www.transparency.org www.cmi.no Corruption Challenges at Sub-National Level in Indonesia Query: Please provide an overview of anti-corruption challenges at the sub-national and local levels in Indonesia, with a particular emphasis on challenges within basic service delivery. Purpose: Summary: Donors are increasingly working in complex Since the fall of General Suharto’s regime, Indonesia operating environments where decentralisation has embarked on a comprehensive and unprecedented brings many new challenges. One of those process of decentralisation, devolving almost overnight challenges includes ensuring the effectiveness of enormous responsibilities to regional, provincial and service delivery at the sub-national and local level. local governments. In spite of considerable achievements, the Indonesian decentralisation process continues to face major challenges of state capture by the local elites, a deeply entrenched patronage system Content: and widespread petty and bureaucratic corruption. The emergence of stronger civil society and a free media Part 1: The Context of constitute promising trends that, combined with further Decentralisation in reforms aimed at promoting transparency, community Indonesia participation as well as reinforcing upwards and Part 2: Overview of Corruption downward accountability mechanisms, could ensure Challenges at the Local that decentralisation fully yields the intended benefits. Level Part 3: Further Reading Part 1: The Context of Decentralisation in Indonesia To fully understand the nature of corruption challenges at the local level, it is important to analyse the successes and failures of Indonesia’ s unprecedented Authored by: Marie Chêne, U4 Helpdesk, Transparency International, [email protected], with special gratitude to Taufik Rinaldi and Bruce M. Bailey Reviewed by: Finn Heinrich Ph.D., Transparency International, [email protected] Date: 21 July 2009 U4 Expert Answers provide targeted and timely anti-corruption expert advice to U4 partner agency staff www.U4.no Corruption Challenges at Sub-national Level in Indonesia decentralisation process, that transferred rapidly were given almost unlimited powers to run their village complete responsibility for most public services to the with access to higher authorities, government projects sub national level. The fast transition from a highly and funds. In the spirit of promoting democratisation at centralised to a largely decentralised system has the local level, the law introduced village councils, created specific accountability challenges that whose members are directly elected by villagers and significantly affect corruption risks at the local level. can hold village heads accountable through village accountability meetings. These changes are intended The Process of Decentralisation in to shift decision making to the local level, providing Indonesia greater opportunities for voice and choice and making public service delivery more accountable and Indonesia’s decentralisation process has been responsive to citizens’ needs. The transition has been described and analysed in several papers, including supported by the emergence of free press, free speech “The making of Democratic Governance in and a stronger civil society. Considerable progress has Indonesia”, “Implementing Decentralized Local been achieved in a very short period of time on the path Governance” and “Combating Corruption in a to local democratisation. decentralised Indonesia”. The Weaknesses of the After 32 years of General Suharto’s rule, Indonesia has Decentralisation Process in Indonesia a long tradition of a patrimonial governance system, lack of accountability and transparency, state However, the democratisation of local governance interventionism and systematic undermining of local remains a slow and demanding process that requires a initiative. Since General Suharto’s fall from power in cultural shift of values and attitudes and continues to 1998, the country has been trying to break with its past face major challenges. experience of centralised power vulnerable to oligarchic abuse, by implementing transparent and accountable Persistent Patterns of Behaviour and forms of local governance. The legal framework for Resilient Corrupt Networks decentralisation was enacted in 1999 and implemented from 2001 with the passage of law 22 and law 25 Only the top layers of the bureaucracy have been representing major steps towards political and replaced while most state officials remain influenced by expenditure decentralisation to local governments. The the work patterns and attitudes of the previous regime’s responsibility for most public services such as health, extremely centralised and hierarchical system of education, culture, public works, land management, patronage. Many public officials have not yet embraced manufacturing and trading has been transferred to new procedures and attitudes, and continue to operate districts, cities and villages, while provinces have been using top down approaches in a relative lack of given a relatively minor coordinating role. transparency and accountability. Indonesia now consists of thirty-three provinces which Decades of collusion between the private and the all have their own political legislature and governor. The public sectors have also created a relatively stable, but provinces are subdivided into regencies, sub districts highly unaccountable system. According to some and again into village groupings. Regencies and cities specialists, the previous oligarchic networks have have become the key administrative units, while village survived and managed to reconstitute themselves by administration level is the most influential on a citizen's building new alliances and informal networks at the daily life, and handles matters of a village through an local and national levels. They’ve extended their sphere elected village chief. of influence to regions and provinces where they strive to capture democratic institutions by taking control over The legal framework also makes provision for change regional parliaments and political parties or building in village government to promote downward alliances with the local businesses. (Understanding accountability and citizen participation. In the past, the political economy of corruption at the local village headmen were the instruments of the regime level: the case of Indonesia). and reported to district or sub-district governments. In exchange for their subordination to the system, they www.U4.no 2 Corruption Challenges at Sub-national Level in Indonesia Limited Bottom Up Accountability Pace of Decentralisation Reforms To promote good governance, effective decentralisation The shift from a highly centralised system to the should not only empower local governments but also devolution of virtually all public services to the local ensure that they are held accountable and deliver level was also achieved in a very short period of time, social services to their constituency. As a result, with little consideration given to the appropriateness of decentralisation must be accompanied by more service devolution, the pace and sequencing of reform, effective and democratic management of public affairs and the operational and economic capacity of local and establish appropriate mechanisms for citizen governments. This originally led to the deterioration of participation. In other words, decentralisation can only public service delivery, a reduction of state expenditure work when citizen – including those traditionally for social services such as public hospitals and schools, excluded from both social and political participation - and the exacerbation of inequalities, with wealthier are systematically involved in policy formulation, regions being in a better position to mobilise and retain decision making and programme oversight and resources for themselves. (The making of Democratic evaluation. In the absence of such mechanisms, there Governance in Indonesia). is a strong risk of state capture by the local elites. In addition, the past concentration of powers at the In Indonesia, the process of decentralisation primarily central level with an accountability system exclusively focused on granting local autonomy without based on hierarchical controls had fuelled a rent simultaneously promoting accountability of local seeking culture where services were delivered with little governments to their citizens. Even if the spirit of the concerns for citizens’ needs and preference. Some decentralisation laws was promoting local authors consider that decentralisation contributed to democratisation, in practice, there have been little shift such dynamics from the central to the local level, opportunities to open up local decision making to public where governance institutions are often very weak and participation due to few specific guidelines for parliamentary controls still in their infancy. Changes in implementation, instances of collusion with local this regard require a deep and profound cultural shift in governments and failure to provide incentives for local governance values and attitudes as well as long term governments to be accountable and responsive to their efforts to build the local capacity to implement effective citizens. In addition, past social arrangements - which mechanisms for strengthening citizens’ accountability. were essentially hierarchical in nature - have bred a long tradition of not questioning those in power. As a The Impact of the Decentralisation result, civil society remains