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Suharto and Corruption

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The second president of Indonesia, Suharto, came to power with a promise of ending corruption. He left the office after 32 years as a result of massive protests over Korrupsi, Kollusi, Nepotisme (KKN), Corruption, Collusion, and Nepotism. His wife and children were also linked with KKK, which created resentment in the eyes of the public. In 1998, Transparency International ranked Indonesia as one of the most corrupt countries measured through Corruption Perception Index. A study by Centre for the Study of Development and Democracy in Jakarta found 78% of Indonesians think bribery is a required to get access to public services. Lack of accountability, trust, democratic institutions and free and independent media were the reasons for corruption culture in Suharto's tenure. [1]

The growth under Suharto's tenure enriched the elites significantly while other classes were isolated from the economic gains. [2] This resulted in massive protests which led to the overthrow of Suharto for good after three decades of reign in Indonesia. In 1970, a bunch of students protested against Suharto and his corrupt administration.[3]. Suharto banned the student's protests and limited civil liberties, another factor leading to his overthrow. [4]. To demand more civil liberties, on 5 May 1980, Petition of Fifty was signed, protesting against Suharto. The document was signed by influential politicians such as former prime ministers, Burhanuddin Harahap and Mohammad Natsir.

He was investigated for corruption in his 32-year rule. A report by Transparency International in 2004 ranked, Suharto, the most corrupt leader in the world [5].

Economic and Social costs of Corruption

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Corruption is an important development challenge that poses economic and social costs in Indonesia. Interference in public laws and policies for the sake of personal or private gain has weakened the competitiveness of Indonesia.[6]

The economic costs of corruption include loss of productivity, which means workers have no incentives to work efficiently. This leads to misallocation of resources, and so is detrimental to the success of the economy. According to a report, 35 % potential investors decided not to operate in the country due to corruption.[7] This reflects the loss of opportunities. Investment by foreign enterprises plays a huge role in increasing the growth rates of a country. With fewer investors coming in Indonesia, it translates into lower growth rates. Foreign investors decided not to invest in Indonesia as existing companies routinely have to pay bribes to public servants to get the work done. In other cases, public servants expect them to give gifts in exchange for doing their job. [8] According to Transparency International, 2017 report, Indonesia has a score of 37. This means it is still under corrupt countries category. Most of the local people view the government as corrupt as per the Corruption Perception Index. [9]

About one-quarter of ministries suffer from budgetary diversions in Indonesia. Households spent approximately 1% while enterprises spent at least 5% of monthly company revenue on unofficial payments. Social costs due to corruption in Indonesia include the weakening of government institutions and the rule of law.[10] Increases in crime due to smuggling and extortion involve the institutions that are supposed to be protecting citizens. The people who suffer most are the poor[11] as they are pressured to finance payments through their already tight budgets and the effectiveness of social services are less accessible indirectly. These concerns were voiced by the poor urban communities of Indonesia themselves in a joint World Bank-Partnership for Governance Reform research project, entitled “Corruption and the Poor”.[12] A survey in 2013 by Ernst and Young and Asia Pacific Fraud Survey concluded that 36% respondents think bribe-giving is important to win contracts. [13]

The impacts of corruption are not uniform. Poor people in Indonesia are the ones who get affected the most. They have to spend a significant amount of their income to pay bribes to get access to public services. A report by World Bank, titled, Corruption and the Poor, explored the effects of corruption on the poor in Indonesia. Poor urban class from Makassar, Yogyakarta, and Jakarta described the struggles of living in the culture of corruption. The respondents identified major costs of corruption, including, lack of trust and so eroding the social capital of Indonesia. Other impacts include negative impacts on the human capital of the country[14].

Public Service Corruption in Indonesia

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In 1997, the country came into limelight when an internal report by the World Bank suggested the officials have siphoned 20% of the funds for World Bank projects in Indonesia. The report states, "our projects are being implemented in an administrative culture which is not just tolerant of collusion and diversion of funds, but which blatantly expects civil servants to supplement their incomes by such means', as published in the Wall Street Journal. The ruling political party of President Suharto, Golkar was mostly involved in the corrupt activities as per the report. [15]. The officials denied the claims of involvement in corrupt activities.

In 2005, Village Corruption in Indonesia, by the World Bank stated that the $273 million World Bank-funded project, The Kecamatan Development Program (KDP) was exploited by corruption. The project was initiated to bring infrastructural development in Indonesian Villages, with involvements of local people though decentralized decision-making. The KDP was the first project with anti-corruption as an element to the entire framework. KDP tried to combat corruption by breaking monopolies and giving incentives to the people in the villages[16] The project was successful in eliminating corruption through more accountability by releasing and simplifying information for the villagers. Still, corruption existed as villagers know the punishment for corruption is rarely enforced. Budget mark-ups was a frequent corruption technique employed by the villagers, where cheap materials were used instead of the specified material and the difference was embezzled.[17]

The judiciary is seen as corrupt in Indonesia. Former Chief Justice Soerjona claimed 50% of the judges and lawyers are corrupt. Bribery is a norm in the justice system of Indonesia[18]. Following the Indonesia Corruption Watch carried out a series of interview and found out that bribery is a major practice in the local courts. There is very little accountability in the judiciary of Indonesia as vast majority of the court decisions are not published on websites or anywhere else. The reasons cited for high corruption include low operational budget and inferior salaries of public servants in comparison to private sectors. In 2004, the government increased the salaries in the hopes of ending the corrupt culture in the local courts.[19]. However, it did not prove to be successful in ending corruption.

Efforts to curb corruption

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Several anti-corruption initiatives have been launched to eradicate the high levels of corruption in Indonesia. Some of these include Corruption Eradication Commission (Komisi Pemberantasan Korupsi, KPK). The KPK prosecutes high-level officials involved in corrupt activities in Indonesia. [20]. KPK released information that from 2004 to 2011 the loss associated with corruption were equal Rp 39.3 trillion. The Anti Corruption Clearing House released data from 2003 to 2013, KPK was successful in exposing 595 cases of corruption. [21]In five years, KPK was able to reach a 100% conviction rate against top officials in the country [22]. KPK is so successful because the investigators and prosecutors work closely together to collect sufficient evidence for the case. The KPK has been given the autonomy to prosecute anyone except people in the Indonesian Army. It can conduct wiretaps, look at bank accounts and can freeze assets and make orders for arrest.[23]. KPK prosecuted Upstream Oil and Gas Regulatory Special Task Force head in Indonesia from accepting bribes from Singapore-based oil company, Kernel Oil Private Limited.[24]

The United Nations and the World bank-led Sustainable Development Goals focus on ending corruption in many countries, including Indonesia. [25]. The World Bank recommends Indonesia to emulate successful anti-corruption initiatives such as the establishment of Extractive Industries Transparency Initiative (EITI) in Nigeria, which played a positive role in raising awareness and reducing corruption [26]

The most salient anti-corruption efforts spearheaded by Indonesian civil society is the Indonesia Corruption Watch (ICW), formulated in 1998 after the overthrow of Suharto. [27] The goal was to reduce corruption in post-Suharto Indonesia. The United Nations Office on Drugs and Crime considers ICW as ‘the leading NGO’ in ending corruption in Indonesia. [28].

  1. ^ https://www.tandfonline.com/doi/pdf/10.1080/01436599913703
  2. ^ http://www.nytimes.com/2008/01/28/world/asia/28iht-suharto.1.9542684.html
  3. ^ Vatikiotis, Michael R.J. (2000). Indonesian politics under Suharto : the rise and fall of the new order (Repr., 3rd ed. ed.). London [u.a.]: Routledge. ISBN 978-0415205023. {{cite book}}: |access-date= requires |url= (help); |edition= has extra text (help)
  4. ^ https://en.wikipedia.org/wiki/Fall_of_Suharto
  5. ^ https://en.wikipedia.org/wiki/Corruption_charges_against_Suharto
  6. ^ Vinay Kumar Bhargava, E. P. (2004). Challenging corruption in Asia: case studies and a framework for action. World Bank Publications.
  7. ^ http://siteresources.worldbank.org/INTINDONESIA/Resources/Publication/03-Publication/Combating+Corruption+in+Indonesia-Oct15.pdf
  8. ^ https://www.business-anti-corruption.com/country-profiles/indonesia
  9. ^ https://www.transparency.org/country/IDN#
  10. ^ Cite error: The named reference Lateef, S. (2003) was invoked but never defined (see the help page).
  11. ^ Mauro, P. (1997). Why Worry About Corruption?
  12. ^ Hardjono, R. a. (2002). The Poor Speak Up; 17 Stories of Corruption, Partnership for Governance.
  13. ^ Yogi Prabowo, H. (2014). To be corrupt or not to be corrupt. Journal of Money Laundering Control, 17(3), 306-326. Retrieved from https://search.proquest.com/docview/1660771100?accountid=12339
  14. ^ http://siteresources.worldbank.org/INTINDONESIA/Resources/Publication/03-Publication/Combating+Corruption+in+Indonesia-Oct15.pdf
  15. ^ By, G. R. (1998, Aug 19). World bank memo depicts diverted funds, corruption in jakarta --- institution says it made reforms. Wall Street Journalhttps://search.proquest.com/docview/398822533?accountid=12339
  16. ^ http://documents.worldbank.org/curated/en/107111468259516418/pdf/342240IND0Village0Corruption01PUBLIC1.pdf
  17. ^ http://documents.worldbank.org/curated/en/107111468259516418/pdf/342240IND0Village0Corruption01PUBLIC1.pdf
  18. ^ Aspinall, edited by Edward; Klinken, Gerry van (2011). The state and illegality in Indonesia. ISBN 9789004253681. {{cite book}}: |first1= has generic name (help)
  19. ^ Aspinall, edited by Edward; Klinken, Gerry van (2011). The state and illegality in Indonesia. ISBN 9789004253681. {{cite book}}: |first1= has generic name (help)
  20. ^ https://en.wikipedia.org/wiki/Corruption_Eradication_Commission
  21. ^ Yogi Prabowo, H. (2014). To be corrupt or not to be corrupt. Journal of Money Laundering Control, 17(3), 306-326. Retrieved from https://search.proquest.com/docview/1660771100?accountid=12339
  22. ^ https://www.u4.no/publications/an-exception-to-the-rule-why-indonesia-s-anti-corruption-commission-succeeds-where-others-don-t-a-comparison-with-the-philippines-ombudsman/
  23. ^ https://www.u4.no/publications/an-exception-to-the-rule-why-indonesia-s-anti-corruption-commission-succeeds-where-others-don-t-a-comparison-with-the-philippines-ombudsman/
  24. ^ Yogi Prabowo, H. (2014). To be corrupt or not to be corrupt. Journal of Money Laundering Control, 17(3), 306-326. Retrieved from https://search.proquest.com/docview/1660771100?accountid=12339
  25. ^ http://www.worldbank.org/en/topic/governance/brief/anti-corruption
  26. ^ http://www.worldbank.org/en/topic/governance/brief/anti-corruption
  27. ^ https://en.wikipedia.org/wiki/Indonesia_Corruption_Watch
  28. ^ https://en.wikipedia.org/wiki/Indonesia_Corruption_Watch
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