The struggle to regain effective government under democracy in Indonesia*

* Much of this paper was written while the author was a visitor at the School of Advanced International Studies, Johns Hopkins University.

Abstract

With Soeharto's demise, Indonesia gained democracy but lost effective government. A return to sustained, rapid economic growth will require an overhaul of Indonesia's bureaucracy and judiciary which, along with the legislatures, the military and the state-owned enterprises, had been co-opted by the former president into his economy-wide ‘franchise’—a system of government designed to redistribute income and wealth from the weak to the strong while maintaining rapid growth. This franchise has disintegrated, its various component parts now working at cross-purposes rather than in mutually reinforcing fashion. The result has been a significant decline in the security of property rights and, in turn, the continued postponement of a sustained economic rebound. To reform the civil service it will be necessary to undertake a radical overhaul of its personnel management practices and salary structures, so as to provide strong incentives for officials to work in the public interest.

* Much of this paper was written while the author was a visitor at the School of Advanced International Studies, Johns Hopkins University.

The author is grateful to John Bresnan, Greg Fealy, Karl Jackson, Hugh Patrick, Bridget Welsh and two referees for their insightful comments, and to audiences at Columbia, Harvard and Johns Hopkins Universities to which earlier versions of this paper were presented.

Notes

* Much of this paper was written while the author was a visitor at the School of Advanced International Studies, Johns Hopkins University.

1. A further consideration is the extent to which the legislatures, answerable to the general public at national, provincial and district levels, hinder the operations of the bureaucracy. Some mention of this is made below, but the main emphasis here is on the civil service (including the judiciary), which is under the direct control of governments.

2. Flood control, drainage and sewerage systems were ignored, however (McLeod 2005a).

3. A similar argument has been put in relation to priorities that need to be followed in establishing a new democratic regime in post-war Iraq (McDougall 2003).

4. Liddle (1985: 71) refers to the political structure of the New Order as ‘a steeply-ascending pyramid in which the heights are thoroughly dominated by a single office, the presidency’. Crouch (1991: 57) refers simply to ‘Soeharto's patronage network’.

5. The DPR is the People's Representative Council, or House of Representatives.

6. Liddle (1985: 74) refers similarly to ‘the building of performance-based support within the pyramid’.

7. For example, a crony firm might be given a valuable concession to log natural forests, or a monopoly on certain kinds of imports. Various rent generation mechanisms are discussed in McLeod (2000: 155–6).

8. After years of strong private capital inflows, the crisis that emerged in 1997 saw a dramatic turn-around. Heavy capital outflow was experienced for the next six years before net inflows returned in 2004 (McLeod 2005a: 136).

9. Note that avoiding privatisation in order to maintain control of the state enterprise cash cows condemns this significant part of the economy to sub-standard performance.

10. ‘Corruption ”from State Palace to Political Parties”’, Jakarta Post, 23/1/2001.

11. ‘Deep Pockets’, Tempo Magazine, 7/10/2002.

12. IBRA was wound up on schedule in February 2004, having recovered only about 25% of the funds the government had put into the collapsed banking system (McLeod 2005b: 43–4).

13. ‘Court Verdict on Manulife Upsets Canadians’, Jakarta Post, 14/6/2002.

14. ‘Manulife Judges Exonerated’, Laksamana.Net, 22/1/2003.

15. ‘Tri Polyta Indonesia Asks Court to Cancel Bond Claim’, Bloomberg, 9/4/2003.

16. The spirit of article 33 of the constitution clearly requires that wealth derived from natural resources belongs equally to all Indonesians, regardless of where they live. This issue seems to have been totally ignored so far.

17. In reality, the implementation of this aspect of the law seems to bear little resemblance to what it appears to say (Fane 2003). Both the decentralisation laws were replaced with new ones in 2004, but without any significant impact on the aspects of their operation discussed here.

18. See, for example, ‘Knives Are Out for ”Skewering” the People’, Tempo Magazine, 22–28 April 2003; ‘Six Into One Does Go’, Tempo Magazine, 29 April – 5 May 2003.

19. ‘Charge Service’, Tempo Magazine, 25–31 March 2003.

20. SMERU Newsletter, No. 03, July–September 2002, SMERU Research Institute, available at <http://www.smeru.or.id/news2002.htm>.

21. ‘Nine Hours in Binjai’, Tempo Magazine, 14/10/2002. An earlier episode in which the army attacked police stations in Madiun resulted in two civilian deaths and numerous injuries (Jakarta Post, 18/9/2001).

22. The impending surrender of their seats in the DPR was not even mentioned by Liddle (2003), who argued that ‘… nothing fundamental has in fact changed since 1998. … A government that does not pay its soldiers cannot control their actions.’

23. A more precise statement of this principle would take into account the trade-off between recruiting ‘better’ people and the extra cost of doing so.

24. This was reflected in a well-known aspect of public sector culture—namely, a wide-spread awareness of differences in the availability of opportunities for graft; areas where such opportunities were abundant became known as ‘basah’ (wet).

25. Thus the often heard argument that low salaries ‘force’ public sector officials to engage in corruption is an insult to those who choose not to do so.

26. At present it is difficult even to discharge civil servants found guilty of corruption, although there is now some suggestion that Law 43/1999 on public servants will be revised in order to speed up this process (Witular 2005).

27. The current annual assessments of performance ‘are descriptive, and do not assess performance against targets and objectives. They … cannot be considered as an instrument of accountability’ (ADB 2004: 59).

28. Public sector salaries may be able to be kept a little below those in the private sector, to the extent that employment in the former is seen to provide additional, non-pecuniary benefits.

29. Filmer and Lindauer (2001) argue that the common perception that civil servants generally are greatly underpaid relative to the private sector is not supported by available evidence. They contend that low-level civil servants are actually somewhat better paid, in which case there is no reason to increase their salaries further.

30. ‘Jakarta To Jail Tax Dodgers without Trial’, Straits Times, 29/3/2003.

31. The government could also generate much more revenue from its marine resources if reform of the navy resulted in a more serious effort to deal with illegal fishing activity; see ‘New Regulation in Works to Curb Illegal Fishing’, Jakarta Post, 10/3/2000.

32. The proportion of public sector officials who have some involvement in petty corruption is so large that it would not be feasible to exclude them all from reappointment or promotion; the sensible approach would be to ignore the past in these cases, while making it very clear that even petty corruption would not be tolerated in the future.

33. It is up to the people to choose their parliamentary representatives, of course, but with a reformed bureaucracy and judiciary the government would be in a position to bring about further reform here, too, by taking firm action against members of parliament found to be involved in corrupt activity.

34. Lindsey (2001: 51–2) also argued in favour of this approach in relation to the reform of the judiciary. Alas, whether as a result of strenuous opposition from the incumbent Supreme Court judges, or of then president Wahid's own second thoughts about the full implications of Indonesia having a more honest and capable judiciary, these hopes came to nothing.

35. The Commission to Audit the Wealth of State Officials reported in mid-2002 that only 35% of judges, prosecutors and police officers had obeyed the directive to report their assets (Simanjuntak 2002).

36. Megawati's then ally, Akbar Tanjung, secretary of coalition partner Golkar and DPR chairman, was also permitted to continue in office even though having been found guilty of corruption; see ‘Court Upholds Tanjung Verdict’, Laksamana.Net, 17/1/2003.

37. Earlier attempts to eliminate corruption under Soeharto were also almost entirely cosmetic; they failed because Soeharto had no intention that they should succeed (Mackie 1970; Mubyarto 1984).

38. ‘Megawati: Expel Corrupt Party Members’, Laksamana.Net, 7/4/2003; ‘Megawati Laments Spread of Corruption to Legislature’, Jakarta Post, 20/5/2003.