Indonesia: Telling Lies

Abstract

Jakarta—Muhammad Nazaruddin, a bright 32-year-old, was an up and coming national politician destined for high office, perhaps even president. He was one of the new political tigers that won office as the result of Indonesian President Susilo Bambang Yudhoyono’s election victory in 2004. By 2010, Nazaruddin was already treasurer of the ruling Democratic Party and a member of the House of Representatives Budget Committee, which oversees government projects.Nazaruddin’s downfall came last May when local newspapers reported he received bribes totalling 25 billion rupiahs ($2.8 million) for a construction contract to build athletes’ housing at the Jakarta 2011 Southeast Asian Games. In late September, two members of the project consortium were convicted of involvement in the bribery scandal and were sentenced to only two and two-and-a-half years in prison and a fine of Rp 200 million ($22,300). “If that’s all they get, there won’t be any deterrent effect,” says Indonesia Corruption Watch chairman Danang Widoyoko.Shortly after these charges first surfaced, the Corruption Eradication Commission (kpk) formally accused Nazaruddin of accepting bribes involving the project. Subsequent charges included two cases that totalled Rp 2.3 trillion ($256.5 million) in bribes. In August, Nazaruddin’s lawyer revealed a letter from his client suggesting he’d keep mum about crimes committed by the Democrats if Yudhoyono would guarantee his family’s safety, leading to the obvious, if unproven, conclusion that the party’s leaders are culpable in as-of-yet-undisclosed offenses. Then in September 2010, the chief of the Constitutional Court alleged Nazaruddin had offered an unsolicited payment of $120,000 to the court’s secretary-general. Nazaruddin resigned hastily, launching a series of stinging attacks accusing high-ranking government figures, including the Sports Minister Andi Mallarangeng and the secretary of the Democratic Party’s ethics committee, Amir Syamsuddin, of crooked deals. After implicating powerful former associates, he fled to neighboring Singapore for what he claimed was a medical appointment. However, he never bothered to return—at least not for three months. That is when Indonesian authorities discovered him, living under an assumed name in Cartagena, a plush Caribbean beach resort in Colombia. The Indonesian government sent a specially chartered executive plane at a cost of Rp 4 billion ($468,000) to collect him. That too provoked a few raised eyebrows, until the kpk pointed out that a previous whistle-blower who returned on a commercial flight had been poisoned.“Corruption in Indonesia is just like Coca-Cola,” says Widoyoko. And indeed the problem has permeated far beyond the billion rupiah bribes that prop up the already rich and powerful. It has become a deeply embedded feature of Indonesian society and everyday life. Corruption is sapping the growth and undermining the foundations of the world’s third largest democracy.In the time of Indonesia’s long-time leader, Suharto, life was a lot simpler for the foreign investor. Suharto ran a one-stop shop. You paid your money to one person, and everything was arranged. Today, in the wake of regional power-sharing, you not only have to bribe officials at the federal level, but also at regional and local levels. This complicates matters. Today, a foreign investor often needs a professional team based in Jakarta and in the appropriate provinces to figure out all the people who need to be paid off.Corruption has trickled down to every aspect of life. It’s routine for authorities to pull over drivers—whether or not a motoring offence has actually occurred—and ask for Rp 50,000 ($5.64) to avoid being taken to court. Agung, a Jakarta property developer, explains, “You are told you have been speeding, or there is something wrong with your car. You are then asked for ‘some money for a friend.’ This is a code phrase that the officer is demanding a bribe for some sort of alleged motoring offense.”Truck drivers and transportation firms make regular payments to police, officials at weigh stations, even local thugs at checkpoints to allow their overloaded trucks to pass. Few of these tolls ever make their way into government coffers, so it’s no surprise to find major roads routinely dotted with large potholes. Hauling cargo from Jakarta to Surabaya requires payment of at least Rp 450,000 ($50) in illegal levies to officials at 14 different weigh stations along this 400-mile route, according to Indonesia’s Food and Beverage Industries Association. Truck drivers claim they must overload their trucks to cover the illegal levies. These overweight vehicles further churn up the already decaying roads. In the Indramayu region alone, there are more than 50 miles of failed roads in need of repair, and no plans to repair them. The Iskandar Agus Bandji Cirebon chapter of the Organization of Land Transportation Owners says truck owners must change their tires every two to three months instead of the normal six months because of the poor state of the roads.Indonesians resent the vicious cycle of corruption that’s become so deeply embedded in their lives. It is a constant topic of conversation, a media fixture, and the focus of countless conferences. “Indonesians have a love-hate relationship with corruption,” says Agung. Many hate paying the bribes on a daily basis to get things done, he says, “but given that public officials take home barely $200 a month in salaries, it’s hardly surprising they look for ways to supplement their incomes.”In the past, politicians have talked about halting corruption, but in the end, it has always been just that—talk. Despite years of anti-corruption rhetoric, the scale of the problem is only growing. The most recent Corruption Perception Index prepared by Transparency International ranks Indonesia as more corrupt than Egypt, Brazil, India, and China. A survey released in October found 91 percent of Indonesians believe corruption is widespread, up from 86 percent five years ago. Many Indonesian executives agree with Agung that “corruption is becoming more bureaucratic at all levels of society.” Ironically, Indonesia’s efforts to improve democracy and accountability after Suharto by building strong regional governments have only made matters worse.In 1999, Time magazine estimated that Suharto amassed a fortune of $15 billion between 1967 and 1998 in cash, shares, property, jewelery, and art. Many businesses included one of Suharto’s children on their board to protect investments from rivals and threats from low-level civil servants. Few want to return to the days of Suharto’s New Order regime when the military massacred hundreds of thousands in the 1960 s, then brutally repressed regional uprisings in Aceh and East Timor from the 1970 s to the 1990 s. Yet, the Suharto system centralized the collection of bribes and established mechanisms to halt deviations from the agreed upon pattern of corruption. People who bought “permits” received guarantees that they were getting the whole package and would not face any more requests for bribes. Corruption under Suharto was compatible with high growth and inflicted minimal damage on economic development. While Suharto was president, Indonesia’s economy boomed, with over three decades of 7 percent per annum growth. The president’s wife, Tien Suharto, was widely known as Madam Ten Percent for the level of payoffs expected for approval of major contracts or development projects. At the time, Indonesia and India were about equally corrupt, according to Ari Kuncoro at Inside Indonesia magazine, but Indonesia’s economic performance was healthier. Only three groups—Suharto’s extended family, top members of the military elite, and leaders of Indonesia’s Chinese conglomerates—dominated corruption.Bribery in post-Suharto Indonesia is different. Corruption is no longer monopolized by a select few. Indonesia launched its regional decentralization program in 2001. Instead of a strong centralized state, the country’s government fragmented into a host of power centers. With this power shift, centralized corruption has been replaced by a haphazard bribe collection system. The Indonesian Chamber of Commerce (Kadin) has complained that decentralization produces additional regulations in the form of taxes, levies, and permits, which drive up corruption at the local government level. The phenomenon is called “overgrazing the commons,” because officials from all levels of government prey on the same economic activities. Today, everyone from ministers to assemblymen to local police officers demand payoffs.During this summer’s Ramadan, local officials took little time off from collecting their take. For a new passport or driver’s license, the quickest way to avoid endless queues at local government offices is to pay an intermediary. It normally costs Rp 175,000 ($20) to obtain a new driver’s license, but the application and processing is time consuming. Instead, the standard bribe for obtaining an instant driving license is Rp 500,000. For migrant workers seeking a new passport, the process routinely takes eight days, but slipping a bribe of Rp 600,000 to an intermediary means a passport can be obtained instantly.Sundah, who lives in Denpasar, Bali, decided he was going to try to snag a driver’s license by going through official procedures without paying a bribe. “I took the written test three times, and each time they failed me,” he says. “I was a couple of points short each time, but when I asked to see the test papers initially, the officials refused. The others in my exam room told me that if I just paid an extra $20, I would get my license.” In the end, Sundah managed to get his license when the police realized he was not going to pay them a dime. “Finally I asked to see the exam paper, and I spotted the question: ‘What would you do if you hit someone in an accident?’” he chuckles. “I got the question wrong, because the correct answer, according to the official exam paper, was to run away.”Effectively, this all but institutionalized system is an express fee for expedited processing—standard practice in most western nations. In Indonesia, however, instead of the government as the beneficiary, these payments go into the pockets of individuals. People have increasingly become both resigned to such fee structures and lured into efforts to see how they, too, might profit.It’s not just passing a small bribe to a public official that’s routine. Corruption has spread to the private sector. Today, Indonesia is home to more than 60,000 millionaires and 20 billionaires (in dollar terms)—figures that have doubled in the past two years, according the Indonesia’s Ministry of Finance. The financial sector is sizzling with deals—and scandals—from a bribery case involving a former governor of the Bank Indonesia that has implicated dozens of politicians, to Citibank, where an employee is charged with skimming millions from her customers. Such cases highlight fears about endemic corruption within Indonesia’s financial sector.Churchill Mining, a publicly traded London-based firm, announced in May 2008 that it had found 150 million tons of coal in Indonesian Borneo. This turned out to be a vast underestimate. The firm now believes there are 2.8 billion tons, making it the seventh-largest undeveloped reserve in the world. Unfortunately for this British firm, other investors quickly became interested. The Nusantara Group, a conglomerate backed by Prabowo Subianto, a politician and Suharto’s son-in-law, had previously controlled mining in that area. Six companies affiliated with Nusantara held licenses for six blocks in the East Kutai district of East Kalimantan province but never explored for coal. After the six licenses expired between March 2006 and March 2007, the district government began offering the area to other mining firms. Churchill entered the picture by acquiring from the Ridlatama Group, an Indonesian company, a 75 percent stake in the four new licenses awarded for the same area.In July 2008, two months after Churchill revealed its discovery, the district chief of East Kutai suddenly extended the six expired licenses that had been held by Nusantara’s affiliates, ignoring the fact that Churchill’s local partner had already been awarded licenses for the same tracts. Churchill claims that it has since been the target of a campaign to drive it out of Borneo. In May 2010, a new district chief of East Kutai revoked the Churchill-Ridlatama licenses, leaving Nusantara-affiliated companies in sole control of the 2.8 billion-ton reserve. Local courts rejected Churchill’s complaints, though it has recently appealed to Indonesia’s Supreme Court. And in the process, Churchill Mining has launched a global public relations campaign alerting the financial world that Indonesia is not a trustworthy place to invest.From the point of view of private companies, corruption is like taxation. Both take money from private business, but the need to avoid detection and punishment makes corruption less efficient than taxation. A bribe is a contract that cannot be enforced in court, increasing the chances the bribe-giver will renege or the bribe-taker will suddenly demand a higher payment. Still, there are some practices many foreign observers (and even Indonesian commentators) would call “corruption” even though it’s totally legal in Indonesia.In Indonesia, like elsewhere, golf clubs exist not only as a place to play golf, they are equally a place to conduct business—organize deals, network, and bribe officials. It is a good place for an important official to win prestige jobs for his expensively educated children. It is also a good place to receive bribes. A top civil servant is invited to play a round of golf and discuss business. The official has conveniently forgotten his bag of golf clubs. His business friends lend him a set; they play a round of golf, with the prize being the golf clubs. The government official wins, and he decides to them at the golf professional since he has a of clubs at The paid by the is always the agreed as the bribe for the the official has made with the executives that This is not is it when a like Indonesia it has given some million to police and Indonesian military officers as a fee to their mining Many private however, these payments as bribery and the legal system is a vast of must be in the The state to the in a In 2010, police two in a for they had in were accused by police of the for without in Indonesia and being in of the for which had not been as a Many found such to the by the police given that for years many of had not been for the same In a Jakarta the to are more by a corrupt than companies to their and Such companies must a of their to Corruption when licenses have to be so businesses often without them since a firm need up to to be At least of all drivers in Jakarta have licenses, says a local one means drivers have not taken an official driving hardly a given the driving that on in For without a license, it means a police It would take at least at to the cost of obtaining an official license, the bribes to up the some for business in recent years, Indonesia’s and legal many foreign and companies to avoid the system It is not surprising that investors are often by to through because the system and The local business the and system as corrupt with many Ironically, many of these regulations have been in an to efforts to a the a Bank found that some percent of investments in Indonesia because of the high costs to corruption. The problem has become so that it Indonesia’s of becoming a India, Indonesia, and have which will make it increasingly for foreign investors to in Indonesia’s corrupt A from the found that a third of British and a of companies would avoid to avoid the of being at At least for the of this not Asian without anti-corruption regulations from in such payments to win business in Indonesians the of corruption has to do with its and Indonesia has of a of regional and at It is not surprising since the has been by of often members of the public as as of the Agung says when he is paying a he he is to a their to of For many up in such a the offering of a bribe is not as corruption but as of the way of life. In many local who have widely in the little between a politician to government contracts in Jakarta and a to change a in the it’s called widely that corruption has out of control in Indonesia because of the high costs of a of over million people some legal and in a regime with no established of by members and Rp billion million) paid in to all in Indonesia’s is hardly to run a professional political the vast of members pay no the small state to were by percent in and politicians try to from companies and state to the of or development through procedures have often been the of political in both and Indonesian Corruption Watch the political in the federal their financial in with the which that have their and to do so from further government Only three political Despite over many to the Corruption Watch as of the six had failed to be a to Indonesia’s as one of the world’s largest a political four have been in Indonesia since the of Suharto’s years of in an increasing of Indonesians question the of given the run of reported by the country’s by the rich not And the Indonesian government is too to make this corruption has not Indonesia’s percent growth since 2007, and there are other for as For the first time since Indonesia won its from the in and some from the political elite, the legal system to have a a surprising of people are being and official a official who by both and foreign companies or their amassed a small fortune of Rp billion was sentenced to years in prison in August, extended to He a to in the the Indonesian media and to their into the within the in the Indonesia’s anti-corruption has for and and of the country’s and corrupt police a to Jakarta last August, official the kpk was a it as and are their For a they have a The kpk has convicted 150 high-ranking including members of more than government four and a of high-ranking chief executive officers and according to its It has also received more than of percent a little too good in any legal system and there needs to be a look at how cases are in the first new drive to corruption has been by from investors to up the and from a new of Indonesian executives and politicians to the economy into the global The in their way of from the country’s economic growth and that in many of Indonesia, a lot of government have a about how to government money in an so need to them and them what practices are the in Indonesia, corruption even the to the is a of have made anti-corruption their The problem the leading anti-corruption up by officials to the of the needs to a of and to corruption. These down and increasing pay levels for civil and officials. have been in Indonesia without the state must become a more powerful and like the kpk have on a corruption, it is all but to build a or power without to pay bribes to win the and the and and the legal foreign investors often and they are in an Indonesian of they often take their business