Excessive Anti-Corruption Drive Hurting the Economy?

Sebastian Mallaby in his book, The World’s Banker, narrates an anecdote about a discussion with Wolfensohn, Indonesia’s former dictator Suharto and Zhu Rongji, Chinese vice premier (emphasis mine);

Suharto was talking to Zhu, and he summoned Wolfensohn over; and then he broached the subject of corruption. The latest corruption rankings produced by a watchdog group called Transparency International were most upsetting, Suharto declared, for they rated Indonesia as less corrupt than China; he had been happier with the previous year’s results, which had recognized his own country as the more energetic embezzler. Zhu looked visibly annoyed, but Suharto carried on. “Don’t you think we should tell the president of the World Bank about corruption in this part of the world?” he asked Zhu, who maintained a stony reticence. The Suharto looked at Wolfensohn. “You know, what you regard as corruption in your part of the world, we regard as family values.”

Suharto’s family values resulted in the embezzling of 15-35 billion dollars from state coffers. The country has come a long way and the government appears a little bit over-zealous nowadays in dealing with corruption. When tsunami struck in Aceh the governor of that province was in jail and was sentenced later to 10 years for the corrupt purchase of a helicopter in 2001.

Recently the country’s finance minister expressed concern that the current anticorruption drive was seen as rather excessive, discouraging government officials from making decisions, thus jeopardizing the economy;

In an effort to eradicate corruption the government has tightened bidding and procurement procedures, as stipulated in a 2003 presidential decree, resulting in much lengthier tenders. Many government contractors have complained about the lengthy process of bidding…

…A reluctance of PLN [state power firm] directors, for instance, to take prompt action in replacing old generators could disrupt the electricity supply. The public would face a situation whereby SOE directors would rather sacrifice public interests than sacrifice their personal safety. It would be ironic if a deterioration in public services occurred, not because of a lack of funds, but because of the war against corruption.

For Comment: Is the Indonesian Finance Minister right? Should the country be complacent in its fight against corruption?

Related Links;

- Stealing from People, an interesting publication from Governance Reform in Indonesia. Papers include Corruption Through The Perspective Of Culture and Islamic Law and Anti-Corruption and NGOs in Indonesia.

- Reflections on Corruption in Indonesia by Gary Goodpaster
Suharto was a stationary bandit running a stationary bandit regime. Under Suharto, businesses that bribed or shared wealth to obtain economic opportunities, advantages, or protection did get services in return. They obtained licenses, land and environmental concessions, security of investment, contract enforcement, and assistance in managing labor disputes.”

- TI Indonesia Chapter

- An Indonesia Anti Corruption NGO

- I couldn’t find any Indonesian economics related blogs; there is one by a Phillipine economist (Go Figure) and another by a Mauritian economist. Asia Finance and Asia pundit ( warning: not always work safe) are closest I could find. Another thing I learned; Jakarta ( Indonesia capital) in Korean means ‘The Perfect Crime’.

- Money and Politics in Indonesia

- How Multinational Investors Evade Developed Country Laws – give Indonesian examples


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This page contains a single entry by Paul published on March 19, 2006 7:48 PM.

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