research essay, the underlying issues surrounding corruption eradication in indonesia, a comparative...

Research Essay

The Underlying Issues Surrounding Corruption Eradication in Indonesia: a Comparative Study

ATS3793 Global Research- Jamie Agland

Samuel Bashfield 22644075

Introduction

Synonymous with the Indonesian political and economic context is the concept of KKN- Korupsi, Kolusi dan Nepotisme. Based on the English terms: Corruption, Collusion and Nepotism, KKN is a household term in modern Indonesia. This reflects the enormous impact corruption has had on Indonesian society. Even for Asian standards, Indonesia has had a damaging history of corruption, which has carried on into the new millennium with devastating consequences.

Indonesia is currently ranked as the 100th most corrupt state out of the 183 surveyed by Transparency International (TI) in 2011(International, 2012b). This score when compared to fellow Asian neighbours Singapore and Hong Kong is especially troubling. Singapore is currently the 5 th least corrupt state and Hong Kong not far behind at 12 th place(International, 2012c, International, 2012a). To further underscore the critical extent of corrupt practices in Indonesia, the BBC reported President Soeharto1 as the most corrupt political leader in world history(NEWS, 2004). Based on the reliable Transparency International information, Soeharto and his family are claimed to have acquired between $15bn and $35bn over his 31 year rule.

Evidence and research shows that Indonesia is a hotbed for corruption, and also that corruption is always a damaging force upon modern nation-states(Mauro, 1997, Maudman and Wei, 1999). Corruption thrives virtually unbridled by law enforcement, and it seems efforts to eradicate corruption have met with little success(Harahap, 2009, 23). This essay asks why this corruption ridden state of affairs continues to plague Indonesia, while neighbouring Singapore and Hong Kong have effectively quelled the majority of corruption occurring within their respective territories. This is especially puzzling considering these three states have established very similar anti-corruption commissions, in that they rely on one independent anti-corruption agency(Quah, 2008, 74). This essay will contend that three reasons affecting Indonesia perpetuate the corruption problem. Firstly, Indonesia has had a long tradition of misplacing talent within their bureaucracy through promotion based upon social influence rather than based upon merit. Lack of a tradition of meritocracy will be traced back to the Dutch colonial era to demonstrate its dangerous implications. Secondly, Indonesian public service wages are dangerously low, and it can be argued that bureaucrats are compelled to siphon money from public coffers to support their day to day expenses. Lastly, this essay will contend that the Indonesian political and bureaucratic elite lack the will and motivation to clamp down on corrupt practices. Historically, Indonesian presidents state their corruption eradication goals and dreams, and a few months later are implicated in a corruption scandal of their own. Furthermore, the Corruption Eradication Commission (KPK) is currently being undermined by the POLRI (Indonesian Police Force), and two KPK leaders have alleged to have been participants in corrupt practices. Parallels can be drawn with Hong Kong and the arguably harsh penalties in place for convicted public officials. While other factors certainly are at play, I will argue that these social, political and economic factors are major contributions to the vicious circle of corruption Indonesia is currently contending with.

For the purposes of this research essay, I will utilise the UN Crime Prevention and Criminal Justice Division’s definition, as based on the Council of Europe’s 1994 Conference. They define corruption as “bribery and any other behaviour in relation to persons entrusted with responsibilities in the public or private sector which violates their duties that follow from their status as public

1 Also spelt ‘Suharto.’

2 | P a g e The Underlying Issues Surrounding Corruption Eradication in Indonesia: A Comparative Study, Samuel Bashfield, ATS3793

official, private employee, independent agent or other relationship of that kind and is aimed at obtaining undue advantages of any kind for themselves or for others(Division, 1997).” While competing working definitions abound, the UN’s is clear and concise, while also comprehensive and all-encompassing. This definition can be summarised as the abuse of public office for private gain.

Research in the corruption field is faced by one major structural limitation. Since corrupt practices are illegal in the majority of states globally, hard facts and data on this clandestine activity is difficult to find. Quantitative and qualitative evidence from corrupt parties such as bureaucrats, politicians, and private sector employee’s etcetera, cannot always be relied upon. Such subjects may fear reprisals or other consequences of stating their true involvement with corruption. As such, TI data and ratings always refer to ’perceived’ levels of corruption, as finding a real level is problematic. Furthermore, data procured by groups such as the Institute for Policy and Community Development Studies, the World Bank and the Partnership for Governance Reform must be used in the knowledge that accuracy may be wanting. While data produced by these institutions is first rate, readers must remain aware that corruption is a crime and morally wrong to varying degrees in most societies, thus the data has the potential to be misleading.

Research methodologies currently utilise a variety of sources such statistics, surveys, perception indexes, policy papers, court documents, press releases and subject interviews to draw conclusions. My research essay will build on the existing literature, adding to the gap in comparative analysis between Indonesia and Hong Kong/Singapore. I will heavily reply on primary sources, such as corruption survey data, newspaper articles and magazine articles. I will also rely heavily on secondary academic material, which has studied similar themes to my topic. This secondary source material provides intriguing insights, evidenced through reputable data, both quantitative and qualitative. All existing literature is country-specific or global, and no academic attempts have been made to locate the empirical Indonesian experience into the broader corruption analysis framework. In this way, my article will supplement the existing literature, and contribute to Indonesia specific corruption analysis in a new way.

Meritocracy

The Indonesian public service has never had a strong tradition of meritocracy. While modern democracies employ and promote their employees based upon skills, experience, knowledge and abilities, the Indonesian system, it can be argued, tends to employ and promote based on social influence and financial means. Historically, since the Dutch period, this has undercut the public service and political system, creating a breeding ground for corrupt practices. The lack of meritocracy problem can also be seen through the Soeharto family’s influence in government. Finally, I will demonstrate how the ability for public servants to purchase promotions creates institutionalised corruption in Indonesia.

Since colonial times, the VOC (Dutch East India Company) has strengthened its power in the archipelago through corrupt practices. With the arrival of the Dutch VOC company in the 16 th

Century, local power brokers were paid nominal fees for access to Indonesian resources. These fees were pocketed by the elite of the existing power structures, and not shared with the wider community. These payments were yearly, and were eventually a factor which led to the bankruptcy


of the VOC(King, 2004, Soesatyo, 2010). The Dutch colonial administration adopted a duel administrative system. Two separate power structures were established: the European Civil Service, and the Native Civil Service. The Native Civil Service were not allowed much responsibility, and were essentially a puppet quasi body, dominated by the powerful European Civil Service(Wijayanto and Zachrie, 2009, 425-427). According to Quah (2011), the European Civil Service only considered candidates for employment who had completed a degree or diploma, and had knowledge in key facets of the Netherlands Indies(Quah, 2011). Conversely, the Native Civil Service needed no such prerequisite knowledge, and admission was not on the basis of exam results. Rather, Indonesian applicants for Native Civil Service positions were judged by social influence rather than intellectual capacity and hereditary succession was a common feature of the selection process(Hadisumarto, 1974). Essentially, the rich and upper class of Indonesia were afforded these positions, in return for loyalty and the support of the Dutch administration. In terms of Indonesia’s Dutch history, the VOC did not leave Indonesia with a properly functioning public service. Instead, Indonesia was left with an unproductive band of elite wealthy men as government. Meritocracy, a key feature of democratic public servants was disregarded by the Dutch colonisers, and this has contributed greatly to Indonesia’s current state.

Indonesia’s lack of a tradition of meritocracy can also be seen in today’s public service recruitment and employment processes. The Indonesian judicial system is a powerful example. Ghoshal (2004) describes how judges are not selected by the Supreme Court system, but instead by the Ministry of Justice and Human Rights. Thus effectively “a system in which a cabinet minister was in firm control of the careers and personal welfare of judges, the government could steer the course of justice to fit its own interests” was created(Ghoshal, 2004). While Ghoshal acknowledges not all judges are corrupt, many find the “huge material rewards” to good to refuse, and bias their decisions in favour of the authorities. This system initiated by the government blatantly misallocates talent in the judiciary, in order to promote the interests of the central government. Furthermore, the civil service promotions policy is of questionable nature in terms of creating a tradition of meritocracy. Quah’s (2011) research provides insight into this arena. Indonesian civil servants are judged for promotion based on work performance, seniority, work experience, and the completion of in-house training programs. The problem is that civil servants do not discuss their career aims, no plans for development, and no appraisal interview. Basically it is argued that promotions are based upon who you know, and that the current promotion system is the strongest “disincentive to professionalism(Quah, 2011).”

Singapore on the other hand has had a very different experience in terms of a tradition of meritocracy. Between 1997 and 1963 Singapore was a part of Malaysia, and subsequent to that, the region was under British authority. Haque (2007) describes how the British bureaucratic principles instilled in Malaysia and Singapore allowed for a public service guided by routine, disciplined, pragmatic and rational behaviour. Furthermore, the model ensured a neutral bureaucracy, with a “greater emphasis on performance standards and educational achievements(Haque, 2007).” This historical underpinning of emphasis on meritocracy in the public service can be seen by comparing Indonesia and Singapore’s corruption data. Indonesia is currently ranked 100 th out of 183 countries in TI’s corruption perception index, while Singapore is ranked fifth(International, 2012b, International, 2012c). Furthermore, Transparency International also collects data on perceptions regarding the extent that laws are followed, abided by and enforced, e.g. the quality of the police, contract enforcement, courts and property rights. The TI 2010 survey on Rule of Law gave Indonesia


a percentiles score of 31%, while Singapore scored 93%. While meritocracy is not the sole contributing factor to this dramatic difference, it is certainly a contributing component to Indonesia’s ailing corrupt bureaucracy.

Low Salaries

My analysis of corruption in Indonesian society has pointed to a factor which seems to perpetually arise in corruption research: low salaries. Indonesia and many other developing countries pay their civil servants spectacularly low salaries. Despite the fact that living costs in Indonesia are far lower than those in Australia, or other developed nations, it will be argued that wages paid are not enough to cover living costs, and lead to the necessity of procuring money through corrupt practices. This section will utilise examples from Singapore and Sweden to demonstrate the effectiveness of higher paid civil servants in maintaining accountability.

Indonesian civil servant wages are very low. Indonesian concepts of family differ greatly from Australian or Western perceptions. While in the West, one’s family usually refers to a partner, and children, in Javanese society (and many other communities in Indonesia) one’s family includes everyone living in their village. This is important in that a civil servants’ wage must also be allocated to their village, not just their immediate blood relations(Norrie, 1993, 8). Indonesia does not have welfare programs, or pensions (except for ex public servants), thus fair wages are vital for the support of entire communities. This fact is significant in that if public servants cannot earn enough income through legal work, and opportunities for corruption are prevalent, many will engage with corruption to complement their income. Interestingly, a public servant’s wage depends on three elements: basic salary, allowances (family, structural, functional, remote locations), and other supplements (bonuses, housing, travel etcetera). Therefore, according to Rainer Rohdewohld of Monash “the salary structure in the Indonesian civil service is quite complex and lacks transparency and simplicity(Rohdewohld, 1995, 100-103).” Rohdenwohld’s research indicates that public servants are often guilty of “projectism”- creating a fake proyek in order to be eligible for grants and bonuses. This activity dramatically hinders the completion of ongoing work, and retards the natural flows of project funds, promoting corruption(Rohdewohld, 1995, 102).

One high profile case study, as published in both Tempo2 and the Jakarta Post3, is the case of the Justice and Human Rights Minister, Yusril Ihza Mahendra(Saraswati, 2003). The minister stated publically his dissatisfaction with his wage, a meagre 19 million rupiah per month, or A$3,092 according to xe.com using rates from November 2003. This politician is a senior minister, and much of this wage goes to pay for travel, and other official duties. Yusril stated “ I feel like I am being exploited (by the state). I am not happy (with this job).” Considering his senior status in the Indonesian Government, and huge responsibility and stresses, this salary is so very miniscule. Significantly, in the same article, Minister of National Development Planning Kwik Kian Gie weighed in on the debate, stating that increasing state officials salaries would certainly help to eradicate corruption, collusion and nepotism. Whether this can be seen as an admission of personal guilt is interesting, none-the-less examples from fellow contemporary states regarding combating of corruption successfully through raising public servants and politicians salaries is evident.2 Highly respected Indonesian language weekly magazine; comparable to Time magazine. 3 English language newspaper circulated primarily in Jakarta.


Critics argue that simply paying public servants and politicians more money will not affect their tendency or likelihood to engage with corruption, and that they will simply be richer bent officials. This is untrue, and United Nations Office on Drugs and Crime even state that a prerequisite for corruption prosecutors to be able to operate effectively is “adequate remuneration(Crime, 2004, 15).” For example, Indonesia’s Anti-Corruption Commission’s staff salaries are “considerably higher” than other civil service positions(Schütte, 2012, 46). While simply paying officials large sums is not the solution, experts have designed the ‘fair wage-corruption’ model, dictating that corruption levels in developing countries will decrease if officials are paid fair salaries. According to the IMF who has tested this theory against data, it is hard to show concrete evidence to suggest fair wages reduce corruption. This conclusion was drawn because finding examples in developing countries of fair wages in public service is difficult, but by the extrapolation of linear relationships, they believe that fair wages can reduce corruption, and promote efficiency(Rijckeghem and Weder, 1997, 39). Singapore is a prime example of a state with high wages, and extremely low levels of corruption. After the 1989 salary increase in Singapore, public service salaries were comparable to those in Australia. For example, a top administrative grade staffer in Singapore was paidA$28,196 annually, or just under A$10,000 more than their New South Wales Public Service counterpart(Quah, 1995, 337). While high wages are surely not the sole reason for Singapore’s success in combating corruption, they are definitely a contributing factor in promoting bureaucratic efficiency and professionalism(Commission, 1989, 34). Assad Lindbeck attributes the high salaries of public servants in Sweden to the relative honesty of Swedish public officials. According to Lindbeck, Swedish official’s fair salaries meant “they could “afford” to be honest(Lindbeck, 1998, 4).” Furthermore, at that time, Swedish senior administrators earned 12-15 times the salary of an industrial worker(Lindbeck, 1998, 4). While 12-15 times a labourer’s wage is very high, it underpins the fact that officials being paid well are more reluctant to engage with corruption, as losing their lucrative career would be enormously financially damaging.

Political Will

Just as Indonesia’s lack of a tradition of meritocracy in government, and the extremely low salaries paid to politicians and bureaucrats are important contributing factors to Indonesia’s corruption problem, the lack of political will to eradicate corruption is also imperative. Historically, successive Indonesian presidents since Soeharto mobilise voters with anti-corruption rhetoric, then abuse their power while in office. Furthermore, the recent court case of Chandra and Bibit, senior members of the KPK (Komisi Pemberentasan Koruption- Corruption Eradication Commission) is further evidence of how the Indonesian elite undermine corruption eradication efforts.

Contemporary Indonesia has been governed by several different presidents, all of whom pronounced corruption eradication as high on their agendas. Two in particular will be examined. First President Megawati was in power between 2001 and 2004. To demonstrate the systemic extent of corruption when Megawati won office, she publically stated that “'I have gathered all my close relatives and asked them to really promise not to open the door even a little for a return of KKN (Corruption, Collusion and Nepotism) among my family,” continuing on that she hopes “they can restrain themselves from many temptations existing around them(Library, 2001).” This comment is both interesting in terms of her staunch opposition to corruption, and also because of the


opportunities she sees her family will gain through her presidency. Despite this anti-corruption rhetoric, Megawati’s term in office was problematic to begin with. Slater (2006) describes the Megawati government as part of a “unaccountable cartel(Slater, 2006).” She had close ties to former Soeharto cronies, and while promoting herself as opposition to President Soeharto, it is known that her elite military and business associates were the same Soeharto colluded with. Megawati has been criticised widely by human rights groups in Indonesia, as “corruption had flourished, and law enforcement had weakened(2001).” Quah (2011) harshly analysis Megawati’s time in office, and points to the fact that she took a whole two years to sign off on the establishment of the KPK, effectively delaying the organisations implementation. President Habibie is another example of an Indonesian president whose actions speak louder than their words. Habibie was president immediately following Soeharto, 1998-1999, and was previously a “trusted Suharto lieutenant(Schwarz, 1997).” Strong anti-corruption rhetoric was popular with President Habibie, in order to boost Indonesia economically, he claimed, but the reality of his presidency was more troubling(Hamilton-Hart, 2001, 65). Firstly, Habibie vowed in 1999 to grant former President Soeharto a pardon if he was convicted on corruption charges, and in October 11, 1999 he dropped the corruption investigation into Soeharto(Mydans, 1999). The abandonment of this criminal case into Soeharto troubled the public and human rights groups. Apart from covering up past corrupt practices, Habibie was implicated in a corruption scandal of his own, involving Bank Bali paying $70million into a firm’s bank account, which had affiliations with President Habibie’s Glokar Party. It is believed that this money was then funnelled into Habibie’s presidential campaign(Landler, 1999). This corruption in Indonesia not only affects the individual president and people involved, but due to this scandal, the IMF, World Bank and Asian Development Bank withheld $1.4bn in loans to Indonesia until this scandal was investigated by an independent agency. The money was returned in full to Bank Bali(Landler, 1999).

While presidential history post-Soeharto has consisted of presidents vowing to protect their predecessors from their corrupt behaviour while in power, contemporary Indonesian politics and government have also not lived up to transparent expectations. The lack of will in the police force to curb corruption was evident in the high profile case of the arrests of Bibit and Chandra, both chairmen of the KPK, in 2009. They were accused of abusing their powers in relation to issuing and revoking travel bans, and the only evidence POLRI produced was “later proven to be a fake(Butt, 2011, 386, Schütte, 2011, 372).” The arrests of these two senior agents of the KPK- Indonesia’s widely praised and respected anti-corruption agency, came after a long investigation into senior members of the Indonesian Police Force (POLRI-Polisi Republik Indonesia)(2008). Critics see the move to arrest these KPK heavyweights as a direct effort to undermine the strength of the successful KPK, by POLRI(Arnaz and Pasandaran, 2009, Brooks, 2011). Both Bibit and Chandra were reinstated to their original positions, and this example represents the lack of will from politicians and senior public servants alike, to curb corruption. It seems those benefiting from graft are willing to use considerable means to ensure the continuation of their criminal activity.

Strong political will against corrupt practices in Hong Kong is evident through their amazingly strict stance on dishonest bureaucrats. According to Professor Kwok, former Deputy Commissioner and Operations Chief of the Hong Kong’s ICAC (Independent Corruption Eradication Commission) “If you want to change the culture (of corruption), never tolerate bribery, no matter how small(Rofiyandi and Kurniawan, 2011).” While Kwok doesn’t believe in the death penalty for committing corruption, he believes Hong Kong’s minimum 1 year, maximum 12 year prison sentence


for corruption is adequate(Rofiyandi and Kurniawan, 2011). This represents the government’s strict political will to curb corruption, and this is lacking in Indonesia. According to the Director of the Anti-Corruption Research Centre at Gadjah Mada University in Yogyakarta, while Indonesia has a maximum sentence of 20 years for committing corruption, this is rarely enforced. Rather, corrupt convicts are generally given a minimal sentence, if one at all(Taufik, 2012).

Conclusion

Corruption is a universal phenomenon, occurring in the developed and developing world alike, and Indonesia’s current predicament is not isolated or unique. Despite this, Indonesia’s corruption problem is both fascinating and intriguing due to its multi-faceted and dynamic characteristics. The study of corruption encompasses many disciplines such the economic, legal, political, historical and psychological spheres. To say that Indonesia is the subject of a ‘culture of corruption’ is over simplistic, and this essay has attempted to explore some of the underlying issues surrounding corruption eradication in Indonesia. Firstly, Indonesia historically and currently does not employ a tradition of meritocracy in the public service. Since the period of the Dutch colonisation, and the VOC, the Indonesian public service has recruited and staffed their departments with people based upon social influence, not necessarily capability or knowledge. Secondly, Indonesian public servants and politicians are paid very low salaries for the work they undertake. These staff are not able to support themselves or their families with their official wage alone, and many turn to illicit means such as bribery to complement their salaries. Many examples globally demonstrate increased transparency, accountability and honesty in their bureaucrats and politicians when paid adequate or generous wages. Finally, there is evidence of a lack of political and bureaucratic will to curb corruption in the archipelago. Example after example abound of both politicians (including presidents) and senior public servants engaged in corruption, and taking considerable steps to undermine the work of the KPK, ensuring the continuation of corrupt practices. It seems that those gaining from corruption are in no rush to halt this lucrative opportunity for wealth creation. It is even argued that now more than ever civil servants are extracting as much capital as possible, as corruption crackdowns become imminent. The causes of corruption provided by this article by no means exhausts all possibilities, but attempts to compare the experience of Indonesia with the experience of fellow contemporary states, and suggests possible avenues to reduce corruption levels. This article is unique in its focus on these three causes, and has the potential to become the basis of a more detailed and in-depth research project. Much contemporary analysis holds high hopes for the successful implementation of anti corruption measures in Indonesia, but all acknowledge that the journey will be lengthy and tenuous, lasting many years henceforth(Schütte, 2012, Indonesia, 2012).

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