Halting corruption by promoting individual rights
By Christopher Lingle
UBUD, Bali (JP): Few are surprised when corruption is uncovered in Indonesia. Prior to the economic crisis, illicit activities arising from corrupt, collusive and nepotistic (KKN) practices were estimated to add between 15 percent and 30 percent to the cost of doing business here.
However, the amounts and extent recently revealed are truly staggering.
In response to International Monetary Fund (IMF) urgings, independent audits by Price Waterhouse Coopers found that state oil company Pertamina lost US$6.1 billion from inefficiency and corruption in just the past two years.
Meanwhile, the Ministry of Finance reported over 11,500 cases of corruption worth nearly Rp 184 billion ($27.46 million) since 1997. Many of these cases stemmed from "special treatment" of well-connected crony capitalists, including Hutomo "Tommy" Mandala Putra, a son of retired president Soeharto.
The Ministry of Home Affairs cited losses of Rp 2.6 trillion, while the Ministry of Education and Culture had losses of Rp 3.3 billion.
Minister of Communications Giri Suseno initially made a remarkable claim that his ministry lost not a single rupiah to corruption, but later admitted a decision to cancel projects worth almost Rp 1.2 trillion.
With the investigation of 12 ministries underway, the government has also taken steps toward greater enterprise transparency and corporate accountability. A new directive requires companies earning more than Rp 25 billion or with outstanding bad debts to file annual financial reports.
These steps may weaken the "culture of corruption" that makes Indonesia arguably the most corrupt place in the world, outside of Arkansas. (Note that a free and open media there contributed to putting the most recently elected governor of Arkansas in prison for corruption.)
It would be helpful if international aid agencies and financial institutions set stricter conditions for aid and lending. A recent report from the Washington-based National Bureau of Economic Research indicates that the presence of corruption did not interfere with aid flows. In some cases, more corrupt governments tended to receive more aid.
Indonesia's financial crisis can be widely attributed to a reassessment of risk that led to a crisis of confidence causing massive outflows of capital from the region. Its government was considered unable to provide an environment where asset values would be protected and financial institutions were viewed as non- responsive to market signals. Restoration of confidence in Indonesia will require that successive leaders take decisive and convincing action to limit government regulations and interventions that invite KKN activities.
Perhaps the best way to reduce opportunities for corruption is to reduce government involvement in the marketplace. Whatever ruling coalition emerges should seek to reduce the politicization of economic life.
Along with selecting a president, any coalition must also select a model of governance to pursue. One of the most pressing aims of any government is to alleviate poverty while addressing other social concerns.
To this end, Indonesian leaders can look to their own past while learning from the failures of the modern welfare states in much of Western Europe.
Post-colonial Indonesia has had disastrous experiences with regimes that share essential features with social democracy or democratic socialism.
During Sukarno's regime and Soeharto's New Order government, social cohesion and mobilization were pretenses for social control and the subjugation of individuals to collective goals. While Sukarno's regime led to economic stagnation and political divisions, Soeharto's rule brought high economic growth that masked widespread abuses.
Indonesians would be better served by democratic capitalism where individuals are the key to communal growth. Global markets encourage governments to have greater respect for the rights of individuals as market participants. Growth in the modern information economy requires nimble responses from entrepreneurs and workers to provide what others want.
Globalization requires greater competition at the national and international levels. In this sense, free and open economies can form the basis of free and open societies. Placing the individual at the heart of government policy promotes development of a society of free individuals.
Imbalances of power are most often perpetuated by government actions that provide protections and privileges for some elite.
Political freedoms ultimately depend upon extensive economic freedom of individuals within a competitive and open economy.
Indeed, most of the worst abuses of governments in this century occurred when individual rights and freedoms were sacrificed in the name of collective goals. Political leaders often repudiated individual rights in order to assign collective rights that excluded certain other groups.
For example, apartheid excluded blacks from political and economic participation by giving special rights to the white community in South Africa. German National Socialism led to the elimination of Jews by claiming that Germans would be better off if their communities were purified of "inferior" groups. The Khmer Rogue murdered intellectuals and other communists purged the bourgeoisie who might interfere with their attempts to construct new communities.
These extreme abuses, along with the outrages arising from attempts to consolidate claims for a greater Serbia, could not have occurred if the rights of all individuals were protected.
Indonesia's rich mixture of religions, ethnic and language groups suggests that placement of individual rights ought to be the centerpiece of its democratic future. Movements toward democracy go beyond halting KKN abuses.
Yet such excesses will disappear when rich and poor, weak and powerful are treated as individuals with the same rights and freedoms before the law.
The writer is an independent corporate consultant and adjunct scholar of the Center for Independent Studies in Sydney, who authored The Rise and Decline of the Asian Century.