Integrity pact for defense procurement system

Integrity pact for defense procurement system

Andi Widjajanto
Jakarta

The international arms market is the main source for
Indonesia's acquisition of defense systems. This arms transfer is
mostly funded by export credit facilities. The existence of
export credit allocations for the procurement of armaments
systems requires a political regulation, especially to guarantee
that export credit allocations are regarded as a transitional
funding mechanism.

In 2005, the minister of defense introduced Decree No.
SKEP/01/M/I/2005 on guidelines for the procurement of military
goods/services using export credit facilities for the Ministry of
Defense and Indonesian Military (TNI). This decree described in
detail the purchase process, beginning with the procurement
planning process and ending in the delivery of the armaments
system, for equipment purchased through export credit schemes.

The decree annulled Ministry of Finance Regulation No.
571/KMK.06/2004 on technical guidelines on completing 2005 budget
implementation form, which explicitly prohibited the use of
export credits for the procurement of military equipment systems
and agricultural commodities.

The contradiction of these two regulations should be abolished
by stating that export credits are a transitional financial
mechanism, and by creating a financial mechanism for procurement
of armament systems that gradually reduce the proportion of
export credits used for such procurements.

The Ministry of Defense decree also regulated an integrity
pact, defined as a "letter of statement signed by the user of
goods/services, procurement committee and interdepartmental team
and provider of goods/services declaring resolution to prevent
and not to commit collusion, corruption and nepotism in the
procurement of military goods/services".

The integrity pact is the rationalization of the
anticorruption movement in Indonesia. Its objectives are, among
others, to prevent officials, commission members and secretariat
employees from receiving bribes, to assist in increasing public
trust in the procurement of services and goods, and to ensure the
quality implementation of programs with appropriate logistical
support in aspects of quality, timing and cost.

At least three parties must sign an integrity pact for the
utilization of defense export credit facilities.

The first is the user of the goods/services, in this case the
Ministry of Defense.

The second is the supplier of the goods/services, who may have
be the manufacturer of the military goods/services, the foreign
distributor, the regional vendor officially appointed by the
manufacturer or those capable of providing military
goods/services.

The third is the procurement committee and the inter-
ministerial team, which is directly chaired by the minister of
defense. It is responsible for all processes in the acquisition
of armaments using export credit facilities. This shows the
minister of defense has succeeded in creating a mechanism
integrating procurement processes in the Ministry of Defense and
TNI Headquarters.

It also shows that the principle of civilian supremacy is
being implemented by putting officials from the Ministry of
Defense in control of various armament acquisition processes
using export credit facilities.

However, a major problem arising from armament procurements
using export credits is that the process is handled with an ad
hoc project organization.

A solution to be considered is the creation of a Defense
Procurement Agency under the Ministry of Defense, directly
responsible to the minister of defense. The agency should be
given full authority to implement all processes of armaments
acquisition.

The agency would also be expected to underline the central
role of the ministry in the procurement of armaments systems and
strengthen the application of transparency and accountability
principles in the procurement of armaments systems.

It would be more effective if the ministry adopted the
Organization of Economic Cooperation and Development's
antibribery mechanism adopted on Feb. 15, 1999, by OECD members
and Argentina, Brazil, Chile, Bulgaria, Estonia and Slovenia.

This instrument evolved from four antibribery guidelines set
by the OECD, including the Action Statement on Bribery and
Officially Supported Export Credits (2003), and the Revised
Survey on Measures Taken to Combat Bribery in Officially
Supported Export Credits (2004).

The OECD's antibribery mechanisms related to export credit
facilities could be used by the Ministry of Defense to create
operational instruments for use by officials in the military
goods/services procurement organization to prevent bribery
attempts. The operational instruments could also be made into an
integral part of a system containing integrity pacts and
antibribery instruments.

The antibribery instruments could also be strengthened by
requiring the government to provide transparency of procurement
of armaments systems. This transparency could be achieved in two
ways.

First, the Ministry of Defense could create an e-procurement
system allowing providers of goods/services to easily find out
how procurement programs are planned by the ministry based on
Defense Strategic Plans.

Second, the ministry should be required to publish reports of
international arms transfers from and to Indonesia. An
international arms transfer report -- an important part of the
international regime -- is an important step in improving
supervision of defense procurement system.

The writer is a lecturer at the School of Social and Political
Science, the University of Indonesia. He can be reached at
andi_widjajanto@yahoo.com.