Indonesian slip on Corruptions Perception Index: A wake-up call for the country
Indonesia has gone backwards on an index of corruption after almost 20 years of making consistent progress.
The latest report by Transparency International shows that Indonesia has slipped 17 places to 102 in a perceptions index. The worrying number comes after the country reached its highest ranking of 85 in 2019 with a record high score of 40.
The German based NGO brings out the Corruptions Perception Index every year and says this year’s paints a grim picture of where corruption is preventing a fair response to COVID-19.
Countries with a higher CPI score are also more likely to have strong democratic norms. (New Zealand shares top place with Denmark).
The AIC’s Jakarta-based Director and Indonesia expert Kevin Evans takes a look at the numbers in this article – outlining some possible reasons for the reversal, and runs through the nation’s history of corruption-busting efforts.
Perceptions of corruption: first slippage in 18 years
Over the past two decades Indonesia has been a true regional, indeed global, stand out – achieving steady improvements in its global score and ranking. The abrupt slide down is a concern if the country is to succeed in creating equitable development and improved foreign investment.
The Secretary General of Transparency International in Indonesia Danang Widoyoko told the AIC that the 2020 number would hopefully be a wake-up call as “the political and economic costs of sustained declines are simply too high for Indonesia”.
“It is to be hoped that this sudden reversal in the long term positive trend in Indonesia’s CPI in 2020 will not become a moment of resignation or dejection, but rather as a moment to re-energise efforts to build a stronger nation more resilient to the subversive and pernicious impact of corruption.”
In 2019 Indonesia achieved a true milestone – for the first time it joined the top half of the world’s nations. There are actually a number of examples of countries that make spectacular progress for a couple of years before fading back towards where they had been. Indonesia’s progress has been slow and steady but consistent and sustained.
The above chart paints a picture of the status of every country measured since 1998 using small blue diamonds. The results for Indonesia are highlighted with large red diamonds. For comparative purposes the annual results for Australia are highlighted with large green diamonds.
To better situate where a country sits, those located at the left hand ends of each year’s chart are those perceived to be the least corrupt while those at the right hand end are those perceived to have the highest levels of corruption.
The result in 2019 was a true national achievement of which the nation should be proud and represented the fruits of a generation of collective hard work between various branches of government, civil society, academia, the private sector and the media.
Then came 2020
For the first time in almost a generation Indonesia suffered a reversal of standing in 2020. The slippage in 2012 was caused by a technical revision to the data verification process that led to several countries, mostly those at the end low of the spectrum, being excluded as the data coverage for these countries was deemed insufficient to provide an effective picture. Indeed while Indonesia appeared to slip, you will also note that its actual score improved that year.
Indonesia’s sharp decline of three points in 2020 was equally the third sharpest decline suffered by any country. While we all hope this turns out to be just a “blip” on the long term trajectory, it is nonetheless important to consider possible explanations. The implications for the country of a sustained reversal are grave.
This includes how a weakening perception of corruption can impact upon a country’s “investability”. Given that the Indonesian Government has invested huge efforts over the past couple of years to enhance the ability of the country to attract new investment, renewed concerns about issues of corruption will only subvert this work. Additionally the county’s hard won success in securing investment grade status among the major ratings agencies will also be put at risk should the regression continue. This would have particular impacts on matters such as the capacity to attract and retain indirect investment as well as securing access to lower levels of interest rates on loans; an issue of particular interest to the private sector.
There are no doubt several specific factors that have produced this sudden reversal. There was considerable negative coverage of the revisions to the Law on the Corruption Eradication Law. These changes created significant public consternation and protest together with suspicion about the motives for these changes, especially given the changes were endorsed during the dying days of the last Parliament. The great danger of allowing lame duck Parliaments to pass substantive legislation is that there is literally no political accountability for many of those concerned, particularly when turnover of MPs is quite high – as it is in Indonesia. The obvious question people raised at the time was why these same MPs did not dare to endorse these changes before the elections.
In addition, the newly formed Commission members appointed after the law was changed have adopted a much more arms-length approach to engagements and partnering with the wider community. This has added further to concerns among public opinion leaders about the capacity or even willingness of the KPK to remain fully active in eradicating corruption.
Despite these concerns the current KPK has already arrested two Cabinet ministers appointed in the Second Jokowi Cabinet and one more who served in the outgoing Cabinet. In addition the newly established Supervisory Council, created as part of the changes in the revised law, has demonstrated its authority in issuing a reprimand against the new Chair of the KPK. Additionally the Council does consist of credible figures including a former KPK Commissioner and a judge well regarded publicly for her integrity in the face of threat.
How did Indonesia get off the bottom of the world ladder
With hopes that the results in 2020 were a blip, and not the start of a very unfortunate new trend, Indonesia has seen two key trends since the beginning of the Reform era in 1998.
The first trend was seen from 1998 to 2003, namely in the early years of the Reform era. During these years there was progress on corruption perceptions one year then regression the next.
This was not surprising for a couple of reasons.
The first reason for the inconsistent trajectory was due to what might be described as high sensitivity feeding perceptions. In the early years of Reform, there was much attention focused on the issue of corruption. This heightened sensitivity thus created a sharp increase in perception. This is indeed quite common in countries undergoing a democratic transition as “sensitive” issues previously hidden from public discourse are revealed for all to see. Indonesians were, of course, perfectly aware that corruption existed, certainly as reflected in much of the gallows humour that people used to express their disgust in the pre-Reform era. Nonetheless matters of corruption did not fill much column space in the press or the airwaves let alone court scenes. The great national focus and public outrage about corruption since the start of Reform provided much of the energy needed to keep leaders focused on creating a national strategy to push back against corruption.
The second reason for the early seesawing was that the country was struggling through trial and error to craft a national strategy and approach to confront the challenges of corruption. This included “political” declarations including from the National Assembly, the launch of various initiatives through executive action and the judicial system to advance enforcement initiatives, endorsing new laws, which sought to build a capacity for the state to strengthen internal systems of integrity, together with lots of pressure from society, academia and the media for state agencies to “act” against corruption. Among the institutional challenges at the time was that there was no real tradition in Indonesia of agencies being “independent” of the Government yet still being agencies of the state. Early efforts included the newly formed General Elections Commission, yet its officials still remained officials of the Ministry of Home Affairs, or the Civil Service Commission whose Chair was also the concurrent Chair of the pre-existing State Officials Agency.
An institutionalised strategy begins to take hold
The establishment of the Corruption Eradication Commission, KPK, in late 2003 represented a major step forward. This agency, created during the presidency of President Megawati, was created as a world class example of a state agency that was independent of the executive, legislative and, initially even judicial, branches of Government. The Commission’s strong legal mandate and operational autonomy was strengthened further by two critically important approaches adopted by the founding commissioners. This included building strong internal integrity controls within the Commission, in essence to prevent the Commission itself from being corrupted, and secondly the building of strong partnerships and communication channels with the wider community, including the media and civil society.
This strong institutional reform drive nationally, which also included the KPK, together with continued focus and pressure from society helped keep political leaders sensitive to accepting the political imperative of remaining on the anti-corruption locomotive. This helped propel Indonesia forward for almost a generation.
From 2004 to 2019 Indonesia followed a trajectory of steady progress. This led the country from the lowest level of global rankings to that new milestone in 2019.
From a regional perspective, Indonesia’s slow but steady progress is also clearly evident. From being clearly at the bottom this group of nations at the turn of the century, by 2019 Indonesia was situated third among the ASEAN countries behind Singapore and Malaysia. (Data from Brunei is incomplete). Indeed prior to the change of Government in Malaysia in 2018 Indonesia was potentially on track to catch up to Malaysia – another historic milestone should this be achieved.
Once again this chart also indicates Indonesia’s fall in 2020. The country now sits below East Timor and just ahead of Vietnam.
The citizenry feel less able to make a difference
To understand the sources for the slippage in 2020, it may be necessary to look beyond the CPI. One further tool used to look at corruption from a comparative basis is Transparency International’s Corruption Baramoter (CB). The CB is less well known than the CPI but contains valuable perspectives that can be used to gain a fuller picture of the corruption challenges in, and between, nations. In addition to seeking views on perceptions, CBs also capture and quantify actual lived experiences.
The most recent CB report for the Asia region was released in 2020. The previous report was from 2017. To provide context for any changes that may have contributed to the 2020 CPI result, it is useful to compare results from 2017 and 2020.
Among the most eye-catching results are the results of the question asked about whether ordinary people can make a difference in the fight against corruption. In 2017 some 78% of Indonesians believed yes to this question versus a regional average of only 63%, the third highest among the 15 countries compared. In 2020, this positive figure fell to 59% actually lower than the regional average of 62%, with Indonesia now ranked 10th out of the 17 countries compared. This growing sense of impotence by the citizenry should be read as a serious warning sign by political leaders about the quality of its communication, consultation and engagement between the governed and those who govern. As the old saying goes silence might not be consent.
On the question of whether the individuals interviewed had personal experience of corruption in dealings with various agencies of the state in 2017 some 32% of Indonesians answered yes, while in the average of 12 regional countries covered the answer was 30%. In 2020 when a similar question was asked in the same countries the figure in Indonesia did improve to 30%. However the figure across the region improved much more significantly to 22%.
Another measure that can be used to reveal problems with public administration is the World Bank’s Ease of Doing Business. This measure is one that has particular importance in a situation where a government is seeking to promote greater investment and business activity by reducing regulatory and other impediments to commercial activities. The following chart provides a picture of the good progress that Indonesia has been making, albeit starting from a very poor base a decade ago.
Unfortunately the data also shows that the great strides being made from the middle of the last decade came to a stop after 2018. The flat lining in Indonesia has occurred whilst steady progress has continued to be made by other members of ASEAN and also more widely by other members of APEC.
There are 10 specific issues covered by the Ease of Doing Business. The following table provides a comparison of the findings for Australia and Indonesia in 2020.
To make for an easier comparison, I have provided a colour coding to identify where each country sits on each issue. If they are ranked in the best 50 globally, the colour is green. If they are ranked between 51 and 100 the colour is amber. If they sit between 100 and 150 the colour is red and for any issue where the ranking is below 150 the colour is black. In 2020 neither country was situated below 150 in any category.
As noted at the outset, it is certainly to be hoped that the sudden dip in Indonesia’s score and ranking in 2020 does not represent the start of a new trend and regression away from the extraordinary progress that had been made by the nation over the previous generation.
The costs to the nation in terms of lost opportunities for investment, more restricted access to investment, increased costs of commercial engagement including concerns about risks in partnering with entities in the country, are simply too high.
The tripod counter corruption strategy that integrates enforcement, prevention and education remains critical. The enforcement work of the KPK together with other law enforcement agencies such as the Police and Office of the Attorney General does remain important. However while “catching big people” is always sexy and newsworthy it is also not enough. There must also be an equally energetic focus on dealing with the issues highlighted in metrics such as the Ease of Doing Business.
This includes simplifying regulatory and administrative systems and procedures together with incorporating various new forms of technology to provide greater transparency and reduced opportunities for corrupt practices to take hold. There is also a need to ensure that systems and procedures provide incentives to enable good practice and disincentives to behave badly.
Rational systems of remuneration, which entails replacing inefficient and patronage-ridden systems of unaccountable discretionary stipends etc with a simplified salary system, has been shown to be effective. Arms-length approaches to managing payments systems has also been effective such as demonstrated with the Finance Ministry’s Treasury operations.
The newly passed omnibus Law on Work Creation should, providing implementing regulations support the spirit and intent of the law, provide a positive boost in the right direction on issues reflected in the Ease of Doing Business.
Sadly improving and streamlining unnecessary, overlapping and even contradictory regulations and implementation procedures are not “sexy” or photogenic! However, they are every bit as important as the “gotcha” caught-you-red-handed photo shaming exercises that can be deployed as part of enforcement work.
Finally there is a strong need to ensure that all people and stakeholders are well educated that reformed regulations and procedures can be followed without the need to engage in shady practices. Or as importantly that attempts to do so will be seriously counterproductive. Here partnering with education institutions, civil society and faith based groups, private sector associations as well as the various branches of the media must be seen as critical networks for disseminating core messages from agencies such as the KPK.
Why the CPI matters
In many countries leaders promote improvements in their global standing as evidence of national progress including as part of efforts to promote their nation as a good partner for investment and other commercial engagements. Meanwhile reversals can be used as a means to re-energise efforts to make improvements in corruption control and integrity systems of a nation.
In many countries, including Indonesia, there are efforts to use the corruption perceptions formula to produce comparisons across the provinces of the nation. More information on Transparency International Indonesia, which has undertaken such exercises across Indonesia, can be found here.
The CPI thus provides political leaders, policy makers, activists and even the media with an easy to use tool for advocacy and promotion, or also criticism. Certainly business leaders use it as part of their fiduciary efforts at assessing risks in engaging in potential commercial engagements around the world.
Even so the CPI is not without its critics and limitations. Civil society activists in particular often complain that the CPI is weighted too much in favour of measuring the views of the business sector. There are also questions about whether perceptions equal reality. Even where that may be the case, nonetheless perceptions are informed by a number of factors including experiences and shared learning. More importantly perceptions can drive decisions and action.
What the CPI includes
The 2020 CPI covered 180 countries and territories. The CPI incorporates some 13 different data series, namely:
- African Development Bank Country Policy and Institutional Assessment 2018
- Bertelsmann Stiftung Sustainable Governance Indicators 2020
- Bertelsmann Stiftung Transformation Index 2020
- Economist Intelligence Unit Country Risk Service 2020
- Freedom House Nations in Transit 2020
- Global Insight Country Risk Ratings 2019
- IMD World Competitiveness Center World Competitiveness Yearbook Executive Opinion Survey 2020
- Political and Economic Risk Consultancy Asian Intelligence 2020
- The PRS Group International Country Risk Guide 2020
- World Bank Country Policy and Institutional Assessment 2019
- World Economic Forum Executive Opinion Survey 2019
- World Justice Project Rule of Law Index Expert Survey 2020
- Varieties of Democracy (V-Dem v. 10) 2020
Transparency International’s Dandang Widoyoko said that “not all data series are used in analyzing each country. For example Indonesia is obviously not covered by the data series from the African Development Bank. However, to be included in the global CPI a country/territory does need to be included in a minimum of three of the 13 series of data systems that TI uses”.
In the case of Indonesia, the data used consists of nine measurements:
- The PRS Group International Country Risk Guide
- IMD World Competitiveness Center World Competitiveness Yearbook Executive Opinion Survey
- Global Insight Country Risk Ratings
- Political and Economic Risk Consultancy Asian Intelligence
- Varieties of Democracy (V-Dem v. 10)
- World Economic Forum Executive Opinion Survey
- Bertelsmann Stiftung Transformation Index
- Economist Intelligence Unit Country Risk Service
- World Justice Project Rule of Law Index Expert Survey
Key: Improvement, Stable, Regression
Mr Widoyoko noted that “in 2020, Indonesia suffered a reversal in five of the nine measurements. In the next three Indonesia maintained its previous rating while in the final measurement Indonesia did produce an improvement.”
He said that of some concern is that t “metrics focused on business risk related measurement suffered the sharpest reversals. This included the Global Insight Country Risk Ratings where Indonesia fell from 47 to 35 and also from the PRS International Country Risk Guide where Indonesia fell from 59 to 50.”
On the one metric that showed improvement, namely from the World Justice Project’s Rule of Law Index Mr Widoyoko noted that “this is usually, and still actually, remains Indonesia’s weakest area of performance on the CPI. However last year we did see a slight improvement from 21 to 23.
He said that these developments “may have well been read as demonstrating an improvement in the competence and integrity of law enforcement.”
He said this might be a reflection of the success in the apprehension of a bank swindling suspect who had been on the run, and swift and transparent action against police officials alleged to have helped him. As well as the arrest and prosecution of the former Secretary of the Supreme Court for corrupt abuse of authority.
Kevin Evans has been a student of Southeast Asia in general and Indonesia in particular for 35 years. During the 25 years he has lived in Indonesia, he has worked variously as a diplomat, stock broker, academic and NGO activist.