If the watchman’s restrained, investors flee
An Indonesian friend involved in a messy divorce was advised by colleagues not to hire a lawyer. Instead he should bribe the judge more than his estranged wife was paying.
Being a moral person he refused, believing it’s every citizen’s duty to help purge corruption from the nation. He paid an attorney and lost his case.
A local personal pain but one indicating a national ill making investors quake. Surreptitiously sliding an envelope across a desk anywhere in the Archipelago is risky business for Australians – home and away.
Bribing a public official is a crime here in the Republic and over there in the Commonwealth; the dirty deal may have been done any place between Sabang and Merauke, but a prosecution can be launched anywhere between Perth and Sydney.
The penalties are harsh: Up to ten years in an Ozzie prison, or a fine of AUD 1.78 million – or both. Drug runners get less.
President Joko Widodo frequently says he wants funds from foreigners to help boost the economy. So who to dial should a joint venture turn to custard through corruption?
As the seers say, perception is reality.
Access to the rule of law delivered impartially is important to overseas entrepreneurs; if the scene’s not clean they just trouser (or handbag) their wallets and head to international departures.
Giving evidence to the Australian Parliamentary Joint Standing Committee on Treaties in Perth earlier this month Louise McGrath, national manager of the Australian Industry Group said:
“When companies aren't sure of the risk they simply don't invest. If we look at the numbers, I think New Zealand is the beneficiary of our greatest investment overseas because it's very low risk.
“We're not taking the high-risk and potentially high-rewards investments into places like Indonesia … (when) the environment seems risky, companies simply don't invest in that market.”
The committee is examining the Indonesia-Australia Comprehensive Economic Partnership Agreement (IA-CEPA) signed in March though yet to be ratified by legislatures in both nations.
Other witnesses stressed that the Indonesian government will have to tackle corruption and the “regulatory chill” of excess red tape seriously if it wants to entice Australian dollars.Last year the Badan Koordinasi Penanaman Modal (BPKM - Investment Coordinating Board) fell short of its investment target of Rp 765 trillion by nine per cent.
Phil Turtle, National President of the Australia Indonesia Business Council, told the committee: “The elephant in the room is corruption.
“When I'm talking to Australian businesses about contemplating Indonesia, it's a bit like the real estate saying —location, location, location —it's corruption, corruption, corruption.”Two years ago research by Transparency International Indonesia suggested corruption added about ten per cent to production costs. It also claimed that 17 per cent of businesses collapsed because competitors bribed officials.
TII’s Corruption Perception Index puts Indonesia in 79th place, a marked improvement since 2014 when President Widodo was first elected. In that year it ranked 107. As teacher report cards say about bright laggards: ‘Improving, but could do better if he tried harder.’The TII added: ‘Corruption is present in all three branches of government in Indonesia and is one of the major constraints on the political leadership’s capacity to govern effectively.
‘Political corruption is particularly pervasive, and Parliament is widely considered the most corrupt institution. Similarly, bureaucratic corruption is rampant and a large part of the population reports paying bribes for services.’
It also noted the KPK’s ‘stellar performance’ and society’s ‘positive view of the government’s efforts to fight corruption.’ That was before law changes were proposed.
At present Indonesia doesn’t feature in the top 20 nations where Australian investors feel comfy about depositing cash and assets.According to Australia’s Department of Foreign Affairs and Trade, while the US and the UK remain the most favored places for Australians to park dollars, pledges to Asia have increased dramatically over the past decade.
Recipients include China, Hong Kong, India, Japan, Korea and Taiwan; investment in this cohort has more than tripled from AUD 108 billion to AUD 395 billion.
Though not Indonesia; Southeast Asia’s largest economy gets only AUD 10.7 billion from its southern neighbor. That’s less than half of one per cent of the AUD 2. 5 trillion posted abroad.
If the keen but concerned traders like Mr Turtle are correct, Indonesia needs a clean place to lure dollars from Down Under. That means maintaining a watchman ready and able to keep the environment corruption-free.
First published in The Jakarta Post 15 October 2019