THE TASTE OF CORRUPTION IS IMPOSSIBLE TO GET RIDD OFF FROM INDONESIAN LIVELY HOOD .THE WORLD CITIZEN HAVE TO RECONGNISE AND ACCEPTED TO BE LEGAL SYSTEM.

http://tbn0.google.com/images?q=tbn:HeOkIm4JjH1atM:http://www.spraguephoto.com/stock/images/Indonesia/06id290.jpghttps://i0.wp.com/insideindonesia.org/images/stories/edition_90/Aspinall_photo_2w.jpg

AID 590-7 (10/88)
1. Gary Goodpaster
2.
3.
AGENCY FOR INTERNATIONAL DEVELOPMENT
PPC/CDIE/DI REPORT PROCESSING FORM
ENTER INFORMATION ONLY IF NOT INCLUDED ON COVER OR TITLE PAGE OF DOCUMENT
1. Project/Subproject Number 2. Contract/Grant Number 3. Publication Date
4. Document Title/Translated Title
5. Author (s)
6. Contributing Organization (s)
7. Pagination 8. Report Number 9. Sponsoring A.I.D. Office
10. Abstract (optional – 250 word limit)
11. Subject Keywords (optional)
1. Indonesia 4. Decentralization
2. Corruption 5.
3. Rent seeking 6.
12. Supplementary Notes
13. Submitting Official 14. Telephone Number 15. Today’s Date
……………………………………………….……………DO NOT write below this line…………………………………….……………
16. DOCID 17. Document Disposition
497-0357 497-C-00-98-00045-00 February 2001
Reflections on Corruption in Indonesia
Nathan/Checchi Joint Venture/PEG Project
21 PEG 29 ECG, USAID/Jakarta
011-62-21-520-1047 4 September 2001
DOCRD [ ] INV [ ] DUPLICATE [ ]
C. Stuart Callison, Chief of Party
Reflections on Corruption in Indonesia
by
Gary Goodpaster∗
February 2001
Just as it is impossible not to taste honey or poison that one may find
at the tip of one’s tongue, so it is impossible for one dealing with
government funds not to taste, at least a little bit, of the King’s wealth.1
Indonesian pundits often say that Indonesia has a “culture of corruption”,2 or that
Indonesian society is permissive and tolerates corruption. Proposals to establish a social
norm that condemns corruption usually follow.3 These claims are efforts to explain why
there is widespread, endemic corruption in Indonesia and why it persists over generations
notwithstanding general notice and constant condemnation. Sadly, cultural explanations
are often “that’s just the way it is” explanations. Even if in some sense correct, there’s not
much explanation there. Cultural explanations also call for cultural remedies, such as
education of children, whose efficacy one may doubt for the world of adults.4
We need a real analysis, something that generalized cultural explanations do not
provide, to understand how corrupt activities enter people’s lives, what it does for them,
and why they would tolerate it, given public condemnation. We must also begin by recognizing
that what we call corruption serves legitimate human needs; it solves problems
of making a living and getting ahead; and, depending on the circumstances, there may be
impelling incentives for people to act corruptly. We need to understand how that occurs
and why it is so difficult to do anything about it.
Corruption, collusion, and nepotism (corruption for short),5 are natural, not aberrational,
behaviors. Consider the countries and governments of the world and their histo-
∗ Professor of Law Emeritus, University of California School of Law, Davis; former Chief of
Party, Partnership for Economic Growth, a joint economic policy development project of USAID and the
Government of Indonesia. This article reflects my views, judgments, and conclusions, and none of them
should be attributed to the U.S. Government nor to USAID. I would like to thank my colleagues at the
Partnership, Jeff Povolny and Thomas Timberg, for reviewing earlier drafts of this paper and providing
helpful comments.
1 Kautilya, The Arthashastra, quoted in World Bank, The Quality of Growth 135 (Oxford University
Press, 2000)
2 Indonesia’s first vice president, Mohammad Hatta, said this a long time ago, but it is often repeated.
Most recently, T. Mulya Lubis, a prominent Indonesian lawyer and reformer, said the same in a
speech in Washington, D.C., to the United States-Indonesia Society. USINDO Brief, USINDO@aol.com,
January 18, 2001.
3 New interpretation of laws sought to fight corruption, Jakarta Post, Jan 30, 2001, p. 2, col. 8.
4 Education may teach people rules and how to talk about them, but such rules and talk rarely
override contextual learning from peers regarding the necessities and practicalities of getting along in the
world.
5 Collusion is just cooperation for gain given a negative cast. It is very common, as noted by
Adam Smith two centuries ago: “People of the same trade seldom meet together, even for merriment and
2
ries, and you will conclude that, at some stage of national development, what we call corruption
constitutes a norm of behavior. Much history comprises tales of corruption and
nepotism, from the courts of Rome and Byzantium, through the palaces of popes, kings,
and renaissance princes, down to the robber barons and Tammany Halls of yesteryear, to
the political patronage, backroom deals, mafias, triads, and yakuza of today. By our standards,
Elizabethan England6 and the late 19th century United States were quite corrupt.
Corruption is also widespread in developing states and transition economies – particularly
those, like Indonesia, where the state controls much of the economy.7 It appears in
post-colonial states – there are “states” in Africa that could give lessons to the Devil –
and in many of the states formed from the dissolved Soviet empire.
Throughout history, and even today, it is actually the countries and governments
that are deemed not corrupt or that cabin corruption successfully that are abnormal. Corruption
is the normal, or ordinary, state, and on this proposition, what needs explaining is
not corruption, but moves away from corruption. History suggests that countries overcome
or “graduate” from corruption, learning that it is an evil to fight and conquer. In
democracies, the development of democratic voting, effective opposition parties and interest
groups, and regulated yet “free” market economies are catalysts in this process.
Even graduates, however, do not always completely succeed in eradicating corruption,
but rather in confining or limiting it. The recent French and German political corruption
scandals and the unseemly story of “money politics” in the United States and most Western
developed countries attest the difficulty in wholly exterminating corruption.
What we call corruption is a form of seeking personal gain. It is natural for individuals
to seek their own advantage and that of their family members or relatives. If the
government controls access to economic opportunities or has large, exploitable resources,
I would, of course, approach the government to gain access to them. As long as what I
got justified the expenditure I had to make to get it, it would be rational for me to pay, in
some way, for that access. From the individual’s point of view, corruption is just securing
some gain or advantage, and not unfairly, for others can do what I do. In fact, I am not
likely to see how my gain hurts anyone else, except perhaps competitors for the deal. If I
don’t receive the gain, then someone else will. As between us, I am at least as deserving,
and I would, of course, prefer that I or mine receive it. Once I and people like me secure a
productive position, or more grandly, capture the state policy and decision-making appadiversion,
but the conversation ends in a conspiracy against the public.” As for nepotism, evolutionary
theories of the selfish gene and kin selection provide a biological and evolutionary basis for favoring one’s
own. Actually, one need only consult one’s own behavior to estimate how natural nepotism is. If required
to make a choice between relatives and strangers, most would choose relatives. An example will make the
point. In 1997, in the United States, out of 4000 kidney donors, only one gave a kidney to a non-relative.
Burnham, Terry & Phelan, Jay, Mean Genes 204 (2000).
6 The crown practice of granting monopolies or special privileges in order to obtain revenue or to
reward services “reached its climax while Elizabeth was in power. A list of her grants includes patents giving
the sole rights to sell or manufacture currants, salt, iron, powder, cards, calf-skins, feels, ouldavies, oxshin
bones, train-oil, lists of cloth, potashes, anise seed, vinegar, sea-coals, bottles, lead, accidents, oil,
calamine-stone, oil-of-blubber, glasses, paper, starch, tin, sulphur, new drapery, dried pilchards, beer, horn,
leather, Irish yarn, importation of Spanish wool, and transportation of iron-ordinance.” Miller, The Case of
the Monopolies, 6 Mich. L. Rev. 1, 2 (1907).
7 Quality of Growth, supra, n. 1, at 151.
3
ratus, we will use it to benefit ourselves and ours as much as we can. In the latter case, we
will push programs in directions that provide the greatest opportunities for rent seeking.
To say that humans are naturally inclined to corruption is not to say that it is
good, nor to claim that nothing can be done about it, nor to preclude judgments about corrupt
activities. Claiming that corruption is natural no more endorses it than saying that
wars are natural endorses war. Just like other natural human inclinations we would perhaps
like to disown, say, for example, the tendency to overeat or inclinations to vice, corrupt
behaviors can be brought under conscious control. It takes some learning and discipline,
however. The case must be made why corruption is bad for you, or – if you personally
profit from it – why it is bad for others and society and why, in the long run, it may
be bad for you and yours. To those who make livings corruptly, where many people do
so, this is not an easy case to make. Worse, even when made, collective action problems
may insure that while all agree in moral concert that corruption is an evil, no substantive
remedy entails.
Assuming that humans naturally tend to engage in what we righteously condemn
as corrupt behaviors, however, also suggests that moral condemnation alone no more
serves to stem corruption than it does the classic human vices or the expression of genuine
human needs. It may comprise a gesture of solidarity with the good and the right, but
as Bertolt Brecht once famously said, “Erst kommt das Essen, denn die Morale.”(Eat
first; moralize later.) Put otherwise, corruption is bound up with making a living for oneself
and one’s own, either through corruptly generated income or self-protectively
through payments of bribes and corruption taxes to get on with one’s business. People
with full bellies and shelter are much more likely to listen to moral arguments than people
without, and we cannot disassociate issues of corruption from issues of self-provision.
Corruption is primarily an economic and social issue, and only down the line a matter for
sermons.
All this said, there are scales and degrees of corruption. Corruption can be narrow
or widespread, petty or grand, restricted or free, disorganized or organized. On deeply infiltrating
state instruments, corruption works a qualitative change in the way a society is
organized and operates. Call this condition “structural” corruption, that is, corruption
woven into the fabric of governance, so that governmental powers are co-opted to enable
corrupt activities, and into the weave of a society’s social and economic affairs. Corruption
can become so insinuated that, like a brain worm,8 it takes over its host, or at least
some of its functions, for its own purposes. Eradicating structural corruption is immensely
difficult because it operates as a governing economic and social system in itself
and because so many livelihoods depend on it.
Widespread corruption, such as now exists in Indonesia and some other developing
countries, forms a parasitic economic and social system. That is, it comprises adap-
8 A brain worm is a parasite that infects ants. Ants, in scavenging, eat a larval form of this tiny
creature, which then makes it way to an ant’s basal ganglia. From there it somehow impels ants to climb
stalks of grass. Ruminants crop the grass, ingesting the ant and the brain worm, which then goes through
another stage of its life cycle in the intestines of the ruminants.
4
tive and interconnected ways of making a living, certain kinds of incentives, characteristic
ways of relating to others, and persistence across generations. It is not a self-sufficient
or stand-alone system, but depends on co-existing economic and social systems, for example,
on the agricultural economy, on markets or state enterprises, on the self employed,
on small and medium enterprises, on the informal or black economy operating
outside, or on the contestable margins of, the law. In Indonesia, corruption interpenetrates
these, and other, systems, and lives off of them.
Corruption is, in considerable part, exploitive. That is, many corrupt activities are
nonproductive, and the corrupt make their livings rentier fashion by extracting wealth
from others. Corruption may involve productive activities, e.g., an overpriced power supply
contract, but these are generally priced at greater than market prices – and are exploitive
to that degree – or depend on theft, such as illegal logging, or other illegal activity,
such as smuggling. Even legitimate business activities, such as some of those the Indonesian
military undertakes, while themselves productive, are sometimes intertwined with
corrupt activities that are exploitive.9
Corruption feeds on poverty and widespread unemployment. Many find those
desperate for employment particularly easy to exploit. For example, the systematized illegal
gold mining in Kalimantan primarily uses poor migrants from Java and Madura for
its workforce.10 The migrants get startup funds from local businessmen, who then receive
half the take. To insure there are no governmental raids on the illegal mines, the businessmen
then must pay off local police, the military, and government officials.11
To the degree that corruption joins or creates organized criminality, as occurs in
Indonesia, it threatens ominous social system consequences. The example reveals that
systematic corruption may require large-scale cooperation. It also shows corruption as
black or inverse kind of governance through which government officials protect illegal
activities for a price, with their own “take” functioning much like a tax for government
services. Finally, note that while productive, illegal mining is extremely costly in adverse
environmental consequences, resulting in despoilation, deforestation, and in mercury and
cyanide poisoning of streams and rivers. It is also costly in terms of public goods such as
governmental authority, rule of law, and accountability. There is a looting lawlessness in
all this that is astonishing. There is, however, also an order in the lawlessness, a system of
expectations, incentives, and arrangements that creates profit and grants impunity from
law.
9 For example, in Medan, trucks that have a sticker from a military foundation routinely pass
through checkpoints at which money is demanded from truck drivers whose trucks do not carry the sticker.
Recently, truck drivers plying the Banda-Aceh road staged a strike to protest illegal levies demanded at between
ten to fifteen different checkpoints. One of the drivers spoke out: “We are tired of the levies demanded
by officers and hoodlums along the road. Every day we have to spend millions of rupiah to pay
these levies.” Truck drivers strike against extortion, The Jakarta Post, Saturday, Feb. 2, 2001, p. 2, col. 4.
10 Anzis Kleden. Illegal miners, transient merchants thrive amid extortion culture, Indonesian Observer,
November 25, 2000.
11 Id.
5
As detailed below, Indonesians support large, and largely unproductive, rentier
and pariah classes. The rentier class forms a kind of aristocracy, basing its position partly
on capitalist profits derived from governmentally conferred privileges, and on rents extracted
from from businesses and from lower classes. The pariah class is composed of
hoodlums and lower level officials and police officers who can use their official positions
to coerce small payments from many people. There are also shadowy ties between these
classes, with the former often employing the latter for various dark purposes.
As an economic system, what is good about corruption is that it provides livelihoods.
To a certain degree, because corrupt payments for protection operate like a tax,
corruption, in theory, may also serve to dampen certain undesirable activities, but that is
an unintentional consequence. Indeed, because corrupt payments often protect what
shouldn’t be protected, e.g., prostitution or drug trafficking, they may actually encourage
them.
What is bad about corruption is that it comprises essentially nonproductive behaviors
or behaviors excessively costly to the host. It does not, in economists’ terms, use resources
efficiently nor incentivize people to engage in productive activities. Studies of
the economics of corruption suggest that officials’ proclivity to rent seek increases and
distorts public investment, as such investment provides rent-seeking opportunities,12 and
causes all sorts of public losses.13In governance terms, it does nothing to provide for the
common good and actively detracts from it.
As a social system, corruption appears feudal or colonial in character, with lower
ranks supporting the upper. And it seems particularly adapted to strongly stratified societies
in which the state asserts a commanding role in economic life. Interestingly, it also
seems to thrive in situations in which, like Russia, the central state becomes enfeebled
and loses the authority it once had. Indonesia falls into all of these categories.
A Highlight Tour of Rent Seeking in Indonesia
Ordinary Rent Seeking
As Indonesian basic salaries are quite low, workers welcome any additional increment
of income. Many Indonesians hold several jobs and most are on a constant lookout
for additional sources of income. This is true even of government employees, a fact
that often surprises foreigners who assume that government employees are already paid
to provide government services. Indonesia’s bureaucracies, however, have been an employment
sink for the country, and they are notoriously overstaffed. Low salaries accommodate
these large numbers and explain some of their work habits. There is a common
saying that Indonesian government employees are paid a salary to show up, not to
work. These employees expect that if they are assigned special tasks, then there will be
additional remuneration to carry out those tasks. This creates a certain kind of entrepre-
12 Quality of Growth, supra, n. 1, at 145.
13 Mauro, Paolo, Why Worry About Corruption 6-7 (1997)
6
neorealism in government offices. Projects, and assignments to projects, are prized because
there will be a payment, beyond the basic salary, associated with the work.
More broadly, there is an expectation that if anyone provides a service, there will
be some payment for it. This is something like the custom of tipping, but has an even
more mandatory character. The delivery man who wrestles the new refrigerator up to
your flat, although a paid employee, nonetheless expects some additional money for the
service. Speakers, presenters, moderators, organizers, and news reporters at conferences
expect, and routinely receive, payments. Indeed, when, as sometimes happens, a foreign
speaker rejects the “fee”, there is befuddlement and consternation on the part of the organizers;
they have no procedures for dealing with a refusal to take a payment. In fact, as
the organizers usually get a percentage of what is paid out, it is in their own interest to insure
that the participants receive their fees. It is also customary to offer attendees at conferences
a “transportation fee” and even an “attendance fee”, in addition to free meals.
These fees are usually small, but they evidence the basic attitude. If someone does something
at your request, you are expected to pay something for it. And if you are a government
official, you are expected to have access to, and provide, information and services
that a citizen wants if he is willing to pay.
In this transactional economy, these service payments to government officials
may or may not count as corruption, depending on the degree of organized “farming” involved,
as I will clarify below. If corruption is defined as the abuse of public power for
private gain, then the “transaction fees and payments” charged and offered primarily reflect
a dysfunctionally incentivized administrative structure. In this structure, the economic
incentives of public employees are to guard access to public information and services
and to deliver them only in exchange for payment of a fee. In a sense, the ordinary
functions of government have been quietly“privatized” in what we would think of as perverse
ways. This comprises a certain kind of economy and a widely accepted way of
making a living. Nonetheless these practices are quite close to what we think of as corruption.
Indeed, close enough that it is easy to cross the admittedly indistinct line.
What, really, is the difference between a government employee that expects an
extra payment for participating in an assigned project and a police officer who expects
payment for providing “protection” to a business? The difference lies in what is “privatized”
and in what we define as an abuse of public power. The abuse lies not in providing
information and service or work for a fee, but in the deliberate distortion, or avoidance, of
laws, rules and lawful procedures in order to secure a private gain. It also lies in appropriating
the state’s monopoly of coercive power for private purposes. For example, to get
a passport or driver’s license renewal, a citizen may have to make a payment, beyond
posted fees, to expedite the renewal. But when a policeman shakes down a private citizen,
threatening to use his power of arrest or citation unless a bribe is paid, the policemen
enlists the coercive authority of the state to extract a gain. Law “enforcement” becomes
an unauthorized toll gate. The policeman provides no lawful service of any kind, but
rather victimizes citizens at will and as arbitrarily as he wishes.
Corrupt Rent Seeking
7
We cannot, however, classify all low and mid-level bureaucratic rent seeking as
petty and as signifying only administrative dysfunctionality. For example, many positions
in the bureaucracy are bought and sold. They are marketed because they are income generating,
and the purchase of a position creates incentives to extract more rents and extract
them systematically, what I call “farming”.
[The positions] include the more desirable positions for traffic police, customs
and immigration officials, and court clerks. Junior officials must pay
their superiors a quota from their earnings to secure these spots. Any
money raised by taking bribes from members of the public over and above
their agreed quotas they keep. Those who fail to meet their quota are
moved on in favor of those who can.14
This practice is also an example of a payment hierarchy or pyramid, something
that seems common and that offers a glimpse of the organized character of predation. It is
also clear, as noted below, that there is a substantial amount of leakage in departmental
and state enterprise budgets, particularly development budgets, and that many rivulets of
cash divert to eagerly cupped hands, then to be used for private purposes.
Outside the gloomy halls and offices of many state bureaucracies where the underemployed
wait, government officials interacting with citizens on the street abuse their
authority to engage in petty illegalities that impose additional regressive predation taxes
on the producing populace.
Poor villagers in West Java were baffled when their government rice supply
suddenly dried up. Suppliers complained that their payment was 60 million
rupiah ($6300) in arrears. But villagers were adamant that they had paid the
bills, the Jakarta Post reported. It was discovered that one local official had
collected money from 4,000 poor families and used it to build himself a
house. Another village chief spent the money he was handling on a car. A
third financed a wedding party. A fourth financed a second wife for himself.
Investigators found that there was one village chief who had used the money
to buy rice, as he should have done. But instead of distributing it to the
needy villagers, he handed it out free to electors to win power for himself.
‘Oddly, none of these officials has been prosecuted,” the newspaper reported.
An article on the same page of the same newspaper reports that a
survey revealed 12,000 malnourished children in the central area of Java
alone15
Consider also the case of weigh stations or bridges. A major reason for the establishment
of weigh stations throughout the provinces is to prevent road damage from overloaded
trucks. Ironically, weigh stations insure the opposite. This is because Department
14 Backman, Michael, Asian Eclipse: Exposing the Dark Side of Business in Asia 31 (John Wiley
& Sons, 1999)
15 Nury Vittachi, Travellers’ Tales, Far Eastern Economic Review 96 (Dec. 7, 2000).
8
of Transport officers openly misuse the weighbridges, forcing drivers to stop for the extraction
of illegal payments. To compensate for these and other illegal payments the police
require, driver and traders must overload to ensure adequate margins.16 There are
many other examples of similar rackets involving illegal taxes and charges on the movement
of agricultural goods. For example, interviews with farmers, truck drivers, traders
and shippers in South Sulawesi reveal that officers ranging from the air/sea police, customs,
port authorities, the forestry department, and local police officers collect these levies.
17
Grand Rent Seeking
Many people, within and without Indonesia, when reflecting on Indonesian corruption,
immediately think of the grand scale corruption that Suharto and his chosen ones
represented. Such corruption involved the conferral of special economic privileges on
Suharto family members and favored associates. These granted monopolies, inflated government
contracts and leases; and allowed access to departmental off budget slush funds.
They also permitted misdirection and misuse of state enterprise and reforestation and social
insurance funds; mandated bank lending to the favored and well connected, in violation
of prudent lending rules; and authorized diversion of development funds to personal
uses. Suharto also apparently encouraged ministers to enjoy the largesse; or, noblesse
oblige, looking smilingly aside when they did.
A World Bank report stated that approximately 20-30% of development aid was
stolen or “diverted through informal payments to GOI staff and politicians…. Most GOI
16 When there are no weighbridges on the planned route, drivers tend to reduce their load. However,
drivers rarely do so. For a province with a relatively small population, South Sulawesi has a large
number of weigh stations. For example, on the road from the northern part of the province, Kabupaten
Luwu Utara, to Makassar (the capital in the south) there are 6 weigh stations, including two that are less
than 25 km apart (i.e. in the town of Datae in the Kabupaten Sidrap and in Lumpue near the port of Pare-
Pare). The amount each truck must pay is between Rp 5,000 – 20,000, depending on the amount of excess
weight.
Provincial Department of Transport offices establish maximum truck weight capacities in ways insuring
that all product transport vehicles are overweight. For example, six wheeled vehicles with a 6-7 ton
capacity have a 4-ton limit, 12-13 ton capacity vehicles have an 8-ton limit. Drivers insist that transporting
at, or under, the maximum tonnage allowed is extremely uneconomic. Of course, drivers do not abide by
the limits even though, under regulations, any transport vehicle found at a weigh station to be overweight
supposedly must be unloaded. This never happens. Drivers know that while in violation of the load limits,
they can pay to avoid a citation and be on their way.
17 For example, from the rice producing area of Sidrap to the port town of Pare-Pare (approximately
one hour by road) there are usually 2 police posts where payments must be made. Further payment
to the police is required for entry into the port of Pare-Pare. Each post requires payment of between Rp
3000-5000 (although some drivers complain that demands are often for larger amounts). From Sidrap to the
provincial capital, Makassar (approximately 4 hours to the south) there are seven police posts, as well as
three weighbridges. Drivers and traders transporting cattle from Bone (on the east coast of the peninsula) to
Makassar reported that the 5-hour trip might involve the payment of around 20 illegal charges. Traders
typically estimate the largest expected loss from these charges and pass these losses on to farmers in the
form of lower prices. Field trip to South Sulawesi, April 2000: David Ray and Rahim Darma, see Ray and
Darma (2000). Report on file at the Partnership for Economic Growth Central Office, Jakarta, Indonesia.
9
agencies have sophisticated informal systems for diversion of 10-20 per cent of the development
budget under their management and for utilizing the proceeds diverted to supplement
both their inadequate operations funds and their compensation.”18
Recent audits of Pertamina, the state oil and gas company, and Bulog, the state
grain agency, disclosed massive “inefficiencies” and corruption, much of that due to corrupt
contracting practices. A Price Waterhouse Coopers audit of Pertamina, completed in
mid-1999, reported losses of US $ 6.1 billion over the two-year period between April
1996 and May 1998.19 Similarly, an Arthur Andersen audit of Bulog found corruption
losses of US$ 2 billion over the four-year period between April 1993 and the end of
March 1998.20
Note, however, that while certain individuals, the aristocracy of the corrupt, profited
handsomely from grand corruption, there is more to it than that. The rule, “follow the
money”, is a tool we can use to give us some insight into the real economy of corruption
in Indonesia. Consider the Bank Bali scandal.21 This involved the transfer of approximately
$80 million out of $123 million owed to Bank Bali – under a government guarantee
scheme on interbank debt – to a private company as a fee for “assistance” in collecting
on the guarantee. The scandal was first disclosed in the midst of a national election
campaign. It was alleged that the money was to be used as a slush fund for Golkar party
election campaign activities, and that President Habibie and his lieutenants were deeply
involved.
One enlightening result of the audit, however, was the disclosure that the $80 million
was distributed to an extraordinary number of businesses and private parties.22 While
it is difficult to discern exactly what the distributions were for, not all, perhaps not even
most, appear to have been intended for political purposes. What the Bank Bali funds flow
chart shows is an immense network of corrupt payments and associations beneath the surface
of a single grand corruption scheme. There are evidently large payoff pyramids associated
with grand corruptions, pyramids apparently the inverse of those noted concerning
rent farming in bureaucracies. There money flows up; here down. In either direction
of flow, however, the flows implicate many people. We can now sense an unseen Indonesian
economy organized as a web of corruption networks, networks that are perhaps more
than just distribution systems. The payments, particularly those downward, must buy
something; and networks useful for one purpose may be useful for another.
While I have used examples from the New Order era, there are many allegations
that not only has grand and mid-level corruption continued, but that it is worse than
18 Quoted in Schwartz, Adam, A Nation in Waiting, p. 316 (1999).
19 Pertamina Stabbed by Audit Documents, GATRA 36/V, July 24, 1999. The Indonesian government
later revised this figure downward.
20 http://www.suarapembaruan.com/News/1999/10/111099/Headline/h103/h103.html.
21 An excellent description and chronology of the Bank Bali scandal can be found at
http://www.tempo.co.id/harian/fokus/16/2,1,4,id.html.
22 A chart of the funds flows can be found at:
http://www.thejakartapost.com/bbscandal_lf_fundsflows.asp
10
ever.23 Habit, opportunities for those new to the feeding chain, and money politics are
reasons, The breakdown of authoritarian rule, which in some sense controlled and directed
these corruptions, is another. I consider these matters below.
Judicial and Legal System Corruption
It is widely accepted in Indonesia that the judiciary is largely corrupt,24 that there
are many corrupt lawyers willing to pay for decisions, and that there is serious corruption
among Indonesia’s prosecutors and police as well.
Indonesians have a very low level of confidence in the integrity and competence
of their judicial system. Corruption is rampant, decisions can be
purchased, the courts are subject to political interference, and legal transparency
is inadequate. In many legal cases, plaintiffs are not seeking justice,
but rather are using the judicial system as a mechanism through
which to extort third parties. Such problems are by no means limited to the
judicial system: they also extend to the legal profession, the attorney general’s
office, administrative agencies and, especially, the police force.25
The corruption of so many actors in the legal system means that it cannot serve as
a proper tool of governance nor as a just means of dispute resolution. Those who would
bribe their way out of a legal problem have many gatekeepers to approach. Police, prosecutors,
lawyers, and several layers of judges can each dispose of or divert cases. If one
doesn’t, another may.
Corruption in the legal system eviscerates Indonesia’s reform efforts because the
system by and large cannot be trusted – indeed, cannot be used – to render honest decisions,
but may be trusted to protect corrupt activities. The cost to Indonesia of a corrupt
legal system is incalculable. Aside from loss of governance capacity and social disaffection
because people cannot use it to remedy real problems, there are clear economic
losses. Donors, creditors, and potential foreign investors look upon the system with immense
frustration, particularly at blatant fraud practiced in the courts.26 Indonesia’s current
foreign investment is negligible, something that limits its ability to grow economically.
While political instability is asserted to be a principal reason, investors also point in
23 “Di sisi lain, praktek korupsi yang menjadi penyebab ambruknya perekonomian hingga saat ini
tidak ada yang diusut secara tuntas. Bahkan, praktek korupsi itu kembali terulang dalam pemerintahan Gus
Dur dalam skala dan kualitas yang makin tersistem. ‘Kroniisme kini merebak di seluruh jajaran kabinet.
Dan kantor kepresidenan agaknya mulai berubah menjadi bursa KKN,’ tandasnya.”
http://www.suarapembaruan.com/News/2000/10/23/Utama/ut01/ut01.html. Politik Uang di DPR Makin
Marak, http://www.hukumonline.com/cetak_artikel.asp?code=1733&artikel=berita.
24 Ruler’s Law, The Report of the International Commissionof Jurists Mission to Indonesia 24
(April 1999); T. Mulya Lubis, ‘The Rechstaat and Human Rights’ in T. Lindsey (ed.), Indonesia, Law and
Society 181 (Federation Press, 1999).
25 Transforming The Legal System: From Rulers’ law to Rule-of-law, Van Zorge Report on Indonesia,
Vol. I, No. 28, at 4.
26 In at least two cases, fradulent creditors have appeared in Indonesian bankruptcy composition
proceedings to defeat claims of legitimate creditors. For a description of the scam, see .
11
horror at the legal system because they know that, under current conditions, they have no
security of investment whatsoever. Worse yet, they have come to realize that if they do
invest, they may be subject to arrest on the complaint of a fraudulent debtor who has
probably paid off the police.27
Police, Military, and Related Corruption
The police, trustworthy confidential sources say, engage in three levels of organized
corruption. There is a large-scale protection racket where police provide protection
to paying businesses. The protection may be from police predation or security from payment
demands from other groups and may also include services in labor disputes. There
is also street level corruption, the extortion of money from ordinary citizens through
threats of arrest or citation. The police also require payments when someone seeks to file
a police report, such as for the theft of a car. Police know that insurers’ demand police
reports before paying any theft claims, and they are able to charge substantial “filing”
fees in such cases. Then there is the purchase of positions within the police force itself.
To become a policeman requires the payment of two years’ salary up front. The rookie
expects to recoup this payment within six months of employment. Higher-level offices
are sold, and offer extraordinary opportunities for gain. The 4.5 million rupiah monthly
salary that police generals earn doesn’t adequately explain the mansions and fleets of
luxury cars that some police generals own. Finally, as noted, this is all well organized,
and there is a payoff pyramid in police departments which is enforced through designation
of some officer, a “hard plant” or quartermaster, to collect and distribute payments.
Where the raison d’etre for the police force is money-making and the collection
of rents, there is no public order and safety mission. Ordinary Indonesians understand this
quite well and openly state that they hate the police, viewing them primarily as criminal
forces preying on members of the public. Storeowners and traders, bus and bajai drivers,
owners of nightclubs and discotheques all must pay protection money to the police. If
anyone needs convincing, the police can send thugs to demonstrate what it is like not to
pay protection. Jakarta newspapers often report such “visits” by mysterious and unnamed
groups, visits sometimes resulting in substantial property damage.
The Indonesian military, although alleged to engage in similar practices, is also a
more difficult case. It operates many businesses, legal and illegal. The justification for its
business empire has been the state’s notorious underfunding of the military. The income
the military derives from its businesses and foundations, however, is off budget. No outside
observer has a good idea of how much money the military takes in, nor exactly how
it is distributed. A large part of it appears to go to military personnel, with commanders
commanding a large portion of that.28 The military also has close but shadowy connections
with many Indonesian conglomerates. There is apparently some cross-shareholding
27 Indonesian Stake Leads to Legal Mess for Canadian Insurer, Wall Street Journal, Dec. 6, 2000.
28 Indonesia’s Army: Friend or Foe?, Van Zorge Report on Indonesia, Vol. II, No.16, at 7.
12
in enterprises, and conglomerates in the past, at least, have allegedly provided funds for
some of the military’s blacker operations.29
Without denying the military’s need for resources beyond those provided by the
state, the secret control of immense resources, derived from sources legal and illegal,
without accountability for their use, is a structure for mafia-like corruption. There are, for
example, allegations that the military has used its resources to fund the violence in the
Maluku islands.30 There are also allegations that the military has extensive arrangements
with wealthy businessmen, under which the military provides “low-cost military manpower
and equipment, threats and intimidation of business competitors, eviction of
smallholders from land, and beatings and murder of those who might threaten the system.”
31
Premanism, or local gangster, mafia-like activities are an associated phenomenon.
Preman gangs charge businesses monthly fees to insure there won’t be any “disturbances”
that interrupt business operations. Of course, since the preman gangs themselves
are the source of these disturbances, these guarantees are effective. Such gangs also appear
prevalent at certain markets and transportation terminals, charging storeowners, kaki
lima, and bajai and taxi drivers fees for operating from the area. One example from
Medan shows the extent and seriousness of the preman problem. On August 21, 2000,
17,000 local transportation drivers called a strike to protest preman activities. Drivers
stated that they had to pay premans 5000 rupiah each day or suffer vehicle damage, and
demanded police action.32 Protest actions like this are not uncommon.33 Preman gangs, of
course, can operate where police forces are either not effective or choose not to be effective.
There is also evidence that in some places, preman gangs are in league with members
of police forces,34 and that preman are hired to undertake demonstrations and violent
mass actions.35 There may be military involvement as well, and certainly there are payoff
pyramids.
Aside from the monetary losses the rent seeking imposes on the populace, and
note that the “protection tax” is highly regressive as far as the poor are concerned, there
are additional and immeasurable social and monetary losses. These arise from the failure
of the police to do what police and armed forces are supposed to do – provide security,
safety, order, and defense – as well as the active doing of what they are not supposed to
do. For we must add to this already scandalous story the illegal activities that these forces
either protect or undertake themselves: drugs, prostitution, gambling, illegal logging and
mining, smuggling, and the like. Leaving aside the vice crimes and social costs attributable
to them, and focusing just on material losses, the illegal logging and mining cause
29 Aditjondro, George, Financing Human Rights Abuses in Indonesia,
http://www.koteka.net.part2.htm.
30Indonesia’s Army, supra, n. 28. id.
31 Id.
32 17.000 Armada Angkot di Medan Mogok Total, Kompas, 22 Agustus 2000.
33 Tanahabang, “Emang Abang Yang Punye”?, Kompas, 29 Juni 2000.
34 Pemicu Bentrokan Preman di Blok M diduga Oknum Polisi dan TNI, Kompas, 15 Nov. 2000;
Pungutan Preman Palembang Mengganas, Kompas, 8 Februari 2000.
35 Political Gangsters, 53 Inside Indonesia.(Jan.-March, 1998)
13
direct theft losses to the state and its people through the destruction of natural capital and
also greatly increase the rate of natural resource depletion. The smuggling, of goods such
as subsidized kerosene and gasoline, to places like Singapore, diverts and appropriates
the subsidy intended to help ordinary people. Police and military involvement in illegal
logging, mining, and smuggling also results in a larger web of corruption. It entails either
“hush” or “facilitation” payments to bureaucrats, inspectors, and local officials or threats
of violence, or actual violence, for interference or disclosure.
Money Politics
Money politics is a term used to describe the purchase of political favors or influence.
It is a problem in all countries, even the most robust democracies, and reform efforts
directed at money politics only cabin, rather than eliminate, it. There is a question of
what part of money politics we should classify as a form of corruption. Of course there
are degrees. Paying money for a legislative vote or to buy a governmental office is one
thing, donating to a political campaign another. Although it is a complicated issue, “ordinary”
money politics, I think, should not count as corruption. Politics is about power,
gaining it and using it. We can no more separate money from politics than we can separate
stargazing from stars. By “ordinary” money politics, I mean the use of money to
support particular candidates or particular parties. Abnormal money politics would include
using money to buy votes or offices, under the table transactions to procure governmental
decisions, and the like.
While Indonesia has a mostly “democratically” elected national legislature, it is
not yet a democracy where ordinary citizen opinions matter much, nor where officeholders
are meaningfully accountable to citizens. Those who hold political power now did not
gain it by offering platforms that citizens endorsed by voting. At the national level, elections
to high office are indirect, as people vote for parties rather than individuals. This essentially
means that the parties control seats. If the electorate votes for a party rather than
for an individual, anyone wanting a seat can simply pay the party to designate him as the
elected official, and that appears to have happened. In addition, no party in the national
legislature holds an absolute majority, and every decisive action requires the building of
coalitions, and coalitions are as readily built, perhaps more readily, with money as with
ideology or shared interests.
In this way, the nature of money politics in Indonesia is closely tied to its electoral
system, and there is a lot of “money politics” going on. In fact, if one draws inferences
from various clues that surface from time to time, and credits allegations and rumors, Indonesian
politics is fundamentally money politics of the worst kind. People, offices, and
votes are bought and sold.
For those in power, and those who seek power, access to sources of money to play
deadly serious political power games is an absolute necessity, and those who have money
use it skillfully to defend their interests. It is also clear that Indonesian political parties
use every avenue they can to obtain funds. Everyone suspects the intense political jockeying
around “cash cow” portfolios, such as IBRA, or state enterprises, discloses that par14
ties are looking for fountains of money for present and future political activities and
power. The immense foot-dragging of Indonesian officials in debt restructuring and privatization,
where vast interests are involved, is perhaps best explained by money politics.
There are widespread suspicions that the government’s favoritism toward three of its
largest debtors,36 expressed through a sweetheart IBRA bailout and decision not to prosecute,
is also the result of money politics. In fact, an assumption of payment goes far in
explaining a lot of otherwise mysterious, erratic, and puzzling official behavior.
The Redistribution of Corruption: Decentralization
Kinds of Bandits
Mancur Olson, in discussing “governmental” incentives to tax or take assets of
subjects, makes a useful distinction between “roving” and “stationary” bandits. Suppose a
situation of anarchy in a territory. Warlords moving through it will appropriate whatever
they can, wherever they can. Because they steal, and steal all they can, they have no interest
in ongoing productive activities. When an area is exhausted of wealth, they will
simply move on to other territories and other plundering opportunities. By contrast,
where a warlord takes over a territory and stays there, he has an interest in ongoing productive
activities and output. He can steal from, or “tax”, the same people on an ongoing
basis. Since he has secured his source of revenue, he may even wish to protect the people
from other predators. Eventually, his own predation may evolve into something like governmentally
provided security, and even into the provision of public goods. After all, as
he takes some percentage of the revenue generated in the territory, if the people generate
more revenue, he will get more revenue. In other words, his interest in increasing his
wealth is allied with the interests of the populace in increasing their wealth. He has what
Olson refers to as an “encompassing” interest. (It’s really just a goose-that-laid-the
golden-eggs story with different possible outcomes.)
Suharto was a stationary bandit running a stationary bandit regime. Under Suharto,
businesses that bribed or shared wealth to obtain economic opportunities, advantages,
or protection did get services in return. They obtained licenses, land and environmental
concessions, security of investment, contract enforcement, and assistance in managing
labor disputes.
36 “On October 2, the Financial Sector Policy Committee (FSPC) approved major debt restructuring
deals between IBRA and five of its top obligors: Texmaco Group (USD 2.1 billion), Tirtamas Majutama
(USD 596 million), PT Kiani Kertas (USD 275 million), Sinar Mas Group (Rp 1.2 trillion swap), and
Banten Java Persada (Rp 1.4 trillion compensation for return of assets). While some analysts supported the
terms of the deals as the best the Government could hope for, others criticized them as expensive bailouts
that expose the Government to high levels of contingent risk. The Texmaco and Tirtamas deals are particularly
controversial because of the complex holding companies created as vehicles for the Government’s equity
stakes as well as the deals’ generous financial terms. According to press reports, the local IMF and
World Bank representatives wrote to the Government shortly after the deals were announced urging that
they be reviewed. However, Coordinating Minister Ramli has vigorously defended the terms of the deals.”
United States Embassy, Jakarta, Indonesia, Recent Economic Reports: Economic and Financial Highlights
– October-November 2000.
15
The Suharto system of highly centralised rule did not eliminate the uncertainties
and indignities suffered by business people trying to invest in the
regions. A variety of local officials reporting to different ministries based
in the capital oversaw various aspects of the business climate, from the
environment to labour affairs to land use and taxation – with regulation
often dependent on bribery. Police and military officers were frequently
active in the selective prevention – and at times, active instigation – of
labour disputes, with labour control bought at a price determined by local
commanders and the superiors to whom they owed fealty.
Companies operating without the benefit of good connections in Jakarta
would tend to suffer from these forms of irregular and illegal exactions.
However, these pay-offs went to local bureaucrats [representatives of the
central government], rather than local politicians, and Jakarta’s insistence
on the encouragement of private investment inculcated a measure of restraint
and predictability based around central government interests in increasing
the flows of private capital into the provinces.37
With Suharto gone, Indonesia’s stationary bandit government is gone, and the
territory is open to roving bandits. With fiscal and governmental decentralization, power
has flowed to the regions and kabupatens and has created greater opportunities for local
corruption through regulatory activity. Their greater independence and a possible “it’s
our turn now” mentality also encourage predation.
Quasi-democratic politics, the emergence of political parties from rigorous government
control, and decentralization have created local contests for influence and
power. “[These processes] have politicized all aspects of business operations. Companies
must now make under-the-table payments to a considerably broader range of politicians
than before ….” 38 With decentralization, businesses dependent on local government
licenses, contracts, and regulation now have shifted “to spreading their money
around different parties or else affiliating themselves with one or another party in the local
assembly. In this regard, businesspeople operating in real estate, construction, and
various criminal activities have become especially prominent ….” 39
Why Corruption is Hard to End: Collective Choice Problems.
Widespread corruption, in the aggregate, creates collective choice problems. The
first is overuse of resources; the second is the free rider problem. When everyone may
use a resource freely, the resource will be overused. The individual user, whose percentage
of the use of the whole may be small, does not see that cumulatively, if all use as he
does, the commons will be overrun – overgrazed if it is cattle land, overfished if it is a
fishery, stripped if it is a forest. As should be obvious, there are corruption commons, the
37 Oxford Analytica Asia Pacific Brief, December, 2000; copy on file with author.
38 Id.
39 Id.
16
public fisc, the lower classes, and a country’s natural resources, that are all grossly overused.
The threat of overuse, of course, entails commons collapse. In this respect, Indonesia’s
1998 financial crisis and sharp economic decline evidence just that kind of event.
Many, perhaps most, of Indonesia’s banks siphoned off bank liquidity credits, freely
granted by Bank Indonesia to try to weather the crisis, in corrupt ways. This, along with
other factors, resulted in a collapse of the Indonesian banking system, a catastrophe from
which Indonesia has yet to recover.
Corruption also presents a free rider problem. Aside from whatever changes
hands, there are passed-on costs of corruption that someone pays, but those who gain are
not among the payers. In a normal case of high-level corruption – overinflated construction
contracts, money siphoned from state enterprises – the population at large pays
through loss or diversion of revenues or resources or through higher taxes. No one suffers
a loss in any clear, direct way, and the small losses allocable to everyone are not sufficient
to cause large numbers of people to organize and unite to fight them. In the case of
street level corruption, those victimized pay directly and suffer a lower standard of living
through what amounts to a highly regressive tax.40 But street level corruption victimizes
classes of people whose response is typically silent rage and suffering, not organized resistance.
There are also large, but intangible or unquantifiable costs – such as loss of governmental
authority and legitimacy, absence of rule of law, misallocation of talent, and
abuse of citizens. Those involved in corruption, of course, gain far more than their allocable
share of any loss, and for practical purposes, can view any loss as entirely passed off
to others. In this respect, corruption resembles environmental pollution, another case
where individual actors do not internalize costs and do not consider the externalities of
their actions.
Anticorruption programs are a common good, but these collective choice problems
make the task of remedying or preventing corruption very difficult. Few who profit
see the harm in their own behavior, the harms – aside from direct immediate financial
losses – are diffuse, sometimes intangible, often difficult to measure. The remedy requires
strong governmental commitment and that may require broad societal consensus.
This will not arise naturally. “In a really large group, the typical individual receives only
a miniscule share of the benefit of an action he or she takes in the group interest. This
miniscule share does not typically motivate individuals in a large group to voluntarily act
in a way that is consistent with the common interest of the group.” 41 By contrast, it is
much easier for small groups to organize and coordinate activities among members. Not
only are communication problems much less severe, member shares in any payoff of
group success are much greater. The corrupt, as members of various webs and networks,
are much more effective in achieving policy and practical goals than the general public or
the many unrelated victims of corruption.
40 “[P]oor households in Ecuador must spend three times more in bribes as a share of their
inocmes than higher income households for access to public services….” Quality of Growth, supra, n. 1, at
146.
41 Olson, Mancur, Power and Prosperity 77 (2000).
17
Because the individual share of benefits from collective action is so small, voluntary
collective action almost always fails in large groups. Small groups, however, are
successful and have powerful incentives to undertake collective action – here, to prevent
anticorruption efforts from reaching them. To these insights, we can add another important
reason for the failure of the victims of Indonesian corruption to act. The Indonesian
military, the police, government officials, the judiciary, and preman enforce structural
corruption in Indonesia. Directly or indirectly, through threats, violence, buy-offs,
coverups, they protect the system through which they make their livelihoods.
Remedying Corruption in Indonesia
Corruption on Indonesia’s scale is immensely costly to the country and society.
There are enormous economic efficiency losses and huge costs arising from misallocation
of resources. There are competitiveness costs, as corruption is a principal reason for Indonesia’s
notoriously high transactions costs economy. There are large lost opportunity
costs from all the investors, both domestic and foreign, that withdraw or forego investing
in Indonesia because of corruption and its associations. I have already noted the immense,
but unquantifiable costs in individual and societal well being and losses in the
provision of public goods.
Only Indonesians themselves can overcome the corruption in their economic, political,
and social systems. At present, except for some NGOs and limited public outcry,
ending corruption is not truly a priority issue in Indonesia. Aside from serious collective
choice problems, the lack of clarity in what an anticorruption campaign would do and
how far back it might reach may have something to do with this. Even reformed sinners
would not relish jail time, nor, no matter how repentant, loss of wealth and reputation.
Powerful vested interests and networks of corruption beneficiaries that profit from
the status quo continue to foil anticorruption efforts. While anticorruption advocates have
made the moral case against corruption, no one in Indonesia has deeply investigated and
explained the economics of corruption, nor exposed in any thorough and convincing way
its social and political costs. Nor have corruption studies focused sufficiently on the future
consequences of continued corruption, the intergenerational losses and costs: the destruction
of Indonesia’s commons, the plundering of resources, the environmental losses
and illnesses. For today’s currently costly economy of corruption is also a spendthrift
economy destroying many of tomorrow’s livelihoods and lives.
Only Indonesians can overcome corruption in Indonesia. They will do so if persuaded
that they must. Careful studies exposing in detail the systems, networks, and social
and economic costs of corruption are essential tools in the anticorruption campaign.
Will, as Bhudda noted, attends knowledge.
18
Study and persuasion is not all there is to be done, however. Recent influential
stances on corruption view it as a governance problem,42 and, indeed, the good governance
program is part of the donor prescription for Indonesia. The program calls for key
reforms.43 These include enhancing competition in the economy through demonopolization
and deregulation; and promoting the accountability of political leadership through
public disclosure and transparency rules. It also includes creating merit-based and service
oriented public administration, transparency and accountability in public expenditure
management, and promoting the rule of law.
While most would agree that these are excellent and essential reforms, they have
proven controversial, primarily because they assertedly ignore the realities of politics.
Some critics believe that those who champion the good governance program, primarily
the World Bank and the Asian Development Bank, import world views that do not fit the
needs and realities of developing countries. For example, Jayasuriya, in this volume, asserts
that the new paradigm for development donors is toward enhancing the regulatory
capacity of the state. This entails that the state should not itself seek to conduct the economy,
but instead create a set of regulatory institutions that facilitate the creation and
proper operation of the market.
Economic constitutionalism…refers to the attempt to treat the market as a
constitutional order with its own rules, procedures, and institutions operating
to protect market order from political interference. However, these
forms of economic constitutionalism demand the construction of a specific
kind of state organization and structure: a regulatory state, the purpose of
which is to safeguard market order.44
Jayasuriya critiques the new paradigm for seeking to insulate the market from politics.
Dick, also in this volume, agrees.45 Both believe that it is not possible to separate markets
or economic reform from existing constellations of powers and interests that shape politics.
To be successful, economic reform needs to have the political support of a
significant group of actors. Reform strikes at the heart of deeply entrenched
political and economic interests; therefore, to be successful a
programme of economic reform must galvanize its own political support.
From this perspective, economic reform is not merely a technical exercise
to implement the “right” policies, but a political project undertaken by the
42 Quality of Growth, supra, n. 1, at 135-168; Asian Development Bank, Good Governance and
AntiCorruption: the Road Forward for Indonesia, paper presented at the Eight Meeting of the Consultative
Group on Indonesia (Paris, July 27-28 1999).
43 Quality of Growth, supra, n.1, at 152-159.
44 Jayasuriya, Kanishka, Governance, Post Washington Consensus and The New Anti Politics
45 [Development theorists and policymakers] have maintained …that economic and institutional
development will proceed best in the absence of (messy and disruptive) politics. Dick, Howard, Corruption
and Good Governance, the New Frontier in Social Engineering.
19
putative winners of the reform process. For this reason, market
transformation is likely to be a deeply contested and prolonged process.46
As I have argued, corruption in Indonesia is a governance problem because Indonesian
corruption is intimately bound up with Indonesian governance. It is also true,
as the critics of the governance paradigm have it, that you cannot insulate the politics of
markets and the economy from politics. However, sometimes something causes reform
politics to grapple seriously with corruption: we have evidence that countries can grow
or evolve away from thoroughgoing and systematic corruption. The United States, for
example, did it over a period of about 50 years, roughly between 1870 and 1920.
All things that evolve, evolve because of variation and what the evolutionary
theorists call “selection pressure”. The environment in which the creature lives, and that
includes other creatures that prey on it and on which it preys, favors some particular
variation over another. Not intentionally, of course; that’s just the way it turns out. The
moth that happens to have better camouflage, that looks like tree bark when it lands on a
tree, will more likely escape bird predators and reproduce. These moths will reproduce
successfully, compared to others, even of the same species, and, as long as the trees on
which they hide remain the same, and as long as their predators do not evolve better detectors,
they will survive and prosper.
At present, money politics and all it entails in the worst sense, and corrupt
ways of making livelihoods dominate the Indonesian environment. Survival in
this environment appears to require playing the political game as it is played, as a
deadly serious power game, or gladiatorial contest, where money is the primary
weapon to wield. Outside the political game, survival requires doing whatever is
necessary to make, or protect, a living, and corrupt activities are an accepted way
to do that.
If these observations are correct, it is a mistake to view the “good governance”
paradigm as an effort to evade politics. Indonesian corruption is a matter of
governance, and there is no way to address grand and petty corruption, and all intermediate
forms, without engaging politics and political actors. If donors, in
promoting the good governance paradigm, think that they can elude politics and
insulate the economic realm from it, they are clearly wrong. But I do not believe
they hold these views, and have other failings. The donor failures are impatience,
short-term time frames, and inability to stay the course.
The donor demand for good governance, the negotiated letters of intent,
the reviews, the granting or withholding of tranches dependent on the fulfillment
of promises, creates a substantial selection pressure in the Indonesian environment:
it changes it. Donors say: do this. Indonesia agrees that it will in order to
get donor money. Indonesia does not fulfill its promises, and donors say, all right,
you don’t get the money. Indonesia returns to its reform promises and tasks, and
eventually complies, rarely completely, but sufficiently to get the tranche.
46 Id.
20
The point of the story is that there is movement in the right direction.
There may be no stunning conversion, no mass baptisms in the anticorruption
faith, but there is change that would not have occurred otherwise. Through continued
selection pressure and through changes stimulated in players in the system,
donor involvement is part of the political mix. Indonesia may do its politics any
way it wants to, but if it wants to take into account the money it needs and the donors
are willing to give, on conditions, it will change and evolve in the direction
of donor desires. One must also remember that there are reformist forces in Indonesia,
both outside the government and within, and they are part of Indonesia’s
developing politics. Donor conditionalities, advice, and good governance ideas
support them and help them make gains they would not otherwise make.
Remedying corruption in Indonesia, which ultimately only Indonesians
can do, will likely take a long time, perhaps at least a generation.47 The worry is
not the good governance paradigm or program, but donor fatigue, donors giving
up after a few years of stalled or stymied efforts. The game is selection pressure,
consistent and constant selection pressure over a long period of time, not mandates
to insulate the economy from politics. Indonesian politics must now take
into account what donors are willing to do; as it must take into account whatever
selection pressures globalization brings. The latter are considerable indeed. In the
long-term, Indonesia will learn and evolve and confront the corruption that seriously
damages its economy and polity, holds back its development, and victimizes
its people.
Keep the faith.
47 Although it is true that some polities, viz., Hong Kong and Singapore, overcame their corruption
in relatively short periods of time, they are very different cases involving small, nondemocratic
jurisdictions and strong, centralized governmental authority. These conditions do not
exist in Indonesia.
21
Bibliography
Asian Development Bank, Good Governance and Anticorruption (1999).
Backman, Michael, Asian Eclipse: Exposing the Dark Side of Business in Asia (John
Wiley & Sons, 1999).
Burnham, Terry & Phelan, Jay, Mean Genes (Perseus Publishing, 2000)..
Delhaise, Phillipe F., Asia in Crisis: The Implosion of the Banking and Finance
Systems (John Wiley & Sons (Asia), 1998).
Mauro, Paolo, Why Worry About Corruption (International Monetary Fund, 1997).
Olson, Mancur, Power and Prosperity (Basic Books, 2000).
Pope, Jeremy, ed., The TI Source Book (3d ed., 1999).
Schwartz, Adam: A Nation in Waiting (Allen & Unwin, 1999).
World Bank, The Quality of Growth (Oxford University Press, 2000).
World Bank, World Development Report

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: