Jakarta, 6 July 2011 Curbing Corruption While Promoting Business & Economic Growth

1. Jakarta, 6 July 2011Curbing Corruption While Promoting Business & Economic Growth By: Wijayanto wijayanto@paramadina.ac.id

2. What is Indonesia’s Main Challenge as a Nation? (Kompas, 2010) Among the Most Corrupt Country? Source: Corruption Perception Index, Transparency International, 2010

3. CPI Change (2003 – 2010) Over the last eight years, Indonesia’s CPI has shown the most encouraging development, while Malaysia has decreased continuously; Encouraging Development..... Indonesia Malaysia Source: Corruption Perception Index, Transparency International, 2010 Source: Corruption Perception Index, Transparency International

4. Corruption Perception Index , Indonesia (1995 – 2009) Press Freedom Bias? Press Freedom Bias?? Establishment of KPK Source: TI, Freedom House, and “KorupsiMengorupsi Indonesia”, Wijayanto & RidwanZachrie

5. Indonesia: Most Corrupt Institutions Global: Most Corrupt Institutions (2010) Why Curbing Corruption is so Tough? • The four most importance institution on curbing corruption are among the most corrupt; • This phenomenon is not unique. Globally, Police, Legislative and Political Party are among the most corrupt institution; • However, in many countries, the judiciary system is relatively less corrupt; Source: Transparency International

6. From Whom We Should Learn? Source: Transparency International Indonesia, 2010

7. The city majors drive Toyota Kijang, instead of high-end sedans; • Establish pro-people budget, a large portion of budget is allocated to improve public facilities instead of for personnel expenses; • Simplify business licensing and building permit process: • Create clear standard operating and procedure; • Publish cost and time line; • Established task force to managed this process; • Firing or removing public officials who are not inline with government’s agenda to improve public service quality; Learning from Yogya & Solo....... Simple initiatives with huge impact Source: Transparency International Indonesia Website (Jokowi and HerryZudianto) and Various Sources

8. Corruption Perception Index , vs. Ease of Doing Business • Strong Correlation between Ease of Doing Business and Corruption Perception Index (C=0.69); • Improving business climate & governance is inline with reducing corruption; • Klitgaard Theorem: • Clear rule of the game in business will reduce discretion, monopoly and improve accountability Best Corruption and Doing Business.... C D M A CPI Score Accountability Monopoly Discretion Corruption Worst Best Ease of Doing Business Source: Transparency International 2009; World Bank 2010

9. Source: World Bank, Ease of Doing Business 2010 Ease of Doing Business (Total Ranking) Cross Border Trading Ease of Doing Business: The Ranking Building Permit Protecting Investor

10. Source: World Bank, Ease of Doing Business 2010 Starting Business Getting Credit Ease of Doing Business: The Ranking Registering Property In Indonesia, Starting Business, Getting Credit and Registering Property are rather difficult and complicated. In the 6 main ASEAN economies, we are only better than the Philippines

11. Source: World Bank, Ease of Doing Business 2010 Closing Business Paying Taxes Ease of Doing Business: The Ranking Enforcing Contract Indonesia is behinds ASEAN’s peers in term ease of paying taxes and enforcing contract. Serious improvement should be done if we would like to keep our economy competitive;

12. Despite Indonesia’s high tax rate (second highest in ASEAN).... • ....tax revenue only account for 11% of GDP (the lowest in the six main ASEAN economies); • In part, it is because the lack of inefficient and complicated tax collection procedure, a possible source of corruption; High Tax Rate, But Low Tax Revenue... Tax Misery Index (2009) Tax Revenue / GDP (2009) Source: Heritage Foundation & Forbes: Tax Misery Index

13. Thank You