Why have our political and economic reforms progressed relatively slowly? Political and economic reforms are essentially about changing the rules of the game.
In the process of changing these rules many different and conflicting interests compete to promote and protect their interests.
In the case of Indonesia, unfortunately, corrupt interests seem to have effectively influenced and distorted the reform process.
Corruption is believed by many to be the cause of the slow progress of government reforms in economic development and democratization in many developing countries. Corruption has weakened the credibility of the state, caused poverty and income inequality, reduced total investment, lowered GDP, wasted government public expenditure resources, and degraded institutional quality.
Moreover, "by undermining trust in political institutions and public officials and by distorting government policy against the best interests of the majority, corruption impairs the process of democracy", as US Congressman John Brademas has pointed out.
The problem of state capture, as a form of corruption, in political and economic transitions of the post-communist states in Eastern Europe and the former Soviet Union has confirmed these negative consequences.
State capture involves firms or other actors that make illicit private payments or provisions of private benefits to policy makers to shape the formation of the basic rules of the game laws or other government policies for their own benefits at the costs of the public at large.
In the context of economic reforms, this type of corrupt activity is directed towards extracting rents from the state by balancing, not necessarily blocking, the equilibrium of reform.
In the Indonesian context, capture was regarded not only as a problem under the Soeharto's regime, but has also remained a serious governance problem up until now.
The promulgation of the Presidential Decree on the National Car Program, which granted a tax privilege by the New Order regime to a company owned by a son of the former President Soeharto, was an example of this problem.
Until now the problem of state capture remains as one of the many factors that have slowed the reform progress in Indonesia.
Since the collapse of Soeharto's regime in 1998, most Indonesians and non-governmental organizations, such as Indonesian Corruption Watch and Transparency International, continue to perceive that the level of corruption in the early period of our reform was relatively higher than that under Soeharto.
In economic reforms the benefits of the reforms were focused on the short-term winners of the reform processes, such as insider entrepreneurs and commercial bankers, while the costs were dispersed. These short-term winners used their economic powers to influence the reform path and shape the policy-making processes in order to generate rents and protect their interests at the costs of the public at large.
Therefore, Hellman has suggested that in order to sustain reforms, the state has to be insulated from the short-term winners. In the case of anticorruption reform, this may also fail if these short-term winners can effectively influence the policy-making and implementation process of reform to protect their rent-seeking interests. Fortunately our drives against corruption now seem quite encouraging.
Furthermore, in a country experiencing political and economic transition, such as Indonesia, there are still major incentives for the ruling party (or parties) to preserve the pre-reform structure because such a structure can be manipulated for reasons of self interest.
In the case of Indonesia, we have to insulate the political and economic reform processes from the corrupt and short-term winners of the pre reform period such as private national firms, multinational companies, interest groups, corrupt politicians and bureaucrats.
The writer is an assistant to the head of the Indonesia Presidential Working Unit for Program Management and Reform; the opinions in this article are personal views of the writer.
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