Implementation of GCG still a long way off
Dadan Wijaksana, The Jakarta Post, Nusa Dua, Bali
The country's die-hard and endemic corruption, collusion and nepotism have become major hurdles to the implementation of good corporate governance (GCG) principles in the public and private sectors, experts have said.
Failure in implementing GCG principles also contributed to the current slow pace of economic recovery, they added.
GCG requires transparent, independent, accountable and fair management.
Chairman of the National Commission for Corporate Governance (NCCG) I Nyoman Tjager said that compared with other countries in the region, Indonesia's performance in implementing GCG principles had been among the worst.
He was speaking while opening a two-day seminar on GCG in the resort island of Bali last week.
A survey of investor opinion by international consultancy firm McKinsey put Indonesia at the bottom of the list in Asia in terms of implementation of GCG principles, according to Nyoman.
Furthermore, Indonesia ranked 88th of the 99 sample countries surveyed by Berlin-based Transparency International on its corruption perception index (CPI). Based on the survey, Indonesia stood only slightly above Bangladesh, Nigeria and Uganda.
Erry Firmansyah, president director of the Jakarta Stock Exchange, cited both external and internal factors that have prevented the implementation of GCG in the country's private sector.
"On external factors, reforms are still inadequate, especially those in public governance, law enforcement and macro policies and regulations," Erry said in the seminar.
"And internally, the typically family-oriented businesses of the country have also acted as a constraint on GCG implementation in the country."
Executive secretary of the office of the state minister of state-owned enterprises Bacelius Ruru agreed that the family- oriented nature of the country's companies was a factor behind the slow progress of GCG implementation in the country.
Bacelius added that poor GCG practices had not only prevented companies from achieving their corporate goals, but worse still, were also prone to fraud.
Recent collapses of American giant companies, including Enron, WorldCom, Xerox, Merck and many others, were partly attributable to violations of GCG principles, he added.
Bacelius and Erry agreed that an intensified effort to improve business practices based on GCG principles was badly needed now, given that Indonesia had entered a variety of free, borderless, trade agreements.
So far, they said, the government has introduced some regulations to promote prudence in corporations, in line with international standards, to gradually establish GCG in the country.
As far as publicly listed companies were concerned, for example, each was required to have at least 30 percent of its board as independent directors and to establish an audit committee within the company.
Such a committee would be tasked to independently review major issues regarding the company's internal control and financial activities. Independence in this case means it would have no connection with the company's majority shareholders and management.
The government, as majority shareholder, has also applied a similar ruling to publicly listed state enterprises.
But for those that have not yet gone public, the percentage of independent directors is lower, at 20 percent.
"The full implementation of GCG practices is still a long way off, but with continued and comprehensive efforts from all stakeholders, I'm optimistic that we can get there someday," Nyoman said.