INDONESIA GOVERNANCE STANDING

Mr. JOACHIM VON AMSBERG ( COUNTRY DIRECTOR INDONESIA -WORLD BANK )

Other standards for reforming and improving public sector management, improving government fighting against corruption, have become supported by much product of the country and by government. It will be forcefully persuaded by leaders of government, I think if I can think that if that’s gonna be the outcome that Indonesia will be so stronger force because the corporate governance is no longer depend on the individual but as seen as support by the entire country.

We say that the reason why actually in the world it is ok to recruit her as exactly her record on good governance, we are increasingly seeing effective good governance as maybe not only one but the key to better development outcome to better economic and social progress. Therefore I think someone who for her ability has achieved significant impact and reform in government in our record of course give us much ability and hopefully give the further ability take the available experience and to lesson and to help other countries to achieve similar progress in that experience because I hope that advantage government agenda both in Indonesia and more .

We have been here to share few thoughts, simply because governance so much development in there to us in the world bank is quite friend and partners like Indonesia who want to help with governance of our partner countries. I will be bit talk about governance matters so much when we talk a bit about public governance reform and link to the corporate governance reform. We emphasize complementary between the public governance and corporate governance reform. And will talk very briefly time for implementing the same in the world bank and here

in Indonesia and te help next time.

I think you have talked about good corporate governance means so the resolution of world bank constituting governance management the public official and public institution requires exercising the authorities of quite public goods and services in to delivery of basic public services and infrastructure in sound best mechanism so emphasize the conduct of public official and the effective public institution to efficiently and accountably provide public services.

POLICY DESTROY IS THE BIG PROBLEM ON GOVERNANCE

Why we are convention that governance matters so much developed, governance had governance is bad not so much because of not just government is stealing money that can be invested I think that is important but is really not biggest problem. The biggest problem is precisely in the track in public and the private governance. The biggest problem is that bad governance, corruption, that in turn use the strong system to create further policy to destroy policies that is the vicious circle that I do want to emphasize because concept of important on how to make it different how to achieve better governance.

What I am talking about are policies destroyed policies that allow private entity to make access profit and those access profit arrangement are in turn used to bribe officers to bribe others never be enforced polices destroyed and get public policies more and more leak from sure the in public from providing public services or providing policies that attract investment, economy and more and more toward public particular search particular best public interest in the public.

Let’s me example here well known and any anti barrier that keep market power in the world case monopoly in the best case that illustration of vicious circle, monopoly company make access money that can be used to reinforce that public policies and that company from professional entity and those polices in turn allowed company to make more profit that is an vicious circles, that is what I am emphasizing is the obstacle to be overcome from one toward, toward in government. Trade area of very similar detection of market power and generate in term use to maintain policies to worsen.

Environment safety regulation and the mining, paying official for relaxing, safety regulation not example of distortion of public policies disturbance That harm public interest, tax payment as an example where obliviously tax payee does not pay next access profit can in turn be shared with of the official which in charge of effective public polices and this is example that can further why bad public governance and why bad private corporate governance interact reinforce each other to create symbiotic mutualism this vicious circle.

How to address these challenges by squeezing of this web by squeezing little by little this . That is used to destroy the system and later destroy, one to express the idea that what can be vicious circle bad governance can be turn into vicious circle an of good governance, on the left side public side good public governance lead to better public services on the right side corporate governance is investment where better public policies create better investment climate that is more open more accepted to known investment that by increase economic dynamism increase job creation which in turn could corporate governance attract investment that is keen to reinforce world of transparency world of good governance which in turn reinforce effective good public governance.

Better public service and increase public investment automatically serve build of development of social economic progress and build of job creation these both vicious circle I think I want to help panelist with and it is easy why within government is so terribly important for all mission of development and poverty reduction.

THE TRIGER OF POLICY REFORM

Looking at the reform of the last decade and there is sense certainty in cloud in term of sense of that a lot squeezing of demand is it policy reform have been undertaken that squeeze out of spoken in term of disturb and destroy the system, that trigger investment have been leverage to specific stand that they trigger more competition of economy and reducing a market power, that tough reform has been undertaken in the tax and customs department that against squeezed friend that they used to destroy the system, that some state enterprises which were not known to be set of good governance have become more commercial and some case privatization have been blessed with more commercial management but exposed to competition again squeezing out of range corrupted system. And shocking of military enterprise for example has been squeezing range in the reducing public that undermine good governance.

We have seen that effort has been made to modernize public administration prophecy that first step are implemented what we can see more effective public service, better budgeting rules, better accounting practices, better financial management human practices, we have seen a large progress on giving voice to demand of good governance. And I was sitting ,that is tremendous change that has happen in Indonesia with media playing such vocal role in giving people voice for better governance. And the accessibility of information of where public sectors spend money means people can not get away with bad thing that happened in the past. And in the last year public acquire when there were for legal support for KPK was the example of how demand of good governance can make big impact.

The creation of KPK and backup for KPK, KPK ability to execute very signal into behind bar, and that I think all of these has tremendous contribution to essence that squeezing out of range that has been successful that make promise in Indonesia over last year. So it is working.

Try to put some wants to do and qualification to question whether this reforms are working. And this is data that the World Bank compile once in a year in a study that is called governance matters, but rather than taking one more perception survey of governance and our researches are publicating all the surveys and researches that does countries compare on good governance and publicated those surveys and research with as good methodology as one kind of project who obligation of such complex that is civil survey.

CORRUPT IN INDONESIA IS VERY BAD

They would claim draw from work done made by many media including someone in this room on governance survey and does any survey for comparing for ranking of countries in the world along the six main promise of governance and I think one focus on once a year which is take red line which control of corruption how do the capture of the world range using all data of survey available in term of the perception of effective control of corruption, I choose the time of 1999 to post more time and shows how Indonesia, chose to this, one Indonesia started with very bad standing about ten percent, meaning that only ten percent of candidate who consider more corrupt in Indonesia that is very bad, and ended today it is about 33 % ( thirty three ) percent it means that now Indonesia has risen from ten last percent to thirty three percent that means now one consider there is more democratic in Indonesia. And the message is to vote why Indonesia’s standing has been very terrible still pretty bad so it is a lot of room to go further in the same time no other countries have made such much progress as particularly does Indonesia over past decade, it is unique in leverage industries in Indonesia, so the simple message is a lot of progress has been made, in yet a lot more has to be done, nothing that message reason it without world working on governance challenges day to day recognize in how much more, needed to keep up the speed to keep up the progress to the pressure and how much can be achieved in course of one decade and how much more to be done in course of next one or two decades.

Now these data reflect more public, effective accountability of public institution or let me turn to private sector, corporate governance side, in the emphasize but I think has been on the presentation of my next slide, which is how important good corporate governance is for financial industries trust, how to protect it as not in but it is need for increasing trust in financial market, for trust in the investment, corporate governance in my ways .

ABOUT ROSC REPORT

Corporate governance side within the instrument that we loss for the 10 years across countries and the always ideas published principles of good corporate governance the world bank periodically assess the member countries with what we called report on the observed standard record or ROSC and we put in this ROSC studies to asses whether a member countries do or don’t need certain principles in this case of good corporate governance and in this case is always based on the principle of corporate governance and the last chance Indonesia was assessed in this program was in 2004 and I want to go much detail in the presentation that is really touch a lot of those specific issues that was assessed. At that time Indonesia came on was little bit challenges, shown in this page.

The ROSC of 2004 mention shortcoming, significant shortcoming of principle of good corporate governance, next slide shows in particularly enforcement of government regulation and of production directors managers, liability of financial information and independence of so the called independent information enforce, in this are for particular special shortcoming were found but again the presentation talk in detail. I just speak in 2010 our assessment is to reassess the good corporate governance assessment in Indonesia, now I can not share the results in detail yet because the work is still in progress. This chart that shows some part and so you invite me again next July to share with you how much progress that has been be made, and whether the rank of Indonesia in the assessment of corporate governance has improved.

We not just much focus so much on law and regulation but on enforcement and implementation of regulation, and which of course then raises the issue when law enforcement is needed for good governance, the question is the good governance and law enforcement and direct attention of policy maker on law enforcement institution can be strengthened with the governance of law institution in charge of the law enforcement can giving of law enforcement institution of the country.

WORLD BANK ‘S PROGRAM IN INDONESIA

How the world bank has try to help Indonesia specifically in the ground on good governance and attack corruption. And the World Bank as main of financial small share of public investment program in Indonesia. Investment program in education has growth public administration and we are doing this one quite financial resources but more important is because Indonesia has access to financial market, financial institution that already there what we hope is really contributing is that we want to help standard of quality of the public expenditures so by financing small share on public expenditures and helping government agencies raises the bar on issues such as anti corruption matters in governance. We hope to help to increasing public sector governance to improving effectiveness of public spending.

How to spend much money that , but what we are trying to do is disclosing information, disclosure to the public, to communities of where investment go, how much money involved invested, which village, certain communities can be aware of where public money is supposed to, now if they find out the money isn’t there, then they complain mechanism, the second element of these plan in action is really establishment of complain mechanism, so if the citizen find out that money that is supposed to there isn’t getting there, they need to get to tell somebody, once they tell somebody, that somebody has to solve the problem, that mechanism that we are trying to do is introducing public spending project funded that with that look at government investment programs, with that national government road construction, road construction areas, that is all over the world including the most developed countries, from serious project, making for hub large contact is gold mine, anyone to find closer media, who want to find corruption here so in any country here we help the government with more bringing more competition into those bidding process decision making, bidding itself for more transparent leading external observers participating in the human intern and the warn process to reduce the risk, I would very hasty to say that these matters are sufficient to eliminate the possibility of corruption, but again additional matters in case of squeeze accountability squeeze some of that are used to destroying the system.

We will find fancying a huge government money program of community empowerment and two billion dollars a year for communities for them selves, to cure goods and services for small community investment, critical program to build information awareness, in the community, getting people handle public funds themselves rather than public office, or public institution of contract as one program, as one of the key steps, but again even those programs public disclose of information complain handling sanctioning mechanism complain are lending problem are critical, so just to be few of names but I think these kinds of work are trying completely to help Indonesian government help reform of Indonesian government to build more about system to deliver public expenditures, how I have talked about more deliver policies distorted

From the goal governance matters for development, that why we need good governance as centre of our advice to government in the centre they are program and support to our member countries, Indonesia has made very good progress in squeezing a lot of range that arise from the interaction of bad public and corporate governance from the interaction of excess range of distorted policies and the data shown that Indonesia is recognized for making some progress but also has long-long way to go to become good decade more decisive reform effort, as I said in the opening generally we hope that the approach one before government does not mean the end but rather mean strong demonstration of the country stand behind these efforts. Those efforts will continue with as much if you want more the grand future. That is such hope that we can make our small contribution toward better governance and dear audience better rapid development than more rapid solution economic policy for Indonesia.