Business owners looking to set up shop in Indonesia are probably best advised to give the Sumatran capital of Medan and the West Java capital of Bandung a miss. According to the Indonesia chapter of Transparency International (TII) the former is Indonesia’s most corrupt city and the latter the one where the most bribes are paid.
The TII 2017 Corruption Perception Index in Indonesia (CPII) survey studied the 12 Indonesian cities that contribute the most to Indonesia GDP — Jakarta, Surabaya, Medan, Pontianak, Pekanbaru, Makassar, Bandung, Balikpapan, Banjarmasin, Padang, Manado and Semarang — awarding them scores of between one and 100. The most corrupt received the lowest scores.
Conducted between June and August, the survey polled 1,200 business owners to measure the level of local competitiveness and ease of doing business, in addition to the frequency that bribes are paid to facilitate business.
Ranked the worst for corruption was Medan which scored just 37.4, far below North Jakarta at the top of the scoreboard with 73.9. Following Medan in the race to the bottom was Makassar and Bandung, which ranked 53.4 and 57.9 respectively.
Business Easiest in Banjarmasin
Cleaning up their act and creating better business environments were Pontianak, the capital of West Kalimantan, and Pekanbaru, the capital of Riau in Sumatra, which tied for second place at 66.5 each. Ranked as the third least corrupt Indonesia city with a score of 64.3 was Balikpapan on the island of Borneo.
On the ease of doing business scale Medan also took out the bottom position, scoring just 41.1, well below Bandung at 54.2, and Balikpapan at 59.5, the other two bottom dwellers.
At the opposite end of the score sheet business was perceived easiest in the South Kalimantan capital of Banjarmasin, which scored 68.1, followed by North Jakarta at 67.4, and Surabaya at 66.8.
According to the report, the city with the highest level of bribery is the West Java city of Bandung, where bribery amounts to about 10.8 per cent of total production costs. Makassar was ranked the most bribery free city, with under the table payments and backhanders accounting for just 1.8 per cent of production costs.
The TII survey found that bribery was most common in the drinking water, banking, and electricity sectors, with corruption permeating through the legislative, judiciary, and police. Processes most prone to corruption involve licensing, procurement, and the issuance of trade quotas, the survey found.
While the backslide by Medan from 57 in 2015 to 37.4 is worrying, TII’s knowledge management program coordinator, Wawan Heru Suyatmiko, pointed out that the combined average of the 12 cities this year was 60.8, an increase from 54.7 in 2015.
Improvements, But Ignorance Prevails
Speaking to CNN Indonesia, he said “there have been many improvements in public service… mostly in the form of reforms on permits, procurement, and regulations”.
On this matter there is little dispute. Last month in the annual World Bank Ease of Doing Business (EODB) index for 2018 Indonesia leaped 19 places to 72nd globally, after moving up 15 places in the 2017 EODB index.
However, corruption remains a shadow looming over Indonesia. Earlier this year Indonesia Corruption Watch (ICW) put losses to the state from corruption in 2016 at more than Rp3 trillion (about US$221 million).
In an interview with the Jakarta Globe Mr Suyatmiko said, “there is still a lot of bribery going on. Businesses lose out not because of clean competition, but because someone somewhere along the line is corrupt”.
According to Mr Suyatmiko ignorance is feeding the fires of corruption. Its CPII survey found that only about 30 per cent of respondents were aware of the National Strategy of Corruption Prevention and Eradication (Stranas PPK), while less than half were aware of the country’s Anti-Corruption Law.
Read the TII 2017 Corruption Perception Index in Indonesia (Indonesian)
Feature photo John Le Fevre
- Transparency and corruption: Malaysia, Indonesia turn to the internet (Free Malaysia Today)
- Top Indonesian politician embroiled in huge corruption case goes missing (The Guardian)
- Indonesia probes ‘monument’ corruption (The Manila Times)
- New Survey Shows Medan as Most Corrupt City, Bandung Ruled by Bribery (Jakarta Globe)
She commenced as an intern at AEC News Today and was appointed as a junior writer/ trainee journalist on April 2, 2018