Indonesia - transparency and corruption - progress but more to be done
Published 18 December 2014
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This publication was archived on 4 July 2016.
This article is no longer current. Please refer to Overseas Business Risk -Indonesia
Summary
Indonesia improves in the Transparency International Corruption perception index 2014- but is still behind its peers. The President has started to push ahead with tackling red tape and bureaucratic reforms. In parallel the National Commission on Eradication of Corruption will directly advise the Ministry for Bureaucratic Reform on further legal provisions which should be enacted to combat corruption. Indonesia is going in the right direction, but a lot remains to be done.
Detail
Transparency International Corruption Perception Index 2014 (CPI)
Indonesia has risen up the Transparency International Corruption perception index and is now ranked 107 of 174 (up from 114 of 175 in 2013). Despite the positive shift, Indonesia is still below its peers and neighbours. In the G20, Indonesia sits close to China (100) and Mexico (103) but well below the rest with the exception of Russia (136). In ASEAN, Indonesia is below Singapore (7), Malaysia (50), Philippines (85), and Thailand (85); but above Vietnam (119), Laos (145), Cambodia (156), and Burma (156).
Of the 8 surveys used to calculate Indonesia’s rank, 2 surveys identified progress in Indonesia’s effort to accelerate its public service delivery: Bertelsmann Stiftung’s Transformation Index praised the investigation and prosecution of high profile corrupt individuals, while the IMD World Competitiveness Yearbook underlined the decreased existence of bribery practices. The rest of the surveys highlight continuing challenges such as finance in politics, corruption in the judiciary and lengthy, opaque business licensing processes.
Cutting red-tape and reforming bureaucracy
President Widodo has started to implement his plan to reform the bureaucracy and asked for ministries to be restructured in order to be more effective by the end of February 2015. To complement this the President is in the process of creating a Presidential Office consisting of 4 ministerial agencies: State Secretariat, Cabinet Secretariat, National Development Planning Agency (Bappenas), and the Presidential Chief of Staff. As a result the development and planning agency will now report directly to the President..
Widodo has also asked that the government’s permit process be streamlined by combining ministry licenses into a One-Stop-Shop (OSS) service, eradicating the need for multiple applications at different agencies for the same activity. At a local level, provinces have one year to comply with this. If they fail to do so, their regional grant from the national budget will be cut. Permits in the mining, forestry and transport sectors will be moved out of ministries and handled centrally by the Investment Coordinating Board (Badan Koordinasi Penanaman Modal, BKPM).
To support the President’s initiatives the Anti-Corruption Commission (KPK) has formally agreed to assist the Ministry of Bureaucratic Reform in preventing corruption by drafting a Ministerial Regulation (akin to a law) to eradicate the practice of graft i.e. giving and receiving bribes and facilitation payments. This follows on from a Prosperity project implemented by Transparency International where they worked with the KPK on how to tackle facilitation payments – including through engaging with key Ministries.
Comment
Indonesia is acutely aware of its corruption problems. It is a constant feature of daily life and makes the news most days, not just on World Anti-Corruption Day - although the day was well marked with a number of well publicised discussions and widespread commentary.
Over the past 18 months we have become an important partner in this area. We have supported a number of anti-corruption related Prosperity projects including on facilitation payments with the KPK and hosted a visit by Whitehall experts to promote the UK Bribery Act . We have engaged more with UK businesses, making them aware of our work. Last month, we hosted an event for the KPK to meet and brief UK businesses where they also received a guide for businesses on avoiding and preventing facilitation payments.. The project has also established a dialogue and networks between Indonesian and foreign chambers of commerce. This has enabled UK businesses to flag issues and report directly to the KPK.
Disclaimer
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