Special Report: Reforms in place to root out rent seekers

Vincent Lingga , The Jakarta Post , Jakarta Tue, 04/28/2009 12:54 PM Headlines

 

Limited financial resources and inadequate institutional capacity have forced the government to go slow in reforming the civil service.

Since bureaucratic reform is also about abolishing or reducing rent, it faces strong opposition from those whose rents are at risk.

Given its complexity, civil service reform therefore requires a long, tedious and modest implementation in several small steps, in which the correct sequencing of reform is crucial.

No wonder, then, that the structure, work attitude and values of most civil servants seem to have remained largely unchanged despite the introduction of the new civil service law 10 years ago and the decentralization of more than two-thirds of civil servants from the central government to regional administrations under the 2001 local autonomy law.

World Bank reports and studies by various other international agencies have cited unpredictable and low-quality services from civil servants and arduous licensing processes as some of the main barriers to doing business in the country.

However, the situation is not so hopeless. The big bang reform, launched in 2007 by building "islands of integrity and competence" at three institutions - the Finance Ministry, the Supreme Court and the Supreme Audit Agency (BPK) - has produced fairly impressive results.

These institutions were selected for their strategic roles in law enforcement and in safeguarding state revenue, minimizing state losses. Most of these strategic functions happen to fall with the Finance Ministry, such as tax, customs and excise duty collection, budget allocations, treasury management and the oversight of the capital market and non-bank financial service industry.

But why does the civil service reform cost so much?

Most studies have concluded one of the main causes of the bureaucratic problems and inertia is gross underpayment. Civil servants always point out their rock-bottom salaries as an excuse for their poor performance, corrupt practices or absenteeism.

Therefore the redesigning of the civil service system with modern personnel management requires exponential increases in their pay, often by as much as five times, to make their living conditions comfortable enough to resist the temptation of corruption.

The reform at the three institutions alone, for instance, cost about US$5 billion.
But the state budget cannot at once afford massive, across-the-board large pay increases for all civil servants. Hence the incremental approach for the bureaucratic reform.

The generous pay introduced under the reform is nevertheless worthwhile, as it are based on a comprehensive personnel management system with clear-cut job classification, job descriptions for key positions and guidelines for recruitment, firing and promotion based on clear-cut performance criteria.

The recruitment system in most other institutions now is largely flawed and corrupt, requiring bribes to enter the civil service or get promoted. The pay system is devoid of any built-in performance criteria.

Riding confidently on the success of the three pilot projects, the administrative reform ministry is now extending the islands of integrity and competence to the President's Office, the National Police, the Indonesian Military and the Attorney General's Office.

Bureaucratic reform, however, has been taking place not only in the central government.
The 2001 regional autonomy law, which requires the direct election of governors, regents and mayors, has forced an increasing number of regional administrations to implement wholesale reform of their civil service and set up one-stop licensing centers for businesses to woo investors.

Reform-minded regional administrations realize businesses create jobs, which in turn provide wages, which in turn generate purchasing power to fuel local economies.
Regional chiefs have increasingly realized that natural-resource endowments, though important, are not the only key assets to attract investors.

A conducive investment climate, including the ease of doing business, is no less important for wooing businesses. And a good portion of a good business atmosphere is related to the public administration service.

As regional competition for investment has now become much more fierce, more regional administrations have issued pro-business policies.

At present, more than 50 district and municipal administrations, or 10 percent of the total, have set up one-stop service centers for business licensing as the competition for new investment grows keener.

The main question, though, in view of the false starts of similar reforms in the 1970s, is how to make the civil service reform sustainable - how to extend the islands of integrity and competence into an archipelago of best governance practices amid the succession of government every five years.

Previous attempts to reform the civil service failed because the initiative and drive depended mainly on the heads of the institutions concerned. And when the reform-minded heads were replaced, it was again back to business as usual.

Here lies the importance of establishing a politically independent National Civil Service Commission, as called for by the 1999 Civil Service Law. The National Civil Service Agency, in charge of managing government personnel, also needs further empowering.