Civil servants lack incentive, competence

Civil servants lack incentive, competence

By Paulus Usmanto Njo

JAKARTA (JP): Ever get stuck trying to obtain information,
data or copies of official decrees from a government office? Ever
try to make an appointment to see an official, or obtain a visa
or license?

Dealing with government offices in Indonesia is often
frustrating for both Indonesians and foreigners.

To be fair, there have been improvements. The government has
slimmed down its bureaucracy, but building a clean and efficient
public service calls for much bolder administrative and political
action.

Indonesian civil servants face a triangular problem of
incentives, competence and accountability. These, and generations
of systemic inertia, have herded the majority of public workers
into the trap of mediocrity. Officially, services are cheap for
the public, but the real cost of obtaining any action, in terms
of time, effort and bribes, can be expensive. The quality can be
dishearteningly poor.

The incentive problem stems from the size of the civil service
and the salaries payable. There were 1.7 million Indonesian civil
servants in 1974. This included employees in regional
governments, state-owned enterprises and the military. Because of
an increased emphasis on government ownership and the enlarged
scope of bureaucratic intervention, the civil service expanded
rapidly, reaching 3.7 million in 1989.

It hit thee 4 million mark in 1993 before sliding back
slightly to 3.97 million the following year, thanks to the zero-
growth policy of the current State Minister for Administrative
Reform, T.B. Silalahi.

In contrast, the government's ability to pay decent salaries
has actually declined. Prompted by plummeting oil revenues, basic
salaries were frozen from 1985 to 1989. In real terms, most civil
servants have endured a steep decline in their official income
since 1984, based on their nominal salaries and relative to other
sectors of the economy.

The series of small pay increases in the past few fiscal years
is only partial relief. It has simply reduced the real decline in
the salaries and prevented the pay for low-position state
employees from sliding below the levels of the legislated minimum
wage.

Poor incentives have denied the civil service the best
available talent and have diverted employee efforts toward a
variety of legal and semi-legal ways to supplement their incomes.
As of March 1994, only 8.7 percent of all civil servants,
including the lecturers at 49 state universities, held university
credentials -- comprising 343,132 university graduates (including
masters degree holders) and 303 Ph.D. holders.

Informal sources reveal that a typical medium-level
incumbent's monthly salary barely meets a family's weekly
expenses. Extra money must consequently be found through the
numerous projects in the office as well as by moonlighting.

Not surprisingly, this condition has dampened initiative and
stifled productivity. Indonesia's rice-centered agricultural
policy has been cited as an indication of the civil service's
ineffectiveness. A whole range of comparative advantages endowed
to tropical Indonesia, such as fruit, cut flowers, herbs and
maritime products, have been neglected, or, at least, not
optimally cultivated. Many observers believe that economic
development in Indonesia could have proceeded at a much faster
rate had the civil service been more effective.

There is, however, a more fundamental problem: the aggravated
weaknesses in the mechanism of checks and balances within the
system. This is more than just an incentive or competence issue.
With basically no political opposition, a weak House of
Representatives and a subdued mass media keeping watch, the
government determines its own terms of accountability. Large
discrepancies within the civil service exist as certain high-
ranking officials enjoy tremendous access to kickbacks, project
mark-ups and multiplicity, while others, mostly in low-level
positions, are simply excluded.

Late in 1993, Indonesia's economics guru, Professor Sumitro
Djojohadikusumo, delivered a bombshell by estimating that
"leakages" in Indonesia's development funds during Indonesia's
Fifth Five-Year Development Plan amounted to 30 percent of the
total fund. Following three months of heated polemic, he modified
his statement by changing the word "leakages" with
"inefficiencies".

In turn, corruption has been associated with Indonesia's
perceived high-cost economy and is believed to stand in the way
of improving the lot of the country's industrial workers. The
bureaucratic delays and the pungutan liar (illegitimate charges)
by numerous state agencies and personnel effectively choke
companies' ability or willingness to pay better wages.

A series of interviews with textile and garment firms in
Greater Jakarta, with representatives of foreign trade offices in
Jakarta, and with the deputy chairman of the Indonesian Textile
Association confirm that up to 20 percent of production expenses
in a typical export firm can be categorized as (both legitimate
and illegitimate) "bureaucratic costs", while direct labor costs
represent only about 9 to 12 percent of the total.

In short, reforming the civil service is a daunting task. As
part of the effort, the government has started to de-
bureaucratize itself. Reforms have touched many aspects of the
civil service, including state-owned enterprises and the customs
service. The tax office, of course, has been at the forefront of
the effort, especially by changing its philosophy from
"controlling taxpayers" to "servicing taxpayers".

Largely sponsored by foreign aid agencies, scores of civil
servants have also studied overseas to improve their
qualifications. But all this is slow to bring about improvements
at a time when the pace of change is getting quicker.

Meanwhile, the State Audit Agency continues to tighten its
supervision. During the first half of the 1994/95 fiscal year,
the agency uncovered 6,407 cases of irregularities worth Rp 1.1
trillion (US$ 500 million) -- most of which it is bound not to
recover. A special team for the procurement of public goods and
services was also established early this year, requiring all
tenders worth Rp 10 billion and above to proceed under its direct
supervision.

Providing better pay is often considered a prerequisite to
improved public services. However, this can be very expensive. In
1994/95, every 10 percent salary adjustment requires Rp 1.9
trillion in funds to realize. Even without a change in the
compensation scheme, according to the Director General of the
Budget, the government must pay Rp 700 billion annually just to
absorb automatic pay increases associated with promotions and
allowances (like marriage and dependent allowances). More
importantly, this may only bring about a "necessary-but-
inadequate" twist of the problem.

Many Indonesians believe that real improvement can take place
only if there is the political will from the highest political
order; if senior government officials are willing to set examples
and are prepared to be placed under public scrutiny; if rules are
clarified to regulate preferential business dealings associated
with family members of these officials, and so on. There has only
been mixed signals thus far, with rhetoric failing to match
reality.

The writer is an observer of economic and social development
issues in Indonesia.