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Politicians plundering public funds to keep their parties going

Jakarta Post - August 15, 2011

[The recently unveiled barrage of graft cases involving legislator Muhammad Nazaruddin, the former treasurer of President Susilo Bambang Yudhoyono's Democratic Party, has added a chapter to the history of deep-rooted corruption at the House of Representatives. The Jakarta Post's Hasyim Widhiarto explores political parties' shadowy fund-raising methods.]

Amid the scandal following the graft allegations against Nazaruddin, the ruling Democratic Party spent over Rp 5 billion (US$585,000) last month to hold a coordinating meeting at the Sentul International Convention Center (SICC), 40 kilometers south of Jakarta.

With a more than 10,000-seat capacity, SICC's main hall, which already hosted international pop singers Justin Bieber and Kylie Minogue this year, had more than enough room for the 5,000 who participated in the meeting.

The organizers also shelled out for meals and accommodations for participants coming from as far away as Papua.

According to deputy party chairman Johnny Allen Marbun, several companies helped sponsor the meeting, but the bulk of the event was paid for from the party's coffers, money that comes from the party's legislators.

"Every month, our 148 lawmakers donate at least Rp 5 million of their salary to the party. In one year, the party receives around Rp 9 billion alone from them. That's more than enough for us to hold a decent annual meeting," Johnny said.

Such incidental costs exclude the daily operations at party headquarters, which requires at least Rp 3 billion (US$351,000) a month, according to a source inside the party.

But questions arise whether contributions from members' monthly incomes are sufficient to finance party activities that stretch from local election campaigns to gearing up for the 2014 general election.

With a steady flow of politicians to prison for graft, coupled with a refusal from nearly all parties to publish transparent financial reports, suspicions abound that politicians are tapping illegal financial wells, too.

Uchok Sky Khadafi, the investigation and advocacy coordinator of the Indonesian Forum for Budget Transparency (Fitra), said that parties' refusal to publish financial reports indicated that something was fishy with how parties accumulated money.

"If they publish the reports, anti-graft NGOs and the media would know the identities of the party's major financial supporters and would be able to probe whether the party's decisions to support certain policies or budget allocations have brought their donors direct financial advantages."

Such transparency would also allow the public to spot money that was gathered illicitly by the parties, which watchdogs and insiders said have long enjoyed the gains of pocketing graft money to make ends meet.

Commission-seeking among ministries, state agencies and regional administrations during state budget deliberations by the House of Representatives' budget committee is currently considered the simplest means of graft.

Committee members approach representatives from ministries, state agencies or regional administrations to strike deals to approve proposed funding and projects in exchange for commission rewards, according to National Mandate Party (PAN) committee member Wa Ode Nurhayati.

Wa Ode came into the media spotlight after she recently accused House leaders of receiving money for acting as brokers in the budgetary committee.

She said the overwhelming authority of the House to decide how to allocate the state budget, granted to the House after the 1998 reform movement, left the door open for widespread rent-seeking practices.

The House has the authority of final approval for most of the detailed project expenditures of a ministry a role supposedly held by the Finance Ministry and the National Development Planning Agency (Bappenas).

The committee members can also pocket fees from companies for successfully lobbying government officials to grant them infrastructure projects that were approved by the committee.

Anticorruption activists and analysts have repeatedly warned that the unchecked authority of the House's budget committee has allowed political parties to feed illegally from the state budget to finance their day-to-day operations and accumulate capital for the 2014 general election.

Under the 2011 state budget, the government and state institutions are earmarked to spend Rp 1,320 trillion ($132 billion).

Concern over graft in the budget committee was highlighted by Nazaruddin's repeated allegations that committee members received fees for lobbying Youth and Sports Ministry officials to grant the construction project of an athletes' village for the upcoming SEA Games to a contractor with close ties to political parties.

The Corruption Eradication Commission (KPK) has named Nazaruddin as a suspect in the case, but he fled overseas on May 23 to escape justice.

Colombian police apprehended Nazaruddin on Aug. 7 in Cartagena as he was on his way to watch a soccer match in Bogota.

Nazaruddin arrived in Indonesia on Saturday evening and was being held at the Mobile Brigade detention center in Depok, West Java, for further questioning by the KPK.

KPK chairman Busyro Muqoddas said on Saturday that Nazaruddin was expected to uncover the mafia ring in the budget committee, as he had fully awareness of their operations.

Aside from his alleged involvement in the Southeast Asian Games project graft case, Nazaruddin is also allegedly involved in 31 other cases valued at around Rp 6 trillion in total and that involve five different ministries, Busyro said.

A legislator who refused to be named said the cases against Nazaruddin stemmed from budget committee negotiations. "The start of Nazaruddin's graft cases was in the budget committee," the legislator said.

He said Nazaruddin's case would not only drag down Democratic Party politicians but also those from other major parties, particularly the other committee members.

"Nazaruddin's case is not exclusive to the Democratic Party. Other parties are also jittery right now over concerns that he will uncover all of the committee's tricks," the legislator added.

Golkar Party politician Melchias Markus Mekeng, who chairs the House budget committee, has repeatedly denied the allegations of fee-seeking during the negotiation of the state budget.

He said limited infrastructure funds had forced the committee to prioritize certain projects without any intentions of members seeking any gratuities for themselves at the end of the day.

Politicians are also believed to have explored other illicit means of pocketing additional money through state-owned companies and donations from businesses in exchange for lobbying for certain favorable policies.

Analysts have repeatedly said that political corruption has spiraled out of control because of the high costs of political operations, which are not balanced by a culture of donation by party members and supporters, as widely practiced in other democracies.

Parties must not only spend overhead costs for maintaining offices throughout the archipelago in order to maintain their network of supporters and members, but also to finance their candidates' campaigns in local elections and to raise money for the 2014 general election.

Political parties' financial sources

Party member contributions: most political parties obligate members in public posts, including lawmakers, regional leaders and ministers, to allocate a fixed percentage of their monthly salary, usually up to 50 percent, to fill their coffers.

Government contributions: A 2009 government regulation on financial aid for political parties stipulates that the state must provide "annual financial assistance" to political parties that have members in the House of Representatives to partly cover administrative costs and fund political awareness programs. State budget watchdog Fitra said the government last year allocated Rp 8.7 billion in subsidies for the nine parties in the House.

State agencies and state-owned companies: Major political parties establish networks of financial resources by putting members or public figures who close to them in strategic positions in state agencies or state companies. The members are expected to influence policies at the agencies or companies to benefit the parties.

Brokering state projects: Lawmakers use political lobbying to help state or private sector companies secure state-funded projects from ministries and other state institutions. Fees for such assistance start from at least 10 percent of the total amount of project.

Brokering state budget allocations: During state budget deliberations, lawmakers at the House's budgetary committee work hand-in-hand to grant certain infrastructure projects or funds to regional leaders in exchange for "commissions". The budget committee is also plagued with legislators allegedly receiving fees from ministries or state agencies for approving their requested annual budget allocation requests.

Vote buying: Lawmakers receive kickbacks during crucial decision-making processes at the House, including during the selection of high-profile public officials and during the passing of key legislation.

Private sector: Some companies and businessmen fund parties in the hope that the parties will lobby on their behalf for certain concessions and favorable policies.

[From various sources.]

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