John Bray: Dealing with the penalties of NOT paying bribes

Complaints about perceived high levels of corruption in Indonesia are a constant topic in both business circles and in everyday social conversation. But how does the country compare with its neighbours? And what can companies and individuals do to address the problem? Two recent international surveys offer valuable insights.

The first is the ASEAN Business Outlook Survey 2018 conducted by AmCham Singapore and the U.S. Chamber of Commerce with analytical support from Control Risks. Respondents to the survey included a total of 317 AmCham member companies in all ten ASEAN countries.

The survey points to good news. When respondents were asked about new investment destinations in Southeast Asia, 28.7% of respondents chose Indonesia, just behind Myanmar (29.3%) and Vietnam (34.4%). Some 73% of AmCham companies already operating in Indonesia expect to expand their businesses.

Nevertheless, corruption emerges as a constant, nagging problem. Overall, some 65% of Indonesia-based respondents expressed concern with current corruption levels. Their counterparts in Cambodia (80%) and Vietnam (77%) were even more likely to be concerned. By contrast, the figures for Malaysia (46%), Myanmar (57%) and Thailand (55%) were significantly lower.

When asked about areas of reform that would benefit foreign investors, 61.5% of Indonesia-based respondents chose “greater progress on battling corruption,” while 50% chose “clearer legal protections, including police and judiciary reform.” There is no question that Indonesia is attractive to investors but on these points it risks losing out to its international competitors.

A second, complementary survey, this time from the anti-corruption NGO Transparency International (TI), presents the perspective of ordinary citizens. The survey was conducted through face-to-face interviews in 1,000 households selected to be representative of Indonesia as a whole. The findings were published earlier this year in TI’s People and Corruption: Asia Pacific report.

Respondents were asked whether they had come into contact in the past year with six core public services: police, providers of identity documents, public schools, hospitals, utility services and courts. Out of the total number of people who had dealt with these services, 32% had paid a bribe in the past year. This means that nearly a quarter (24%) of all Indonesian respondents — including those who hadn’t been in touch with any of these agencies — had paid a bribe. The police came top of the agencies most likely to demand bribes (25% of the respondents who had come into contact with them), followed by the bureaucrats who issue identity documents (23%), and officials at public schools and hospitals (15% each).

The incidence of bribery payments may seem high, but Indonesia is by no means the worst-affected country in Southeast Asia. In TI’s survey that title goes to Vietnam where as many as 61% of respondents said that they had paid a bribe in the previous year. Anecdotally, many Indonesians tell Control Risks that the penalty for refusing to pay bribes is a delay in service delivery. In Vietnam they may not receive the service at all.

These findings offer a helpful point of perspective. While demands for bribes in relation to routine government services remain endemic, Indonesia is by no means the worst-affected country in the region. Nevertheless, both companies and individuals need strategies for dealing with the problem.

The Indonesian respondents to the TI survey appear optimistic in that 78% agree with the proposition that “ordinary people can make a difference in the fight against corruption.”

However, responses to a follow-up question on precisely what they can do are more nuanced. The most popular answer – chosen by a third of respondents – was that they could “refuse to pay bribes.” In other words, bribery payments need not be inevitable. However, 23% thought “ordinary people cannot do anything,” and only 12% of respondents thought that it was viable to “report corruption when you see or hear it.”

In response to a follow-up question on reporting, 38% of Indonesians said that people did not report corruption because they were “afraid of the consequences.” The survey does not go into detail on the nature of these consequences. However, at a minimum, they might include the inconvenience of being caught up in a long-running investigation, possibly including the need to appear in court as a witness. Moreover, it is easy to imagine that ordinary people will fear intimidation from powerful interests who benefit from corruption. They will be reluctant to take risks if the outcome is uncertain.

Many of these responses will strike a chord with companies who are invited to pay bribes, for example when applying for permits and licenses. Nevertheless, companies are far from powerless. Here there are three key points.

• For companies as well as ordinary people, “refusing to pay” is the single biggest contribution that they can make. However, refusal needs to be part of a coordinated strategy. The minimum requirement is to ensure that companies meet all official requirements in all their official dealings, resolving any apparent contradictions as well as they can. At the same time, they may need to develop contingency plans, allowing for bureaucratic delays if they refuse to pay “speed money.”

• Second, while reporting corruption is highly desirable from a public interest perspective, it is easy to see why most companies are reluctant to take a public stance. The outcomes are uncertain especially given that the opaqueness of the Indonesian court system. Even if companies win one success, they may fear that the bribe-demanders will find other ways of retaliating, for example by finding ‘legitimate’ reasons for slowing down other bureaucratic processes, or targeting the company for some alleged breach of official procedures. In Control Risks’ view companies should take a stand against corruption, but it may be more effective — as well as less hazardous — to do so as part of a collective initiative, for example with an industry association.

• Third, therefore, the main emphasis needs to be on prevention, making sure that all employees are fully aware of their company’s anti-corruption policies, and that these are fully supported by middle and senior management. This support will include targeted training. However, the most effective demonstration of the company’s policies will come through the choices that it makes in day-to-day decision-making, including a consistent refusal to pay.

Overall, the two surveys underline the challenges of facing up to corruption in Indonesian society. At the same time, both society and politics remain highly fluid. There will be reversals as well as advances, but both individuals and companies can contribute to positive change.

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John Bray, pictured above, is a Director at the Singapore office of Control Risks, the international business risk consultancy. In addition to being a risk consultant, he is a policy specialist with more than 30 years’ experience in Asia, Europe and Africa. His particular areas of expertise include: anti-corruption strategies for the private sector; business and human rights; and private sector policy issues in conflict-affected areas.