Decentralization of powers or corruption?<\/p>\n
By Santi W.E. Soekanto<\/p>\n
JAKARTA (JP): At the bottom of greater demands for regional
\nautonomy is the wish for power to be dispersed in order to
\novercome the central government's incapability of ensuring smooth
\ndelivery of goods and services.<\/p>\n
Some people believe that decentralization of power often leads
\nto \"decentralization of corruption.\"<\/p>\n
The 1999 Law No. 22 and 25 on regional autonomy and fiscal
\nbalance, respectively, were introduced amid mounting pressure in
\nthe resource-rich provinces of Aceh, Irian Jaya and Riau to break
\naway from Jakarta rule over what was perceived as decades of
\nplundering of their vast natural resources with little given in
\nreturn.<\/p>\n
Under the new rulings, the provinces now control affairs of
\neducation, health, land rights and transport policies, as well as
\ninvestment approvals.<\/p>\n
The local government will also now have control over general
\nmining activities (including gold and copper) but not over oil,
\ngas and radioactive substances. The rulings also exclude affairs
\nin foreign policy, defense, religion, law, fiscal and monetary
\naffairs.<\/p>\n
While the move has been welcomed across Indonesia's political
\nspectrum, it has raised concerns among foreign investors that
\nlocal authorities might be ill prepared to handle their new
\nresponsibilities. Investors also worry that decentralization will
\nopen up avenues for corruption among local authorities vested
\nwith the responsibility to handle greater amounts of funds.<\/p>\n
Is this always the case?<\/p>\n
For Indonesia, which has been repeatedly described as \"the
\nmost corrupt country in Asia\", it may not always be the case.<\/p>\n
Indonesians will by now have accepted the institutional needs
\nfor devolution of power and the establishment of public
\nenterprises in order to deliver services and goods efficiently.<\/p>\n
What is to be discussed further, however, is why such
\nstructure encourages corruption in the country where corruption
\ndogs a person from birth until his death.<\/p>\n
Although the stated agenda for both devolution of power and
\npublic enterprises is the same -- namely to provide people with
\nefficient delivery of goods and services, the two are actually
\noperating on different principles. The first is dispersal of
\npower, while the second is relatively marked with state
\nintervention.<\/p>\n
However, countries often are unable to choose between a) the
\ninefficiency of central governments or b) corruption, but in fact
\nhave to face the double problems simultaneously.<\/p>\n
There are exceptions to this observation. South Korea may be a
\ncase in point. Under President Park Chung Hee (1963-70), the
\ncountry's economy developed enormously and corruption was thought
\nto be productive as favors were not granted solely on the basis
\nof political patronage but on economic performance. The cost,
\nhowever, were civil liberties and political freedom.<\/p>\n
In Indonesia, corruption features heavily at various stages of
\npower administration. Corruption was present when power was
\nheavily centralized in Soeharto's hands and public enterprises
\nwere turned into monopolies that benefited only a few
\nIndonesians. It was also present when Soeharto made gestures to
\ndevolve economic powers onto private enterprises.<\/p>\n
A broad definition of corruption would be misuse of public
\nposts for private gain (Fiona Robertson-Snape, 1999). This covers
\npractices of collusion and nepotism rampant in Indonesia.<\/p>\n
Here, a large number of people are resigned to the fact that
\nit is frequently necessary to pay a bribe when registering the
\nbirth of a baby, or applying for a driving license, or a marriage
\ncertificate or when obtaining a compulsory identity card. The so-
\ncalled \"petty corruption\" is a daily reality that is invariably
\nexplained away by the low wages of Indonesia's civil servants.<\/p>\n
Many scholars believe corruption is symptomatic of other
\ncauses, and that opportunities for corruption on a large scale
\narise in particular political, economic and cultural conditions.<\/p>\n
Among the political factors identified are a lack of
\naccountability, transparency, and weak democratic institutions.<\/p>\n
Among the cultural factors are centuries-old dominant Javanese
\nculture -- the offering of gifts by subjects to their rulers, for
\nexample, is said to explain why bribery is rife.<\/p>\n
According to such an explanation, gift-exchange is a business
\nnorm in Indonesia and should not be considered corrupt. Nepotism
\nand collusion can similarly be explained. In a traditional
\nculture where family loyalties are stronger than state loyalties,
\na public official's duty to his office is secondary to that
\ntowards his family or community.<\/p>\n
Any opportunities to further the economic or employment
\nopportunities of that family will therefore be considered
\nlegitimate in terms of the official's priorities.<\/p>\n
For years, corruption in Indonesia was perpetuated by
\nSoeharto's need to secure his position by enabling key figures in
\nthe bureaucracy and the military to benefit economically from
\ntheir loyalty. Adam Schwartz once wrote: \"To Soeharto, this is
\nnot corruption, rather it is the spoils of office. Big
\ncorruption ... has its roots in ancient cultural traditions, and
\nfrom Soeharto's perspective the dispensing of government largesse
\nis one of the personal prerogatives of the Javanese ruler.\"<\/p>\n
Among the economic factors identified and blamed for the
\nrampant corruption is extensive government intervention in the
\neconomy because of the rents that this intervention creates.<\/p>\n
This factor also was present under the previous president,
\nSukarno. Then, the government was omnipresent in the economy,
\nwhich was dominated by state enterprises and tied up in
\nbureaucratic red tape, providing ample opportunities for
\ncorruption.<\/p>\n
When Soeharto came to power in the late 1960s, inflation was
\nrunning over 600 percent. Indonesia had a negative growth rate, a
\nhuge foreign debt and almost fully depleted foreign reserves.<\/p>\n
Soeharto then embarked on a highly pragmatic economic policy
\n-- opening up the economy in order to attract foreign aid and
\ninvestment, reducing the size of government and the level of
\ngovernment subsidies.<\/p>\n
The period of liberalization, however, did not last long. Over
\nthe course of his rule, Soeharto's economic policies vacillated
\nbetween liberal and outward looking economic policies promoted by
\nHarvard-trained technocrats and inward, interventionist policies
\nadvocated by economic nationalists.<\/p>\n
According to Robertson-Snape, during the 1970s and early 1980s
\nthe economic pendulum swung away from liberalism and there was a
\nresurgence of nationalist and interventionist ideas. During this
\nperiod of protectionism, economic policies turned inwards while
\nrestrictions were placed on foreign investments and a state-led
\ndrive for import substitution industrialization was initiated.<\/p>\n
By the mid-1980s the state owned over 200 enterprises,
\nranging from tea plantations to steel manufacturers. Indigenous
\nindustries were protected from external competition and imports
\nwere controlled through a sole-importer policy.<\/p>\n
Soeharto managed the situation into one that benefited his
\nclosest allies. The monopoly on the import of plastics, for
\nexample, was given to a company controlled by Soeharto's cousin
\nSudwikatmono and two of his sons: Sigit Haryoyudanto and Bambang
\nTrihatmodjo.<\/p>\n
Following the end to the oil boom in the 1980s, Indonesia
\nagain shifted its economic policy-making as oil revenues could no
\nlonger subsidize inefficient domestic industries and inward
\nlooking, interventionist policies became untenable.<\/p>\n
Indonesia needed to encourage private enterprise, to cut
\nproduction costs across industries and create an industrial base
\nthat could compete on world markets. Deregulation and economic
\nliberalization -- often emphasized as important anti-corruption
\npolicies -- were given urgent attention.<\/p>\n
Banking reforms, taxation reforms and customs reforms were
\nintroduced successively in 1983, 1984 and 1985. Each reform
\nremoved certain opportunities for collusion. Banking reforms, for
\nexample, put a stop to the practice of command loans whereby
\nbanks were instructed by political leaders to lend money to
\nfavored individuals and companies, without undertaking the usual
\ncommercial evaluation process.<\/p>\n
The approach was meant to shift power from the government to
\nthe private sector, to break key monopolies and ease the growing
\npublic outcry against corruption.<\/p>\n
The regulatory responsibilities of the state remained strong,
\nas did Soeharto's power of patronage. His family and favored
\nsupporters again benefited from the liberalization -- political
\nconnections made it easier for them to secure licenses and other
\ncontracts and to expand their business interests into most of the
\nvital sectors of the economy including roads, car manufacturing
\nand telecommunications.<\/p>\n
When what was thought to be the world's largest deposit of
\ngold was discovered in Indonesia, the battle for exploitation
\nrights \"worth billions of dollars\" inevitably involved members of
\nthe Soeharto family.<\/p>\n
A small Canadian company called Bre-X discovered the deposits,
\nbut was later bogged down in bureaucracy while waiting for
\nofficial approval to exploit the find.<\/p>\n
The company also had to contend with a rival bid from
\ninternational mining giant Barrick Gold Corporation. In order to
\nsecure the rights, Barrick formed a partnership with Soeharto' s
\neldest daughter, Siti Hardijanti Rukmana.<\/p>\n
In response, Bre-X signed on the eldest son, Sigit
\nHaryoyudanto. His fee was 40 million rupiah up front, and a 10%
\nstake in the mine -- a deal potentially worth $1 billion. Both
\nsides essentially bought a member of the president's family in
\norder to secure the deal.<\/p>\n
In conclusion, countries are not always in the position to
\nchoose between inefficiency of a decentralized power or
\ncorruption. In the case of Indonesia, the two go together.<\/p>",
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