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Viewing cable 06JAKARTA4520, INDONESIA'S ANTI-CORRUPTION EFFORTS - PART II
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| Reference ID | Created | Released | Classification | Origin |
|---|---|---|---|---|
| 06JAKARTA4520 | 2006-04-11 00:07 | 2011-08-24 01:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Embassy Jakarta |
VZCZCXRO8611
RR RUEHCHI RUEHDT RUEHHM
DE RUEHJA #4520/01 1010007
ZNR UUUUU ZZH
R 110007Z APR 06
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 2449
RUEATRS/DEPT OF TREASURY WASHDC
RUEAWJB/DEPT OF JUSTICE WASHDC
RUEHLMC/MILLENNIUM CHALLENGE CORPORATION WASHINGTON DC 0007
INFO RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RHEHNSC/NSC WASHDC
RUEAIIA/CIA WASHDC
UNCLAS SECTION 01 OF 06 JAKARTA 004520
SIPDIS
SENSITIVE
SIPDIS
DEPT FOR EAP/MTS AND EB/IFD/IFD
AID FOR ANE/ESA-CAVITT
TREASURY FOR IA-JEWELL AND BAUKOL
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DOJ FOR CRIM AAG BRUCE SWARTZ
DOJ FOR ICITAP JONES
DOJ FOR OPDAT ALEXANDRE AND EHRENSTAMM
MCC FOR MORFORD AND BENT
E.O. 12958: N/A
TAGS: PGOV KCOR KMCA ECON EINV ID
SUBJECT: INDONESIA'S ANTI-CORRUPTION EFFORTS - PART II
OBSTACLES AND USG ASSISTANCE
REF: Jakarta 3490
JAKARTA 00004520 001.2 OF 006
¶1. (SBU) Summary. A slew of high-profile corruption
prosecutions of current and former Government of Indonesia
(GOI) officials over the past year has energized the media
and civil society groups and placed newfound and largely
positive pressure on the bureaucracy (Reftel). Permanently
reducing the level of corruption in Indonesia will require a
generation of reforms to the bureaucracy and the legal
framework. Indonesia's largely unreformed bureaucracy
remains perhaps the biggest hurdle to reducing corruption;
with weak bureaucratic discipline and low salary levels, GOI
revenue and expenditure processes have grown corrupt with
kickbacks and bribes the norm. President Susilo Bambang
Yudhoyono (SBY) and his economic ministers, understanding
the systemic nature of the corruption problem, have moved
forward cautiously with a broad based civil service reform
program. GOI ministers and civil society leaders admire the
United States' strong record of prosecuting corruption and
white-collar crime, and US agencies provide generous amounts
of long-term development assistance and hands-on capacity
building. Para 19 has suggestions for further steps we
could take to support reducing corruption in Indonesia. End
Summary.
¶2. (SBU) This message, the second of two cables analyzing
SBY's signature anti-corruption campaign, outlines the major
legal, judicial, and institutional hurdles to anti-
corruption progress and areas where we might assist.
Coaxing Progress from an Unreformed System
------------------------------------------
¶3. (SBU) Reftel outlined the significant prosecutorial
successes of SBY's anti-corruption campaign to date,
including the conviction of nearly 70 current or former
senior officials of the central government -- including a
former Minister -- local governments, courts, or regional
parliaments on corruption charges. Despite this strong
start, pervasive shortcomings in Indonesia's legal regime
for prosecuting graft cases make it unlikely that an anti-
corruption strategy based predominantly on law enforcement
measures can by itself dramatically reduce the level of
corruption. The current anti-corruption system seems too
hidebound, inefficient, and, ironically, corrupt to handle
the huge increase in caseloads that would make fear of
prosecution an effective deterrent to corrupt behavior. Key
weaknesses of the current system include,
--Unavailability of Bank Records: Access to bank records
lies at the core of most corruption investigations;
Indonesia's bank privacy laws tightly restrict police and
prosecutor access to them. To get bank records, the
Attorney GeneralQ Police Chief must write the bank in
question via Bank Indonesia (BI), a cumbersome process that
rarely results in the timely production of key records.
--Lack of an Immunity or Cooperation Mechanism: Indonesia
lacks a law permitting plea bargains and a system for
granting immunity or a sentence reduction to a cooperating
suspect. Prosecutors tend to charge every person involved in
a crime, leaving no incentive to cooperate or implicate
others. The inability to "turn" lower-level operatives
against higher-level criminals means that many
investigations go no higher than the "bag man".
--Lack of Witness Protection or Whistleblower Laws: Law
30/2002 requires the Corruption Eradication Commission (KPK)
to "provide protection to witnesses and whistleblowers," but
provides no resources or legal framework. Other agencies
have even less of a legal basis for protecting witnesses.
Informants, complainants and other witnesses remain
vulnerable to threats, intimidation, or improper witness
tampering. No whistleblower protection laws exist to
prevent retaliation in the workplace such as firings,
JAKARTA 00004520 002.2 OF 006
demotions, or transfers.
--Restrictive Rules of Evidence: Indonesian rules of
evidence recognize only five types of evidence: testimony of
a witness; testimony of an expert; testimony of the accused;
a "document" as defined in the code; and an "indication"
(evidence of an act relating to the crime, as proved by
testimony or a document.) Common evidence used to prove
corruption charges in other countries, such as undercover
tapes, evidence recovered from computers, and financial
records do not clearly fall within the five types of
admissible evidence. In Indonesia, a civil law country,
judges have no obligation to honor rulings on the
admissibility of evidence in other cases, making it
difficult to plan effective investigations.
--Lack of Effective Asset Forfeiture and Mutual Legal
Assistance Laws: Indonesia's patchwork of poorly drafted
asset forfeiture laws makes it difficult for police or
prosecutors to locate criminal assets in a timely manner.
As Indonesia has very few mutual legal assistance treaties
(MLATs) with foreign countries, it can rarely recover funds
transferred abroad. The legislature recently passed a
mutual legal assistance law authorizing such international
cooperation, but with its numerous exceptions likely will
not substantially augment recovery of such assets.
--Weaknesses in the KPK Law: The 2002 law establishing the
KPK gave the new agency special powers against corruption,
but other sections of the law created obstacles to effective
prosecution. The special powers become available only when
the KPK has commenced an "investigation." The law expressly
prohibits the KPK from dismissing cases for insufficient
evidence, as the Attorney General can do in other cases,
and, as a result, the KPK must often make a difficult
decision on whether to commence a formal corruption
investigation based on incomplete evidence early in the
process. Various definitions "losses to the state" in
several Indonesian laws have led many investigators,
prosecutors, and judges to conclude erroneously that in a
corruption case a loss to the state must exist.
Weaknesses in Key GOI Anti-Corruption Institutions
--------------------------------------------- -----
¶4. (SBU) Institutional weaknesses in key GOI anti-corruption
bodies also acts to restrict the effectiveness of the
current prosecution-based anti-corruption strategy.
Although Attorney General Saleh enjoys a good reputation,
internal reform at the AGO has advanced slowly, particularly
when compared to General Sutanto's promising start with the
Indonesian National Police (INP). The AGO has little
experience dealing with outsiders, and few officials at the
AGO have had exposure to foreign legal systems, giving the
institution a strong inward-looking perspective. Saleh, an
outsider with no prior experience within the agency, has no
network of allies to push his reform program. The internal
affairs division within the AGO remains weak and poorly
regarded, and despite indications of corruption within the
institution, we have seen no arrests or public reports of
discipline. Many of the officials Saleh has appointed have
little experience as line prosecutors and only a limited
understanding of the obstacles to prosecuting corruption
cases.
¶5. (SBU) An overly rigid and dysfunctional relationship
between prosecutors and police hinders many investigations.
The two groups rarely work together on investigations; when
police hand over a dossier, prosecutors find themselves
often dissatisfied with the results. The lack of police
involvement once prosecutors accept a dossier for
prosecution also produces problems. Prosecutors cannot
conduct follow up investigations because the Indonesian
Procedure Code gives police the primary authority to take
investigative steps, includingQecuting search warrants,
JAKARTA 00004520 003.2 OF 006
obtaining bank records, and making arrests. Once an
investigation ends, prosecutors take charge of the dossier
and the arrested defendants, and have exclusive control of
the process. Interagency law enforcement task forces seen
routinely in the US remain rare in Indonesia; police and
prosecutors seldom develop joint, long-term strategies and
often miss opportunities to shake up corrupt networks. We
have seen recent progress in this area: the KPK and
Interagency Team to Eradicate Corruption feature integrated
teams of investigators and prosecutors who work together.
¶6. (SBU) The evolving relationship between the media and law
enforcement community complicates the prosecution of many
corruption cases. Intense media interest in such cases
coupled with distrust of the police often creates strong
pressure on the police to act very openly, at times
excessively so. As a result, the police announce or leak
many investigations at the outset, alerting suspects and
giving them time to destroy evidence, develop alibis, flee
the country, or transfer assets abroad.
Corruption and Poor Performance in the Courts
---------------------------------------------
¶7. (SBU) Despite signs of progress, corruption within the
law enforcement community and the judiciary provides a
serious obstacle to prosecution of corruption. Big cases
involve wealthy businessmen, bankers, or senior GOI
officials; they provide tempting extortion targets for
crooked cops, prosecutors, and judges. That said, we have
seen no indication to date of serious corruption in the Anti-
Corruption Court, the KPK and the Team for Corruption
Eradication, all created to circumvent corrupt law
enforcement and judicial organs. INP Chief Sutanto has
expressed determination to reduce police corruption.
¶8. (SBU) Unlike our Supreme Court, which selects a few cases
of legal significance each year, nearly every legal case in
Indonesia may go to the Supreme Court, creating a backlog of
some 20,000 cases and a climate of uncertainty for important
cases, which can sit in limbo for months. SBY appointed a
Judicial Commission in 2005 to review the performance of
judges, but the procedures and consequences of a negative
review remain undefined; it seeks additional authority to
remove poorly performing judges from the Supreme Court, some
of whom actively resist this effort. A Prosecutorial
Commission, also created recently, has fallen behind
schedule and not yet become operational. On the positive
side, these oversight organizations have sent a clear signal
to judges and prosecutors about SBY's determination to
tackle corruption.
Weak Audit Agencies and Inspectors General
------------------------------------------
¶9. (SBU) Well functioning state audit agencies and
Inspectors General (IG) offices provide an important defense
against official corruption. The two state audit agencies
do not perform an effective oversight role. The Finance and
Development Control Agency (BPKP), the internal GOI audit
agency, has no real mandate now that IG offices in line
ministries have taken over its internal audit function. The
Supreme Audit Board (BPK) has a constitutionally mandated
external audit function, and with decentralization, the
provincial and district governments have begun taking over
that function at those levels. As part of a multi-million
dollar program to rationalize, professionalize and
strengthen audit functions and inspectors general, the Asian
Development Bank (ADB) has recommended transferring BPKP
resources and staff to regional auditors and the Supreme
Audit Board.
¶10. (SBU) The Supreme Audit Board (BPK) seems a more
powerful organization, with an independent status spelled
out in the constitution. It, however, only slowly has begun
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programs that could reduce corruption in the bureaucracy.
BPK publishes thick reviews of agencies' operations on its
website, but has not developed media-friendly reports that
would garner public attention. U.S. GAO and USAID advisors
have suggested that the BPK create short summaries of its
reports. Most of its management board consists of political
appointees who have on occasion contradicted its Chairman,
Harvard-trained economist and former Bank Indonesia Senior
Deputy Governor Anwar Nasution.
Civil Service and Government Procurement Reform
--------------------------------------------- --
¶11. (SBU) The salary and incentive system in the civil
service throws up perhaps the largest single obstacle to
anti-corruption efforts. Civil servants do not have a
performance pay incentive system, and get promoted based
almost solely on length of service or patronage and paid
strictly for number of hours worked. Formal salaries for
most lower and middle level officials remain low,
encouraging moonlighting and the collection of informal fees
or bribes. A large part of many civil servants' salaries
comes from formal but irregular "honoraria" that supervisors
dole out when subordinates participate in special projects,
training programs or conferences. The control senior
bureaucrats exert over the compensation level of their
subordinates greatly reduces the incentive to report
corruption. Applicants seeking positions with high
potential for informal income (known as "wet" jobs) must
often buy them, e.g., many police cadets pay significant
fees to ensure their selection into the force.
¶12. (SBU) The corrupt government procurement system requires
kickbacks and bribes even for mundane purchases. The World
Bank estimates that 40 percent of official corruption comes
in procurement; kickbacks of 10-20 percent provide a major
source of income for officials. As noted Reftel, SBY's anti-
corruption campaign has created a significant disincentive
to corruption in this area to both positive and negative
effect: anecdotal evidence suggests that in 2005 fear of
prosecution slowed down the execution of block grants for
support of district-level purchases, as officials no longer
felt safe doing business as usual.
¶13. (SBU) SBY understands the systemic nature of the
corruption problem, and has begun moving cautiously with a
broad civil service reform program and other plans.
Coordinating Minister Boediono told us in March that while
SBY did not want to create a formal blue-ribbon commission
to draft a civil service reform plan (as recommended by the
World Bank), he asked Boediono to head an informal task
force to draft a broad-based civil service reform plan that
addresses salaries and benefits, incentives and promotions,
human resource development, staffing levels and other
issues. While a daunting task given the size and political
power of the civil service, the World Bank and other donors
stand ready to offer large-scale technical assistance. The
National Development Planning Agency (BAPPENAS) seeks to
revise Presidential Decree 80/2003 on procurement; the GOI
might create a separate procurement agency.
Decentralization of Corruption
------------------------------
¶14. (SBU) Prior to decentralization, businesses could make a
single payment to an appropriate national official, who
would make a few calls if a local problem arose.
Decentralization has given local officials much greater
autonomy, reduced oversight from Jakarta, and increased
opportunities to engage in corrupt activities. When, for
example, a prominent local coffee producer announced plans
to set up a factory in an industrial estate east of
Surabaya, the head of the village sent him a letter
demanding the firm pay USD 2,000/month for "causing a
disturbance," build a new soccer field for the village team,
JAKARTA 00004520 005.2 OF 006
and a new office building for the village chief. The
proliferation of small-scale, local corruption has become an
investment climate issue; many businessmen complain that the
Suharto-era system of one large bribe payment seemed more
"business friendly" as firms could budget for it.
U.S. Anti-Corruption Assistance
-------------------------------
¶15. (U) GOI ministers and civil society leaders admire our
strong record of prosecuting corruption and white collar
crime, and USG agencies provide generous amounts of long-
term development assistance and hands-on capacity building.
USAID has budgeted approximately USD 36 million for 2004 -
2009 for anti-corruption development programs, including,
--Judicial Reform Initiative: Bolsters capacity at the Anti-
Corruption Court and the Commercial Court.
--Financial Crimes Prevention Project: Assist the Financial
Transaction Reports and Analysis Center (PPATK) with
training and advice. Recently extended to include the AGO,
KPK and Ministry of Finance's Inspector General to help
investigate and prosecute money laundering and other crimes.
--Transparency in Local Governance: Helps local governments
develop sound policies, performance-based budgeting, and
participatory planning.
--Justice Sector Reform Project: Helps the Supreme Court,
AGO and Judicial Commission with internal reforms and
transparency issues such as hiring, evaluation, retention
and promotion policies for judges and prosecutors, together
with new codes of ethics and improved public outreach.
--Working with the "Institute for the Independence of the
Judiciary," AID helps the Judicial Commission establish
transparent judicial selection procedures.
--In February 2006, USAID held a government procurement
conference that produced recommendations to improve
government procurement transparency, including a toolkit for
local and provincial governments. The KPK, BAPPENAS,
Indonesia Procurement Watch and USAID's Local Governance
Support Program will collaborate on a procurement reform
training program for local governments to increase
procurement integrity.
¶16. (SBU) Since May 2005, the Department of Justice Resident
Legal Advisor (RLA) has provided assistance to GOI officials
working corruption cases. He has worked with the AGO on a
draft mutual legal assistance law and appeared before
Parliament to discuss witness protection legislation. The
RLA has worked on a proposed regulation to allow the AG to
dismiss charges against cooperating defendants in corruption
cases, conducted a series of workshops on prosecuting
complex corruption cases for the KPK and AGO, and
participated in anti-money laundering training sessions for
prosecutors. He has run seminars on undercover
investigations and complex prosecutions for prosecutors of
the AGO's Special Crimes Division, and a workshop for the 45-
member Team for Corruption Eradication.
¶17. (SBU) DOS-funded International Criminal Investigative
Training Assistance Program (ICITAP) Anti-Corruption
Assistance Project has engaged with police to strengthen
internal discipline. Funded at USD 600,000 through April
2007, the project hosted a January 2006 high-level workshop
to review INP's internal discipline system, and supports INP
financial management reform and capacity building.
¶18. (SBU) Although no extradition treaty or mutual legal
assistance treaty exists between the US and Indonesia, in
January 2006 the FBI, Diplomatic Security and DOJ cooperated
to secure the return from the US of David Nusa Wijaya, an
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Indonesian fugitive convicted of embezzling bank liquidity
support funds in the late 1990s. The RLA and DOJ's Office
of International Affairs responded to a GOI request to
recover proceeds from the Bank Negara Indonesia (BNI) fake
letter of credit scam involving convicted felon Adrian
Waworuntu. The consular section has requested
identification information from INP on subjects of ongoing
corruption cases to prevent them fleeing to the US.
What More Can We Do?
--------------------
¶19. (SBU) Our generous assistance to date in this area has
won praise from ordinary Indonesians and GOI officials from
President Yudhoyono on down. We can do more to demonstrate
U.S. support for GOI anti-corruption capacity,
--During his February 2006 visit to Washington, Minister of
Law and Human Rights Hamid Awaluddin told Deputy Secretary
Zoellick the GOI wants an MLAT. When Attorney General
Gonzales visited Jakarta in November 2005, Attorney General
Saleh asked for help tracking down and returning corruption
fugitives and their gains. Negotiating an MLAT would provide
at little cost a new channel for cooperation on corruption
cases, and boost bilateral law enforcement ties. We
recommend DOJ respond favorably to Hamid's request.
--Indonesia qualified for Millennium Challenge Corporation
threshold status in November 2005 and plans an extensive
anti-corruption initiative. We should continue engagement
with the GOI to make sure it delivers results.
--State or DOJ should provide the FBI USD 75,000 to provide
undercover equipment and training to KPK investigators to
improve the capacity of the KPK to break open corruption
cases, and work up the chain from lesser figures to those
who direct and benefit from corrupt activity.
--The posting of a RLA has given the Embassy a means to
provide hands-on capacity building assistance to prosecutors
and investigators on complex corruption cases. The RLA also
provides us a resident source of expertise on witness
protection and whistle blower laws, immunity provisions, and
criminal procedure reforms. We recommend INL continue to
fund the RLA position in Jakarta, and if events warrant,
consider expanding that support to fund a second RLA
position.
--The KPK has requested information from DOJ on its
investigation of Monsanto under the Foreign Corrupt
Practices Act, and two KPK commissioners met DOJ prosecutors
on this last year. Where possible, we recommend that DOJ
provide information so the KPK can identify and prosecute
Indonesian recipients of payments made on behalf of
Monsanto.
--The ICITAP Anti-Corruption Assistance Project has had
significant success working with INP on reducing corruption
and promoting internal reform. We recommend the Department
continue to fund this program; without additional assistance
it ends in April 2007.
PASCOE