Agung Wicaksono_Governance in Indonesia, A Conclusion From the Public Forum on Governance in Indonesia

8/2/2019 Agung Wicaksono_Governance in Indonesia, A Conclusion From the Public Forum on Governance in Indonesia

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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 SoutheastAsia, 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 asignificant 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 bementioned. 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 publicservices. 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 oflimited few.

In a conundrum between reserved optimism and frustrated fatalism, there is however alingering 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 whengovernance 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 itsbenefit for the people through good governance, accomplished in a manner essentiallyfree 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 civilliberties 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).

1The author would like to appreciate the comments from Dr. Chin Kin Wah and Ambassador Verghese

Mathews. The main errors , however, remain with the author.


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To gain better insights on governance in Indonesia, the Institute of Southeast Asian

Studies (ISEAS), Singapore, conducted the Public Forum Governance in Indonesiaheld 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 ofshariah on governance in

some selected districts in Indonesia. Second, Dr. Aris Ananta focused on the governanceand 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 themacro-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 ofshariah regulations and good localgovernance. 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 developmentofshariah 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 thepossible 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. Sunyotoargued 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 wereexcluded 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 nosignificant evidence to support the view that radicalism was rising in the regions. There


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was growing conservatism, but not in terms of radicalisation. The struggle to endorse theshariah 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 ofshariah 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) wereinstrumental in passing shariah bylaws in Banjarmasin, it was misleading to conclude

that these two groups were the sole endorsers of such bylaws. The adoption ofshariah

regulations is part of political strategies used by the local politicians to gain politicalsupport. 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 andPDI-P are also endorsing shariah regulations. Parties that support the adoption ofshariah

regulations in the regions have gained popularity by promising to deliver services andenforce good governance based on Islamic principles. Dr. Aris Ananta, the secondspeaker, 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 publicservices. 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. Indonesianhistory showed that political changes always brought along changes in the public sector.

Public sector reform was portrayed from three approaches: good governance, free marketmechanism 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 theimplementation 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 inthe 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.


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The new agency like many other agencies providing public service is facing thechallenge 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 maximizesprofit.

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 thenew 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-for-

profit 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 hadbeen 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 toimprove 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 privatesector 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


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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 accommodatedproperly, 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 innatural 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 ofCSR 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 on-

going 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 andeconomic conditions in the surrounding areas in East Java as described by Sejiwan

(2006).

In conclusion, mainstreaming Good Governance principles and practices in Indonesia canonly be achieved when the private sectors fully engage and participate in governance

reform. Studies have shown that companies with good governance measures and goodCSR 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 politicalparticipation.

Concluding Remark

Indonesias transition to democracy holds out the promise of good governance. Having

transformed from autocratic governance to democratic governance, Indonesia has nochoice 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 ofdevelopment. Indicators of good governance can be developed to replace the commonly

used conventional macro-economic indicators. They still need the conventional macro-

economic 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 thepriority 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 governanceand democratic society in Indonesia.


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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. InJournal of Democracy, 18: 2, pp. 125-137, April 2007

Ramage, Douglas E. Indonesia: Democracy First, Good Governance Later. InSoutheast Asian Affairs 2007, edited by Daljit Singh and Lorraine C. Salazar, pp. 135-157. Singapore: Institute of Southeast Asian Studies, 2007

Sejiwan, Bondan. CSR creates goodwill for long-term business. The Jakarta Post, 03September 2006, retrieved from:

http://www.thejakartapost.com/yesterdaydetail.asp?fileid=20060903.G07 on 13

September 2007

Transparency International. Corruption Perception Index 2006. Retrieved from

http://www.transparency.org/news_room/in_focus/2006/cpi_2006__1/cpi_table on 30

August 2007

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Agung Wicaksono_Governance in Indonesia, A Conclusion From the Public Forum on Governance in Indonesia