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Governance in Indonesia: A Conclusion from the Public Forum on Governance in Indonesia Agung Wicaksono1 The 1997-1999 crisis has

made governance a popular topic for discussion in Southeast Asia, particularly Indonesia. Poor governance, both in the government and business sectors, had been blamed for the severe crisis. The crisis, and the poor governance, had resulted in the downfall of the New Order in 1998, which in turn clearly brought a significant wind of change for Indonesia. Democratisation, a process toward the rule of the people by the people, was an obvious immediate impact of the change. All significant transformation happening in post-Soeharto era can be clearly attributed to be the fruit both for good and for bad of democratisation. Three examples can be mentioned. First is the decentralization creating demands on regional autonomy providing districts with much larger decision-making power. Second is the call for public sector reform allowing for better quality, lower cost and timely delivery of public services. And the third is the awareness on the need for good corporate governance that a large part of the economic crisis was due to bad corporate governance and unsound economic fundamentals with control and concentration of ownership in the hand of limited few. In a conundrum between reserved optimism and frustrated fatalism, there is however a lingering question on whether the democratisation has brought what is necessary for Indonesias quest toward good governance. At the end of the day, no one would argue against the idea that democracy as a state of political system would only matter when governance described as the process of decision-making and its implementation has improved for the benefit of the people. Democracy must certainly be able to deliver its benefit for the people through good governance, accomplished in a manner essentially free of abuse and corruption, and with due regard for the rule of law. Interestingly, Ramage (2007) described that Indonesia was in a state of democracy first, good governance later. No doubt that Indonesia since the fall of Soeharto had focused on strengthening democratic and political reform. In its recent assessment of Southeast Asian countries degree of freedom based on a survey with a focus on criteria of civil liberties and political rights, Freedom House in Puddington (2006) ranked Indonesia at the top among the neighbours. In contrast however, Transparency International (2006) which has been frequently quoted for its survey on corruption as a measure of good governance consistently ranked Indonesia in the lowest level in Southeast Asia. Indeed, the process of building democratic governance can be quite messy, and there have been cases where setback toward authoritarianism can happen when democratic governance failed to yield good governance (McLeod & MacIntyre, 2006).

The author would like to appreciate the comments from Dr. Chin Kin Wah and Ambassador Verghese Mathews. The main errors , however, remain with the author.

To gain better insights on governance in Indonesia, the Institute of Southeast Asian Studies (ISEAS), Singapore, conducted the Public Forum Governance in Indonesia held at ISEAS on 30 August 2007. The Konrad Adenauer Foundation supported the Public Forum. Dr. Aris Ananta, Senior Research Fellow at ISEAS, coordinated the Public Forum and Mr. Agung Wicaksono, research associate at ISEAS, chaired the Public Forum. Three eminent speakers were invited to examine the governance issue from three different angles. First, Prof. Sunyoto Usman, a sociologist from Gadjah Mada University, Yogyakarta, Indonesia, presented his findings on the impact of shariah on governance in some selected districts in Indonesia. Second, Dr. Aris Ananta focused on the governance and marketization of the delivery of public service, particularly on the business of sending Indonesian workers abroad. And last but not least, Ms. Felia Salim, a successful businesswoman with an intensive experience on governance in Indonesia, discussed the macro-issue of governance in Indonesia.

Decentralization and Shariah-inspired Bylaws in Local Governance Prof. Sunyoto Usman, a former dean of the Faculty of Social Sciences and Politics in Gadjah Mada University,concentrated on the issues of shariah regulations and good local governance. The passing of many shariah-inspired bylaws or rather, bylaws containing values of Islam at various districts in Indonesia was perceived as an impact of both political openness and decentralization. He discussed how local communities that had adopted shariah regulations were mobilized to access public services. The development of shariah regulations at the local level was argued to be part of the decentralization reform implemented since 1999. There were contrasting opinions on this issue. A number of analysts said that shariah regulations adopted by the local government in Indonesia was the extreme version of the possible future of Indonesia, where a conservative tide of radicalism was challenging the moderate or tolerant traditions. Others said that the adoption of the regulations was merely part of the responses to the social dislocations, coloured by rising religiosity, that had accompanied the economic crisis in 1998.. Using the case of several districts in Indonesia the city of Banjarmasin in the province of South Kalimantan and Tangerang in the province of Banten in Java, Prof. Sunyoto argued that the second opinion fitted better into the empirical findings. However, a conservative tide (radicalism) could emerge if, in the global context, the local people of the regions felt that Islamic principles and values were oppressed, and they were excluded from the political decision making process. Prof Sunyoto also described the religious and cultural Islamisation in various regions in Indonesia. However, his studies on politics in Indonesia showed that, there was no significant evidence to support the view that radicalism was rising in the regions. There

was growing conservatism, but not in terms of radicalisation. The struggle to endorse the shariah regulations in the regions was limited to dealing with aspects of social behaviour (ahlaq). Political openness in the regions had promoted religious values and, at the same time, maintained the moderate attitude of the society. The adoption of shariah regulations in the regions was more likely to be considered as a legal framework to unite and mobilize the local population. Although the Prosperous Justice Party (PKS) and Hizbut Tahrir Indonesia (HTI) were instrumental in passing shariah bylaws in Banjarmasin, it was misleading to conclude that these two groups were the sole endorsers of such bylaws. The adoption of shariah regulations is part of political strategies used by the local politicians to gain political support. In a country like Indonesia where political parties are still underdeveloped, religion is a powerful mobilizing force and is subject to exploitation for political ends. Therefore, it is common to find that even nationalist secular parties like Golkar and PDI-P are also endorsing shariah regulations. Parties that support the adoption of shariah regulations in the regions have gained popularity by promising to deliver services and enforce good governance based on Islamic principles. Dr. Aris Ananta, the second speaker, borrowing a marketing concept, commented that shariah had been used as a branding strategy to market political elites in the regions. Public Sector Reform: Case Study on Management of Indonesian Overseas Workers Dr Aris Ananta an economist and demographer highlighted the case study of the programme on sending Indonesian workers abroad as an illustration of how the government and people of Indonesia could attempt to apply good governance to public services. This was understood as an impact of the changing economic structure with the swinging pendulum on the role of state vis a vis the market in providing public service in the history of Indonesia that led to the marketization of public services. Indonesian history showed that political changes always brought along changes in the public sector. Public sector reform was portrayed from three approaches: good governance, free market mechanism and social network and civil societies. From the perspective of good governance defined as design of a system of government that effectively promotes the interest of the society as a whole and monitors the conflict of interest from the implementation of the system the important indicators are transparency, accountability and participation. The Indonesian government has recently set up a national agency in charge of Placement and Protection of Indonesian Overseas Workers, in short known as BNP2TKI. Directly responsible to the President, it aims to integrate services and to share responsibilities in the placement and protection of the overseas workers among various ministries and government agencies. There are five major reform issues imperative in the case of BNP2TKI: placement, protection, elimination of brokers/sponsors, institutions of placement and supports from banking institutions.

The new agency like many other agencies providing public service is facing the challenge of being torn between becoming a profit-making institution with social responsibility and a non-profit-making institution with some profitability. In this context, the agency aims at marketization of the public services. The underlying reason behind this was that information makes markets work, and markets can improve welfare. Therefore, businesses have to be paid for providing the information. This leads to an implication that the new agency is a business-oriented institution, which maximizes profit. In a nutshell, the new agency is in fact a lucrative business-oriented institution enjoying oligopolistic captive market. The key question is then: can it deliver its social objective, which is to protect and promote the rights of the Indonesian Overseas Workers? If the new agency is successful in protecting the workers, the model can be replicated in other programs involving management of public services, in Indonesia and even other countries.

Corporate Governance: Toward the Role of Private Sector in Development Finally, Ms Felia Salim a speaker from the private sector and a civil society activist discussed the implementation of good corporate governance in both private and not-forprofit sectors. As the chairperson of the Executive Board of Partnership of Governance Reform of Indonesia, she outlined the state of governance reform in Indonesia, which had been campaigned for almost a decade. Perception surveys such as the World Economic Forums Global Competitiveness Index and Transparency Internationals Corruption Perception Index show that Indonesia has made some improvement, but still ranked below its neighbours. An overall strategy to improve governance has to encompass three aspects: public service governance, democratic governance as well as security and justice governance. As former Director of the Jakarta Stock Exchange and independent commissioner of Bank Negara Indonesia (BNI), one of the biggest state-owned bank, and hence both a regulator and business player, she focused her discussion on the need for the private sector to do more in terms of corporate governance, including in becoming good corporate citizens. This was in line with the evolving paradigm of doing business from Friedmans the responsibility of corporation is to be profitable to Cadburys there is no conflict between social responsibility and the obligation on companies to use scarce resources efficiently and be profitable and at last Maignan who defined corporate social responsibility as the extent to which businesses meet the economic, legal, ethical and discretionary responsibilities imposed on them by their stakeholders. She argued that there are three key players who each play a role in responding to the state of governance. They are government, civil society and the private sector. Following

Crane, Matten and Moon (2006), the role of private sector is to provide social rights, to enable civil rights and to channel political rights. When managed and accommodated properly, the impacts of business would go beyond profitability or legal compliance, but also contribute to social development and political stability at local and national levels. Indonesia was the first nation in the world to regulate corporate social responsibility (CSR) with the enactment of the new Act on Limited Liability Companies No. 40/2007. Social and Environmental Responsibility is mandatory for limited liability companies in natural resources and industries producing hazardous waste as stipulated in Article 74 of Limited Liability Companies Act, passed by the Parliament in July 2007. Despite resistance from the Association of Indonesian Listed Companies on the enactment of CSR into company law, the parliament still insisted on the needs for CSR law but limited to the extractive sectors, believed to be influenced by the public pressure amid the ongoing debacle of Lapindos mud case the accident related to Lapindos drilling activities which caused never ending flow of hot mud which has destroyed the social and economic conditions in the surrounding areas in East Java as described by Sejiwan (2006). In conclusion, mainstreaming Good Governance principles and practices in Indonesia can only be achieved when the private sectors fully engage and participate in governance reform. Studies have shown that companies with good governance measures and good CSR programs are more profitable. The principle of triple bottom lines economic viability, social sensitivity and environmental sustainability in doing business is a global trend, and Indonesia has to follow the path, augmented with civil and political participation.

Concluding Remark Indonesias transition to democracy holds out the promise of good governance. Having transformed from autocratic governance to democratic governance, Indonesia has no choice but to ensure that the democratic process delivers good governance. With this in mind, the government and the people of Indonesia may consider a shift in the development paradigm, particularly on the use of indicators to measure the progress of development. Indicators of good governance can be developed to replace the commonly used conventional macro-economic indicators. They still need the conventional macroeconomic indicators, but should not be the most important set of indicators Probably, as a start, characteristics of good governance, which include participation, accountability, rule of law, transparency, responsiveness, consensus orientation, equity and inclusiveness, and efficiency and effectiveness, can be considered to replace the priority of the conventional macro-economic indicators. Creating the set of indicators on governance, as the prime development criteria, could be an immediate agenda for academics and policymakers alike, and a step forward toward realizing good governance and democratic society in Indonesia.

Selected References McLeod, Ross and MacIntyre, Andrew. Indonesia: Democracy and the Promise of Good Governance. Singapore: Institute of Southeast Asian Studies, 2007. Moon, Jeremy, Crane, Andrew and Matten, Dirk. Corporations and Citizenship. Revue de l'Organisation Responsible, Vol.1 (1), pp. 82-92, 2006 Puddington, Arch. The Freedom House Survey: The Pushback against Democracy. In Journal of Democracy, 18: 2, pp. 125-137, April 2007 Ramage, Douglas E. Indonesia: Democracy First, Good Governance Later. In Southeast Asian Affairs 2007, edited by Daljit Singh and Lorraine C. Salazar, pp. 135157. Singapore: Institute of Southeast Asian Studies, 2007 Sejiwan, Bondan. CSR creates goodwill for long-term business. The Jakarta Post, 03 September 2006, retrieved from: on 13 September 2007 Transparency International. Corruption Perception Index 2006. Retrieved from on 30 August 2007