Corruption in Indonesia free essay sample

And surveys of external perception, in which Indonesia currently ranks among the most corrupt nations of the world, may well be reflecting more the greater transparency about corruption in what is rapidly becoming one of the more open societies in the world, than the actual levels of corruption prevailing. But whether Indonesia is more or less corrupt than other countries is immaterial. Corruption levels by any objective standard appear very high, and cause the vast majority of Indonesians themselves to see corruption as an evil that must be eradicated. Corruption weakens the ability of the state to deliver basic public goods: essential services and the rules that allow societies to function effectively.As such it taxes most the poor and the vulnerable Indonesia’s silent majority, creates high macro-economic risks, jeopardizes financial stability, compromises public safety and law and order, and above all, it undermines the legitimacy and credibility of the state in the eyes of the people. We will write a custom essay sample on Corruption in Indonesia or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Corruption, therefore, represents a significant threat to a successful political and economic transition for Indonesia. By undermining the formal rules and the key organizations which are charged with safeguarding them, and by destroying people’s faith in these institutions, democracy itself is threatened. Why did Soeharto’s New Order succeed in delivering high levels of economic growth and substantial poverty reduction despite high levels of corruption? The answer is in two parts (Chapter 1). The first is that the regime was careful to ensure that the scale of corruption did not deter investment and economic activity and kill the goose that lay the golden egg, requiring extraordinarily good management and restraint, neither of which lasted into the 1990s when greed began to assert itself. The second is that this success is overstated since it came at a high cost in terms of weak and corrupt institutions, severe public indebtedness through mismanagement of the financial sector, the rapid depletion of Indonesia’s natural resources, and a culture of favors and corruption in the business elite. Research findings now confirm that institutions are crucial to sustainable development. Attempts to estimate through multi-country regressions the contributions of geography, trade and institutions to economic growth in income levels shows that â€Å"the quality of institutions trumps everything else†3.Thus, the neglect of institutions in Indonesia combined with environme ntal deterioration and other adverse consequences flowing from the New Order period has had serious negative effects on the sustainability of Indonesia’s development efforts. Has corruption gotten worse since the fall of the New Order? The evidence on this is far from clear. With declining levels of public investment, big ticket corruption may well have fallen in absolute terms, while petty corruption under weaker political management may have increased. Political competition on the other hand may be once again driving up big ticket corruption. What matters, though, is that corruption continues to remain very high and that it hurts the poor and the vulnerable the most.Such persistent corruption causes some people to conclude that it is part of the average Indonesian’s mental make up. We beg to disagree. Indonesians are like people everywhere. As surveys show (see Chapter 1), they Overview iii deplore corruption, and they are themselves much less corrupt when placed in work environments which reward performance and good behavior and penalize corrupt behavior. A significant number of Indonesians are enraged by what they see and want to do something about it. They are fighting the good fight in every kabupaten and kota, and in every sphere of Indonesian life. This report is a modest contribution to their valiant efforts. Why another report? Much has been written about corruption in Indonesia. Why another report?This report is an initial outcome of an ongoing process of rethinking and learning by the World Bank on issues of accountability and corruption in Indonesia. In the aftermath of the financial crisis and related political upheaval, the World Bank revisited its entire strategy towards Indonesia. To many Indonesians, the Bank was associated with the Soeharto regime, which it had supported for 32 years. It was associated with the accumulation of debt, the most serious of the economic problems inherited from the New Order. And, in particular, it was seen as having failed to take a stand against corruption while lending large sums to a corrupt regime. The Bank has over the last three years confronted these weaknesses.In close consultation with the new Government of Indonesia and reflecting the high level of country indebtedness and fiduciary weaknesses, lending volumes to Indonesia were sharply reduced. The Bank has shifted much of its portfolio towards innovative operations that support poverty reduction through community-driven programs where the beneficiaries actively participate in the determination of investment priorities and oversee the proper use of funds. It has put governance and anti-corruption at the front and center of its development strategy, devoting a significant portion of its analytical work, its lending and its supervision resources to helping improve governance and accountability.