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Meeting chaired by Geoffrey Catchpole
Dr Leslie Palmier
Formerly of University of Bath
16 January 2006
Dr Palmier was formerly Reader in Sociology & founder Director of the Centre for Development Studies at the University of Bath, as well as Associate Fellow of St Antony’s College Oxford. He has been a student of Indonesia since 1951, & has authored several publications about the country.
What is corruption? The accepted definition, virtually universal, is the use of public office to obtain unauthorised emoluments. It has been widely adopted by writers in the field. In essence, it is a juridical definition, successfully used to convict many. However, it is deficient in one important sociological respect: it may deflect attention from an important characteristic of corruption, namely that it is almost always a conspiracy which includes the perpetrator of the corrupt act and his accomplices. But what is wrong with corruption? Why should not a public official with time on his hands use it to increase his income? The answer is that it brings into question loyalty to the employer, that is, the public good.
As a crime, corruption is unique in its secrecy. There are no identifiable victims, no corpses, no broken windows, no forced doors. When, as is usually the case, several people are involved, they have no interest in denouncing one another. All this makes both its detection and prosecution, and therefore analysis, very difficult indeed. So one has to rely on general impressions derived from police prosecutions, testimony of those who have experienced corruption, and so on.
There is probably no country in the world in which corruption cannot be found, as may be seen from the annual tables compiled by Transparency International. All that varies is its extent. In some countries, such as Britain, it seems limited to local government in specific areas (well chronicled by the magazine Private Eye). Corruption is not widespread. However, in some other countries it enters into all aspects of daily life. Restricting ourselves to Asia, corruption is common in China, Japan seems free of it, but not South East Asia. The current joke is that in China corruption is under the table, in Indonesia it is over the table, and in the Philippines the table goes too.
Corruption, being hard to detect, is equally difficult to prove. Police engaged in prosecuting this crime assert that only the stupid are caught, the clever cover their tracks too well. : As an Indonesian official report of 1970 put it: ‘…the powerful and rich were adept at sophisticated methods of corruption and at destroying any evidence.’
It is worth emphasising the implicit point just made. Corruption is not a crime of the weak and poor; it is a crime of the powerful. In this context, the Chinese experience is instructive. The Kuo Min Tang government of the 1930s was notorious for corruption, and their opponents, the Chinese Communists, gained considerable support by promising to run a clean government. And, indeed, while fighting their way across China, they were scrupulously honest, paying for all supplies. Once they had assumed power in 1949, however, matters became very different. Within two years, the government was to mount the first ‘Anti’ campaign, directed at the failings of their officials, including especially corruption. The campaign had little result, and over time has been followed by several others, equally ineffective. At present corruption in China may incur the death penalty, and executions take place frequently. This does not seem to have had much effect, possibly because those who are caught are not the prime movers.
We should distinguish between corruption on the one hand and theft and fraud on the other. They are similar activities, but with different consequences. The latter terms are used in the private sector. Here, when these activities are discovered, the culprits are often dismissed at once and may face a criminal prosecution. Corruption is a term restricted to government service where it is often the case that officials have great security of tenure and are not subject to instant dismissal. Fraud and theft, if suspected, become the subject of lengthy investigations, sometimes lasting for years, before any charges can be laid against the suspected official.
Indonesia features among the worst in Transparency International’s annual list of corrupt countries. But we do not have to rely only on this ‘perceptions’ index. We also have testimony from no less than Megawati Sukarnoputri when she was president. Speaking to the Indonesian Press Club in Tokyo in September 2001, she declared that Indonesia was unable to repay its very large foreign debt because government officials had stolen the money. This was revealing enough. Her next sentence was even more so: ‘They thought it was aid.’ This implies some honour among the thieves, in that loans have to be repaid, but aid does not. Indonesia’s national debt amounts to some US$140bn, equivalent to 80% of annual national income. The external debt alone is US$75 billion; its servicing takes up more than half the budget. The background to Megawati’s remarks was an announcement by the State Audit Agency that between January 2000 and June 2001 it had uncovered almost 10,000 cases of embezzlement, amounting to the equivalent of over ten billion dollars. The principal embezzlers were Bulog (discussed below), the national oil company Pertamina, and the Ministry of Finance.
Megawati herself bore witness in the same speech to the pervasive nature of corruption in the country: ‘I only have ten fingers. How can I handle those cases involving thousands [of people]?’ Matters have not improved since she spoke. A report by the Indonesian ‘Commission To Combat Corruption’ (BPK) declared that about 50% of state development funds were misappropriated during the first six months of 2004.
Previously, in January 1998, Megawati had given an insight into how foreign loans were stolen:
‘The entrenched practice of personal enrichment through the issue of special concessions and monopolies to certain business groups and individuals, supposedly in the interest of the nation, was equal to channelling the foreign debt to specific business sectors owned and developed by these groups for their own profit…The mounting foreign debt enabled more corruption and collusion while generating more suffering for the poor masses.’
The former president’s admission of the widespread nature of corruption in Indonesia draws attention to an aspect that has rarely been recognised. The (somewhat pejorative) term ‘brain drain’ has been applied to professionals in the developing world who find employment in industrialised countries. Little note has been taken of what may be called the "internal corruption drain", to indicate that able people in the many developing countries devote their talents not to productive work, but to corrupt activity.
It would be easy to conclude that corruption is part of Indonesian culture, as is sometimes alleged in the country itself. But of course any culture depends on the social and economic structures of the day. So while the Dutch East Indies Company of the 17th and 18th centuries, like its English counterpart, was notorious for the corruption of its officials, once reforms had been effected, honesty ruled. This was even more so when the Dutch state took over the Company in the mid-19th century. The rot set in, so to speak, during the Japanese occupation of Indonesia from 1942 to 1945. Considerable inflation made salaries insufficient for the basic needs of officials. They naturally supplemented their incomes illegally. After Indonesian independence, inflation continued, and so did bureaucratic corruption. It fell a little under the authoritarian rule of President Suharto, where he and his family practically monopolised corruption. Among officials, it continues to this day.
Political corruption (meaning both the bribery of a politician or minister as well as his or her theft of state funds) emerged in the 1950s, as soon as a decision was taken to hold elections. Elections are very expensive and, in the West, paid for primarily by gifts from the rich. But in newly independent Indonesia the only wealthy were a few Chinese, who were considered outside the political process. So the only source of funds was the state, which was duly rifled. During President Suharto’s term of office from 1966 to 1998 elections were formalities, now officially paid for from state resources.
Suharto was succeeded as president by his former Minister for Technology, BJ Habibie, and it was during the latter’s term of office that occurred the sequence of events to be described as an illustration of a method of political corruption, focusing on a career politician, Akbar Tanjung. Mr Tanjung first rose to prominence in Golkar, the government’s own political party, under President Suharto. The story begins in 1999, when BJ Habibie, former Minister of Technology and also a member of Golkar, held the presidential office, and Tanjung was State Secretary. Indonesia had been very badly affected by the Asian currency crisis, and some parts of the island of Java were destitute and famished. In March Habibie called a limited cabinet meeting of himself, Tanjung, and a Mr Rahardi Ramelan, who was head of Bulog, the National Logistics Agency.
Bulog’s task is to maintain a stable price for rice, the national staple. It does so by market operations, in the course of which it accumulates large sums of money, which are dubbed "extra-budgetary funds". The official Indonesian enquiry of 1970 mentioned earlier identified this body as a powerful source of corruption, and recommended its reform. Nothing has been done, because for President Suharto and his successors, Bulog and other state enterprises, equally corrupt, have been too convenient as suppliers of cash to the government, given its failure to raise sufficient resources by legitimate means (as I shall explain later).
President Habibie called a limited cabinet meeting in March 1999 and instructed Ramelan as head of Bulog to transfer 40 billion rupiah (roughly, 40 million dollars) of ‘extra-budgetary’ money to Tanjung as State Secretary, to buy food for the destitute in the two worst affected provinces in Java. It is indicative of the state of public administration in Indonesia that two years later when Habibie (now working in Germany) was interrogated over the matter, he declared that by the end of his term in office in October 1999, not having received an account from Tanjung, he had assumed all had gone as intended.
The scandal did not break until over two years later, October 2001. Ramelan (no longer head of Bulog) was on trial for corruption. He declared that on Habibie’s orders he had given 40 billion rupiah to Akbar Tanjung for the relief of poverty in Java. Tanjung, now chairman of Golkar and Speaker of the Parliament, admitted receiving the money, but said he had passed it on to a foundation, whose name he could not remember, to buy food for the poor in the affected provinces. An influential news magazine, Tempo, alleged that the money had been used to fund the Golkar Party’s campaign in the general election of June 1999. President Megawati gave the necessary authority to the Attorney General to interrogate Tanjung. He now remembered that the money had been given to a charitable foundation called Raudlatul Jannah to buy 1.7 million food packs for distribution to the needy in the Javanese provinces. This charity was almost unknown.
In January 2002, the Attorney General, MA Rachman, having completed his preliminary investigations, said there was no evidence that the poor in the Javanese provinces had received any food packs. He declared Tanjung suspect of corruption, as also two other individuals: the head of Raudlatul Jannah, Dadang Sukandar, and one Winfried Simatupang, owner of a company supposedly entrusted with distributing the food packages, and who maintained having done so.
Two months later, March 2002, all three were arrested and detained. In short order Simatupang, he of the distribution company, returned the 40 billion rupiah to the Attorney General’s Office, maintaining that he had kept the money in his house all the time. The trial for corruption of Tanjung, Simatupang, and Sukandar, now began at the Central Jakarta District Court. Simultaneously, Rahardi Ramelan, head of Raudlatul Jannah, was being separately tried for corruption in the South Jakarta District Court. Simatupang was called as a witness. He now admitted that he had lied about the use of the 40 billion rupiah, and had returned it to save Akbar Tanjung from being found guilty of corruption. The rumour mill declared that in fact Tanjung and his supporters had put up the money.
In the Parliament, some members proposed that a special committee be set up to investigate the role of Tanjung, who was the Speaker, in the scandal. The motion was supported by only 73 of the 491 members, and so was lost. All 110 members of Tanjung’s own party, Golkar, of course opposed it. More surprisingly, most of President Megawati’s ‘Indonesian Democratic Party of Struggle’ abstained.
Finally, in September 2002 Tanjung was convicted of corruption and abuse of power, and sentenced to three years in prison. His accomplices, Sukandar and Simatupang were given 18 months. They all appealed their convictions to the Jakarta High Court. The following January this court upheld Tanjung’s conviction and sentence, and increased the prison term of his accomplices from 18 months to three years.
Tanjung now appealed to the Supreme Court. The case was heard there a year later, with the decision announced in February 2004. The Court found that only five billion rupiah out of the missing 40 billion had been used to buy food for the poor. They also found that the problem had been caused by lack of government control, for which Tanjung as State Secretary was directly responsible. Nevertheless, the Supreme Court declared that his action in giving the money to Sukandar to distribute foodstuffs to the poor was neither an abuse of authority, nor a manipulation. The court therefore annulled his conviction. Unusually, one of the five judges wrote a dissenting opinion.
For many Indonesians except the most cynical, the Supreme Court decision was surprising, flying in the face not only of its own finding that most of the money had been spirited away, but also of admissions by the conspirators. The explanation seems to lie in the field of politics. President Megawati owed her election, under the system then obtaining, to the support of two political parties, a small Muslim grouping, and the much larger Golkar, of which Tanjung was chairman, and which continued to support him throughout his trial. She was hoping to be re-elected later in the year, and would not have wished to compromise her support by Golkar. Indeed, she had supported Tanjung’s remaining Speaker of the Parliament while his appeal was being heard. Then, with regard to the Supreme Court, she had appointed the Chief Justice, who would naturally have hoped for her re-election and his continuance in office. Opinion in Jakarta was convinced Megawati had leant on him to exonerate Tanjung. (Both the Chief Justice and Tanjung were members of Golkar.) It is these political factors, which perhaps explain why Megawati, despite her denunciations of corruption, tolerated it to an extent, which doomed her at the next presidential election.
In all this, it would appear that the corrupt elite had made a number of miscalculations. The most obvious is that the method of election of the president had changed. Previously, it had been the responsibility of the MPR, or Constitutional Assembly, so that the larger parties in it, such as Golkar, had a decisive voice. For the 2004 elections, however, the DPR, or Parliament, had decided that the president was to be elected by direct popular vote, which, in the event, disappointed all the corrupt elite’s expectations. They had also not reckoned with the fact that the country was no longer ignorant and deferential. At independence in 1949, only 10% of Indonesians was literate. By the end of the century only 10% or less was illiterate. And Habibie, to his credit, had freed the Indonesian media from the censorship imposed by Suharto. This has led to very lively debate, as well as frequent demonstrations against Golkar as a remnant of the Suharto regime. The country is no longer prepared unthinkingly to accept the authority of the country’s institutions. When Tanjung heard that the Supreme Court had upheld his appeal he exclaimed, ‘If we do not respect the decisions of the Supreme Court, which of the country’s institutions will we respect?’ He revealed some rather out-dated thinking, namely that if the political elite could manipulate institutions to their satisfaction, the country would go along. This may have been true in the illiterate Indonesia of the 1940s; it was not true in 2004. In the event, Mr Tanjung is now not a significant actor on the Indonesian political stage. His party, Golkar, is strongly linked to corruption, and the new President has been elected on an anti-corruption policy.
Further insight into the conspiracy was provided in 2004 whenTanjung found himself sued for 5 billion rupiah, by Mr Kito Irhami. At the time of Tanjung’s trial he had been a senior official in the Attorney General’s Office. He claimed that Tanjung had promised to pay him a billion rupiah for ‘informing him of developments’. Though Irhami had kept his side of the bargain, Tanjung had not, and Irhami was claiming ‘moral damages’. Mr Irhami is now serving a sentence on unrelated charges.
What light does this throw on the methods of political corruption? It confirms that it is a conspiracy, initiated by one or more powerful people, and shrouded in secrecy. The fate of the missing money remains mysterious. It is not even known whether it was used entirely for political purposes or if some of it stuck to the fingers of the hands through which it passed, as would not be uncommon. The only certainty is that it was not spent as intended, that is to feed the famished. The further point to be made is that political corruption involves very large amounts of money, which mean the ability to buy many votes, to pay for ‘spontaneous’ demonstrations, or to bribe key officials. If stolen for private purposes, these great sums mean ease, comfort, and security for more than one generation of a family. They therefore represent virtually irresistible temptations. This assumes, of course, the lack of accountability implicit in Habibie’s admission that he never checked on whether the money had been used as intended.
Corruption is so pervasive in Indonesia that it invites question as to what may be its function in maintaining the socio-political system. (No tone of approval is implicit in the word ‘function’.) The answer perhaps lies in the structure of the country. Its name trips off the tongue very easily, and over the years its identity has become recognised. Many have also become aware that it is the most populous Muslim nation, with over 200 million people. However, still not widely appreciated is the vastness of this archipelago. If the western edge were placed on the west coast of Ireland, Indonesia’s eastern frontier would lie on the Caspian Sea (in North America, it would stretch from Hawaii to the eastern seaboard).
As in Europe, this great stretch of territory includes very many disparate ethnic groups. The first president, Sukarno, was once asked what all the peoples of Indonesia had in common. He replied, ‘Only that we were colonised by the Dutch’. He was saying this after the Dutch had departed, so that in effect he meant that the peoples of Indonesia no longer had anything in common. Ethnic divisions in Indonesia, as in many other countries, are like an unpleasant odour, of which all are aware, but none may dare mention for fear of being thought implicated. The several ethnic groups display various degrees of antipathy to one another. In the 1930s the colonial authorities rounded up a number of nationalist leaders and placed them in an internment camp. Even in these extreme circumstances, however, ethnic separatism was maintained.
To overcome these divisions, Sukarno, as is generally known, went in search of enemies. First, he targeted the Dutch for wrongfully retaining Western New Guinea. When that claim was settled, he harangued the country to oppose the entirely legitimate creation of Malaysia. All this, and cosying up to the Communist bloc, earned him the animosity of the West, in particular the United States, to which in large part Indonesia owed its de-colonisation. He succeeded only in wrecking the economy, with famine making its appearance.
Sukarno’s supplanter, General Suharto, adopted a quite different policy to keep the country united. Indonesia’s Armed Forces, of which he was now the head, had always seen their duty as not only defence against external aggression, but also maintaining the country’s integrity. To understand the reasons for this requires appreciation of the basic economic structure of Indonesia. In brief, the island of Java holds over half the people, but has very few assets apart from fertile land, mostly producing rice. It is on the other islands that natural resources are to be found. Most of the inhabitants of Java, originating in the centre and east of the island, are ethnically Javanese, by themselves accounting for more than a third of the total population. For historical reasons they have held a dominant position in the country, being strongly represented in the administration and armed forces: all presidents of Indonesia have been of that ethnic group. The ‘Javanese nightmare’, as it may be called, is of a disintegration of the country, with the resource-rich islands going their own way, leaving Java in poverty (rice is not a valuable commodity on the world market). Under pressure from the provinces outside Java, in 2001 a local autonomy law was enacted, allowing provinces a greater share of the funds they generated. However, the central bureaucracy is dragging its feet over implementation. Bali is a case in point. It earns about 30% of the country’s tourism revenue, and the number of tourist arrivals at its airport is second only to Jakarta’s. Nevertheless, the province does not receive its fair share of the revenues that accrue.
This unfair division of funds was one of the main factors behind the uprising of the oil-producing province of Aceh, and the recent agreement between the Aceh Freedom movement and the Indonesian Government has given a preview of the Javanese nightmare made real. Aceh is to keep 70% of the proceeds from its natural resources, with the accounts externally audited. It may also make its own trade agreements with other countries, and raise external loans. The Free Aceh Movement has certainly not achieved the independence it sought; equally clearly Aceh must now be considered semi-detached.
Suharto, himself a Javanese, was determined to prevent any disintegration of the country. He also recognised that continuation of Sukarno’s aggressive policies would alienate the Western countries on whose aid and investment Indonesia would depend for recovery. The outcome was the Armed Forces’ ‘Defence Doctrine’. This declared that there existed no external threat to the country, and therefore the Armed Forces should concentrate on ensuring internal security. The first part of the doctrine was perhaps a statement of the obvious. Indonesia was on good terms with the other countries of South East Asia, and maintained larger forces than they. India, too, represented no threat, while Australia was engaged in training the Indonesian Armed Forces’ officers. There remained China, but the United States’ Seventh Fleet, stationed in the straits of Taiwan, assured security.
South East Asia has perhaps been the first part of the world to experience the effect of the new order dominated by American power. A short summary of United States foreign policy might be that no state is permitted to threaten any other, but may pursue its own internal policies. The effect of this pax Americana is to remove the external threats, which often encourage disparate peoples to group together. But it in no way stops the ceaseless competition within states between individuals and groups for power and wealth. Even in Western nations, such as the United States and Australia, composed of descendants of immigrants uprooted from their societies of origin, ethnicity is a powerful social link in the struggle. It is much more so in Indonesia, where the only substantial recent immigrants have been Chinese, also with strong ethnic bonds.
So the second part of the Indonesian Armed Forces’ doctrine, namely ensuring internal security, came into effect. This did not mean ‘helping the police with their enquiries’. It meant repressing any threat to order, in particular secessionist movements; an implicit admission that Indonesia could be held together only by force. However, the armed forces have been used against only three separatist movements: in East Timor (which was never part of the Netherlands Indies, and so legitimately not part of Indonesia), in Irian (West Papua), and in Aceh. This relative quiescence may perhaps be ascribed to the phenomenon which commonly occurs when fear is removed, namely the flowering of greed, which ignores ethnicity. Corrupt conspiracies include all who might be mutually useful. It might therefore be argued that Indonesia’s pervasive corruption binds together elite members of different ethnicities, so that one of its functions is to maintain the politico-social unity of the country.
What of the future? Is corruption likely to remain dominant in Indonesia? To answer this, a brief look at the origins of the notion of corruption may be useful. It is intimately tied with our idea of bureaucracy, which implies state officials paid exclusively by government from taxes levied on its subjects. This was hardly the traditional method of administration, even in Europe. In the Roman Empire, governors of provinces were given no salary, and were left to use the powers of their office to provide for their financial needs. The Spanish Empire of the 17th century adopted similar methods. Closer to our own day, Napoleon gave magnificent salaries to the marshals and relatives whom he appointed as rulers of the states whose armies he had defeated. There was one condition, however. The salary was to be spent in Paris. In the conquered countries, these various rulers were to shift for themselves.
Reverting to Aceh, the eminent Dutch Islamist Snouck Hurgronje carried out research there in the late 19th century, when the territory was still independent of Dutch rule. He found that the magistrates were primarily concerned not with administering justice, but with what money they could make from the cases brought before them. Much the same applied in Mughal India. Since, in both these cases, we can assume the money raising was authorised, either officially or by custom, and was hardly secret, it is difficult to call it corruption in terms of the day.
This perspective is perhaps peculiarly valuable in the case of Indonesia, as well as other countries similarly afflicted by corruption. This may be judged from a ‘Governance Audit’ conducted at the end of 2001 by PriceWaterhouseCooper and the British Institute of International and Comparative Law. It concluded that the Indonesian system of justice would ‘probably collapse’ were it not for payments from rich companies and individuals to the Attorney-General’s Office. The audit went on to say that the Public Prosecution Service has an institutionalised unofficial budget, set by the Service and its members and provided for through an intricate system of unofficial payments made by members of the public, businesses, and other justice institutions. The amount the Attorney General receives from the state budget usually leaves an annual shortage of some 40%. The report concluded ‘this public/unofficial funding model is endemic to the Indonesian justice system and binds the system’s principal actors to one another… prosecutors, judges, lawyers and police officers all participate in collecting and disbursing the unofficial budget’. The World Bank confirmed this elliptically: ‘Many institutions providing key public services are severely under-funded, forcing them to adopt informal means of revenue mobilization through "off-budget" measures.’ What remedy the Bank proposed was not stated.
This system of funding, which would be considered corrupt anywhere else, is protected by a peculiarity of Indonesian law. For the accused to be convicted of corruption it is not enough to show that he has made mercenary use of his office. It is also necessary to demonstrate that his activities have caused loss to the finances or economy of the state. Indeed, the official body established to fight corruption, BPK, defines its task accordingly. It would be very difficult to show that gifts had that effect. (This provision is a relic of colonial law, and emits the scent of the Dutch East India Company, whose directors may well not have cared how dishonest were their low-paid employees, as long as they did not steal from the Company.) The convenience of this provision to the government, not to mention the corrupt elite, has ensured its survival.
In consequence, while the public and the media are agitating against corruption, using the definition I gave at the beginning of this talk, the prosecutors and judges, for their own reasons, take refuge in the law. While there have been several anti-corruption bodies set up in the last half-century, none have pressed for the removal of this limiting provision. Not surprisingly, therefore, some judges on salaries of about three million rupiah a month are said to be spending more than 250 million rupiah a year on houses and cars. Of course, in Indonesia as elsewhere, the tune is called by those who pay the piper. A system of justice maintained by donations will incline towards the donors, and prostrate itself before the munificent; it cannot be called just.
A very clear instance of the supine nature of Indonesian justice in face of the rich is the case of Mr ‘Tommy’ Suharto, son of the former president, and to whom he owes his great wealth. In September 2000 a panel of three Supreme Court judges sentenced Tommy and a confederate to 18 months each in jail for a land swindle which had cost the state the equivalent of US$11 million. It was alleged that Tommy’s lawyer had offered the senior judge, Mr Kartasasmita, a bribe of US20,200, which had been refused. In July 2001 Mr Kartasasmita was murdered in broad daylight in Jakarta by two gunmen. When arrested, they declared that Tommy had supplied them with guns and paid them 100 million rupiah (US$10,000) for the murder. The following month police seized arms, explosives, and ammunition from Tommy’s houses. All this was a clear signal that the plutocracy, particularly the Suharto family, was not to be trifled with; their offers were not to be refused. Heed was duly taken. In October the Supreme Court overturned Tommy’s conviction for the land swindle, on the grounds that he could not be held accountable for the activities of his company. This caused a public outcry, but corrupt politicians said the verdict must be respected. In May of the following year (2002) the two gunmen were given life sentences. The judge made no link to Tommy. When the latter was charged with murder at the Central Jakarta District Court, he hardly needed a defence counsel. The State Prosecutor asked for a sentence of only 15 years, on the grounds that Tommy had behaved politely in court, and was still a young man (he was 40, the average expectation of life for men in Indonesia is 65 years.). The court accepted the Prosecutor’s plea, and sentenced Tommy to 15 years in jail for murder, evading justice, and possession of firearms, explosives, and ammunition. Nevertheless, in June 2005 the Supreme Court reduced Tommy’s sentence to 10 years, however, on the grounds that the charge of evading justice should not have carried any penalty. While serving his sentence, Tommy has received remissions on various occasions, such as public holidays, totalling nearly 20 months, so that his sentence for murder is, in effect, only a little over eight years. His ‘incarceration’ is in a luxurious cell where on occasion he has enjoyed the overnight company of as many as four young women.
Tommy’s father, the former president, receives even more lenient treatment. While the public and media bay for him to be charged with corruption, the prosecutors stay their hands, arguing that the former president is medically unfit to stand trial, although he is to be seen out and about in Jakarta
That the state budget is unable to meet the needs of even such a central institution as the system of justice is due to the fact that successive Indonesian governments have been reluctant to raise enough resources. A source of the 1960s reported that: ‘Direct taxation has never brought in state revenue to any great extent…income tax is light and is conscientiously avoided … [in some] rural areas there were fewer taxpayers in 1958 than there had been twenty years earlier [i.e. under the Dutch]. According to a senior tax official in Djakarta, some 200,000 individuals of high worth in the capital avoided paying taxes. About 60% of the state’s finances depend on duties and licences …on exports and imports.’ Thirty years later, the situation had not changed: ‘There was no assured enforcement of tax collections from the very wealthy, whether individuals or corporations; the government depended on voluntarism among its taxpayers…’ With regard to property taxes, ‘only around 40 per cent of urban and rural property tax potential has been realized.’ Even now, registered personal income tax payers are less than 2% of the 120 million workforce, while the tax ratio (tax receipts against gross domestic product) is less than 13%, the lowest of all the countries in South East Asia.
If there is any one cause of corruption in Indonesia it lies in this catastrophic failure to raise enough resources to finance the state, thus making it dependent on the rich. It is ironic that Indonesians, having liberated themselves from overt colonial rule, should now be in covert thrall to their own plutocracy. In the country’s fairly short life, none of its presidents (the office is executive) have asserted the power of the centre. This is perhaps evidence that successive governments have felt that their legitimacy was insufficiently recognised by their subjects, and feared that a heavier tax burden would alienate them further. In the resource-rich islands, this might well encourage secessionist ambitions. So a vicious circle came into being. Since the state institutions were being financed, in however ramshackle a fashion, there was no pressure on Indonesia’s governments to establish an impartial system for raising money.
The results of this policy were demonstrated in particularly dramatic fashion in 1956. The government of the day, with Sukarno as President, was unable to transfer pay and the rice ration to the various army units. In Sumatra, the colonels commanding went into trade, selling the produce of their areas to Singapore, and from the profits paying their men. This experience strengthened the resolve of the Armed Forces not to depend on government funds, and they developed several commercial undertakings – a very clear instance of a state institution finding its own resources.
Former President Megawati saw the dangers of this. Speaking on Indonesian Defence Forces Day in 2002, she declared: ‘We cannot allow the practice of the police and military needing to find their own funds.’ A more recent report declares that almost 70% of the Armed Forces’ annual budget comes from their business activities, while their commercial assets are worth the equivalent of nearly a billion US dollars.
A law (No.34) passed in 2004 requires the Armed Forces to surrender all their commercial enterprises to the government within five years. The Armed Forces are prevaricating, understandably enough in view of the government’s manifest inability to fund its responsibilities, and consequent dependence on ‘extra-budgetary’ sources of revenue.
The argument so far might be summarised as follows: The pacification of the world consequent on American dominance has removed from the various Indonesian peoples and their elites the cohesive fear of external aggression. This has been replaced on the one hand by the threat of drastic punishment of separatist ambitions by the Indonesian Armed Forces, and on the other by the unifying interest of members of the various ethno-cultural elites in large-scale corruption, particularly of foreign aid and loans.
There are now signs that this theft of their taxpayers’ money is not to be tolerated by donor governments. However late, this is a welcome conversion from the situation which obtained as recently as 1998, to quote an observer of Indonesia: ‘Corruption in Indonesia has been shamelessly excused by some Western observers as culturally acceptable to Indonesians, dismissed by many aid donors as a small price to pay for economic development, and rationalized by many foreign investors as helping to grease the wheels of an otherwise unresponsive bureaucracy.’
Former President Megawati’s admission that she had only ten fingers, so could not control the thousands of corruption schemes in the country, should perhaps be seen as neither an indiscretion nor a cry of despair, but rather an appeal for help. She was saying, in effect: ‘Here am I, the senior executive in Indonesia, but even I can do nothing about the prevalent corruption. You foreign donors must come to my help; it is your money that is being stolen.’ Of all the many statesmen concerned with providing aid to Indonesia, only one had wit enough and resolve to respond: John Howard, Prime Minister of Australia.
After the tsunami struck the northwest coast of Sumatra, mainly Aceh, Mr Howard announced that Australia would provide a billion Australian dollars as aid. This sum would not be handed over to the Indonesian government, but would be administered by a joint Australian-Indonesian council, headed by himself and the new Indonesian President, Mr Yudhyono. All contracts for use of these funds would be placed exclusively with Australian or New Zealand entities, though they could sub-contract to Indonesians. In this way, Mr Howard has ensured that his taxpayers’ money would be properly accounted for. There were murmurs of ‘national feeling’ from the Indonesian Minister of the Interior, but she received no support.
The Australian initiative is perhaps another effect of the Pax Americana. The end of the cold war has removed the need to humour dishonest governments for fear of losing a vote in the General Assembly of the United Nations. And, in a world invigilated by American satellites and patrolled by undetectable American nuclear submarines with ICBM capability, that other argument for complaisance, namely ‘strategic importance’, has lost much of its strength. In brief, donor taxpayers are no longer obliged to put up with theft.
The official aid, which has been discussed, is generally concerned with preparing the ground. However, to limit consideration of corruption and development to this alone is very like discussing Hamlet and ignoring the role of the Prince of Denmark. It has become clear that the critical element in alleviating poverty is neither aid nor loans, but foreign direct investment, or FDI. It is this that has raised the Chinese world (Taiwan, Singapore, and now China itself) from poverty. The prevalence of corruption in Indonesia led to a severe decline of FDI, since those responsible for it were using either their own money, or funds for which they were directly responsible. The consequences were well understood in Indonesia and the election of the new president, on an anti-corruption policy, may be traced directly to this pressure. It may, if maintained, bring about the political and administrative changes necessary for the Indonesian peoples to climb out of poverty.