Promoting good governance is essential<\/p>\n
Purbaya Yudhi Sadewa<\/p>\n
The Indonesian community at large has agreed that creating
\ngood governance is one of the main agendas of Reformasi. It
\nseems, however, that the implementation of good governance is
\nstill far away. And in the open economy era, which creates
\nstiffer competition among nations, Indonesia will experience huge
\nlosses if it fails to move toward creating good governance.<\/p>\n
Good governance is sometimes defined as the process whereby
\nelements in society wield power and authority, and influence and
\nenact policies and decisions concerning public life, economic
\nmatters, and social development.<\/p>\n
With good governance, all three supporting pillars (the state,
\ncivil society, and the market\/business community) intertwine
\nsynergistically in political, economic and administration
\nactivities. In addition to the legislature, civil society and the
\nbusiness community provide checks and balances to monitor the
\nwork of the government, which push the government to carry out
\nits tasks effectively. As such, it is hoped that the country's
\nsocial and economic resources can be managed efficiently, which
\nwill ultimately lead to high and sustainable economic growth.<\/p>\n
Indonesia has taken several measures in its efforts to create
\nclean government and good governance. For example, regional
\nautonomy, antimonopoly, bankruptcy and anticorruption laws have
\nbeen passed. Decentralization is expected to make public
\nadministration more responsive to the people and their needs,
\nsince regional governments are closer to their citizens than the
\ncentral government is. As such, decentralization should bring
\nabout greater efficiency and effectiveness in the delivery of
\npublic services.<\/p>\n
Meanwhile, both the government and national legislature
\nestablished an independent commission (KPKPN) to serve as a
\nrepository for the records of assets of government officials, to
\naudit these assets, and, in general, to investigate allegations
\nof corruption among government officials.<\/p>\n
In addition, the media and NGOs have been granted more freedom
\nto scrutinize and criticize policies, programs and the actions of
\nboth central and local governments. For example, Indonesian
\nCorruption Watch acts as a watchdog in respect of government
\npolicies. All these steps are promising moves toward the
\nimprovement of governance and a reduction in corruption.<\/p>\n
So far, however, these efforts have not resulted in
\nsignificant improvements in governance. For example, it is widely
\nbelieved that decentralization only involves the decentralization
\nof corruption. And money politics (read: bribery) often taints
\nthe election of governors and mayors. Furthermore, regional
\ngovernments have been concentrating too much on increasing their
\nrevenues without realizing that sometimes they have created
\nregulations that are not friendly to business.<\/p>\n
Also, illegal wood exports and illegal logging are still
\nwidespread. These activities are flourishing as the officials
\nconcerned are bribed to look the other way, or even provide
\nprotection for the illegal activities. These activities have not
\nonly reduced government revenues but also inflicted great damage
\non the environment.<\/p>\n
Why are we failing so badly? One major reason is that
\nIndonesia has failed to enforce the rule of law, which has
\ncrippled the checks and balances function of the press, the
\nprivate sector and civil society. As such, wrongdoers can get
\naway with their crimes.<\/p>\n
For example, very few of the individuals who misused Bank
\nIndonesia liquidity loans were convicted, let alone given jail
\nterms. Meanwhile, Akbar Tandjung has not yet started serving his
\nprison sentence even though he was sent to jail for 3.5 years.
\nAnd neither has the Supreme Court ruled on his appeal, even
\nthough the Supreme Court rules provide for speedy decisions in
\ncases of major public importance, which the Akbar case
\nundoubtedly is. Both cases send the wrong message -- namely that
\ncorruptors and embezzlers can get away scot-free.<\/p>\n
Meanwhile, the inability of the central government to spin off
\nSemen Padang has sent a clear message to the international
\ncommunity that the Indonesian government is facing huge
\ndifficulties in regard to decentralization. The international
\nbusiness community and multilateral agencies are using this case
\nas a litmus test to determine whether the Indonesian government
\nis able to uphold the rule of law. And apparently Indonesia has
\nfailed the test.<\/p>\n
The inability of Indonesia to uphold the rule of law raises
\nquestions regarding the seriousness of Indonesia in its stated
\ndesire to create good governance. And it suggests that the fight
\nagainst corruption is merely well publicized rhetoric.
\nImplementation and practice, by contrast, are both very weak.<\/p>\n
And the international business community is well aware of
\nthese woeful conditions. According to Transparency International,
\nIndonesia is one of the most corrupt countries in the world
\n(ranked 122 out of 132). Compared to other ASEAN countries
\nsurveyed, Indonesia has the lowest ranking. Indonesia's
\nCorruption Perception Index (CPI) is also significantly below the
\nindices of Singapore, Malaysia, Thailand, the Philippines, and
\neven Vietnam (table 1).<\/p>\n
Table 1. 2003 Corruption Perception Index (CPI)<\/p>\n
This negative perception of Indonesia has had an adverse
\nimpact on the Indonesian economy. First of all, on the back of
\ndifficulties in calculating the cost of conducting business due
\nto corruption, multinational companies have become more reluctant
\nto set up production facilities in Indonesia. Some have even
\nrelocated their existing production facilities overseas, which
\nhas hampered job creation and pushed up unemployment. It is worth
\nnoting here that Indonesia is currently the only country in the
\nregion that is still experiencing negative flows of direct
\ninvestment; that is, more direct investment is flowing out of the
\ncountry than flowing in.<\/p>\n
In addition, because conducting business in Indonesia is
\nconsidered to contain higher risks, international investors
\nrequire a higher premium in extending loans to Indonesian
\ncompanies. This has made it more expensive for Indonesian
\ncompanies to access funds from the international financial
\nmarkets.<\/p>\n
Furthermore, in the AFTA era, most of the barriers to trade
\nhave been or will shortly be eliminated, and companies in each
\nASEAN country can export most types of merchandise to other ASEAN
\ncountries with significantly lower import tariffs than before. As
\na result, multinational companies can choose one country as a
\nproduction base for the ASEAN market. And it is more likely that
\nmultinational companies will set up their production facilities
\nin a country that has better governance and a better investment
\nclimate. This means that without improvements in governance, AFTA
\nwill lead to the exploitation of Indonesia's market by
\nmultilateral companies operating from neighboring countries.<\/p>\n
Unfortunately, in the free trade era, protecting industry is
\nnot as easy as before. Government support for a specific industry
\nunder the WTO system is not allowed or is subject to
\ncountervailing duties imposed by other countries. The government
\ncan only implement industrial policy as far as it aims to promote
\nindustrial competitiveness. And, currently, bad governance is one
\nof the main obstacles that is hampering the competitiveness of
\nIndonesian products on world markets.<\/p>\n
Against this backdrop, if the problem of poor governance is
\nnot rectified, then Indonesia will end up as a loser in the open
\nglobal economy.<\/p>\n
The rule of law must be enforced more seriously if Indonesia
\nwants to have better governance. The formation of the KPK
\n(Anticorruption Commission) brings new hope to the fight against
\ncorruption. Besides being vested with the functions of its
\nforerunner, the KPKPN, this commission has the authority to
\ninvestigate and to prosecute officials suspected of corruption.
\nWith this additional authority, it is hoped that the KPK will
\nproduce better results in enforcing the law against corruption.<\/p>\n
Meanwhile, to alleviate the problems arising from
\ndecentralization, Indonesia has to establish a rating system for
\nlocal governments. This rating system needs to be based on fair
\nmarket mechanisms that will create incentives for local
\ngovernments to pursue good governance practices and to create
\nconducive investment climates. The rating system would be very
\nuseful for would-be investors to understand the characteristics
\nof the localities and their development potential. The ratings
\nshould be updated regularly so as to allow regions with low
\nratings to improve their governance and catch up with the highly
\nrated regions based on transparently assessed criteria.<\/p>\n
Promoting good governance is a must if Indonesia wants to
\nemerge as a winner in the open global economy and experience a
\nfaster rate of economic growth.<\/p>",
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