Preventing Graft in Procurement

Continuing the commitment of the previous administration, the government of President Joko “Jokowi” Widodo and Vice President Jusuf Kalla has taken up corruption eradication as one of their main programs.

The government of president Susilo Bambang Yudhoyono manifested its support for anticorruption by, among other things, issuing Presidential Decree No. 70/2012 on goods and service procurement through electronic procurement
(e-procurement).

According to the Government Procurement of Goods and Services Agency (LKPP), e-procurement has saved approximately Rp 44 trillion (US$3.5 billion) of the state budget. At the local government level, many have profited from the online mechanism. Makassar city, for example, saved one fifth of its procurement budget last year.

Despite its advantages, however, e-procurement is not implemented as well as it could be. The use of e-procurement even tends to decline as is apparent in the fact that the mechanism was chosen in only 27.5 percent out of the total procurement budget worth Rp 828.3 trillion as of November 2014, down from 33.6 percent of the procurement budget of Rp 742.88 trillion in 2013.

State-owned enterprises (BUMN) and non-state-owned enterprises have mostly failed to comply with transparency in the procurement process, such as in oil imports.

Based on various government and public studies, the implementation of e-procurement faces obstacles as a result of its weak regulation system. This is evident in the fact that 19 percent of regency/municipal governments, 50 percent of state institutions and 26 percent of ministries in the country do not provide electronic procurement services (LPSE) despite the presidential decree on the mechanism. It also explains why corruption remains rampant in goods and services procurement.

Corruption Eradication Commision (KPK) said 60 percent of the graft cases it was investigating as of October 2014 were related to procurement. The figure does not include procurement corruption cases being investigated by the Attorney General’s Office and the National Police.

To show his strong political will to fight corruption, it is high time President Jokowi resume deliberation of the draft law on goods and services procurement, which was previously proposed as part of the National Legislation Program in 2011. Indonesia and Myanmar are the only two member countries of Association of Southeast Asian Nations (ASEAN) that have yet to enforce procurement legislation.

Besides regulating the e-procurement mechanism, the bill on goods and service procurement should govern at least three issues. First up is the establishment of an independent institution to receive complaints related to procurement, which under the current practice is handled by the procurement committee. In fact, as apparent in investigations into fraudulent procurement processes, the committee often perpetrates corruption itself.

Second, public engagement in procurement should start from planning, implementation and post-auction.  Acts of corruption often occur in the planning stage in the government and legislative debate over procurement. Public scrutiny will ensure a fair procurement process, besides improving transparency on the part of the government. Such a mechanism is successfully implemented in Makassar city and the regencies of Batang and Banjarbaru through www.pantaupbj.or.id.

Third, the private sector must be involved in the prevention of procurement corruption. The government can provide incentives to the private sector for their role in preventing graft and, on the other hand, impose harsh punishments for their involvement in corruption. The penalties may include fines and the revocation of business licenses.

Both incentives and penalties are expected to prevent bribery, which apparently have remained rampant in the procurement sector. A survey conducted by Kemitraan on entrepreneurs’ integrity in five provinces recently revealed that one in three entrepreneurs had been involved in bribery.

Combating corruption in the procurement sector will only be effective if the government enforces strict and tight regulations, the private sector adopts an internal mechanism to prevent bribery and the public has access to the control mechanism.

Jokowi and Kalla should now translate their commitment to corruption eradication in this country by enacting the much-awaited law on goods and service procurement.

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Arif Nurdiansah works for Partnership for Governance Reform (Kemitraan). Fitrya Ardziyani Nuril works for ASEAN Coordinating Centre for Humanitarian Assistance. The views expressed are their own.

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