Embezzling foreign loans
There is nothing surprising about the statement last week by Koensatwanto Inpasiharjo, secretary of the National Development Planning Board, that 20 percent of foreign loans to the government have been corrupted.
Nor did the statement in any way reflect a stronger resolve on the part of the government to crack down on graft. As Inpasihajro talked only a day after the end of the two-day meeting of Indonesia's creditor consortium (Consultative Group on Indonesia) in Bali, one could simply relate his statement to the speech his boss, National Development Planning Minister Kwik Kian Gie, made at the CGI meeting.
Kwik, seemingly frustrated with the government's lack of determination to fight corruption, said Indonesia would not have had to get down on its knees for new loans had the government been able to stop corruption and collusion which he said had robbed the state of the equivalent of US$28.5 billion a year.
International corruption watchdogs have indeed always ranked Indonesia, together with Angola and Nigeria, among the most- corrupt countries in the world. The guru of Indonesian economists, the late Sumitro Djojohadikusumo, had even put state losses from corruption as high as 30 percent of the annual state budget.
Two fact-finding missions from the World Bank, including international specialists on anticorruption efforts, who visited the country in September, 1998, concluded that corruption in Indonesia was endemic, systemic and deeply institutionalized. Practically all institutions were involved: judiciary, civil service, security forces, even internal and external audit firms.
The Supreme Audit Agency and the Government Finance Comptroller also have discovered in their annual audits thousands of instances of irregularities or strong evidence of corruption involving the equivalent of billions of dollars within state companies and the state budget implementation.
What is painfully surprising though is the tiny number of people already jailed after being found guilty of corruption. Yet more insulting to the public's sense of justice is that even the most high-profile suspects or defendants, such as former president Soeharto, his family members and his cronies, who were largely responsible for the economic crisis, have either escaped on technicalities, received light sentences or are about to be pardoned thanks to their willingness to return what they had allegedly embezzled.
This has created a moral hazard as most big white-collar crimes turn out to always pay. No wonder, the situation has been made seemingly hopeless because corruption, instead of being controlled by the reform movement that had ushered in a more democratic and decentralized government, is now perceived to be much more pervasive than ever.
The root causes of corruption have been identified. The Supreme Audit Agency and the government internal audit body have made many recommendations on how to contain corruption. For example, graft within the state budget implementation and state companies has been blamed mainly on the utterly poor financial management and flawed procurement system, which has been prone to systemic abuse and systematic irregularities.
Yet the government has been very slow in reforming its procurement system, and the bills on state finance, treasury and audit have been stuck at the House of Representatives for more than two years.
Set against this situation, Kwik's remarks at the international creditors' meeting appear to be an effort by a frustrated senior official, who feels he has lost the fight from within the government to control corruption, to increase public pressure on the government.
Or could Kwik, despite his disillusionment with the performance of foreign creditors, notably the International Monetary Fund, have meant his statement as a plea to garner international support to apply pressure on the government?
Unfortunately, though, Kwik's criticism could further embolden the staunch critics of foreign loans to step up their campaign against international creditors, demanding that Indonesia simply stop paying its foreign debts because the creditors had largely tolerated the crime.
Whatever the case might be, one thing is clear. The urgency of coping with corruption is now greater than ever. Without significant, steady progress in combating graft, the government will never have credibility and popular legitimacy, which are the key to its ability to implement tough reforms in order to achieve sustainable economic recovery.
Without an assurance that foreign-funded projects can be insulated from corruption, Indonesia may lose support even from its most loyal creditor members of CGI.