Manipulation and Corruption

Corruption has become an issue of major political and economic significance in recent years and the necessity to take measures against it has become evident.

Explooring Manipulation ?...ask Mbah Ghus Taf..on the spot

Why Corruption is Harmful

Why Corruption is Harmful

Text by Alistair G. Speirs

You can't live in many countries these days without reading about corruption, or reading about it on the news. It's everywhere, it's rampant, its effects are incredibly harmful but invisible, and unless you are directly affected you may think, "So What? It's just a few politicians scamming the system, let it be". But despite its invisibility, corruption really does harm countries - and people - to an extraordinary agree. Publisher Alistair Speirs explains why.

Corruption can be most easily defined as the manipulation or perversion of a system for the benefit of a single party rather than for the benefit of the public or the intended beneficiaries. Complicated isn't it? And hard to pin down, that's why it's so widespread, so endemic (that means widespread!), so engrained, and so hard to eliminate. But is it really necessary to eliminate? After all many countries are still advancing despite allegations of corrupt systems and have positive economic growth rates? Absolutely, totally and without a doubt, is my personal take on the matter, and if we have to be ruthless about it, so be it, for the only way to be a fair and just society is through the complete elimination of corruption from the public and private sectors alike.

I have just been reading a marvelous book called "How the Scots Invented the Modern World" by an American professor of history called Arthur Herman, which brilliantly clarifies the birth of modern political, economic and commercial thinking, and which traces the development of the theories which guide modern democratic society and the commercial world which thrives in it. And there is no doubt, starting from as far back as 1760, that the systems which enable civilized communities to live well have to be fair, just and clearly understood and adhered to by all.

In "Wealth of Nations", which is probably the book which launched modern economic theory, the author Adam Smith is quite adamant that progress is driven by personal interest, but that interest must be channeled and guided by law so that the outcomes are for the overall benefit of society, and not just for the individual. Anyone interested in this whole area would benefit greatly from a dip into these extraordinarily visionary works from Smith, Adam Fergueson, Lord Kames, David Hume and Alexander Caryle, who combined philosophy and economic theory, commerce and the law and often religion as well! It was not uncommon for someone to be a Lord Chief Justice, a University Professor and a Minister of the Church of Scotland all at same time. These gentlemen knew how to think but also combined their debates with evenings of serious drinking of claret and port! Quite the metropolitan man 250 years ago!

But back to the point: these brilliant minds honed the theories of how to advance society through law and justice, through commerce and industry hundreds of years ago, and they work. That's why Britain became a world power and is still one of the leading educators of the world today, with a currency which is still extraordinarily strong.

And where is all this information? Is it a secret used by Britain and Western countries to dominate the world economy? No, its free, open and easily accessible, and should be mandatory reading for all Government officials, legislators, parliamentarians and the whole judiciary. Sadly, the great majority of those in power prefer to ignore these good advices and in the case of ex-colonial nations blame their continuing political and economic woes on "300 years of Dutch occupation" as in Indonesia's case conveniently ignoring 60 years of independence during which time other countries as Singapore have transformed their social and legal structure to become world class economic powers.

So why is corruption harmful? At its simplest level it inhibits the wealth of the country in favour of the wealth of the individual, at its most complex level it denies justice and human rights, it creates fear and confusion, it wastes time and money, it inhibits development, it destroys the environment, it wastes valuable resources and ultimately diminishes the value of human life. That's hardly a trivial list, but let's look at some examples to illustrate these claims:

Let's start with a very hard area to identify: investment fraud. A company gets a license to build a cement factory, for example, with all the appropriate government permits. It borrows US$100M on the promise that the plant will have a total value of US$200M with the rest funded by equity (capital). In fact, they only use the borrowed US$100M and build a much under specified plant. This results in the company suffering losses but because it is an "essential industry" the government bails it out and buys 50% of the company for, you've guessed it, US$100M and imposes a price control on the cement industry raising prices until the factory is profitable. No one is hurt, but the country has wasted US$100M, the owners have not spend a cent and now own 50% of a factory which produces overpriced cement which the consumer pays for making the whole economy worse. A brilliant and invisible scheme.

Repeat that over 100 industries and you have a completely inefficient economy supported by a corrupt government with let's say 10 companies or commercial groups owning 10 industries each paid for by the consumers and taxpayers. My imagination? No. A real scenario in the 60's and 70's and the root of many of today's problems in ex-colonial countries.

Let's move on to a much smaller – and more endemic – example: commissions. One person gets paid a commission in return for placing business with a certain supplier. Harmless, right? Wrong. This destroys the selection process based on best performance and "steals" the profit margin from purchasing company. In the case of public works contracts the country ends up with low quality roads, water systems, airports, education, well everything provided by the government. And in the private sector you get lower profits (or actual losses), lower employment, lower wages, lower quality of work. Again the same people pay – the consumer and the taxpayer.

Now if the legal system is itself subject to abuse, whereby court decisions can be influenced by promised benefits or prosecution avoided by the careful application of funds (which themselves were stolen!), then there is little incentive to pursue this course, and even less chance of recovery for those who have been harmed, wronged or defrauded. This is exactly the point that Kames and Smith made, that people are driven by the urge to create wealth for themselves but they must be able to feel secure in the legal system or they will lose incentive even to try, and the only "entrepreneurs" left will be those engaged in illegal acts. A chilling and yet realistic prognosis.

Then there are the 'harmless' results of corruption: un-repaired roads causing delays (and increased stress, wasted time and wasted fuel); idiotic bureaucracy over permits, licences, ID cards, well just about everything; wasted money over badly planned programs such as tourism promotion, health services, traffic systems and well just about everything again! These are not criminal in the strict sense of the word but where there is a "good way" of doing things which is ignored in favour of a 'bad way' this is wasting taxpayer money and worse than that allowing profitable, efficient opportunities to go to other competing countries.
Perhaps this is why Singapore with a total population of just 4 million can buy foreign companies with a total customer base of over 10 million! And Malaysia with no better resource has 18 million visitors and Myanmar only 1 million! Just a thought.

So how to eliminate this astonishingly ingrained disease? During a seminar with Singapore's Senior Minister Goh Chok Tong, I asked him that very question and he was very clear in his answer. First of all, he said pay government officials well – equal to top private sector packages – that means a million dollars a year for ministers. Then ensure the legal system is sound, again by paying very well. Then punish public sector corruptions very, very severely, but that punishment should not just be for the person involved but his whole family. A complete ban on all public office, all commercial activities, complete social ostracism. No escape. Perhaps when the family also suffers, the lesson will be learnt. Who knows, but it worked in Singapore!

But as Mr. Goh said, "when a man can live in any house, drive any car, educate his family in any school worldwide, have any holiday, any luxury, why should he be corrupt?"

Well, one of the answers to that is the fact that so many countries have a 'price of entry' system which is hard to break. To become a general, a governor, an MP, a head of a state owned company, the price is so steep that the successful applicant has to pursue illegal activities to repay their backers. This is extremely difficult to put an end to since it is like tenured labour but at the highest levels. But at some point there will have to be an amnesty for all in that situation and call a halt, otherwise the world will never be free of corruption.

And that means we can never be healthy, wealthy and free from guilt. Anyone ready for the challenge?

Press Release Draft State Budget 2008

The draft 2008 budget was presented in the Parliamentary Session on 16 August 2007. The Draft 2008 Budget represents a further step forward in the systematic implementation of the vision and mission of the United Indonesia Cabinet set out in the Medium-Term National Development Plan (RPJMN) for 2004-2009.

The Financial Notes to the 2008 Draft Budget are more detailed, comprehensive and transparent. The economic conditions and projections underlying the budget are fully explained, as are the various policies envisaged by the Government that will affect the details of revenues, expenditures, and financing. This comes in response to demands from stakeholders, among others the Indonesian Parliament, economists, rating agencies, international institutions and the public, all requiring more complete and accurate information, and the Government desire for improved accountability and transparency in fiscal management.

The key reforms presented in the Financial Notes and the Draft 2008 Budget include the following: (i) full explanation of the economic conditions and projections underlying the formulation of the Draft Budget, (ii) detailed explanation of the effect on the budget and financing of the various policies to be implemented by the government; and (iii) disclosure of uncertainties and fiscal risks, both to the ongoing and future budget, most importantly with regard to deviations from assumptions and macroeconomic indicators, implementation of the infrastructure guarantee programme, the Public Service Obligation programme, sound condition of SOEs, natural disasters and the planned pension and social security policy.

These reforms are expected to provide a more complete and proportional picture for the general public and decision makers in their study and analysis of the Budget and tracking its implementation. The Government is confident that the provision of more transparent and accurate information that is understandable to all members of the public and decision makers will minimise uncertainties and strengthen the overall efficiency of the economy.

Primary feature of the Draft 2008 budget: reallocation to more productive expenditures

In the Draft 2008 Budget, the Government is striving for consistent improvement in fiscal effectiveness and efficiency. In so doing, capital expenditures are up dramatically from Rp 68.3 trillion (Revised 2007 Budget) to Rp 101.5 trillion (Draft 2008 Budget), an increase of 48.6%. At the same time, procurement is being reduced to Rp 52.4 trillion from the Revised 2007 Budget procurement level of Rp 62.5 trillion.



2006 Real


2008 Draft Budget

State Budget

Revised State Budget

GDP Growth:

Growth (%)





Nominal Expansion (Rp trilloins)





GDP per Capita (in US$)





Inflation (%)





Exchange Rate





Average SBI Rate (%)





Indonesian Crude Price (US$/barrel)





Lifting (MBCD)






10.31 1)

8 - 9


17.8 2)

15 – 16.8

Source: MoF, Central Statistics Agency, Government Work Plan 2008

1) August 2006

2) March 2006

Significantly increased spending on infrastructure

The government is focusing on construction of infrastructure in support of economic growth and creation of employment, given that the primary foundation for promoting economic growth will only be established with increased stock and quality of infrastructure.The increased allocations for infrastructure construction are reflected in the substantially expanded budgets for the two ministries in charge of infrastructure. The budget allocation for the Ministry of Public Works is up 41.1% to Rp 35.6 trillion and the Ministry of Communications will receive an additional 64.1% over the estimated outcome of the Revised 2007 Budget, or a total of Rp 16.2 trillion. Similarly, the Ministry of Energy and Mineral Resources will receive a Rp 5.6 trillion budget allocation.

Greater priority for poverty alleviation and security for impoverished families

The effort to lift Indonesian families out of poverty has been redoubled with the scope the National Community Empowerment Programme (PNPM) launched last year broadened from 2,831 to 3,800 subdistricts. This represents a drive to consolidate poverty reduction programmes across a range of Ministries, most importantly in the three key ministries of Home Affairs, Public Works and the State Ministry for Development of Impoverished Regions. Allocated funds are being raised from Rp 3.9 trillion (2007) to Rp 7.0 trillion.

The Government will also retain the fuel and electricity subsidies to a substantial degree. In the Draft 2008 Budget, the fuel subsidy is maintained at Rp 46.7 trillion and the subsidy for household bottled LPG at Rp 2.4 trillion. Most of the fuel subsidy will be used to subsidise prices for kerosene, a fuel consumed widely by the poor. The government has also allocated a Rp 27.8 trillion subsidy for electricity.

Human Development in Indonesia Top Priority

The increased allocation for education sector is aimed at meeting targets for poverty alleviation and reduction in disparities through continued provision of limited free schooling and special scholarships for poor families. In 2008, 10.9% of total central government spending will be on education. Central government expenditures for education will total Rp 61.4 trillion, up from Rp 52.4 trillion in the Draft Revised 2007 Budget.

Allocations for health care have similarly been raised by a significant 4.3% over the Draft Revised 2007 Budget, from Rp 16.1 trillion to Rp 16.8 trillion. This spending on health involves the continuation of the health insurance programme for poor families, as mandated in the National Social Security Law and measures to improve maternal and child health to promote healthier growth and intelligence in the future generation of Indonesians.

Commitment to improve governance through bureaucratic reforms and more robust budgets for law enforcement

The Draft 2008 Budget allocations also attest to the Government’s desire for improved governance in support of law enforcement, eradication of corruption and bureaucratic reforms. This is reflected, among others, in the Government proposal for a 20% pay rise for civil servants, payment of a 13th month salary and a hike in the meal allowance. Budget allocations are also significantly raised for almost all institutions involved in strengthening governance and law enforcement (Supreme Audit Agency, Supreme Court, Ministry of Law and Human Rights and the Attorney-General’s Office).

Defence and security budget moving towards ideal level

Expenditure allocations in the Draft 2008 Budget also stress the creation of peaceful conditions in Indonesia. Reflecting this is the more robust defence and security budget to be managed by the Indonesian Armed Forces and National Police.

Higher expenditures for the regions

Budget increases have also been made for regional government expenditures. Transfers to Regions will rise from Rp 252.5 trillion to Rp 271.8 trillion, reflecting the desire to bring about fully-fledged decentralisation and regional autonomy. Significant increases have been made in allocations for the special autonomous regions of Papua and Aceh to 2% of General Allocation Funds, resulting in a 100% increase in Special Autonomy Funds compared to the Draft Revised 2007 Budget.

Budget financing to rely more on domestic sources, most importantly taxes

The financing envisaged in the Draft Budget will be derived from increased domestic revenues collected through taxes and non-tax receipts. The tax ratio will be raised from 12.9% of GDP in the Draft Revised 2007 Budget to 13.6% of GDP Similarly, the non-oil and gas tax ratio will rise to 12.6% of GDP (Draft 2008 Budget) from 11.9% of GDP in the Revised 2007 Budget. With the tax ratio at this level, total revenues and grants are projected at Rp 761.4 trillion, up 11.2% over the projected outcome for the Revised 2007 Budget.

Net domestic financing in the Draft 2008 Budget is planned to reach Rp 91.7 trillion. The domestic financing will be raised from (i) issuance of Government Securities within the context of integrated fiscal and monetary policy; (ii) sale of bank restructuring assets at optimum value; (iii) use of government funds held on deposit at Bank Indonesia; and (iv) privatisation. Net budget financing from foreign borrowings is planned at a negative Rp 16.7 trillion. This amount consists of Rp 43.0 trillion in programme and project loans, subtracted by repayment of foreign debt principal at Rp 59.7 trillion.


(in trillions of rupiahs)




Draft Revised budget

Draft Budget

A. Revenues and Grants




I. Domestic Revenues




1. Taxation Revenues




Tax Ratio (% of GDP)




2. Non-Tax Revenues




II. Grants




B. State Expenditures




I. Central Government Expenditures




II. Transfers to Regions




C. Budget Surplus/Deficit (A – B)




% of GDP




C. Financing (I + II)




I. Domestic Financing




II. Foreign Financing (net)




The fiscal function constitutes only part of the Economic Reform Programme for promoting economic growth and employment

In addition to the fiscal stimulus described above, other measures are being pursued to promote employment through increased investment and exports. These are centred more around micro economic reforms as set out in Presidential Instruction Number 6 of 2007.

Micro economic reforms are focused on four main categories: (i) improvement in the investment and business climate, (ii) accelerated construction of infrastructure throughout Indonesia, (iii) financial sector reform and (iv) empowerment of MSMEs.

Please find attached the unofficial translation of Press Release of draft budget 2008. The complete Financial Notes of Draft 2008 Budget in Indonesian language can be accessed at

Source: Ministry of Finance and Coordinating Ministry for Economic Affair

Corruption in the U.N.

Corruption in the U.N. is not News For Google News

An internet journalist who exposed information regarding corruption inside the U.N. disappeared from Google news.

Matthew Lee, an editor-in-chief, webmaster and reporter for the Inner City Press news source regularly posted stories about U.N., including those about corruption inside the organization. Those stories appeared regularly on Google news search engine on request for news about the U.N. However, the news from Inner City Press seemed to be excluded from Google News since the February, 13.

Lee reported about receiving an e-mail from Google on February, 8 saying that it can no longer include his site in Google News due to complaints from some users. He suspected that someone at UNDP took part in disappearance of his news source from Google.

The journalist is known for his candid remarks, that earned him an unfriendly attitude from the U.N. during the incident on a press conference in November 2007, when he asked why Google hadn't signed the global human-rights and anti-censorship compact after Google reported about its partnership with UNDP to achieve anti-poverty goals. Lee thinks that both U.N. and Google agreed on limiting his access to the public.

As it was later found, someone e-mailed the Internet company, saying that Inner City Press violates the Google news rules, stating that news organizations should include at least two employees. After this, his site was de-listed from Google News. The disappearance of Inner City Press news from Google News was explained by temporary technical error.

Tuyet Nguyen, president of the U.N. Correspondents Association said that Google is "shutting people up and not doing a good thing for society by only defending their business interests.

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