Risks and Rewards

Corruption charges! Corruption? Corruption is government intrusion into market efficiencies in the form of regulations. That’s Milton Friedman. He got a goddamn Nobel Prize. We have laws against it precisely so we can get away with it. Corruption is our protection. Corruption keeps us safe and warm. Corruption is why you and I are prancing around in here instead of fighting over scraps of meat out in the streets. Corruption is why we win. – Danny Dalton, Syriana (2005).

Why do people cheat?

Is it motivated by the lack of satisfaction with what they already have, thus the false need of wanting more? Or is it because, in general, they perceive that the rewards that they would get is higher than the risks that is involved?

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Over the past few weeks, the Indonesian media has been highlighting the Nazaruddin corruption case, who is currently on trial for rigging the construction tender of the athlete’s village for the SEA Games last year. Nazaruddin, who was the Democratic Party’s treasurer at the time, stated that he did not act alone and subsequently accuse the involvement of Anas Urbaningrum (the Party’s chairman) and Angelina Sondakh (the Party’s deputy secretary general and former Miss Indonesia).

President Yudhoyono is the chief of patron of the Democratic Party, the ruling party in Indonesia, which managed to get 21 percent share in the 2009 election. A recent poll by the Indonesian Survey Institute showed that if elections were to be held now, the Party’s share would drop to 13.7 percent, second to Golkar. President Yudhoyono was re-elected in 2009 over his promise in tackling Indonesia’s corruption problems, but the graft cases in his own party have been overshadowing his performance.

President Yudhoyono have made it clear that he will not suspend Anas, but he will not protect him either if the Corruption Eradication Commission (KPK) declares him as a suspect. Angelina, on the other hand, was removed from the deputy secretary general position on Friday (24/02) after she was named a suspect by KPK, although she is technically still an MP.

In Singapore, a high profile corruption case that has been on the news recently was about Singapore Civil Defense Force (SCDF) commissioner Peter Lim and Central Narcotics Bureau (CNB) director Ng Boon Gay. Both of the officers are married and they are being investigated by the Corrupt Practices Investigation Bureau (CPIB) on an IT-related procurement contract case allegedly involving not just money, but sex with a married IT executive.

The Ministry of Home Affairs (MHA) stated that they moved swiftly to replace the two senior civil servants in late January, not long after the investigations began at the end of December and early January. A Singaporean blogger questioned however, why was there a delay in making the investigations public.

The investigation is still ongoing, but a Singaporean friend commented, “if the two officers are proven guilty, they are surely done in Singapore. They can only get a private job most probably outside of Singapore.”

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The two cases above illustrates that they are willing to risk themselves in engaging in an act that is seen to give them better rewards despite the rewards that they already have in their high-ranking position. Why?

Perhaps because they operate in a system that does not penalize them for engaging in such acts. If the rewards from corruption is high, and the risks of getting caught is low (or you can get caught but can get away with it easily), why wouldn’t they?

They say that the root problem of corruption is the low pay that public officials receive, hence the need for rent-seeking behaviors. Giving higher salary, however, does not solve the problem either, as in the case in Singapore (they are among the most well-paid civil servants in the world) and in the recent case of another Gayus in the tax department (reportedly he makes Rp. 8 million per month despite his low rank – which is much better compared to other civil servants in Indonesia).

Is it then the question of greed, not need?

What I would like to highlight here is that we need to create an environment where engaging in corruption is something to be seen as “high risk-low reward“. In order to do so, we would need not only political will from the leaders to fight corruption, but also society’s low acceptance towards corruption.

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On paper, Indonesia’s political will to fight corruption is on the right track. The strategy is right to focus on preventing corruption especially in the law enforcement agencies (another blog post of mine might illustrate why), reflected in the Presidential Instruction 9/2011 (see chart below, taken from UKP4). Quah (2007) argues that you can also see political will in fighting corruption in how much budget and qualified personnel is allocated towards the Anti-Corruption Agencies in the country.

Strategy for Preventing and Eradicating Corruption (Inpres 9/2011)If only there are publicly available information on how we are doing so far with corruption prevention and eradication efforts, then I can probably give a fair assessment. I lament on the media’s reporting on how much corruption is going on, I wonder how many government efforts are actually successful but not reported.

On the other hand, what signals political will to fight corruption to the public, is how swift the political leaders are in acting or responding on corruption cases in their organizations (i.e. suspension of their officers). That is why President Yudhoyono’s hesitation with what is going on in his party is creating questions in the eyes of the public regarding his own political will to fight corruption. To be fair, other political party leaders need to be scrutinized for their slow responses in their party members’ behaviors as well.

On society’s acceptance or attitude towards corruption, this is a bit tricky. I question whether corruption is a part of our culture, because culture is supposed to be seen as something that collectively agree upon. So, is corruption really “okay”? I believe this is a valid question as well in China and their guanxi practices.

A recent effort to challenge society’s definition of corruption is seen in the movie Kita vs. Korupsi (Us against Corruption). Without a collective effort to condemn corruption, even government efforts are futile if we are complacent with the problem.

At least what I see from the Singapore case is that the people are very intolerant towards corruption, as evidenced by the anecdotal remark by my friend above. In Indonesia, unfortunately it is not uncommon for former corruption convicts to run for public office and in few instances they actually get promoted, not demoted from their position. This sort of toleration is what creates that “low risk” situation that I mentioned earlier.

There are details in creating that “high risk-low reward” environment for corruption that I can’t elaborate one by one (and I believe there are more experts on this issue). I sincerely hope, however, that Indonesia can expedite the process in preventing people’s tendency to cheat or engage in corruption.

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5 thoughts on “Risks and Rewards”

  1. So it’s possible to enjoy reading about something which actually is a disgrace :). And wanting to be critical I wondered with what part of this post I ought to disagree. Found none.

    I wondered though if sufficient public trust, appreciation and respect for public, collective institutions exists in RI. If that is lacking – and I guess it is – self-centred materialism might favour public leniency towards corruption ( “you can’t rely on justice, so take advantage of every opportunity to enlarge your share”).

    1. You would assume that in a “religious” society, intolerance for corruption would be high, but that is certainly not the case here. It’s a puzzle. In one way politicians like to brand themselves as someone who are in a position of higher morals, but in practice, they’re just as corrupt as any other crook out there. For someone who believes in life beyond death, why would wealth accumulation through breaking rules and ethics be acceptable? I think this is the cue of where Mauricio would butt in and say, “when it comes to religion, it’s always form over substance in Indonesia”.

  2. Nigeria has Prebendalism. Indonesia has Bapakism. When you get into office, you become the Bapak. Of course, you must act like the Bapak, and this requires dispensing and accepting gifts, favors and gratuities. Image and prestige expectations are a motivation.

    A political officer at a foreign embassy recently shared with me that he’s come across senior politicians who unashamedly boast and defend corrupt practices as the price of doing business and the requirement of meeting social expectations.

  3. A more thoughtful appraisal of salaries and how Singapore became one of the cleanest countries shows that increasing pejabat salaries was neither the primary nor the first tool that the Singaporean government deployed. Long before Singapore used high salaries as an incentive for good behaviour, it had deployed a range of hard measures aiming at disincentives. The issue of raising salaries needs to be taken into account in a varied basket of measures, taking into account the sequencing of those measures. All of this gets lost in the facile discussions about corruption. No, in Indonesia raising salaries now as the primary incentive cannot be expected to reap significant benefits, for the sequencing and the policy mix are both–to use a technical term–kacau.

    1. Well said, Mauri. Much of the focus of bureaucracy reform in Indonesia is the carrot approach less of the stick, though you need the latter in order for the incentive system to work. Greed, if possible, should be limited. But this again comes down to the problem of law enforcement in Indonesia…

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