Democracy very bad for corruption

Berlin-based Transparency International (TI) said in its 2002 annual report that based on its corruption perceptions index, Indonesia, together with Kenya, is the world's fourth most corrupt country. The following are excerpts of an interview with TI chairman Peter Eigen, a former World Bank director for Kenya, during a visit to Jakarta earlier this month. He talked to The Jakarta Post's contributor Rikza Abdullah.

Question: Is there any hope of curbing corruption here?

Answer: We have many examples of countries which seemed to be totally hopeless in fighting corruption ... (But) we believe you can change things if you are smart and if you do it in a way that gets the support of the people.

Q: Could you explain your proposals for change?

A: There are three very important elements in our approach. First, none of the major elements of society can do it alone, neither the government, nor the private sector nor civil society. So you need a coalition of these three. Second, you should not only think of punishment. In many countries, when people want to fight corruption they introduce only stronger criminal sanctions. ... punishment is only one of the tools to fight corruption.

Third, you should empower the people inside society to find the solution. Don't try to impose pressure from outside.

Q: Do you have an example on empowering people inside society?

A: A few months ago, I was in Nicaragua. The former president (Arnoldo Aleman) was accused of having embezzled and stolen about US$100 million, and sending the money to banks in other countries. The new government could not investigate and punish him because he was still a strong man in the parliament. The government seemed to be hopeless for two years ... He had his right of impunity ...

So the new government called me, and I met with the new president (Enrique Bolanos). Together we organized a huge conference with about 450 participants, including executives of the chamber of commerce, professionals, civil society activists, foreign diplomats and representatives of the World Bank.

The next morning the parliament took a vote and lifted the impunity of former president Aleman and he is now in jail. So if you don't give up hope, you will achieve some little things and then you can move forward.

Q: What do you say about Indonesian civil society?

A: Civil society in Indonesia ... is strong and courageous. It was, for example, the civil society -- not the private sector or the armed forces -- that bashed out the previous government. It was civil society which created the tremendous momentum, the anger and impatience with the corrupt leader. The question now is whether they can keep this momentum alive.

One problem is that the new political leadership came to power under the banner of fighting corruption and then nothing happened. Of course, civil society may become disappointed and lose hope; there will be a great danger because the government came to power with the main mandate to fight corruption ...

In Mexico, the previous government and its president were believed to have been corrupt and then the new government and the new president started a strong campaign against corruption.

But ... the governing party was so strongly controlled by some of the corrupt sources. The new president was not able to do much, but he did pave the way and did a lot to introduce freedom of information, legislation and the campaign against corruption. He introduced transparency in his government by introducing e- government. But he needed 10 years to make things begin to show.

Q: So what concrete measures should we take to fight corruption?

A: I have two recommendations. One is about civil society itself -- it has to grow and develop. As corruption is very complex, civil society needs a willingness to engage other partners as an independent partner and develop cooperation programs with them, rather than confront them.

Its members have to internally organize themselves with more transparency and democracy. And they should organize internationally with global non-governmental organizations like TI. They must develop cooperation with the government and the government has to welcome the civil society.

The other recommendation is the implementation of good governance in big companies in the private sector. They are the victims and the prosecutors of corruption. As many want changes, they have to be open to civil society and invite civil society to come, and say, "Look what we are doing in business, in child labor and in environmental protection."

Q: Can we use democracy as a tool to fight corruption?

A: There is no direct correlation between democracy and honesty ... However, democracy is very bad for corruption. In many countries, the leadership is very corrupt to make sure that they will never lose an election. Therefore democracy with transparency and a free press is good for fighting corruption. A democratic government is usually better protected against corruption.

Q: Sometimes, officials cooperate with foreign investors and international financial institutions to commit corruption...

A: Corruption in many developing countries is based on, or derived from systematic export corruption. But export corruption will hopefully subside because it is now forbidden.

In Europe foreign bribery (used to be) allowed -- meaning that they allowed bribes in other countries. A German company, for example, was allowed to offer bribes in Indonesia ... it was part of life (here). So, if you wanted to do business here, you had to do what was part of the culture here. A few years ago, bribes made in other countries were tax deductible in Germany because it was part of the system.

In my opinion, many foreign investors and foreign suppliers preferred not to offer bribes but they thought they had to offer bribes because their competitors were doing it.

But two years ago, the OECD (Organization for Economic Cooperation and Development) Anti-bribery Conventions was put into force and some European countries such as Germany and France have now changed their laws. Now, if a German businessman bribes here in Jakarta, he will be punished in Germany.

So, there is a tremendous change. It's amazing.

Q: Economists here once disclosed that some 30 percent of foreign aid from international financial institutions, including the World Bank, for Indonesia was embezzled. Do you believe it?

A: I cannot trust it. However, if possible, the other 70 percent was really useful to help the people.

Anyway, it is a dilemma. The World Bank and the International Monetary Fund (IMF) are the captives of shareholder governments. If they believe that their shareholders think corruption is necessary to do business in international market places, then they don't allow the financial institutions to fight corruption. When Germany, Britain and some other OECD countries thought that they needed to bribe to export to and to do business in a certain country, they would not allow the World Bank to fight corruption.

Furthermore, corruption used to be very much considered as a sovereign, political, internal matter of a country and therefore the World Bank was forbidden by its chapter to get involved in this. But now, corruption is recognized as an economic development matter and the World Bank, to a certain extent, has a mandate to get involved. The World Bank is now very active in fighting corruption with different approaches.