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First Draft: Corruption Indonesia

Suharto and Corruption

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The second president of Indonesia, Suharto, was investigated for corruption in his 32-year rule. A report by Transparency International in 2004 ranked, Suharto, the most corrupt leader in the world [1]. The growth under Suharto's tenure enriched the elites significantly while other classes were isolated from the economic gains. [2] This resulted in massive protests which led to the overthrow of Suharto for good after three decades of reign in Indonesia. In 1970, a bunch of students protested against Suharto and his corrupt administration.[3]

Corruption[4]

The wave of Corruption under Suharto

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Muhammad Suharto, an army general, became the second president of Indonesia in 1967 and held the office till 1998. During his tenure, it was widely believed he was enriching his family and close friends. Nothing could be done as he was the highest political authority in Indonesia. His wife, Ibu Tien, also a close advisor to the president, was actively seen as bending the laws for her own gains and so became known as Madam Ten Percent[5] (Raymond Fisman)

His son, Mandala Putra Suharto, commonly known as Tommy, was living a lavish lifestyle by driving expensive sports cars and dining with the starts at the most expensive places in Jakarta. Indonesians knew that the lavish lifestyle of the first family’s children was supported by the President’s influence and authority. Tommy could get many business contracts due to his father and this is a clear sign of nepotism and corruption. [6]

Furthermore, his six children were granted monopolies to major sectors of the country. Government officials used to construct policies favoring the few elites (including Suharto's family and relatives) rather than the entire nation. The growth under Suharto's tenure enriched the elites significantly while other classes were isolated from the economic gains. [7] This created sentiments of resentment, which led to the overthrow of Suharto for good after three decades of reign in Indonesia.


Economic and social costs

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Corruption is an important development challenge that poses economic and social costs in Indonesia. Interference in public laws and policies for the sake of personal or private gain has weakened the competitiveness of Indonesia.[8]

The economic costs of corruption include loss of productivity, which means workers have no incentives to work efficiently. This leads to misallocation of resources, and so is detrimental to the success of the economy. According to a report, 35 % potential investors decided not to operate in the country due to corruption.[9] This reflects the loss of opportunities. Investment by foreign enterprises plays a huge role in increasing the growth rates of a country. With fewer investors coming in Indonesia, it translates into lower growth rates. Foreign investors decided not to invest in Indonesia as existing companies routinely have to pay bribes to public servants to get the work done. In other cases, public servants expect them to give gifts in exchange for doing their job. [10] According to Transparency International, 2017 report, Indonesia has a score of 37. This means it is still under corrupt countries category. Most of the local people view the government as corrupt as per the Corruption Perception Index. [11]

About one-quarter of ministries suffer from budgetary diversions in Indonesia. Households spent approximately 1% while enterprises spent at least 5% of monthly company revenue on unofficial payments. Social costs due to corruption in Indonesia include the weakening of government institutions and the rule of law.[12] Increases in crime due to smuggling and extortion involve the institutions that are supposed to be protecting citizens. The people who suffer most are the poor[13] as they are pressured to finance payments through their already tight budgets and the effectiveness of social services are less accessible indirectly. These concerns were voiced by the poor urban communities of Indonesia themselves in a joint World Bank-Partnership for Governance Reform research project, entitled “Corruption and the Poor”.[14]

The impacts of corruption are not uniform. Poor people in Indonesia are the ones who get affected the most. They have to spend a significant amount of their income to pay bribes to get access to public services. A report by World Bank, titled, Corruption and the Poor, explored the effects of corruption on the poor in Indonesia. Poor urban class from Makassar, Yogyakarta, and Jakarta described the struggles of living in the culture of corruption. The respondents identified major costs of corruption, including, lack of trust and so eroding the social capital of Indonesia. Other impacts include negative impacts on the human capital of the country[15].

Public Services Corruption

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Corruption in public services is a norm in Indonesia. Funds that are allocated for infrastructure development are stolen by public servants. The public officers keep enriching their own pockets with funds allocated for the public good. [16] This is done by overestimating the prices and quantities of inputs.


Efforts to Curb Corruption

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Several anti-corruption initiatives have been launched to eradicate the high levels of corruption in Indonesia. Some of these include Corruption Eradication Commission (Komisi Pemberantasan Korupsi, KPK). The KPK prosecutes high-level officials involved in corrupt activities in Indonesia. [17]. In five years, KPK was able to reach a 100% conviction rate against top officials in the country [18]

The United Nations and the World bank-led Sustainable Development Goals focus on ending corruption in many countries, including Indonesia. [19]. The World Bank recommends Indonesia to emulate successful anti-corruption initiatives such as the establishment of Extractive Industries Transparency Initiative (EITI) in Nigeria, which played a positive role in raising awareness and reducing corruption [20]

The most salient anti-corruption efforts spearheaded by Indonesian civil society is the Indonesia Corruption Watch (ICW), formulated in 1998 after the overthrow of Suharto. [21] The goal was to reduce corruption in post-Suharto Indonesia. The United Nations Office on Drugs and Crime considers ICW as ‘the leading NGO’ in ending corruption in Indonesia. [22]

  1. ^ https://en.wikipedia.org/wiki/Corruption_charges_against_Suharto
  2. ^ http://www.nytimes.com/2008/01/28/world/asia/28iht-suharto.1.9542684.html
  3. ^ Vatikiotis, Michael R.J. (2000). Indonesian politics under Suharto : the rise and fall of the new order (Repr., 3rd ed.). London [u.a.]: Routledge. ISBN 978-0415205023.
  4. ^ By, G. R. (1998, Aug 19). World bank memo depicts diverted funds, corruption in jakarta --- institution says it made reforms. Wall Street Journal Retrieved from https://search.proquest.com/docview/398822533?accountid=12339
  5. ^ Raymond, Fisman (04-03-2010). "Corruption You can Count On". The Wall Street Journal. {{cite news}}: Check date values in: |date= (help)
  6. ^ https://press.princeton.edu/titles/9170.html
  7. ^ http://www.nytimes.com/2008/01/28/world/asia/28iht-suharto.1.9542684.html
  8. ^ Vinay Kumar Bhargava, E. P. (2004). Challenging corruption in Asia: case studies and a framework for action. World Bank Publications.
  9. ^ http://siteresources.worldbank.org/INTINDONESIA/Resources/Publication/03-Publication/Combating+Corruption+in+Indonesia-Oct15.pdf
  10. ^ https://www.business-anti-corruption.com/country-profiles/indonesia
  11. ^ https://www.transparency.org/country/IDN#
  12. ^ Cite error: The named reference Lateef, S. (2003) was invoked but never defined (see the help page).
  13. ^ Mauro, P. (1997). Why Worry About Corruption?
  14. ^ Hardjono, R. a. (2002). The Poor Speak Up; 17 Stories of Corruption, Partnership for Governance.
  15. ^ http://siteresources.worldbank.org/INTINDONESIA/Resources/Publication/03-Publication/Combating+Corruption+in+Indonesia-Oct15.pdf
  16. ^ Svensson Jakob
  17. ^ https://en.wikipedia.org/wiki/Corruption_Eradication_Commission
  18. ^ https://www.u4.no/publications/an-exception-to-the-rule-why-indonesia-s-anti-corruption-commission-succeeds-where-others-don-t-a-comparison-with-the-philippines-ombudsman/
  19. ^ http://www.worldbank.org/en/topic/governance/brief/anti-corruption
  20. ^ http://www.worldbank.org/en/topic/governance/brief/anti-corruption
  21. ^ https://en.wikipedia.org/wiki/Indonesia_Corruption_Watch
  22. ^ https://en.wikipedia.org/wiki/Indonesia_Corruption_Watch
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