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Fighting corruption – an Indonesian case study


11/2005
  

[ Good governance ]

The paradox
of fighting corruption

A programme to improve schools in Indonesia became well-known for abuse of funds, even though it served its purpose fairly well. Indeed, the programme was designed to check corruption. It was for that reason that cases of wrong-doing were detected and publicly discussed. The irony of the matter is that the programme would not have earned its negative reputation, had its corruption monitoring been less efficient.


[ By Stephen Baines ]

In mid 2003, on the eve of a visit to Indonesia by the Dutch Minister for Overseas Development, articles appeared in the Dutch press alleging widespread corruption in the Government of Indonesia’s School Improvement Grants Programme (SIGP). The Netherlands was providing grant funding for the SIGP, amounting to $60 million. The fall-out from the adverse publicity dominated the Minister’s visit, led to questions in the Dutch Parliament and a cessation of new technical cooperation for several months.

The Dutch Government was under considerable popular and media pressure to make efforts to safeguard Dutch taxpayers’ money. Inter-governmental relations between the Dutch and Indonesians, which at the best of times, operate against a background of ex-colonial sensitivity, were put under strain. The ensuing furore also affected relations between the Dutch Government and the World Bank, which was managing the programme through a trust fund. The situation was not helped by the fact that relations between the Indonesian Government and the World Bank were not good at the time. The Indonesian Government is conscious of its bad reputation for corruption but resentful of outsiders who point it out.

This situation was paradoxical in two ways.
– SIGP, which became synonymous with corruption, was actually a successful programme. It substantially achieved its objective of improving learning conditions in the poorest schools in Indonesia.
– Problems of corruption came to light, not because of programme failures. Rather, the programme was successful in introducing measures to improve accountability and expose corruption.

SIGP provided large grants to 8000 particularly poor schools in Indonesia between 2001 and 2004. The money was mostly spent on physical rehabilitation. The programme was deliberately planned in the full knowledge of the prevalent corruption that had infused education projects in the past and incorporated features for a solid accountability framework.

Important decision-making was decentralised. Only the direction of programme policy, its regulatory framework and the setting of district allocations were centrally determined. Selecting the beneficiaries was the responsibility of multi-sectoral committees at the district and local levels, which included non-government representatives. In schools, implementation was the responsibility of school committees, on which community participants served.

The adoption of block grants to fund schools enabled operational expenditure to reflect local needs and avoided interference from intermediaries. Direct transfer of funds to beneficiaries through the banking system by-passed the usual public expenditure mechanisms of the government treasury system. In the past, operational funds were routinely filtered from the system before reaching schools.

Programme procedures were specified in comprehensive guidelines. Considerable effort also went into briefing implementers. A structure of accountability was set out defining the roles and responsibilities of the central government, the districts and schools. These were formalised in a series of compacts known as Memoranda of Understanding (MOU).

Programme processes were open to public scrutiny. The key organising committees had to comprise 50% non-government representatives. Information about the grants was to be made freely available to school communities, through “socialisation” meetings and school notice board displays. The media were invited to report. The programme was independently monitored to assess compliance to the rules, gauge performance against objectives and evaluate outcomes.


A lingering image

SIGP was thus set up to avoid leakage and corruption. It minimised opportunities for diverting funds, prescribed grant selection and cash handling procedures, promoted public awareness and provided professional monitoring. And yet the image that lingers is one of a programme flawed by corruption.

Some cases of corruption were discovered by the independent monitors. Other cases were publicised by NGOs or the press. Instances included charging for services that were supposed to be provided free, for example, by the construction consultants. Cases of more systematic diversion of funds from grant recipient schools by local government officials were also found. Because grants could not be filtered as they passed down through the system, they had to be siphoned up from the schools. Corrupt practices by local officials included:
– accepting bribes to influence the selection of grant recipients,
– “taxing” schools for services rendered or favours given,
– colluding with local building contractors to subvert the requirement that rehabilitation works should be school-managed, and
– operating opaque and unaccountable procurement arrangements on behalf of schools for the purchase of books and furniture, which provided poor value for money.

These instances of fund diversion were serious breaches of programme rules and reduced the efficiency of the grants. Some schools suffered significant losses.

Despite the publicity given to the issue, however, the extent of corruption in SIGP was not as extensive or as damaging as might be thought. Precisely because of the transparency and accountability safeguards built in to SIGP and the scrutiny it received, corrupt activity was brought into the light of day, in ways that did not apply in most other programmes.

By the standards of these other programmes, the amount of corruption was limited and its negative impact contained. Thus, corruption was not worse in SIGP. It was just more visible. Of the many lessons that can be learned from the SIGP experience, four are worth noting here.
– Reliance on regulatory approaches to establish accountability and ward off corruption is not enough. Rules are ineffective without the will to enforce them.
– Clear lines of authority are a prerequisite of accountability and a bureaucratic structure with unclear and overlapping areas of jurisdiction inhibits enforcement. There also has to be a framework of generally accepted procedural mechanisms for government business, which provide consistency of approach and the expectation of due process. There has to be a “good” way of doing things, otherwise “bad” practices will prevail. Corruption leads to inefficiency and waste, but it is a workable way of getting things done, when no better alternative is available.
– Monitoring can be an effective safeguard, but it has its limitations. Independent monitors made three major contributions to SIGP: they provided a clear and timely view of what was going on; they provided competent investigative capacity; and they developed a rigorous and systematic approach to case management. However whilst monitoring is necessary, it is not sufficient to ensure proper accountability.
– Programmes and projects that attempt to tackle corruption can become victims of their own success. SIGP was regulated by a set of safeguards. It was precisely these transparency and accountability mechanisms along with the scrutiny the programme encouraged that shone a spotlight on corrupt activity, which in most other programmes was shrouded in darkness. Corruption became an issue in SIGP because of all the effort that went into discovering it.

Policy makers and donors need to understand the complexities of establishing accountability. They should realise that the more emphasis they place on accountability and on exposing corruption when it occurs, the more likely they are to find it. Policy makers and donors should therefore retain a realistic view of what is being achieved. In the fuss surrounding corruption in the SIGP, it was easy to loose sight of the purpose of the programme and its achievements. It was not primarily an anti-corruption programme. It was a school quality improvement programme, which acknowledged the corrupt environment in which it operated and attempted to do something about it. It should therefore be judged against its own objectives and not solely against an anti-corruption agenda.


Stephen Baines
is a free-lance development consultant from the UK and was Team Leader of
the Central Independent Monitoring Unit in the Indonesian Ministry of National Education 1999-2004. He presented this case study at an InWEnt workshop on social services earlier this year.
smbaines@onetel.com