STEALING FROM THE PEOPLE 16 Studies on Corruption in Indonesia Book 3 Foreign Aid, Bussines, and State Enterprises: Counting the Cost Editor of English Edition Richard Holloway Stealing from the People 16 Studies of Corruption in Indonesia Book 3: Foreign Aid, Bussiness, and State Enterprises: Counting the Cost Editor of the English Edition Richard Holloway First Printing : January 2002 Published by the Aksara Foundation on behalf of the Partnership for Governance Reform in Indonesia Cover Design by the Aksara Foundation incorporating (with permission) Firman Ichsan’s photograph of Dolorosa Sinaga’s statue “Waiting for Godot” This book is published in both English and Bahasa Indonesia. The Indonesian title is “Mencuri Uang Rakyat”. The contents of both are largerly the same, except where adjustments were made in recognition of the different readership, language idioms, and editing styles. The Indonesian edition is the definitive edition. Publishing Data for the Indonesian National Library Stealing from the People – 16 Studies of Corruption in Indonesia/Editor, Richard Holloway - Jakarta: Aksara Foundation, 2002, 4 volumes, 18 cms. Contents: 1. Corruption - from top to bottom. 2. The Big Feast: soldier, judge, banker, civil servant. 3. Foreign Aid, Business, and State Enterprise: counting the cost. 4. The Clamp Down: in search of a new paradigm Book 1: Corruption - From Top to Bottom ISBN: (for complete set) 979-3093-05-6 ISBN: (for Book 1) 979-3093-06-4 ii “Stealing from the People” Foreward to the English Edition Stealing from the People is published by the Partnership for Government Reform in Indonesia. The Partnership’s aim is to promote and support a program of governance reform. The Partnership is governed by a Board consisting of senior government officials, private entrepreneurs, and Indonesian citizens who have a clear perception of the meaning and pur- pose of good governance. The World Bank, the United Nations Development Program (UNDP), and the Asian Development Bank are both founders and members of the Partnership. The purpose of publishing the book Stealing from the People is to present the Indo- nesian public with a collection of research reports about how corruption has come about, spread, and held hostage the entire social fabric of the Indonesian nation. The book also aims at convincing the deeply concerned community of reform minded citizens in the country that somewhere, behind a mountain of hard and smart work, there is hope for salvaging the nation. The editorial concept of the book emerged from the ranks of the Partnership. The editors wish to thank Ms. Merly Khouw, a consultant to the Partnership, for the selection of authors, and her persistent drive for precision, detail, and accuracy. Most of the reports were written in Indonesian and have been translated into English. It is not an easy task and the Partnership is grateful for the work done by translators and editors, particularly Michael Soldner, who understood that each language carries with it its own syntax and idiom which would result in distortion of intended meaning if translated literally. The book’s cover represents the work of Dolorosa Sinaga, an Indonesian sculptor who has generously permitted the Partnership to feature the fruits of her creativity at the front of this most important book. To the Partnership, Dolorosa Sinaga’s sculpture symbolizes the resolve and the desperation of Indonesias’s poor waiting for justice. Finally the editors thank Mr. Khateeb Sarwar Lateef, Senior Adviser to the World Bank in Indonesia and Ms. Sri Urip, Executive Director of the Partnership for their accessability and wise counsel. iii The book is up to date until April 2001. The findings, interpretations and conclusions are those of the authors of each report and do not necessarily reflect the views of the Partner- ship. Neither the Partnership, the members of the Governing Board, the organisations or gov- ernments they represent, nor their affiliated organizations may be held responsible for the accuracy of the facts and data in this publication, or any consequence whatever resulting from their use. Richard Holloway Editor of the English Edition Jakarta, January 02 iv “Stealing from the People” - Introduction By Nono Anwar Makarim The 16 essays in the 4 volumes of Stealing from the People report on research conducted by the authors. The book is about what people have always suspected, but didn’t know precisely. How did they steal from the people? From the presidential palace to military headquarters, from state enterprise to national development planning boards, from foreign aid projects to courts of justice, from banks to political parties, entire sectors were exam- ined. The result was a picture of systemic corruption. It is corruption conducted in an insti- tutional and organized manner, covering all political and economic sectors. Highly placed government authorities cooperate with private businessmen, local government bureaucra- cies, customs, and the state security apparatus in order to maintain and develop the art of stealing. The constant theme emerging from the studies is that the government must be con- trolled, that control cannot be done by government alone, and that those most entitled to exercise such control are the corruption’s victims – who are the entire citizenry of Indonesia. A warning that also arises from the 16 studies is that news about corruption in the media is not about some distant crime occurring to some other person removed from ourselves. It is, in reality, a prior notice to everybody that a bill is on the way to pay for the luxury of the few. Stealing from the People cautions that isolated measures are not enough to begin making a dent in the armour of corruption. Setting up anti-corruption task forces and watch- dogs only won’t do. When political pressure is strong, governments normally succeed in de- flating tension by feigning serious attempts at dealing with corruption. Most of the time they get busy setting up commissions. In 1997, in Kenya, the government established 4 anti-cor- ruption commissions within the span of one year. There was no significant improvement in the situation. During the rule of President Suharto no less than 5 anti-corruption committees were installed. In 1970, at the time of establishing No.2 in this series, Suharto even pledged to lead the fight against corruption himself. One of the cruel ironies of the anti-corruption efforts during the New Order era is that the country managed to gain a prominent seat among v the most corrupt countries in the world. Simply jailing the culprits won’t do either. Pursuing corrupt officials, even in countries where the legal system has a tradition of working more or less effectively, has not produced the desired results. In the 80s and 90s waves of successful prosecutions and convictions of corrupt officials swept through the bureaucracies of India, Bangladesh and Pakistan. Soon there- after, their replacements were doing the very same things for which their predecessors had been jailed. Law enforcement as a single anti-corruption policy tool in a broken down legal system such as we find in Indonesia is disastrous for two reasons. It is ineffective and it erodes what little social trust remains in society. Officials accused of corruption are interrogated, held in detention, milked by investigating officers, prosecuted and then set free by the courts. Arrests made by investigating officers against present or former government officials leave the general public cold. People already know what the outcomes of the arrests will be. The 16 research papers warn that, unless law enforcement and anti-corruption com- missions are accompanied by other policy reforms, efforts to reduce and eventually eradicate the most flagrant forms of corruption are doomed at birth. Such policies include institutional reform of the bureaucracy, the reduction of the public sector, privatization of state enter- prises, and the launching of successive campaigns to raise public awareness of the evil corrup- tion generates. The proposed policies may have big sounding names, but at closer inspection contain down to earth prescriptions. Institutional reform of the bureaucracy, for instance, calls for fit and proper criteria to be met by people joining the bureaucracy, and similar crite- ria for people to be promoted. The ethos of selfless service to the public, no matter how far removed from reality, must be inculcated and restored to each government agency in order for its members to regain their self-respect. Law enforcement, the punishment of those found guilty of violating the laws, is not merely a retributive measure, but aims at resurrecting the basic moral code of right and wrong. It should correct the disproportionate adulation of rich government officials and promote the embarrassment of association with persons whose wealth was accumulated by corrupt means. The reduction of the public sector should not be seen as a capitulation of selfless public service to rapacious plunder by cut-throat capitalist monopolies. It is but a serious effort to vi reduce the space of corrupt activities and, sometimes, even to increase public gain. An ex- ample of this would be the take-over of Indonesian customs functions by a Swiss-based sur- veyor company. Government income increased, and the increase served as an indication of what, in the past, would be lost to corruption. The same goes for the privatization of state enterprises. Protests against these measures are cloaked in nationalistic jargon. In reality it is but a political mask hiding the fear of losing resources from which to finance patron-client relations and political loyalties. Finally, there is the need for sustained campaigns to broaden the pressure faults and include both domestic and foreign fronts in demanding a stop to the plunder of citizens. For- eign pressure is much needed in a power structure dominated by a bureaucratic polity bent on protecting the status quo.