Corruption Hampers Indonesian Economic Growth
Friday, 22 September, 2006 | 14:56 WIB

Tempo Interactive, Jakarta: The high rate of corruption has been the cause for the low economic growth in Indonesia compared to other developing countries. “Corruption is considered as quite high a risk for business and investment in Indonesia,” said Paul A Volcker, the former member of the Board of Directors of the US Central Bank, yesterday (21/9) in Jakarta.

Voelcker, also an Honorary Chairman of the Board of the Financial Services Volunteer Corps, said that the intention of foreign and domestic investors for investing in Indonesia has lacked on account of the high corruption rate. The condition is worsened by the indistinct legal framework as well as the inefficiency of bureaucracy in Indonesia.

However, Indonesia has high potential for developing business and investment. In fact, according to him, the potential is higher than other developing countries such as Malaysia and Singapore. “Nevertheless, the excessive corruption rate has caused Indonesian economic growth to decrease,” he said. “The economic performance is disappointing because there is not enough investment for accelerating economic growth,” he added.

He has said that as long as the corruption rate is still elevated, economic growth in Indonesia will keep diminishing and will be lower than other developing countries. “Indonesia will have trouble competing at the international level, especially within the free market system,” he said.

He has suggested that the government take concrete steps for eradicating corruption, improving audits, as well as doing better planned and more transparent projects. “It is expected that this step will stimulate investment.”

Finance Minister Sri Mulyani Indrawati said that the high corruption rate and the low implementation of government management are caused by the low quality of human resources in Indonesia. The problem is that it is not easy for improving the quality of human resources. “Depending only on good intentions and policies is not enough,” she said.

According to her, the improvement of the government credibility will also require performance-based incentives and payments that improve (the merit system). “Salary is not the only matter. However, without improving salaries, corruption eradication will not be completed.”

Suryani Ika Sari, Sofian
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