A Survey of National Policies and...

A Survey of National Policies

and Approaches

Soren Davidsen, Vishnu Juwono, and David G. Timberman

The United States– Indonesia Society

Centre for Strategic and International Studies

Curbing Corruptionin Indonesia, 2004–2006

A SURVEY OF NATIONAL POLICIES

AND APPROACHES

Soren Davidsen, Vishnu Juwonoand David G. Timberman

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CURBING CORRUPTION IN INDONESIA, 2004–2006A survey of National Policies and Approaches

© 2006

First published 2006

Published by CSIS and USINDO

ISBN 979-8026-99-3

All rights reserved.No part of this publication may be reproduced in any form or by any means, includingphotocopying, without permission from the author or the publisher.

Printed by Kanisius Printing House Yogyakartawww.kanisiusmedia.com

CSIS and USINDO

The United States–

Indonesia Society

Centre for Strategic and

International Studies

The writing and publication of this study is financed by the Dutch Trust Fund Program for Institutional Devel-

opment and Capacity Building, administered by The World Bank. All views expressed in this study are those of

Strategic and International Studies (CSIS), Jakarta, and the United States—Indonesia Society (USINDO).

Corruption output 11/28/06 2:41 PM Page ii

December 2006

the authors and do not reflect the views of the World Bank, the Royal Netherlands Government, the Centre for

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FOREWORD

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The public discussion about Indonesia’s commitment to effective anti-corruption

measures is complex, both as to the nature of the problem and the implications for governance.

In this debate, one fact is indisputable: Indonesia’s ability to attract sound and durable

investment depends on greater adherence to the Rule of Law in the judiciary and on all levels

of government.

The Centre for Strategic and International Studies (CSIS) in Jakarta, Indonesia’s leading

think tank, and the United States-Indonesia Society (USINDO) in Washington, D.C. are

pleased to co-publish this important study illuminating today’s issues and efforts. Research,

which entitled Curbing Corruption in Indonesia. 2004 - 2006: A Survey of National

Policies and Approaches, by Soren Davidsen, Vishnu Juwono, and David G. Timberman

was sponsored by The World Bank in order to provide impartial information in the debate

on corruption issues. The authors not only describe the legal backdrop and current situation,

but they also indicate the scope for systemic improvements in bureaucratic accountability

and how public expectations can be met more effectively.

USINDO and CSIS believe that publication of this report will support the commitment

to an improvement in governmental integrity by the administration of President Susilo

Bambang Yudhoyono and add to informed public discourse of this critical topic. The views

represented herein are those of the authors, however, and do not necessarily represent those

of USINDO, CSIS or The World Bank. We are grateful to The World Bank for sponsoring

this study and for contributing to the cost of publication.

Hadi Soesastro Alphonse F. La Porta

Executive Director President

Centre for Strategic and International Studies United States-Indonesia Society

v

Jakarta, Indonesia and Washington, D.C., November 2006

THE AUTHORS

Soren Davidsen is a governance specialist who has held positions with the World Bank

in Indonesia and Vietnam, where he has worked on the Bank’s investment projects and

budget support loans. He is an expert on civil service reform and anti-corruption, and

has worked on both the demand and the supply side of governance reforms. Prior to his

assignments with the World Bank, Mr. Davidsen was employed by undp and also was a

lecturer at the University of Aarhus in Denmark. He holds a Masters Degree in Politi-

cal Science and a Masters Degree in East Asian Area Studies from the University of

Aarhus. He can be reached at [email protected] or [email protected]

has worked for the International Monetary Fund (imf ) and Danareksa, Indonesia’s state-

owned investment bank. He has published articles in several Indonesian newspapers,

including Kompas, Koran Tempo, Media Indonesia and Suara Pembaruan. He graduated

Affairs degree from Columbia University’s School of International and Public Affairs, New

York. He can be reached at [email protected] and [email protected].

David G. Timberman is a Jakarta-based consultant and writer specializing in Asian

politics and governance. He has held staff positions with the Asia Society, the Asia Foun-

dation and the U.S. Agency for International Development (usaid) and has served as a

consultant to the National Democratic Institute for International Affairs, Management

Systems International, usaid and the World Bank. He has written or edited a number

of books and articles on the Philippines, Cambodia, and the political economy of South-

east Asia. He can be reached at [email protected].

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Vishnu Juwono is a governance consultant with the World Bank in Indonesia. He also

from the University of Indonesia’s School of Economics and holds Masters of International

vii

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ACKNOWLEDGEMENTS

Badan Rehabilitasi dan Rekonstruksi (brr): Kevin Evans

Bawasda of East Java: Imam Buchori

Bawasda of Kabupaten Tuban: Heri Sisworo

Center for Law and Good Governance Studies fhui: Safri Nugraha

City of Surabaya: Aris Affandi, Muhlas Udin

dprd East Java Province: H. Sabron Djamil Pasaribu

dprd Kabupaten Tuban: Marwan

fitra: Ismail Amir, Madekhan Ali

forum 2004: Romli Atmasasmita

Emerson Yuntho

Jawa Pos Newspaper Daily: Azrul Ananda, Tofan Mahdi

kadin: Mas Achmad Daniri, Miftahul Hakim

kadin Surabaya: Muh. Rudiansyah, DJ Gagat SW, Bagus Taruno Legowo

Kementerian Koordinator Politik, Hukum dan Keamanan: Vice Admiral Djoko

Sumaryono, Brig. Gen. Soedibyo, Andi Amir Husri, S.M.T. Gultom

Kementerian pan: Gunawan Hadisusilo,Lukman Sukarma

Indonesia Corruption Watch (icw): Danang Widoyoko, Luky Djani, Yunita,

ix

The authors wish to express their appreciation to the World Bank and the Dutchgovernment for supporting this study. Joel Hellman, Chief Governance Adviser, theWorld Bank Jakarta, played an important role in shaping the focus and contents ofthe study. We also greatly appreciate the efforts made by Ambassador Al La Porta andthe staff of the U.S.-Indonesia Society and by Pak Hadi Soesastro and Pak BantartoBandoro of CSIS to publish and disseminate this study. Finally, we also wish tothank the following people for giving us their time an insights:

Kementerian ppn/bappenas: Syahrial Loetan, Diani Sadiawati

Komisi Hukum Nasional: Frans H. Winarta

Komisi Ombudsman Nasional: Sunaryati Hartono

Kompas: Daniel Dhakidae

kpk: Erry Ryana Hardjpamekas, Amien Sunaryadi, Waluyo

Local Governance Support Program: Hans Antlov

ndi Indonesia: Paul Rowland, Tom Cormier

Nahdlatul Ulama East Java Province: Ali Maschan Moesa

Nahdlatul Ulama Kabupaten Tuban: Nur Nahar Husein

Partnership for Governance Reform in Indonesia: Bambang Widjayanto,

Sofie Arjon Schutte

Pemerintah Kabupaten Tuban: Soekarman

Tempo Magazine: Bambang Harymurti

Transparency International Indonesia: Todung Mulya Lubis, Rezki S. Wibowo,

Endang Kartiningtyas, Heni Yulianto

The World Bank Jakarta: Sebastiaan Pompe, Steve C. Burgess, Kundhavi Kadiresan,

Renganaden (Raj) Soopramanien, Rizal H.Rivai, Anne-Lise Klausen,

Guy Janssen, Lieke S. Riyanti

US Agency for International Development: Kusumastutu and Jason Singer

US Department of Justice: Benjamin Wagner

US Embassy Jakarta: Ruth Mary Hall and William Heidt

While the insights and information provided by these individuals are gratefully acknowledged,

any mistakes or omissions are solely the responsibility of the authors.

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TABLE OF CONTENTS

1. Executive Summary 1

2. Introduction 9

Corruption in Indonesia 9

About this Report 10

3. Anti-Corruption Measures Since “Reformasi” 13

4. The SBY Government’s Campaign Against Corruption 17

SBY’s Approach: Cautiously Attacking Corruption on Multiple Fronts 18

Increasing Investigations and Prosecutions 20

Presidential Instruction 5 (inpres 5/2004) 21

31

Impact at the Local Level 35

5. Important Dimensions of Corruption Eradication 39

Not Covered by INPRES 5 and RAN-PK

Reducing Corruption in the Justice Sector 39

Increasing Financial Sector Supervision 41

Reducing the Influence of “Money Politics” in Elections, 42

Political Parties and Legislatures

Reforming Military Procurement and Military-owned Businesses 43

6. The KPK and the Special Court for Corruption 47

Overview of the kpk 47

The kpk’s Legal Mandate 47

The kpk’s Strategy 48

Investigations and Prosecutions 49

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The National Action Plan on Corruption Eradication (RAN-PK)

xi

Prevention 49

Organizational Development 52

The Special Court for Corruption 53

Assessment of the kpk 53

Looking Ahead 55

7. Other Independent Bodies 57

Indonesian Financial Transaction Reports and Analysis Center (ppatk) 57

National Ombudsman Commission or kon (Komisi Ombudsman Nasional) 58

Business Competition Supervisory Commission or kppu 58

(Komisi Pengawas Persaingan Usaha)

The Judicial Commission 59

8. The Legal Framework for Fighting Corruption 61

The Existing Legal Framework 61

Additions or Revisions Needed 62

9. Non-Governmental Partners in the Fight Against Corruption 65

Anti-Corruption ngos 66

Muslim Social Organizations 68

Business Associations 69

Mass Media 69

Schools, Universities and Think Tanks 70

10. Measuring Political Will and Progress 73

Indicators of Political Will and Ability to Combat Corruption 73

Measuring Progress in Reducing Corruption 74

11. Conclusion 77

The Challenge of Translating Presidential Commitment 77

Into Bureaucratic Action

The Importance—and Limits—of Punitive Measures 78

Managing Expectations and Fears 78

The Road Ahead 79

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xii

Appendices

Appendix 1 81

Appendix 2 82

Appendix 3 84

Appendix 4 85

Sources of Information 87

Endnotes 91

Glossary 97

List of Tables

Table 1: Major Obstacles Faced by Businesses 11

Table 2: The Biggest Optimists 18

Table 3: Recovery of Fines and Indemnification Payments by the ago 27

Table 4: Wealth Reports of State Officials as of June 11, 2006 51

List of Boxes

Box 1: Anti-Corruption Measures, 1998–2004 14

Box 2: Key Elements of inpres 5/2004 22

Box 3: Prosecutions of Special Crime Cases by the ago, 1994–2005 27

Box 4: Summary of Key Elements of ran-pk 32

Box 5: Examples of Local Government Initiatives to Address Corruption 36

Box 6: Major Anti-Corruption ngos and ngo Networks in Indonesia 67

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EXECUTIVE SUMMARY

INTRODUCTION

In 2004 Susilo Bambang Yudhoyono was elected President of Indonesia in large part

because of his promises to improve governance and fight corruption. Over the last two

years, President Yudhoyono has been outspoken about the need to reduce corruption,

and his government has taken a number of steps in support of this goal. Two years into

the President’s term, it is an appropriate time to examine what his government has done

to fight corruption, and to what effect. Recognizing that reducing corruption is a diffi-

cult, long-term endeavor, this report offers a stocktaking of the variety of anti-corrup-

tion initiatives begun or enhanced since 2004. A central concern of this report is whether

these initiatives can produce a significant and lasting decline in the level of corruption

in Indonesia.

This report describes and analyzes the range of anti-corruption initiatives that have

been undertaken or supported by the administration of President Yudhoyono1 as of mid-

2006. It focuses on the wide range of initiatives included under Presidential Instruction

5 of 2004 (inpres 5/2004) and the subsequent National Action Plan for the Eradication

of Corruption (ran pk). It also includes an examination of the Commission for the Erad-

ication of Corruption (kpk), which although an independent agency, has taken a lead-

ing role in the government’s efforts to fight corruption.2

THE YUDHOYONO GOVERNMENT’S ANTI-CORRUPTION PROGRAM

President Yudhoyono is committed to punishing corruption, and there is a small but

significant constellation of reform-minded actors inside and outside the government who

have the potential to make a difference. However, there also are real political and bureau-

cratic constraints on the pace and scope of reform. Because the president’s cabinet is

essentially a coalition government, his ability to push (or punish) his Ministers and other

1

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senior officials is limited. Moreover, it doesn’t appear that the Office of the President has

the capacity to continually press the anti-corruption agenda.

The Yudhoyono government’s approach to fighting corruption has a number of

notable characteristics: First, the president has made anti-corruption “his” issue: to date

he has not delegated leadership and oversight to anyone else in his government. (How-

ever, the president appears to have designated the kpk as his proxy in the fight against

corruption.) Second, the president’s approach is multi-faceted: it includes prosecutions,

prevention and education. To date, however, the most noticeable thrust has been in the

realm of prosecutions. Third, the approach is incremental and “rehabilitative”: the pres-

ident seems to have ruled out the wholesale replacement of government officials and

instead believes that they can be induced to stop their corrupt behavior. Fourth, it also

appears to be very attuned to political considerations. To date, there has been only lim-

ited action taken against those at the apex of power in Indonesia, namely politicians and

generals who currently hold high level positions in the national government, political

parties or military. Finally, it is notable for the absence of any explicit emphasis on inves-

tigating and prosecuting corruption by former president Soeharto and his family and

close associates—despite continued calls to do so from civil society.

The President’s anti-corruption effort also is notable less for the introduction of

institutional reforms than for an emphasis on ending a variety of practices that histori-

cally have bred and abetted corruption, including cronyism in appointments, political

favoritism in commercial and regulatory decisions, and political intervention in inde-

pendent commissions and oversight bodies. He has been less proactive in developing and

implementing a strategy of institutional reforms to reduce the incentives and opportu-

nities to engage in corruption.

Under President Yudhoyono, the number of anti-corruption prosecutions has

increased, continuing a trend since 2001. This is the result of the combined efforts of the

kpk, ago, polri, bpk, ppatk and several other agencies. These punitive measures are send-

ing a message that corruption is not risk-free. Indeed, many Indonesian commentators

are already claiming that these measures are changing the way bureaucrats behave, includ-

ing causing them to slow down the release of funds for government projects. But it is

unlikely that by themselves, these measures will fundamentally change the risk-reward

calculation over the long term.

To date, the impact of the national government’s anti-corruption initiatives at the

local level is also a mixed picture—which is not surprising given decentralization. On

the one hand, some 1,000 members of dprds (local assemblies) across the country are

under investigation for misuse of dprd funds.3 On the other hand, there continue to be

2


numerous opportunities for corruption and collusion at the local level. The kpk has only

a very limited reach beyond Jakarta and in most places local auditing functions are still

at a low stage of development. Moreover, the capacity of local civil society groups and

capacities to expose and prosecute corruption are improving. An encouraging develop-

ment is the national government’s recent decision to launch a “National Community

Empowerment Program.” This program enables individual communities across the coun-

try to decide how their development funds will be spent. To guard against corruption

and elite capture, the program emphasizes transparency, participatory decision-making

and participatory monitoring of development projects.

INPRES 5/2004 AND RAN-PK

In December 2004, President Yudhoyono issued Presidential Instruction 5 (inpres 5/2004)

which instructs all institutions of the government that fall under the authority of the

executive branch to expedite efforts to eradicate corruption. inpres 5 is a signal to the

bureaucracy and the public of presidential commitment to fighting corruption. It is rel-

atively comprehensive and multi-faceted, including instructions to bolster prosecutions,

prevention and education.

However, while inpres 5 includes a number of general and specific instructions

directed at virtually every part of the executive branch, it doesn’t include any deadlines

or sanctions; nor does it prioritize reforms in Indonesia’s most corruption prone min-

istries. And the Ministry for State Administration (MenPAN), the ministry tasked with

coordinating, monitoring and evaluating implementation, is most notable for its lack of

bureaucratic clout.

Moreover, there are several important corruption-prone arenas of governance that

are not covered by inpres 5: 1) the judicial sector; 2) supervision of the financial sector;

3) political parties and parliaments; and 4) military procurement and military-owned

businesses. Addressing corruption in all four of these areas is critical to the overall fight

against corruption.

The creation of a National Action Plan for the Eradication of Corruption (ran-pk)

establishes a government-wide framework for addressing corruption. While ran-pk is

comprehensive, it lacks some key elements of an effective strategy: it is weak on priori-

tization, vague on time frames and doesn’t specify clear incentives and sanctions. inpres

5 assigns MenPAN the responsibility for coordinating and monitoring implementation

of ran-pk, but it doesn’t give any organization the responsibility, authority or resources

to take a leading role in moving the plan forward. As a result, there appears to be a low

3


media to detect corruption varies greatly. However, there are some indications that local

level of engagement on the part of first and second echelon officials, who are crucial to

any effort to accelerate change within the bureaucracy.

As a result, ran-pk is in danger of becoming little more than the bureaucracy’s way

of doing the minimum required to show the president that it is complying with inpres

5. For ran-pk to be meaningful, it should be used by the government as the starting point

for creating a genuine anti-corruption strategy that establishes priorities, recognizes the

need for sequencing, and provides resources, incentives and sanctions.

THE KPK AND OTHER INDEPENDENT AGENCIES

The independent Commission for the Eradication of Corruption (kpk) and the Special

Court on Corruption were created by legislation passed in December 2002. The creation

of the kpk and the Special Court were de jure recognition of the failure of other law

enforcement agencies and courts to seriously and effectively address corruption.

Although the kpk receives the most attention for its investigations and prosecutions,

its leadership sees the kpk (and its prosecutions) as a catalyst for stimulating institutional

reforms, especially in the judiciary and the civil service. It sees prosecutions as the cut-

ting edge for implementing broader institutional reforms. Although it recognizes the

importance of preventive measures, to date, its strategic emphasis has been more on puni-

tive activities.

The kpk has posted some important successes with its investigations and prosecu-

tions, and it has helped to energize other anti-corruption efforts. However, it has yet to

become a significant force for promoting preventive reforms, and to date its effort to col-

lect and investigate wealth reports of government officials has been lackluster.

In addition to the kpk and the Special Court, there are four other independent bod-

ies that are playing, or have the potential to play, important roles in the fight against cor-

ruption. These are: 1) the Indonesian Financial Transaction Reports and Analysis Center

(ppatk), which watches for possible money laundering; 2) the National Ombudsman

Commission (kon), which is supposed to facilitate the redress of public complaints about

government services; 3) the Business Competition Supervisory Commission (kppu),

which investigates monopolies and other forms of collusion in business; and 4) the Judi-

cial Commission, which is intended to improve the quality and integrity of judges. All

four share two common characteristics: First, while their mandates tend to be broad,

their actual authority tends to be limited; and second, their capacity to carry out their

mandate is reduced by serious resource constraints.

4


THE LEGAL FRAMEWORK

Most observers feel that the existing body of laws provides an adequate legal basis for

addressing corruption. More at issue is the willingness and ability of the various agencies

of the government to fully and effectively implement these laws. This said, there are sev-

eral ways the legal regime to fight corruption can be strengthened: First, the existing evi-

dence code is out-of-date, overly narrow, and inconsistently adhered to by judges. Second,

the Indonesian legal system doesn’t offer any incentives—such as immunity or plea bar-

gaining—for cooperating with investigations and prosecutions. Third, efforts to fight cor-

ruption would benefit from the passage or revision of a number of laws and regulations.

THE ROLE OF CIVIL SOCIETY

The overall “non-governmental” landscape for fighting corruption is a mixed one: On

the one hand, since the fall of Soeharto and the advent of decentralization, there has been

a dramatic expansion in the number of civil society and media organizations. On the

other hand, the capacity and influence of most ngo’s tends to be very limited, and there

are relatively few ngos that are able to serve as competent anti-corruption watchdogs.

The capacity and willingness of the media to expose corruption—as opposed to merely

report on it—is mixed but generally limited. It does not appear that many universities

and think tanks have made corruption a major subject of research and analysis; and the

student movements that used to demonstrate against kkn seem to have lost their energy.

Increasingly elements of the business community profess an understanding of the

long term costs of corruption, but few individual businesses are prepared to forego cor-

rupt practices if it means losing business. Political parties, with the possible exception of

pks, have shown little interest in addressing the manifold problems associated with money

politics. Finally, decentralization creates the potential for greater local-level transparency

and accountability; but in many parts of the country, the capacity of powerful local offi-

cials and wealthy businesses to engage in corrupt practices is still much greater than the

capacity of individuals, local ngos and the media to detect and deter the corruption.

THE ROAD AHEAD

It appears there are high public expectations regarding the government and kpk’s anti-

corruption efforts. The 2005 Transparency International survey indicates that Indone-

sians believe there has been a decline in corruption over the last three years and are

optimistic that it will decline even more over the next three years. It is important that

the government and kpk manage expectations, deliver on their promises, and commu-

nicate their priorities and progress to the public.

5


There also is a risk that the government and kpk’s anti-corruption initiatives will

provoke a political backlash or public disappointment—or both. The potential problems

include:

∫ The credibility of anti-corruption efforts could be undermined by the appearance

of partisanship and/or selectivity.

∫ Efforts to impose reforms on the judiciary could be seen as undermining the inde-

pendence of the judiciary.

∫ The failure of anti-corruption efforts to punish “big fish” or to improve the avail-

ability or quality of public services could fuel public frustration and cynicism.

The possibility also exists that a heavy emphasis on repressive measures could

cause risk-averse bureaucrats from making any decisions, thereby further slowing down

the functioning of national and local governments. It seems premature to worry very

much about the possible negative consequences of an anti-corruption drive that, to

date, has had only limited impact. However, the concern does highlight what ulti-

mately is involved in effectively addressing bureaucratic corruption in Indonesia,

namely significantly changing the existing system of bureaucratic decision-making,

which is based principally on patronage, discretion and rent-seeking. If the existing

system is changed, there needs to be a new system to replace it. This points to the

urgency of implementing meaningful civil service reform—including reforms that clar-

ify administrative procedures and responsibilities—so that honest civil servants can

perform their jobs with some measure of confidence that they’ll be rewarded rather

than punished.

The Yudhoyono government’s emphasis on prosecutions, commendable as it is, has

not been matched to date by a comparably vigorous effort to prevent corruption from

occurring within the bureaucracy. Until meaningful checks on corruption and collusion

are introduced into the civil service, the threat of punishment will have, at best, only a

limited deterrent effect.

For the Yudhoyono government and other anti-corruption agencies to produce a

significant and lasting decline in the level of corruption in Indonesia, there needs to be

further progress in a number of areas. These include:

∫ First, there must be no let up in the ongoing effort being made to increase the integrity

and capacity of the ago, polri and the courts, including the Special Court for Corruption.

∫ Second, it is critical that the kpk and other independent oversight and accountabil-

ity agencies have both the authority and resources they need to carry out their mandates.

∫ Third, the government must take meaningful steps to increase regulatory clarity and

transparency in budgeting, procurement and project implementation. In effect, this

6


involves introducing a new culture and incentive structure within the bureaucracy, and

especially in Echelons 1 and 2.

Fourth, governments at the national and sub-national levels must increase the scope,

quality and integrity of internal and external auditing.

Finally, given Indonesia’s status as a new democracy, serious attention needs to be

paid to addressing the corrupting and corrosive influence of “money politics” on politi-

cal parties, elections and legislatures.

7


∫

∫

INTRODUCTION

“Almost every Indonesian has been a victim of corruption, particularly when

he deals with the bureaucracy”—Attorney General Abdul Rahman Saleh4

CORRUPTION IN INDONESIA

It is difficult to overstate the seriousness of the problem of corruption in Indonesia. Cor-

ruption is pervasive—that is, almost no sector of society is free of corruption. It is deeply

embedded in the fabric of society and institutions. And typically it is highly organized.

Corruption appears to be endemic in the bureaucracy, in State Owned Enterprises (soes)

and in government-business intercourse. It is also a serious problem in the police, Attor-

ney General’s Office (ago) and judiciary. Political parties, parliamentarians, civil society

groups and the media are not immune either.

Rather than being an aberration, corruption has been a core norm of Indonesia’s

political economy for decades. Corruption, of course, existed before the Soeharto regime;

but hierarchical, systemic corruption became one of the central features of the New

Order political economy. With the fall of Soeharto in 1998, the reintroduction of elec-

toral politics in 1999, and the implementation of decentralization in 2001, corruption

appears less hierarchical and organized. According to the World Bank’s Combating Cor-

ruption in Indonesia, “The political transition has led to greater competition among polit-

ical parties, forcing them to depend on the old elite for the considerable funds needed

to mount effective campaigns in such a vast country. And decentralization has opened

new avenues for corruption by the local elite, who may earlier have had difficulty get-

ting “their fair share of the cake” in a tightly centralized Indonesia.”5

Blatant, big-ticket corruption may have declined since the fall of Soeharto, but many

observers argue that smaller scale corruption may be increasing as more players enter the

fray in the absence of a chief “franchiser” or enforcer. While smaller scale or petty cor-

ruption is often viewed as being relatively benign, it contributes to a culture that is accept-

9


, ,

ing of not just rent-seeking and patronage, but also of the attendant fraud, collusion and

disregard for the law.

The fall of Soeharto and the implementation of decentralization have allowed for a

dramatic improvement in the conditions that produce greater transparency and account-

ability. The most important are the expansion of media freedoms and civil society, the

creation of independent political parties and holding competitive elections, and the intro-

duction of at least rudimentary checks and balances in national and local government.

As a result, since 1998 we have seen the passage of tougher anti-corruption laws, greater

transparency and an increase in the number of corruption cases successfully prosecuted.

However, given the pervasiveness and embeddedness of corruption in Indonesia, it is too

early to conclude that these developments are causing a significant reduction in the preva-

lence of corruption.

Surveys point to corruption as a major problem in Indonesia, although the picture

is mixed. The cross-country evidence paints a grim image. Indonesia ranks 137th of 158

countries in the 2005 Country Perception Index of Transparency International, though

the cpi should be interpreted with some caution.6 The wbi governance indicator on cor-

ruption situates Indonesia in the bottom 25 percentile rank in a cross-country compar-

ison. However, an improvement is recorded from 2002 to 2005. On a point estimate,

where +3 is the best and -3 the worst, Indonesia’s score has improved from -1.19 to -0.86.7

This is not an insignificant improvement in relative terms.

Interestingly, country specific surveying confirms the positive trend identified in the

wbi governance indicators. According to the 2005 Investment Climate Survey a signifi-

cant decline in both national and local corruption as an obstacle to doing business was

recorded from 2003 to 2005. This overall trend is supported by Henderson & Kuncoro,

who find that bribes as percentage of cost for businesses has declined from 2001 to 2004.8

Nevertheless, corruption is still perceived as one of the four most important impediments

for doing business.

ABOUT THIS REPORT

In September 2004 Susilo Bambang Yudhoyono was elected President of Indonesia in

large part because of his promises to improve governance and fight corruption. Over the

last two years, President Yudhoyono has been outspoken about the need to reduce cor-

ruption, and his government has taken a number of steps in support of this goal. Two

years into the President’s term, it is an appropriate time to examine what his government

has done to fight corruption and to what effect. Recognizing that reducing corruption

is a difficult, long-term endeavor, this report offers a stocktaking of the variety of anti-

10


TABLE 1: MAJOR OBSTACLES FACED BY BUSINESSES

(% OF RESPONDENTS WHO IDENTIFY THE PROBLEM AS MODERATE, SEVERE OR VERY SEVERE)

Source: Investment Climate Survey 2005

corruption initiatives begun or enhanced since 2004. A central concern of this report is

whether these initiatives can produce a significant and lasting decline in the level of cor-

ruption in Indonesia.


been undertaken by or with the support of the Yudhoyono government9 as of mid-2006.

It covers the variety of measures included under Presidential Instruction 5 (inpres 5/2004)

and the National Action Plan for the Eradication of Corruption (ran-pk). It also includes

an examination of the Corruption Eradication Commission (kpk), which is an inde-

pendent agency, but has emerged as a leader in the government’s anti-corruption cam-

paign.10 Finally, it also describes the larger context in which these efforts are playing out,

including the legal framework and the involvement of “civil society.”

This report examines inpres 5 and ran-pk for two reasons. First, because the Pres-

idential Instruction and Action Plan are, to date, the principal official expressions of the

Yudhoyono government’s anti-corruption objectives and approaches.11 And second,

because they do set out the government’s self-proclaimed anti-corruption objectives, the

two documents can be used as a basis for assessing the government’s progress in address-

ing corruption. This report also takes a more in-depth look at the kpk because of the

leading role it is now playing in attacking corruption. Finally, the report endeavors to

11

Macroeconomic Instability

Economic Policy Uncertainty

Local Corruption

National Corruption

System and Conflict Resolution

Transport

Tax Administration

Labor Skill and Education

Cost of Financing

Tax Rate

Labor Regulation-Regional

IMS & Trade Regulation-Regional

IMS & Trade Regulation-National

Licensing and Permits-Regional

Electricity

Labor Regulation-National

Licensing and permits-National

Monopoly Practices

Crime

Access to Financing

Telecommunication

Access to Land

0% 10% 20% 30% 40% 50% 60% 70% 80%

2005

2003


focus on the “preventive” aspects of anti-corruption. However, given the presumed deter-

rent effect of effective prosecutions—especially in a society where impunity has been the

norm for so long—the report also addresses the critical issue of law enforcement.

The purpose of this report is to provide policymakers, other stakeholders and inter-

ested observers with a better understanding of the current status of the wide range of anti-

corruption initiatives being carried out by the government and by independent bodies like

the kpk. We hope the information and analysis contained in the report will contribute in

a small way to better informed policymaking and policy dialogue, to greater public under-

standing of the strengths and weaknesses of the current efforts to address corruption in

Indonesia, and to academic efforts to understand the Indonesian political economy.

It is important to note in advance the limited scope of this report. First, it is not

intended to provide a detailed analysis of the causes or consequences of corruption in

Indonesia; this has already been done by the World Bank, Partnership for Governance

Reform, Asian Development Bank and others.12 Second, this report does not seek to

describe and assess the extent of anti-corruption efforts in every government ministry.

While it would be useful to do this, it would require a significantly larger research effort.13

Third, this report attempts to capture the status of the sby administration’s efforts

as of mid-2006. As such, it is a snap shot of a highly complex and continually evolving

landscape. The information contained in this report is based on research and interviews

with government officials, civil society groups, the media and donors. Although the focus

of this report is on the national government, it also factors in the experiences in East Java

and West Sumatra.

This report is organized as follows:

∫ Section III briefly reviews anti-corruption efforts from the fall of Soeharto in 1998

through the Megawati presidency.

∫ Section IV describes the sby government’s major anti-corruption initiatives.

∫ Section V briefly comments on four corruption-prone arenas of public life not cov-

ered under the executive branch’s initiatives.

∫ Section VI focuses on the kpk and the Special Court for Corruption

∫ Section VII briefly describes four other independent agencies that play or could play

important roles in the fight against corruption.

∫ Section VIII reviews the legal framework and the special court for corruption.

∫ Section IX surveys the universe of non-governmental actors.

∫ Section X outlines ways of measuring political will and progress in fighting corrup-

tion

∫ Section XI offers conclusions and recommendations.

12


ANTI-CORRUPTION MEASURES SINCE “REFORMASI”

“The new framework for governance in post-Soeharto Indonesia continues to be

shaped by many of the same interests that were active during Soeharto’s time. For them,

an effective system of checks and balances constitutes no less than a fundamental threat,

especially if the system involves more meaningful and wide ranging public scrutiny

and accountability.” –Vedi Hadiz14

The Yudhoyono government’s efforts to address corruption must be viewed in the con-

text of what has preceded them. In particular, it is important to be cognizant of the pol-

itics of the “kkn” (corruption, collusion and nepotism) issue, public attitudes about

corruption and the half-hearted efforts to address corruption since 1998.

Governments since the Soekarno era have felt compelled to address—or appear to

address—the problem of corruption. As one study has reported, “. . . the Indonesian gov-

ernment has throughout its history launched numerous anti-corruption initiatives begin-

ning in 1957, and continuing throughout the Old Order, the New Order and the Reform

governments of B.J. Habibie and Abdurrahman Wahid. During the New Order, no less

than 14 initiatives, including the issuance of laws and regulations, the establishment of

special teams, commissions and the like were implemented. Between 1973 and 1998, each

five-year General Outline of the State Guidelines (gbhn) drawn up by the mpr placed

the eradication of corruption high on the agenda . . .”15

Ending kkn was, of course, a central demand of the students who played a lead-

ing role in unseating President Soeharto in May 1998. Not surprisingly, since the fall of

Soeharto, ending corruption, along with democratization, have been central elements

of the reformasi (reform) agenda. Those concerned with reducing corruption include

reformers in the government and parliaments, religious leaders, students and academ-

ics, assorted ngos, and some in the business community who have come to recognize

the long term costs of rampant corruption. The ability of these groups to expose and

13


address corruption has been aided hugely by the freeing of the media and increased plu-

ralism in Indonesian politics.16

As a result, corruption remains a potent political issue that can have major conse-

quences for Indonesian politics. As Emmy Hafild, the former Executive Director of

Transparency International Indonesia, has pointed out, the first three governments that

followed Soeharto were either impeached (Wahid) or rejected (Habibie and Megawati)

in part due to their perceived complicity in corruption.17 Pledges to attack corruption

were important factors in the electoral success in 2004 of both Yudhoyono and the

Islamist pks party.

The Habibie, Wahid and Megawati governments, along with the reformasi-era dpr

all recognized the need to address corruption, and so between 1998 and 2003 there was

a spate of new laws and decrees that dealt with corruption. The most important of these

are included in Box 1.

BOX 1: ANTI-CORRUPTION MEASURES, 1998–2004

∫ In 1998 and 1999 President Habibie presided over the freeing of media. He also signed into law

several of the MPR decrees and DPR laws mentioned below.

∫ In October 1999 the MPR passed a decree calling for a state apparatus that “functions in provid-

ing services to the people that are professional, efficient, productive, transparent and free from corrup-

tion, collusion and nepotism.”

∫ The Clean Government Law (Law 28/1999) passed in 1999 requires public officials to declare their

wealth and agree to periodic audits. It also established the Commission to Audit the Wealth of State Offi-

cials (KPKPN).

∫ The Law on the Eradication of Criminal Acts of Corruption (Law 31/1999) passed in 1999 defines

criminal corruption and establishes charges and procedures for prosecution. An amendment to the Law

(Law 20/2001) broadens and clarifies the definition of corruption and increases the penalties.

∫ In 2000 President Wahid issued KEPPRES 44/2000 establishing the National Ombudsman’s Com-

mission (KON). He also created, under the coordination of the AGO, the Joint Team for the Eradication

of the Criminal Act of Corruption (TGPTPK).

∫ The issuance of KEPPRES 18/2000 in 2000 resulted in some improvements in procurement pro-

cedures. It was replaced in November 2003 by a new KEPPRES on government procurement, KEPPRES

80/2003, which establishes a National Procurement Office (NPPO).

∫ In April 2002 the DPR passed the Anti-money Laundering Law (Law 15/2002), which established

the Center for Financial Transactions Reporting and Analysis (PPATK); the Law was strengthened by an

amendment in October 2003.

∫ In December 2002 the DPR passed Law 30/2002 establishing the KPK and Special Court for Corruption.

∫ In 2004 the DPR passed Law 22/2004 establishing the Judicial Commission.

14


Although many of the decrees and laws passed since 1998 have shortcomings, col-

lectively they are a big improvement in the legal framework compared to what existed

under Soeharto. Taken together they constitute a legal and institutional framework that,

though incomplete, can be used to fight corruption.

Furthermore, since 2003, significant progress has been made in the critical area of

reforming the management of state finances. Key actions have included:

∫ Passage in March 2003 of the Law on State Finances (Law 17/2003), which clarifies

and rationalizes multiple aspects of the formulation and management of the state budget.18

∫ Passage in December 2003 of the Law on State Treasury (Law 1/2004), which con-

tains provisions to deter fraud and corruption.

∫

∫ Partial procurement reform.

∫ The functional reorganization of the Ministry of Finance.

∫ The gradual enhancement of government accounting standards.

However, the overall impact of these and other measures to address corruption has

been less than many observers have hoped for. The reasons most frequently cited for this

include:

∫ A lack of will and commitment on the part of political leaders and senior bureaucrats;

∫ The persistence of a culture of impunity for the wealthy and the powerful;

∫ The strength and sophistication of the networks of corruption and collusion that

exist in the bureaucracy and among businesses;

∫ The failure to implement meaningful reform in the civil service, especially mean-

ingful procurement reform;

∫ Weaknesses and corruption within law enforcement agencies including the police,

ago and judiciary;

∫ The limited ability of civil society groups and the media to translate increased trans-

parency into increased accountability.

As a result, Indonesian public opinion regarding the prospects for reducing cor-

ruption seems to combine—or perhaps vacillate between—cynicism and hope. Said and

Suhendra, writing in 2001, observed: “Today it is clear that society is skeptical of the fea-

sibility of eliminating corruption as years of experience to the contrary have convinced

us of the government’s inability or unwillingness to take the necessary steps to this end.”19

At the same time, according to Transparency International’s 2005 Global Corruption

Barometer, 40% of Indonesians surveyed think corruption decreased “a lot or a little”

over the last three years, 28% think it increased a lot or a little and 27% think it stayed

the same.20

15


In July 2004, passage of a Law on State Audit enacted.

THE SBY GOVERNMENT’S CAMPAIGN AGAINST CORRUPTION

“Since the beginning, the government, has been determined to combat corruption.

We consider corruption as a serious crime that has brought suffering to the people and

damaged the morality of the nation. Having learned from past experiences, we must truly

be firm and consistent in eradicating corruption.”—President Yudhoyono21

In October 2004 former-general Susilo Bambang Yudhoyono (widely referred to as “sby”)

became Indonesia’s first directly elected president—in large part because he promised to

reform government and reduce corruption. His promise appears to have had resonance

with Indonesian voters, at least in part because of the inability of prior governments to

convince the Indonesian people of their seriousness about attacking kkn. sby’s promise

was given added credence because he is seen as having been a reformist within the mil-

itary and because he and his family have not been associated with government economic

programs or with big business.

sby’s electoral victory has given him a popular mandate to pursue reforms. But it also

has created expectations that may be difficult to meet. According to Transparency Inter-

national’s 2005 Global Corruption Barometer, 81% of Indonesians surveyed think cor-

ruption will decrease “a lot” or “a little” over the next 3 years. Only 10% surveyed think

it will get worse. This level of optimism was the highest of all the countries surveyed.

The Yudhoyono government’s agenda for its first 100 days was as broad as it was

bold. It proclaimed: “To create an Indonesia that is just and democratic, the main

agenda is to improve the performance and to restore public faith toward law enforce-

ment agencies, especially the ago and Police, also the functioning of judicial system

that is credible and accountable, and the implementation of civil service reform based

on good governance principle.”22

But there are significant practical political constraints on the pace and scope of the

President’s ambitious anti-corruption agenda. Although Yudhoyono won almost 61% of

17


TABLE 2: THE BIGGEST OPTIMISTS

(COUNTRIES WHERE THE PUBLIC THINKS CORRUPTION WILL DECREASE)

COUNTRY 2003 2004 2005

Indonesia 55% 66% 81%

Uruguay N/A* 28% 57%

Nigeria 39% 27% 51%

Kosovo N/A* 52% 50%

Sample average 19% 17% 19%

* Country not included in Global Corruption Barometer 2003/2004.

Source: Transparency International Global Corruption Barometer 2005.

the vote for the presidency, his political party, the Democrat Party, won just 10% of the

seats in the national parliament. His Vice President, Jusuf Kalla, is from Golkar (the

largest political party, controlling 23% of the seats in the dpr) and has extensive business

interests of his own. The President’s cabinet includes representatives of eight different

political parties. As the leader of a minority party, the President sees a need to maintain

the support of the bureaucracy and military, political party leaders (especially in Golkar

and pdi-p) and the dpr. Therefore, it is likely that the President, who is known to be a

cautious and incremental decisionmaker, sees a need to proceed carefully with his efforts

to address corruption.

Moreover, as important as fighting corruption may be, as a long term issue it can

easily be bumped down the president’s list of priorities by other, more pressing short-

term concerns. This may have been the case for the president during most of 2005. For

large portions of the year his government was preoccupied first with the tsunami recov-

ery and negotiations with gam, then with the ending of fuel subsidies October 1, and

finally with a year-end cabinet reshuffle.

SBY’S APPROACH: CAUTIOUSLY ATTACKING CORRUPTION ON MULTIPLE FRONTS

“I want this entire machine to work. All agencies involved in eradicating corruption must

work in synergy.”—President Yudhoyono23

Since coming into office in October 2004, the Yudhoyono government has taken a

number of specific steps to address corruption. The President has:

∫ Expressed support for the kpk and worked closely with it;

∫ Issued inpres 5/2004 on Eradicating Corruption and formulated the national

Action Plan for the Eradication of Corruption (ran-pk);

18


∫ Issued keppres 17/2004 authorizing the creation of a National Police Commission;

∫ Issued keppres 18/2004, authorizing creation of an Attorney General’s Commission;

∫ Issued inpres11/2005, creating an inter-agency “Coordinating Team for the Eradi-

cation of Corruption” (“Timtas Tipikor”);

∫ Established a “hunting team,” under the Attorney General and the Coordinating

Minister for Political, Legal and Security Affairs (Menko Polhukam), to search for fugi-

tives and their assets;

∫ Approved the investigation of some 84 government officials;24

∫ Expressed support for judicial reform, including the prospective review of judges

and complaints by the Judicial Commission;

∫ Appointed well-regarded, reform-minded people as Attorney General and head of

the national police (polri);

∫ Increased civil service salaries, although not in the context of broader civil service

reform;

∫ Supported reform of tni procurement and budgeting.

∫ Supported a strong emphasis on combating corruption in the process of rebuilding

the tsunami-devastated provinces of Aceh and Nias.

The Yudhoyono government’s approach to fighting corruption has the following

notable characteristics:

First, the president has made anti-corruption “his” issue: to date he has not dele-

gated leadership and oversight to anyone else in his government. (However, the presi-

dent appears to have designated the kpk as his proxy in the fight against corruption.)

Second, the president’s approach is multi-faceted: it includes prosecutions, preven-

tion and education. To date, however, the most noticeable thrust has been in the realm

of prosecutions.

Third, the approach is incremental and “rehabilitative”: the president seems to have

ruled out the wholesale replacement of government officials and instead believes that

they can be induced to stop their corrupt behavior.

Fourth, it is attuned to political considerations. To date, there has been only lim-

ited legal action taken against politicians and generals who currently hold high level posi-

tions in the national government, political parties or military.

Finally, it is notable for the absence of any explicit emphasis on investigating and

prosecuting corruption by former president Soeharto and his family and close associ-

ates—despite continued calls to do so from civil society.

19


INCREASING INVESTIGATIONS AND PROSECUTIONS

“There needs to be some shock therapy so that the people know that this government is serious

about corruption. . . .” — President Yudhoyono25

Under the current government, the number of anti-corruption prosecutions has

increased, continuing a trend since 2001. This is the result of the combined efforts of the

ago, Police, bpk, kpk, ppatk and several other agencies. An illustrative listing of high

profile corruption cases that have been prosecuted or are in the process of being investi-

gated or prosecuted is included as Appendix 1. The President also has shown his com-

mitment to fighting corruption by giving permission to the ago and polri to investigate,

at last count, more than 84 regional officials

To increase corruption investigations and prosecutions, the President has appointed

respected, reform-minded people to head the ago and polri. The sby government also

has created two inter-ministerial teams intended to accelerate the investigation and pros-

ecution of high profile and big ticket corruption cases.

Timtas Tipikor In May 2005 the President issued Keppres 11/2005 creating the Coordi-

nating Team for the Eradication of Criminal Corrupt Acts (“Timtas Tipikor”) to accel-

erate the investigation and prosecution of big corruption cases involving government

agencies such as the State Secretariat (SekNeg) and State-owned Enterprises (soes). To

facilitate its investigations, Timtas Tipikor is authorized to gather information from all

government agencies, including local governments, soes and regional soes. The team

has a two-year mandate, subject to renewal.

Timtas Tipikor is headed by the Deputy Attorney General for Special Crimes. There

are two deputies: the Director for Acts of Criminal Corruption of the Police and the Deputy

for Investigation of the Financial and Development Supervision Body (bpkp). The Attor-

ney General, head of the Police and the head of the bpkp act as advisors to the team.26 The

team consists of 15 people from the Attorney General’s Office, 15 from the Police and 15

from bpkp. In response to the President’s desire to monitor high level investigations and

prosecutions, the team reports to the president on its activities every three months.

As of early 2006 Timtas Tipikor was reported to be investigating about 10 corrup-

tion cases, and it had successfully prosecuted two cases: the misuse of Haj funds by the

former Minister of Religion under Megawati and corruption within the state-owned

insurance firm PT. Jamsostek involving its former President Director. (See Appendix 4

for a list of cases handled by Timtas Tipikor.)

The creation of the team is another sign of the President’s seriousness about prose-

cuting corruption, and if it is well managed, it should increase cooperation among the

20


ago, Police and bpkp. At the same time, the creation of a separate team also increases the

risk that the mandates of the team, ago, Police and kpk will overlap and cause confu-

sion and possibly rivalries. The president’s close association with the team also makes the

team vulnerable to charges that its investigations and prosecutions are influenced by par-

tisan political considerations.

Other initiatives For its part, in early 2005 the Coordinating Minister for Political,

Legal and Security Affairs (Menko Polhukam) created an “Interdepartmental Team for

Hunting People Accused or Convicted of Criminal Corruption.” The purpose of the

team is to track down and repatriate fugitives who have fled abroad and recover their

assets. Most of the identified fugitives have been accused or convicted in cases involving

the misuse of emergency liquidity funds (blbi) extended to private banks by Bank

Indonesia during the financial crisis. The team is headed by a Deputy Attorney General

for Intelligence and includes representatives from the ago, Police, Menko Polhukam, the

Ministry of Law and Human Rights, Ministry of Foreign Affairs and ppatk. The effort

to repatriate fugitives and their offshore assets is hampered by Indonesia having extradi-

tion agreements with only four countries, and significantly, not with Singapore.

Additionally, within the Ministry of Finance, the first internal investigative team

was recently established within the Office of the Inspectorate General. So far the team

has been very proactive in its investigations; but it is too early to tell if they will lead to

successful prosecutions.

These steps are beginning to chip away at the longstanding culture of impunity. Still,

the number of cases being investigated and prosecuted is considered just a small fraction

of potential cases, and there appears to be reluctance on the part of the government’s law

enforcement and anti-corruption agencies to energetically pursue cases involving “big

fish.” Also, the process of investigating, prosecuting and sentencing is still very prone to

corruption and abuse. Between 1998 and 2004 staff in the ago successfully thwarted most

efforts to increase the integrity of the organization. There also are concerns about unclear

and/or overlapping mandates.

INPRES 5/2004

The President issued Presidential Instruction 5 (inpres 5/2004) in December 2004.

inpres 5 instructs all institutions of the government that fall under the authority of the

executive branch to expedite efforts to eradicate corruption. It consists of ten instruc-

tions that apply to all institutions and eleven special assignments to various Ministers.

(See Box 2.)

21


BOX 2: KEY ELEMENTS OF INPRES 5/2004

INPRES 5/2004 consists of a set of instructions that apply to all state institutions and 11 special assign-

ments to various Ministers. These are:

GENERAL INSTRUCTIONS:

∫ All state officials should immediately submit wealth reports to the KPK and assist the KPK with the

reporting, registering, announcing and auditing of wealth reports.

∫ Civil service reform: Create performance criteria; standardize and make transparent fees for services

and licenses and eliminate illegal fees; and create “islands of integrity.”

∫ Implement KEPPRES 80/2003 on government procurement.

∫ Apply simplicity in official affairs and personal lifestyles and economize on state expenditures.

∫ Give maximum cooperation to the prosecution of corruption cases by POLRI, AGO and KPK.

∫ Cooperate with the KPK to determine if administrative systems invite or are susceptible to corruption.

∫ Increase supervision in order to eliminate corruption.

SPECIAL ASSIGNMENTS:

∫ The Coordinating Minister for Economic Affairs, the Minister of Finance and the head of BAPPENAS

to initiate a pilot project for government-wide e-procurement.

∫ The Minister of Finance to improve collection of taxes and customs, review laws and regulations

on state finances that invite corruption, and prepare draft laws as needed.

∫ Head of BAPPENAS to prepare a National Action Plan for Corruption Eradication (RAN-PK) for 2004-2009.

∫ MenPAN to prepare policies to improve the quality of public services and to introduce perform-

ance-based personnel management. MenPAN also tasked with coordinating, monitoring and evaluating

the implementation of INPRES 5.

∫ The Minister of Law and Human Rights to prepare laws and amendments as needed to eliminate

corruption.

∫ State Minister fir State-owned Enterprises to implement principles for good corporate governance in SoEs.

∫ The Minister of National Education to develop curricula cultivating the spirit of anti-corruption.

∫ The State Minister for Communications and Information to undertake an anti-corruption education

campaign.

∫ The Attorney General to optimize investigations and prosecutions of corruption, punish abuses of

power by prosecutors, and enhance cooperation with POLRI, BPKP, PPATK and other agencies.

∫ The Chief of Police to optimize investigations and prosecutions, punish abuses of power by the police,

and enhance cooperation with AGO, BPKP, PPATK and other agencies.

∫ Governors and Bupati/Walikota to adopt good governance principles, improve public service and

eliminate illegal fees, and prevent leakage from State and regional budgets.

22


inpres 5 is a signal to the bureaucracy and the public of presidential commitment

to fighting corruption. It is comprehensive and multi-faceted, including instructions to

bolster prosecutions, prevention and education. However, the inpres doesn’t include any

deadlines or sanctions; nor does it prioritize reform of the most-corruption prone min-

istries. According to the kpk, inpres 5 has been poorly socialized within the government.

And MenPAN, the Ministry tasked with coordinating, monitoring and evaluating imple-

mentation, is most notable for its lack of bureaucratic clout. (It is noteworthy that nei-

ther Menko Polhukam nor bappenas were assigned the tasks of coordinating, monitoring

and evaluating implementation.) Finally, it is important to note that for valid constitu-

tional reasons, inpres 5 doesn’t address corruption in the judiciary, the financial sector,

or legislatures. It also doesn’t address corruption in tni.

Although they have their shortcomings, inpres 5 and ran-pk are the official expres-

sions of the totality of the sby government’s anti-corruption priorities. As such, and

because inpres 5 and ran-pk are quite comprehensive, it makes sense to assess the gov-

ernment’s anti-corruption efforts largely—though not entirely—in terms of the progress

being made with the individual elements of inpres 5. Brief assessments of the major ele-

ments of inpres 5 follow.27 This is followed by a discussion of ran-pk. Finally, we com-

ment briefly on four important, corruption-prone arenas of governance not included in

inpres 5 and ran-pk: namely the judiciary, supervision of the financial sector, political

parties and parliaments and the military procurement and businesses. A separate, more

detailed discussion of the kpk is contained in a later section.

Reforming the civil service and reducing corruption in the delivery of public services

At least three of inpres 5’s ten general instructions concern reforming the civil service

and reducing corruption in the delivery of public services. This is an appropriate recog-

nition of the necessity of civil service reform in order for there to be a meaningful and

lasting decline in corruption.

Stephen Sherlock has succinctly described the problem with Indonesia’s civil service:

“The current civil service is process based, not results based, and performance is

measured by obedience to one’s superiors. Recruitment, promotion and pay are

structured around control of the service by its senior echelons. Interactions with

the public are regarded not as occasions to deliver public services but as opportu-

nities to levy informal taxes. Because accountability is entirely internal, individual

civil servants find it either desirable to participate in corrupt practices or impossi-

ble to combat such practices because promotion, pay and position are at stake.”28

23


In the area of civil service reform, inpres 5 assigns MenPAN to:

∫ Prepare policy documents to enhance the quality of public services;

∫ Prepare policy documents to improve performance measurement for high officials;

∫ Prepare policy documents for good governance in regional governments and non-

department government institutions and departments;

∫ Undertake research with a view to improving the State’s personnel management

system.

ran-pk further elaborates these objectives. For instance, ran-pk aims to “Develop

open recruitment for strategic positions in the central and local government,” “to improve

the remuneration system for the civil service, the armed forces and polri,” and to pass

laws—an administrative procedure code and a law on public service delivery—to

improve public service delivery. While these are commendable objectives, their poten-

tial to produce tangible results remains limited. Thus open recruitment for strategic posi-

tions is not expected to be launched before mid-2008.

Some progress can be noted in the efforts to reform the compensation system. A key

first step has been the effort to design a new remuneration policy for high-ranking state

officials, so-called pejabat negara (e.g. ministers, legislators, judges and heads of special

commissions and agencies). The Minister of Finance has set up a task force to examine

the entire compensation package with the goal of creating a more transparent, systematic

and coherent framework of pay and allowances linked to a comprehensive review of job

classifications and categories. This is intended to lead to an independent remuneration

commission to recommend both the level and structure of the compensation package to

Indonesia’s highest ranking political officials. Such an approach would be followed by a

similar comprehensive review of pay issues for the larger civil service. However, it would

be mistaken to claim that this reform is attributable to the Action Plan.

ran-pk also suggests that civil service pay should be increased to curb corruption.

Evidence from elsewhere, however, suggests that the link between government wages and

corruption is tenuous at best. Low earnings prompt individuals to seek alternative sources

of income. But high earnings are not sufficient to counter corrupt practices. Financial

scandals involving government officials whether in Britain, Japan or the U.S. are cases

in point.

Rather than seeing corruption as a response to low pay, it is more helpful to view

corruption as a response to opportunity. Corruption represents a calculated risk where

costs and benefits are weighed. If the risk of getting caught is low and punishment min-

imal, corruption is more likely to flourish. Increases in official pay, alone, do little to

change the cost/benefit calculation and corruption need not abate. In addition, up to

24


now there have been no thorough studies confirming the public myth that civil servants

are underpaid compared to the private sector. In short, pay increases can play a role in

changing behavior but they must be part of an over all policy package designed to influence

civil servant behavior.

The draft bills on public service delivery, the administrative procedure code and the

law on the ombudsman are intended to become the legal umbrella for the implementa-

tion of public service activities and to create sanctions and entitlements. As of mid-2006,

the draft bill for public service and the draft administrative procedure code initiated by

MenPAN are still being discussed with the Commission II of the dpr.

The effectiveness of a new legal framework to improve public services is question-

able. First, the introduction of new laws and regulation in the absence of institutional

capacity and incentives to actually implement these could spur public cynicism. One of

the key articles in the draft public service bill thus entitles citizens to seek legal recourse

in case of misuse of administrative power by civil servants. However, the probability of

enforcing this in the context of weak judicial and legal institutions remains low. Second,

there are potential overlaps and contradictions among several of the provisions in the law

on public service, the administrative procedure code and new law on the ombudsman.

At a more general level, this underscores a general shortcoming in the integrity sys-

tem, namely the inclination to pass new policies and regulation with little consideration

to establish institutional capacity and incentives to implement them.

Improving investigations and prosecutions by the Attorney General’s Office. The

Public Prosecutor’s Office (ppo) within the Attorney General’s Office (ago) is critical to

the effective investigation and prosecution of corruption cases. And its importance is

magnified because it is one of the arms of the national government that wasn’t devolved

with decentralization. inpres 5 explicitly calls on the ago to “optimize efforts to inves-

tigate and prosecute corruption crimes to punish actors and secure state money.”

Historically, institutional weaknesses and corruption within the Public Prosecutor’s

Office have constituted serious impediments to investigating and prosecuting corruption

cases. Many prosecutors are suspected of not pursuing or intentionally weakening cases

in exchange for bribes. Another problem has been the unclear division of labor between

the ago and the Police with regard to investigations. Since the fall of Soeharto, there have

been six Attorneys General—several of whom have been considered reformers—but there

has been only limited progress in increasing the integrity and capacity of prosecutors.

The current Attorney General, Abdul Rahman Saleh, is widely viewed as being hon-

est and reform-minded. His priorities have been:

25


∫ To intensify the investigation and prosecution of corruption cases;

∫ To review corruption cases that were ended when predecessors terminated the inves-

tigations;

∫ To promote internal reform with the ago;

∫ To create an independent prosecutorial commission to serve as an external control

mechanism for the ago.29

In July 2005 Attorney General Salleh launched an “ago Reform Agenda” that calls

for across the board reforms in the ago, and particularly the Public Prosecution Service.

The Reform Agenda seeks to improve the organizational structure, working procedures

and human resource management. It also seeks to reform the case management system

and strengthen oversight and supervision of the Public Prosecution Service.30 In mid

2006 the ago conducted an assessment of the Office’s commitment to implementation

of the Reform Agenda. The assessment points to an increase in the number of serious

sanctions against prosecutors as evidence of the ago’s commitment to enforce “profes-

sionalism, discipline and ethical conduct of the prosecutors.”31 It also notes a gradual

improvement in the quality and transparency of the ago’s case and information man-

agement systems.32

The assessment also highlights the increasing cooperation between the ago and other

law enforcement agencies. The ago signed an MoU with the kpk in early 2005, under

which the Public Prosecution Service provides the kpk with personnel and operational

support. Timtas Tipikor was formed in part to improve ago-Police coordination. The pps

also cooperates with bpk, Bank Indonesia, ppatk, and the National Ombudsman.

In 2005 the President authorized creation of an Attorney General Commission to

monitor and evaluate the performance of prosecutors and ago staff. On March 16, 2006,

the President inaugurated 7 members of the Commission.

However, progress remains incremental. As the ago’s assessment points out, a vari-

ety of new decrees are still needed in order to improve the quality and integrity of pros-

ecutions. Inadequate budgets and low salaries also slow the pace of reform. Moreover,

according to one interviewee, part of the problem is that the Attorney General’s approach

to investigating corruption is focused on individuals rather than on the systems and net-

works that perpetuate corruption.

It also appears that the ago has been unable or unwilling to enforce fines and recover

losses to the state. As of late 2005 the ago had failed to collect more than Rp 3.9 billion

in fines and more than Rp 2.5 trillion in indemnification money from guilty parties.

26


27

TABLE 3: PROSECUTIONS OF SPECIAL CRIME CASES

BY THE ATTORNEY GENERAL OFF ICE, 1994–2005

Number of Cases in Prosecution Stage

No Year Carried over from prior year New Cases Settled

1 1994 49 129 125

2 1995 53 143 138

3 1996 58 108 109

4 1997 57 128 131

5 1998 54 540 115

6 1999 479 314 688

7 2000 105 185 230

8 2001 56 440 435

9 2002 61 444 433

10 2003 71 533 584

11 2004 40 577 586

12 2005 31 654 637

Sources: Evaluation of One Year sby-Kalla Government: Commitment Without Support.” Indonesia Corruption

Watch (2005), pp. 31; “Attorney General Office Agenda in Combating Corruption,” Presentation Material by

Attorney General, Abdul Rahman Saleh in JFCC Forum, January 11, 2006.

BOX 3: RECOVERY OF F INES AND INDEMNIF ICATION PAYMENTS BY

THE CRIMINAL CORRUPTION SECTION OF THE ATTORNEY GENERAL’S OFF ICE

FINES

Uncollected in 2004 Rp 3,015,744,500

Fines applied through Sept.2005 Rp 1,190,100,000

Total through Sept. 2005 Rp 4,205,844,500

Fines Paid Rp 227,000,000

Fines Unpaid Rp 3,978,844,500

INDEMNIFICATION PAYMENTS

Total due as of Sept 2005 Rp 5,317,737,001,799

Paid as of November 2005 Rp 2,747,875,786,559

Amount not paid Rp 2,569,861,215,240

Sources: Material on hearing between Attorney General Office and commission III of dpr on November 28, 2005.

Pp. 44—45


Finally, it is important to note, as the Asian Development Bank has, “By itself, the

ago cannot go far in reforming the prosecution service. Some key aspects of reform are

beyond its jurisdiction. . . . The institutional reform of the public prosecution service

therefore depends on the political will and leadership of the president, and on coordi-

nation between several ministers and the dpr.”33

Reforming the Police. The National Police (polri), along with the ago, plays a criti-

cal role in investigating suspected cases of corruption. And like the ago, historically its

ability to discharge this function has been compromised by inadequate resources and

capacity and by corruption. The adb reported that in 2003, “ The national Corruption

Crime Directorate in police headquarters, which deals with corruption in government,

state enterprises, financial institutions, and international development projects, has only

40 operative officers assigned to combat corruption and a yearly budget of Rp 160 mil-

lion (about $16,000)—far from enough to cover salaries and operational expenses.”34 As

with state prosecutors, there is a history of police investigators tampering with evidence

and altering their findings in exchange for bribes.

The current police chief, General Sutanto, is considered a reformer, and he has

wasted no time sending some important signals: He has spoken out forcefully against

police involvement in gambling. He has allowed the former head of the Criminal Inves-

tigation Bureau to be named as a suspect in the bni corruption case. And he has put a

number of capable senior officers in key positions—for example appointing Made

Mangku Pastika as Chief of the National Narcotics Agency. Also, in 2004 the president

issued a Keppres authorizing the creation of an independent National Police Commis-

sion. In June 2006 the President inaugurated 9 members to serve as Commission mem-

bers—3 from government (including Menko Polhukam as a chairman) and 6 members

representing various civil society groups.

These are positive initial steps, but the wholesale professionalization of the police

will come slowly and incrementally. In the meantime, one of the key priorities with

regard to fighting corruption should be strengthening the integrity and capacity of police

investigative units.

Reform of tax collection. inpres 5 calls for the Minister of Finance to “supervise the

implementation of provisions on taxation, customs and excise, non-tax state revenues and

budget to abolish irregularities in the receipt of state finance, as well as assess legislation

related to state finance, which can open opportunities for corrupt practices . . .” The Tax

Directorate of the Ministry of Finance collects Rp 362 trillion ($38.5 billion) a year, about

28


70% of the State’s revenues. A recent report by the MoF’s Inspectorate General illustrated

how widespread corruption in the tax service occurs primarily because of the services exces-

sive powers, including its power to set tax policy, collect taxes and supervise tax collec-

tion. The report also points to the corruption being highly organized and institutionalized.

It is beyond the scope of this report to comment in detail on steps being taken in

the MoF to reform the tax system and reduce corruption and leakage. It can be noted,

however, that the Directorate General of Tax is undertaking a major reform program that

includes modernizing tax laws and strengthening integrity and accountability. Likewise,

the Directorate General of Customs and Excise is also implementing a modernization

program that includes measures to enhance transparency and accountability. Addition-

ally, legislation submitted to the dpr would alter the existing system of tax collection.35

Finally, Minister Sri Mulyani has begun a reorganization of the Ministry that will strip

the tax service of its authority to determine tax policies and limit it to managing the col-

lection of taxes.36

Preparing laws and regulations to support corruption eradication. A number of

new laws and several changes to existing laws and regulations are needed to optimize the

fight against corruption.37 As of mid-2006, legislation being contemplated includes:

∫ A bill on freedom of information,

∫ A bill on the National Ombudsman Office,

∫ Amendment of the extradition law (Law 1/1979),

∫ Amendment of Law 30/2002 establishing the kpk, and

∫ Amendment of the laws and regulations on money laundering.

Some observers believe movement on the legal front was slow during 2005 due to

the Minister of Justice and Human Rights’ deep involvement in the Aceh peace negoti-

ations. The dpr also has been slow to move through its legislative agenda. Several of these

laws are discussed in greater detail in later sections of this report.

Improving internal and external auditing: the BPKP and BPK. inpres 5 emphasizes

the importance of better cooperation between the law enforcement agencies and the bpkp

(the Financial and Development Supervision Body), the government’s internal audit

body. inpres 5 does not include bpk, the Supreme Audit Agency, presumably because it

is an independent agency and not part of the Executive branch. For the sake of coher-

ence, both are discussed here.

The bpkp has wide-ranging responsibilities on the central government level for for-

mulating and preparing control plans and programs, exercising general control of

29


national government finances, by auditing the activities of line ministries and their proj-

ect offices. Since decentralization, bpkp no longer has the mandate to audit regional gov-

ernments. bpkp’s budget is substantial, but it is nevertheless inadequate to cover all its

expenditures. It is forced to demand funds from the institutions it audits, a practice that

jeopardizes its integrity.38

Indonesia’s constitution establishes the bpk as the Supreme Audit Institution in

Indonesia. The constitution provides for the independence of the bpk as the sole exter-

nal audit authority empowered to investigate state financial management and account-

ability. The main focus of audits tends to be compliance with financial regulations and

procedures. The bpk submits its reports to the dpr and relevant dprds. The bpk’s budget

is typically not enough to cover its operating expenses. Frequently the bpk requires the

institutions its auditing to pay for the audits, a practice that undermines the independ-

ence and credibility of bpk audits.39

The bpk has relatively good staff capacity, but also has been vulnerable to tamper-

ing with audit results in exchange for bribes. Also, some observers point to a problem

translating BKP audits into evidence that can be understood and used by ago and judges.

The BKP has become more proactive under Anwar Nasution, and as part of its new strat-

egy will strengthen its regional presence.

Implementation of KEPPRES 80/2003 on procurement and the piloting of an e-

procurement system. In November 2003, the Government issued the Presidential

Decree (keppres) 80/2003 as a new national procurement regulation. This keppres pro-

motes the basic principles of procurement: transparency, open and fair competition,

economy and efficiency. Although there are exceptions, keppres 80/2003 meets most of

what is generally regarded as accepted international practice.

However, with decentralization now well established, there is an urgent need for

national standardization. The strength and harmonizing effect of Indonesia’s legal frame-

work for public sector procurement can best be increased by anchoring that framework

with an overarching consolidated and comprehensive national public sector procurement

law with subordinate regulations.

Within the above context, the creation of a national public procurement office as a

procurement regulatory and oversight body is greatly needed. The government recognizes

this and has committed to creating one. However, the establishment of a national pro-

curement policy office has been delayed by the cabinet reshuffle in December 2005. A

presidential decree on establishing this office was well-advanced but with the leadership

change in bappenas, which is chairing the drafting committee, the outline of the decree

30


is undergoing additional revisions. There are efforts, however, to link the establishment

of this office to the enactment of the decree on e-procurement, based on the idea that

instituting e-procurement would require a regulatory body to oversee implementation.

The Government has also committed to improving its procurement system by

expanding the use of e-procurement systems. To date, only the Ministry of Public Works

has published online standard bidding documents, contract opportunities and awards,

and this system isn’t a full-fledged e-procurement system. Several soes have experimented

with elements of e-procurement systems, including Angkasapura II (ports), pln (elec-

tricity), Garuda Indonesia (airline) and Kereta Api Indonesia (railways).

The e-procurement regulation is now being drafted. The pilot implementation will

be coordinated by the Center of Public Procurement Policy in the State Ministry of

Development Planning/bappenas, and will be launched in 3 ministries and 2 local gov-

ernments by the end of year 2006.

THE NATIONAL ACTION PLAN ON CORRUPTION ERADICATION (RAN-PK)

In inpres 5, the President instructed bappenas to prepare the National Action Plan for

the Eradication of Corruption or ran-pk. In December 2005 then bappenas Minister

Sri Mulyani established a team to draft the ran-pk.40 In the course of developing the

Action Plan, consultations were held with local officials and civil society groups in a num-

ber of cities. The action plan was completed in February 2005.

ran-pk includes plans to strengthen both preventive and repression of corruption.

However, ran-pk deals more with prevention than with repression. The matrix for ran-

pk includes 89 action plans for prevention, compared to 17 action plans for repression

and only 4 action plans for monitoring and evaluation. (See Box 4.)

In the area of corruption prevention, ran-pk’s priorities include:41

∫ Redesign public services, especially in those sectors that have a significant impact

on the daily lives of the public. The goal is to simplify people’s access to public services

that are professional, high quality, punctual and without extra cost.

∫ Strengthen transparency, supervision and sanctions on government activities related

to the economy and human resources. The goal is to increase the accountability of gov-

ernment in managing state and human resources. A second goal is to increase access to

information and other opportunities for people to participate in the economy.

∫ Empower people in the context of corruption prevention. The goal is to uphold the

“rule of law,” improve the awareness of people about the law and empower them so that

they can participate actively in the corruption eradication process.

31


BOX 4: SUMMARY OF KEY ELEMENTS OF RAN-PK

PREVENTION

Improvement of Public Services

∫ Improve licensing mechanisms in Ministries/Non Ministry Bodies that are crucial for investment

(BKPM, Environment, Land Agency, Mining, etc.)

∫ Improve public services that have a big impact on society (Education, Health, Labor, Immigration,

Public Works, Police, Fisheries, etc.)

∫ Draft government regulations on one stop services in districts/cities.

Improvement in the Performance of Government Services

∫ Apply Integrity Pact on state apparatus involved in delivering public services

∫ Apply reward and punishment system on delivering public services in crucial Ministries/Non

Ministry Bodies (BKPM, Land Agencies, Health, Public Works, Fisheries, Environment, Police, Labor etc.)

∫ Improve performance accountability system of government officials and institutions

Improvement in the Performance of Public Service Institutions

∫ Implement pilot “islands of integrity” in several areas/government institutions

∫ Internalization and application of good governance principles within government management at

national and local levels;

∫ Internalization and application of good corporate governance principles within State Owned Enter-

prises (SOEs) and Regional SOEs

Improvement in Supervision of Government Services

∫ Increase people’s access to information about the status of public complaints and increase services

to respond to public complaints.

∫ Improve reporting, disclosure and investigations of government officials wealth reports and increase

people’s access to reports on gratification

∫ Harmonization and revision of laws and implementing regulations related to supervision and

internal investigation of government institutions

Improvement of State Financial Management System

∫ Application of “integrity pacts” on state officials responsible for government revenue and the imple-

mentation of the state budget

∫ Improvement of services and audit system on customs and developing e-government in the tax

and customs system

∫ Application of reward and punishment system on tax and customs management

∫ Revision of law and regulations on tax and customs

Improving Government Goods and Services Procurement System

∫ Application of “integrity pacts” on officers who have responsibility for goods and services, pro-

curement, business and other related players

∫ Application of an e-procurement system and empowerment of the internal audit institutions for the

procurement process

∫ Revision on laws and regulations in government goods and services procurement

32


Improving Human Resource Management and State Apparatus Mentoring System

∫ Improving development system for government officials related to appointment, reassignment and

dismissal of position, performance appraisal and career development for law enforcement officers

∫ Creating database for the evaluation of integrity and quality of law enforcement officers in the

context for promotion and reassignment

∫ Improving recruitment system of strategic positions at national/local levels and for law enforce-

ment officials

Increasing the Awareness and Participation of the People

∫ Increasing the application for anti-corruption curricula from elementary level of education through

university

∫ Increasing the participation of public figures and anti-corruption campaigns

∫ Finishing all the laws/regulations in related to anti corruption (Freedom of Information, Witness

Protection, Public Service, Governmental Administrative Procedure, etc.)

REPRESSION

Accelerate the Handling and Execution of Corruption Cases

∫ Decide priority sectors for corruption eradication and apply performance indicators on the handling

existing corruption cases to accelerate the process

∫ Support an increase in the number of Ad-Hoc Judges for the Corruption Court

Increase the coordination between internal and external audit agencies with law enforcement agencies

Increase the Capacity of Law Enforcement Officials

∫ Provide asset tracing, legal audit, accounting/audit forensic and public relations training

∫ Improve management supervision system on law enforcement institutions

∫ Continue accelerating the establishment of Attorney General Commission and Police Commission

as external supervision institutions

MONITORING AND EVALUATION

∫ Creation of a monitoring team

∫ Compile information on the judicial process related to corruption

∫ Conduct survey on corruption

∫ Conduct supervision of the implementation of RAN-PK related to the improvement of the existing law

The repressive elements of ran-pk emphasize the application of sanctions on any

irregularities that violate norms, values, laws and regulations that cause state loss. The

priority action with regard to repression is the prosecution of big corruption cases and

the retrieval of money stolen from the state.42

Because of criticisms that arose during the consultative process, the government has

dubbed the Action Plan a “living document.” As a “living document” ran-pk will be

updated annually to include the latest corruption eradication initiatives. However, this

creates a problem for enforcement of the Action Plan, for as long as the Plan’s goals and

33


targets are subject to change, then they remain essentially non-binding and therefore lose

most of their significance. bappenas has tried to overcome this deficiency by including

ran-pk in the Mid-Term Development Plan.43

In September 2006, bappenas published an updated version of ran-pk. However,

only three changes were introduced, all of them in the prevention pillar of ran-pk. One

new action plan was added, “Improvement of Public Service Institutions” with a specific

view to improve service delivery. Two minor revisions were introduced in the actions

plans covering “Budget System Reforms” and “Improvement of Tax Service.”

It is noteworthy that the September 2006 version of the ran-pk does not update

the Monitoring and Evaluation framework. For instance, the passage of the Witness Pro-

tection Bill and the ratification of the United Nations Convention on Anti-Corruption

are not reported.

Implementation and monitoring of RAN-PK It is beyond the scope of this report to

try to assess the extent to which the hundred-plus action plans included under ran-pk

are being implemented in a meaningful way. Instead, this report limits itself to looking

at several broader aspects of implementation: 1) leadership and coordination, 2) the

absence of incentives and sanctions to encourage follow through, and 3) monitoring and

evaluation.

With regard to leadership and coordination, it appears there is limited commitment

and capacity to advancing the ran-pk on the part of the two ministries assigned leading

roles: bappenas and MenPAN.44 bappenas apparently sees it role principally as coordi-

nating the preparation of the ran-pk; it doesn’t appear to want to play a further role.

MenPAN, which has the responsibility for monitoring and evaluating progress of

both ran-pk and inpres 5, is a politically weak ministry with limited capacity and lim-

ited presence at the local level.45 MenPAN sees its role in the fight against corruption

principally as being to establish civil service performance standards rather than explic-

itly trying to reduce or punish corruption in the civil service. MenPAN has stated that

the principal indicator they are using to gauge success with regard to reducing corrup-

tion is improving Indonesia’s ranking on TI’s Global Corruption Index.

Implementation of ran-pk has been left to each Ministry. For example, the Min-

istry of Public Works set up and has implemented an e-procurement system since 2002.

Another example is ran-pk’s sub-plan for the improvement of financial management sys-

tems. Most of the action plans in this sub-plan are carried over from the previous reform

program started under the Megawati presidency with the enactment of the new State

Finance Law no 17/ 2003 and Treasury Law no 1/2004. And as of mid-2006, the Min-

34


istry of Education hasn’t decided whether to introduce corruption education a manda-

tory course or extracurricular subject in schools.46

While ran-pk sets out annual performance indicators, it doesn’t provide rewards for

good performers or sanctions for poor performers. Likewise, it doesn’t allocate extra

resources to support anti-corruption efforts or require that Ministries include funding

for their anti-corruption efforts in their budget requests.

To track the progress of government agencies towards fulfilling the targets they have

set out in ran-pk, MenPAN has created, at least on paper, an elaborate monitoring and

evaluation system (Kormonev). The Kormonev system is supposed to feed data from

every Ministry, Province and Kabupaten to MenPAN, where it is supposed to be aggre-

gated and analyzed. As of mid-2006, only polri and the Ministries of Public Works,

Transportation, and Labor and Migration have submitted reports to MenPAN. And as

of October, MenPAN had received reports on implementation of inpres 5 from 13 of 20

central government ministries, 17 of about 33 provincial governments and 38 kabupaten

and 8 cities out of about 441 kabupaten/cities.

MenPAN is mandated to submit to the President semi-annual reports on the imple-

mentation of ran-pk. It would be difficult, almost anywhere, to develop a system to mon-

itor and evaluate the performance of more than 500 disparate units of government.

However, the challenge in Indonesia is magnified because MenPAN doesn’t have the

authority or the financial and human resources to effectively carry out its monitoring

and evaluation function. As a result, more than a year and a half after the formulation

of the Action Plan, the President has yet to receive a progress report.

By way of summation, the creation of ran-pk establishes a government-wide frame-

work for addressing corruption. But it is not a strategy: the Action Plan is weak on pri-

oritization, vague on time frames and doesn’t create significant incentives and sanctions.

inpres 5 assigns MenPAN the responsibility for coordinating implementation of ran-

pk, but it doesn’t give any organization the responsibility, authority or resources to take

a leading role in moving the plan forward. As a result, there appears to be a low level of

engagement on the part of first and second echelon officials, who are crucial to any effort

to accelerate change within the bureaucracy.

IMPACT AT THE LOCAL LEVEL

“SBY’s shock therapy on corruption . . . is only happening in Jakarta” —Ervyn Kaffah,

National Coalition of NGOs Against Corruption47

The general instructions regarding the eradication of corruption contained in inpres

5 are addressed to sub-national executives, namely, Governors, Bupatis and Walikotas.

35


But inpres 5 does not issue any special instructions to these sub-national officials. Under

ran-pk, however, Governors, Bupatis and Walikotas are expected to do the following:

∫ Improve licensing mechanisms in public works;

∫ Draft government regulations for “one stop” provision of government services;

∫ Promote the internalization and application of good governance principles;

∫ Undertake “zero toleration of corruption” campaigns.

Given Indonesia’s size and diversity, it is beyond the scope of this study to examine

the extent to which several hundred sub-national level officials are aware of their “duties”

under inpres 5 and ran-pk and have been advancing the goals set out in the inpres and

Action Plan. Therefore, we limit ourselves to making only the following general obser-

vations about the impact of national level anti-corruption efforts at the sub national level:

First, many local governments have moved ahead with their own laws and regula-

tions to improve governance and fight corruption; they’re not looking to the national

government for direction. (See Box 5 for two illustrations.) The kpk has relationships

with governments in a few kabupaten and provinces, but otherwise its influence outside

of the national government still is limited.

Second, there have been some impressive successes in both punishing and prevent-

ing corruption at the local level. A number of dprd members have been convicted of

BOX 5: EXAMPLES OF LOCAL GOVERNMENT INITIATIVES TO ADDRESS CORRUPTION

In Kabupaten Solok: Inspired by his participation in a TI workshop, in 2003 Bupati Gamawan Fauzi, now

the Governor of West Sumatra, required that all civil servants and suppliers sign an “Integrity Pact.” The

pact obliges them to refrain from corruption, not to receive or provide bribes, provide transparency to

public and avoid in collusion/cronyism. The Bupati has also reformed the rules for the procurement of

goods and services in the Kabupaten, simplifying documentation, reimbursement of funds, and corre-

spondence in the procurement process.48 Lastly, in early 2004, Solok eliminated civil servants’ hono-

raria, the salary supplements received by government staff for working on specific projects. The objec-

tive was to reduce corruption as well as improve employee welfare overall.

In city of Surabaya:49 In the response to Presidential Decree number 80/ 2003, in 2004 the newly-

elected Walikota of Surabaya developed an e-procurement system for the city. To set up the system, the

city government conducted its own research and tried to adopt the best practices of the procurement

system in Hong Kong and Singapore. It also received assistance setting up the computer system from

students at the local school of engineering. Initially the government faced resistance from big vendors,

who relied on payments and collusion to win their contracts. Since the implementation of the e-pro-

curement system, the savings from procurements has been substantial, and the savings has been allo-

cated to other city projects. In addition, the application of e-procurement increases the opportunity for

small and medium vendors to participate in the bidding process. As a result, a big portion of the city’s

projects now are won by small and medium sized vendors.

36


corruption and a small but significant number of local governments have made a seri-

ous effort to improve governance and reduce corruption. Indeed, the large number of

former or current dprd members under investigation for misuse of their budgeting

authority—about 1,000 people—has prompted the dpr’s Working Committee for Law

Enforcement and Regional Governments to recommend to President Yudhoyono that

many of these cases be dropped. Many of the cases involve dprds that appropriated large

sums of money for members’ benefits, such as expensive health insurance and official

cars. At issue is whether, under the laws and regulations prevailing at the time, these self-

serving appropriations were illegal.50

Third, generally speaking, accountability mechanisms at the local level still are weak.

Collusion between Bupatis and dprd members appears to be a widespread problem, as

is corruption within dprds. The scope, quality and integrity of government auditing at

the local level is very uneven. And in many localities, ngos and media have limited capac-

ity to monitor government expenditures and uncover corrupt practices.

A recent World Bank study of ten cases of corruption in five provinces (West Suma-

tra, West Kalimantan, Central Sulawesi, East Java and West Nusa Tenggara) provides inter-

esting insights into the situation at the provincial and district levels. The study identifies

three basic motives for corruption: (i) to maintain smooth relations between the execu-

tive and the members of the legislature (dprd); (ii) to generate funds political parties need

to finance their operations and cultivate support; and (iii) to provide extra income for per-

sonal or group use. The modus operandi of most corruption is through collusive mark

ups or mark downs on government projects and misuse of the Regional Budget (apbd).

The basic finding of the study is that success in uncovering and prosecuting cor-

ruption has been mixed at the provincial and district levels. The positive developments

include: (i) law enforcement agencies at the local level have become more pro-active due

to the momentum created by the President’s anti-corruption agenda; (ii) in some cases

there is successful synergy between local ngos and local media; and (iii) local ngos are

getting better at uncovering corruption. However, local level efforts to reduce corrup-

tion continue to face a number of problems. These include: (i) collusion between local

executives and legislatures can be quite strong, especially if the executive and the leaders

of the legislature are from the same party; (ii) many local ngos and other stakeholders

still have a limited understanding of the law and law enforcement processes; and (iii)

sometimes religious and ethnic issues are used to divide the anti-corruption movement.

Fourth, a concerted effort is being made by the national and local governments and

non-governmental groups to guard against corruption in the reconstruction of the

tsunami-devastated provinces of Aceh and Nias.51 In response to the December 26, 2004

37


tsunami, more than $4.5 billion in private and public funds have been committed to

rebuilding Aceh and Nias. The Yudhoyono government created the Rehabilitation and

Reconstruction Agency (the brr) to oversee the effort.52 From the outset, it was recog-

nized that controlling corruption had to be a central element of the reconstruction effort.

As a result, an Anti-Corruption Unit (the sak) was established within the brr and tasked

with corruption prevention, investigation and education.

The anti-corruption unit works with a variety of other government bodies and civil

society organizations. Because the sak has limited investigatory powers, it refers serious

cases to the kpk, which has a small office in Aceh. The sak also has established a work-

ing relationship with the Financial and Development Supervisory Agency (bpkp) and

the Business Competition Supervision Commission (kppu). This cooperation includes

the secondment of expert staff from bpkp to assist sak in the field.

sak also works with a variety of national and local ngos, including Transparency

International Indonesia (tii), Indonesian Corruption Watch (icw), Procurement Watch

and the People’s Movement for Anti-Corruption (GeRAK), and several university groups.

Over the last year, the brr joined with the kpk and Indonesia Procurement Watch to

sponsor anti-corruption public information programs across Aceh and Nias. In early

November, the brr signed an MoU with tii to evaluate brr’s integrity systems, improve

its use of technology and do additional anti-corruption education.53

Of the approximately 1,000 complaints and inquiries sent to the brr over the last

tigated by the kpk.54 According to the World Bank, there are indications that corrupt55 And

Indonesia Corruption Watch (icw) and the People’s Movement for Anti-corruption

in Aceh (GeRAK) have reported corruption in five projects worth a total of about $2.6

million.

Finally, an encouraging development in the fight against the misuse of village level

development funds is the national government’s recent decision to launch a “National

Community Empowerment Program.” This program will enable individual communi-

ties across the country to decide how their development funds will be spent. To guard

against corruption and elite capture, elements of the program promote transparency, par-

ticipatory decision-making and participatory monitoring of project expenditures and

implementation.

38


practices capture about 5 percent of the $530 million multidonor trust fund.

one year, 131 have been classified as corruption cases. Of these, seven are being inves-

IMPORTANT DIMENSIONS OF CORRUPTION ERADICATION

NOT COVERED BY INPRES 5 AND RAN-PK

Although inpres 5 reflects a multi-dimensional approach to fighting corruption, there

are four important corruption-prone arenas of public life that are not covered by the

inpres. These are:

1) The justice sector,

2) Supervision of the financial sector,

3) Political parties and parliaments, and

4) Military procurement and businesses.

The first three are not included under inpres 5 because they involve branches of

the Indonesian state not under the control of the executive branch: the judiciary, Bank

Indonesia and legislatures.56 tni may not have been included in inpres 5 because of

its sensitivities and because its program of reform is set out in the tni Law (Law

34/2004).

Addressing corruption in all four of these areas is critical to the overall fight against

corruption. In particular, the prospects for reducing corruption in the judiciary and in

parliaments have an important influence on the government’s efforts to address corrup-

tion in other areas. Therefore, each is briefly discussed below.57

REDUCING CORRUPTION IN THE JUSTICE SECTOR

Judicial corruption represents a huge barrier to prosecuting corruption cases. Even the best

prepared prosecution will fail or be weakened if judges’ decisions are for sale. And given

the huge amounts involved in some corruption cases, millions of dollars of bribes may

be in play. In Transparency International Indonesia’s 2005 survey of 1,305 business peo-

ple in 21 regions/cities, the courts (followed by tax services) were at the top of the list of

institutions that need cleaning.58

39


Describing the status of all the reforms needed in the judicial sector is beyond the

scope of this report.59 But a few aspects of judicial reform are particularly relevant to

anti-corruption and therefore should be mentioned. These include:

First, Bagir Manan, the Supreme Court Chief Justice, has been an advocate of judi-

cial reform and the Supreme Court has endorsed a comprehensive “Blue Print” for judi-

cial reform. However, judicial corruption is based on deeply entrenched and highly

lucrative networks and practices, and the ability of the Chief Justice to single-handedly

make sweeping changes is limited. Moreover, it may be that the Chief Justice’s author-

ity has been weakened by the kpk’s investigation of him and other justices in 2005.

Second, the kpk has as one of its highest priorities eradicating judicial corruption,

first in the Supreme Court, then throughout the court system. In late 2005 the kpk began

an investigation of the acceptance of bribes by three Supreme Court judges including

the Chief Justice.60

Third, in a December 2005 meeting with the Supreme Court, the president said that

he would review and restructure the remuneration system for senior state officials, and he

noted that Supreme Court salaries are lower than those of other senior state officials. He

expressed his hope that the government can establish a remuneration system that is more

equitable and will boost professionalism, especially in the Supreme Court.61

Finally, during 2005–2006 the independent Judicial Commission emerged as an

important force for judicial accountability. The seven members of the commission won

widespread respect for their integrity and assertiveness, and the commission was instru-

mental in addressing a host of scandals in the judiciary. During 2005 the Commission

asserted that it should have the authority to review the integrity of all 49 Supreme Court

justices. To this end, it proposed to the president the issuance of a government regula-

tion in substitute of the law (perpu) that would significantly increase the Commission’s

authority vis-à-vis the judiciary. The idea triggered resistance from the Supreme Court

and some members of the Parliament. In early 2006, 31 justices of the Supreme Court

formally requested the Constitutional Court to review the constitutionality of Law

Number 22/2004 on the Judicial Commission. Specifically, the justices objected to pro-

visions in the law that empowers the Judicial Commission to monitor judges and rec-

ommend sanctions. In August 2006 the Constitutional Court removed the Judicial

Commission’s mandate to monitor judges, claiming a conflict with the constitution.

The ruling limits the commission to its role in screening applicants for Supreme Court

vacancies.

40


INCREASING F INANCIAL SECTOR SUPERVISION

According to the World Bank, Indonesia’s financial sector crisis in 1997–98 was one of

the costliest in the world, with public funds equivalent to more than 50 percent of

Indonesia’s gdp used to bail out the banking sector.62 The behavior of Bank Indonesia

(bi), other government agencies (such as the bank restructuring agency, ibra) and state

and private banks during and immediately following the financial crisis revealed the

extent of weak oversight, corruption and collusion within Indonesia’s financial sector.

The losses to the state (and therefore to Indonesian citizens) from the blbi loan scheme

totaled some Rp 138 trillion—based on bpk and bpkp audits.63 Given the past and poten-

tial magnitudes involved in the banking system—in part because of the continued dom-

inance of the banking sector by four state-owned state banks, which hold about 40% of

assets—it is essential that the integrity of the system be strengthened.

The Central Bank Law (Law 23/1999) creates a legal structure whereby Bank Indone-

sia can independently carry out its duties as monetary policymaker and banking sector

supervisor. The law also gives bi responsibility for regulating and supervising the banking

sector. (The Ministry of Finance is responsible for supervising the insurance sector and

bappepam supervises the stock exchange.64) In keeping with its new authorities and

responsibilities, bi has moved to strengthen the “infrastructure” of the banking system,

improve corporate governance, and improve the effectiveness of banking regulation and

supervision. As Vedi Hadiz has observed, “Bank Indonesia . . . is taking more seriously its

role of supervising state banks. Moreover, a governance and oversight unit for state and

recapitalized banks has been established, and the audit of state banks has been carried out

by international firms. The central bank itself now has to report to the parliament.”65

According to the World Bank, regulation and supervision of the financial sector has

“improved substantially” since 1998. However, the management and oversight of State-

owned banks, which continue to dominate the banking sector, remains a problem.66 In

May 2004, the joint imf/Government of Indonesia Monitoring Team on the Economic

Policy Package reported: “there has been considerable ongoing effort to improve the gov-

ernance and soundness of the state banks, but recent revelations of irregular banking

practices in bni and bri clearly demonstrate that more needs to be done to improve their

managerial, supervisory risk management and internal controls.”67 And according to the

World Bank, “the recent scandals in some state banks have revealed systemic weaknesses

in their internal controls. Even more worrying was the fact that repeated warnings from

the central bank about state banks’ operations went unheeded.”68

As Indonesia’s recent history has shown, financial crises can have a profound impact

on the country’s economic development and political stability. Financial crises impose

41


huge costs on the State—and therefore on the public—and inevitably spill over into the

real sector. It is imperative, therefore, as the trauma of Indonesia’s most recent financial

crisis recedes, that the government, Bank Indonesia and the private sector continue to

strengthen oversight of financial institutions and reduce the opportunities for corrup-

tion and collusion.

REDUCING THE INFLUENCE OF “MONEY POLIT ICS” IN ELECTIONS, POLIT ICAL

PARTIES AND LEGISLATURES

The introduction, in 1999, of genuinely competitive, multi-party elections and the

empowerment of the dpr and regional dprds, represent major improvements in both

representation and government checks and balances in Indonesia. However, there also is

a downside to this: the apparently sharp increase in “money politics.” By “money poli-

tics” we mean the vicious circle wherein large amounts of money are needed to partici-

pate in politics, money becomes a key determinant of political behavior, and politics is

viewed as a way of making money.

Elections are expensive in a country as large as Indonesia, and the more competitive

(and media-driven) they are, the more expensive they become. Indonesia’s campaign

finance law does not create realistic campaign expense limits nor does it require serious

disclosure of parties’ expenditures or the sources of funding. According to an ifes study

on campaign financing for the 2004 elections: “Although the legal framework for politi-

cal finance transparency in Indonesia was generally improved for the 2004 elections . . .

reporting obligations in these provisions were widely avoided by the political parties and

electoral participants. . . . This result is not surprising, however, given the absence of mean-

ingful sanctions in the relevant political laws for non-compliance with political finance

reporting obligations”.69

It is widely thought that in many political parties the order of ranking of legislative

candidates on their party’s list is influenced by money politics. At the local level, both

the election of Governors and Regents and their subsequent accountability sessions are

vulnerable to money politics. Additionally, “fit and proper” tests are also used by parlia-

mentarians to extort money.70

There is mounting evidence that once elected, a significant number of dpr and dprd

members also use their positions to extract funds for themselves and their parties. This

can take the form of appropriating themselves luxurious benefits, misusing appropria-

tions, and receiving payments for making hearings friendly, for ensuring appropriations

and for voting a certain way. According to Hadiz: “icw, as well as press reports, has

alleged that national parliamentarians of all parties regularly receive bribes from gov-

42


ernment bodies and the private sector for voting a particular way on various bills. More-

over, certain parliamentary commissions are widely regarded as being particularly lucra-

tive or “wet”—for example, those that deal with finance and development. . . . As is true

in the national parliament, certain commissions in local parliaments are considered to

be more lucrative than others . . .”71

While one of the reasons for this behavior is self-enrichment, another (and not mutu-

ally exclusive) explanation is the need for representatives to recoup their election expenses,

contribute to party coffers and finance their political/patronage networks. But whatever

the mix of reasons, the result is the distortion of the legislative process in favor of those

who have money, a weakening of parliamentary oversight of the executive branch, and

growing public cynicism regarding parties and parliamentarians. According to TI’s 2005

Global Corruption Survey, Indonesians view political parties and parliaments as being the

country’s most corrupt institutions—even more so than the police and customs.

There does appear to be a growing recognition of the problem of money politics.

TI Indonesia made an effort to monitor party expenditures in the 2004 elections. A num-

ber of ngos monitor dprds and their budget processes. A small but still significant num-

ber of dprd members have been prosecuted and sentenced to jail. The President has

spoken out against the politicians who are also businessmen, noting that if the “dual

function” of the Army was once criticized, people should not accept the “dual function”

of politicians (as businessmen and politicians).

REFORMING MIL ITARY PROCUREMENT AND MIL ITARY-OWNED BUSINESSES

Finally, mention also needs to be made of the status of reforms in the Ministry of Defense

(MoD) and Armed Forces (tni) that are intended to reduce corruption. Reforms are being

made in two broad areas: 1) rationalization of budgeting and procurement, and 2) reduc-

ing the number and autonomy of military-owned businesses and foundations (yayasan).

A bit of context is required. Relative to total government spending, Indonesia has one

of the smallest defense budgets in Asia. The military budget for 2006 is about Rp 28 tril-

lion, which represents 6.3% of the national government budget and under 2% of gdp. (By

way of comparison, education receives about 10% of the budget and public works about

5%.) Of this, about two-thirds of the military’s budget is spent on personnel, food, mainte-

nance and other regular expenses. The conventional wisdom is that the military’s real budget

is about 30% higher than its official budget and this difference is funded by the profits of

numerous military-owned businesses and yayasans. But recently Defense Minister Sudar-

sono, Indonesia’s first civilian defense minister since the 1950s, put the percentage for off-

budget funding as being only about 5%. It is not clear which is the more accurate figure.72

43


Minister Sudarsono has been outspoken on the need to clean up military budget-

ing and procurement and the Defense Ministry is taking steps to unify and rationalize

the budgets and procurement processes of the three branches of the armed forces. After

the budgets of the three defense forces are submitted to tni Headquarters for approval

they now are combined and submitted to the Defense Ministry.

There appears to be less progress reforming procurement procedures. In a recent

report on the Indonesian military’s economic activities, Human Rights Watch Asia noted:

“Many military equipment purchases in Indonesia are made using alternative financing

arrangements, such as export credit guarantees or counter-trade (barter) deals, that typ-

ically bypass normal procurement channels and frequently are associated with corrup-

tion.”73 The problem is compounded by the fact that the bpk, the Supreme Audit

Agency, has only limited access to the Armed Forces’ books.

Minster Sudarsono is trying to reduce the influential role individual generals (both

active and retired) traditionally have played in the procurement process.74 In early 2005

he issued ministerial decrees outlawing military services and their units from procuring

their own equipment. According to Marcus Mietzner, “The decision had the potential

to cut deeply into the entrenched network of military officials and business agents, and

to put an end to some of the collusion that had marked the procurement process. In prac-

tice, however, the decrees failed to address the underlying problems of the military pro-

curement system, which uses well-connected agents to pre-finance purchases that the

state is unable to cover through its actual budget. This mechanism has traditionally

opened the door for mark-ups and corruption, and this appears not to have changed.”75

Finally, there is the issue of the lack of transparency and oversight with regard to

military-owned businesses, cooperatives and yayasan. In the last days of the Megawati

administration, the dpr passed the Armed Forces Act (Law 34/2004), which included

language that mandated the government to take over all military businesses within five

years. Shortly after his appointment, Minister Sudarsono required tni to submit an

inventory of all enterprises, foundations and cooperatives run by armed forces head-

quarters and its various units. tni complied, but asserted that most of tni’s 219 core busi-

nesses (which had 1,520 subunits below them) were exempted from the transfer plan

because they were crucial for the welfare of soldiers and that cooperatives and most foun-

dations be excluded from the takeover. According to Mietzner: “With 194 of the main

219 enterprises being classified as cooperatives, the mandate of the Armed Forces Act had

been undermined by a simple semantic redefinition.”76

Moreover, according to Human Rights Watch, so far the government’s effort “has

focused exclusively on businesses in which the military has a documented ownership

44


share, ignoring the informal and illegal arrangements that also need to be eliminated.”77

The next stage is the verification process will be conducted by an Inter-Ministerial

team that will classify military businesses into two categories: 1) military businesses that

are using state assets/property and 2) active/non active members of the armed forces who

participate in business activities.78 The military businesses that fit into the first category

will be transformed into soes. As for businesses that fit into the other category, the team

will decide its course of action later on.

Civilian oversight of military budgets—which typically involves a high degree of

public disclosure—is an important aspect of democratic governance. While there have been

significant improvements in the role of tni since 1998, it seems that increased trans-

parency regarding the military’s budget, its procurements and its businesses will occur

only gradually. The slow pace of change is regrettable because greater transparency has a

number of benefits not just for the public, but also for those in tni who seek a more pro-

fessional and effective military. First, greater transparency will cause less of the military’s

budget to be wasted or diverted, leaving more funds for modernization. Second, greater

transparency will improve the military’s case for getting the resources it needs from the

government budget. Finally, greater transparency will enhance the image and credibility

of tni, both domestically and internationally.

45


THE KPK AND THE SPECIAL COURT FOR CORRUPTION

“The KPK is to be a State agency that will perform its duties and authority

independently, free from any and all influences. The KPK is formed with

the primary purpose of improving the effectiveness and efficiency of efforts

to eradicate criminal acts of corruption.” —Law 30/2002

We now turn to an examination of the Corruption Eradication Commission or kpk

(Komisi Pemberantasan Korupsi). The kpk has been operational for almost three years,

but it is only over the last year and a half that it began its investigative and prosecutor-

ial functions. During this time, the kpk has assumed an increasingly high profile role in

the fight against corruption, particularly with its publicly-expressed intention of attack-

ing corruption in the judiciary.

OVERVIEW OF THE KPK

The kpk was established under Law 30/2002, which was passed in December 2002. The

same law mandated the creation of a Special Court for Corruption. The Commission

was established a year later, in December 2003. With the creation of the kpk, the Com-

mission on the Appraisal of Wealth of Government Officials (the kpkpn) became part

of the kpk Prevention Department.

The kpk has five Commissioners, consisting of one Chairman and four Vice-Chair-

men. The Commissioners were selected by the dpr from a pool of candidates offered by

the President. They can serve for a maximum of two four-year terms.

Currently the kpk has about 400 employees. Under existing law, all of the kpk’s

investigators and prosecutors are seconded from the ago and polri.

THE KPK’S LEGAL MANDATE

As set out in Law 30/2002, the kpk’s responsibilities are as follows:

47


∫ Coordinate with other state institutions to eradicate corruption.

∫ Supervise other state institutions authorized to eradicate corruption.

∫ Perform investigations, indictments and prosecutions of corruption cases.

∫ Take steps to prevent corruption, including:

∫ Examination of wealth and gratification reports;

∫ Conduct anti-corruption education and socialization programs; and

∫ Engage in bilateral and multilateral cooperation to eradicate corruption.

∫ Monitor the administration of state institutions and make recommendations for

making them more corruption-resistant.

The law also provides the kpk with the following extraordinary powers:

∫ To conduct surveillance of other state institutions whose tasks and authority are rel-

evant in the fight against corruption;

∫ To do wire taps, record conversations and access bank and tax records;

∫ To take over investigations or prosecutions being performed by the police or ago.

THE KPK’S STRATEGY

The leadership of the kpk sees the Commission as a “trigger mechanism” or catalyst for

stimulating anti-corruption reforms in the government, and especially in the judiciary

and the civil service. As such, the kpk’s investigations and prosecutions are as seen as

being the cutting edge for implementing broader institutional reforms that will prevent

corruption in the future.

Initially, the kpk’s leadership identified as its priorities attacking corruption in the

judiciary (especially the Supreme Court), the ago and police and the MoF (particularly

tax and customs). But in the course of its work, it has by necessity become somewhat

more opportunistic in deciding which cases to investigate and prosecute.

To date, the kpk’s strategic emphasis has been mainly on punitive activities: inves-

tigating and prosecuting corruption. To operationalize its “repressive” strategy, the kpk

has established Memoranda of Understanding (MoU) with the ago, polri, bpk and other

agencies.

The kpk is an advocate of increasing remuneration and introducing performance

based management systems throughout the government. It also is advocating the cre-

ation of “islands of integrity” and “integrity pacts.” Finally, it also seeks to change pub-

lic perceptions and cultural permissiveness towards corruption. To this end it plans to

undertake a major anti-corruption campaign in 2007.

48


INVESTIGATIONS AND PROSECUTIONS

The kpk has significant powers of investigation and prosecution. Law 30/2002 authorizes

the kpk to conduct examinations, investigations, and prosecutions for corruption cases that:

∫ Involve law enforcement officials, judicial personnel, state officials and related third

parties;

∫ Attract the attention and dismay of the public; and/or

∫ Involve a minimum state loss of Rp 1 billion.

The Law also authorizes the kpk to take over investigations or prosecutions being

conducted by the Police or the ago if any of the following conditions exist:

∫ A public report is not acted on;

∫ A case is delayed for too long without explanation;

∫ There is bias in the handling of the case;

∫ There is obstructive intervention by the executive, judicial or legislative branches;

∫ Other circumstances make it impossible for the Police or ago to handle the case

well and responsibly.

In 2004, the first year the kpk was operational, it conducted 17 pre-investigations,

1 investigation and began 2 prosecutions. In 2005, the kpk had 31 pre-investigations, 19

investigations and 17 cases being prosecuted. The breakdown of kpk’s cases in 2005 is

included as Appendix 3.

PREVENTION

With regard to prevention of corruption, the kpk is authorized to conduct the follow-

ing preventive measures or efforts:

∫ Inventory and examine the wealth reports of state officials;

∫ Receive reports on gifts and decide on their status;

∫ Arrange anti-corruption education programs;

∫ Design and promote the execution of anti corruption socialization programs and

campaigns;

∫ Engage in bilateral and multilateral cooperation to eradicate corruption.

Collecting and auditing the wealth reports of state officials The potential impor-

tance of wealth reports is well summarized by Stephen Sherlock: “Public disclosure of assets

and expenditure far beyond their stated incomes could seriously embarrass officials, espe-

cially elected ones . . . More importantly, the information contained in declarations could,

by inclusion or omission, provide evidence for the investigation and prosecution of cor-

ruption by an anti-corruption commission or law enforcement agencies. If the supply of

49


false or incomplete information were subject to prosecution, corrupt officials could be

punished without the actual corrupt transactions having to be proved.”79

According to the kpk, the issuance of inpres 5/2004, which included an instruction

for State officials to submit their wealth reports to the kpk, accelerated the submission

of reports by high level officials. To facilitate the submission of reports, the kpk has pro-

vided information to officials and conducted workshops to walk them through the prepa-

ration of the reports.

As of mid-2006, 55% of national and local government officials required to submit

wealth reports had done so. (See Table 4) The kpk has published the wealth reports of

the 29 current cabinet ministers and those of 182 regents, mayors and governors who

recently won office in local elections. But as of late 2005, the kpk had audited less than

1% of all the reports received. And it had not announced the results of audits done of

senior officials in prior six administrations (from 1999 to 2004)—even though the media

reported that several officials had significant increases in their wealth during their term

in the office.80 The kpk now has 16 people working on wealth report audits and expects

to audit a significantly higher percentage of reports in 2006.

In September 2006 the kpk announced it was beginning probes of what it consid-

ers to be mismatches between the data given by 80 state officials in their wealth reports

and the findings of audits conducted by kpk investigators. The investigations would also

take into account reports from the public about state officials' suspicious wealth.81

Preventing corruption in State institutions by recommending changes in rules and

procedures Another way that the kpk seeks to prevent corruption is by recommending

reforms to corruption-prone State institutions. To date, the kpk has done this in only a

few instances:

∫ The kpk has taken a leading role in advocating civil service reform, particularly with

regard to the judiciary.

∫ The kpk has provided recommendations to the dpr on how to make the tax col-

lection system less prone to corruption.

∫ The kpk also has worked with Governors and Bupatis in Riau, West Sumatra and

Kalimantan to develop “islands of integrity” in their administrations.

∫ According to media reports, the kpk is providing recommendations for institutional

reforms with the kpu.

Informing and educating the public The kpk has yet to play a major role in informing

or educating the public about corruption and how to fight it. According to the kpk, dur-

50


ing 2004 and 2005 it focused primarily on educating senior officials in the civil service about

their wealth reports and corruption prevention. It has done some relatively small scale media

activities and has started to engage with the Ministries of Education and Religious Affairs

in order to get them to develop anti-corruption messages. As part of this effort, the kpk

has conducted anti-corruption workshops within various middle (smp) and high (sma)

schools. The kpk has said that it will expand its public information activities in 2007.

Responding to public reports of corruption As of the end of 2005, the kpk had

received about 10,000 reports of alleged corruption from the public. (Many of which

concern allegations of small scale corruption or mistreatment.) About 1,300 of these were

deemed substantive enough to be forwarded to the Police or ago. The Commission rec-

ognizes that it needs to develop a better system for managing and responding to these

reports so that the public doesn’t come to see the kpk as disingenuous or incompetent.

ORGANIZATIONAL DEVELOPMENT

The kpk is a relatively new organization with an exceedingly broad and challenging man-

date that requires it to interact effectively with a wide range of government agencies as well

as the general public. As such, the kpk has had to build itself as an organization almost from

scratch—and relatively quickly. It appears the management of the kpk is approaching the

issue of organizational development with considerable professionalism and with the goal

of making the kpk a model for performance-based management in the public sector.

51

TABLE 4: WEALTH REPORTS OF STATE OFF ICIALS AS OF JUNE 11, 2006

Amount % Amount % Amount %

Executive 61,231 31,441 49 23,297 74 8,144 26

Legislative 24,297 16,553 68 16,006 97 547 3

Judiciary 18,566 8,101 44 6,842 84 1,259 15.5

State/Region-owned 7,141 4,987 70 4,721 95 266 5

Enterprises

TOTAL 111,235 61,6082 55 50,866 83 10,216 17

Source: Material for hearing between KPK and commission III of DPR on June 20, 2006

In the Process

of Being Included

in the Additional

State Gazette

Wealth Reports

That Have Been

Included in Additional

State Gazette

Officials Who

Have Reported

Total Amount

of OfficialsSector


Staffing Currently the kpk has about 221 professional staff, of which about 15 are audi-

tors seconded from the bpkp, 43 are investigators from the Police, and 19 are prosecutors

from the ago. The professional staff is supported by 84 administrative staff. The salary

structure for the kpk, which is higher than the civil service structure, was finally imple-

mented in late 2005.

According to the kpk, the biggest staffing challenge it faces is finding the right peo-

ple. The Prevention Department, for example, has only about one quarter of the staff it

requires. In mid-2005 the kpk hired and began training its first batch of 32 inductees.

Under Law 30/2002, kpk investigators and prosecutors are lent from the ago and

police, two institutions with history of corrupt practices all the way from their recruit-

ment process. Independent recruitment would guarantee employees whose loyalty is to

kpk not to other institutions. This also would help reduce the institutional “zero-sum

game” between the kpk and the ago and police, wherein the kpk draw staff resources

away from those two organizations.

Budget and funding The kpk’s budget was Rp 109 billion (about $11 million) in fy2004,

Rp 170 billion (about US$18 million) in fy2005 and Rp 224 billion (about US$23 million)

in fy2006. Additionally, the kpk had spent about Rp 9.82 billion (about US$940.000) of

donor funding in 2005.

Links to other organizations The kpk faces a difficult challenge balancing its independ-

ence from the ago and the Police with the need to work with the two law enforcement agen-

cies. Its effectiveness will be reduced if either it is too independent or it becomes too close.

The kpk has entered into MoUs with the ago, polri, MenPAN, and kppu. It also

has working relationships with bpk, ppatk and the MoF. It has done joint training with

the ago, polri and bpk. As noted, it also engages with the Ministries of Education and

Religious Affairs. The kpk also has relationships with local governments in Riau, West

Sumatra and Kalimantan.

THE SPECIAL COURT FOR CORRUPTION

The kpk’s success with prosecutions is dependent upon the integrity and competency of

the Special Court for Corruption. All anti-corruption cases initiated or taken over by the

kpk are tried by the Special Court.82

The Special Court of Corruption is established under Law 30/2002, the same law

that mandated the creation of the kpk. The Court is domiciled in the District Court of

Central Jakarta, but has jurisdiction over all of Indonesia. The law does not appear to

52


allow for the establishment of more than one Corruption Court. Recently, however, the

kpk has urged the Supreme Court to establish anti-corruption courts in every province,

beginning with East and Central Java and North Sumatra.83

The Special Court is composed of a mix of career District Court judges (appointed

by the Chief Justice) and “ad hoc” judges (appointed by the president, with the counsel

of the Supreme Court). Cases are tried by teams of two District Court judges and three

“ad hoc” judges. Decisions can be appealed to an appellate court and then to the Supreme

Court. According to the Jakarta Post: “The Anticorruption Court, with no defendants

so far having escaped punishment, is seen as firmer in trying corruption cases than the

other courts. A defendant appealing his sentence also faces the strong possibility of it

being increased instead of dismissed.”84

The start up of the Special Court has been marred by insufficient or delayed fund-

ing. The most serious problem has been the non-payment of judges’ salaries. The judges

are supposed to receive Rp 10 million/mo. at the District Court level, Rp 12 million at

the appeals court level, and Rp 14 million at the Supreme Court level. Although a kep-

pres was issued, as of late 2005 SekNeg had not approved payment of the judges’ salaries.

As of late 2005, the judges were surviving on Rp 1.2 million per month given them by

the Supreme Court. Housing for the judges has also been a problem.

To ensure the integrity and competence of the Special Court, in addition to receiving

their salaries, the judges also need to receive training in finance and accounting so that they

can understand the complex financial transactions that often are central to corruption cases.

ASSESSMENT OF THE KPK

The kpk is a young organization operating in the context of a relatively new govern-

mental emphasis on fighting corruption. The initial signs are very encouraging, at least

with regard to the kpk’s commitment, the quality of its staff and its initial success with

investigations and prosecutions.

Accomplishments to date The selection and appointment of the kpk’s Commission-

ers wasn’t completed until late December 2003. During the remainder of the Megawati

administration, the kpk was preoccupied with getting organized, staffed and funded.

Over the last year, with the support of the sby government, the kpk has become

much more active. The kpk’s major accomplishments include:

∫ Initiating a growing number of investigations and prosecutions: In 2005 there were

20 pre-investigations, 30 investigations, and 18 prosecutions (which resulted in the con-

victions of former Aceh Governor Puteh and members of the kpk).

53


∫ Better coordination and cooperation with other key agencies: The kpk has signed

MoUs with the ago, polri, ppatk, MenPAN, MoF, brr and the kppu.

∫ It has put pressure on other state organizations (including the police and ago) to inten-

sify their anti-corruption efforts.

∫ Establishing working relations with a number of local governments (and the brr in

Aceh/Nias) to support their efforts to implement practices that promote “good governance.”

∫ Continued organizational development, including recruiting and training its first

batch of professional staff.

Shortcomings and challenges At the same time, the kpk faces a number of potentially

serious issues:

∫ To date, the kpk has not demonstrated the capacity to follow up its prosecutions with

recommendations for institutional reforms. In discussions with kpk leadership, they have

recognized that, in practice, the kpk’s ability to push for institutional reforms is limited.

∫ There is a perception that the kpk’s investigations are not targeting “big fish” and

that political considerations sometimes have influenced the process of selecting who will

be investigated and prosecuted. kpk leadership rejects this criticism. They argue that (a)

the law, as they interpret it, doesn’t allow them to investigate alleged corruption before

1999 and (b) to a considerable extent the choices made regarding who to investigate are

based on the availability of evidence and the likelihood of success.

∫ It is too early to tell if there has been a significant improvement in cooperation and

coordination among the kpk, ago, polri, bpk, etc.

∫ To date, it appears the kpk has not aggressively collected or investigated the wealth

reports of senior government officials. However, the kpk has taken steps to make the sub-

mission of complete wealth reports easier, and kpk leadership assert that they are scruti-

nizing the wealth reports of a number of “high profile” officials and ex-officials.

∫ To date, the kpk has done relatively little in the area of corruption prevention.

∫ Although the kpk has formed partnerships with several provincial and kabupaten gov-

ernments, its reach outside of Jakarta still is very limited.

LOOKING AHEAD

Because the kpk is new and is still in the process of defining its role (and has become the

most prominent actor in the fight against corruption), it is important to be cognizant of

a number of potential issues. These include:

∫ First, there is the risk that the kpk will grow too quickly and spread itself too thinly.

In particular, there is a risk that if the kpk expands its efforts in the area of prevention

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too rapidly, it will diminish its focus on prosecutions. Attention must be paid to issues

such as the kpk ’s comparative advantage and absorptive capacity. Recognizing this, the

kpk isn’t planning a major expansion of its regional presence for several years.

∫ Second, there also is the possibility that the kpk will avoid pursuing politically-sen-

sitive cases. To date, the kpk has not taken action against any officials, politicians or gen-

erals currently in powerful positions in the government, the dpr or tni.

∫ Third, the kpk faces a difficult challenge balancing its independence from the ago

and the Police with the need to work with the law enforcement agencies. Its effective will

be reduced if it is too independent or becomes too close.

∫ Finally, it is important to bear in mind that the kpk’s success with prosecutions is

dependent upon the integrity and competency of the Special Court for Corruption.

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OTHER INDEPENDENT BODIES

In addition to the kpk, there are four other independent bodies that are playing, or have

the potential to play, important roles in the fight against corruption. The four—the

ppatk, kon, kppu and Judicial Commission—are described briefly below. All four share

two common characteristics: First, while their mandate might be broad, their authority

tends to be limited. And second, their capacity to carry out their mandate is reduced by

serious resource constraints.

INDONESIAN FINANCIAL TRANSACTION REPORTS AND ANALYSIS CENTER (PPATK)

The initial law on money laundering (Law 25/2002) was approved in April 2002 was

amended in October 2003. The law as amended criminalizes money laundering activi-

ties for the first time and requires financial services providers including non-banks to

report suspicious financial transactions.

The ppatk was established under law 25/2003, in large part in response to US and

international pressure on Indonesia to strengthen its anti-money laundering regime. Cur-

rently, the ppatk’s mandate is limited to analyzing reports of potential money launder-

ing and forwarding them to the police for further investigation. Persons in possession of

sums of Rp 10 million or more, when challenged in court, must prove that the money

was not illegally obtained.

As of November 2005, the ppatk had referred 344 cases to the police and ago, result-

ing in one successful prosecution involving terrorism, 19 involving bank fraud and/or cor-

ruption, and two for money laundering. An additional 30 cases were in the process of being

prosecuted.85 As of October 2006, the ppatk had received over 3,200 reports of possible cor-

ruption and had handed over to law enforcers about 429 cases of suspicious transactions.86

Obviously, ppatk reports can play an important role in deterring and punishing cor-

ruption. Bank Indonesia and multiple government agencies are cooperating with the

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ppatk. However, unless the law is changed, it remains dependent upon the willingness

of other institutions to act. For example, according to Tempo, in July 2005 the ppatk gave

Police General Sutanto a list of 15 mid- and senior-level police officers who had been

assessed by the ppatk as having extraordinary bank accounts. According to Tempo,

Sutanto declined calls to turn an investigation of the 15 over to the kpk. Instead it is being

investigated by the Police.87

A possible revision of Law 25/2003 would give the ppatk power to take over inves-

tigations being done by the police as well as freezing assets and halting related financial

transactions.88

NATIONAL OMBUDSMAN COMMISSION OR KON (KOMISI OMBUDSMAN NASIONAL)

The Ombudsman Commission was established by a presidential decree (keppres

44/2000) issued by Abdurrahman Wahid. The 11 member Commission is authorized to

monitor and examine public complaints about state administration and the provision of

public services. The kon has no authority to compel government agencies to follow up

on its reports and recommendations. Theoretically, it has the authority to investigate

irregularities; but in practice is hasn’t had the staff or resources to play a proactive role.

The kon has suffered from chronic under funding.

Stephen Sherlock has observed, “At the heart of the kon’s problem of ineffectual

powers is its lack of legislative backing. The keppres was only designed as an interim

instrument. . . . The kon fulfilled its commitment tom present a bill to the Ministry of

Justice, but it was met with non-interest and obstruction from within the Ministry. The

bill was subsequently submitted directly to the dpr . . . ”89 As of early 2006, the bill to

formalize the kon is still with the dpr.

The future of the kon will depend on the passage of legislation to formalize it and

give it greater resources and authority. If it were empowered and given sufficient

resources, it could usefully partner with the kpk.

BUSINESS COMPETIT ION SUPERVISORY COMMISSION OR KPPU (KOMISI

PENGAWAS PERSAINGAN USAHA)

The kppu was set up following the passage in 1999 of the Law on Monopolies and Unfair

Business Competition (Law 5/1999). The purpose of the Commission is to ensure unre-

strained business competition. So while the kppu is not explicitly an anti-corruption body,

it is concerned with collusion, a principal form of corruption.

In early 2005 the kppu determined that a Pertamina sale of two large oil tankers vio-

lated the law. In late 2005 the Supreme Court upheld the finding, opening the door for

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the kpk to investigate allegations of the corruption.90 In September 2005, the kppu ruled

that six soes were involved in a tender conspiracy for a Rp 1.7 trillion road construction

project in Riau. The kppu handed down sanctions against the soes and asked the kpk to

investigate the Riau Housing and Infrastructure Department. The project also investi-

gated by pks members of the Riau dprd.91

THE JUDICIAL COMMISSION

The Judicial Commission was established under Law 21/2004. Under this law, the Com-

mission has the authority to a) nominate to the dpr a list of possible appointees to the

Supreme Court, and b) review the conduct of judges and, if deemed appropriate, rec-

ommend sanctions to the Supreme Court.

The members of the Judicial Commission were not appointed until August 2005.

But the Commission quickly demonstrated its potential influence on the judiciary

through its investigation of a controversial West Java High Court ruling on the dispute

of the election results for the mayoral election in Depok, adjacent to Jakarta. The Com-

mission tried, with less success, to have 49 Supreme Court judges face “re-selection.”

In early 2006 the Judicial Commission requested that the President issue a govern-

ment regulation in substitute of a law (perpu) that would give the Commission the power

by to review the competency of the sitting Supreme Court Justices. This proposal would

significantly broaden the mandate and authority of the Commission vis-à-vis the

Supreme Court and as a result is considered very controversial within legal circles. The

proposal triggered resistance from the Supreme Court, the dpr and the Constitutional

Court. In August 2006, the Constitutional Court removed the Judicial Commission's

mandate to monitor judges, claiming a conflict with the constitution.

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THE LEGAL FRAMEWORK FOR F IGHTING CORRUPTION

THE EXISTING LEGAL FRAMEWORK

As noted at the beginning of this report, since 1998 quite a few laws that address cor-

ruption have been passed. The principal existing laws that provide the legal framework

for addressing corruption are:

∫ Law 28/1999 on Clean Government Free from Corruption, Collusion and Nepo-

tism, which, inter alia, defines corruption as a criminal act and requires public officials

to report their wealth.

∫ Law 31/1999 on Eradication of Criminal Acts of Corruption, which establishes

tougher penalties for corruption—but continues to define corruption only as actions

that cause losses to the state—and calls for the establishment of a Corruption Eradica-

tion Commission.

∫ Law 5/1999 on Monopolies and Unfair Trade Practices, which makes collusion and

other efforts to restrict competition illegal and established the kppu.

∫ Law 20/2001 on Eradication of Criminal Acts of Corruption, which amends 31/1999

by expanding the definition of corruption and more clearly specifies acts of corruption.

In July 2006, the Constitutional Court issued a decision to narrow the definition of cor-

ruption contained in Law 31/1999. Imprudent conduct, or irresponsible management,

may no longer serve as grounds for a corruption investigation.92

∫ Law 30/2002 on the Commission for Eradication of Corruption, which establishes

the kpk and the special corruption court.

∫ Laws 15/2002 and 25/2003 on money laundering, which criminalize money laun-

dering and mandate the establishment of the ppatk.

∫ Law 13/ 2006 on Witness and Victim Protection, was approved by the dpr in July

2006. Because of the nature of corruption, many anti-corruption cases rely on the testi-

mony of individuals who were part of the corrupt system or network. For this reason, it

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is helpful to have a law that provides both inducements and protections for people who are

prepared “to talk.” In July 2006 a law was passed providing a comprehensive set of pro-

tections for witnesses who testify in criminal cases, including crimes of corruption. The

law includes both whistleblower and witness protection, albeit with more limited rights for

whistleblowers than witnesses. The law also mandates the establishment of a special com-

mission and secretariat to ensure implementation of the provisions of the bill. For the law

to be effective, the next year should see a properly resourced commission and secretariat.

Overall, most observers feel that this body of laws provides an adequate legal basis

for addressing corruption. More at issue is the willingness and ability of the various agen-

cies of the government to fully and effectively implement these laws.

That said, there are several ways the legal regime to fight corruption can be strength-

ened. First, the existing evidence code is out-of-date, overly narrow, and inconsistently

adhered to by judges. Second, the Indonesian legal system doesn’t offer any incentives—

such as immunity or plea bargaining—for cooperating with investigations and prosecu-

tions. Third, efforts to fight corruption would benefit from the passage or revision of a

number of laws. These are described in the next section.

ADDITIONS OR REVISIONS NEEDED

The following new or revised laws are needed to complete and improve the legal regime

for fighting corruption:

Amendment of Law 30/2002 establishing the kpk and the Special Court for Cor-

ruption The kpk’s independence and effectiveness can be enhanced by two amendments

to the existing law: 1) to allow for the kpk to hire its own investigators and prosecutors,

and 2) to allow for greater flexibility in starting and stopping investigations. Addition-

ally, an amendment could be made to mandate the establishment of special anti-cor-

ruption courts outside of Jakarta.

Passage of a freedom of information law foi laws are important both for repression

and prevention. foi laws make it easier for investigators to know what information exists

and to access it. They serve as a potentially important preventive function by imposing

greater transparency on public officials.

There is a draft Bill on the Freedom to Obtain Public Information which grants

rights to access and disseminate information from public institutions and makes it pos-

sible to sue in order to access info.93 It will be important that the National Security Law,

which gives the authority to government officials to determine what is considered a state

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secret, is not used by corrupt officials to undermine the intent of a Freedom of Infor-

mation Law. The status of draft law now is still being discussed in the parliament.

Passage of a law on government procurement Implementation of Procurement kep-

pres 80/2003 is gaining momentum, with solid evidence of unit cost reductions in pub-

lic procurement. There seems to be less of a momentum when it comes to the national

procurement law, which is still pending. Approval by the dpr of the new procurement

law is now expected towards the end of 2007 only.

Clarification of the tax law In the proposed new law for taxation, Article 36 A (1) stip-

ulates punishment for tax officials who deliberately make a “mistake” which causes state

losses. However, this Article needs to be clarified so that the “mistake” would not just be

punishable with an administrative sanction applied by the tax office but also could be

treated as a corrupt practice punishable under Law 20/2001. Clarifying this point would

reduce the likelihood of conspiracy among tax evaders, tax officials and the tax office.

Amendment of the Judicial Commission law Currently the authority of the Judicial

Commission is limited only to monitoring and investigating judges and making recom-

mendations. The Judicial Commission seeks to amend Law 22/2004 to empower it to:

a) investigate all aspects of judicial administration, b) to make its recommendations for

suspension or termination of judges binding.94 This is a controversial proposal and is

unlikely to be considered by the dpr any time soon.

Passage of a law establishing the National Ombudsman (KON) An empowered

Ombudsman can play an important role in identifying and rectifying systemic problems

with government, including corruption. For the kon to be effective, its status and

resources need to be affirmed by a law. A draft law prepared by the kon has been sub-

mitted to the dpr, but it does not appear likely that the parliament will consider it any

time soon.

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NON-GOVERNMENTAL PARTNERS IN THE F IGHT AGAINST CORRUPTION

“In combating corruption, the government will not be able to work on its own.

The action to eradicate corruption requires the support from all layers of the society.”

—President Yudhoyono95

The Yudhoyono government’s anti-corruption efforts can not and do not operate in iso-

lation of Indonesian society and politics. Indeed, for official efforts to be successful, they

require the active involvement of individual citizens, civic organizations and the media

as whistleblowers and watchdogs, as analysts and educators, and as critics and advocates.

Reflecting this, in TI Indonesia’s 2005 survey of 1305 business people in 21 regions and

cities, most respondents looked to the kpk, business associations, the media and other

ngos to fight corruption. Very few expected the police, religious leaders or politicians to

play a role.96

The overall “non-governmental” landscape for fighting corruption is a mixed one:

On the one hand, since the fall of Soeharto, there has been a dramatic expansion in the

number of civil society organizations. On the other hand, the capacity and influence of

most ngo’s tends to be limited, and there are relatively few ngos that are able to serve

as competent anti-corruption watchdogs.97 Muslim social organizations have large mem-

berships, but haven’t adopted fighting corruption as a major cause. The capacity and will-

ingness of the media to expose corruption—as opposed to merely report on it—is mixed

but generally limited. It does not appear that many universities and think tanks have

made corruption a major subject of research and analysis; and the student movements

that used to demonstrate against kkn seem to have lost their energy.

Increasingly elements of the business community profess an understanding of the

long term costs of corruption, but few individual businesses are prepared to forego cor-

rupt practices if it means losing business. Political parties, with the possible exception of

pks, have shown little interest in addressing the manifold problems associated with money

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politics. Finally, decentralization creates the potential for greater local-level transparency

and accountability; but in many parts of the country, the capacity of powerful local officials

and wealthy businesses to engage in corrupt practices is still much greater than the capac-

ity of individuals, local ngos and the media to detect and deter the corruption.

This section describes the non-governmental organizations that already are or might

serve as partners with the government and the kpk. It looks at issue-based ngos, the two

major Muslim social organizations, business groups, the mass media and universities and

think tanks.

ANTI-CORRUPTION NGOS

Since the fall of Soeharto civil society has flourished quite significantly, especially the

number of non-governmental organizations (ngos). In 2003, LP3ES, an Indonesian

research organization, determined that there are about 450 leading ngoS; but the total

number is probably in the thousands since there is no formal registration process that

can produce reliable records.98

There are now quite a few national- and local-level ngos that engage in issue advo-

cacy, the promotion of “good governance” and/or increasing public participation in pub-

lic affairs. In the course of pursuing their particular interests, many of these ngos also

promote greater transparency and accountability; and some (particularly environmental

and legal reform ngos) directly address the issue of corruption. At the local level, ngos

with an anti-corruption agenda tend to focus on land transactions, allegations of cor-

ruption and collusion by local officials, and local budget analysis.

The number of ngos that are explicitly or exclusively concerned with corruption is

relatively small, but not insignificant. In a 2001 description of anti-corruption ngos, Tim

Lindsey wrote that “many observers agree that leadership of the anti-corruption sector

is probably limited to around 50 or so key organizations . . . Masyarakat Transparansi

Indonesia (mti) has identified 43 ngos across Indonesia that are specifically concerned

with anti-corruption . . .”99 One national network, the National Anti-corruption Move-

ment Network (Jaringan Nasional Gerakan Antikorupsi or GeRAK), consisted of 27

ngos from across Indonesia active in anti-corruption, including icw, tmi, and Walhi.

The GeRAK network was principally to amplify its members’ advocacy and public aware-

ness efforts in support of strong anti-corruption measures by the government.

What follows are brief descriptions of the major anti-corruption ngos or ngo net-

works that operate at the national (or in the case of fitra, semi-national) level.

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BOX 6: MAJOR ANTI-CORRUPTION NGOS AND NGO NETWORKS IN INDONESIA

INDONESIA CORRUPTION WATCH (ICW) ICW was established in 1998 and focuses on investigating,

exposing and tracking big corruption cases. Under the leadership of Teten Masduki, ICW has played a

leading role in some of the major corruption cases, including the Bank Bali case, the Texmaco case and

the fall of then Attorney General, Andy Ghalib. ICW works closely with the media and also has good rela-

tions with certain government officials, including the Ministry of Forestry which has invited them to

monitor corruption in forest concessions. ICW also has studied the prosecution and rulings in corrup-

the Supreme Court, but the nation’s highest legal body has taken no action.”10

TRANSPARENCY INTERNATIONAL INDONESIA TI Indonesia is the Indonesian chapter of Transparency

International, which promotes greater transparency in government and business. TI Indonesia produces

Indonesia also vigorously uses the TI Corruption Perception Index and Global Corruption Barometer to

campaign for stronger anti-corruption measures in Indonesia. At the local level, TI Indonesia assisted

Kabupaten Solok with the development of its “integrity pact.”

FITRA FITRA is an NGO network consisting of 23 NGOs that are engaged in promoting budget analysis

and transparency. It carries out systematic budget analysis in seven provinces and is a member of the

International Budget Project Network. FITRA exposed the DPRD budget scandal in Southeast Sulawesi

that became a national story and resulted in the investigation of 12 DPRD members.

INDONESIA TRANSPARENCY SOCIETY (MASYARAKAT TRANSPARENSI INDONESIA OR MTI) MTI was

established by Indonesian reformers, including a number of people who have become important players

in the government or in other prominent institutions like Erry Ryana Hardjapamekas (KPK), Sudirman Said

(BRR), Marie Muhammad (Indonesia Red Cross) and one of Indonesia’s leading Muslim intellectuals, the

late Nurcholis Madjid. Most of their work is on public education by providing an anti-corruption training

to regional government officials.

INDONESIAN PROCUREMENT WATCH (IPW) IPW was established in 2002 and is led by one of Indone-

sia’s most prominent Islamic scholars, Prof. Dr. Komaruddin Hidayat. The focus of its work is on supervi-

sion of and public advocacy on the procurement of goods and services, especially in the public sector.

Their activities have included: a program on supervision and investigation of goods and services pro-

curement within the KPU; capacity building for civil society groups to supervise procurement activities

in two locations in West Sumatra (Solok and Tanah Datar); and a national conference that resulted in the

establishment of a national network for the supervision of public goods and services procurement.

THE PARTNERSHIP FOR GOVERNANCE REFORM The Partnership for Governance Reform is a collabo-

rative effort between international donors, the Indonesian government and Indonesian civil society to

promote and support governance reform. It was set up in 2001 by the major international donors, includ-

ing the World Bank, the ADB and UNDP. In 2002 the Partnership conducted a comprehensive “Diagnos-

tic Study of Indonesian Corruption” based on a nationwide survey on corruption for three groups of respon-

dents—households, business, and government officials. The Partnership also was an early supporter of

the KPK and continues to work closely with it. The Partnership also plays a role in coordinating donor

support for anti-corruption efforts.

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an Indonesia Corruption Perception Index, which is based on a survey of businessmen in 21 cities. TI

tion trials. According to the “ICW has already submitted 20 different legal case studies toJakarta Post,

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MUSLIM SOCIAL ORGANIZATIONS

Indonesia’s two huge Muslim social organizations, Muhammadiyah and Nahdlatul

Ulama (nu), represent two potentially significant actors in the fight against corruption.

Each organization claims to have between 15 and 30 million followers. Each has strong

networks that reach to the local level, with Muhammadiyah mainly in Central Java and

parts of Sumatra and nu mainly in East Java.

The two organizations have many affiliated organizations (such as youth and

women’s organizations), and some of these have been active in monitoring elections since

1999. The groundbreaking event regarding their involvement in anti corruption was in

2003 when nu, Muhammadiyah and the Partnership for Governance Reform signed a

Memorandum of Understanding (MoU) to address corruption. Under the MoU, nu and

Muhammadiyah have done the following:

Nahdlatul Ulama has:

∫ Collaborated with Muhammadiyah to conduct pilot workshops on the analysis of

corruption and building an anti corruption movement in Kendal, Magelang, Blitar and

Probolinggo.

∫ Organized roundtable discussions to compile Islamic themes and interpretations to

support anti-corruption efforts.

∫ Created a website on anti corruption at nu on-line which includes a web-based “PO

Box 1926” for receiving complaints of corruption.

Muhammadiyah has:

∫ Held an event called “Halaqoh Tarjih” in August 2005 that was attended by 80

Muhammadiyah religious leaders from 19 provinces. The leaders formulated a compre-

hensive application of Islamic Law relating to corruption.

∫ Provided advocacy training and monitoring of local budgets in Lampung, Central

Java, Yogyakarta and West Sumatera.

∫ Published monthly a Friday sermon in the Anti-Corruption Supplement in Suara

Muhammadiyah magazine.

The potential impact of anti corruption drives carried out by the two organizations

is enormous. They have loyal and vast constituencies that can be mobilized. Unfortu-

nately, within the two organizations, and particularly within nu, there are disagreements

over the extent to which the organizations can and should address corruption. The dis-

agreement seems to be one of the differences between traditionalists and progressives in

nu. Traditionally, nu kyai and their pesantren have been beneficiaries of government

funds and the largesse of government officials. These payments by officials, which often

take the form of gifts or donations, are not easily differentiated from corruption. Hence,

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traditionalists are concerned about how nu comes to define corrupt practices, whereas

progressives think that such payments do in fact co-opt nu’s kyai and therefore should-

n’t be permitted. As for Muhammadiyah, the new chairman, Din Syamsuddin, appears

less interested in placing corruption high on his agenda. As a result, it seems unlikely

that nu and Muhammadiyah will undertake major anti-corruption initiatives in the fore-

seeable future.

BUSINESS ASSOCIATIONS

In Indonesia, especially during New Order era, business associations like Young Entre-

preneurs Association (hipmi) and the Indonesian Chambers of Commerce (kadin), have

been used as vehicles for acquiring government contracts for indigenous (as opposed to

Indonesian-Chinese) businessmen. hipmi, for example, was established in the 1970s

by young contractors of the state oil company, Pertamina. Thus historically the mem-

bers of these associations have been among the beneficiaries of corruption and collusion.

For this reason, it is difficult to be optimistic that Indonesian businesses, individually or

collectively, will take a leading role in fighting corruption.

However there is an encouraging sign by kadin. Its Good Corporate Governance

Standing Committee, working with TI Indonesia, has run an Anti Bribery Program for

its members. The program consists of “anti-bribery clinics” and the publication of anti-

bribery training modules, guide books and case studies. In the future kadin is planning

to set up similar program for “Good Corporate Governance,” consisting of a “clinic,”

trainings and publications.

MASS MEDIA

The freeing of the media following the fall of Soeharto resulted in a dramatic increase in

the quantity and variety of the media in Indonesia. However, the rapid expansion of the

media has created a very mixed picture in terms of quality and professionalism: some first-

rate newspapers, magazines and radio and television stations co-exist with many more of

much lower quality. Overall, most Indonesians get their media-sourced information

overwhelmingly from TV and radio, with newspapers and magazines following far behind.

The mass media potentially can play multiple roles in addressing the problem of

corruption. These include: 1) exposing corruption, 2) reporting on allegations and pros-

ecutions of corruption, 3) educating the public in ways that will help them fight cor-

ruption, and 4) providing a forum for airing grievances and debating issues pertaining

to corruption. The Indonesian media performs all of these functions to some extent, but

could do considerably more in each.

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107

The mass media in Indonesia, whether print and broadcast, have a mixed track

record with regard to exposing corruption. Only a few magazines and newspapers have

the capacity and the commitment to doing serious investigative reporting. The most

prominent one is the weekly newsmagazine, Tempo. As for most of the other weekly mag-

azines or daily newspapers, usually the corruption cases reported are based on the inves-

tigative work of ngos, legal and political experts, the kpk, Timtas Tipikor or the Police.

Rarely do they come up with stories based on the investigative work of their own jour-

nalists. A couple of mainstream newspapers—for example, Kompas and Media Indone-

sia—have their own research departments. However, they only occasionally conduct

public surveys or publish extensive analyses on corruption- related topics and cases. And

most radio and television stations (beside news channel Metro TV) often just recycle the

stories that have been reported in the print media.

On the local level only big local media such as the Jawa Pos group occasionally pub-

lish investigative reports. For instance, they helped to expose the budget misuse in Kabu-

paten Sidoarjo, East Java, which implicated the dprd chief and his deputies in 2004.

Even with the small number of media that provide investigative reports, they still

have to face a risk of being victims of the criminalization of journalistic works under the

current criminal code (kuhp). Court verdicts in media related legal cases are indica-

tors of the powerlessness of the Indonesian media in the face of libel law, especially when

wielded by politicians and well-connected, wealthy businessman. There were about 30

libel prosecutions and civil actions against the media over the last five years that were

coupled with significant claims for damages.

SCHOOLS, UNIVERSIT IES AND THINK TANKS

Through its preventive mandate kpk is currently conducting anti-corruption workshops

with Junior Secondary Schools (smp) and senior secondary schools (sma). The aim is to

socialize norms of integrity and anti-corruption in the youth. Up to now, only one Junior

Secondary High School (smp) has incorporated anti-corruption into the curriculum.

It is currently being debated whether it is more effective to make anti-corruption

values mandatory curriculum or just an extra-curricular activity. By making it manda-

tory there is a concern that it will increase the work load of students, who already have

a full curriculum. Another risk is that a mechanical preaching approach could result in

skepticism towards the issue, much like the fate of the “Moral Education according to

Pancasila” (pmp) course during the Soeharto period. Thus the Ministry of National

Education has not yet decided to make anti-corruption a mandatory curriculum topic.

At a more general level, academia and think tanks have devoted surprisingly lim-

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ited institutional resources to addressing corruption. A superficial survey of these insti-

tutions doesn’t reveal any major programs or publications that demonstrate a desire to

play a leading role in addressing corruption. The bulk of research and publishing being

done on corruption is being carried out by ngos such as mti, icw, TI Indonesia and the

Partnership for Governance Reform.

Although a small number of scholars have been involved in the public debate on

corruption cases/issues, for the most part they are involved as individuals rather than rep-

resenting their institutions. Only a small number of universities are actively involved in

addressing corruption. The Gadjah Mada University (ugm), through its Center for Pop-

ulation and Policy Studies (cpps) collaborated with the World Bank on conducting a

Governance and Decentralization Survey (gds). Besides the survey, the gds comprised

various activities such as workshop, seminars and policy discussions. At fhui, the newly-

established Center for Law and Good Governance Studies (clgs), with support from the

Partnership, is mapping the extent to which specific government ministries are achiev-

ing the targets set out under inpres 5 and ran-pk. In August 2006, the Syarif Hidayat-

ullah Islamic University (uin) began piloting an anti-corruption course at uin campuses

in Medan, Malang, Banjarmasin and Riau.

It would appear that there exists enormous potential for Indonesian universities that

have departments relevant to anti-corruption issues (criminology, sociology, anthropol-

ogy, and politics)—like UI, ugm, Airlangga, Diponegoro, etc.—to play more active roles

in studying corruption and evaluating the impact of anti-corruption programs.

It is ironic that university students, who were so incensed by Soeharto-era kkn, seem

to have lost their interest in actively addressing corruption. Regrettably, it appears that

the student movement today lacks the unity and the intensity of purpose to once again

play a leading role. However, there is at least one recent example of student activism

regarding anti-corruption. In August 2005 the Student Executive Body at ugm estab-

lished an “Anti-Corruption School” for university juniors. The curriculum covers the

dynamics of corruption, judicial corruption, corruption in political institutions and the

bureaucracy, corruption in budgeting and how to investigate and monitor corruption.

The ultimate objective of the school is to create a future generation of Indonesian lead-

ers who will reject corruption.

71


111

112

MEASURING POLIT ICAL WILL AND PROGRESS

Before concluding, it is necessary to address two related questions: First, looking to the

future, how can we gauge the national government’s “political will” and ability to com-

bat corruption? And second, how can we determine the extent to which progress is actu-

ally being made in reducing corruption? This section addresses both of these questions.

INDICATORS OF POLIT ICAL WILL AND ABIL ITY TO COMBAT CORRUPTION

The government’s political will can be measured by its willingness to take steps that are

intended to prevent and/or punish corruption. However, a government may have the

will, but not the ability—which is a function of authority, knowledge, competency and

resources—to effectively address corruption. Thus, both will and ability are needed. The

actions that would indicate continuing political will and ability on the part of the Indone-

sian government include the following:

∫ The appointment of a senior minister, adviser or coordinator for anti-corruption.

∫ Develop a national anti-corruption strategy that is focused, identifies priorities and

commits resources.

∫ Ensuring that special bodies including the kpk, Special Court for Corruption, ppatk,

kppu and kon have the staff and financial resources they need to be effective.

∫ Passing or amending laws that will help prevent or punish corruption as outlined

in Section VIII of this report (per item 11, no 5 in inpres 5/2004).

∫ Providing the resources and regulatory framework needed to produce meaningful

and lasting reforms in the ago and police.

∫ The continued increase in the number of corruption cases investigated and suc-

cessfully prosecuted by the ago and Timtas Tipikor (per item 11 no 9, inpres 5/2004).

∫ The acceleration of civil service reform (per items 3-5 in inpres 5/2004).

∫ The continued increase in the number and quality of audits as well as the rational-

73


ization of auditing functions at both the national and sub-national levels.

∫ The acceleration of procurement reform per keppres 80/2003 (item 6 in inpres

5/2004).

∫ Accelerate efforts to reduce corruption in tax and customs administration (per item

11 no 2 in inpres 5/2004).

∫ Setting a deadline and impose sanctions for officials who haven’t submitted wealth

reports to the kpk (in support of items 1 and 2 in inpres 5/2004).

∫ Supporting efforts to (a) increase the transparency of political party financing, (b)

increase public campaign finance (in conjunction with enforcement of limits on private

funding), and (c) reduce the propensity for money politics in the dpr and dprds.

MEASURING PROGRESS IN REDUCING CORRUPTION

How will we know what impact the government’s anti-corruption efforts are having on

corruption? It is, of course, exceptionally difficult to accurately measure corruption or

changes in the level of corruption. The tools applied up to now in Indonesia for this task

include:

Surveys of public perceptions. TI Indonesia does at least one survey a year; other

organizations, such as the Partnership for Governance Reform undertook a diagnostic

of corruption based on the World Bank methodology surveying businesses, households

and public servants.

Sector specific surveys such as the World Bank’s investment climate surveys, the

surveys by Regional Autonomy Watch (kppod) and the Bank’s ongoing rural investment

climate survey. It would be useful to conduct additional surveys or focus group discus-

sions to see if attitudes and practices are changing within the bureaucracy, police and

judiciary.

Monitoring and analysis by independent agencies such as the kpk, ppatk, kppu,

kon and the Judicial Commission.

Monitoring and analysis by NGOs, academics and the media. ngos like icw

and TI Indonesia are beginning to produce some solid trends analysis. This needs to be

bolstered with more and better monitoring and analysis by local ngos and by academ-

eral, factual questions on corruption.

Tracking trends in the audit findings of the BPK and BPKP. Tracking audit

findings that point to corruption might provide a way to identify changes in the most

prevalent types of corrupt practices.

74


ics and the media. The Institute of Economic and Social Research (LPEM) at the Uni-

versity of Indonesia undertook a major governance survey in 2001–2002, which also in-

cluded sev

Monitoring and evaluation of corruption in large-scale donor-funded devel-

opment projects. If well-designed, the monitoring and evaluation systems of large-scale

development projects like the kdp, education and roads projects provide significant

insights into the extent and character of corruption in government projects.

75


CONCLUSION

To conclude, as of mid-2006, the anti-corruption track record of the Yudhoyono gov-

ernment and the kpk is positive and encouraging in some respects, but disappointing

and worrisome in other respects. The mixed record is, to a considerable extent, a reflec-

tion of the severity and complexity of the problem of corruption in Indonesia. But it also

is a consequence of shortcomings inherent in some of the Yudhoyono administration’s

approaches to addressing corruption.

THE CHALLENGE OF TRANSLATING PRESIDENTIAL COMMITMENT

INTO BUREAUCRATIC ACTION

It is important to begin by acknowledging that the President is genuinely committed to

fighting corruption, and he is supported in this effort by a small but significant constel-

lation of reform-minded actors inside and outside the government who have the poten-

tial to make a difference. Moreover, his comprehensive approach, with its emphasis on

both punitive and preventive measures, has considerable promise.

However, there exist real political and bureaucratic constraints on the pace and scope

of reform. Because the president’s cabinet is essentially a coalition government, his abil-

ity to push (or punish) his Ministers and other senior officials is limited. And because

the government’s anti-corruption agenda involves action by many parts of the govern-

ment, it requires continual and active leadership. It doesn’t appear that the office of the

president has the capacity to continually press the anti-corruption agenda. By way of

example, the government’s “National Action Plan for the Eradication of Corruption”

(ran-pk) is in danger of becoming nothing more than the bureaucracy’s way of doing

the minimum required to show the president that it is complying with inpres 5.

As a result, the President’s most significant action to improve governance has not

been the introduction of institutional reforms; but rather clamping down on standard

77


practices such as cronyism in appointments, political favoritism in commercial and reg-

ulatory decisions, and political intervention in independent commissions and oversight

bodies. The President has been less proactive in developing and implementing a strategy

of institutional reforms to reduce the incentives and opportunities to engage in corruption.

THE IMPORTANCE—AND L IMITS—OF PUNITIVE MEASURES

To date, the most pronounced change has been in the area of punishing corruption.

There are a number of significant, and in some respects unprecedented, steps being taken

to uncover and punish corruption—such as the invigoration of audits, investigations and

prosecutions, and the pressure being applied to reform the ago, the police and the courts.

These punitive measures are important because they are sending a message that engag-

ing in corruption is no longer risk-free. But given the still limited capacity in Indonesia

for exposing and prosecuting corruption relative to the pervasiveness of the problem, it

is unlikely that by themselves, these measures will fundamentally change the risk-reward

calculation.

The kpk has posted some important successes with its investigations and prosecu-

tions, and it has helped to energize other anti-corruption efforts. However, it has been

less successful promoting preventive reforms, and its effort to collect and investigate

wealth reports of government officials appears lack luster. Even if the kpk excels in pros-

ecuting corruption, its overall impact will be limited if there aren’t significant and sus-

tained reforms in the ago, police, judiciary, auditing and procurement. As Stephen

Sherlock has observed, “. . . an anti-corruption body will be effective only to the extent

that it operates within a framework of accountable and transparent judicial, bureaucratic

and legislative institutions.”

MANAGING EXPECTATIONS AND FEARS

It appears there are high public expectations regarding the government and kpk’s anti-

corruption efforts. The 2005 Transparency International Global Corruption Barometer

indicates that Indonesians believe there has been a decline in corruption over the last

three years and are optimistic that it will decline even more over the next three years. It

is important that the government and kpk manage expectations, deliver on their prom-

ises, and communicate their priorities and progress to the public.

There is a risk that the government and kpk’s anti-corruption initiatives will pro-

voke a political backlash and/or public disappointment. Potential problems include:

∫ The credibility of anti-corruption efforts could be undermined by the appearance

of partisanship and/or selectivity.

78


113

∫ Efforts to impose reforms on the judiciary could be seen as undermining the inde-

pendence of the judiciary.

∫ The failure of anti-corruption efforts to punish “big fish” or to improve the avail-

ability or quality of public services could fuel public frustration and cynicism.

Finally, the possibility also exists that a heavy emphasis on repressive measures could

cause risk-averse bureaucrats from making any decisions, thereby further slowing down

the functioning of national and local governments. In early 2006 Minister of Finance

Sri Mulyani warned: “Deterrence is good, but too much deterrence makes everyone freeze.

They do not want to make any decisions because they are afraid.” It seems premature

to worry very much about the possible negative consequences of an anti-corruption drive

that, to date, has had only limited impact. However, the concern does highlight what

ultimately is involved in effectively addressing bureaucratic corruption in Indonesia,

namely significantly changing the existing system of bureaucratic decision-making, which

is based principally on patronage, discretion and rent-seeking. But if the existing system

is changed, there needs to be a new system to replace it. This points to the urgency of

implementing meaningful civil service reform—including reforms that clarify adminis-

trative procedures and responsibilities—so that honest civil servants can perform their

significant and lasting decline in the level of corruption in Indonesia, there needs to be

further progress in a number of areas. These include:

First, for ran-pk to be meaningful, it should be used by the government as the start-

ing point for creating a genuine anti-corruption strategy that establishes priorities, rec-

ognizes the need for sequencing, and provides resources, incentives and sanctions. The

development of this strategy could be used to generate more meaningful participation

of the business community and civil society.

Second, there must be no let up in the ongoing effort being made to increase the

integrity and capacity of the ago, the Police and the courts, including the Special Court

for Corruption.

Third, it is critical that the kpk and other independent oversight and accountabil-

ity agencies have the authority and resources they need to carry out their mandates.

Fourth, the government must take meaningful steps to increase transparency and

disclosure in budgeting, procurement and project implementation. In effect, this involves

introducing a new culture and incentive structure within the bureaucracy, and especially

79


For the Yudhoyono government and other anti-corruption agencies to produce a

jobs with some measure of confidence that they’ll be rewarded rather than punished.

THE ROAD AHEAD

114

in Echelons 1 and 2.

Fifth, governments at the national and sub-national levels must increase the scope,

quality and integrity of internal and external auditing.

Sixth, with regard to combating corruption at the local level, one of the most impor-

tant things the national government can do is hasten and broaden the reform of law

enforcement, including the police, ago and judiciary.

Seventh, civil society can play a larger and more important role than is currently the

case. The sectors of civil society where it appears there is the most upside potential include

universities, students, the media and professional associations.

Finally, given Indonesia’s status as a new democracy, serious attention needs to be

paid to addressing the corrupting and corrosive influence of “money politics” on politi-

cal parties, elections and legislatures.

80


APPENDIX 1

EXAMPLES OF MAJOR CORRUPTION INVESTIGATIONS AND PROSECUTIONS

Major corruption cases recently prosecuted or currently being prosecuted:

∫ Aceh Governor Abdullah Puteh convicted; several other Governors and Bupatis have

also been prosecuted.

∫ Chairman and members of the kpu have been convicted.

∫ Former Minister of Religious Affairs convicted for the misuse of Haj funds.

∫ Trial of former Bank Mandiri ceo and two ex-directors for the alleged misuse of

Bank loans.

∫ More than 100 dprd members have been charged with corruption. 43 dprd mem-

bers in West Sumatra were convicted of graft in 2005, but most were still free as of Jan-

uary 2006.115

∫ Former Chairman on Investment Coordinating Board has been convicted for mis-

appropriating Rupiah 30 billion of state funds.

∫ A former kpk investigator has been convicted for extortion.

∫ Former Head of polri’s Criminal Investigation Unit has been convicted for receiv-

ing bribes in the bni case.

∫ Case against South Jakarta District Court Judge for extorting money from one of

the key witnesses in the jamsostek case.

Ongoing corruption investigations or cases:

∫ Investigation of the misappropriation of pt jamsostek funds by its President.

∫ Investigation of corruption in the State Secretariat.

∫ Investigation of pt pertamina oil smuggling.

∫ Misappropriation of pln funds by directors and commissioners.

∫ Former head of ibra, for collusion in the sale of ibra assets.

∫ Former Police Chief and other senior police officials involved with bni investigation.

∫ Ministry of Defense helicopter procurement.

∫ Investigation of misuse of forest concessions.

∫ Misappropriation of blbi funds: a number of bank owners remain abroad; some

have been convicted. Absence of an extradition treaty with Singapore a problem. ago

has vowed to prosecute seven bank owners in absencia.116

∫ Investigations of dpr members, dprd members, Governors/Deputy Governors,

Bupatis, and Mayors.

81


APPENDIX 2

CASES HANDLED BY T IMTAS T IPIKOR SINCE ITS ESTABLISHMENT IN 2005

82

1

2

3

4

5

6

The Ministry of Religious Affairs

suspects:

Prof. Dr. Said Agil Munawar, former

Minister of Religious Affairs; and

Drs. Taufik Kamil, former Director

General of Islam Society and Haj

Management

State Owned Insurance Company

JAMSOSTEK suspects:

Achmad Djunaidi, former President

Director; and

Andy R. Alamsyah, former Director

of Investment

State Owned Oil Company

PERTAMINA

Suspects:

ZA, Vice President Administration

and Finance Petral; and

D.B.G

State Secretary

Senayan Sport Center

Ministry of Defense

Violations of Haj fund

disbursement

Violations of Medium

Term Notes Purchasing

Fund

Violation on Petral’s

fund allocation in Credit

Suisse Singapore (CSS)

without approval of the

Board

Violations of State

Finance on Procurement

system of the Asia Africa

Summit 2005

Violation of law on

extension of land using

right no. 26 and 27

Indobuildco Hotel Hilton

Violations of State

finance on procurement

of M 17 helicopter series

Rp 732.65

Billion

Rp. 311

billion and

Rp. 411

billion

About US$9

million

About Rp

600 million

Waiting for

BPKP

appraisal

Waiting for

BPKP

appraisal

Appeal to

high court

Appeal to

high court

Investigation

Investigation

Investigation

Investigation

No Cases Violations State Loss Stage in legal

Process


83

7

8

9

10

State Owned Enterprise Pelindo

State Owned Enterprise PT. Pupuk

Kaltim

State Owned Enterprise PT.

Angkasa Pura

Case of State Owned Enterprise PT.

Telkom

Violations of

subordinated bonds

offering, which is not in

line with the regulation

and the privatization

program of PT. Pelindo

Subsidiary (PT. JICT)

a) Violation of office

facilities (house and car

allowances) for top

management;

b) Violation of regulation

on export facilities

Violation of land right

guarantee over 18 Ha

land at Soekarno Hatta

airport area without

approval of PT. Angkasa

Pura

Violation of regulation

regarding cooperation

with third party

Waiting for

BPKP

appraisal

Waiting for

BPKP

appraisal

Waiting for

BPKP

appraisal

In appraisal

process by

Telkom

internal

auditor

Investigation

Investigation

Pre-

Investigation

Investigation

No Cases Violations State Loss Stage in legal

Process

Sources: “Attorney General Office Agenda in Combating Corruption”, Presentation Material by

Attorney General, Abdul Rahman Saleh in JFCC Forum, January 11, 2006; The Attorney General Office’s

Performance Assessment Report, September 5, 2006.


APPENDIX 3

BREAKDOWN OF CASES HANDLED BY THE KPK BETWEEN 2004–2006

84

No Description Subtotal Total

1 Total Pre-Investigative Cases Handled in 2005 31

Pre-Investigated Cases from 2004 continued in 2005 2

Pre-Investigative Cases started in 2005 29

2 Total Cases Continued to Investigative Level in 2005 19

Investigative Cases from 2004 continued in 2005 0

Investigative Cases started in 2005 19

3 Total Cases Continued to Prosecution Level in 2005 19

Prosecutions Begun in 2004 continued to 2005 2

Cases at Prosecution Level started in 2005 17

4 Total Cases Continued to Sentencing Level in 2005 5

Execution from 2004 continued to 2005 0

Cases at Sentencing Level started in 2005 5

5 Status of Cases at Prosecution Level in 2005 19

At Anti Corruption Court 9

Being Appealed 5

Cassation 0

Final Ruling (including 2 cases from 2004) 5

6 Cases continued to 2006 (until May) 41

Pre-investigation level 14

Investigation level 7

Prosecution level 20

At Anti Corruption Court 10

Being Appealed 8

Cassation 2

Note: At the pre-investigative level, the unit of measurement is cases. At the investigative level, the

unit of measurement is the File Case. As an investigation progresses, one File case can be divided into

multiple cases.

Sources: Suara Pembaruan, January 12, 2006; Material for hearing between KPK and commission III

of DPR on June 20, 2006.


APPENDIX 4

CASES THAT ARE BEING PROCESSED IN SPECIAL COURT FOR CORRUPTION

JANUARY—OCTOBER 2006

85

1

2

3

4

5

6

The Supreme Court defendants:

Sudi Achmad, former Supreme

Court staff;

H. Suhartoyono, former Supreme

Court Staff;

R.A. Harini, lawyer and former judge

Malem Pagi Sanuhaj, former

Supreme Court Staff;

Sriyadi, former Supreme Court Staff;

Pono Waluyo, former Supreme

Court Staff

Indonesia’s Investment Coordinat-

ing Board

Defendant: Theo Timeon/ former

Chairman

National Election Commission

(KPU) defendants:

Daan Dimara, former member of

KPU;

Untung Sastra Wijaya, former

member of KPU

Corruption Eradication Commission

(KPK) defendants: Suparman,

former Investigator

Indonesia Consulate General in

Penang, Malaysia defendants :

Erick Hikmat Setiawan, former

Consul General;

Muhammad Khusnul Yakin Payopo,

former head sub-directorate

immigration

National Indonesia Radio Station

(RRI) defendants:

Suratno, former Director of Finance

Fahrani Suhaimi, President Director

of Budi Jaya Corp.

Try to bribe judge in

Supreme Court related

to prominent business-

man Probosutedjo’s

misusing Reforestation

fund Case

Implementation of

Indonesia Investment

Year Project year

2003–2004

Direct appointment of

P.T. Royal Standard for

Ballot Seal printing in

2004 Legislative

Election

Extorsion and bribe

Charging illegal fee for

Passport processing

Procurement of trans-

mitting equipment

Rp 30 billion

Rp 3.5 billion

Rp 513

million

Rp 20 billion

Sentenced

Sentenced

Sentenced

Sentenced

Sentenced

(Ercik

Setiawan)

Prosecuted

(Muhammad

Payopo)

Appeal to

high court

No Cases Violations Estimated Stage on

State Loss Court


86

7

8

9

10

11


(KPU) defendants:

Bambang Budiarto, former member;

Safder Yussac, former member;

and others

State Owned Enterprise P.T.

Sandang Nusantara suspects:

Kuntjoro Hendrartono, former

President Director;

Liem Kian Yin, Supplier


(KPU) defendants:

Rusadi Kantraprawira, former

member;

Achmad Rojadi, former member


(KPU) defendant:

Nazaruddin Sjamsuddin, former

chairman;

Hamdani Amin, former Head of

Finance Bureau

Directorate Budget in Ministry

of Finance:

Raden Soedji Darmono, former

Director;

Ishak Harahap, former head of

Sub-directorate

Procurement of Books

and other print materials

for election 2004

Asset Sales misappropri-

ation

Procurement for Ink in

2004 legislative election

Procurement for Insur-

ance Service for KPU

employee and bribe

from suppliers

Receiving bribe related

to National Election

Commission (KPU)

Rp 20 billion

Rp 70 billion

Rp 1.382

billion

Rp 5.032

billion

Appeal to

high court

Appeal to

high court

Appeal to

high court

Permanent

ruling

Cassation

No Cases Violations Estimated Stage on

State Loss Court

APPENDIX 4 (CONTINUED)

Source: from various Indonesia national newspapers.


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Law 20/ 2001 on Amendment to Law 31/ 1999 on Eradication of Criminal Acts of Corruption

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Law 30/ 2002 on the Commission for Eradication of Corruption in Indonesia

Law 17/ 2003 on State Finance

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Presidential Decree (keppres) 18/ 2000 on Guidelines on Government Procurement

Presidential Decree (keppres) 80/ 2003 on Public Procurement

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Sherlock, Stephen (2002). “Combating Corruption in Indonesia? The Ombudsman and the Assets Audit-ing Commission.” Bulletin Indonesia Economic Studies Vol. 38 No. 3 December 2002. Canberra:Australian National University

Transparency International (2005) Global Corruption Barometer 2005. Berlin: Transparency International

Transparency International Indonesia (2005). Indonesian Corruption Perception Index 2004. Jakarta: Trans-parency International Indonesia

Tupai, Roy. President Proposes Pay Increases for Supreme Court Chief. Paras Indonesia, December 21, 2005 athttp://www.laksamana.net/read.php?gid=150.

usindo (2005). Transparency and Anti-Corruption Challenges in Indonesia.

http://www.usindo.org/Briefs/2005/Corruption%20Conference%2010-12-05.htm

World Bank (2003). Indonesia Country Assistance Strategy FY 2004–2007. Jakarta: World Bank Office Jakarta

World Bank (2003). Combating Corruption in Indonesia: Enhancing Accountability for Development.Jakarta: World Bank Office Jakarta

World Bank (2005) A Financial Sector Agenda for Indonesia. Jakarta: World Bank Office Jakarta. Availableat http://www.worldbank.or.id.

World Bank, Justice for the Poor Program (2006). Local Government Corruption Study —WB Collabora-tion Capacity Building of Anti-Corruption NGO at Local Level. Idea Note. September, 2006.

World Bank, Justice for the Poor Program (2006). Temuan Awal Penelitian “Korupsi di Tingkat Lokal.”Power Point Presentation, October 12, 2006

PERIODICALS

Jakarta PostKompasMedia IndonesiaSuara PembaruanTempo Weekly Magazine, Indonesian and English editions

ON-LINE PERIODICALS

Detikcom (http://www.detik.com/)The Jakarta Post.com (http://www.thejakartapost.com/headlines.asp)Kompas Cyber Media (http://www.kompas.com/)Paras Indonesia (http://www.laksamana.net/)Tempo Interaktif (http://www.tempointeraktif.com/)Suara Karya Online (http://www.suarakarya-online.com)President Republic of Indonesia (http://www.presidensby.info/)


ENDNOTES

1. The term “government” is used throughout this report as short hand for the executive branch of thenational government. The term “government” suggests an entity in which leadership issues a coherent setof policies that then are implemented by their subordinants, including the bureaucracy. It is important tonote that the authors of this report do not assume a unity of purpose within the Indonesian government,especially with regard to implementing the bureaucratic reforms central to combating corruption.

2. It is important to note that a number of agencies that are key to fighting corruption in Indonesia (suchas the kpk, bpk, ppatk, kppu and Judicial Commission) are, in fact, independent agencies and not part ofthe executive branch.

3. The leaders of some political parties assert that many of these cases are the result of unclear and chang-ing government regulations and therefore should be dropped.

4. Tempo, October 26–November 1, 2004.

5. The World Bank, Combating Corruption in Indonesia, pgs. 48‒49.

6. See www.transparency.org/policy_research/surveys_indices/cpi.

7. Kaufmann D., A. Kraay, and M. Mastruzzi 2006: Governance Matters V: Governance Indicators for1996‒2005.

8. See Henderson & Kuncoro: “Sick of Local Government Corruption? Vote Islamic,” nber Working Paper,March 2006.

9. The term “government” is used throughout this report as short hand for the executive branch of thenational government. The term “government” suggests an entity in which leadership issues a coherent setof policies that then are implemented by their subordinants, including the bureaucracy. It is important tonote that the authors of this report do not assume a unity of purpose within the Indonesian government,especially with regard to implementing the bureaucratic reforms central to combating corruption.

10. It is important to bear in mind that a number of agencies that are key to fighting corruption in Indone-sia (such as the kpk, bpk, ppatk, kppu and Judicial Commission) are, in fact, independent agencies and notpart of the executive branch.

11. There are a number of important elements of the fight against corruption that are not included underinpres 5 and ran-pk. These are also discussed in this report.

12. See Combating Corruption in Indonesia, Stealing From the People, Challenging Corruption in Asia….

13. The Partnership is supporting a study of ministries’ performance vis-à-vis the ran-pk.

14. Vedi Hadiz, in Challenging Corruption in Asia, pg. 228.

15. Said and Suhendra, in Stealing From the People, Book 1, pg. 109.

16. Additionally, Indonesia’s two largest providers of development financing, the Asian Development Bankand the World Bank, which have been criticized for turning a blind eye to corruption and profligacy dur-ing the Soeharto era, initiated efforts to reduce corruption in development projects. According to the WorldBank, it “revisited its entire strategy toward Indonesia, agreeing with the government to cut lending to athird of past levels, speaking out on issues of corruption, and shifting it focus toward governance, anti-cor-ruption and community development programs.” (See Combating Corruption in Indonesia, pgs. 188‒200.)

91


92

17. Emmy Hafild, Corruption Eradication in Indonesia: A Case Study (2004).

18. According to Combating Corruption in Indonesia: “The state finance law moves to a unified budget (com-bining development and recurring spending) with a performance orientation requiring line agencies to sub-mit performance indicators and reports to Parliament and a medium-term framework. The law brings moreclarity to the roles and responsibilities in the budget process and to its organization and introduces a keyaccountability mechanism by making the treasurer personally responsible for losses to the state.” pg. 67.

19. Said and Suhendra, in Stealing From the People, Book 1, pg. 109.

20. See www.transparency.org.

21. State Address on the Bill on the State Budget for the 2006 Fiscal Year and its Financial Note before thePlenary Session of the House of Representative on August 16, 2005.

22. “Agenda of the First 100 Days of President SBY’s United Indonesia Cabinet.”

23. Quoted in Tempo, February 1‒7 2005.

24. http://www.presidensby.info/index.php/fokus/2006/10/03/1090.html.

25. Time Asia edition, November 8, 2004.

26. Fifth article of keppres 11⁄2005.

27. Three of inpres 5’s instructions are not addressed in this report: 1) introducing “good governance” prin-ciples in soes, 2) injecting anti-corruption education into school curricula, and 3) carrying out an anti-cor-ruption public information campaigns.

28. Stephen Sherlock, “Combating Corruption in Indonesia?” bies, pg. 381.

29. See “Reform Developments in the Attorney General’s Office of Indonesia,” Mas Achmad Santosa, Reportfrom the ADB Symposium on Challenges in Implementing Assess to Justice Reforms, Asian DevelopmentBank, Manila, (2005), pgs. 72‒73.

30. See “The Attorney General Office’s Performance Assessment Report (Summary),” Kejaksaan RepublikIndonesia (undated), pg. 5.

31. Ibid, pg. 7.

32. Ibid, pgs. 9‒10.

33. ADB, Country Governance Assessment, Indonesia, pg. 101.

34. ADB Country Governance Assessment, Indonesia, pg. 94.

35. There was a hope in early 2005 for an overhaul in the tax system when kadin was asked to jointly drafttax law amendments by Ministry of Finance’s Directorate General of Taxation. The revisions included LawNo. 16⁄ 2000 on general taxation arrangements and procedures, law no 17⁄ 2000 on income tax and Law no18⁄ 2000 on Value-added tax (vat) on good and services and luxury sales tax.

36. However, the amendments, which were initially hailed as business friendly, were later found to containunfavorable articles, which granted more authority to tax officials, who are prone to power abuse. The amend-ments contained changes altered unilaterally by the tax officials when they were about to be submitted to thePresident. With intensified opposition from the public, the government eventually agreed to accommodatethe request for a more friendly tax regime during deliberation, especially under the new finance minister. Still,it has caused the delay for the government to overhaul the tax regime from this year into early 2007.


93

37. Jakarta Post, 24 January 2006, pg. 1.

38. Indonesia Corruption Watch. 2005. “Evaluasi Setahun Pemerintah SBY-Kalla: Komitmen Tanpa Dukun-gan.” ICW: Jakarta, pg. 20.

39. See the ADB’s Country Governance Assessment, Indonesia, pg. 47.

40. See the ADB’s Country Governance Assessment, Indonesia, pgs. 49‒50.

41. Within the team there were three working groups: 1) on corruption prevention, 2) on corruption caseprosecution and law enforcement system improvement and 3) on monitoring and evaluation. Each work-ing group was composed of first and second echelon officials from 18 ministries, 14 high ranking officialsfrom Non Ministry Institutions, heads of universities, kpk officials, members of the National OmbudsmanCommission, ppatk officials and ngos.

42. “Rencana Aksi Nasional Pemberantasan Korupsi 2004‒2009,” State Minister of Development Plan-ning/bappenas.

43. Ibid.

44. See Chapter 11 (Penghormatan, Pengakuan dan Penegakkan atas Hukum dan Hak Asasi Manusia) inPeraturan Presiden Republik Indonesia Nomor 7 Tahun 2005 Tentang Rencana Pembangunan Jangka Pan-jang Tahun 2004‒2009.

45. It is notable that Menkopolhukum wasn’t given a role in coordinating ran-pk.

46. According to the ADB’s Country Governance Assessment, Indonesia: “MenPAN has during recent yearsproduced annual policy statements followed by ministerial decrees intent on converting the bureaucracyinto a responsive, efficient, and professional civil service based on new public management theories. How-ever, these initiatives have only marginal impact on the administration, including on MenPAN itself.”

47. Agustina, Widiarsi and Bandelan Amiruddin. “Saat Siswa Bicara Korupsi.” Tempo Magazine, July 3‒9,

2006.

48. Jakarta Post, 8 March 2006, pg. 4.

49. Hafild, Emmy and Hanu Yulianto. 2004. “Hasil Assesement Penerapan Pakta Integritas KabupatenSolok” paper presented by TI Indonesia in workshop “Mewujudkan Sistem Pengadaan Barang dan Jasa yangEfisien dan bebas kkn,” Jakarta, August 25, 2005. pg. 4.

50. Interview with the Vice Mayor of Surabaya and his team on January 6, 2006.

51. See the Jakarta Post, 11 October 2006, pg. 1 and Kompas, 11 October 2006, pg. 1. The investigation ofdprd members requires permission from the Governor of the province. The investigation of sub-nationalexecutive officials (Governors, Vice Governors, Walikotas, Vice Walikotas, Bupatis and Vice Bupatis) requirespermission from the President.

52. Aceh is rich in oil and natural gas and historically it has been considered one of Indonesia’s more cor-ruption-prone provinces. Not coincidentally, until a peace accord was signed in August 2005, it also washome to a long running armed separatist struggle.

53. In fy2006, the BRR oversaw about $1.6 billion in reconstruction funds.

54. Jakarta Post, 8 November 2006, pg. 3.



94


57. The Executive branch has some influence over other branches of the government through its control ofthe civil service and budgets.

58. It is noteworthy that despite the problem of money politics and the recent corruption scandal withinthe kpu, the credibility of Indonesia’s elections since the fall of Soeharto has not been seriously underminedby widespread corruption or collusion.

59. TI Indonesia Survey, 2005, pg. 13.

60. For an overview of justice sector reform issues, see the ADB’s Country Governance Assessment, Indonesia,pgs. 107‒120.

61. The kpk arrested the lawyer of Probosutedjo and five Supreme Court (MA) officials who were involved intransaction of money gifts worth Rp 6 billion. The kpk also began an investigation of the three Supreme Courtjudges hearing the Probosutedjo case, including the Chief Justice, who initially refused to be questioned.

62. Tupai, Roy. “President Proposes Pay Increases for Supreme Court Chief,” Paras Indonesia, December21, 2005 at (http://www.laksamana.net/read.php?gid=150)

63. See “A Financial Sector Agenda for Indonesia,” World Bank Indonesia (January 2005), available atwww.worldbank.or.id.

64. Richard Robinson and Vedi Hadiz, Reorganising Power in Indonesia: The Politics of Oligarchy in an Ageof Markets, pgs. 219.

65. An amendment to Law 23⁄1999 passed in December 2003 requires that a single supervisory agency beestablished no later than December 2010.


67. According to the World Bank, in 2003, weak internal controls in state owned banks cost the govern-

of transparency and disclosure, weak management information systems and poor corporate governance.”See “A Financial Sector Agenda for Indonesia.”

68. “Report of the Joint Monitoring Team for September 2003–May 2004,” dated May 31, 2004, pg. iv.

69. “A Financial Sector Agenda for Indonesia,” pgs. 2‒3.

70. “Reporting and Public Disclosure of Financial Activity of Political Parties and Electoral Participants,”ifes Indonesia, November 2004, pg. 3.

71. See Emmy Hafild, “Corruption Eradication in Indonesia, A Case Study,” a draft paper, prepared forOctober 2004 meeting in Kenya on “New Governments, New Anti-Corruption Governments: The Chal-lenge of Delivery.”


73. While 30% may be high, 5% seems very low. If it is only 5%, then there would have to have been eithera significant increase in the military budget—which hasn’t been the case—or a significant decline in off-budget funding, or some combination of the two.

74. “Too High a Price: The Human Rights Cost of the Indonesian Military’s Economic Activities,” HumanRights Watch Asia, available at www.hrw.org/reports/2006/indonesia0606/5, (no pagination).


ment about $300 million. The Bank also notes that Indonesia’s state run pension funds “suffer from a lack

95

75. Tempo English edition, 13 February 2006, pgs. 23‒25.

76. Marcus Mietzner, “The Politics of Military Reform in Post-Suharto Indonesia,” East West Center Wash-ington, 2006; available online at www.eastwestcenterwashington.org/publications; pg. 53.

77. Ibid, pg. 55.

60. Lisa Misol, Jakarta Post, 7 October, 2005, pg. 5.

78. Defense Media Center Website. “ Dua Kriteria Kelompok Bisnis TNI: Yang Menggunakan Aset Negaradan yang Dilakukan Anggota/Pensiunan TNI,” October 19, 2000 (http://www.dmc.dephan.go.id/html/kesra/2005/oktober/191005%20bisnis.htm).

79. Stephen Sherlock, “Combating Corruption in Indonesia?,” bies, pg. 377.

80. For example, an article in Kompas on February 25, 2005 reported that the wealth of the soe Ministerunder Megawati presidency had increased by Rp 16 billion.

81. Jakarta Post, 13 September, 2006, pg. 1.

82. All corruption cases prosecuted by the ago currently are tried in regular courts, although there is a pos-sibility that this may eventually change.



85. According to the head of ppatk, Yunus Husein, as reported in usindo report http://www.usindo.org/Briefs/2005/Corruption%20Conference%2010-12-05.htm.


87. Tempo English edition, 3 October 2005, pg. 15.


89. Stephen Sherlock, “Combating Corruption in Indonesia?” Bulletin Indonesia Economic Studies, pg. 371.

90. The kppu and the kpk entered into a MoU to cooperate in February 2006.

91. Tempo English edition, 19 December, 2005, pgs. 46‒49.

92. Up to now, investigators could cite imprudence as grounds for suspicion of corruption, but now inves-tigators must cite acts that violate specific laws. The ago and other law enforcement officials indicated thatthe decision will complicate their efforts to establish suspects and make arrests. (See Jakarta Post, August 27,2006.)

93. Tempo English edition, 21 November 2005, pg. 38.

94. Tempo English edition, 14 November 2005, pgs. 50‒51.

95. State Address Op Cit.

96. TI Indonesia 2005 Survey, pg. 13.

97. The density and capacity of ngos varies greatly across the archipelago from “many and strong” in cen-tral and eastern Java to “few and weak” in places like ntt.


96

98. Tim Lindsey, “Anti-corruption and NGOs in Indonesia,” in Stealing from the People: The Clamp Down:in Search of New Paradigms, Book 4, pgs. 35‒42.

99. Ibid.

100. John Clark, “Overview of Indonesia Civil Society” (unpublished paper), The World Bank Jakarta, 2005.


102. John Clark, Op Cit.

103. “Jaringan Nasional Pengawas Barang Terbentuk,” Kompas, February 12, 2006 at (http://www.kom-pas.co.id/kompas-cetak/0602/13/Politikhukum/2436174.htm)

104. Unpublished report on MoU signing among NU, Muhammadiyah and the Partnership for governanceReform, by the Partnership for Governance Reform, 2005.

105. Arabic term for discussion on Islamic Law

106. See Richard Robinson and Vedi Hadiz, Op cit. pgs. 62, 132.

107. Like virtually every other sector of Indonesian society, the Indonesian media is not immune to cor-ruption. The professionalism and credibility of the media are undermined by the Soeharto-era practice of“envelope journalism:” paying journalists to report on a story a certain way—or to not report on a story.

108. Text of remarks given by Dr. Atmakusumah Astraatmadja, of the Dr. Soetomo Press Institute, at usindo

conference “Indonesian Media and the Freedom of Expression,” September 8, 2005.

109. Sasdi, A.,“Ethical Reactive Journalism Creates Us vs. Them Media,” Jakarta Post, May 12, 2005, pg. 7.

110. Agustina, Widiarsi and Bandelan Amiruddin. “Saat Siswa Bicara Korupsi.” Tempo Magazine EditionJuly 3–July 9, 2006.

111. Suara Karya online, August 30, 2006.

112. See Indriastuti, D. “Sekolah Antikorupsi: Belajar Berantas Korupsi,” Kompas, 24 February 2006, pg. 5.

113. Stephen Sherlock, “Combating Corruption in Indonesia?,” bies, pg. 378.

114. Jakarta Post, 24 February 2006, pg. 13.

115. As of early February 2006, none of the 43 had gone to jail, even though the order to execute the sen-tences of 33 of the councilors was given in December 2005.


116. English edition, 10 October 2005, pg 43.Tempo

GLOSSARY

ADB Asian Development Bank

AGO Attorney General Office

BAWASDA (Badan Pengawas Daerah) Regional Supervision Agency

BAPEPAM (Badan Pengawas Pasar Modal) Capital Market Supervisory

BAPPENAS (Badan Perencanaan Pembangunan National Development Planning BoardNasional)

BLBI (Bantuan Likuiditas Bank Indonesia) Liquidity Assistance from Central Bank of Indonesia

BKPM (Badan Koordinasi Penanaman Modal) Investment Coordinating Board

BPK (Badan Pemeriksa Keuangan) Supreme Audit Institutions

BPKP (Badan Pengawas Keuangan dan Pembangunan) Comptroller of Finance and Development

BRR (Badan Rehabilitasi dan Rekonstruksi) Rehabilitation and Reconstruction Agencyfor Aceh and Nias

Bupati Head of District

CIMU Central Independent Monitoring Unit

DPD (Dewan Perwakilan Daerah) House of Representatives of Regions

DPR (Dewan Perwakilan Rakyat) House of Representative

DPRD (Dewan Perwakilan Rakyat Daerah) Regional Representative Council

Fiqih Islamic Law Compilation

FOI Freedom of Information

FORUM 2004 (Forum Pemantau Pemberantasan Forum for Corruption EradicationKorupsi) Monitoring

GAM (Gerakan Aceh Merdeka) Free Aceh Movement

GBHN (Garis—garis Besar Haluan Negara) General Outline of State Policy

GDP Gross Domestic Product

GeRAK (Gerakan Rakyat Anti Korupsi) People’s Movement for Anti Corruption

Golkar (Golongan Karya) The State party during the New Order;now holds the largest number of seats in the DPR

Halaqoh Tarjih Discussion on Islamic Law

HIPMI (Himpunan Pengusaha Muda Indonesia) Indonesia Young Entrepreneur Association

IBRA Indonesia Bank Restructuring Agency

97


98

ICW Indonesia Corruption Watch

IFI

INPRES (Instruksi Presiden) Presidential Instruction

JAMSOSTEK (Jaminan Sosial Tenaga Kerja) Employee Social Welfare Insurance SOE

Kabupaten District

Kecamatan Sub-District

KADIN (Kamar Dagang Indonesia) Indonesia Chamber of Commerce

KDP Kecamatan Development Program

KKN (Korupsi Kolusi Nepotisme) Corruption, Collusion and Nepotism

KON (Komisi Ombudsman Nasional) National Ombudsman Commission

Kormonev (Koordinasi Monitoring Evaluasi) Coordination, Monitoring and EvaluationTeam

Kota City District

KPK (Komisi Pemberantasan Korupsi) Corruption Eradication Commission

KPKPN (Komisi Pemantau Kekayaan Commission to Audit the Wealth ReportPenyelenggara Negara) of State Officials

KPPOD (Komisi Pemantau Pelaksanaan Commission on Supervision of theOtonomi Daerah) Decentralization Implementation

KEPPRES (Keputusan Presiden) Presidential Decree

KPPU (Komisi Pengawas Persaingan Usaha) Business Competition SupervisoryCommission

KPU (Komisi Pemilihan Umum) General Elections Commission

KUHP (Kitab Undang—Undang Hukum Pidana) Criminal Code Law

LSM (Lembaga Swadaya Masyarakat) Non Governmental Organization

Menko Polhukam (Menteri Koordinator Politik, Coordinating Minister for Hukum Dan Keamanan) Political, Legal and Security Affairs

MenPAN (Menteri Negara Pendayagunaan Aparatur State Minister for the Empowerment(Negara) State Apparatus

MoD Ministry of Defense

MoF Ministry of Finance

MoU Memorandum of Understanding


International Financial Institution

LPPI (Lembaga Pengawas Pengaduan Independen) Independent Body for ComplaintSupervision

LPEM (Lembaga Penyelidikan Ekonomi Masyarakat) The Institute of Economic andSocial Research

99

MPR (Majelis Permusyawaratan Rakyat) People’s Consultative Assembly

Muhammadiyah Organization representing Islamicmodernism in Indonesia

Nahdlatul Ulama (NU) Literally, ‘Revival of the Religious Scholar’Organization Representing Islamictraditionalism in Indonesia

New Order The period of Soeharto’s presidency(1966–98)

Pancasila State Ideology based on five principles

PELINDO (Pelabuhan Indonesia) State Owned Sea Port

PMP (Pendidikan Moral Pancasila) Moral Education of Pancasila Course

Pengadilan Tindak Pidana Korupsi (TIPIKOR) Corruption Criminal Court

Perpu (Peraturan Pemerintah Pengganti Government Regulation in SubstituteUndang–Undang) of Law

PERTAMINA (Perusahaan Pertambangan Minyak National Oil and Gas CompanyNasional)

PKS (Partai Keadilan dan Sejahtera) Justice and Welfare Party

PLN (Perusahaan Listrik Negara) State Electricity Company

POLRI (Polisi Republik Indonesia) Indonesian National Police

PPN (Perencanaan Pembangunan Nasional) National Development Planning

PPATK (Pusat Pelaporan Analisa Transaksi Indonesian Financial Transaction and dan Keuangan) Analysis Centre

National Action Plan for Eradication

Reformasi Literally ’Reform’; often used to refer to the period following Soeharto’s fall

R.I. (Republik Indonesia) Republic of Indonesia

Rupiah/Rp Basic unit of Indonesia currency

SAI Supreme Audit Institutions

SBY (Susilo Bambang Yudhoyono) President Yudhoyono’s nickname

SekNeg (Sekretariat Negara) State Secretariat

SOE State Owned Enterprise

Telkom (Telekomunikasi) Telecommunication Provider SOE


RAN-PK (Rencana Aksi Nasional Pemberantasan korupsi)

100

Timtas Tipikor (Tim Pemberantasan Tindak Pidana Criminal Corruption Act Eradication

Korupsi) Team

TNI (Tentara Nasional Indonesia) Indonesia Military Forces

UGM (Universitas Gadjah Mada) Gadjah Mada University

UI (Universitas Indonesia) University of Indonesia

UNDP United Nations Development Programme

USAID United States Agency for InternationalDevelopment

WALHI (Wahana Lingkungan Hidup Indonesia) Indonesia Forum for Environment

Yayasan Foundation; organization intended as charities but often used for politicalfunding and Investment


TGPTPK (Tim Gabungan Pemberantasan Tindak Joint Team for the for the EradicationPidana Korupsi) of the Criminal Act of Corruption

TI Transparency International

CENTRE FOR STRATEGIC AND INTERNATIONAL STUDIES

(CSIS) is an independent, non-profit research organization,

established on September 1, 1971. CSIS’s main activities consist of

policy oriented studies on both domestic and international affairs.

The aim of this institution is to produce analysis for the benefit of

those who need them.

CSIS employs an interdisciplinary approach involving scholars in various fields of

study. In this way the complexity of the problem in hand may be dealt with adequately, yet

within the bounds required for scholarly analysis. To that extent CSIS researchers and analysts

work in an atmosphere and spirit of academic freedom.

CSIS dates back to the activities undertaken independently by two groups of young

Indonesian scholar in the early 1960s. One group consisted of Indonesian postgraduate student

abroad, especially in Western Europe. The other comprised Indonesian graduates who continued

to pursue their studies in the country. They realized that not enough attention had been paid

until then to strategic and international studies in Indonesia. It was intellectual contact between

those two groups that gave birth to the idea of establishing CSIS. This idea could come into

realization thanks to the full support of the late General Ali Moertopo and the late General

Soedjono Hoemardani, then personal assistants to the President, and the formation of the

Yayasan Proklamasi (Proclamation Foundation) in July 1971 to sponsor CSIS and its activities.

CSIS analysts undertake research on various international and domestic developments

and problems. Their findings are published in the Centre’s journals or in the form of

monographs and books. They may also be presented in various fora of discussion such as

seminars and conferences, at the national as well as international levels.

CSIS also organizes public lectures and provides lecturers for universities and various

other institutions of higher learning.

CSIS publications comprise:

1. Books, monographs, occasional papers, and collections of seminar and conference papers.

2.

3.

4. Dokumentasi, clippings of Indonesian newspapers on selected topics.

The Indonesian Quarterly, an English quarterly journal.

Analisis CSIS, a quarterly journal in Indonesian.

ABOUT THE UNITED STATES-INDONESIA SOCIETY

The United States-Indonesia Society (USINDO) is the preeminent organization whose

mission is to advance mutual understanding and good relations between the two countries.

It was founded in 1994 by prominent Americans and Indonesians in the belief that enhanced

understanding will promote a more effective relationship. Governed by a binational Board

of Trustees and incorporated in Washington DC as a 501(c)3 organization it conducts a wide

variety of programs in both countries in pursuit of this mission:

Open Forums, Conferences and Reports bring scholars, officials and other leaders from

the United States, Indonesia and other countries to examine current public affairs in Indonesia,

in the United States and in their international relationships. USINDO Briefs are reports

on these programs that reach up to 10,000 readers. Monographs explore certain topics at

greater length and are sent to key policymakers in both countries.

USINDO Summer Studies is an intensive 10-week language and culture program in Indonesia

for American college seniors and graduate students, designed to create a network of informed

young people at the start of their careers. Since 1996 130 students have participated, many of

whom have focused on Indonesia in their subsequent pursuits.

Congressional Relations. USINDO sponsors an annual orientation trip to Indonesia for

U.S. Congressional staff members to enable them to meet public and private leaders, visit a

variety of sites and see for themselves the size, complexity and importance of Indonesia. On

a continuing basis USINDO works closely with the Congressional Indonesia Caucus and

with the corresponding working group in the Indonesian House of Representatives to promote

inter-parliamentary dialogue.

Speakers’ Bureau. USINDO hosts a binational list of experts in various fields who are

available to speak to interested organizations in the United States and Indonesia.

The Factiva Indonesian edition is specially selected a daily summary of news on Indonesia

and U.S.-Indonesian relations from international sources sent to USINDO supporters via e-

mail

Sumitro Fellowships are awarded to Indonesian and U.S. doctoral and post-doctoral scholars

for research and publication in the field of political economics.

USINDO Aceh School Project. In partnership with Syiah Kuala University (Unsyiah) in

Banda Aceh and with other Indonesian political and educational institutions, USINDO is

developing and funding a model high school to be built on the Unsyiah campus that can

lend themselves to replication all over Indonesia. This Lab School is USINDO’s contribution

to post-tsunami rehabilitation, made possible by generous donations from American students

and corporate employees whose contributions were matched by their companies.

Partnership for Higher Education. USINDO has spearheaded a joint effort with the

Indonesian Ministry of Higher Education and other organizations to develop a four-fold

plan to enhance higher education in Indonesia. The plan includes a Presidential Scholars

program to enable 100 or more Indonesians to pursue PhD studies abroad and return to staff

10 Centers of Excellence for designated fields of study. Also planned is an Indonesian

university Internet network, a program for teacher training institutions, and facilitation of

direct university-to-university contacts between Indonesian and U.S. institutions.

A Survey of National Policiesand Approaches

Soren Davidsen, Vishnu Juwono, and David G. Timberman

Centre for Strategic and International Studies

In September 2004 Susilo Bambang Yudhoyono was elected President of Indonesia in

large part because of his promises to improve governance and fight corruption. Over

the last two years, President Yudhoyono has been outspoken about the need to reduce

corruption, and his government has taken a number of steps in support of this goal.

Two years into the President's term, it is an appropriate time to examine what his gov-

ernment has done to fight corruption and to what effect. Recognizing that reducing

corruption is a difficult, long-term endeavor, this report offers a stocktaking of the

variety of anti-corruption initiatives begun or enhanced since 2004. A central concern

of this report is whether these initiatives will produce a significant and lasting decline

in the level of corruption in Indonesia.


been undertaken by or with the support of the Yudhoyono government. It covers the

variety of measures included under Presidential Instruction 5 (INPRES 5/2004) and the

National Action Plan for the Eradication of Corruption (RAN-PK). It also includes an

examination of the Corruption Eradication Commission (KPK), which is an independent

agency, but has emerged as a leader in the government's anti-corruption campaign.

Finally, it also describes the larger context in which these efforts are playing out, includ-

ing the legal framework and the involvement of civil society.

This report is intended to provide policymakers, other stakeholders and interested

observers with a better understanding of the current status of the wide range of anti-

corruption initiatives being carried out by the government and by independent bodies

like the KPK. It is hoped that the information and analysis contained in the report will

contribute to more informed policymaking and policy dialogue, to greater public under-

standing of the strengths and weaknesses of the current efforts to address corruption

in Indonesia, and to academic efforts to understand the Indonesian political economy.

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The United States–Indonesia Society

A Survey of National Policies and...

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