Indonesia slides again on transparency perceptions

The latest global report on corruption perception by Transparency International was released at the end of January. For Indonesia this is a deeply troubling result.

For the second time in three years the country has suffered a reversal in standing following almost a generation of steady improvement. The 2022 result takes Indonesia back to 2014. On a scale of one to 100 Indonesia fell from 38 to 34.

Indonesia is measured on eight indices, and notably the two measurements with the sharpest falls were both from business and investor-focussed groups with a particular interest in country risk.

The chart below outlines the evolution of Indonesia’s rating and ranking using annual data from Transparency International’s Corruption Perception Index since 1998.

In this chart every country is represented by a small blue dot and those on the left are perceived to be least corrupt. Indonesia is identified as a large red diamond and it’s easy to see that at the end of the last century it was far to the right of the corruption perception scale. Another notable point is the establishment of the anti-corruption commission, known as the KPK, in 2003. From this point the country began a slow but steady improvement resulting in Indonesia reaching the top half of the rankings for the first time ever in 2019.

And then came 2020 and the first dip, followed by a brief stabilisation in 2021 before the serious reversal in 2022.

The seriousness of this reversal can also be seen in relation to Indonesia’s neighbours. The following chart compares the trajectory of all members of ASEAN and some other regional countries since the turn of the century. Indonesia’s extraordinary transformation from the worst in the region to third in ASEAN in 2019 is clear to see (data on Brunei is insufficient to be included). Since then we have seen Thailand, Vietnam and East Timor overtake Indonesia while the Philippines is now just one point below Indonesia.

What are the implications of this fall from grace?

It may be tempting to think that anti-corruption as a theme is unimportant. Unfortunately, this is not the case. The problem with corruption affects a nation both socially and economically. There are the added costs and risks of conducting business which are reflected in increased costs of capital and loans as financiers cover for higher risks.

There are also threats to human health and development. The effects are felt in different parts of the world – buildings not built to standard that collapse under a modest earthquake, hospitals and clinics issued with out-of-date equipment or sub-quality medicines or schools and education facilities that are not fully equipped. More insidious costs of corruption include a subversion of the social and political fabric reflected in lower levels of trust and this often exacerbates imbalances of power and influence.

So, what is causing this fall from grace?

The opening chart in this article suggests the 2022 results should not be seen in isolation. Rather, it’s the result of a series of developments that have all but guaranteed this outcome. Very early signs were seen in the aftermath of the 2019 elections. During the “lame duck” period between the conclusion of the 2019 elections in April and the inauguration of the new parliament at the start of October, the outgoing parliament passed a series of laws including a revision to the key anti-corruption law. For many critics there were concerns both about the substance of these changes but also suspicions about the way the laws were passed. Why did the parliament not “dare” to pass this law before the election? This left many with questions about the future direction of the nation’s anti-corruption work.

Further concerns were added when the new commissioners were appointed to lead the Corruption Eradication Commission (KPK). The new chair was a controversial selection given that he had previously departed the body under a cloud over issues related to the strict code of conduct that had guided members of the Commission for many years. One of the strengths of the Commission traditionally was that it had forged close partnerships and engagement with Indonesia’s civil society. The new Commission established at the end of 2019 has reduced these kinds of partnerships. One further development that has affected the perception of the Commission has been transforming the status of Commission staff into regular civil servants. The result of this process led to the dismissal of many of its well-known investigators.

To be fair, these kinds of issues are not exactly the same as the actual performance of the Commission in its work. But unfortunately, when examining some of the data from the Commission itself on key areas of performance the trend does not look promising. According to the KPK’s own information the number of investigations undertaken is now down almost one third from its peak in 2018.

The measurement of the corruption perceptions index (CPI) is not restricted to the performance of a nation’s counter corruption agencies. As a result, this decline cannot be directed solely at the state of the KPK.

Transparency International uses 13 different internationally comparable indices to produce the results for each country. In the case of Indonesia there are eight indicators used to measure the CPI, namely:

1. The PRS Group International Country Risk Guide
2. Political and Economic Risk Consultancy (PERC) Asian Intelligence
3. IMD World Competitiveness Center World Competitiveness Yearbook Executive Opinion Survey
4. Bertelsmann Stiftung Transformation Index
5. Global Insight Country Risk Ratings
6. Varieties of Democracy (V-Dem v. 10)
7. Economist Intelligence Unit Country Risk Service
8. World Justice Project Rule of Law Index Expert Survey

Transparency International takes each of these eight indices and converts them into a numerical system from 1 (worst result) to 100 (best result) to permit a combined measurement that is then averaged back to produce the national result for Indonesia from 1 to 100. In essence changes in the aggregate national result reflects the collective changes in each of these input results.

Sometimes these individual indices move in different directions. For example, the World Justice Project Rule of Law Index Expert Survey showed a very modest increase of one point from 23 to 24. This modest improvement was overwhelmed by the declines produced by the PRS International Country Risk figure, however, that collapsed from 48 to 35. It should also be noted that in 2019 this figure was at 58. Political and Economic Risk Consultancy (PERC) Asian Intelligence showed a sharp decline from 37 to 29. Less significant but still notable declines were seen in the IMD World Competitiveness Center World Competitiveness Yearbook Executive Opinion Survey and the Bertelsmann Stiftung Transformation Index.

Indonesia faces a major election early next year and suggestions there is always more risk as a country heads towards major elections flies in the face of the fact Indonesia continued to make positive progress in the lead up to the elections of 2009, 2014 and 2019. The notion of risk here should be seen in a more nuanced way than mere electoral contestation. The issue is more about commitment to the very principles that inspired the national effort to promote accountable, democratic and transparent governance at the turn of the century.

With one year to go before the next elections it may indeed be worth reflecting on the sharp insights offered at the closing session of the Indonesia Update in 2018 by one of Australia’s new generation of ‘Indonesianists’.

“As in 2014, we will have on one side a candidate who styles himself as strongly nationalistic; anti-leftist; pro-military; and open to further encroachment of conservative Islamic agendas into the national political arena. His record on the preservation of human rights, his regard for core democratic principles, his commitment to transparent and accountable government, and his support for a meaningful anti-corruption agenda are all highly dubious. He will be contesting the presidential election with the support of a grand coalition of parties, a strong grip on the media, and an assembly of political elites whose own democratic and reformist credentials should inspire little confidence from the Indonesian electorate. And on the other side of the presidential ballot paper, we will have Prabowo Subianto”.

The framing of these comments left the entire audience of Indonesia experts stunned into silence before embarrassed laughter filled the hall.

Among the factors that may have been contributing to this elevated risk assessment for the country may have been an issue that prima facie may have been seen as reflecting some kind of enhanced stability, that is deferring the 2024 elections for a couple of years or permitting the incumbent president to seek a third term. Either approach requires at minimum a questionable re-interpretation of the Constitution or more likely an actual amendment to the Constitution.

Part of the temptation to seek to delay elections or permit a third term by the President is support for the incumbent government remains very high despite the stresses and strains caused by the pandemic. Survey work from Charta Politica, one of Indonesia’s established pollsters indicates that satisfaction with the performance of the government closed 2022 at over 72 per cent, a rise of more than 10 per cent since the middle of the epidemic. At the same time when asked whether they would agree to deferring the elections almost 75 percent of respondents said they did not agree. This figure was remarkably steady throughout 2022.

In my view, the capacity for respondents to be both satisfied with the incumbent government yet still accepting that when the second term concludes the people elect a new president reflects a sophisticated view that augurs very well for the nation’s future.

There is an apparent mismatch between the cool-headed views of the electorate, as reflected through these kinds of polls, and the ambitions of those who would seek to delay the forthcoming elections. This may well be a part of the analysis that is adding to perceived risk in Indonesia.

Anecdotal discussions with various business figures, both foreign and Indonesian, over the past couple of years suggest a growing disquiet not necessarily with the results of policy or legislation, but rather with the penchant for the current government and parliament to ride roughshod over public sentiment by developing and endorsing major initiatives with minimal genuine public engagement. Examples offered include the omnibus Job Creation Law initiative that was not part of the public discourse during the 2019 elections. The more recent case of the adoption of the new Criminal Code, which re-inserts issues of lese majeste which were deemed unconstitutional by the Constitutional Court in 2006 is the latest example frequently cited. “Closed shop” governments are invariably seen as much more vulnerable to corrupt practices flourishing.

Prospects for recovery

At a personal level as one who spent so much of my earlier years working inside and with the government to face the challenges of systemic corruption, this report presents a sad picture. Ever the optimist, though, there may be opportunities, possibly limited, to re-energise efforts to face these challenges.

The President has clearly been stunned by the findings of this year’s CPI survey. He has ordered an evaluation of these results. The four-year term of the current board of commissioners of the KPK concludes this year meaning that new commissioners will have to be appointed, through a process that engages both the President and the House of Representatives (DPR), by the end of this year. We are already seeing MPs and the parliamentary factions showing a renewed sense of interest for public concerns with eight of the nine factions making statements in support of keeping the open list system of proportional representation. Voters are overwhelmingly in favour of the open system as they enjoy the power to determine which candidates from their preferred party are elected.

There have been two successive elections in which the issue of corruption was neither a campaign priority nor a point of differentiation between either candidate. It may well be that these growing concerns about corruption gain a new focus.

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