A Survey of National Policies and Approaches

Transcription

1 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

2 Curbing Corruption in Indonesia, A SURVEY OF NATIONAL POLICIES AND APPROACHES Soren Davidsen, Vishnu Juwono and David G. Timberman

3 CURBING CORRUPTION IN INDONESIA, A survey of National Policies and Approaches CSIS and USINDO 2006 First published 2006 Published by CSIS and USINDO ISBN All rights reserved. No part of this publication may be reproduced in any form or by any means, including photocopying, without permission from the author or the publisher. Printed by Kanisius Printing House Yogyakarta

4 The United States Indonesia Society Centre for Strategic and International Studies December 2006 The writing and publication of this study is financed by the Dutch Trust Fund Program for Institutional Development and Capacity Building, administered by The World Bank. All views expressed in this study are those of the authors and do not reflect the views of the World Bank, the Royal Netherlands Government, the Centre for Strategic and International Studies (CSIS), Jakarta, and the United States Indonesia Society (USINDO).

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6 FOREWORD 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 : 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. Jakarta, Indonesia and Washington, D.C., November 2006 Hadi Soesastro Executive Director Centre for Strategic and International Studies Alphonse F. La Porta President United States-Indonesia Society v

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8 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 Political Science and a Masters Degree in East Asian Area Studies from the University of Aarhus. He can be reached at sdavidsen@worldbank.org or sorendavidsen@hotmail.com Vishnu Juwono is a governance consultant with the World Bank in Indonesia. He also has worked for the International Monetary Fund (imf ) and Danareksa, Indonesia s stateowned investment bank. He has published articles in several Indonesian newspapers, including Kompas, Koran Tempo, Media Indonesia and Suara Pembaruan. He graduated from the University of Indonesia s School of Economics and holds Masters of International Affairs degree from Columbia University s School of International and Public Affairs, New York. He can be reached at vjuwono@worldbank.org and vjcolumbia@yahoo.com. 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 Foundation 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 Southeast Asia. He can be reached at DGTimber@aol.com. vii

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10 ACKNOWLEDGEMENTS The authors wish to express their appreciation to the World Bank and the Dutch government for supporting this study. Joel Hellman, Chief Governance Adviser, the World Bank Jakarta, played an important role in shaping the focus and contents of the study. We also greatly appreciate the efforts made by Ambassador Al La Porta and the staff of the U.S.-Indonesia Society and by Pak Hadi Soesastro and Pak Bantarto Bandoro of CSIS to publish and disseminate this study. Finally, we also wish to thank the following people for giving us their time an insights: 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 Indonesia Corruption Watch (icw): Danang Widoyoko, Luky Djani, Yunita, 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 ix

11 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. x

12 TABLE OF CONTENTS 1. Executive Summary 1 2. Introduction 9 Corruption in Indonesia 9 About this Report Anti-Corruption Measures Since Reformasi 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 The National Action Plan on Corruption Eradication (RAN-PK) 31 Impact at the Local Level 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 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 xi

13 Prevention 49 Organizational Development 52 The Special Court for Corruption 53 Assessment of the kpk 53 Looking Ahead 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 The Legal Framework for Fighting Corruption 61 The Existing Legal Framework 61 Additions or Revisions Needed 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 Measuring Political Will and Progress 73 Indicators of Political Will and Ability to Combat Corruption 73 Measuring Progress in Reducing Corruption 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 xii

14 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, List of Boxes Box 1: Anti-Corruption Measures, Box 2: Key Elements of inpres 5/ Box 3: Prosecutions of Special Crime Cases by the ago, 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 xiii

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16 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 difficult, long-term endeavor, this report offers a stocktaking of the variety of anti-corruption initiatives begun or enhanced since 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 Yudhoyono 1 as of mid 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 Eradication of Corruption (kpk), which although an independent agency, has taken a leading 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 bureaucratic 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

17 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. (However, 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 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 also appears to be very attuned to political considerations. To date, there has been only limited 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 investigating 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 historically have bred and abetted corruption, including cronyism in appointments, political favoritism in commercial and regulatory decisions, and political intervention in independent commissions and oversight bodies. He has been less proactive in developing and implementing a strategy of institutional reforms to reduce the incentives and opportunities to engage in corruption. Under President Yudhoyono, the number of anti-corruption prosecutions has increased, continuing a trend since This is the result of the combined efforts of the kpk, ago, polri, bpk, ppatk and several other agencies. These punitive measures are sending a message that corruption is not risk-free. Indeed, many Indonesian commentators are already claiming that these measures are changing the way bureaucrats behave, including 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

18 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 media to detect corruption varies greatly. However, there are some indications that local capacities to expose and prosecute corruption are improving. An encouraging development is the national government s recent decision to launch a National Community Empowerment Program. This program enables individual communities across the country 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 relatively 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 ministries. 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 prioritization, 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

19 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 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 cutting edge for implementing broader institutional reforms. Although it recognizes the importance of preventive measures, to date, its strategic emphasis has been more on punitive activities. The kpk has posted some important successes with its investigations and prosecutions, 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 collect and investigate wealth reports of government officials has been lackluster. In addition to the kpk and the Special Court, there are four other independent bodies that are playing, or have the potential to play, important roles in the fight against corruption. 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 Judicial 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

20 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 several ways the legal regime to fight corruption can be strengthened: 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 prosecutions. Third, efforts to fight corruption 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 corrupt 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 officials 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 anticorruption efforts. The 2005 Transparency International survey 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 promises, and communicate their priorities and progress to the public. 5

21 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 independence of the judiciary. The failure of anti-corruption efforts to punish big fish or to improve the availability 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 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. 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 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 accountability 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

22 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 political parties, elections and legislatures. 7

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24 INTRODUCTION Almost every Indonesian has been a victim of corruption, particularly when he deals with the bureaucracy Attorney General Abdul Rahman Saleh 4 CORRUPTION IN INDONESIA It is difficult to overstate the seriousness of the problem of corruption in Indonesia. Corruption 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, Attorney 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 electoral politics in 1999, and the implementation of decentralization in 2001, corruption appears less hierarchical and organized. According to the World Bank s Combating Corruption in Indonesia, The political transition has led to greater competition among political 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 getting 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 corruption is often viewed as being relatively benign, it contributes to a culture that is accept- 9

25 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 accountability. The most important are the expansion of media freedoms and civil society, the creation of independent political parties and holding competitive elections, and the introduction 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 prevalence 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 corruption situates Indonesia in the bottom 25 percentile rank in a cross-country comparison. However, an improvement is recorded from 2002 to On a point estimate, where +3 is the best and -3 the worst, Indonesia s score has improved from to 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 significant decline in both national and local corruption as an obstacle to doing business was recorded from 2003 to This overall trend is supported by Henderson & Kuncoro, who find that bribes as percentage of cost for businesses has declined from 2001 to 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 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 difficult, long-term endeavor, this report offers a stocktaking of the variety of anti- 10

26 TABLE 1: MAJOR OBSTACLES FACED BY BUSINESSES (% OF RESPONDENTS WHO IDENTIFY THE PROBLEM AS MODERATE, SEVERE OR VERY SEVERE) 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 % 10% 20% 30% 40% 50% 60% 70% 80% Source: Investment Climate Survey 2005 corruption initiatives begun or enhanced since 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 by or with the support of the Yudhoyono government 9 as of mid 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. 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 Presidential 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 addressing 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

27 focus on the preventive aspects of anti-corruption. However, given the presumed deterrent 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 interested observers with a better understanding of the current status of the wide range of anticorruption 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 understanding 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 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 covered 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 corruption Section XI offers conclusions and recommendations. 12

28 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 Hadiz 14 The Yudhoyono government s efforts to address corruption must be viewed in the context of what has preceded them. In particular, it is important to be cognizant of the politics of the kkn (corruption, collusion and nepotism) issue, public attitudes about corruption and the half-hearted efforts to address corruption since 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 government has throughout its history launched numerous anti-corruption initiatives beginning 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 Ending kkn was, of course, a central demand of the students who played a leading role in unseating President Soeharto in May 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 academics, 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

29 address corruption has been aided hugely by the freeing of the media and increased pluralism in Indonesian politics. 16 As a result, corruption remains a potent political issue that can have major consequences 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, 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 providing services to the people that are professional, efficient, productive, transparent and free from corruption, 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 Officials (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 Commission (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 procedures. 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 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

30 Although many of the decrees and laws passed since 1998 have shortcomings, collectively 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 contains provisions to deter fraud and corruption. In July 2004, passage of a Law on State Audit enacted. 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 meaningful 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 transparency into increased accountability. As a result, Indonesian public opinion regarding the prospects for reducing corruption 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 feasibility 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

31

32 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 Yudhoyono 21 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 military 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 International s 2005 Global Corruption Barometer, 81% of Indonesians surveyed think corruption 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 enforcement 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

33 TABLE 2: THE BIGGEST OPTIMISTS (COUNTRIES WHERE THE PUBLIC THINKS CORRUPTION WILL DECREASE) COUNTRY 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 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 shortterm concerns. This may have been the case for the president during most of For large portions of the year his government was preoccupied first with the tsunami recovery 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 Yudhoyono 23 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

34 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 Eradication 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 fugitives 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 delegated leadership and oversight to anyone else in his government. (However, 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 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 limited legal action taken against 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 investigating and prosecuting corruption by former president Soeharto and his family and close associates despite continued calls to do so from civil society. 19

35 INCREASING INVESTIGATIONS AND PROSECUTIONS There needs to be some shock therapy so that the people know that this government is serious about corruption.... President Yudhoyono 25 Under the current government, the number of anti-corruption prosecutions has increased, continuing a trend since 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 investigated or prosecuted is included as Appendix 1. The President also has shown his commitment 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 prosecution of high profile and big ticket corruption cases. Timtas Tipikor In May 2005 the President issued Keppres 11/2005 creating the Coordinating Team for the Eradication of Criminal Corrupt Acts ( Timtas Tipikor ) to accelerate 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 Attorney 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 corruption 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 prosecuting corruption, and if it is well managed, it should increase cooperation among the 20

36 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 confusion 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 partisan 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 extradition 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 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 instructions that apply to all institutions and eleven special assignments to various Ministers. (See Box 2.) 21

37 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 assignments 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 MenPAN to prepare policies to improve the quality of public services and to introduce performance-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

38 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 ministries. According to the kpk, inpres 5 has been poorly socialized within the government. And MenPAN, the Ministry tasked with coordinating, monitoring and evaluating implementation, is most notable for its lack of bureaucratic clout. (It is noteworthy that neither Menko Polhukam nor bappenas were assigned the tasks of coordinating, monitoring and evaluating implementation.) Finally, it is important to note that for valid constitutional 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 expressions 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 government 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 elements of inpres 5 follow. 27 This is followed by a discussion of ran-pk. Finally, we comment 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 recognition 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 opportunities to levy informal taxes. Because accountability is entirely internal, individual civil servants find it either desirable to participate in corrupt practices or impossible to combat such practices because promotion, pay and position are at stake

39 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 nondepartment 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 potential to produce tangible results remains limited. Thus open recruitment for strategic positions is not expected to be launched before mid 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 minimal, 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

40 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 implementation 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 questionable. 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 system, 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 investigate 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 honest and reform-minded. His priorities have been: 25

41 To intensify the investigation and prosecution of corruption cases; To review corruption cases that were ended when predecessors terminated the investigations; 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 professionalism, 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 management 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 variety of new decrees are still needed in order to improve the quality and integrity of prosecutions. 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 networks 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

42 TABLE 3: PROSECUTIONS OF SPECIAL CRIME CASES BY THE ATTORNEY GENERAL OFFICE, Number of Cases in Prosecution Stage No Year Carried over from prior year New Cases Settled 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, BOX 3: RECOVERY OF FINES AND INDEMNIFICATION PAYMENTS BY THE CRIMINAL CORRUPTION SECTION OF THE ATTORNEY GENERAL S OFFICE FINES Uncollected in 2004 Rp 3,015,744,500 Fines applied through Sept.2005 Rp 1,190,100,000 Total through Sept 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, Pp

43 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 coordination between several ministers and the dpr. 33 Reforming the Police. The National Police (polri), along with the ago, plays a critical 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 million (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 Investigation 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 Commission. In June 2006 the President inaugurated 9 members to serve as Commission members 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

44 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 excessive powers, including its power to set tax policy, collect taxes and supervise tax collection. 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. Additionally, 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 collection 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 negotiations. 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 coherence, both are discussed here. The bpkp has wide-ranging responsibilities on the central government level for formulating and preparing control plans and programs, exercising general control of 29

45 national government finances, by auditing the activities of line ministries and their project offices. Since decentralization, bpkp no longer has the mandate to audit regional governments. 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 external audit authority empowered to investigate state financial management and accountability. 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 independence and credibility of bpk audits. 39 The bpk has relatively good staff capacity, but also has been vulnerable to tampering 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 strategy 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 promotes 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 framework 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 procurement policy office has been delayed by the cabinet reshuffle in December 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

46 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 (electricity), 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 governments by the end of year 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 number of cities. The action plan was completed in February 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 ranpk 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 government 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

47 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 Enterprises (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 implementation 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, procurement, 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

48 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 enforcement 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

49 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 Protection 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 coordinating 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 limited 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 explicitly 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 corruption is improving Indonesia s ranking on TI s Global Corruption Index. Implementation of ran-pk has been left to each Ministry. For example, the Ministry of Public Works set up and has implemented an e-procurement system since Another example is ran-pk s sub-plan for the improvement of financial management systems. 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

50 istry of Education hasn t decided whether to introduce corruption education a mandatory 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 aggregated 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 implementation of ran-pk. It would be difficult, almost anywhere, to develop a system to monitor 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 framework for addressing corruption. But it is not a strategy: the Action Plan is weak on prioritization, vague on time frames and doesn t create significant incentives and sanctions. inpres 5 assigns MenPAN the responsibility for coordinating implementation of ranpk, 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 Corruption 47 The general instructions regarding the eradication of corruption contained in inpres 5 are addressed to sub-national executives, namely, Governors, Bupatis and Walikotas. 35

51 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 observations 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 regulations 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 preventing 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 correspondence in the procurement process. 48 Lastly, in early 2004, Solok eliminated civil servants honoraria, the salary supplements received by government staff for working on specific projects. The objective 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 newlyelected 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-procurement system, the savings from procurements has been substantial, and the savings has been allocated 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

52 corruption and a small but significant number of local governments have made a serious 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 selfserving 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 capacity to monitor government expenditures and uncover corrupt practices. A recent World Bank study of ten cases of corruption in five provinces (West Sumatra, West Kalimantan, Central Sulawesi, East Java and West Nusa Tenggara) provides interesting 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 executive 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 personal 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 corruption 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 corruption 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,

53 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 recognized 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 working 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 one year, 131 have been classified as corruption cases. Of these, seven are being inves- tigated by the kpk. 54 According to the World Bank, there are indications that corrupt practices capture about 5 percent of the $530 million multidonor trust fund. 55 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 communities 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, participatory decision-making and participatory monitoring of project expenditures and implementation. 38

54 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 corruption 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 people in 21 regions/cities, the courts (followed by tax services) were at the top of the list of institutions that need cleaning

55 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 judicial reform and the Supreme Court has endorsed a comprehensive Blue Print for judicial 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 authority has been weakened by the kpk s investigation of him and other justices in 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 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 instrumental 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 regulation 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 provisions in the law that empowers the Judicial Commission to monitor judges and recommend 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

56 INCREASING FINANCIAL SECTOR SUPERVISION According to the World Bank, Indonesia s financial sector crisis in 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 potential magnitudes involved in the banking system in part because of the continued dominance 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 Indonesia 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 However, the management and oversight of Stateowned 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 governance 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

57 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 corruption and collusion. REDUCING THE INFLUENCE OF MONEY POLITICS IN ELECTIONS, POLITICAL 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 politics we mean the vicious circle wherein large amounts of money are needed to participate 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 political 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 meaningful 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 parliamentarians 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 appropriations, 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

58 ernment bodies and the private sector for voting a particular way on various bills. Moreover, certain parliamentary commissions are widely regarded as being particularly lucrative 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 While one of the reasons for this behavior is self-enrichment, another (and not mutually 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 number of ngos monitor dprds and their budget processes. A small but still significant number 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 MILITARY PROCUREMENT AND MILITARY-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) reducing 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 trillion, 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, maintenance 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 Sudarsono, Indonesia s first civilian defense minister since the 1950s, put the percentage for offbudget funding as being only about 5%. It is not clear which is the more accurate figure

59 Minister Sudarsono has been outspoken on the need to clean up military budgeting 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 typically bypass normal procurement channels and frequently are associated with corruption. 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 practice, however, the decrees failed to address the underlying problems of the military procurement 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 headquarters and its various units. tni complied, but asserted that most of tni s 219 core businesses (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 foundations 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

60 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 transparency 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 professional 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

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62 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 prosecutorial 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 attacking corruption in the judiciary. OVERVIEW OF THE KPK The kpk was established under Law 30/2002, which was passed in December The same law mandated the creation of a Special Court for Corruption. The Commission was established a year later, in December With the creation of the kpk, the Commission 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-Chairmen. 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

63 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 relevant 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: investigating 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 creation of islands of integrity and integrity pacts. Finally, it also seeks to change public perceptions and cultural permissiveness towards corruption. To this end it plans to undertake a major anti-corruption campaign in

64 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 following 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 importance of wealth reports is well summarized by Stephen Sherlock: Public disclosure of assets and expenditure far beyond their stated incomes could seriously embarrass officials, especially elected ones... More importantly, the information contained in declarations could, by inclusion or omission, provide evidence for the investigation and prosecution of corruption by an anti-corruption commission or law enforcement agencies. If the supply of 49

65 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 provided information to officials and conducted workshops to walk them through the preparation 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 In September 2006 the kpk announced it was beginning probes of what it considers 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 collection 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

66 TABLE 4: WEALTH REPORTS OF STATE OFFICIALS AS OF JUNE 11, 2006 Sector Total Amount of Officials Officials Who Have Reported Wealth Reports That Have Been Included in Additional State Gazette In the Process of Being Included in the Additional State Gazette Amount % Amount % Amount % Executive 61,231 31, , , Legislative 24,297 16, , Judiciary 18,566 8, , , State/Region-owned 7,141 4, , Enterprises TOTAL 111,235 61, , , Source: Material for hearing between KPK and commission III of DPR on June 20, 2006 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 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 recognizes 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 mandate 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

67 Staffing Currently the kpk has about 221 professional staff, of which about 15 are auditors 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 implemented in late According to the kpk, the biggest staffing challenge it faces is finding the right people. 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 recruitment 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$23 million) in fy2006. Additionally, the kpk had spent about Rp 9.82 billion (about US$ ) of donor funding in Links to other organizations The kpk faces a difficult challenge balancing its independence from the ago and the Police with the need to work with the two law enforcement agencies. 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

68 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 funding. 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 keppres 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 governmental 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 Commissioners wasn t completed until late December 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 convictions of former Aceh Governor Puteh and members of the kpk). 53

69 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 intensify 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 submission of complete wealth reports easier, and kpk leadership assert that they are scrutinizing 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 governments, 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 54

70 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-sensitive cases. To date, the kpk has not taken action against any officials, politicians or generals 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. 55

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72 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 The law as amended criminalizes money laundering activities 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. Currently, the ppatk s mandate is limited to analyzing reports of potential money laundering 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, resulting in one successful prosecution involving terrorism, 19 involving bank fraud and/or corruption, 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 corruption 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 corruption. Bank Indonesia and multiple government agencies are cooperating with the 57

73 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 investigations 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 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 COMPETITION 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 unrestrained 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 violated the law. In late 2005 the Supreme Court upheld the finding, opening the door for 58

74 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 investigated by pks members of the Riau dprd. 91 THE JUDICIAL COMMISSION The Judicial Commission was established under Law 21/2004. Under this law, the Commission 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, recommend sanctions to the Supreme Court. The members of the Judicial Commission were not appointed until August 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 Commission 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 government 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. 59

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76 THE LEGAL FRAMEWORK FOR FIGHTING CORRUPTION THE EXISTING LEGAL FRAMEWORK As noted at the beginning of this report, since 1998 quite a few laws that address corruption 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 Nepotism, 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 Eradication 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 corruption 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 laundering and mandate the establishment of the ppatk. Law 13/ 2006 on Witness and Victim Protection, was approved by the dpr in July Because of the nature of corruption, many anti-corruption cases rely on the testimony of individuals who were part of the corrupt system or network. For this reason, it 61

77 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 protections 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 commission 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 agencies of the government to fully and effectively implement these laws. That said, there are several ways the legal regime to fight corruption can be strengthened. 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 prosecutions. 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 Corruption 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. Additionally, an amendment could be made to mandate the establishment of special anti-corruption 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 possible 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 62

78 secret, is not used by corrupt officials to undermine the intent of a Freedom of Information Law. The status of draft law now is still being discussed in the parliament. Passage of a law on government procurement Implementation of Procurement keppres 80/2003 is gaining momentum, with solid evidence of unit cost reductions in public 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) stipulates 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 recommendations. 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 submitted to the dpr, but it does not appear likely that the parliament will consider it any time soon. 63

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80 NON-GOVERNMENTAL PARTNERS IN THE FIGHT 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 Yudhoyono 95 The Yudhoyono government s anti-corruption efforts can not and do not operate in isolation 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 memberships, but haven t adopted fighting corruption as a major cause. 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 corrupt 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 65

81 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 capacity 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 advocacy, the promotion of good governance and/or increasing public participation in public 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 corruption 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 One national network, the National Anti-corruption Movement 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 awareness efforts in support of strong anti-corruption measures by the government. What follows are brief descriptions of the major anti-corruption ngos or ngo networks that operate at the national (or in the case of fitra, semi-national) level. 66

82 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 relations with certain government officials, including the Ministry of Forestry which has invited them to monitor corruption in forest concessions. 100 ICW also has studied the prosecution and rulings in corrupthe Supreme Court, but the nation s highest legal body has taken no action. 10 tion trials. According to the Jakarta Post, ICW has already submitted 20 different legal case studies to 1 TRANSPARENCY INTERNATIONAL INDONESIA TI Indonesia is the Indonesian chapter of Transparency International, which promotes greater transparency in government and business. TI Indonesia produces an Indonesia Corruption Perception Index, which is based on a survey of businessmen in 21 cities. TI 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. 102 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 Indonesia s most prominent Islamic scholars, Prof. Dr. Komaruddin Hidayat. The focus of its work is on supervision 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 procurement 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. 103 THE PARTNERSHIP FOR GOVERNANCE REFORM The Partnership for Governance Reform is a collaborative 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, including the World Bank, the ADB and UNDP. In 2002 the Partnership conducted a comprehensive Diagnostic Study of Indonesian Corruption based on a nationwide survey on corruption for three groups of respondents 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. 67

83 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 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: 104 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 105 in August 2005 that was attended by 80 Muhammadiyah religious leaders from 19 provinces. The leaders formulated a comprehensive 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. Unfortunately, within the two organizations, and particularly within nu, there are disagreements over the extent to which the organizations can and should address corruption. The disagreement 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, 68

84 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 shouldn 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 foreseeable future. BUSINESS ASSOCIATIONS In Indonesia, especially during New Order era, business associations like Young Entrepreneurs 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. 106 hipmi, for example, was established in the 1970s by young contractors of the state oil company, Pertamina. Thus historically the members 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 antibribery 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 firstrate newspapers, magazines and radio and television stations co-exist with many more of much lower quality. 107 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 prosecutions of corruption, 3) educating the public in ways that will help them fight corruption, 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. 69

85 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 magazines or daily newspapers, usually the corruption cases reported are based on the investigative 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 journalists. A couple of mainstream newspapers for example, Kompas and Media Indonesia 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 publish investigative reports. For instance, they helped to expose the budget misuse in Kabupaten Sidoarjo, East Java, which implicated the dprd chief and his deputies in 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). 108 Court verdicts in media related legal cases are indicators 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. 109 SCHOOLS, UNIVERSITIES 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 mandatory 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) 110 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- 70

86 ited institutional resources to addressing corruption. A superficial survey of these institutions 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 representing their institutions. Only a small number of universities are actively involved in addressing corruption. The Gadjah Mada University (ugm), through its Center for Population 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 newlyestablished Center for Law and Good Governance Studies (clgs), with support from the Partnership, is mapping the extent to which specific government ministries are achieving the targets set out under inpres 5 and ran-pk. In August 2006, the Syarif Hidayatullah 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, anthropology, 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 established 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 leaders who will reject corruption

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88 MEASURING POLITICAL 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 combat corruption? And second, how can we determine the extent to which progress is actually being made in reducing corruption? This section addresses both of these questions. INDICATORS OF POLITICAL WILL AND ABILITY 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 Indonesian 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 successfully 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

89 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 discussions 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- factual questions on corruption. ics and the media. The Institute of Economic and Social Research (LPEM) at the University of Indonesia undertook a major governance survey in , which also included several, 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

90 Monitoring and evaluation of corruption in large-scale donor-funded development 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

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92 CONCLUSION To conclude, as of mid-2006, the anti-corruption track record of the Yudhoyono government 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 reflection 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 constellation of reform-minded actors inside and outside the government who have the potential 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 ability 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 government, 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

93 practices such as cronyism in appointments, political favoritism in commercial and regulatory 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 LIMITS 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 engaging 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 prosecutions, 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 prosecuting corruption, its overall impact will be limited if there aren t significant and sustained 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. 113 MANAGING EXPECTATIONS AND FEARS It appears there are high public expectations regarding the government and kpk s anticorruption 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 promises, and communicate their priorities and progress to the public. There is a risk that the government and kpk s anti-corruption initiatives will provoke 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

94 Efforts to impose reforms on the judiciary could be seen as undermining the independence of the judiciary. The failure of anti-corruption efforts to punish big fish or to improve the availability 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 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. 114 THE ROAD AHEAD 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, 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 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 accountability 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

95 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 important 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 political parties, elections and legislatures. 80

96 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 members in West Sumatra were convicted of graft in 2005, but most were still free as of January Former Chairman on Investment Coordinating Board has been convicted for misappropriating 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 receiving 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

97 APPENDIX 2 CASES HANDLED BY TIMTAS TIPIKOR SINCE ITS ESTABLISHMENT IN 2005 No Cases Violations State Loss Stage in legal Process 1 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 Violations of Haj fund disbursement Rp Billion Appeal to high court 2 State Owned Insurance Company JAMSOSTEK suspects: Achmad Djunaidi, former President Director; and Andy R. Alamsyah, former Director of Investment Violations of Medium Term Notes Purchasing Fund Rp. 311 billion and Rp. 411 billion Appeal to high court 3 State Owned Oil Company PERTAMINA Suspects: ZA, Vice President Administration and Finance Petral; and D.B.G Violation on Petral s fund allocation in Credit Suisse Singapore (CSS) without approval of the Board About US$9 million Investigation 4 State Secretary Violations of State Finance on Procurement system of the Asia Africa Summit 2005 About Rp 600 million Investigation 5 Senayan Sport Center Violation of law on extension of land using right no. 26 and 27 Indobuildco Hotel Hilton Waiting for BPKP appraisal Investigation 6 Ministry of Defense Violations of State finance on procurement of M 17 helicopter series Waiting for BPKP appraisal Investigation 82

98 No Cases Violations State Loss Stage in legal Process 7 State Owned Enterprise Pelindo Violations of subordinated bonds offering, which is not in line with the regulation and the privatization program of PT. Pelindo Subsidiary (PT. JICT) Waiting for BPKP appraisal Investigation 8 State Owned Enterprise PT. Pupuk Kaltim a) Violation of office facilities (house and car allowances) for top management; b) Violation of regulation on export facilities Waiting for BPKP appraisal Investigation 9 State Owned Enterprise PT. Angkasa Pura Violation of land right guarantee over 18 Ha land at Soekarno Hatta airport area without approval of PT. Angkasa Pura Waiting for BPKP appraisal Pre- Investigation 10 Case of State Owned Enterprise PT. Telkom Violation of regulation regarding cooperation with third party In appraisal process by Telkom internal auditor Investigation 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,

99 APPENDIX 3 BREAKDOWN OF CASES HANDLED BY THE KPK BETWEEN No Description Subtotal Total 1 Total Pre-Investigative Cases Handled in Pre-Investigated Cases from 2004 continued in Pre-Investigative Cases started in Total Cases Continued to Investigative Level in Investigative Cases from 2004 continued in Investigative Cases started in Total Cases Continued to Prosecution Level in Prosecutions Begun in 2004 continued to Cases at Prosecution Level started in Total Cases Continued to Sentencing Level in Execution from 2004 continued to Cases at Sentencing Level started in Status of Cases at Prosecution Level in 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,

100 APPENDIX 4 CASES THAT ARE BEING PROCESSED IN SPECIAL COURT FOR CORRUPTION JANUARY OCTOBER 2006 No Cases Violations Estimated Stage on State Loss Court 1 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 Try to bribe judge in Supreme Court related to prominent businessman Probosutedjo s misusing Reforestation fund Case Sentenced 2 Indonesia s Investment Coordinating Board Defendant: Theo Timeon/ former Chairman Implementation of Indonesia Investment Year Project year Rp 30 billion Sentenced 3 National Election Commission (KPU) defendants: Daan Dimara, former member of KPU; Untung Sastra Wijaya, former member of KPU Direct appointment of P.T. Royal Standard for Ballot Seal printing in 2004 Legislative Election Rp 3.5 billion Sentenced 4 Corruption Eradication Commission (KPK) defendants: Suparman, former Investigator Extorsion and bribe Sentenced 5 Indonesia Consulate General in Penang, Malaysia defendants : Erick Hikmat Setiawan, former Consul General; Muhammad Khusnul Yakin Payopo, former head sub-directorate immigration Charging illegal fee for Passport processing Rp 513 million Sentenced (Ercik Setiawan) Prosecuted (Muhammad Payopo) 6 National Indonesia Radio Station (RRI) defendants: Suratno, former Director of Finance Fahrani Suhaimi, President Director of Budi Jaya Corp. Procurement of transmitting equipment Rp 20 billion Appeal to high court 85

101 APPENDIX 4 (CONTINUED) No Cases Violations Estimated Stage on State Loss Court 7 National Election Commission (KPU) defendants: Bambang Budiarto, former member; Safder Yussac, former member; and others Procurement of Books and other print materials for election 2004 Rp 20 billion Appeal to high court 8 State Owned Enterprise P.T. Sandang Nusantara suspects: Kuntjoro Hendrartono, former President Director; Liem Kian Yin, Supplier Asset Sales misappropriation Rp 70 billion Appeal to high court 9 National Election Commission (KPU) defendants: Rusadi Kantraprawira, former member; Achmad Rojadi, former member Procurement for Ink in 2004 legislative election Rp billion Appeal to high court 10 National Election Commission (KPU) defendant: Nazaruddin Sjamsuddin, former chairman; Hamdani Amin, former Head of Finance Bureau Procurement for Insurance Service for KPU employee and bribe from suppliers Rp billion Permanent ruling 11 Directorate Budget in Ministry of Finance: Raden Soedji Darmono, former Director; Ishak Harahap, former head of Sub-directorate Receiving bribe related to National Election Commission (KPU) Cassation Source: from various Indonesia national newspapers. 86

102 SOURCES OF INFORMATION LAWS AND REGULATIONS Law 28/ 1999 on Clean Government Free from Corruption, Collusion and Nepotism Law 31/ 1999 on Eradication of Criminal Corruption Acts of Corruption Law 16/ 2000 on General Taxation Arrangements and Procedures Law 17/ 2000 on Income Tax Law 18/ 2000 on Value-added Tax (VAT) on Good & Services and Luxury Sales Tax Law 20/ 2001 on Amendment to Law 31/ 1999 on Eradication of Criminal Acts of Corruption Law 15/ 2002 on Anti-money Laundering Law 30/ 2002 on the Commission for Eradication of Corruption in Indonesia Law 17/ 2003 on State Finance Law 1/ 2004 on State Treasury Law 15/ 2004 on State Financial Audit Law 22/ 2004 on Judicial Commission Presidential Decree (keppres) 18/ 2000 on Guidelines on Government Procurement Presidential Decree (keppres) 80/ 2003 on Public Procurement Presidential Decree (keppres) 17/ 2004 on National Police Commission Presidential Decree (keppres) 18/ 2004 on National Attorney General Commission Presidential Decree (keppres) 11/ 2005 Criminal Corruption Act Eradication Team (Timtas Tipikor) Presidential Instruction (inpres) 5/ 2005 on Expedite Corruption Eradication Effort Presidential Regulation (PERPRES) 7/ 2005 on Middle Term Development Plan Year Menko Polhukam Decree Kep 54/MENKO/POLHUKAM/12/2004 on Interdepartmental Team for Hunting People Convicted of Criminal Corruption Menko Polhukam Decree Kep 21/MENKO/POLHUKAM/4/2005 on Interdepartmental Team for Hunting People Accused and Convicted of Criminal Corruption State Minister for Development Planning/Head of bappenas Kep. 219/M.PPN/12/2004 on Creation of Team for Drafting ran pk MenPAN Decree Kep/94/M. PAN/8/2005 on Coordination, Monitoring, Evaluation of INPRES 5 Implementation 87

103 INDONESIA STATE INSTITUTIONS PUBLICATION, REPORTS, SPEECH, PRESEN- TATION MATERIAL AND LETTER Attorney General (2006). Attorney General Office Agenda in Combating Corruption. Presentation material in JFCC forum, Jakarta, Indonesia, January 11, Jaksa Agung Republik Indonesia (2005). Bahan Jaksa Agung Republik Indonesia Pada Rapat Kerja Komisi III DPR R.I. dengan Jaksa Agung R.I. Jakarta: Jaksa Agung R.I. Kejaksaan Republik Indonesia (2006?) The Attorney General Office s Performance Assessment report (Summary). Jakarta: Office of the Attorney General. Kementerian Perencanaan Pembangunan Nasional/bappenas (2005). Rencana Aksi Nasional Pemberantasan Korupsi (RAN-PK) Jakarta: Kementerian Perencanaan Pembangunan Nasional/bappenas. Kementerian Perencanaan Pembangunan Nasional/bappenas (2005). Agenda 100 hari Pertama Kabinet Indonesia Bersatu: Dalam Kerangka Pembangunan Jangka Menengah ( ). Jakarta: Kementerian Perencanaan Pembangunan Nasional/BAPPENAS. Komisi Pemberantasan Korupsi (2006). Bahan KPK Pada Rapat Kerja Komisi III DPR R.I. dengan KPK: 27 Februari Jakarta: KPK MenPAN circular letter number SE/03/M.PAN/01/2005 on State Officials Wealth Report MenPAN circular letter number B/345/M.PAN/2/2005 on Reporting for INPRES 5 Implementation MenPAN circular letter number SE/14/M.PAN/8/2005 on follow up of INPRES 5 President of Republic of Indonesia (2005). State Address of the Republic Of Indonesia And Government Statement on the Bill on the State Budget for the 2006 Fiscal Year and Its Financial Note before DPR of Republic of Indonesia on August 16, ( ARTICLES, BOOKS AND REPORTS Asian Development Bank (2004). Country Governance Assessment Report: Indonesia. Manila: Asian Development Bank. Astraatmadja, Atmakusumah (2005). Text remarks given in conference by usindo, George Washington University and Asia Society Washington Centre Indonesia Media and the Freedom of Expression, Washington D.C., USA, September 8, Bhargava, Vinay and Emil Bolongaita (2004). Challenging Corruption in Asia: Case Studies and a Framework for Action. Washington D.C.: World Bank Clark, John (2005). Overview of Indonesia Civil Society. World Bank, Indonesia Country office Jakarta. Unpublished. Corruption Eradication Commission (2004). Bring Indonesia Free from Corruption: Annual Report Jakarta: Komisi Pemberantasan Korupsi (KPK) Defense Media Center Website. Dua Kriteria Kelompok Bisnis TNI: Yang Menggunakan Aset Negara dan yang Dilakukan Anggota/Pensiunan TNI. October 19, 2000 ( 88

104 Elegant, Simon and Jason Tedjasukmana. We Need Shock Therapy. Time Asia Magazine Volume 164, No. 19. November 8, Febiana, Fenny. Panglima TNI: Inventarisasi Bisnis TNI Sudah Selesai. Tempo Interaktif, October 3, ( Hafild, Emmy (2004). Corruption Eradication in Indonesia a Case Study, first draft paper presented in meeting New Governments, New Anti-Corruption Governments: The Challenge of Delivery, Nairobi, Kenya, October 11 13, Hafild, Emmy and Hani Yulianto (2004). Hasil Assessment Penerapan Pakta Integritas Kabupaten paper presented in workshop Mewujudkan Sistem Pengadaan Barang Dan Jasa yang Efisien and Bebas KKN, Jakarta, Indonesia, August 25, Human Rights Watch Asia (2006). Too High a Price: The Human Rights Cost of the Indonesian Military s Economic Activities. New York: Human Rights Watch. IFES (2004). Reporting and Public Disclosure of Financial Activity of Political Parties and Electoral Participants. Jakarta: IFES. Indonesia Corruption Watch (2005). Evaluasi Setahun Pemerintah sby Kalla: Komitmen Tanpa Dukungan. Jakarta: Indonesia Corruption Watch Indriastuti, Dewi. Sekolah Antikoupsi: Belajar Berantas Korupsi. Kompas, February, 24, Juwono, Vishnu (2006). kpk brief background; Partners in Fight against Corruption; INPRES 5 and RAN PK, Notes prepared for A Survey and Assessment of The Government of Indonesia s Anti-Corruption Initiatives. Jakarta. World Bank Lindsey, Tim (2002). Anti Corruption and ngos in Indonesia in Richard Holloway, ed., Stealing from the People: 16 Studies on Corruption in Indonesia. Book 4, The Clampdown: In Search of New Paradigms. Jakarta: Aksara Foundation for Partnership for Governance Reform in Indonesia. Mietzner, Marcus (2006): The Politics of Military Reform in Post-Suharto Indonesia. Washington, DC: The East West Center. O Rourke, Kevin (2002). Reformasi: The Struggle for Power in Post-Soeharto Indonesia. Australia: Allen & Unwind. Partnership for Governance Reform in Indonesia (2001). A Diagnostic Study of Corruption in Indonesia. Jakarta: Partnership for Governance Reform. Partnership for Governance Reform in Indonesia (2005). MoU Signing Between NU-Muhammadiyah-Partnership. Unpublished. Robinson, Richard and Vedi Hadiz (2004). Reorganizing Power in Indonesia: The Politics of Oligarchy in an Age of Markets. London: Routledge Cruzon. Said, Sudirman and Nizar Suhendra (2002). Corruption and Indonesian Society in Richard Holloway, ed., Stealing from the People: 16 Studies on Corruption in Indonesia. Book 1, Corruption From Top to Bottom. Jakarta: Aksara Foundation for Partnership for Governance Reform in Indonesia. 89

105 Santosa, Mas Achmad (2004). Reform Developments in the Attorney General s Office of Indonesia. In Report from the ADB Symposium on Challenges in Implementing Access to Justice Reforms. Manila: Asian Development Bank. Sasdi, Ardimas. Ethical reactive journalism creates us vs. them media. Jakarta Post, May 12, Sherlock, Stephen (2002). Combating Corruption in Indonesia? The Ombudsman and the Assets Auditing Commission. Bulletin Indonesia Economic Studies Vol. 38 No. 3 December Canberra: Australian National University Transparency International (2005) Global Corruption Barometer Berlin: Transparency International Transparency International Indonesia (2005). Indonesian Corruption Perception Index Jakarta: Transparency International Indonesia Tupai, Roy. President Proposes Pay Increases for Supreme Court Chief. Paras Indonesia, December 21, 2005 at usindo (2005). Transparency and Anti-Corruption Challenges in Indonesia. World Bank (2003). Indonesia Country Assistance Strategy FY 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. Available at World Bank, Justice for the Poor Program (2006). Local Government Corruption Study WB Collaboration Capacity Building of Anti-Corruption NGO at Local Level. Idea Note. September, World Bank, Justice for the Poor Program (2006). Temuan Awal Penelitian Korupsi di Tingkat Lokal. Power Point Presentation, October 12, 2006 PERIODICALS Jakarta Post Kompas Media Indonesia Suara Pembaruan Tempo Weekly Magazine, Indonesian and English editions ON-LINE PERIODICALS Detikcom ( The Jakarta Post.com ( Kompas Cyber Media ( Paras Indonesia ( Tempo Interaktif ( Suara Karya Online ( President Republic of Indonesia ( 90

106 ENDNOTES 1. The term government is used throughout this report as short hand for the executive branch of the national government. The term government suggests an entity in which leadership issues a coherent set of policies that then are implemented by their subordinants, including the bureaucracy. It is important to note 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 (such as the kpk, bpk, ppatk, kppu and Judicial Commission) are, in fact, independent agencies and not part of the executive branch. 3. The leaders of some political parties assert that many of these cases are the result of unclear and changing government regulations and therefore should be dropped. 4. Tempo, October 26 November 1, The World Bank, Combating Corruption in Indonesia, pgs See 7. Kaufmann D., A. Kraay, and M. Mastruzzi 2006: Governance Matters V: Governance Indicators for See Henderson & Kuncoro: Sick of Local Government Corruption? Vote Islamic, nber Working Paper, March The term government is used throughout this report as short hand for the executive branch of the national government. The term government suggests an entity in which leadership issues a coherent set of policies that then are implemented by their subordinants, including the bureaucracy. It is important to note 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 Indonesia (such as the kpk, bpk, ppatk, kppu and Judicial Commission) are, in fact, independent agencies and not part of the executive branch. 11. There are a number of important elements of the fight against corruption that are not included under inpres 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 Said and Suhendra, in Stealing From the People, Book 1, pg Additionally, Indonesia s two largest providers of development financing, the Asian Development Bank and the World Bank, which have been criticized for turning a blind eye to corruption and profligacy during the Soeharto era, initiated efforts to reduce corruption in development projects. According to the World Bank, it revisited its entire strategy toward Indonesia, agreeing with the government to cut lending to a third of past levels, speaking out on issues of corruption, and shifting it focus toward governance, anti-corruption and community development programs. (See Combating Corruption in Indonesia, pgs ) 91

107 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 (combining development and recurring spending) with a performance orientation requiring line agencies to submit performance indicators and reports to Parliament and a medium-term framework. The law brings more clarity to the roles and responsibilities in the budget process and to its organization and introduces a key accountability mechanism by making the treasurer personally responsible for losses to the state. pg Said and Suhendra, in Stealing From the People, Book 1, pg See State Address on the Bill on the State Budget for the 2006 Fiscal Year and its Financial Note before the Plenary Session of the House of Representative on August 16, Agenda of the First 100 Days of President SBY s United Indonesia Cabinet. 23. Quoted in Tempo, February Time Asia edition, November 8, Fifth article of keppres Three of inpres 5 s instructions are not addressed in this report: 1) introducing good governance principles in soes, 2) injecting anti-corruption education into school curricula, and 3) carrying out an anti-corruption public information campaigns. 28. Stephen Sherlock, Combating Corruption in Indonesia? bies, pg See Reform Developments in the Attorney General s Office of Indonesia, Mas Achmad Santosa, Report from the ADB Symposium on Challenges in Implementing Assess to Justice Reforms, Asian Development Bank, Manila, (2005), pgs See The Attorney General Office s Performance Assessment Report (Summary), Kejaksaan Republik Indonesia (undated), pg Ibid, pg Ibid, pgs ADB, Country Governance Assessment, Indonesia, pg ADB Country Governance Assessment, Indonesia, pg There was a hope in early 2005 for an overhaul in the tax system when kadin was asked to jointly draft tax law amendments by Ministry of Finance s Directorate General of Taxation. The revisions included Law No on general taxation arrangements and procedures, law no on income tax and Law no 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 contain unfavorable articles, which granted more authority to tax officials, who are prone to power abuse. The amendments contained changes altered unilaterally by the tax officials when they were about to be submitted to the President. With intensified opposition from the public, the government eventually agreed to accommodate the 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

108 37. Jakarta Post, 24 January 2006, pg Indonesia Corruption Watch Evaluasi Setahun Pemerintah SBY-Kalla: Komitmen Tanpa Dukungan. ICW: Jakarta, pg See the ADB s Country Governance Assessment, Indonesia, pg See the ADB s Country Governance Assessment, Indonesia, pgs Within the team there were three working groups: 1) on corruption prevention, 2) on corruption case prosecution and law enforcement system improvement and 3) on monitoring and evaluation. Each working group was composed of first and second echelon officials from 18 ministries, 14 high ranking officials from Non Ministry Institutions, heads of universities, kpk officials, members of the National Ombudsman Commission, ppatk officials and ngos. 42. Rencana Aksi Nasional Pemberantasan Korupsi , State Minister of Development Planning/bappenas. 43. Ibid. 44. See Chapter 11 (Penghormatan, Pengakuan dan Penegakkan atas Hukum dan Hak Asasi Manusia) in Peraturan Presiden Republik Indonesia Nomor 7 Tahun 2005 Tentang Rencana Pembangunan Jangka Panjang Tahun 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 years produced annual policy statements followed by ministerial decrees intent on converting the bureaucracy into a responsive, efficient, and professional civil service based on new public management theories. However, 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, Jakarta Post, 8 March 2006, pg Hafild, Emmy and Hanu Yulianto Hasil Assesement Penerapan Pakta Integritas Kabupaten Solok paper presented by TI Indonesia in workshop Mewujudkan Sistem Pengadaan Barang dan Jasa yang Efisien dan bebas kkn, Jakarta, August 25, pg Interview with the Vice Mayor of Surabaya and his team on January 6, See the Jakarta Post, 11 October 2006, pg. 1 and Kompas, 11 October 2006, pg. 1. The investigation of dprd members requires permission from the Governor of the province. The investigation of sub-national executive officials (Governors, Vice Governors, Walikotas, Vice Walikotas, Bupatis and Vice Bupatis) requires permission from the President. 52. Aceh is rich in oil and natural gas and historically it has been considered one of Indonesia s more corruption-prone provinces. Not coincidentally, until a peace accord was signed in August 2005, it also was home 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 Jakarta Post, 8 November 2006, pg

109 56. Jakarta Post, 9 November 2006, pg The Executive branch has some influence over other branches of the government through its control of the civil service and budgets. 58. It is noteworthy that despite the problem of money politics and the recent corruption scandal within the kpu, the credibility of Indonesia s elections since the fall of Soeharto has not been seriously undermined by widespread corruption or collusion. 59. TI Indonesia Survey, 2005, pg For an overview of justice sector reform issues, see the ADB s Country Governance Assessment, Indonesia, pgs The kpk arrested the lawyer of Probosutedjo and five Supreme Court (MA) officials who were involved in transaction of money gifts worth Rp 6 billion. The kpk also began an investigation of the three Supreme Court judges 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, December 21, 2005 at ( 63. See A Financial Sector Agenda for Indonesia, World Bank Indonesia (January 2005), available at Richard Robinson and Vedi Hadiz, Reorganising Power in Indonesia: The Politics of Oligarchy in an Age of Markets, pgs An amendment to Law passed in December 2003 requires that a single supervisory agency be established no later than December Vedi Hadiz, in Challenging Corruption in Asia, pg According to the World Bank, in 2003, weak internal controls in state owned banks cost the governof transparency and disclosure, weak management information systems and poor corporate governance. ment about $300 million. The Bank also notes that Indonesia s state run pension funds suffer from a lack 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 Reporting and Public Disclosure of Financial Activity of Political Parties and Electoral Participants, ifes Indonesia, November 2004, pg See Emmy Hafild, Corruption Eradication in Indonesia, A Case Study, a draft paper, prepared for October 2004 meeting in Kenya on New Governments, New Anti-Corruption Governments: The Challenge of Delivery. 72. Vedi Hadiz, in Challenging Corruption in Asia, pg While 30% may be high, 5% seems very low. If it is only 5%, then there would have to have been either a significant increase in the military budget which hasn t been the case or a significant decline in offbudget funding, or some combination of the two. 74. Too High a Price: The Human Rights Cost of the Indonesian Military s Economic Activities, Human Rights Watch Asia, available at (no pagination). 94

110 75. Tempo English edition, 13 February 2006, pgs Marcus Mietzner, The Politics of Military Reform in Post-Suharto Indonesia, East West Center Washington, 2006; available online at pg Ibid, pg Lisa Misol, Jakarta Post, 7 October, 2005, pg Defense Media Center Website. Dua Kriteria Kelompok Bisnis TNI: Yang Menggunakan Aset Negara dan yang Dilakukan Anggota/Pensiunan TNI, October 19, 2000 ( kesra/2005/oktober/191005%20bisnis.htm). 79. Stephen Sherlock, Combating Corruption in Indonesia?, bies, pg For example, an article in Kompas on February 25, 2005 reported that the wealth of the soe Minister under Megawati presidency had increased by Rp 16 billion. 81. Jakarta Post, 13 September, 2006, pg All corruption cases prosecuted by the ago currently are tried in regular courts, although there is a possibility that this may eventually change. 83. Jakarta Post, 6 March 2006, pg Jakarta Post, 6 March 2006, pg According to the head of ppatk, Yunus Husein, as reported in usindo report Briefs/2005/Corruption%20Conference% htm. 86. Jakarta Post, 9 November 2006, pg Tempo English edition, 3 October 2005, pg Jakarta Post, 30 January 2006, pg Stephen Sherlock, Combating Corruption in Indonesia? Bulletin Indonesia Economic Studies, pg The kppu and the kpk entered into a MoU to cooperate in February Tempo English edition, 19 December, 2005, pgs Up to now, investigators could cite imprudence as grounds for suspicion of corruption, but now investigators must cite acts that violate specific laws. The ago and other law enforcement officials indicated that the 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 Tempo English edition, 14 November 2005, pgs State Address Op Cit. 96. TI Indonesia 2005 Survey, pg The density and capacity of ngos varies greatly across the archipelago from many and strong in central and eastern Java to few and weak in places like ntt. 95

111 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 Ibid John Clark, Overview of Indonesia Civil Society (unpublished paper), The World Bank Jakarta, Jakarta Post, 14 January 2006, pg John Clark, Op Cit Jaringan Nasional Pengawas Barang Terbentuk, Kompas, February 12, 2006 at ( Unpublished report on MoU signing among NU, Muhammadiyah and the Partnership for governance Reform, by the Partnership for Governance Reform, Arabic term for discussion on Islamic Law 106. See Richard Robinson and Vedi Hadiz, Op cit. pgs. 62, Like virtually every other sector of Indonesian society, the Indonesian media is not immune to corruption. 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 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, Sasdi, A., Ethical Reactive Journalism Creates Us vs. Them Media, Jakarta Post, May 12, 2005, pg Agustina, Widiarsi and Bandelan Amiruddin. Saat Siswa Bicara Korupsi. Tempo Magazine Edition July 3 July 9, Suara Karya online, August 30, See Indriastuti, D. Sekolah Antikorupsi: Belajar Berantas Korupsi, Kompas, 24 February 2006, pg Stephen Sherlock, Combating Corruption in Indonesia?, bies, pg Jakarta Post, 24 February 2006, pg As of early February 2006, none of the 43 had gone to jail, even though the order to execute the sentences of 33 of the councilors was given in December Tempo English edition, 10 October 2005, pg

112 GLOSSARY ADB AGO BAWASDA (Badan Pengawas Daerah) BAPEPAM (Badan Pengawas Pasar Modal) BAPPENAS (Badan Perencanaan Pembangunan Nasional) BLBI (Bantuan Likuiditas Bank Indonesia) BKPM (Badan Koordinasi Penanaman Modal) BPK (Badan Pemeriksa Keuangan) BPKP (Badan Pengawas Keuangan dan Pembangunan) BRR (Badan Rehabilitasi dan Rekonstruksi) Bupati CIMU DPD (Dewan Perwakilan Daerah) DPR (Dewan Perwakilan Rakyat) DPRD (Dewan Perwakilan Rakyat Daerah) Fiqih FOI FORUM 2004 (Forum Pemantau Pemberantasan Korupsi) GAM (Gerakan Aceh Merdeka) GBHN (Garis garis Besar Haluan Negara) GDP GeRAK (Gerakan Rakyat Anti Korupsi) Golkar (Golongan Karya) Halaqoh Tarjih HIPMI (Himpunan Pengusaha Muda Indonesia) IBRA Asian Development Bank Attorney General Office Regional Supervision Agency Capital Market Supervisory National Development Planning Board Liquidity Assistance from Central Bank of Indonesia Investment Coordinating Board Supreme Audit Institutions Comptroller of Finance and Development Rehabilitation and Reconstruction Agency for Aceh and Nias Head of District Central Independent Monitoring Unit House of Representatives of Regions House of Representative Regional Representative Council Islamic Law Compilation Freedom of Information Forum for Corruption Eradication Monitoring Free Aceh Movement General Outline of State Policy Gross Domestic Product People s Movement for Anti Corruption The State party during the New Order; now holds the largest number of seats in the DPR Discussion on Islamic Law Indonesia Young Entrepreneur Association Indonesia Bank Restructuring Agency 97

113 ICW IFI INPRES (Instruksi Presiden) JAMSOSTEK (Jaminan Sosial Tenaga Kerja) Kabupaten Kecamatan KADIN (Kamar Dagang Indonesia) KDP KKN (Korupsi Kolusi Nepotisme) KON (Komisi Ombudsman Nasional) Kormonev (Koordinasi Monitoring Evaluasi) Kota KPK (Komisi Pemberantasan Korupsi) KPKPN (Komisi Pemantau Kekayaan Penyelenggara Negara) KPPOD (Komisi Pemantau Pelaksanaan Otonomi Daerah) KEPPRES (Keputusan Presiden) KPPU (Komisi Pengawas Persaingan Usaha) KPU (Komisi Pemilihan Umum) KUHP (Kitab Undang Undang Hukum Pidana) LPEM (Lembaga Penyelidikan Ekonomi Masyarakat) LPPI (Lembaga Pengawas Pengaduan Independen) LSM (Lembaga Swadaya Masyarakat) Menko Polhukam (Menteri Koordinator Politik, Hukum Dan Keamanan) MenPAN (Menteri Negara Pendayagunaan Aparatur (Negara) MoD MoF MoU Indonesia Corruption Watch International Financial Institution Presidential Instruction Employee Social Welfare Insurance SOE District Sub-District Indonesia Chamber of Commerce Kecamatan Development Program Corruption, Collusion and Nepotism National Ombudsman Commission Coordination, Monitoring and Evaluation Team City District Corruption Eradication Commission Commission to Audit the Wealth Report of State Officials Commission on Supervision of the Decentralization Implementation Presidential Decree Business Competition Supervisory Commission General Elections Commission Criminal Code Law The Institute of Economic and Social Research Independent Body for Complaint Supervision Non Governmental Organization Coordinating Minister for Political, Legal and Security Affairs State Minister for the Empowerment State Apparatus Ministry of Defense Ministry of Finance Memorandum of Understanding 98

114 MPR (Majelis Permusyawaratan Rakyat) Muhammadiyah Nahdlatul Ulama (NU) New Order Pancasila PELINDO (Pelabuhan Indonesia) PMP (Pendidikan Moral Pancasila) Pengadilan Tindak Pidana Korupsi (TIPIKOR) Perpu (Peraturan Pemerintah Pengganti Undang Undang) PERTAMINA (Perusahaan Pertambangan Minyak Nasional) PKS (Partai Keadilan dan Sejahtera) PLN (Perusahaan Listrik Negara) POLRI (Polisi Republik Indonesia) PPN (Perencanaan Pembangunan Nasional) PPATK (Pusat Pelaporan Analisa Transaksi dan Keuangan) RAN-PK (Rencana Aksi Nasional Pemberantasan korupsi) Reformasi R.I. (Republik Indonesia) Rupiah/Rp SAI SBY (Susilo Bambang Yudhoyono) SekNeg (Sekretariat Negara) SOE Telkom (Telekomunikasi) People s Consultative Assembly Organization representing Islamic modernism in Indonesia Literally, Revival of the Religious Scholar Organization Representing Islamic traditionalism in Indonesia The period of Soeharto s presidency ( ) State Ideology based on five principles State Owned Sea Port Moral Education of Pancasila Course Corruption Criminal Court Government Regulation in Substitute of Law National Oil and Gas Company Justice and Welfare Party State Electricity Company Indonesian National Police National Development Planning Indonesian Financial Transaction and Analysis Centre National Action Plan for Eradication Literally Reform ; often used to refer to the period following Soeharto s fall Republic of Indonesia Basic unit of Indonesia currency Supreme Audit Institutions President Yudhoyono s nickname State Secretariat State Owned Enterprise Telecommunication Provider SOE 99

115 TGPTPK (Tim Gabungan Pemberantasan Tindak Pidana Korupsi) TI Timtas Tipikor (Tim Pemberantasan Tindak Pidana Korupsi) TNI (Tentara Nasional Indonesia) UGM (Universitas Gadjah Mada) UI (Universitas Indonesia) UNDP USAID WALHI (Wahana Lingkungan Hidup Indonesia) Yayasan Joint Team for the for the Eradication of the Criminal Act of Corruption Transparency International Criminal Corruption Act Eradication Team Indonesia Military Forces Gadjah Mada University University of Indonesia United Nations Development Programme United States Agency for International Development Indonesia Forum for Environment Foundation; organization intended as charities but often used for political funding and Investment 100

116 CENTRE FOR STRATEGIC AND INTERNATIONAL STUDIES (CSIS) is an independent, non-profit research organization, established on September 1, 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. Analisis CSIS, a quarterly journal in Indonesian. 3. The Indonesian Quarterly, an English quarterly journal. 4. Dokumentasi, clippings of Indonesian newspapers on selected topics.

117 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 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.

118 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.

119 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 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-corruption initiatives begun or enhanced since A central concern of this report is whether these initiatives will 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 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, including 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 anticorruption 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 understanding of the strengths and weaknesses of the current efforts to address corruption in Indonesia, and to academic efforts to understand the Indonesian political economy.