Corruption in

Indonesia
Syndicate 10
Anthony 291 17 005
Sofia Pujiasti 291 17 053
Afriska Yuni Anggraini 291 17 238
Arfan Nur Akbar 291 17 246
 Bribes
Money or favor
given or promised in
order to influence
the judgment or
Red Tape conduct of a person
in a position of trust
Official routine or
procedure marked
by excessive
complexity which
results in delay or
inaction
⊸ Decentralization completely changed fiscal
arrangements starting in 2001 with new
formula for transfers and new fiscal
responsibilities of local governments.
⊸ Increases in red tape will generate more
bribe income for local officials but will also
drive firms out of the district and lower its
tax base
⊸ Without the proper license for a particular
activity, a firm may be harassed by
neighbors and inspectors, unable to
perform certain functions, or have all
operations suspended
The major categories of revenues for
discretionary expenditures were the portion of
national property taxes rebated back to the
district, local license and levy fees, and
residual intergovernmental transfers, some of
which seem arbitrary and some connected, for
example, with the district’s generation of
natural resource related revenues (generated
by the sale of oil, natural gas, mining, and
forest and fishery products from the district).
What is the modus of
corruption in Indonesia?
With decentralization;
expenditure functions
governing regulation and
policing were decentralized to
the district level.

An opportunity to gain more income by taking bribes from the

company; especially when the company want to have any new
license or renewal.
What is the modus of
corruption in Indonesia?
Local officials use a red tape to waste more
time in processing a license or new business
permission
What is the modus of
corruption in Indonesia?

⊸ Rebated tax revenue

Local officer tend to manipulate the tax revenue that paid by the
company before shifting the money into the central government.
The local (district) government lowering the tax base of the
district. Local governments have limited taxation ability and
thus rely on corruption to help supplement the salaries of local
employees.
What is the impact to the
business?

Unfriendly
competitiveness
By doing this, the company
that give a higher bribes will
be processed first by the
officer
What is the impact to the
business?
⊸ Lower quality of project done by the
firm because of the un-observed by
the officials
When a firm give bribes to the local government, the
quality of the project can’t be measured anymore
because there isn’t any objectiveness in giving the
license that needed to run the project/business.
What is the impact to the
business?

⊸ Inhibit the FDI from the foreign

because of the “red tape”
The foreign investor will see Indonesia is not a
good place to invest their money because
sometimes the cost on the “slickness” is more
than 50% or far higher than the production
cost of the company.
What is the impact to the
business?
⊸ The increasing in the production cost
will affect the higher price of the
product

⊸ The firm need more capital to prepare

for the bribes to have a faster
processing regulation
 Factor that determine the amount
of “bribes” from the entrepreneur
to the local government

⊸ Number of licenses
⊸ Type of the companies
⊸ The import and export
activities
Factor that determine the amount
of “bribes” from the entrepreneur
to the local government
⊸ Tax transfer
⊸ Bargaining of the firms influence with
government official
Firms need to bargain for the time that needed to
process their request by giving an extra bribes if the
firms want to processed faster than it regulated.
Factor that determine the amount
of “bribes” from the entrepreneur
to the local government
⊸ Characteristic of local government
⊸ Education level of the local officials
Not every local government apply red tapes to gain
more bribes from the firms. Beside that, based on
the survey results; the higher education level of the
local officials tend not going to do a corruption act.
Thanks!