Indonesia: An Increasing Focus on Corruption Involving Private Companies

Indonesia: An Increasing Focus on Corruption Involving Private Companies

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January 03, 2017

Today’s guest blog post is written by Richard Cornwallis and Ryan Budihardjo at Makarim & Taira S. (M&T), TRACE’s Partner Firm in Indonesia. M&T is one of Indonesia’s leading business law firms offering a full range of corporate, banking, litigation and specialist legal services to national and international clients. Richard, Senior Foreign Legal Consultant, specializes in a broad range of corporate and commercial areas, with particular emphasis on foreign investment, international M&A, employment, franchise, anti-corruption and corporate governance, and hotel/resort matters.

The Indonesian Corruption Eradication Commission (KPK) has long had its hands full investigating corruption in the public sector—government departments, state-owned companies, law enforcement officials, and politicians. It has also (for obvious reasons) had a particular interest in prosecuting large-scale, high level corruption.

However, under a number of recent government initiatives, private companies in Indonesia are coming under increased scrutiny as well. Although there is already a legal framework in place to address facilitation payments made by private companies, the KPK has noted that law enforcement authorities—including the police, public prosecutors, and the judiciary—have not yet shown themselves equally committed to prosecuting cases against the private sector.

The government has responded to this situation in various ways. Presidential Regulation No. 87 of 2016 established the Illegal Levies Eradication Task Force, which has directed its focus on ports and logistics. The KPK has undertaken investigations of private companies with respect to permit, procurement, and tax-related activities. The KPK has also encouraged the implementation of good corporate governance, attempted to eliminate the institution of work permit/visa agents, and sought to reduce facilitation payments by streamlining and simplifying bureaucracy. This latter initiative has included implementing online systems for licenses and permits (an approach that has already proven successful with e-procurement), issuing more official price lists, and making online payments to designated accounts.

Although it remains to be seen how successful these initiatives will be, the days may be numbered when multinational subsidiaries in Indonesia could afford to be concerned only about the FCPA, the UK Bribery Act, and similar overseas legislation rather than their domestic equivalents. At the same time, we should be on the watch for unintended consequences—for example, the possibility that eliminating visa agents will lead to an increase in bureacratic hurdles (visits to the immigration authorities; lengthy wait times) for foreigners seeking work permits. We shall see. 


TRACE Matrix: Indonesia
Indonesia’s Corruption Eradication Commission Making Waves behind the Courthouse
Indonesian govt establishes task force to eradicate illegal levies

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Indonesia: An Increasing Focus on Corruption Involving Private Companies


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