Corruption Trend Indonesia

Forecast 2022

8 April 2022

For decades, corruption in Indonesia was the same as its humidity: constantly present. According to Transparency International’s global Corruption Perceptions Index 2021, released in January 2022, Indonesia has improved though, rising from place 102 to 96 despite high-profile corruption cases emerging last year.

In July 2021, Indonesia’s Former fisheries minister was sentenced to five to nine years in prison, in addition to a fine of 9.6 billion Indonesian Rupiah (approximately US$ 77,000), Mongabay reported. The court judged that the minister received approximately US$ 2 million in bribes from companies for allowing the illegal export of larvae and baby lobsters. Lobsters are among Indonesia’s top fisheries export products, but their illicit export costed the country a lost revenue of IDR 900 billion (US$ 62 million) in 2019 alone.

Moreover in December, Indonesian Prosecutors recommended the first ever death sentence for businessman Heru Hidayat who was found guilty in a major corruption case misleading the state-run military insurer Asari. Hidayat is accused to having made “bad investments for his personal gains” and “laundering the ill-gotten money by re-investing in other assets”. His activities allegedly costed Asari IDR 12.6 trillion (US$ 878 million).

The Fight Against Corruption

Corruption is extraordinarily challenging to control and considered by the World Bank to be  a“major challenge to its twin goals of ending extreme poverty by 2030 and boosting shared prosperity for the poorest 40 percent of people in developing countries”.

Indonesia is the 2022 president of the G20, the 20 largest economies of the world. C20, the platform for Civil Society Organizations of the G20 member countries, and its C20 Anti-Corruption Working Group, promotes commitments to enhance the international anti-corruption programme.

The Biden administration placed combatting corruption as a fundamental pillar of its foreign policy launching its U.S. Strategy on Countering Corruption. In November, the United States offered US$ 23.6 million to Indonesia to improve “public demands for liability” and “preventative measures against corrupt practices”. And in January, the United States Agency for International Development (USAID) initiated a five-year new anti-corruption project enhancing civic engagement and endorsing a “culture of integrity” in the public and private sector.

According to the UN Office for Drugs and Crime, the Indonesian Corruption Eradication Commission (KPK) found that “80% of corruption cases detected across the country relate to public procurement”. Increased data transparency on government tenders and beneficial ownership are among the efforts to change the instances of corruption.

The USAID project will also “strengthen” the KPK which on 4 March launched the Corruption Eradication Roadmap leading up to 2045. Chairman Firli Bahuri, shared the aim for Indonesia to “become the largest economic power in the world” by 2045 partly by addressing corruption.

Another approach is increasing the tracking, monitoring and negotiation of corruption cases through the Supreme Court, supported by the Asia Foundation. An online database of corruption cases and e-learning for judges were launched so far.

Looking Beyond Peace Agreements

Recent regional developments increased Indonesia’s ability to counter illicit finance. On 25 January,  an agreement was signed between Joko Widodo, the president of Indonesia and Singapore’s prime minister Lee Hsien Loong settling long-standing issues of extradition, defence and airspace management. In the near future, these two nations can continue to reinforce their collaboration in law enforcement and aviation security “on the principle of mutual benefit,” Widodo said.

The agreement also improves cooperation in tackling capital flight and strengthens financial regulation. Until now, Singapore was a safe haven for Indonesians “with millions of dollars from the Indonesian government’s liquidity funding after the 1997 Asian financial crisis”. Research by Merrill Lynch and Capgemini, identified that a staggering third of all high-net worth individuals residing in Singapore in 2006, were Indonesian.

The new extradition treaty will “allow Jakarta to bring back fugitives” from Singapore including for crimes committed during the 18 years before the treaty’s start date.

Recently, the financial intelligence unit of the country, the Indonesian Financial Transaction Reports and Analysis Centre (INTRAC), became more aligned with the global transparency mechanism Andi Widjajanto, senior adviser for defence at Indonesia’s Presidential Staff Office said, making it easier for Singapore to cooperate with the extradition treaty. In 2018, INTRAC was assessed as an “independent government institution, with well-established internal policies and procedures.”

The enhanced efforts to combat cross-border crime is hoped to send a “clear and positive signal to investors,” Prime Minister Lee said. Both countries are among each other’s largest trading partners, with Singapore being the largest foreign investor in Indonesia.

Despite the progress made so far, Indonesia still has a “lot of work to do to realise its commitment to international efforts to combat corruption,” as Andi Y. Kadir, senior partner at HHP Law Firm, notes.

Article by Fatima Abuzar.
Editing by Anrike Visser.

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