Indonesia Loses $4b Annually to Procurement Graft, Study Finds

June 12, 2014 Leave a comment

Indonesia Loses $4b Annually to Procurement Graft, Study Finds

By Vanesha Manuturi on 09:22 pm Jun 03, 2014

  1.  Indonesia loses $4 billion every year due to poor procurement practices in the public sector, according to a recent study by consultant firm A.T. Kearney.

“This equals 40 years of operational cost for 32,000 schools in Indonesia. It also represents 20 percent of Indonesia’s public infrastructure spending,” said ShirleySantoso, a principal at Kearney, in a statement, a copy of which was obtained by the Jakarta Globe on Monday.

The study by Kearney found that around 30 percent of the cases handled by the Corruption Eradication Commission (KPK) over the past decade were related to poor procurement practices.

This comes as no surprise for economists and business owners, who have often cried out against the country’s repeated tenders, document reworks and unnecessary administration.

To clean up the process, President Susilo Bambang Yudhoyono created the LKPP, a government procurement agency that monitors and evaluates procurement practices within the public sector, through a regulation issued in 2010.

Still, the issue remains the elephant in the room for the country’s lawmakers.

“Procurement is not a sexy topic and it remains below the radar of most politicians,” said John Kurtz, head of A.T. Kearney’s Asia-Pacific division. “Hopefully, when a new president comes to office later this year, he’ll recognize what improved procurement can mean for Indonesia.”

Transforming infrastructure programs across the public sector and state-owned enterprises, according to Kurtz, could save the country up to $1.7 billion. He added that better procurement will also result in higher state fund absorption, which, in turn, will lead to higher growth rates.

“Improving procurement is one way to unleash Indonesia’s economic potential,” Kurtz stressed.

The country is set to hold a presidential election in July this year.

Observers in Jakarta say rampant corruption is dragging the country’s economic growth. Indonesia’s $900 billion economy, which expanded 5.8 percent last year, is forecast to slow to expand at 5.5 percent this year. Falling exports have caused the economy to slow.

Among the high-profile procurement projects mired in graft allegations is the purchase of buses for the TransJakarta network.

The Attorney General’s Office last month named several officials from the Jakarta Transportation Office as suspects in the case.

The implicated officials include former Jakarta Transportation Office chief Udar Pristono, who signed the Rp 1.5 trillion ($127.2 million) contract for the Chinese buses, which were overpriced and upon arrival in the capital earlier this year were found to be rusty and in poor condition.

 

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