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Curbing Corruption while Promoting Business & Economic Growth

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Looking at the state of corruption in Indonesia, while looking at the local cases in combating it.

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Curbing Corruption while Promoting Business & Economic Growth

  1. 1. Jakarta, 6 July 2011Curbing Corruption While Promoting Business & Economic Growth<br />By: Wijayanto<br />wijayanto@paramadina.ac.id<br />
  2. 2. Among the Most Corrupt Country?<br />What is Indonesia’s Main Challenge as a Nation? (Kompas, 2010)<br />Source: Corruption Perception Index, Transparency International, 2010<br />
  3. 3. Encouraging Development.....<br />CPI Change (2003 – 2010)<br />Over the last eight years, Indonesia’s CPI has shown the most encouraging development, while Malaysia has decreased continuously;<br />Indonesia<br />Malaysia<br />3<br />Source: Corruption Perception Index, Transparency International, 2010<br />Source: Corruption Perception Index, Transparency International<br />
  4. 4. Press Freedom Bias?<br />Corruption Perception Index ,<br />Indonesia (1995 – 2009)<br />Press Freedom Bias??<br />Establishment<br />of KPK<br />Source: TI, Freedom House, and “KorupsiMengorupsi Indonesia”, Wijayanto & RidwanZachrie<br />
  5. 5. Why Curbing Corruption is so Tough?<br />Indonesia: Most Corrupt Institutions<br />Global: Most Corrupt Institutions (2010)<br /><ul><li>The four most importance institution on curbing corruption are among the most corrupt;
  6. 6. This phenomenon is not unique. Globally, Police, Legislative and Political Party are among the most corrupt institution;
  7. 7. However, in many countries, the judiciary system is relatively less corrupt;</li></ul>Source: Transparency International <br />
  8. 8. From Whom We Should Learn?<br />Source: Transparency International Indonesia, 2010<br />
  9. 9. Learning from Yogya & Solo.......<br />The city majors drive Toyota Kijang, instead of high-end sedans;<br />Establish pro-people budget, a large portion of budget is allocated to improve public facilities instead of for personnel expenses;<br />Simplify business licensing and building permit process:<br /><ul><li>Create clear standard operating and procedure;
  10. 10. Publish cost and time line;
  11. 11. Established task force to managed this process;</li></ul>Firing or removing public officials who are not inline with government’s agenda to improve public service quality; <br />Simple initiatives with huge impact<br />Source: Transparency International Indonesia Website (Jokowi and HerryZudianto) and Various Sources<br />
  12. 12. Corruption and Doing Business....<br />Corruption Perception Index ,<br />vs. Ease of Doing Business<br /><ul><li>Strong Correlation between Ease of Doing Business and Corruption Perception Index (C=0.69);
  13. 13. Improving business climate & governance is inline with reducing corruption;
  14. 14. Klitgaard Theorem:
  15. 15. Clear rule of the game in business will reduce discretion, monopoly and improve accountability </li></ul>Best<br />C<br />D<br />M<br />A<br />CPI Score<br />Accountability<br />Monopoly<br />Discretion<br />Corruption<br />Best<br />Worst<br />Ease of<br />Doing Business<br />Source: Transparency International 2009; World Bank 2010<br />
  16. 16. Ease of Doing Business: The Ranking<br />Source: World Bank, Ease of Doing Business 2010<br />Ease of Doing Business<br />(Total Ranking)<br />Cross Border Trading<br />Building Permit<br />Protecting Investor<br />
  17. 17. Ease of Doing Business: The Ranking<br />Source: World Bank, Ease of Doing Business 2010<br />Starting Business<br />Getting Credit<br />Registering Property<br />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<br />
  18. 18. Ease of Doing Business: The Ranking<br />Source: World Bank, Ease of Doing Business 2010<br />Closing Business<br />Paying Taxes<br />Enforcing Contract<br />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;<br />
  19. 19. High Tax Rate, But Low Tax Revenue...<br /><ul><li>Despite Indonesia’s high tax rate (second highest in ASEAN)....
  20. 20. ....tax revenue only account for 11% of GDP (the lowest in the six main ASEAN economies);
  21. 21. In part, it is because the lack of inefficient and complicated tax collection procedure, a possible source of corruption;</li></ul>Tax Misery Index<br />(2009)<br />Tax Revenue / GDP<br />(2009)<br />Source: Heritage Foundation & Forbes: Tax Misery Index<br />
  22. 22. Thank You<br />

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