Seven years in the making, Parliament recently passed amendments to the Criminal Code Act that cover foreign bribery. They are intended to crush Australian companies engaging in corruption overseas. Will it work in places like Indonesia? Duncan Graham asks.
Hardly noticed except by corporate lawyers and this website, the changes to Australia’s criminal code are intended to address flaws in the old law which meant only seven individuals and three corporations in Australia have been convicted of foreign bribery in the past 25 years.
One legal firm claimed it “represents a fundamental shift in how corporations can be prosecuted for bribery in Australia.”
The change comes with a big stick – a fine of up to $27.5M. Attorney General Mark Dreyfus called foreign bribery a “serious and insidious problem across the world… that impedes economic development, corrodes good governance and undermines the rule of law.”
According to the Berlin-based organisation Transparency International (TI), there’s a lot more to graft than just losing money: It also helps “serious crimes like human trafficking and money laundering.”
Good move, poor timing. The get-tough message clashed with yet another plea by Canberra for investors to drop their cash in Indonesia, a country where graft is like eating sticky rice with fingers – messy but the only way to get replete.
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Red-blooded investors in Indonesia thrived last century when corporates were casual and laws slack, while President Soeharto – the Republic’s king of corruption – was in total control.
The few savvy and adventurous Australian hustlers who found trusty partners and left envelopes in the right hands did OK – some even better. The rest of the projects turned into tombstones.
During Soeharto’s 32-year autocracy, the unwritten rule was a two-thirds investment in a project, though this didn’t preclude ticket-clipping. The other third went to the politicians and bureaucrats to get the show going with the right permits – or scuttle the project.
Soeharto set the standard for his followers by allegedly stealing up to US$35B from the public purse during his 32 years in power. He was never charged, and his son, ‘Tommy‘ still lives large on the spoils.
Joko Widodo – Mr Clean
Fast-forward to 2014, when Joko ‘Jokowi’ Widodo became president. TI’s Corruption Perception Index (CPI) ranked Indonesia 107 out of 175 nations surveyed that year.
The new leader, not openly linked to the military, religion or the oligarchs, was seen as Mr Clean. He promised to back the Komisi Pemberantasan Korupsi (KPK- Corruption Eradication Commission.)
Brewed during the 2003 reformist zeal of starting afresh after the 1998 fall of dictator Soeharto, the independent KPK rapidly made an impact. It was so efficient it became the nation’s most popular bureau applauded in the kampongs though not in the hillside villas squinting down on Jakarta’s pollution and overcrowding.
Within four years, the KPK was struggling with a backlog of 16,200 reported cases.
Its few well-publicised prosecutions had a 100 per cent success rate, guaranteeing the agency’s downfall.
In 2019 the Parliament withered KPK’s muscle and made staff civil servants. Protests were widespread but went nowhere. KPK Version Two continued until late last year when chair Firli Bahuri was found guilty of violating ethical standards by “engaging with a prominent suspect under investigation.”
In the past decade, President Jokowi has had the power and public support to honour his pledge. Six ministers have faced corruption charges and been sacked. The Wikipedia entry Indonesian politicians convicted of corruption has 44 entries.
The more things change…
Despite these actions, last year the nation’s Republic’s CPI rank tumbled from 96 to 110 out of 180 countries surveyed by Transparency International. The Jakarta Post commented, “Unless Jokowi makes a bold move in the coming months, the downward trend will continue in the next few years.”
While his administration is not seen as corrupt, his policies have facilitated the return of Indonesia’s corrupt ways of the past, or he has turned a blind eye to corruption by people in his inner circle.
Ethical investors were wary of Indonesia then and now. Coordinating Minister for Economic Affairs, Airlangga Hartarto, said that Australia’s total foreign direct investment in Indonesia had reached US$545.2 million in 2023.
Big? Not much – the $US1.1T market and the UK at $836B top the list for Australian investment. Keeping it in the ‘family’.
Our tiny trade with the archipelago is also not in the whiz-bang, high-tech, education, and health sectors we like to trumpet. According to Ambassador Kristiarto Legowo, it’s mostly in mining, metals, agriculture, hotels, and restaurants.
In Melbourne, President Jokowi urged Australians to invest in his country, help society and reap great dividends. There was no great rush for the fund transfer forms.
Reluctance to invest
The South China Morning Post asked, “What’s behind Australian investors’ reluctance to venture into Southeast Asia?” and found John Walker, a former executive at Macquarie Bank, to answer.
He reportedly said Ozzies with the wherewithal “just did not understand” Asia and other emerging markets. They suffered from “fear of the unknown” and preferred “neatly packaged opportunities in jurisdictions with familiar regulatory, financial, and political systems.”
He’s right. Boards charged with handling investors’ money wisely are rightly wary of countries with flawed legal systems – and the smarter heads will have done their research.
Churchill Mining
An infamous casualty of Indonesia’s capricious system was Churchill Mining, a British company with Australian links in 2008 claimed to have found “Indonesia’s second largest and the world’s seventh largest undeveloped coal resource” – an estimated deposit of 2.8 billion tonnes in the province of East Kalimantan.
All seemed to be going well until Isran Noor, the Regent of East Kutai where the coal was to be mined, revoked Churchill’s permits alleging licence forgery and illegal logging. An Indonesian company then seized the project.
Churchill appealed, lost and was ordered to pay almost US$9.5 million in costs and arbitration fees. David Quinlivan, the former executive chairman of Churchill Mining, hasn’t responded to a request for comment.
Big stick or wet lettuce leaf – does it even matter?
Will the new legislation work? Maybe, but more to the point, if Indonesia and its neighbours in ASEAN want money from credible Western investors, they have to clean up their act – in part by following Australia’s aggressive lead.
Otherwise, they’ll have to shake their can in Saudi Arabia and China. But even these big lenders who don’t care too much about ethical issues seek security.
If Indonesia wants our money, Jakarta needs to ensure it’s safe. Jokowi’s successor Prabowo Subianto, a disgraced former general and former son-in-law of Soeharto, takes over the world’s fourth-largest nation in October. He’s unlikely to fire on the corrupt – they’re his mates.
Australian investors – beware.
Indonesia elects a new President – more of the same or back to the past?
Duncan Graham has a Walkley Award, two Human Rights Commission awards and other prizes for his radio, TV and print journalism in Australia. He now lives in Indonesia.