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.