Bloomberg News

Graft Busters Set to Catch Indonesian ‘Big Fish’: Southeast Asia

February 13, 2014

Indonesia’s anti-corruption agency predicted an increase in graft in the run-up to elections this year, with its vice chairman anticipating the rise will land major cases on the authority’s books.

Corruption usually escalates around elections as officials take advantage of their posts by trading favors and candidates seek to fund campaigns, Adnan Pandu Praja, vice chairman at the Corruption Eradication Commission, or KPK, said in an interview in Jakarta yesterday. Parliamentary elections are scheduled for April and a presidential ballot in July.

The KPK, which has already caught government ministers, chief executives and central bankers, is still scratching the surface of the 7,000 reports of graft it gets from across the archipelago of the world’s fourth-most populous nation each year, Praja said. Indonesia ranked 114th among 177 countries in a 2013 Transparency International survey on corruption perceptions, undermining the country’s investment appeal.

“There will be a big fish in the pipeline,” Praja said, with several others in the “tank” to be announced in the next six months. Praja did not give specifics, citing the sensitivity of the KPK’s investigations. “Corruption runs from the east to the west, from the west to the east.”

The agency has prosecuted 72 members of parliament, eight government ministers, six central bankers, four judges and dozens of CEOs in the decade since it was formed in 2003 and boasts a 100 percent conviction rate.

Red-Handed

The agency has convicted three foreigners, one from Japan and two from Malaysia. This number is low partly because overseas executives are worried about strict U.S. and British laws on graft overseas, which can land them in jail, and also because foreigners avoid giving bribes directly, he said.

“They have a strategy to avoid the act, by using a third party to do it,” Praja said.

The KPK’s strategy is to tap suspects’ phones and follow the money trail to try to catch people red-handed, Praja said. The agency’s efforts have made people more careful and secretive about being corrupt, he said.

The agency will focus on tackling graft in government revenue, energy and food security this year, Praja said. It’s starting to investigate potential corruption stemming from a Jan. 12 ban on exports of mineral ores such as nickel and bauxite, he said.

Rigged System

The KPK has done a good job in arresting officials with limited resources, said Fauzi Ichsan, a managing director and head of government relations at Standard Chartered Plc in Jakarta. Companies selling goods and services, such as autos and banking, can operate cleanly, while energy and mining are industries where graft is common, he said.

“The system is rigged to the extent that the opportunities for corruption are pretty widespread,” Ichsan said in an interview yesterday. For investors, projects can be stopped by requests for bribes coming from many people, even when they don’t necessarily get things done, he said.

President Susilo Bambang Yudhoyono, who is ineligible to run after his second term ends this year, was re-elected in 2009 on a platform to fight corruption.

The KPK will urge presidential candidates in June to have an anti-graft vision and develop a cleaner government as part of their campaign promises in an effort to make them more accountable, Praja said.

“All political parties seem involved,” Praja said. “There’s always money involved when they make campaigns.”

Strong President

A strong president is also needed to curb corruption among lawmakers, who have in the past opposed efforts by the KPK, he said. “If the executive has enough confidence to fight against parliamentary pressure, then bit by bit parliament will learn.”

The KPK plans to initiate discussions on avoiding graft in each parliamentary commission, where bills are debated, after the April elections, Praja said.

Jakarta Governor Joko Widodo, who has not announced whether he will run for president, topped a poll by the Indonesian Survey Circle carried out in January, attracting as much as 35.6 percent support from respondents. Coal tycoon Aburizal Bakrie, of the Golkar party, was second with 20.1 percent and the Gerindra party’s Prabowo Subianto, a former army general, was third with 19.7 percent support.

Praja said regional mayors emerging on the national scene are supporting the fight against corruption, including Widodo and Tri Rismaharini, the mayor of Surabaya, Indonesia’s second-largest city.

Widodo’s efforts to take on parliament over the administration’s budget were “inspiring,” he said. Widodo said in an interview last month that he has moved budget procurement and tax collection online in an effort to cut graft.

“Most Indonesians are probably grateful that something has been done on the issue in recent years, and that the KPK has played the dutiful role of a lonely warrior in a protracted quest,” said Wellian Wiranto, a Singapore-based economist at Oversea-Chinese Banking Corp. “Ironically, however, the more they dig, the more cases might be unveiled, contributing to the sense that corruption remains a rather prevalent issue.”

To contact the reporter on this story: Neil Chatterjee in Jakarta at nchatterjee1@bloomberg.net

To contact the editor responsible for this story: Rosalind Mathieson at rmathieson3@bloomberg.net


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