(The Straits Times interactive) OCT 9, 2004 Our Columnist Yudhoyono's big challenge: Get rid of graft By Janadas Devan
THIS is how business used to be conducted in Suharto's Indonesia, according to Mr Adam Schwarz in his excellent book, A Nation In Waiting: In September 1988, the government announced a US$300 million (S$600 million) project to add 300,000 telephone lines in Jakarta, and invited suppliers of telephone switching equipment to submit bids for the project. Knowing full well they didn't stand a chance without someone on the inside pressing their case, major international companies made a beeline for then president Suharto's children. Japan's Fujitsu chose second son Bambang as its agent, the United States' AT&T picked eldest daughter Tutut and an NEC-Sumitomo joint venture retained youngest son Tommy. With so many Suharto children all eyeing the same honey pot, officials had trouble choosing between them. Then they hit upon a simple solution: They doubled the size of the project, from US$300 million to US$600 million. They awarded one half to NEC-Sumitomo, and the other half to AT&T. Fujitsu lost out, but Mr Bambang was kept happy - his Bimantara Group was made the local manufacturer for the project. A second local manufacturing contract was given to a company jointly owned by Tutut and a brother of Mr B.J. Habibie, then the Minister for Research and Technology and later Mr Suharto's hapless successor. The honey was distributed more or less equitably and all were happy. Indonesia, however, picked up the hefty bill. The Suharto regime's corruption was a disaster for Indonesia in many ways: Investor confidence was shattered, project costs were inflated, the public became cynical and economic development was retarded. But as Mr Schwarz also went on to note: 'It could be said in defence of Suharto's children that they could be worse. When they built a toll road, for example, they do it expensively, not terribly efficiently and probably in place of someone more qualified. But the road does get built. In contrast to, say, the worst examples of African kleptocracies, government funds spent on Mr Suharto's family are not totally wasted. Most of the time, anyway.' In retrospect, it can also be argued that the corruption of the Suharto era was at least more efficient than the corruption of the post-Suharto era. Mr Suharto, after all, had a limited number of cronies and family members. Investors who wished to do business in Indonesia knew who to approach. Just as other countries had one-stop investment centres, Mr Suharto's Indonesia had one-stop corruption centres. Pay off a crony, a Tutut or a Tommy, and you could be fairly certain things would happen. The roads got built, the telephone lines got laid (albeit, at double the cost), and Indonesia's economy grew at a fairly brisk pace. One unintended consequence of democracy in Indonesia is that corruption, too, has been democratised. Since power is now diffusely distributed, many more people have opportunities to abuse it. Since Jakarta has devolved considerable authority to the provinces, there are now more opportunities for rent-seekers. Investors can no longer pay off some potentate in Jakarta and expect things to happen elsewhere. Last week, in Jakarta, I heard numerous horror stories: Businessmen complained of difficulties in transporting goods from one part of the far-flung archipelago to another. Newly-empowered tinpot dictator-bureaucrats in the provinces have imposed numerous levies and regulations, retarding trade. Investment bankers spoke of 'legal uncertainty', referring to how even major multinational companies have been subjected to harassment by newly- empowered courts. And a former attorney-general spoke despairingly of the 'high cost of legislation', his euphemism for how money has to be spent to grease the passage of laws in a divided legislature. The result of all this is that investors have yet to flock back to the country, six years after Mr Suharto's fall. Alone among the 1997-98 crisis countries, Indonesia has experienced a net negative outflow of capital every year since 1998. It is the only Asean country that has yet to recover its pre-crisis growth rate. More than 38 million of its people live on less than US$1 a day, and another 100 million live on less than US$2 a day. About 41 million, or 10 times the population of Singapore, are unemployed or underemployed. President-elect Susilo Bambang Yudhoyono, elected to office with a staggering 60 per cent of the votes, has a herculean task before him. There is little doubt what his priorities must be. Indonesia's economy must grow by at least 7-8 per cent a year if the unemployment rate is to come down. It cannot grow at that pace without investments. Those investments are not likely to be forthcoming unless there is a minimal degree of 'legal certainty'. In other words, Dr Yudhoyono must attack corruption. Here's an indication of the challenge he faces: Last week, the country's Supreme Audit Agency reported to the outgoing Indonesian parliament its findings of irregularities in the accounts of 377 state institutions. The institution with the highest number of irregularities was none other than the Attorney-General's Office. This biggest of the 'money abusers', the agency reported, had misused 95 per cent of its non-taxable funds last year. Quis custodiet ipsos custodes - Who shall guard the guards? With 60 per cent of the votes, Dr Yudhoyono has the mandate to become the country's one-stop guard. He may well be democracy's last chance there. If he fails, that army of 41 million unemployed may become fertile recruiting ground for militant Islam. ------------------------ Yahoo! Groups Sponsor --------------------~--> $9.95 domain names from Yahoo!. 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