Current Edition http://www.insideindonesia.org/ Fri, 25 Jul 2014 02:31:20 GMT FeedCreator 1.8.0-dev (info@mypapit.net) Pemilu Lampung yang berlapis gula http://www.insideindonesia.org/current-edition/pemilu-lampung-yang-berlapis-gula Sugar Group membiayai pemilu gubernur baru Lampung supaya dapat menjaminkan perpanjangan sewa tanah

Ward Berenschot dan Darmawan Purba

Ward 1 ridhoRidho's campaign sugar- LampungOnline: http://www.lampungonline.com/2014/03/bagi-gula-cagub-cawagub-lampung-ridho.html

Pada tanggal 9 April, Ridho Ficardo menjadi gubernur baru Lampung, yaitu propinsi Sumatera yang paling selatan. Pada pandangan pertama, pemain berusia 33 tahun ini tampaknya pilihan yang bukan tetap karena ia tidak memiliki karisma serta pengalaman pemerintah. Tapi ia memiliki suatu fitur yang menang: ia adalah anak dari salah satu direktur Perusahaan Sugar Group (Sugar Group Companies, SGC), produser gula Gulaku yang terdapat di mana-mana pun.

Dukungan keuangan dari Sugar Group memungkinkan Ridho untuk menghabiskan boros selama kampanyenya. Sesuai dengan slogan kampanyenya ‘memberi kepada, dan melayani, masyarakat Lampung’, Ridho membuat pemilu gubernur sebagai suatu prestasi yang mewah. Truk-truk penuh gula melaju ke desa-desa di seluruh Lampung untuk melaksanakan ‘banjir gula’, sebuah ‘banjir’ besar karung-karung gula beratnya 2 kilo yang dihiasi dengan gambar Ridho. Konser music, drama boneka, dan menurut kabar, distribusi langsung 50,000 rupiah per pemilih memastikan bahwa nama Ridho secara bertahap meningkat dalam jajak pendapat. Pada akhirnya, is memenangkan 44 persen suara, unggul jauh dari pesaing-pesaingnya. Pencapaian ini memiliki biaya, menurut perkiraan pengamat-pengamat yang diwawancarai, hingga 500 miliar rupiah (43 juta USD).

Uang ini mempereratkan pengaruh politik SGC yang sudah cukup itu. Sugar Group telah lama memberikan sumbangan kepada para politisi. Sejak 2011 perusahaan ini telah mendanai kampanye-kampanye pemilu bupati, yang mengarah ke pemilu calon-calon ‘mereka sendiri’ di Tulang Bawang dan Tulang Bawang Barat.

Memperbaharui sewa tanah

Bukan suatu kebetulan bahwa di kabupaten-kabupaten ini, terdapat perkebunan besar yang dimiliki oleh Sugar Group. Perusahaan ini bisa mendapatkan keuntungan yang cukup banyak dengan menempatkan orang-orang mereka sendiri dalam posisi yang berkuasa. Alasan utama untuk boros gula raya Lampung ini adalah berakhirnya mendatang sewa tanah 30 tahun SCG itu (HGU) untuk beberapa perkebunan. Mengingat bahwa suap besar yang pembaharuan seperti sewa tanah biasanya melibatkan, SGC mungkin bisa menutup sebagian biaya kampanye sekarang karena Ridho akan menjadi orang untuk mengotorisasi perpanjangan tersebut.

SGC juga terlibat dalam sejumlah konflik tanah dengan perusahaan lain - ada pertempuran hukum berkepanjangan dengan kelompok Salim atas tanah dan sebuah pabrik - dan juga dengan penduduk desa. Pada tahun 2012 penduduk desa di Tulang Bawang melakukan protes besar terhadap SGC, karena perusahaan ini meraih tanah mereka dan memotong akses ke desa mereka. Dengan gubernur serta bupati setempat sekarang sekutunya, SGC tidak akan diganggu lagi oleh kerepotan tersebut. Ada kemungkinan bahwa SGC akan menggunakan politisinya yang 'ramah' untuk memperoleh lisensi demi mendapat lebih banyak lahan untuk memperluas perkebunannya. Sifat kepemilikan lahan yang sudah tegang itu di Lampung memang menunjukkan bahwa pemilu Ridho mungkin juga memicu gelombang konflik tanah yang baru.

Ridho Ficardo tidak menyembunyikan kesetiaannya. Program pemilu berbaris 16 di situsnya menunjukkan bahwa melayani Sugar Group adalah tujuan utamanya: "potensi agro-bisnis di Lampung terhambat (...) oleh infrastruktur yang lemah, masalah keamanan dan pungutan liar ('biaya liar', yaitu mencari sewa). Apa yang harus kita lakukan untuk menyelesaikan masalah ini? Kita perlu memilih pemimpin yang memiliki solusi". Memang untuk SGC, Ridho mewujudkan solusi untuk tantangan operasional besar yang lain: mencari sewa merajalela yang telah menjangkiti perusahaan ini selama bertahun-tahun.

Birokrat dan politisi telah memeras uang dari perusahaan ini dengan mengancam untuk mengambil (dan membuat) penyimpangan dalam penggunaan lahan SGC dan produksinya. SGC adalah kehadiran perusahaan dominan di suatu daerah ekonomi yang terpencil. Ia juga bekerja dalam kerangka hukum yang lemah dan bertentangan mengenai penggunaan lahan. Jadi SGC adalah rentan untuk digunakan 'seperti ATM' oleh individu giat pada semua tingkat pemerintahan. Ridho sekarang diharapkan untuk bertindak lebih tegas dalam menangani praktek-praktek tersebut. Bahkan, itulah yang pernah diperdebatkan oleh informan-informan yang bersimpati kepada SGC - bahwa SGC memberikan Ridho kemampuan untuk 'membersihkan' dan 'memprofesionalkan' lembaga-lembaga negara.

Ward 2 Ridho Rally resizeLocals drive to a Ridho campaign rally- Author's collection

Pelukan yang bersemangat

Pemilu Lampung yang berlapis gula itu menggambarkan bagaimana proses demokratisasi di Indonesia sedang mendorong bisnis dan politisi ke dalam pelukan masing-masing. Sebelumnya, melakukan bisnis di Indonesia bergantung pada memiliki kontak yang baik. Selama Orde Baru, hartawan-hartawan bisa mengumpulkan kekayaan besar dengan memanfaatkan hubungan mereka bersama Suharto untuk mendapatkan lisensi dan pembebasan. Tapi harapan adalah bahwa reformasi dapat mengubah karakter politik Indonesia yang oligarki dan mendistribusikan tenaga yang lebih merata. Beberapa reformasi awal, seperti undang-undang kehutanan yang baru, undang-undang tentang serikat buruh dan komitmen untuk mengakui hak tanah umum menyarankan (agro-)bisnis besar tidak bisa lagi menginjak-injak hak-hak warga negara Indonesia. Tapi, seperti berbagai pengamat kini telah menunjukkan, demokratisasi hanya mengubah strategi elit ekonomi Indonesia, bukan dominasi mereka.

Ward 3 SGCSGC advertisement congratulating a local Bupati on this election win- Author's collection

Sementara pengusaha perlu membangun kontak dengan birokrat berpengaruh pada waktu Orde Baru, kini mereka membeli pengaruhnya dengan mendukung kampanye pemilu politisi - atau mereka sendiri menjadi politisi. Karena melonjoknya biaya menjalankan kampanye pemilu, politisi tidak bisa mengorbankan dukungan perusahaan tersebut. Sebuah karir politik yang sukses membutuhkan baik sedang atau menemukan seorang pengusaha kaya.

Pelukan yang erat ini antara bisnis dan politik sebagian besarnya adalah memperkuat diri. Betapa bisnis-bisnis menyadari bahwa kontak politik sangat penting untuk memperoleh lisensi dan menghindari pungutan liar di mana-mana, mereka menghadapi insentif yang kuat untuk melibat diri dalam perjanjian rahasia atau tidak-begitu-rahasia dengan kandidat politik. Pertimbangan tersebut melaju Sugar Group untuk mendukung politisi. Perusahaan ini tidak benar-benar menginginkan birokrasi yang lebih profesional ketika mengeluarkan lisensi baru. Birokrasi yang mengimplementasikan kebijakan dan hukum secara universal dan adil tidak akan memungkinkan Sugar Group untuk menutup uang yang dikeluarkan untuk kampanye pemilu. Untuk menutup biaya ini, Sugar Group mengharapkan politisinya untuk campur tangan dalam prosedur birokrasi, yaitu membengkokkan aturan dan regulasi supaya menguntungkan mereka. Dengan cara ini kesepakatan tersebut melemah lembaga negara serta relevansi aturan dan kebijakan.

Dalam rangka untuk menghormati komitmen mereka kepada pendukung dan penyandang dana kampanye, pemimpin terpilih terus-menerus merusak dan menghindari prosedur birokrasi. Pelemahan lembaga negara yang dihasilkan lebih memperkuat ketergantungan pengusaha pada politisi, karena mereka memiliki jaminan sedikit bahwa aturan dan kebijakan akan diterapkan dalam mode diprediksi jika mereka tidak memiliki kontak politik. Dalam arti tersebut, strategi bisnis Sugar Group hanya mengalahkan diri sendiri. Selama elit ekonomi (seperti direktur SGC) menggunakan kontaknya untuk menghindari regulasi, campur tangan politik mereka tidak akan mengarah pada profesionalisme lembaga negara maupun membasmi praktik mencari sewa.

Kekecewaan publik dan pemanis pemilu

Tumpang tindih antara politik dan bisnis juga memperkuat diri dalam cara lain. Pemilih melihat kekayaan koalisi yang dikumpulkan oleh politik-bisnis besar dengan memberi izin dan kontrak kepada satu sama lain. Mereka menyadari bahwa janji-janji politisi tentang perubahan peraturan dan kebijakan sering kosong, karena pemilih melihat bagaimana pemimpin terpilih tidak mematuhi peraturan ketika ditekan oleh teman-teman perusahaan mereka. Dalam konteks ini tidak mengherankan bahwa banyak pemilih memperdagangkan suara mereka untuk uang (atau gula), karena merasakan bahwa pemanis tersebut mungkin menjadi satu-satunya manfaat yang mereka dapat harapkan secara realistis dari politisinya. Pengamatan kampanye selama pemilu legislatif pada tanggal 9 April menunjukkan bahwa pembelian suara telah menjadi sangat umum. Pemilih menjadi semakin pragmatis dalam hubungan mereka dengan politisi. Ironisnya adalah bahwa kekecewaan ini dengan politik dan harapan yang dihasilkan dari uang dan hadiah memfasilitasi dominasi lanjutan dari elit ekonomi, karena melonjaknya biaya kampanye membuat politisi bergantung pada donor kaya.

Saat ini ada sedikit ruang bagi pemilih untuk menghukum politisi yang terlibat dalam penawaran gelap dengan perusahaan-perusahan. Pemilih umumnya tidak tahu perusahaan mana yang mendanai calon mereka. Politisi diwajibkan untuk melaporkan dana dan biaya kampanye mereka. Namun karena tidak ada mekanisme untuk mengecek kebenaran mereka, laporan-laporan ini telah menjadi latihan administrasi yang sia-sia. Lebih jauh lagi, sungguhpun keterlibatan Sugar Group dalam pemilihan gubernur Lampung agak terang-terangan, wartawan lokal jarang berani menyebutkan nama perusahaan ini secara eksplisit karena takut pembalasan dan penarikan iklan. Akibatnya pemilih tidak benar-benar tahu apa kepentingan bisnis mereka mungkin mendukung dengan suaranya. Para petani yang memprotes Sugar Group di Tulang Bawang tahun 2012 mungkin telah memilih Ridho, hanya karena peran para perusahaan jarang masuk debat publik.

Pembiayaan kampanye yang lebih transparan

Salah satu solusi yang mungkin bisa, seperti yang diperdebatkan oleh Marcus Mietzner dalam buku terbarunya tentang partai-partai politik di Indonesia, ialah meningkatkan dana negara untuk kampanye pemilu. Hal ini akan mengurangi ketergantungan politisi pada donor perusahaan. Tapi itu tidak akan menghilangkannya.

Inisiatif juga diperlukan untuk meningkatkan transparansi pembiayaan kampanye. Negara-negara Amerika Latin dapat menunjukkan bahwa hal ini dimungkinkan. Melalui kombinasi reformasi hukum dan penelitian mendalam, sejumlah LSM-LSM Amerika Latin berhasil dalam mempublikasikan sumber dana kampanyenya politisi. Situs-situsnya telah menjadi sumber penting bagi wartawan, memungkinkan mereka untuk mengekspos hak istimewa yang diberikan kepada para donor kampanye. Sebuah replikasi dari upaya-upaya tersebut di Indonesia bisa memungkinkan pemilih untuk lebih meneliti politisi mereka dan, pada akhirnya, melonggarkan hubungan antara bisnis dan politik.


Ward Berenschot (ward.berenschot @ gmail.com) adalah seorang peneliti di KITLV Leiden. Ia meneliti tentang clientelisme dan kewarganegaraan di Indonesia.
Darmawan Purba (yuanren_purba@yahoo.com) adalah seorang ilmuwan politik di Universitas Lampung.


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vhon6830@gmail.com (Vivian Honan) Fri, 04 Jul 2014 07:10:41 GMT http://www.insideindonesia.org/current-edition/pemilu-lampung-yang-berlapis-gula
Lampung’s sugar-coated elections http://www.insideindonesia.org/feature-editions/lampung-s-sugar-coated-elections Sugar Group financed the election of Lampung’s new governor to secure the renewal of its land leases

Ward Berenschot and Darmawan Purba

Ward 1 ridhoRidho's campaign sugar- LampungOnline: http://www.lampungonline.com/2014/03/bagi-gula-cagub-cawagub-lampung-ridho.html

On 9 April, Ridho Ficardo became the new governor of Lampung, Sumatra’s southern-most province. At first glance, the 33 year-old seems an odd choice as he lacks both charisma and government experience. But he does possess one winning feature: he is the son of one of the directors of Sugar Group Companies (SGC), the producer of the ubiquitous Gulaku sugar.

Sugar Group’s financial support has enabled Ridho to spend lavishly during his campaign. True to his campaign slogan, ‘giving and serving [to] the people of Lampung’, Ridho made the gubernatorial elections a lavish feast. Trucks, full of sugar, were driven up to villages through Lampung to execute a massive flood of two-kilogram sacks of sugar adorned with Ridho’s picture. This, followed by a string of music concerts, puppet plays and what was reportedly a direct distribution of Rp.50,000 per voter ensured the consistent rise of Ridho’s name in the polls. In the end, he won 44 per cent of the votes, well ahead of his competitors. This achievement had cost, according to estimates of interviewed observers, up to Rp.500 billion (US$43 million).

This money served to cement SGC’s already considerable political clout. Sugar Group has long been giving donations to politicians. Since 2011, the company has been bankrolling election campaigns for district heads, which led to the election of its candidates in Tulang Bawang and Tulang Bawang Barat.

Renewing a land lease

It is no coincidence that these districts have large plantations owned by Sugar Group. The company stands to gain considerably from having put their men in power. The main reason for Lampung’s extravagant sugar feast is the upcoming expiration of SCG’s 30-year land lease (HGU) for some plantations. Given the enormous bribes that a renewal of such a land lease typically involves, SGC will probably recoup most of its campaign expenses now that Ridho is the person authorising these renewals.

SGC is also involved in a number of land conflicts with other companies – such as the long-standing legal battle with the Salim group over both land and factory – as well with villagers. In 2012, villagers in Tulang Bawang staged a big protest against SGC for taking their land and cutting off the access to their village. With the governor as well as local district heads now their allies, SGC will no longer be bothered by such matters. SGC is likely to use its ‘friendly’ politicians to acquire licences for more land to expand its plantations. The already tense nature of land tenure in Lampung suggests that Ridho’s election may well trigger a new wave of land conflicts.

Ridho Ficardo hardly hides his allegiances. The 16-line election program on his website suggests that serving Sugar Group is his main goal: ‘the potential of the agro-business in Lampung is hampered […] by weak infrastructure, security concerns and pungutan liar (‘wild fees’, i.e. rent-seeking). What should we do to solve this? We need to elect a leader who has the solutions.’ Indeed, for SGC, Ridho embodies the solution to yet another big operational challenge: the rampant rent seeking that has plagued the company for years.

Bureaucrats and politicians have been extorting money from the company by threatening to take up (and make up) irregularities in SGC’s land use and production. SGC is the predominant corporate presence in a relative economic backwater. It also works within a weak and contradictory legal framework regarding land use. This could mean that SGC is vulnerable to being used ‘like an ATM’ by enterprising individuals at all levels of government. Ridho is now expected to be more firm in dealing with such practices. In fact, that is what informants sympathetic to SGC have been arguing – that SGC put Ridho in power to ‘clean up’ and ‘professionalise’ state institutions.

Ward 2 Ridho Rally resizeLocals drive to a Ridho campaign rally- Author's collection

An eager embrace

Lampung’s sugar-coated elections illustrate how Indonesia’s democratisation process is driving business and politicians into each other’s arms. Doing business in Indonesia used to depend on having good contacts. During the New Order, tycoons could amass large fortunes by exploiting their connection to Suharto to obtain licences and exemptions. But the hope was that reformasi would change the oligarchic character of Indonesia’s politics and distribute power more evenly. Some early reforms, such as a new forestry law, a law on labour unions and a commitment to recognise common land rights, suggested big (agro-) businesses could no longer trample on the rights of Indonesia’s citizens. But, as various observers have now pointed out, democratisation has merely changed the strategies of Indonesia’s economic elites, not their dominance.

Ward 3 SGCSGC advertisement congratulating a local Bupati on this election win- Author's collection

While entrepreneurs needed to cultivate contacts with influential bureaucrats during the New Order, now, they buy their influence by supporting the election campaigns of politicians – or by becoming one themselves. Because of the spiralling costs of running an election campaign, politicians can hardly forego such corporate support. A successful political career requires one to be either a businessman or have the support of one.

This intimate embrace between business and politics is largely self-reinforcing. As businesses realise that political contacts are vital for obtaining licences and for avoiding the ubiquitous rent seeking, they face strong incentives to engage in secret or not-so-secret deals with political hopefuls. Such considerations drove Sugar Group to support politicians. The company does not really want a more professional bureaucracy when it comes to issuing new licences. A bureaucracy that implements policies and laws in a universal, impersonal way would not enable Sugar Group to recoup the money it spends on election campaigns. To recoup these costs, Sugar Group expects its politicians to intervene in bureaucratic procedures to bend rules and regulations in their favour. In this way, such deals are in fact weakening state institutions and diluting the relevance of rules and policies.

In order to honour their commitments to supporters and campaign funders, elected leaders constantly undermine and evade bureaucratic procedures. The resulting weakening of state institutions further reinforces the dependence of entrepreneurs on politicians as they have little assurance that rules and policies will be applied in a predictable fashion if they lack political contacts. In this sense, Sugar Group’s business strategy is self-defeating. As long as economic elites (like SGC’s directors) use their contacts to circumvent regulation, their political meddling will not lead to the professionalisation of state institutions or the stamping out of rent-seeking practices.

Public disillusionment and electoral sweeteners

The overlap between politics and business is self-reinforcing in yet another way. Voters see the large fortunes that politico-business coalitions are amassing by granting licences and contracts to each other. They realise that politicians’ promises of regulatory and policy change are often empty, because voters see how elected leaders do not abide by regulations when pressured by their corporate friends. In this context, it is no surprise that many voters trade their votes for money (or sugar), seeing that such sweeteners might be the only benefit they can realistically expect from their politicians. Observations of the campaign during the legislative elections on 9 April suggest that vote buying has become very common. Voters are becoming increasingly pragmatic in their dealings with politicians. The irony is that this disillusionment with politics and the resulting expectation of money and gifts end up facilitating the continued dominance of economic elites, as the spiralling costs of campaigning makes politicians dependent on wealthy donors.

At present, there is little scope for voters to punish politicians for engaging in backroom deals with companies. Voters generally do not know which companies are funding their candidates. Politicians are required to report on their campaign funds and expenses. However, as there are no mechanisms to check their veracity, these reports have become meaningless administrative exercises. Furthermore, even while Sugar Group’s involvement in Lampung’s gubernatorial elections was rather blatant, local journalists rarely dared to make explicit mention of the company for fear of reprisals and withdrawal of advertisements. As a result, voters do not really know what business interests they might actually be supporting with their votes. The farmers who protested against the Sugar Group in Tulang Bawang in 2012 might have voted for Ridho simply because the role of corporate backers rarely enters public debate.

More transparent campaign financing

One solution might be, as Marcus Mietzner argues in his recent book on Indonesia’s political parties, to increase state funding for election campaigns. This would reduce the dependence of politicians on corporate donors. But it would hardly eliminate it.

Initiatives are also needed to improve the transparency of campaign financing. Latin American countries are showing that this is not impossible. Through a combination of legal reform and painstaking research, a number of Latin American NGOs are succeeding in publicising politicians’ sources of campaign funds. Their websites have become important source for journalists, enabling them to expose the privileges granted to campaign donors. A replication of such efforts in Indonesia could enable voters to better scrutinize their politicians and, ultimately, loosen the ties between business and politics.


Ward Berenschot (ward.berenschot@gmail.com) is a researcher at KITLV Leiden working on clientelism and citizenship in Indonesia. Darmawan Purba (yuanren_purba@yahoo.com) is a political scientist at the University of Lampung

 

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vhon6830@gmail.com (Vivian Honan) Thu, 03 Jul 2014 02:00:00 GMT http://www.insideindonesia.org/feature-editions/lampung-s-sugar-coated-elections
The politics of audit http://www.insideindonesia.org/feature-editions/the-politics-of-audit Perceptions of political influence on the Indonesian Supreme Audit Agency’s governing board continue to challenge its need for independence

Anna Peterson

Peterson 1 BPK BPK Building- http://nasional.kontan.co.id/news/bpk-belanda-wewenang-bpk-indonesia-masih-lemah-1

For many observers of Indonesian politics, the legislative and presidential elections taking place this year will be the most important barometer of Indonesia’s democratic reform. But the quality of bureaucratic institutions can also tell us much about Indonesia’s young democracy. The Supreme Audit Agency (Badan Pemeriksaan Keuangan, or BPK) has been a focus of Indonesia’s democratic and bureaucratic reform over the past 15 years, and has made strong progress toward becoming an impartial monitoring agency. However, the BPK still faces challenges when it comes to ensuring accountability of the public sector and the spending of public resources.

The BPK’s job includes monitoring irregularities in the budgetary reporting of government bodies and uncovering financial dealings between state actors and private interests of the nature described in many contributions to this Special Edition. But domestic and international observers continue to question the independence of the BPK’s governing board. In October 2014, the Indonesian parliament is due to reappoint five positions on the BPK’s nine-member governing board. The refreshed composition of the board will provide observers with valuable insight into the success, or otherwise, of reforms intended to enhance the BPK’s independence.

An unlikely place for party politics

The sedate world of an audit office would seem a somewhat unlikely place for party politics. The BPK’s role is to monitor government spending, hold the government to account and maintain public and parliamentary confidence in its reports. Thus it relies on being independent from bureaucratic, executive and political influence. However, the BPK has an enduring connection with political parties, largely through its governing board. While there have been a series of important reforms aimed at increasing the agency’s independence, there remains scope for further improvement.

During Suharto’s New Order the BPK’s independence was, unsurprisingly, minimal. For thirty years the central government approved the BPK’s audit reports, members of its governing board were appointed and dismissed by President Suharto, and it had no freedom from executive influence. Without any independence, the BPK was unable to fulfill its role, and the abuse of public office and public resources could occur at the whim of the president.

After Suharto’s resignation in 1998, and in step with Indonesia’s broader democratic reforms, the apron strings tying the BPK to executive government gradually began to loosen. But there remained a tendency for members of the BPK’s governing board to possess links to political parties. In 2001, the World Bank’s report, ‘Indonesia: Country Financial Accountability Assessment’, highlighted the tendency of BPK board members to have links with political parties. The report observed that several members were former parliamentarians, appointed by President BJ Habibie in October 1998. In some cases, the new board members only resigned their parliamentary positions once appointed to the BPK. The report argued ‘such appointments may seriously undermine the independence of BPK and have the potential to give rise to conflicts of interest’. In addition, ‘the perception of independence can become clouded when the board of BPK is mainly composed of officers who have been closely associated with political parties’.

The tendency for members of the BPK’s board to possess links to political parties does not sit comfortably with international standards set down in the International Organisation of Supreme Audit Institutions’ (INTOSAI) Code of Ethics: ‘it is important to maintain both the actual and perceived political neutrality of the [Supreme Audit Institution]. Therefore it is important that auditors maintain their independence from political influence in order to discharge their audit responsibilities in an impartial way’.

The slow process of reform

It is not surprising that members of the BPK’s board, as selected in 1998, possessed political affiliations. Indeed, at that point in time the board selection process was still under the auspices of the president. In recognition of concerns about the agency’s independence, the BPK and the Indonesian parliament introduced a range of reforms between 2001 and 2007 that were intended to provide the agency with the independence it required.

The first of those reforms came in 2001 with the third amendment of the 1945 Constitution which, among other things, established that the president could no longer appoint the BPK’s Chairman. Several years later, the Law of Audit (2004) and the Law on BPK (2006) introduced additional changes that included legislating the processes for the appointment, tenure and reappointment of BPK board members, specifically the president no longer selects the members, and increasing the number of BPK Board members from seven to nine. In 2007, the BPK introduced a Code of Ethics to guide the integrity and professionalism of BPK board members and auditors.

Enduring perceptions of political influence

These reforms are tempered by critiques of the audit model employed by the BPK. The ‘board’ or ‘collegiate’ model is considered to be the model at greatest risk of political influence. In this model the parliament appoints members of a governing board for a fixed term. As Transparency International has observed in relation to the collegiate model generally, ‘in this system, the method of appointing board/college members might be problematic, particularly if a political party has a dominant position in parliament and can thus exercise influence over who is appointed – which may undermine the independence and impartiality of the institution’. Furthermore, if the appointment of members coincides with the country’s election cycle ‘it may increase even further the risks of political influence’. Indeed, in the case of Indonesia, five positions on the governing board are due for re-appointment this year, which makes the selection of the BPK’s board partially aligned with the election cycle.

A perception of political influence can undermine public confidence in the agency. For example, when new appointments to the board are due the press regularly reports on political affiliations that may affect the BPK’s independence. In the lead-up to a renewal of the board in 2009 The Jakarta Post stated, ‘with the BPK’s leadership composed mostly of politicians and staunch supporters of the ruling elite, there is growing concern over the agency’s independence in its job to spot indications of graft at state and government offices’.

anggotaAli Masykur- http://www.merdeka.com/foto/politik/anggota-bpk-ali-masykur-musa-ikuti-konvensi-capres-demokrat.html

Concerns aired by the media are not unfounded. Look, for example, at the composition of the board between 2004 and 2009. During that period the board included the late Abdullah Zainie who was a long-standing member of Golkar and member of the House of Representatives from 1971 to 1997 and then again from 1999 to 2004. Baharuddin Aritonang, also on the board, had been a member of the House of Representatives for Golkar between 1999 and 2004. The late Herman Widyananda, another Golkar member who served on the BPK board from 2007 until he passed away in 2011, had been a member of the House of Representatives from 1993 to 1999 and 2003 to 2007. The concern here is not necessarily that board members have had previous political lives but that reforms enacted at the BPK to date have not yet put controls in place regarding the ability of board members to continue to pursue political interests while in office.

Most recently, the absence of such controls was demonstrated by the political activity of a current BPK board member. On 9 June this year, The Jakarta Post noted that BPK board member, Ali Masykur Musa, had stepped down from his position as member of the campaign team for the Prabowo Subianto – Hatta Rajasa presidential ticket following a ‘reprimand from the Elections Monitoring Agency (Bawaslu), which stated that state officials are not allowed to join politics’. The article also observed that Ali Masykur Musa had been a ‘contestant in the Democratic Party presidential convention’. Musa’s involvement with political parties and his subsequent decision to resign from a political role, illustrates the current lack of clarity around the ability of BPK board members to participate in politics while in office.

In the lead-up to the 2014 elections, other general concerns about the interaction of BPK board members and party politics have been aired in the media. In June 2013, The Jakarta Post highlighted that a majority of board members ‘have either strong affiliations to political parties or to vested-interest groups’. The article also stated, ‘critics are alarmed by the integrity and independence of candidates for a top job at the BPK … failure to select a credible person for the job will undermine the professionalism of the agency’. The Indonesian Legal Roundtable’s Erwin Natosmal asserted that ‘the BPK has been turned into a tool for corrupt political parties ahead of the 2014 elections. That is obvious in the current selection process.’

The importance of an independent audit office

As in any democratic country, a robust and independent audit office is fundamental in keeping the government on track and accountable to the Indonesian people. The need for continuing reform was recently pointed out in the Supreme Audit Office of Poland’s Peer Review Report of the BPK, published in April 2014. By way of context, Supreme Audit Institutions (those bodies which provide the highest level of external audit of government agencies in a country) periodically undertake peer reviews of one another. They are generally used as a quality assurance tool to help improve the practices and procedures of the agency under review.

Poland’s Peer Review Report highlighted that reviewers had consistently met with a view from the BPK’s external stakeholders that ‘members of the board should not be involved in current political activities’. The number one recommendation of the report was that a ‘potential board member should be required to resign from membership in any political organisation and withdraw from political activity for the duration of their mandate’. Changes such as these will be important in clarifying expectations around the political engagement of board members. They will also allow for increased public confidence in the BPK and increase assurance that it has the level of independence necessary to fulfil its role of holding the government to account.

International organisations, local media and non-government organisations (NGOs) continue to suggest that perceived or actual political influence on the BPK’s governing board, may affect its independence and therefore limit its ability to perform its essential monitoring and public accountability role. In particular, there are concerns around the ability of BPK board members to participate in politics while in office. Without the BPK’s thorough auditing of government finances and programs, connections between public office and private interests would remain hidden from the public eye. Therefore, the upcoming renewal of five positions on the BPK’s governing board and its resultant configuration will provide scholars of Indonesian politics with important insight into the progress of reforms at the BPK as well as Indonesia’s broader democratic consolidation.

This article represents the personal views of the author only.

Anna Peterson (u4307118@anu.edu.au) is a Masters student at the College of Asia and the Pacific at the Australian National University.

 

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vhon6830@gmail.com (Vivian Honan) Wed, 02 Jul 2014 11:01:00 GMT http://www.insideindonesia.org/feature-editions/the-politics-of-audit
Challenging times for big tobacco http://www.insideindonesia.org/feature-editions/challenging-times-for-big-tobacco Can the industry’s political and financial resources continue to stall important regulatory change?

Andrew Rosser

 Rosser 1 Billboard Mataram April 2014 resizeBillboard from Mataram- author's own

Indonesia’s major tobacco companies—Sampoerna, Gudang Garam, Djarum and Bentoel—face challenging times as new policies on tobacco control come into effect this year. Under the New Order, the Indonesian government did very little to control the production, marketing, sale and use of tobacco. As a result, these companies have for decades rated among the country’s largest and most profitable. But during the era of democratic reform, Indonesia’s tobacco control lobby—the most prominent members of which are the National Commission for Tobacco Control, the Indonesian Consumers Association, the Jakarta Citizens’ Forum, the Indonesian Heart Foundation, and the Indonesian Cancer Foundation—has grown stronger. It has sought to bring Indonesia in line with international standards when it comes to regulating tobacco. The industry now knows that it has a fight on its hands. Consequently, companies are engaging significant financial and political resources in order to prevent further regulatory restrictions that might compromise their bottom line.

New controls on big tobacco

In early May, Sampoerna announced that its net revenue growth had fallen sharply over the previous year due to declining sales of hand-rolled cigarettes. In a press statement, company President Paul Janelle said that he remained ‘optimistic’ about the future, noting that profit growth was strong. But he also said that 2014 would be ‘full of challenges’ because of greater competition and the implementation of new tobacco control policies. A few days later, the company announced that it would shut two hand-rolled cigarette plants in East Java and lay off almost 5000 workers. Sampoerna’s difficulties may be nothing more than a blip caused by changing consumer preferences away from hand-rolled to machine-produced cigarettes. However, Janelle’s reference to regulatory changes indicates that other factors are working against it as well.

In late May, media outlet Tempo.co reported comments by a stock market analyst that investors were ‘becoming reluctant to bet their money on tobacco stocks’ because tougher tobacco control measures were ‘expected to hamper the growth of the tobacco industry’. If this is the case, it suggests that big tobacco is in for a more challenging time, not just in terms of selling its products, but also raising capital to finance its operations.

Since the fall of the New Order, consecutive governments have continued to encourage tobacco production. At the same time, however, they have gradually tightened restrictions on the marketing, sales and use of tobacco products as calls have grown for stronger measures to address the country’s tobacco epidemic. According to the most recent figures, in Indonesia 67 per cent of men and four per cent of women use tobacco, with devastating effects for the nation’s health and productivity.

Among the main policy changes have been a ban on cigarette advertising in the electronic media (except between the hours of 9.30pm and 5.00am); the identification of tobacco as an addictive substance in the 2009 Health Law; the establishment of ‘smoke free areas’; requirements for tobacco companies to include pictorial health warnings in cigarette advertising and on cigarette packets; and restrictions on tobacco company sponsorship of music concerts and sporting events. The latter include bans on the use of company or product logos and brands (including brand images) in sponsorship material and tobacco company sponsorship of events covered by the media. The government has also introduced a new regional cigarette tax of 10 per cent. Some of these changes are still being implemented. For instance, the regional cigarette tax only came into effect earlier this year. The requirement for pictorial warnings only came into effect on 24 June 2014.

 

Tobacco control advocates argue that the government’s tobacco control policies remain weak by international standards. In particular, they note that the government has refused to ratify the World Health Organization’s (WHO) Framework Convention on Tobacco Control (FCTC). Government tobacco control policy consequently does not include at least two key protections common in many other countries: (i) a comprehensive ban on tobacco advertising, promotion and sponsorship and (ii) restrictions on the sale of individual cigarettes. The latter is necessary to limit tobacco companies’ ability to sell their products to children and the poor.

The structural power of big tobacco

Rosser 2 Warning that appears on billboardsHealth warnings like this appear on some billboards in Indonesia

The operating environment for the tobacco companies has clearly changed, as Janelle’s comments indicate. Gone are the days when almost no controls were imposed on big tobacco. Despite this more challenging environment, it would be a mistake to underplay big tobacco’s future prospects. These companies continue to hold enormous economic power and political influence in post-authoritarian Indonesia and are consequently well positioned to resist the efforts of the tobacco control lobby. Tobacco companies are major investors, employers and taxpayers, giving them considerable structural economic power, particularly in relation to the government’s budget. Tobacco taxes accounted for between 4.8 and 7.7 per cent of the Indonesian government’s total annual revenues between 1998 and 2010, according to the Tobacco Control Support Centre.

Tobacco companies are also very well-connected. Laksmiati Hanafiah, the former General Chairperson of the Indonesian Heart Foundation and one of Indonesia’s leading tobacco control advocates, claims that tobacco companies have been a key source of campaign finance for all presidents since Habibie. At the same time, they are well-organised through a series of industry associations, the most prominent of which is the Indonesian Cigarette Manufacturers’ Association (GAPPRI). Finally, they have the ability to mobilise popular forces—most notably tobacco farmers—to support their cause, engage in public protests and more generally act as the public face of the tobacco industry, giving their cause popular legitimacy.

Tobacco companies have considerable resources at their disposal to fight the introduction of further tobacco controls and water down existing ones. Tobacco control advocates have successfully used the court system to combat previous tobacco industry efforts in this regard. In 2011, for instance, they defeated an attempt by a group of tobacco farmers to challenge legal recognition of tobacco as an addictive substance. But they lack big tobacco’s economic power, political connections, organisational capacity and ability to mobilise popular forces.

Health Minister Nafsiah Mboi, a strong proponent of tobacco control, recently warned tobacco companies to make sure they include pictorial warnings on cigarette packaging before the June deadline, apparently concerned that they are dragging their feet on this reform. She also criticised House of Representatives speaker, Marzuki Ali, for lobbying President Yudhoyono against ratifying the FCTC because parliament was still in the process of discussing a tobacco bill. Nafsiah, clearly exasperated, told the media that, “[l]awmakers were voted in by the public to represent and protect the people, it is very sad that the House Speaker chooses to side with the tobacco industry instead of his constituents.” Such outbursts from the Health Minister illustrate the ongoing struggle for tobacco control, even where the required regulations are already in place.

A new government, a new approach?

The upcoming election of a new president in July is unlikely to change the balance of power between the tobacco companies and tobacco control advocates. Neither of the two presidential candidates—Joko Widodo and Prabowo Subianto—smokes. But Widodo’s party, the Indonesian Democratic Party of Struggle (PDIP), relies on support in key tobacco-growing areas such as Central and East Java, while Prabowo Subianto has sought to woo tobacco farmers through his leadership of the Indonesian Farmers’ Association (HKTI). Neither candidate has declared a clear policy position on the issue of tobacco control during the election campaign so far. However, for both individuals, there is a political logic to moving slowly in this area.

Big tobacco is entering more challenging times in Indonesia. But the industry is likely to remain a powerful economic and political force for the foreseeable future, given both its lobbying capacity and politicians’ willingness to engage industry support for their own political needs. This will doubtless be to the detriment of the health of millions of Indonesians.

Andrew Rosser (andrew.rosser@adelaide.edu.au) is associate professor of development studies and an Australian Research Council Future Fellow at Adelaide University.

 

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vhon6830@gmail.com (Vivian Honan) Wed, 02 Jul 2014 10:40:00 GMT http://www.insideindonesia.org/feature-editions/challenging-times-for-big-tobacco
Business and politics in Indonesia’s expanding palm oil sector http://www.insideindonesia.org/feature-editions/business-and-politics-in-indonesia-s-expanding-palm-oil-sector Indonesia needs political reform, not just legal prosecution, to eradicate corruption in palm oil plantations

Patrick Anderson

Anderson 1 Palm oil resizeWorkers loading fresh fruit bunches- Marcus Colchester

In 2003, Indonesia was ranked as one of the ten most corrupt countries in the world. By 2013 it had shifted to the 60th most corrupt out of 175 countries surveyed. That move up the global ranking came as a result of intensive and consistent efforts by Indonesian civil society and government to document, expose and prosecute endemic corruption. Anti-corruption institutions have recently turned their attention to Indonesia’s rapidly expanding oil palm sector. However, criminal prosecution of corrupt state officials and company directors must be supplemented by bureaucratic and electoral reform if Indonesia is to be effective in its struggle against corruption.

A history of rent seeking

The practice of rent seeking - government officials using their positions to extract payment for services – goes back at least to the Sultanates and their courts that preceded and overlapped with Dutch colonisation of Indonesia. The practice was maintained by the Dutch administration when appointing ‘natives’ to government positions; there was a common understanding that the meagre salaries of native bureaucrats would be complemented by them charging clients for their services.

These practices continued into the post-colonial period. In the late 1960s following widespread criticism of corruption in the then young New Order regime, a commission was appointed to investigate the issue. The report of the Commission of Four in 1970 noted that corruption was rampant, but none of the cases it documented led to prosecutions. Later in the Suharto era, despite a restricted political space, civil society groups, lawyers and journalists continued to research and document corrupt officials, exposing the corrosive effect of corruption on the rule of law, and advocating for legal reform.

The problem of low wages and low accountability for public servants has continued into the reform era. With the advent of direct local elections, rent seeking by state officials has taken on new levels as they engage in corrupt fundraising for election campaigns. At the same time, Indonesia’s anti-corruption movement has had more space and more resources to fight corrupt business-state practices

New era of anti-corruption activism

In 1999, following the fall of the autocratic New Order regime, police were given the power to investigate corruption, and in 2002 a law on anti-Corruption was passed by the national parliament, providing the legal basis for the Corruption Eradication Commission (Komisi Pemberantasan Korupsi or KPK). The KPK was established in 2003 with the power to investigate and prosecute government officials for involvement in corruption and to undertake efforts to prevent corruption through provision of public information and education campaigns.

The KPK is regarded as one of the most effective anti-corruption agencies in Asia, with the successful prosecution of more than one hundred state officials including district heads, provincial governors and national ministers. Its efforts have returned hundreds of millions of dollars in stolen assets to the state, and its prevention efforts around the nation are promoting good governance (transparency, participation and accountability) as a means to change the culture of corruption. However, corruption is still rife in the forestry and agriculture sectors due to the large payments companies are prepared to make to obtain licenses, and the need of elected officials to generate large ‘war chests’ to run for office.

The uphill battle against corporate corruption

Today, five per cent of Indonesia’s land area is covered with oil palm plantations. Government and industry have plans to double or even triple this area in the coming two decades. The expansion of the sector is closely associated with corrupt relationships between companies and politicians. For the most part, this involves local and international oil palm companies paying district government officials to obtain plantation licenses. Plantation managers in Kalimantan and Sumatra will often comment that, ‘off the record, our company couldn't do business if we weren't prepared to pay bribes,’ when responding to questions about corruption. The implication is that palm oil companies are prepared to do business without paying bribes, but that ultimately their hands are tied and they must appease the demands of corrupt officials. But in a 2013 review of the industry’s best practice standards, such sentiments were revealed to be untrue.

The Roundtable on Sustainable Palm Oil sets industry standards for company practices in regards to environmental sustainability, legality and human rights. In 2013, during the year-long review of the Roundtable’s Principles and Criteria, NGOs had called for the addition of a clause on fighting corruption in the sector, with the requirement that member companies agree not to pay bribes. Malaysian and Indonesian companies argued strongly against adding a clause on corruption, and their lobbying and blocking strategies successfully defeated the proposed anti-corruption clause.

The rise in prosecutions

Anderson 2 Hartai MurdayaHartati on trial- Hukumonline http://www.hukumonline.com/berita/baca/lt50d2e5d36ef1f/hartati-murdaya-berdebat-dengan-dirut-pt-sonokeling

Now ten years old, the KPK has successfully prosecuted government officials involved in corruption, sending a message to government and industry alike that things need to change. The KPK has also successfully prosecuted oil palm companies in Kalimantan, and is continuing its efforts to eradicate corruption in association with the issue of licenses for forestry and plantation concessions. As of early 2013, some 280 provincial governors, district heads, mayors and their deputies were under investigation or being prosecuted.

The first oil palm case the KPK took up was in Buol District, South Sulawesi. In February 2013, Hartati Murdaya, the director of the oil palm company PT Hartati Inti Plantation, was found guilty of providing District Head of Buol District Amran Batalipu with US$500,000 in bribes to obtain licenses for 11,000 hectares of oil palm. The district head was sentenced to seven and a half years and Hartati received a jail sentence of 32 months and a US$15,000 fine. After her arrest, Hartati resigned from the board of patrons of Indonesia's Democratic Party and the National Economic Committee.

The need for political reform

Despite having KPK launch large numbers of investigations into the oil palm and pulpwood plantation sectors, elected officials are still prepared to take the risks associated with receiving bribes in order to amass the funds necessary to run for office. The coalescence of interests between plantation companies and local political elites remains strong, so new cases seem to appear every day.

While KPK’s efforts are laudable, reform of Indonesia’s election laws will also be necessary, so that political parties and their candidates can access sufficient funds to run election campaigns without relying on illicit funding sources. Without removing the incentives for corruption, Indonesia’s forests and the people whose livelihoods depend upon them, will continue to suffer.

Patrick Anderson (patrickanderson1960@gmail.com) works as a policy advisor with the Forest Peoples Programme, focused on Indonesia. He is a visiting fellow at the ANU School of Culture, History and Language, in the College of Asia and the Pacific.


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vhon6830@gmail.com (Vivian Honan) Wed, 02 Jul 2014 09:57:00 GMT http://www.insideindonesia.org/feature-editions/business-and-politics-in-indonesia-s-expanding-palm-oil-sector
Deforestation, rent seeking and local elections in West Kalimantan http://www.insideindonesia.org/feature-editions/deforestation-rent-seeking-and-local-elections-in-west-kalimantan The ubiquity of corrupt forest licensing demonstrates the close relationship between business, politics and environmental destruction

Danang Widoyoko

tambang RusakEnvironmental damage caused by mining in Ketapang- http://borneoclimatechange.org/berita-246-ribuan-ton-pasir---zirkon-disita-petugaslingkungan-rusak.html

In early May 2014, Indonesia’s Corruption Eradication Commission (KPK) arrested the District Head of Bogor, Rahmat Yasin, for accepting bribes to allow conversion of forestland into a housing area. Rahmat received bribes from real estate companies totalling around Rp.4.5 billion for licenses to convert 2754 hectares of forest. This kind of corruption case is not uncommon in democratic Indonesia. In March 2014, former Governor of Riau, Rusli Zainal, was sentenced to 14 years in prison for similar practices; the District Head of Pelalawan, Tengku Azmun Jafar, the District Head of Siak, Arwin AS, and several public officials at local forestry offices in Riau were also implicated in corrupt forest licensing.

The enormous profit to be gained from the mining and plantation industries, or from real estate businesses, drives expansion into protected forest areas. At the same time, candidates for public office need huge funds to campaign in local elections. This coalescing of interests means that bribery in the issuing of business permits and land concessions has become a key source of political funding, particularly for incumbents. This essay studies the 2010 district election in Ketapang, West Kalimantan, because it provides fascinating insight into the relationship between electoral politics, private business interests and environment damage.

Background to Ketapang’s district election

Ketapang is the largest district in West Kalimantan by size, but is inhabited by only 9.8 per cent of the provincial population. Despite its small population, Ketapang’s forests are not well conserved. Link-AR Borneo, an environmental non-government organisation (NGO) based in Pontianak, maintains that forest coverage in Ketapang in 2013 was only 21.55 per cent of the total area, while the rest has been allocated for mining and plantation licenses as well as housing and other land usages. Part of the problem is how forest concessions are abused for political gain.

In Ketapang’s 2010 district head election, Yasir Ansyari and Martin Rantan (Golkar, PKS) ran against Henrikus and Boyman Harun (PDIP, Demokrat, PAN) in a second-round showdown. Yasir is a local businessman, a member of the district parliament, and part of a politically prominent family. He is the son of Morkes Effendy, former district head of Ketapang who served two full terms. (Morkes also ran in West Kalimantan’s 2012 gubernatorial elections, but lost to current Governor Cornelis.) Morkes was chairman of Golkar’s provincial branch and Yasir was chairman of Ketapang’s district branch. Henrikus was deputy district head during Morkes tenure as district head. Yasir is Malay, while his running mate, Martin Rantan comes from Kalimantan’s Dayak community. Meanwhile, Henrikus has a Dayak background and Boyman is Malay. Melayu and Dayak are the main ethnic groups in Ketapang so, in what has become standard practice across Indonesia, both pairs made sure to form a multi-ethnic ticket.

Yasir – Ketapang’s licensing middleman

Prior to the election, Yasir sold his company, PT Lanang Bersatu and another five affiliated companies to investors. These companies controlled lucrative mining concessions, so whoever bought them would automatically own those concessions. Yasir’s companies were not serious mining enterprises. Rather, they were a vehicle for rent-seeking. Conducting a mining business requires not only the land concession, but also capital, technology, labour and access to international markets. Yasir was only focused on getting the land license, with the sole goal of selling it on to companies with more capital and better knowledge of the mining sector. As the son of a Bupati, Yasir could get concessions easily and at good rates. In fact, it is widely believed by informants that he was not selling all of his stocks. Yasir and Morkes were retaining some ownership of PT Lanang Bersatu and other companies. The money that Yasir raised via his enterprise as a mining license middleman went toward his own political campaign in 2010.

Morkes also made significant contributions to his son’s campaign. It’s now common knowledge that every investor has to give district leaders an extra payment on top of formal fees for licenses and permits, particularly in mining and plantation industries. As district head, Morkes was able to collect a significant amount of money through these illegal fees to fund, not only his son Yasir to run in the Ketapang district election, but also his previous campaign in the 2009 district legislative election, and Morkes’s own campaign for governor of West Kalimantan in 2012.

Yasir’s competitor and former deputy district head, Henrikus, did not possess the authority to obtain bribes in the way that Morkes was able to. Henrikus strategy was, instead, to raise cash via donations from companies. It is common knowledge that all of the mining and plantation companies in Ketapang gave campaign contributions to all candidates. Companies spread their financial support amongst the candidates to secure their business sustainability in the future, whatever the electoral outcome. If they are only given to a specific candidate and that candidate is defeated, the company will suffer financial loss. In other words, businesses that do not put in for the successful candidate’s campaign might face more complicated bureaucratic procedures and regulations down the track, compared with those that did make a financial contribution.

In the end the amount of funds collected by the Henrikus camp was not as big as Yasir Ansyari. Several informants estimate that Henrikus spent around Rp.8 billion while Yasir’s spending was around Rp.50 billion. Of course, these estimates were much bigger than their official campaign report to the local electoral commission (KPUD), which had Yasir spending only around Rp.3 billion and Henrikus only Rp.1 billion.

It’s not all about business

But money and business connections alone are not enough to win an election. In the end, Henrikus won the election with 52.24 per cent of the vote while Yasir received 44.76 per cent. In the case of Ketapang ethnic politics played a part in the electoral outcome. An important part of Henrikus’s successful campaign was the promise not to grant mining and plantation licenses anymore, which marginalised the Dayak people. Extractive businesses were given local land, but their profits stayed with investors while Dayak people remain poor. Henrikus also campaigned on a platform to build better infrastructure and better public services for the poor, particularly the Dayak.

As a representative of the Malay ethnic group, Yasir and his father worked to mobilise the Malay community through The Malay Cultural and Adat Council (Majelis Adat dan Budaya Melayu, or MABM). MABM is a cultural organisation but also a political machine. His partner, Martin Rantan was also Chief of the Dayak Adat Council (Dewan Adat Dayak or DAD), and Martin used it as the vehicle to mobilise support from Dayak ethnic groups. However, Governor Cornelis was chief of DAD at the provincial level. Following Cornelis’ instructions, in the second round of the Ketapang election, almost all Dayak people voted for Henrikus instead of Martin Rantan.

Cornelis and his high profile daughter and People's Representative Council (DPR) member, Carolin Margret Natasha, gave full support to Henrikus. These were two important allies, both in terms of their public popularity and their business networks. Governor Cornelis engaged Oesman Sapta Odang, a rich businessman and well-known politician at the national level in support of Henrikus. Observers assume that Oesman contributed financially to support Henrikus. Cornelis’s backing of Henrikus was strategic because he was to compete against Yasir’s father, Morkes in the forthcoming 2012 gubernatorial election. A defeat for Morkes’s son was a victory for Cornelis. This strategy paid off and in the provincial election, Cornelis dominated in Ketapang, winning more votes here than Morkes.

A new style of administration or just a new style of rent-seeking?

Unfortunately, after Henrikus took power, his behaviour was markedly similar to Morkes. Instead of building a new style of administration, Henrikus started to engage in rent seeking, albeit in a different form than that employed by Morkes. Henrikus has two sons, businessman Alexander Tommy Henri and Jecky Hendrik, a public servant. Once Henrikus took power, Jecky got promoted to a strategic position in the district administration to control all local government tenders. Now businesses in Ketapang have to deal with Jecky or Tommy to get government contracts. Henrikus has kept part of his promise not to grant new licenses for plantation and mining businesses. However, rather than dispensing new licenses, Henrikus can keep making money from the licenses granted by Morkes.

This is because there are several procedures for obtaining permission to operate a resource extractive company – they need a Principal Permit, a Location Permit, and either a plantation or mining Right of Use Permit (amongst others). During the Morkes administration, a particular company might have obtained a Principle Permit, but still needed to obtain other kinds of permits. So rather than put a stop to these land use licenses granted by Morkes, Henrikus continued providing the subsequent permits and was able to capture rents in the same way that Morkes did.

The way forward

The story of Ketapang illustrates the dark side of Indonesia’s electoral reforms. Campaign financing has had an unforseen and shocking impact on the country’s forests. Yasir Ansyari used a unique strategy in raising political finances by selling companies that owned forest licenses. Yasir’s case demonstrates the weakness of monitoring and supervision by the government bureaucracy. Strong local businessmen such as Yasir who have networks and influence among politicians and policy makers can easily cheat existing regulations on licensing tenders and on forest conservation. We now know that similar trends occur across the country. According to a study by Burgess et al (2001) illegal logging increases by 42 per cent in the year prior to an election, which the authors infer is because illegal logging and forest conversion licenses are a major source of funds for candidates.

While this trend is now widely recognised, so far only a few district leaders or governors have been successfully prosecuted by law enforcement agencies. It should be the task of Province or National level government to ensure that all licenses have been granted legally. Independent supervision and monitoring by bodies like the State Development Auditing Agency (BPKP) or the President’s Delivery Unit for Development Monitoring and Oversight (UKP4) is fundamental. Independent agencies need to be tasked with ensuring licenses are granted to legitimate companies, and according to the law. Only with more involvement from national level, independent monitoring bodies can Indonesia stop further deforestation and environmental destruction caused by corrupt state-business alliances.

Danang Widoyoko, danang@antikorupsi.org is Head of Indonesian Corruption Watch, one of Indonesia’s leading anti-corruption NGOs. He is also a doctoral candidate at the Department of Political and Social Change, College of Asia and Pacific, Australian National University.

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vhon6830@gmail.com (Vivian Honan) Wed, 02 Jul 2014 09:44:00 GMT http://www.insideindonesia.org/feature-editions/deforestation-rent-seeking-and-local-elections-in-west-kalimantan
Balancing business http://www.insideindonesia.org/feature-editions/balancing-business Indonesia’s unions are engaging in electoral politics in unprecedented ways in an attempt to balance the influence of business

Teri Caraway and Michele Ford

Ford 1 FSPMI protest resizeUnions' political experiments depend on their ability to mobilise- FSPMI

The presidential elections this time around are a big deal not only for business. They are also a big deal for Indonesia’s unions, who have taken sides in the presidential race. Said Iqbal, the leader one of the major labour confederations, has openly backed Prabowo. Others are backing Jokowi.

The stakes are incredibly high. Iqbal expects to become minister for manpower. If Prabowo wins, Iqbal will be under enormous pressure to ensure that he actually does become minister and then to deliver worker-friendly policy. If Prabowo loses, Iqbal’s credibility and the credibility of his union will suffer. Jokowi’s union backers, meanwhile, would have to show that they can deliver.

The very public engagement of union leaders in the lead-up to the presidential elections would have been unthinkable just a decade ago. Even years after the fall of Suharto, unions didn’t engage openly in politics. But now many union leaders feel that there simply isn’t a choice. Business is there boots and all. For there to be any hope of a more pro-worker approach to policy, labour has to follow.

Growing engagement

The 2014 elections are not the first time unions have experimented with electoral politics. It all started back in 2004, when political parties began to approach leading union figures as the legislative elections drew near.

Union leaders’ interest intensified in the lead-up to the 2009 legislative elections, when the parties wooed trade unionists for support in union-dense districts – some even running union candidates on their tickets. This trend continued in the 2014 legislative elections when dozens of trade union candidates ran on party tickets. A number were elected.

In many ways, unions’ engagement in local executive elections has been even more important. It’s hard for union candidates to get traction in legislative races. Even if they do make it, there’s not much you can do if you’re the single labour candidate in parliament.

With a few notable exceptions, labour candidates understand that they don’t have a hope of winning a mayoral or district head race. But what they can – and have done – is leverage these contests to push for wage rises.

Votes for wages

In Indonesia, raises for most workers depend more on negotiations around the minimum wage than on workplace-based collective bargaining. Minimum wages are set by tripartite committees – comprised of unions, business and the government – at the district and city level. Negotiations take place annually.

The minimum wage setting process creates multiple opportunities for horse-trading within the committee structure and with executive officers at the local and provincial levels, both for members of the Employers’ Association and for unions.

Given that labour and capital seldom agree on wages, the government's vote on tripartite committees is decisive. Government representatives on the committee are drawn from a variety of local offices, but all are accountable to the district or city head, not to the local legislature. Knowing that they are unlikely to convince each other, business and unions concentrate on currying favour with government representatives.

The strength of the Employers’ Association lies behind the scenes, where money can be used to influence government representatives. Unions, knowing this, typically mount protests warning the government that there will be more trouble if wage increases are low. The number and intensity of the protests depends on the extent to which unions think the local government is playing ball.

Ultimately, the district head or mayor makes the final call in the form of a minimum wage recommendation, which is forwarded to the provincial governor for approval. There, unions and employers have one last chance to affect the outcome before the wage decision comes into effect.

Jockeying for influence

When wage negotiations take place close to the date of a local executive election, they present an opportunity for unions to exert political pressure on local executives – especially when candidates expect a tight race.

Candidates for local executive positions have two reasons for cutting deals with unions. First, the spectre of a tight executive race encourages incumbents to woo workers, who are unlikely to vote for an incumbent who refuses to sign off on a substantial wage hike. Minimum wage setting is an issue that union members follow closely. They happen at the same time every year and are highly anticipated. If wage increases are disappointing, voters know whom to blame: the mayor or district head in the region concerned.

Second, in union-dense districts where unions have proven their capacity to paralyse industrial areas with massive actions, mayors and district heads, along with governors, have an interest in accommodating wage demands to preserve industrial peace.

Busting business in Bekasi

The links between minimum wage negotiations and local executive contests are nowhere more evident than in Bekasi, a major industrial areas to the east of Jakarta. In the last quarter of 2011, the 2012 minimum wage negotiations took place just months before the executive election for Bekasi district.

The incumbent district head, Prosperous Justice Party (PKS) member Sa'dudin, was up for re-election. Facing what looked to be a close election in this union-dense district, he made a last ditch effort to win labour votes.

Although he had not been an especially close ally to labour, his administration supported workers in the 2012 minimum wage negotiations. Ignoring the protests of the Employers’ Association, which walked out of negotiations, Sa'dudin recommended the figure demanded by unions. The governor, Ahmad Heryawan who, like Sa'dudin, was a member of PKS, approved the recommendation of the district head.

Having lost the battle locally, the Employers’ Association went to the courts, where money mattered more than votes. Concerned that employers would bribe the judges, unions mounted a series of protests.

The largest of these took place on January 27 after the court ruled against them. Union activists took to the streets, shutting down production in all seven of Bekasi's industrial zones and blocking the toll road between Jakarta and Bandung.

Proximity to Jakarta and the scale of economic disruption captured the attention of the national media and government. The central government quickly moved to facilitate a settlement. Unions agreed to accept a tiny reduction of Rp.1,000 (A$0.10) to the minimum wage set by the tripartite committee, a face-saving gesture for employers. Once again, workers had prevailed.

Calling Sa'dudin’s bluff

But the story didn’t end there. During the election, which took place almost immediately after the massive protests in January 2012, a number of candidates approached unions. Despite Sa'dudin’s support for unions in the minimum wage negotiations, none of them backed his candidacy. Given his weak track record on labour issues in the district, they saw through his attempts to woo them the previous year and looked to other candidates.

One union, SPN, formalised its backing of the Indonesian Democratic Party of Struggle (PDIP) in a political contract that promised operational support for the union if the PDIP candidates won. In the absence of a clear leader, FSPMI – the union headed by Said Iqbal and Bekasi's largest federation – hedged its bets by adopting a two-track strategy.

On one hand, FSPMI placed union activists on the campaigns of all of the candidates. On the other hand, it concluded an unwritten political deal with Golkar's Neneng Hasanah Yasin, and her Democrat Party (PD) running mate, Rohim Mintareja. No official announcement or written commitment was issued by either side. But union leaders agreed to speak favourably about her to members and Neneng indicated that she would be amenable to issuing a moratorium on outsourcing and tighten labour law enforcement.

Neneng and Rohim ultimately won. In the subsequent minimum wage negotiations for 2013, government representatives sided with unions and signed off on a minimum wage increase of nearly 35 per cent.

Going national

As the Bekasi case suggests, tight executive races have led candidates for local executive positions to enter into political bargains with unions, promising to back unions in the wage committees in exchange for a combination of political support and labour peace.

This strategy has paid off in Bekasi and elsewhere, like Tangerang, an industrial town to the west of Jakarta. But it remains to be seen how far Iqbal can push it in the presidential elections.

If Iqbal succeeds in trading union support for pro-worker policy at the national level, unions’ position in the political process will be greatly enhanced. If he fails, there will be serious repercussions not just for him and his union, but for the labour movement as a whole – unless, of course, the unions backing Jokowi manage to make it work instead.

Teri Caraway (caraway@umn.edu) teaches comparative politics at the University of Minnesota.

Michele Ford (michele.ford@sydney.edu.au) is director of the Sydney Southeast Asia Centre. Teri and Michele are currently working on an ARC project on the re-emergence of political labour in Indonesia (DP120100654). A fuller account of this case, and of a similar case in Tangerang, appears in the 2014 book, Beyond Oligarchy: Wealth, Power, and Contemporary Indonesian Politics, edited by Michele Ford and Thomas Pepinsky.


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vhon6830@gmail.com (Vivian Honan) Wed, 02 Jul 2014 09:05:00 GMT http://www.insideindonesia.org/feature-editions/balancing-business
The business of politics in Indonesia http://www.insideindonesia.org/feature-editions/the-business-of-politics-in-indonesia Democratic institutions are increasingly burdened by the illicit transactions and collusive practices of politico-business elites

Eve Warburton

Warburton 1 Prabowo and Team at Senayan Rally Credit Liam GammonPrabowo and team at Senayan Rally- Liam Gammon

At a recent presidential campaign rally, Prabowo Subianto addressed a crowd of bussed-in supporters at a Jakarta football stadium. On stage stood some of the key supporters of his campaign from political parties and business, including Aburizal Bakrie, Hary Tanoesoedibjo, Hashim Djojohadikosumo, and Titiek Suharto, the daughter of the former New Order dictator. These figures are some of the country’s wealthiest politico-business elites and economic oligarchs. They stood alongside Prabowo, himself a fantastically rich former New Order general, as he saluted the crowd. The scene was a striking visual display of politico-business power in contemporary Indonesia, and also a vivid reminder of the resilience of its authoritarian past.

On the eve of Indonesia’s third direct presidential elections, voters are faced with two candidates whose politico-business credentials couldn’t be more different. The second contender, Jokwo Widodo (known as Jokowi), left his previous life as the owner of a furniture exporting business to enter local politics in Solo. A reputation for efficiency, pragmatism and clean governance led him to become governor of Jakarta, and then propelled him onto the national stage.

In many ways, Prabowo and Jokowi represent two contradictory features of Indonesia’s democratic political economy. On the one hand, democracy has provided space for political outsiders, many from the private sector, to launch careers in government. Some, like Jokowi, come from industries comparatively free of rent seeking and corrupt licensing. They enter politics and leverage their business acumen to build more transparent and efficient government. At the same time, reform has provided ample opportunity for oligarchic dominance of mainstream politics, and for predatory alliances between political and business elites. These alliances are driven partly by personal enrichment; but politics is also a costly enterprise and state officials increasingly depend on wealthy donors to underwrite their political activities.

Enter the oligarchs

Indonesia’s reform era has been marked by the rise of private sector entrepreneurs in political parties and public office. It’s common for political parties and their leaders to forge formal relationships with wealthy donors and business tycoons. For example, in 2013 the National Awakening Party (PKB), Indonesia’s largest Islamic-based political party appointed Rusdi Kirana as the deputy chairman. Rusdi is a Chinese non-Muslim businessman who owns Lion Air, one of the country’s most profitable airline companies. Party elites did not unanimously support the appointment of a non-Muslim outsider, but the decision paid off. In the end, Rusdi’s resources probably helped PKB receive around nine per cent of the vote in April’s legislative elections, almost twice the proportion of votes it received in 2009.

In the early stages of the presidential elections, almost every potential candidate was either a business tycoon or bankrolled by one. Chairman of Golkar, Aburizal Bakrie, is one of Indonesia’s most controversial businessmen. His empire, the Bakrie Group, stretches across property, agribusiness, media, and mining industries, and in 2013 was worth around 2.4 billion dollars US. Early in 2014 Bakrie announced his ill-fated bid for the presidency. Around the same time Surya Paloh, a powerful media tycoon, announced his own ambitions for the top job. Paloh had competed against Bakrie for the Golkar Chairmanship back in 2009, so three years later Paloh drew upon his personal wealth to establish the National Democratic party (Nasdem) as a vehicle for his 2014 presidential bid.

Meanwhile, Hary Tanoesoedibjo, Indonesia’s other major media tycoon joined Hanura to run as Wiranto’s vice presidential candidate. But when their party’s poor showing in the legislative election put an end to that fantasy, Hary jumped ship and threw his weight behind Prabowo’s candidacy. Golkar also now stands behind the Prabowo-Hatta ticket. With Hary and Bakrie’s media companies onside, five of the country’s free-to-air TV stations are giving huge airtime and unashamedly positive coverage to the Prabowo campaign. Surya Paloh’s Metro TV is almost equally unashamedly pro-Jokowi, but his market share is dwarfed by that of his rivals.

Accordingly, Prabowo is now supported by a coalition of powerful politico-business elites and insiders say he is cultivating other major oligarchs that so far remain politically unaligned. But his rise to heavy-weight presidential candidate is the work of business tycoon and younger brother, Hashim Djojohadikusumo, who appeared at number 42 on Indonesia Forbes’ rich list for 2013, and number 37 for Global Asia in the same year. Since 2008 Hashim has invested a significant amount of personal wealth into realising his older brother’s political aspirations. The pair established Gerindra (Partai Gerakan Indonesia Raya) as Prabowo’s political machine and vehicle for his presidential nomination, and they’ve run an effective and efficient campaign that has Prabowo now leading the polls.

Sons of the late New Order economist and cabinet minister, Sumitro Djojohadikusumo, Hashim and Prabowo were born into a well-heeled political dynasty and educated abroad (despite Prabowo’s recent absurd claims to have experienced poverty as a youth). Sumitro’s close connections to the Suharto regime meant Hashim was able to accrue significant personal wealth during the New Order through investments in the banking sector, cement, petrochemicals and coal. Much of this was lost after the economic crisis in 1998. But Hashim has clawed his way back. After a series of lucrative business investments, including in the oil fields of Kazakhstan, Papua and East Java, Hashim and his revamped conglomerate Arsari Group are, according to Forbes, now worth around US$700 million dollars. (Most of these oil assets have now been divested.) Other sources put Hashim’s net worth at over a billion.

Prabowo, while not one of Indonesia’s business tycoons, has accrued significant personal wealth through his own investments in the oil and gas and agribusiness sectors, and through business partnerships with his brother. Prabowo recently reported his wealth to the Electoral Commission and Corruption Eradication Commission to be at Rp.1.67 trillion, or approximately US$140 million dollars, and just over US$7.5 million in overseas currencies.

Thirsty for funds

Many observers believe business expansion and ego are what motivates these tycoons’ foray into public office. The democratic era offered them more opportunity to access the state and, hence, more opportunity for expansion of their business empires. For example, Jusuf Kalla, Jokowi’s running mate and former vice president under SBY’s first government, owns the large and profitable conglomerate, Kalla Group (worth over US$550 million according to Globe Asia). His brother and business partner, Achmad Kalla, admitted to the media that their contracting businesses under the Kalla Group benefitted from priority access to government tenders while Kalla was vice president between 2004-2009.

However, oligarchic infiltration of political office is not simply a case of wealthy rent seekers penetrating the state to expand their private wealth, though there is certainly plenty of that. The relationship between wealthy businessmen and state officials is symbiotic. Without government subsidies, parties must raise their own cash to fund party events, pay staff, finance electoral campaigns, buy advertising and so on. Money is also an important part of building political coalitions. Press reports, for example, described how Prabowo requested payments from potential vice presidential candidates. He apparently demanded Bakrie pay Rp3 trillion, or $US250 million, in campaign funds. Gerindra asked Hatta Rajasa for Rp 1.7 trillion, or around $US140 million. But Hatta was able to close the deal by offering to pay 40 per cent of the campaign costs instead. This is an extreme case, in which one oligarch is extorting money from others. However, it does help illustrate the broader point that the parties are not simply captured by oligarchs, but they also target tycoons for their deep pockets.

The entry of people like Bakrie, Paloh, Rusdi and Hashim onto the political stage makes it tempting to conclude that Indonesia’s political parties operate at the whim of economic elites. But two points are worth noting here. Firstly, Indonesia’s mainstream, historically rooted political parties are not headed by economic oligarchs. Megawati, Chairperson of PDIP, Hatta Rajasa, Chairman of the National Mandate Party (PAN), and Muhaimin Iskandar of PKB, might be wealthy individuals (particularly Hatta), but they are not powerful tycoons who’ve moved suddenly onto the political scene. They have a long history of involvement with their respective parties, and have been placed at the helm for ideological, historical and political reasons – not purely because of their access to funds. If anything, it is their access to state office that has provided them with wealth – again, Hatta is the stand-out case here – not the other way around.

Secondly, both Bakrie and Paloh were quickly made aware of their limited popular appeal and pulled out of the presidential race early in 2014, showing that fantastic wealth isn’t everything in Indonesian politics. In fact, association with wealthy oligarchs can be detrimental for a political party. A recent opinion piece by Bayu Daridas in The Jakarta Post argued that Bakrie has jeopardised rather than strengthened Golkar’s political position. Dardias states that, ‘for the first time since 1972, not only has Golkar failed to propose a presidential candidate, but as a latecomer, it might also receive the worst deal in a potential Prabowo Cabinet.’

Business and politics in the regions

Campaigning for office requires significant financing, even in the country’s poor far-flung districts. Edward Aspinall’s recent research on the legislative elections, for example, reveals a new electoral economy emerging throughout the country. Voter support is engaged through a layered system of professional consultants, brokers and campaign volunteers whose job is to distribute money or community gifts on behalf of an electoral candidate. This increasingly professionalised system of patronage necessitates large cash investment on the part of candidates. Given these spiralling costs, it’s no wonder that established local business elites do well in regional elections. They can finance professional and efficient campaigns, distribute wealth or opportunity to political clients, and buy support from citizens leading up to election day.

The story of Governor Nur Alam is a good example. Nur Alam was well known in Sulawesi for his highly successful contracting business, PT. Tamalakindi Puri Perkasa. Then in 2008, Nur Alam ran a well-funded campaign for the governorship as a candidate for PAN, defeating Golkar incumbent and favourite, Ali Mazi. At the time, PAN was not a prominent party in Sultra. However, during his six years as governor, Nur Alam has ensured that a PAN district head wins almost every district election.

Warburton Hatta Nur Alam and Kendari Mayor Asrun Author PhotoCampaign from April's legislative elections in Southeast Sulawesi, featuring Hatta Rajasa, Governor Nur Alam, and the Mayor of Kendari, Asrul- author's collection

Nur Alam likes to emphasise his business acumen, describing his political strategy as a combination of ‘research and resources’. By this he means hiring a professional consulting company that does everything from conducting community surveys to shaping public relations and campaign materials. These surveys are used to determine who, out of a list of potential PAN candidates, has the most name recognition and public support. Survey results are also used to gain investor confidence and are shown to private business donors in order to secure campaign donations.

Similar stories of local business people entering politics can be found across the country. Indeed, Indonesia’s reform era has been marked by the entry of entrepreneurs into public office on an unprecedented scale. Typically these characters have business interests in areas that are dependent on, or advantaged by, access to state contracts and licenses. Before reformasi, and during the early years of transition, all levels of government were stacked with career bureaucrats and military men. Today, many national and regional parliamentarians have backgrounds in the private sector - the 2004-9 parliament consisted of almost 40 per cent from the private sector and by 2009-14 it had increased to just over 47 per cent.

Licenses and alliances

Nur Alam’s success in Sultra is owed, in part, to his close ties with Hatta Rajasa - former Coordinating Minister for Economic Affairs, PAN Chairman, and Prabowo’s vice presidential candidate. In fact, the political careers and finances of local and national politico-business elites are often linked in important ways. Yet these connections remain an under researched area of Indonesia’s political economy.

For example, during Hatta’s tenure as Minister for Transport (2004-07), Nur Alam’s contracting companies received considerable access to infrastructure projects across the country, contributing significantly to the expansion of his business. It seems that Nur Alam has repaid the favour, turning Southeast Sulawesi into one of the only PAN strongholds in the country. Hatta has paved a political path for other business allies. Jon Erizal is former Executive Director of PT Arthindo Utama, the Hatta family’s oil, gas, mining and geothermal company. In 2010 Erizal was made PAN’s party treasurer, then in 2013 he ran as governor of Riau. Erizal failed to mount a serious challenge against Golkar’s candidate, Annas Maamun. This year, however, Erizal ran in the legislative election for a seat in the national parliament, winning the largest vote of any candidate in Riau.

Strategic alliances between regional and national elites like these are important, particularly when it comes to revenue generation in the natural resource sectors. Decentralisation gave district heads and governors the power to issue a gamut of business permits – everything from land conversion, mining, plantation licenses, among others. So having allies in resource rich local governments is an invaluable asset for politico-business elites at the national level. Prabowo, for example, has cultivated an important local alliance with Isran Noor, District Head of East Kutai in East Kalimantan. In 2012 London-listed Churchill Mining had its permit revoked by Noor, following the company’s discovery of unexpectedly massive coal reserves. The permit was promptly transferred to Nusantara Group, a local mining company affiliated with Prabowo. Isran Noor, also the head of All Indonesia District Governments Association (APKASI), is believed to maintain a close political relationship with Prabowo and threw his support behind Prabowo’s presidential bid early in the campaign period despite being head of the Democrat Party’s East Kalimantan branch.

The business of parliament

Parliament is also a very important arena for business transactions and politico-business alliances. Every day it seems the newspapers report on corrupt transgressions by parliamentarians. The most sought-after positions in parliament are of course in ‘wet’ commissions which deal with lucrative sectors of the economy, such as oil and gas, or banking, and which therefore provide ample opportunity to extort funds.

For example, with a decade of experience in Hatta Rajasa’s energy company, there’s little doubt that Jon Erizal will be vying for a seat in Commission number 7 on Energy, Mining, Research & Technology and Environment. This is one of the most strategic parliamentary commissions because it oversees laws and budgetary processes for the energy and mineral resource sectors. There’s also plenty of opportunity for lucrative kickbacks and bribes. Commission 7 works closely with the Ministry of Energy and Mineral Resources (ESDM) and SKKMigas (the oil and gas regulatory body). Together, members of these institutions can rig the bidding of oil, gas or mining contracts in order to favour their business alliances and collect kickbacks.

Given these rewarding business opportunities, it is an unwritten rule that whichever party maintains the most seats in parliament gets priority access to Commission 7, and will appoint one of its own at the helm. So during President Yudhoyono’s second term, his Democrat Party held the largest number of seats in Commission 7, and placed party member, Sutan Bhatoegana as its chair. Minister for Energy, Jero Wacik, is also a Democrat and close ally of Yudhoyono.

The Corruption Eradication Commission (KPK) has now turned its attention to the natural resource sectors and the inner workings of Commission 7, ESDM and SKK Migas. Former head of SKK Migas Rudi Rubiandini was convicted of taking over US$900,000 in bribes from a Singaporean oil company to approve its bid for tender. Since Rudi’s arrest, more claims have emerged. It now appears that Rudi was under pressure to provide funds to the Secretary General of ESDM, Waryono Karno, to more easily elicit parliamentary approval of ESDM’s budget - at Sutan’s request. This practice is ubiquitous across all parliamentary committees: parliamentarians leverage their authority to approve state budgets and request bribes in return for decisions on budget items. Journalists have speculated that some of the money collected by Rudi was intended for Democrat Party coffers.

Of course it’s not all about vested business interests. Parliamentary processes are shaped by a composite of rent seeking and ideology; untangling their relative influence can feel like an impossible task. The 2009 Mining Law, for example, was discussed in Commission 7 for four years. It is often criticised in industry circles and international press for its protectionist character and many believe it was designed with a view to advantage domestic politico-business elites. But insiders also emphasise that much of the Law’s contents were based on long-held dissatisfaction with foreign companies’ extraction of the country’s resources and attendant environmental consequences. For example, one of the key players in the negotiation of this law, former Minister for the Environment, Sonny Keraf, was a champion of its protectionist character and has no business connections to the industry.

The impact of public-private predation

Institutions like KPK and NGOs like Indonesia Corruption Watch play a pivotal role in uncovering collusive state-business alliances. The head of the KPK, Abraham Samad recently told the press that as of 2013, the KPK had recovered Rp. 214 trillion, or approximately US$17.8 million. The hope is that their work acts as a deterrent.

But most assume that the KPK is probably only scratching the surface. (Others believe there is at times beholden to the political sympathies of its leaders.) The entire political system – from the appointment of party leaders, to parliamentary decisions, to direct elections –turns on financial transactions, often illicit in nature. The consequences for policy outcomes can be tragic. Indonesia’s expensive electoral system means that candidates for office often become the clients of wealthy businesspeople, so their time in government is spent serving debts to donors rather than the interests of their electorates. The environment suffers acutely at the hands of corrupt businessmen and politicians. Recent studies indicate that illegal logging increases 42 per cent in an election year as state officials trade land licenses for campaign funds.

More generally, where government contracts are awarded based on personal alliances and private interests, rather than on merit, efficiency and cost, Indonesia’s infrastructure and the state budget will continue to suffer from debilitating weakness. According to the Forum Global Competitiveness Index (GCI, 2013-2014), Indonesia ranks 61st out of 148 economies in terms of its infrastructure, significantly impeding the country’s economic growth.

The business of politics under a new administration

The transactions and transgressions outlined in this essay afflict institutions that are the backbone of Indonesia’s democratic state – political parties, direct local elections, the parliament, and bodies like the Constitutional Court. The intention here was not to dismiss these institutions as completely dysfunctional or inoperative. Each continues to perform its role to a degree; indeed Indonesia’s stable political and economic development over the past decade has received praise from many quarters (see Hill’s contribution to this edition). The point is that Indonesia’s democratic institutions are increasingly burdened by their alternative purpose as sources of private capital accumulation. Their weakness leaves the Indonesian state open to predation by corrupt politico-business elites, and prevents Indonesia from achieving important social and economic benchmarks.

The upcoming election is a critical turning point for Indonesian politics. Both candidates for the presidency have vowed to stamp out corruption and reform the bureaucracy. But which has the credentials and the political will to fulfill these illusive campaign promises?

A Jokowi government would not cure Indonesia of the political transactions laid out in this essay. But his previous record indicates the political will for slow and steady reform. A victory for Prabowo’s coalition would be powerful confirmation of oligarchic capture. Prabowo and Hashim cut their teeth in Suharto’s inner circle, and their nostalgia for that era is no secret - rather it has become part of their campaign message. Prabowo is making it increasingly clear he would sooner scale back, rather than improve, democratic institutions, like direct elections. Judging by the track record of Prabowo, Hashim and the powerful men who now stand by their side, we could assume that a Prabowo government will work to centralise and entrench, rather than reform, the business of politics in contemporary Indonesia.

Eve Warburton is a PhD candidate in the Department of Political and Social Change at the Australian National University. Her thesis focuses on politics and policy making in Indonesia’s natural resource sectors.

 

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vhon6830@gmail.com (Vivian Honan) Wed, 02 Jul 2014 07:41:00 GMT http://www.insideindonesia.org/feature-editions/the-business-of-politics-in-indonesia
A development policy agenda for a new administration http://www.insideindonesia.org/latest-articles/a-development-policy-agenda-for-a-new-administration Indonesia's economic and political transformation has been remarkable, now the challenge is to deliver rapid, broad-based improvements in living standards

Hal Hill

Jakarta nightlifeJakarta Night life- Tania Huiny (https://creativecommons.org/licenses/by/2.0/)

First, the good news

Viewed from the perspective of the late 1990s, the Indonesian economy has been performing better than even the most optimistic of observers would have dared to predict. At the peak of the Asian financial crisis (AFC) in 1998, the economy contracted by over 13 per cent. In economic parlance, there was a ‘peak-to-trough’ growth collapse of 20 percentage points, one of the largest in modern global economic history. There was also a large-scale exodus of capital from both the country and the currency. As a result, the rupiah was worth less than 20 per cent of its pre-AFC value relative to the US dollar, while much of the modern financial sector collapsed. The banking and corporate bailouts cost Indonesia dearly. debt, which had been modest under the Suharto administration, ballooned to about 100 per cent of gross domestic product (GDP). Poverty and unemployment rose significantly.

Unlike neighbouring Malaysia and Thailand, Indonesia experienced both an economic and a political crisis, the two of course intertwined. If recent comparative history were any guide, Indonesia then looked likely to face a prolonged period of economic stagnation. The closest parallel to the events of 1997-98 was in the Philippines, where an enduring authoritarian regime under Ferdinand Marcos collapsed in early 1986. That country’s economic decline in 1985-86 was of a similar magnitude to Indonesia’s 12 years later, and there was a major remaking of political institutions under the successor Aquino administration. It took two decades for Filipino per capita income and poverty levels to recover to those of the pre-AFC period. A reasonable presumption would have been that Indonesia would follow a similar trajectory. If anything, Indonesia’s institutional reconstruction looked to be more complex because, unlike the Philippines, its dominant domestic business group was unnerved by the anti-Chinese incidents at the time of the crisis.

Gloom about Indonesia’s economic prospects is nothing new. In fact the dominant narrative on the Indonesian economy throughout the twentieth century was a pessimistic one. There were Boeke’s dualistic theories about the non-economic behaviour of Indonesian farmers and later the proposition that an independent Indonesia would be unable to manage its economic affairs. Post independence, Benjamin Higgins, the leading foreign chronicler of the Indonesian economy in the 1950s and early 1960s, characterised the country as a ‘chronic economic dropout’. In the mid-1980s, when most developing country commodity exporters experienced a decade-long debt crisis, the Indonesian economy was similarly expected to contract. In all four cases the gloomy prognostications turned out to be wrong.

In the wake of the AFC, Indonesia again confounded the pessimists. Incomes and poverty levels took not 20 years to recover, but just seven. That is, by around 2004 these indicators were comparable to those immediately prior to the AFC. Beginning in 2000, growth returned to levels not far off those of the Suharto era. Towards the end of the decade, when another crisis threatened, this time the global financial crisis (GFC) emanating from the rich country capital markets, Indonesia weathered the challenges with ease. This is not the place to examine the reasons for the quick recovery from the AFC and the mild impact of the GFC, except to point to three key factors: the prompt and effective restoration of macro-economic stability after 1999, including a rapid reduction in public debt; broadly open trade and investment policies, albeit with significant exceptions; and general acceptance and understanding within the business community of the new institutional rules of the game.

The evolving reformasi policy compact

Yet, while the positives far outweigh the negatives, any reading of Indonesian press and social media highlights the country’s daunting challenges. Indonesia is still a poor country, with more than two-thirds of its people either below or (some times temporarily) just above an extremely modest poverty line. The country needs faster and ‘better’ growth, but a de facto political economy compact has evolved under the new democratic Indonesia that renders this goal more elusive. The compact has three main elements.

First, macroeconomic policy is essentially fenced off from political intrusion. The 2003 Fiscal Law limits budget deficits to no more than three per cent of GDP and public debt to no more than 60 per cent of GDP. This is essentially the EU’s Maastricht Accord to which, unlike the EU, Indonesia has adhered. As a consequence, providing growth exceeds three per cent and there are no major shocks (such as another bank bailout), the country’s debt relative to GDP will continue to be very modest. Monetary policy has also been depoliticised. An independent Bank Indonesia no longer funds government deficits, and it manages a floating exchange rate generally free of government interference. These two fundamentally important measures, both instituted in the wake of the bitter lessons learned from the AFC, are not well understood outside the economic community. But they have gone a long way towards making the country ‘crisis-proof’ in a conventional economic sense. The politicians and policy makers in the post-Suharto era deserve great credit for instituting and then adhering to these reforms.

Second, owing to the ever-present nationalist rhetoric, and the political imperative to fund election campaigns, Indonesia’s trade and investment policies are what Chatib Basri and I characterised as at best ‘precariously open’. Nevertheless, it is likely to remain a broadly open economy. This is principally because of the formal and informal neighbourhood effects, and at the margins, Indonesia’s commitments under the World Trade Organization. The formal regional arrangements take the form of the country’s commitments to the Association of Southeast Asian Nations (ASEAN), in December 2015 to be extended with the introduction of the ASEAN Economic Community (AEC). As part of these protocols, it is possible to erect trade barriers to the other nine member countries. But some of these economies are among the most open in the developing world. Consequently Indonesia will be under the spotlight, as it would be required to notify the group of its proposed ‘exemptions’ (from free trade within the region), which would be subject to scrutiny and possible challenges. In addition, there are the informal demonstration effects of lower trade barriers practically everywhere in developing Asia, most notably in the larger economies of China, India and Korea.

Barring unforeseen circumstances, these two positive effects will continue to drive the Indonesian economy. They are the key to explaining why the economy has performed well since 2000, even when there is seemingly so much policy disarray. If pre-reform India had its ‘Hindu Equilibrium’ growth rate of 3.5 per cent, in the absence of major shocks, Indonesia’s more or less automatic rate is at least five per cent.

But five per cent is not enough to achieve the social objective of rapid and broad-based improvements in living standards. Absolute poverty incidence (that is, the poverty ‘head count ratio’) has been declining steadily over the past decade, from about 17 per cent to 11 per cent. But, especially in recent years, the rate of decline has been appreciably slower than during the Suharto era, both because the growth rate is lower and because the growth-poverty elasticity (that is, how responsive poverty is to growth) has been declining. The main reason for the latter has been rising inequality. The (expenditure) gini ratio, for example, has risen almost 10 percentage points from 32 to 41 over the period 2003-13. The ratio ranges from 0 (perfect equality) to 100 (perfect inequality). A ratio above 40 is considered to be high. A related and major causal factor has been the much slower formal sector employment generation since 2000 (as documented by Chris Manning and colleagues), principally due to the weaker labour-intensive manufacturing growth and more restrictive labour market regulations.

The faster and better growth that Indonesia needs is being stymied by the third element of Indonesia’s post-Suharto political economy compact: the difficulty of achieving durable microeconomic reform. Without the sort of reforms referred to in the next section, it is difficult to see how the economy can grow faster. And with the bottom 40 per cent or so of the population enjoying few of the benefits of rising prosperity, Indonesia’s social and political cohesion could be jeopardised. As in Thaksin’s Thailand and elsewhere, glaring inequalities render an electorate vulnerable to the rise of populist regimes that promise much, but in reality adopt policies that further imperil socio-economic progress.

An added challenge is that it is now very likely that Indonesia will have to adjust to an era of lower commodity prices and rising global interest rates. Since around 2005 the country has enjoyed a massive transfer of wealth through historically unprecedented prices for gas, coal, palm oil and other commodities. The result has been a classic ‘Dutch Disease’ syndrome that, as in the 1970s, resulted in a sluggish non-commodity tradeables sector, especially in manufacturing. Some current research with Haryo Aswicahyono at the Centre for Strategic and International Studies has attempted to document some of the magnitudes. For example, the real exchange rate, that is the weighted nominal exchange rate adjusted for relative inflation rates, has increased, thus adversely affecting Indonesia’s competitiveness. Unit labour costs have risen significantly, especially with the recent increases in minimum wages. Productivity growth has been declining. As a consequence, most of Indonesia’s export growth since 2000 is explained by price effects, that is the commodity boom, rather than by increased competitiveness. These positive price effects are now considerably weakened. Meanwhile, Indonesia has been a relatively minor participant in the most dynamic segment of East Asian trade, the global production networks centred on electronics and the automotive industry, while it has lost export market share in one of its traditional labour-intensive mainstays, garments.

jakarta night2Streets- Abraham Arthemius (https://creativecommons.org/licenses/by-nc-sa/2.0/)

Five challenges for a new administration

So, what needs to be on the agenda of the incoming administration? Drawing on the framework above, the macroeconomic policy achievements of the past decade need to be maintained while, in Joseph Stiglitz talk, globalisation has to be effectively managed for all Indonesians, and not just for the top 40 per cent of the population. With these two building blocks, the microeconomic reform agenda needs to be aggressively addressed to achieve the pro-poor growth that Indonesia urgently needs. A non-exhaustive reform agenda includes the following, interrelated issues.

First, the fuel and other subsidies need to be phased out. At almost four per cent of GDP – coincidentally, about as costly as Thailand’s disastrous ‘rice pledge’ scheme – they dominate the government budget and squeeze out everything else. They are bad for efficiency, equity (the better off are the main beneficiaries) and the environment, the latter especially for an avowedly ‘pro-green’ administration. The subsidies highlight the fact that an incoming administration has surprisingly little fiscal space to undertake any new initiatives. The tax effort is rather weak, while on the expenditure side the subsidies, the civil service salary bill, the 20 per cent education expenditure mandate and the automatic transfers to sub-national tiers of government, Dana Alokasi Umum (General Fund Allocation) and Khusus (Special), leave little room for anything else. As in Australia, the commodity boom is vanishing but Indonesia’s fiscal policy settings have yet to make the corresponding adjustment.

Second, Indonesia is facing a severe infrastructure deficit. As a percentage of GDP, it is spending little more than half of that in the Suharto era or in Asia’s high growth economies. The result is that Indonesia lags behind its middle-income neighbours on practically every infrastructure indicator. This puts a cap on economic growth. It hurts both the rural poor, who particularly depend on rural roads and irrigation for their productivity and markets, and the urban poor, who face daunting commute times using sub-standard transport facilities. The political complexities in overcoming these problems are immense, as all four solutions to the problem will face stiff opposition. There needs to be more public funding, which has to come from lower subsidies and higher taxes. The local governments, which now have greatly increased revenue, need to be induced to spend more of their allocations on infrastructure rather than on bloated administrations and accumulated reserves. The state agencies responsible for harbours, ports and toll roads need to improve their efficiency, including, crucially, being forced to operate in a more competitive environment. There needs to be another round of deregulation, like the highly successful domestic civil aviation reforms of 2002. And populist price caps that deter international infrastructure providers need to be removed. Without these reforms, the various master plans and infrastructure summits will probably amount to little.

Third, more and better jobs need to be created. The labour market transformation that was underway from the 1980s has stalled. Formal sector manufacturing employment has been anaemic since the AFC. Thus the labour moving out of agriculture has found employment mainly in the services sector. While some of this employment has been attractive, in modern retail, finance and telecommunications, much has been in insecure, low productivity, ‘last resort’ occupations. There are both supply and demand side dimensions. The latter arises from the fact that economic growth has not been fast enough, and labour market regulations have deterred employers from hiring permanent staff. On the supply side, and in spite of impressive quantitative gains, Indonesia’s education system is under-performing. The country ranks poorly on virtually all international quality comparisons. Post-primary dropout rates for the poor are very high. No Indonesian university ranks in the Asia top 100 league. (The government in fact spends ten times as much on subsidies as it does on higher education.) It is not surprising that international investor surveys for Indonesia highlight labour problems as a serious bottleneck. Two-thirds of employers report skills shortages, while youth unemployment is about double the national average. Over time, the Indonesian labour market may come to resemble that of the Philippines, where the most dynamic segment is international employment.

Fourth, there is an increasing disconnect between the fluid, open political system and the vibrant civil society on the one hand and the largely unreformed civil service on the other. Indonesia continues to rank poorly on comparative business surveys, including ease of start-ups, property rights and protection, international trade logistics, labour regulations, general licensing provisions, and of course corruption perception indicators. To be sure, there have been some notable improvements since the Suharto era. The country now has a vigorous, independent anti-corruption commission, the KPK. The central bank, Bank Indonesia, has become more professional and independent. Regional autonomy opens up the possibility – though arguably not yet the reality – of broad-based improvements in local level governance, and with it of better-governed regions being rewarded with a reform dividend of more investment and employment. But without a more professional civil service, responsive to the community’s needs, based on meritocratic principles, and with incentives that underpin these objectives, bureaucratic quality will continue to be a drag on economic development and civil society.

Finally, policies need to be much more actively pro-poor, without sacrificing economic growth. Indonesia’s rising inequality jeopardises the country’s social cohesion and renders it more vulnerable to dangerous populist rhetoric. At least four sets of measures are required. First, the tax-transfer system needs to be pro-poor. Currently the effects of government policies are practically distribution-neutral. That is, there is little if any progressivity in tax policy, while education and health policies are generally not well targeted on a needs basis. Second, as noted, the labour market needs to become more inclusive, so that more decent jobs are created. Third, particular attention needs to be paid to education quality at all levels and for all socio-economic classes, so that not only is the average quality raised but also the inequities in the current outcomes are ameliorated. The 20 per cent budget mandate for the first time removes finance as the binding constraint. Finally the very modest social safety net programs need to be extended so that they provide genuinely effective insurance against sudden and catastrophic declines in living standards, as well as making inroads into ‘hard-core’ poverty, which is particularly concentrated among female-headed households and in lagging regions. In comparative terms, Indonesia’s social spending, at about five per cent of GDP is modest. Excluding education, it is minimal. Here too, removal of the subsidies is a key part of any reform.

Scenarios

Consistent with the style of modern, personalistic electoral politics everywhere, none of these issues featured in Indonesia’s 2014 parliamentary and presidential campaigns, beyond impassioned nationalist rhetoric and vague sloganeering. Based on their histories and campaigns, can one draw any inferences about the two candidates and their policy priorities for the next five years?

First, Joko Widodo: he appears more likely to address the subsidies issue, although it is not clear how far he would progress, and how the released funds would be used. His campaign rhetoric has been somewhat less xenophobic. He has demonstrated governance capacity, albeit at a municipal rather than a national level. He appears to be completely free of any allegations of misconduct and corruption. He has also had to make fewer personal and policy concessions to obtain endorsement and construct a coalition. To this extent he may be less constrained in his policy choices.

Next, Prabowo Subianto: we have practically no prior indication of his likely policy directions since he has never held an administrative position outside the armed forces. If anything, his policy pronouncements are even more vague that those of Widodo. His father was in effect the founder of the Indonesian economics profession, but this connection does not seem to have had inter-generational effects. Perhaps it could be said that he has a greater appreciation of international business issues by dint of his family and others in his immediate circle. He also has a reputation for decisiveness.

Under Indonesia’s political rules, the president appoints the cabinet members. During the democratic era, there has been a welcome trend towards the appointment of ‘professionals’ to some key government departments. By far the most important for economic policy is the Minister of Finance. The Governor of Bank Indonesia is another crucial appointment. We have little guidance thus far about the likely cabinet appointments, although Widodo has signaled an intention to appoint a substantial number of professionals. It would not be unfair to state that neither side has highly credentialed economic advisors, although within the Prabowo camp there is his brother-in-law, the highly regarded former Bank Indonesia governor, Dr J. Soedradjad Djiwandono.

In the Suharto era, the late Hadi Soesastro provided the analytical framework for understanding the success of economic policy reforms. The key ingredients were the threat of economic crises, or at least slow economic growth; the united team of technocrats having a coherent and feasible set of reform measures and a direct channel of communication, via ‘low politics’ (that is, avoiding grand ideological debates), to an all-powerful President Suharto who, once convinced of the need for change, was able to implement the reforms comprehensively and decisively.

Assuming that Indonesia does not experience a serious economic crisis, none of these ingredients is currently present. Neither of the candidates has displayed an inclination to become a ‘reform champion’ in a way that would significantly lift the country’s economic momentum. In the short run, the best that can be hoped for is that enough of the policy setting adumbrated above will be maintained to ensure that at least five per cent growth is achieved. The task for the professional economics community will then be an educative one, to undertake the high-quality analytical work that outlines the case for reform, to lift the quality of public debate and thus for the community to put pressure on the legislature and the bureaucracy to enact and implement better policies.

Such is the complexity of managing the modern democratic Indonesia that simply maintaining the status quo is not an inconsiderable achievement. But on the basis of the evolving political economy, and the presidential candidates and their platforms, the prospects of rapid economic development are not encouraging. Nevertheless, as pointed out earlier, Indonesia has consistently confounded the pessimists, and perhaps is about to do so again.

Hal Hill is the H.W. Arndt Professor of Southeast Asian Economies at the Australian National University.

 

Inside Indonesia 117: Jul-Sep 2014{jcomments on}
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vhon6830@gmail.com (Vivian Honan) Wed, 02 Jul 2014 07:27:00 GMT http://www.insideindonesia.org/latest-articles/a-development-policy-agenda-for-a-new-administration
Business and politics in Indonesia http://www.insideindonesia.org/feature-editions/business-and-politics-in-indonesia    Eve Warburton

The worlds of private business and public office are deeply enmeshed in contemporary Indonesia.

At the national level and down into the districts, democratic institutions are brimming with opportunities to extort money. From elections, to party leadership ballots, to budget processes in the parliament, it can seem like Indonesia’s entire democratic system works on a foundation of business transactions. These same transactions lubricate the world of business, providing companies with access to government contracts, licenses and sometimes even regulatory reprieve. A patronage system of incessant backscratching between state officials and business elites appears to undergird Indonesia’s political economy.

Prabowo and Bakrie at Senayan Rally- MietznerPresidential candidate, Prabowo Subianto, and Golkar Chairman Aburizal Bakrie campaigning in Senayan- Mietzner

What are the institutional mechanisms that make these (often illicit) transactions an ongoing feature of Indonesian politics? More broadly, what are the consequences of increasing business-state overlap for public policy, both good and bad? This special edition of Inside Indonesia goes some way toward addressing these questions. The articles investigate the connections between public office and private capital in contemporary Indonesia, with a view to understanding the institutional landscapes that exacerbate, or limit, predatory politico-business alliances.

The edition opens with a timely economic overview from Hal Hill, a long-time observer of Indonesia’s political economy. A welcome change from the many negative characterisations of Indonesia’s corrupt government, Hill sketches out the remarkable economic progress the country has made over the past decade. Hill emphasises that, against the odds, economic policy makers have in many instances avoided political influence and put Indonesia on a stable path of economic growth. But he also highlights Indonesia’s pronounced and worsening inequality, arguing that it leaves the door open to populist appeals and politicised policy interventions. On the eve of Indonesia’s presidential election, Hill lays out five challenges for a new administration, including reduction of fuel subsidies and reform of the bureaucracy. He does not consider either Prabowo or Jokowi a ‘reform champion’ when it comes to economic policy, but is hopeful that the victor will surround himself with a ‘professional’ and experienced cabinet.

Eve Warburton’s article shifts gears and turns our focus to Indonesia’s political landscape. Warburton maps out the varied ways in which democratic institutions have become sources of capital generation for state officials and their business partners – or for entrepreneurs that have entered office directly. Collusive state-business alliances are motivated partly by personal enrichment, but also by how expensive it is to take part in Indonesia’s democracy. The business transactions that now feature so heavily in national and regional politics can have serious consequences for social policy and economic development, and for the quality of democratic institutions more generally.

Ward Berenschot and Darmawan Purba report on the recent gubernatorial elections in Lampung Province, where a single company dominates the local political economy. They describe how Sugar Group Companies (SGC) bankrolled one of their own company insiders to run for governor. Companies like SGC often claim they are compelled to cultivate political allies because they must face Indonesia’s notoriously unpredictable rules and corrupt rent seeking from state officials. But the authors make a powerful case that these business-state pacts are self-reinforcing, and only perpetuate regulatory uncertainty. Berenschot and Purba propose that enforcing transparency around campaign financing would help limit collusion on the scale witnessed in Lampung.

Teri Caraway and Michele Ford’s article provides insight into how local governments have become sites of contestation between labour and business. Wage disputes motivate both sides to lobby local government officials. Businesses use their influence behind closed doors. But, as the authors demonstrate with a case from Bekasi, during election season labour unions sometimes posses significant bargaining power, as political candidates try to win their support and leverage union networks.

In their articles, Danang Widoyoko and Patrick Anderson detail the nature and consequences of corrupt forest licensing. Danang, former Director of Indonesia Corruption Watch, looks back at an election in West Kalimantan, and the way that one candidate manipulated forest licenses to extort funds for his campaign. This case reveals the tragic environmental consequences of the symbiotic relationship between politics and business in resource rich regions.

Patrick Anderson from Forest People’s Programme reminds readers of the immense progress that environmentalists and anti-corruption activists have made in order to prevent cases like that described by Danang. The Corruption Eradication Commission has now turned its attention to the oil palm sector, with many arrests of company staff and state officials already underway. But Anderson argues that prosecutions alone are not a sufficient deterrent. There must be serious reform of the electoral system and the corrupt bureaucracy if Indonesia is to stamp out predatory deals between local governments and oil palm companies.

Andrew Rosser examines how some of Indonesia’s largest corporations continue to stall reform in the health sector. Important legal changes impacting the sale of cigarettes have been on the horizon for some time, and are imperative for a country where, according to the World Health Organisation, over 400,000 people die each year from tobacco related illnesses. Rosser shows that tobacco companies continue to use political connections within the parliament and in political parties to stall regulations that threaten their bottom line.

Finally, Anna Peterson takes a look at reform of one of Indonesia’s most important regulatory institutions. The Supreme Financial Audit Agency (BPK) is tasked with monitoring irregularities in the financial reporting of government organisations, and is thus key for preventing many of the illicit business transactions outlined in this edition. Peterson looks at how, despite much progress, the governing board remains politicised, primarily through members’ ongoing connections with political parties. As such there is much public skepticism about the capacity of the BPK board to fulfill its role.

Corporate lobbying, political extortion, and bribery are ubiquitous features of Indonesia’s evolving democratic political economy. Of course, such practices feature to different degrees in many democracies around the world. But Indonesia’s rising socio-economic inequalities, critical environmental damage, and its relatively young and fragile democratic institutions, mean that addressing illicit state-business transactions is a matter of urgency.

While the articles in this edition tend to paint a bleak picture, each also identifies forces for change – local entrepreneurs-cum-politicians who bring business acumen and efficiency to their new position in government, anti-corruption activists, progressive parliamentarians, just to name a few. Of course, the critical question now is who will lead a new administration, and which presidential candidate has the political will to reform the business of Indonesian politics.

Eve Warburton is a PhD candidate in the Department of Political and Social Change at the Australian National University. Her thesis focuses on politics and policy making in Indonesia’s natural resource sectors.

 

Inside Indonesia 117: Jul-Sep 2014{jcomments on}
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vhon6830@gmail.com (Vivian Honan) Wed, 02 Jul 2014 07:02:00 GMT http://www.insideindonesia.org/feature-editions/business-and-politics-in-indonesia