Procurement and Integrity

Laode M Syarif, Ph.D Senior Adviser on Justice and Environmental Governance

Partnership for Governance Reform www.kemitraan.or.id

Presented at Danish Embassy Jakarta 22 January 2013

• “… it is impossible for one dealing with government funds not to TASTE, at least a little bit, of the King’s wealth”

(Kautilya, The Arthashastra, 350-283 BC)

• “Do Not let Corruption to become part of the Indonesian culture (Muhammad Hatta, 1961,)

Why … Indonesia URGENTLY needs Good Procurement system ?

• DENMARK: Score 91 /Ranking 1 • Indonesia Score 32 of 100 • Ranking 114 of 177 State • Under: Niger, Philippines, Ethiopia, and Niger.

Note: we are a member of G-20

We are not Denmark

Corruption Trend

2011 Semester I- 2012

436 Corruption cases 285 corruption cases

1.053 accused person 597 accused person

State lost Rp. 2.169 Triliun State lost 1.22 Triliun.

Sumber: ICW-Trend Korusi 2011 & Semester I 2012

Most Corrupt Sector 2010-2011

2010 2011

Infrastructure (85 cases) Education (54 cases)

Local gov budget (82 cases) Local gov budget (51 cases)

Education (47 cases) Social aid (42 cases)

Sumber: ICW-Trend Korusi 2011

10 Most Corrupt Sector 1st Semester 2012

Sumber: ICW-Trend Korusi Semester I-2012

• Misappropriation • Misused of State budget

• Bribery • Mark Up

• Actors: executive-parliament-law enforcement agencies-judiciary-Businessmen/women

• Example: more than 300 Head of Districts/Cities are

prosecuted/investigated on corruption cases

Modus: Sem I-2012

Sumber: ICW-Trend Korusi Semester I-2012

Most Vulnerable Intuitions to Corruption

• Local Government

• Provincial Government

• State Owned Companies

• Parliament

• Ministries/State Agencies Note: Number of cases mostly occurred at sub-national but the amount

of money involved is less compared to Central Gov corruption

Sumber: ICW-Trend Korusi 2011

Survey: Corruption in Procurement-

Ja-Bo-De-Ta-Bek, 2010

• Respondent: 720 vendors • 92,7% respondents admitted that they bribe officials. • ONLY 1,3% respondents was not involved in bribery.

Main reasons: • To win the tender (89,7%).

• Gift to the owner of the project (4,3%) and • A sign of ‘Gratuity’ (3,9%).

Source: Indonesia Procurement Watch, 2010

Just a few examples

Hambalang Sport Complex Case Driving License

Simulator Case

Source of Corruption Potential 2014

Gov Employ Expenditure

Capital Expenditure: Infrastructure, etc

Subsidy: Rp 333.7 T - Energy : Rp282.1 T

- Non-Energy: Rp51,6 T

Social Aid:

APBN 2014 Rp 1.842,5 Triliun

‘all of them are prone to corruption’

How to save our APBN 2014 ?

Source: Kemitraan, State of Play of Anti Corruption, 2010

Comprehensive Strategy

Closing the Loop

Compliance training

Integrity testing

Zero tolerance policy

Code of Conduct

Business collective Action

Supplier ‘white list’

Reward to whistle blower

Integrity Pact

Medium Return, Medium Risk

Community Integrity Building

Multi-stakeholder initiatives with oversights

Holistic/step change

High Return, High Risk

Whistle blower hotline

Whistle blower protection

Supplier ‘black-list’

Low Return, Low Risk

Ethics advice center Ethics officer

Code of Ethics

Compliance-plus ethics

Low Return, Low Risk

COMPLIANCE INTEGRITY

R E A C T I V E

P R O A C T I V E

National Procurement System is one of the main tools to prevent corruption,

inefficiency and collusion

E-Proc Institutional Structure

• Limited Human Resources • Nation-wide responsibility but only has an office in Jakarta

• Insufficient E-Procurement Network

We CAN NOT relay 100% to LKPP

Where we learn from …..?

UNCITRAL Model Law on Procurement of Goods, Construction and Services with Guide to

Enactment

• General provisions

• Method of procurement & their conditions for use

• Tendering proceedings

• Principal method for procurement of services

• Procedures for alternative methods of procurement.

• Review

Article 9.

Public procurement and management of public finances

1. Each State Party shall, in accordance with the fundamental principles of its legal system, take the necessary steps to establish appropriate systems of procurement, based on transparency, competition and objective criteria in decision-making, that are effective, inter alia, in preventing corruption.

Indonesia has ratified this Convention by UU No 7 /2006 on UNCAC

4 pillars of Indonesia’s e-Proc System

Strong legal basis

E-Proc Prevent

Corruption and

inefficiency

Professional and

accountable Institution

Accommodate public

Participation

Kemitraan’s Intervention

• Government

• Private sector

• Civil Society Organisations (CSOs)

Government

• Evaluating and ‘revising’ the existing Procurement Policy

• Dissemination & adaptation of new e-procurement system/policy at sub-national level.

• Establishing e-proc agency at sub-national level. • Training government officials • Drafting ‘pro SMEs’ sub-national regulation

Private Sector

• Training SMEs on E-proc in 12 provinces

• Disseminating E-Proc policy in 18 provinces

• Conducting Assessment on Procurement Integrity Index in EIGHT provinces. (Business & Media)

• Providing Module and Training for SMEs at local level.

Business Association

• Engaging Business Associations and Chamber of Commerce (APINDO-KADIN-GAPEKNAS-GAIKINDO-ARDIN)

• Training and facilitating business association through ‘BERSIH’ (Business-Ethic-Rules- for the System of Integrity enHancement) movement.

• Drafting and mainstreaming ‘Ethic’ in business practices.

Lesson Learned

• Procurement reform requires ‘collaborative effort’ (Gov-Priv-CSO)

• SMEs at local level can win ‘big tender’ in e-procurement (Bandung & Makassar case).

• Private sector needs ‘neutral forum’ to meet/discuss their problems with Government and CSOs.

• E-proc institutions in Papua-East Java-South Sulawesi-Central Kalimantan-West Java show some good achievements.

• E-proc can reach remote areas (West Sumatera/Riau).

New Initiatives

• Establishing ‘Independent Procurement Monitoring Network’ (involving companies and People) in 5 provinces

• Certification of company who implement ‘BERSIH’ …. will be Certified by APINDO.

• Up-scaling and expanding our ‘success stories’.

Closing note

“Written laws are like spider's webs; they will catch,

it is true, the weak and the poor,

but would be torn in pieces by the rich and powerful.”

- Anacharsis- Scythians Philosopher, 6 Century BC

We DON’T want this to happened

Laode M. Syarif, Ph.D Mobile: +62-8111- 899-689

Email : laode.syarif@kemitraan.or.id Partnership for Governance Reform

(www.kemitraan.or.id)