 2004 – 2015 (Data per May 2015)

Goods and Services Procurement

31%

Unlawful Licensing4%

Bribery46%

Unauthorized Col-lection

5%

Budget Misallocation10%

Money Laundering3%

Obstruction of Investi-gation

1%

Source: Corruption Eradication Commission

Corruption Suspects’ Occupations (Data per May 2015)

Members of Central and Regional Parliaments

(DPR and DPRD)17%

Heads of Agencies and Ministries

5%

Ambassadors1%

Commissioners2%

Governors3%

Mayors/Regents and Vice Mayors/Vice

Regents10%Ehcelons I/II/III

25%

Judges2%

Private Sector25%

Others10%

Source: Corruption Eradication Commission

Rationalization - Examples

• A study by Budiman et al. (2013):

• Denial of Responsibility:

• “Realistically, for a senior employee like me, if we lived based on my basic salary, no incentives, no teaching, and not having a wife who is employed as a civil servant, my family would not have survived.”

• “I think that corruption was normal because the salary of civil servants was just not enough.”

• “People committed corruption to meet their basic needs. It was acceptable. If they didn’t do corruption, well, it was impossible to live on.”

Rationalization - Examples

• Appeal to Higher Loyalties:

• “To help and to overcome problems for civil servants, although small, we also had to become involved in this corruption. But my feeling as a civil servant is that it was wrong. We knew that the salary was small. Then, one of my staff had a child fall sick or pass away or her husband was hospitalized in Jakarta. She had no money to support herself. Well, for the sake of human compassion, I had to assign her to do an official trip to Jakarta, although she didn’t have any work to do there. In the administration system, this was not allowed. But, we allowed it.”

Narcissism

• Narcissism is essentially a state of being the center of a loving world where one may act merely out of desire in a spontaneous way.

• Narcissism is associated with pervasive pattern of grandiosity, need for admiration and a lack of empathy.

• Interestingly, despite their seemingly larger-than-life personality, narcissistic people often suffer from lack of self-esteem and self-confidence due to which they always try to make themselves appear more important than others to compensate their shortcomings.

Narcissism

• Core dimensions: authority, self-admiration, superiority and entitlement.

• The authority dimension is related to one’s desire to be seen as an authoritative figure and thus a center of attention (Emmons, 1984; 1987; Rijsenbilt & Commandeur, 2013).

• The self-admiration dimension is related to one’s preoccupation with how extraordinary he or she feels (Emmons, 1984; 1987; Rijsenbilt & Commandeur, 2013).

• The superiority dimension is about one’s believe that he or she is better than others and thus overestimate his or her own abilities (Emmons, 1984; 1987; Kaufman, 2010).

• The entitlement dimension is concerning one’s believe that he or she deserves more than what he or she actually accomplishes which is often associated with one’s interpersonal exploitativeness (enjoying manipulating and exploiting others and expect favors from others) (Emmons, 1984; 1987; Kaufman, 2010).

Future Directions• Bringing down the entire structure of corruption normalization requires the destruction of its

three pillars: institutionalization, rationalization and socialization.

• Appointing morally sound leaders.

• Once a morally sound leader is appointed to manage a corrupt organization, the next step is to identify each element of the existing corruption normalization and develop countermeasures accordingly.

• To demolish the “institutionalization” pillar, preventing corrupt acts to occur in the first place should always be a priority.

• Many small and seemingly insignificant corrupt acts may later on turn into serious offences if they are perpetrated frequently. Periodical reviews on the existing structures and process within an organization must be performed to ensure that no part of organizational operations constitutes corruption.

• Should any part of the operation is found to be of corrupt nature, it must be erased from organizational memory immediately. This includes identifying unofficial practices by organization members outside the formal structure as part of daily operations.

• Regardless of the resistance, routinized corrupt acts must be explicitly sanctioned so as to create deterrence effect for other organization members.

• To take down the “rationalization” pillar an organization needs to have means to neutralize the various types of denials used by corruption offenders. Denial of legality problem can be addressed with formulating explicit and detailed job descriptions as well as code of ethics so as to avoid multiples interpretations.

Future Directions• To take down the “rationalization” pillar an organization needs to

have means to neutralize the various types of denials used by corruption offenders.

• Denial of legality can be addressed with formulating explicit and detailed job descriptions as well as code of ethics so as to avoid multiples interpretations.

• Denial of responsibility can be diminished by giving organization members decent salaries to minimize financial pressure.

• Denial of injury and victim can be countered by educating and raising organization members’ awareness on the real damages caused by corruption and other misconducts.

• Other denials such as “social weighting”, “appeal to higher loyalties”, “metaphor of the ledger”, and “refocusing attention” can be minimized by educating organization members on the concepts of right and wrong in their line of works as well as the principle of justice and fairness.

Future Directions• To take down the “socialization” pillar an organization needs

to have means to monitor employees’ individual behavior.

• Fair and transparent recruitment and promotion mechanism

• Monitoring employees’ moral development

• Leadership role model

• Rewards and sanctions for good and bad behaviors

• Etc.

Thank You!