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Corruption Eradication Commission And Investing In The Country.

Doing Business in ASEAN: Legal Considerations – Indonesia Chapter

 
June, 2014

An educated person should conduct justice since in mind and especially in deed

 

This powerful line is quoted from the book This Earth of Mankind written by Pramoedya Ananta Toer (6 February 1925 – 30 April 2006), a well known writer who had experiences to be exiled in one of the old regime of the government of Indonesian, for his controversial stance against human rights violation and corruption. Pramoedya Ananta Toer words helps to remind us that the fight against corruption must begin in our mind and will continue in our deeds.

 

The word corrupt is defined by some sources as a deviation from an ideal or the illegitimate use of public power to benefit a private interest. Aristoteles used the term to describe bribe and abandonment of good habits. Corruption activities may include bribery and embezzlement.

 

Eradication Of Corruption

 

1. Laws

 

Following to the ending of the New Order regime in Indonesia, the Indonesian government issued various laws and regulations to fight corruptions actions, amongst others:

 

  • Law No. 28 Year 1999 regarding State Management that is Free and Clear from Corruption, Collusion and Nepotism;
  • Law No. 31 Year 1999 regarding Eradication of Corruptions Criminal Actions (“Anti Corruption Law”);
  • Government Regulation No. 71 Year 2000 regarding Procedures for Public Participation and the Granting of Award for the Effort of Anticipating and Eradicating Corruptions Criminal Actions;
  • Law No. 20 Year 2001 regarding Amendments to the Anti Corruption Law;
  • Law No. 30 Year 2002 regarding Corruption Eradication Commission (“KPK Law”)
  • Law No. 8 Year 2010 regarding Anti Money Laundring;
  • Law No. 46 Year 2009 regarding Corruptions Criminal Court; and
  • Law No. 6 Year 2011 regarding Immigration.

 

The Anti Corruption Law replaces Law No. 3 Year 1971 regarding the same subject matter, which is deemed no longer applicable to the needs of people. The act of corruption is defined and described in detail under the Anti Corruption Law as amended by Law No. 20 of 2001. The Anti Corruption Law describes 2 main forms of corruptions on Article 2 and Article 3.

 

Article 2 states:

 

Paragraph (1):

 

“Every person which against the law conduct action to benefit personally or other parties or corporation which results in the detrimental to the state finances, will be penalized with life imprisonment or imprisonment at the minimum of 4 years and the maximum of 20 years and fine at the minimum of IDR 200,000,000 and at the maximum IDR 1,000,000,000”

 

Paragraph (2):

 

“In the event the above corruption action is conducted in certain conditions, death sentence can be determined.”

 

2. Corruption

 

Article  3 states:

 

“Every person with the intention to benefit personally or other parties or corporation, and illegitimately use authority, opportunity or the means because of position and power which results in the detrimental to the state finances, will be penalized with life imprisonment or imprisonment at the minimum of 1 year and at the maximum of 20 years and fine at the minimum of IDR 50,000,000 and at the maximum IDR 1,000,000,000”.

 

Besides the previously mentioned corruption actions, the Anti Corruption Law also provides other form of activities which are considered as corruption.

 

3. Institution Of KPK

 

To facilitate the implementation of corruption eradication, KPK Law provides legal basis for the establishment of the Corruption Eradication Commission (also known as “KPK”). According to Article 3 of KPK Law, KPK is a state institution which shall be independent in performing it duties and free from any influences of any whatsoever powers. Meanwhile, Article 4 states that the purposes of the establishment of KPK are to increase the efficiency and achievement of the eradication of corruption.

 

Other functions and tasks of KPK are as follows according to KPK Law are as follows:

 

  1. Coordinating with agencies authorized to eradicate corruption;
  2. Supervising agencies authorized to eradicate corruption;
  3. Conducting investigation and prosecution to corruption;
  4. Conducting preventive action against corruption;
  5. Conducting monitoring on the organization of the government.

 

 

In realizing the functions and tasks, KPK is allowed to gather information from any related agencies, investigating and monitoring any agencies in eradicating corruption. The KPK is allowed to take over any investigation on corruption which is being handled by law enforcer such as the police department or prosecutor’s office. The legal basis of KPK take over of corruption is mentioned in Article 9 of Law No. 30 of 2002 which are public report on corruption which is not being processed, impending investigation without clear reasons and impending corruption case because of legislation, judiciary and executive branch involvement.

 

4. Positive Impact Of Anti Corruption Campaign To Investment

 

Investor often had concern that investment in Indonesia requires high cost and expenses. One of the reasons behind this is corruption conducted by irresponsible government officers/authorities in relation to business licensing and permits. This factor was exacerbated by the misuses of power conducted by local authorities with regard to the implementation of regional autonomy/decentralization concept of government.

 

Nowadays, along with the growth of KPK, the efforts of the enforcement of Anti Corruption Law, undimmed public supports to KPK and Anti Corruption Law, freedom of press (Law No. 40 Year 1999 regarding Press (“Press Law”)) and public demands on government transparency, the awareness on anti-corruption campaign of the public and government institutions have significantly been increased. There have been many examples of detentions performed by KPK to public officers such as regents, mayor, governors, minister/head of ministry level, judges, prosecutors, police officers, parliament members, political figures, including private sectors such as entrepreneurs. This alone, provides “shock therapy” to government institutions and private sectors to fix themselves and take prudent act to eliminate possible corruption opportunity.

 

What we can see from business sector is that governments have tried to create various formulas to simplify licensing and permits for investments, in order to eliminate corruption opportunity. Not to mention that governments are also encouraged providing public transparency information by Law No. 14 Year 2008 regarding Public Information Transparency (“Public Information Transparency Law”), which enables people supervising the work of the governments. Despite not all institutions have provided such kind of public transparency, however, some authorities have started it presently. One of the examples is the Province Government of the Special Region of Jakarta (“DKI Jakarta”) which provides transparency on the financial conditions and Regional Revenue and Expense information to public in their website.

 

Investment Coordinating Board of the Republic of Indonesia (“BKPM”) in cooperation with local governments, also create a concept what so called as “One Roof Integrated Service System” (stipulated under the Chairman of BKPM Regulation No. 7 of 2013 regarding the Implementation of One Stop Service in Investment Field at BKPM) to simplify the timeline, flow and complexity of bureaucracy in business licensing and permits, in province and regency/city levels. This concept is also expected to cut off corruption opportunity at regional level. Even electronic application concept for business licensing has been created, pending the readiness of infrastructure, human resources and facilities.

 

Greater public awareness and supports on anti-corruption campaign and to KPK, the Public Information Transparancy Law and the assurance of freedom of press under the Press Law offers important tools for eradication of corruptions. Hence, in turn is expected to provide better investment environment, legal certainty and law enforcement in Indonesia to attract investment activities in Indonesia, as Indonesia is a big market for investment.

 

Citing from BKPM’s website (www.bkpm.go.id), it is stated that “Indonesia is an emerging global powerhouse in Asia. With the GDP expected to reach US$ 1 trillion in 2012, Indonesia is the largest economy in Southeast Asia. Much less affected by the global financial crisis compared to its neighboring countries, Indonesia’s economy grew by 5.7% in 2013, making “The World’s Most Stable Economy in the Last Five Years” according to The Economist Magazine.”

 

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For further information, please contact:

 

Anangga W. Roosdiono, Partner, ZICOlaw

[email protected]

 

Corporate/M&A Law Firms in Indonesia

 

Doing Business in ASEAN: Legal Considerations

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