1. Corruption Diagnostics
Prescribing a Reform Agenda for Indonesia

2. Corruption is “use of public office for private gain”
Why study Corruption
- Hurts Growth (hurting innovative activities and distorting budgetary priorities)
- Leads to huge immediate and lingering economic losses
After discussing on the definition, the following two points discuss on why it is necessary to talk about corruption.

3. Why study Indonesia Measure Indonesia status
World Bank Governance indicator
Ranks among bottom 10%
Transparency International CPI
Consistently ranks among worst; most corrupt country in 1995
World Economic Forum
Ranks midway and lowest among Asian peers

4. Corruption Diagnostics
Corruption = F (rent, risk)
Rent
High
High corruption
Watchdog systems
Low
Corruption potential
Low corruption
Risk

5. Corruption Diagnostics (contd.)
Wholesale corruption targeting versus focusing on specific sectors
Finding the Primary Root
Targeting corruption reduction/ reforms on Primary Root
This section will compare corruption to growth; we say that the point of focusing on Primary Root is to obtain the maximum bang for the reform buck a la Hausmann et al.

6. Diagnostic Framework High rent Low risk Natural endowments
Economy structures and nature
Value systems
Incidence of political transition
Quality and performance of Institutions
Management of natural resources – are they leading to poorer administration and management in the country?
Civil society, public information and media
Electoral and political processes
Branches of government Executive, Legislature & Judiciary
Administration and civil services
Oversight and regulatory mechanisms
Rule of law

7. Analysis of corruption in Indonesia
Maximizing World Bank’s investment in reforms
Application of corruption diagnostic in Indonesia

8. High rent Low risk Natural endowments Economy structures and nature
Value systems
Incidence of political transition
Quality and performance of Institutions
Civil society, public information and media
Electoral and political processes
Branches of government Executive, Legislature & Judiciary
Administration and civil services
Oversight and regulatory mechanisms
Rule of law
Value systems imply emphasis more on cooperative (Asian) values rather than valuing fairness and prosecution; political transition with change from autocratic to democratic regime; the institutions of judiciary and civil services were ill-equipped to deal with transition and also dealing with the work load and demands of a democratic society; State conclusion here that Indonesia suffers from poor judicial system compounded by an inefficient civil service that was unable to help make the smooth transition to a democratic system.
Fares well
Cause for concern
Primary root of corruption

9. Policy options for judiciary reform
Introduction of special courts
Setting up of Vigilance Committees
Introduction of merit-based promotions in courts
Sector-specific salary increases

10. Policy recommendations
Addressing judiciary, civil service and political transition history
From discussion with Schauer