Corruption in Indonesia

Topics: Economic growth, Economics, Political corruption Pages: 3 (940 words) Published: October 1, 2012
Culture of corruption is deeply entrenched in Indonesian society and remains an ongoing challenge for Indonesia (Temple, 2001). Under Suharto’s regime, corruption was centralized in which the collection of bribes was dominated by government (Macintyre, 2003). In other words, individual officials were prohibited to maximize their personal gains (Temple, 2001). After the Suharto’s fall, Indonesia became more democratic and decentralized which were likely to confront corruption. However, corruption has gotten worse as institutions of democracy were still unstable during the critical transition (Smith, 2003). Under decentralization, bribe-takers have been substantially increasing due to the fragmented bribe collection system. On top of that the new local regulations were created as it involved all levels of government officials, therefore increasing the magnitude of bribe-taking (Kuncoro, 2006; Henderson & Kuncoro, 2004). Furthermore, business uncertainties also increased as any bureaucrats would subsequently involve in collecting further bribes themselves (Macintyre, 2003). As a result, foreign investment dropped precipitously because of too high “corruption-related cost”, thereby impeding the economic growth more than in the Suharto era (Webber, 2006; Mauro, 1995). Corruption is endemic in Indonesia and it has a long-term impact on economic growth and development. (Lindsey, 2002). The culture of corruption hampered the economic growth as it attracted greater number of bribe-takers involving in corrupt activities. For examples, many local companies tend to increase the cost of doing business to solicit bribes and this corrupt act becomes a deterrent to foreign firms making investments in the country; it eventually made the local investment less attractive which significantly eroded the country’s long-term economic growth (Shera, 2011). However, some researchers argued that high levels of corruption could create and coexist with economic growth prosperity,...
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