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What the Asian crisis showed -- nowhere more clearly than in
Indonesia -- is that corruption is often is at the very root of why
governments don't work.
Today, one of the biggest threats to development in many countries --
including this one -- is corruption. It weakens the systems, it
distorts the market, and it therefore encourages non-productive skills.
In the end, governments and citizens will pay a price, in lower
incomes, lower investment, and more volatile economic swings.
This is a lesson that Indonesia learned the hard way. After the
progress of the last 20 years, corruption contributed significantly to
the economic collapse of the late 1990s. It now looms as a major
obstacle to achieving the development successes this country is capable
of -- and which the Indonesian people deserve.
Corruption not only undermines the ability of governments to function
properly, it also stifles private sector growth.
We hear it from investors -- both domestic and foreign -- who worry
that where corruption is rampant, contracts are unenforceable,
competition is skewed and the cost of doing business is stifling. When
investors see that, they take their money elsewhere.
To give an idea: In Indonesia, 56 percent of surveyed firms say they
are willing to pay more taxes -- in fact half are willing to pay up to
5 percent of their revenues -- if corruption could be eliminated.
Corruption thrives in countries where private investors face cumbersome
procedures and excessive regulations. When extra licenses are needed to
start a business, when extra signatures are required to import goods,
it creates opportunities for abuse of authority and for corruption.
Our estimates show that the time to start a business has already fallen
from 151 days to below 80 days, and we are hopeful that the government
will reach its target. That would be a wonderful success story.
Perhaps the most important challenge lies in the enforcement of
contracts. On this front, Indonesia ranks amongst the lowest in the
world -- 145 out of 155. In fact, investors' lack of trust in the legal
system is one of the problems that have brought investment levels down
to half of those in your fast-growing neighbors.
Indonesia has already begun to confront some of these difficult
challenges. President Yudhoyono has launched a tough anti-corruption
drive that is holding public officials accountable across all levels of
government.
New institutions like the Anti-Corruption Commission, the
Anti-Corruption Court, the Judicial Commission and Timtastipikor are up
and running and producing results. And institutions like the Supreme
Audit Commission and the Attorney General's Office are showing newfound
strength.
Even more important are the measures taken to reduce opportunities and
incentives for corruption, led by an impressive economic team.
Weknow that when governments don't work, the development assistance we
provide to governments doesn't work either. It means that children are
denied the education they need. Mothers are denied the health care they
deserve and countries are denied the institutions needed to deliver
real results.
Fighting corruption is a long-term commitment. We cannot expect results
overnight.
What we can expect is steady progress towards building transparent and
accountable institutions. That is why fighting corruption requires a
long-term strategy that systematically and progressively attacks the
problem. And that is why any strategy for solving a problem requires
the commitment and participation of governments, citizens and the
private sector.
There's been a lot of attention recently to a number of actions we've
taken to suspend lending in existing projects where corruption concerns
have emerged.
The World Bank Group's country strategy for Indonesia is one that
particularly emphasizes governance. In partnership with the Indonesian
government, we will commit $900 million per year to strengthening
governance, with the goal of improving service delivery in education,
health and other essential services and enhancing the investment
climate.
In countries like Indonesia where the government is committed to
fighting corruption, our resources anbd expertise can make a difference.
Enforcement alone will not cure corruption. How much we do, and how
much progress we make, depends on the desire of both governments and
civil society to create the right setting for sound, strong,
sustainable development.
The greatest changes come when the ideas people carry in their heads
change. In many countries, people are not as tolerant of corruption as
they were in the past.
The good news is that in Indonesia, the social and economic
achievements of the last forty years have created a demand for
government that works. The people of Indonesia recognize that with
transparent and accountable governance, they stand a better chance of
reducing corruption...of improving their quality of life...and securing
a better future for their children.
The article is condensed from an address made by the World Bank
President at a discussion on democracy, governance and development held
Tuesday night in conjunction with Tempo media group's 35th anniversary.
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