Village corruption in Indonesia1

Fighting corruption in the World Bank’s

Kecamatan Development Program

Andrea Woodhouse

June 2002

The author is a World Bank consultant working on a World Bank-funded community development project in Indonesia, the Kecamatan Development Program (KDP). The views expressed in the paper are the author’s own and do not necessarily reflect the views of the World Bank or KDP.

1 A previous, unpublished version of this paper appeared under the title The Dynamics of Rural Power in Indonesia: Fighting Corruption in a

World Bank Community Development Program

T a ble of C ont e nts

TABLE OF CONTENTS I

EXECUTIVE SUMMARY II

ACKNOWLEDGEMENTS IV

INTRODUCTION 1

WHY KDP? 2

ANALYTICAL FRAMEWORK 3

DEFINITIONS 3

I. THE CONTEXT OF COMMUNITY DEVELOPMENT IN INDONESIA 7

POLITICAL CHANGE & DECENTRALIZATION 7

VILLAGE LIFE IN INDONESIA 9

II. CORRUPTION IN KDP 15

WHAT IS KDP? 15

DIFFERENT TYPES OF CORRUPTION IN KDP 18

FIGHTING CORRUPTION IN KDP: MAKING THE DESIGN OPERATIONAL 26

MODELING CORRUPTION: ANALYSIS OF A CASE IN KDP 32

III. RECOMMENDATIONS FOR IMPROVEMENT 35

POLITICAL ASSUMPTIONS 35

INCENTIVES 36

FUTURE STRATEGY 42

CONCLUDING THOUGHTS 44

ANNEX I 46

HISTORICAL BACKGROUND 46

ANNEX II 47

CORRUPTION MAP OF THE KDP PROJECT CYCLE 47

E x e c utiv e Su m m ar y

What works to limit corruption in a large, rural development project in a country with endemic corruption, a weak legal system and a history of top-down political control by a powerful state bureaucracy?

The Kecamatan Development Program (KDP) is a $370 million World Bank community-driven development project in Indonesia that funds infrastructure and small loans in over 20,000 villages nationwide.2 Its approach to combating corruption is based on an analysis of the political economy of corruption in Indonesian villages and is two-pronged. First, it aims to change the conditions that breed corruption in villages by breaking existing monopolies over information, resources, and access to justice. Second, it aims to prevent corruption in the project itself by skewing the incentives of the project structure against corrupt behavior.

At the heart of KDP’s anti-corruption approach is the principle that villagers themselves have decision- making power over planning, procurement and management of funds. Some of the concrete measures of its approach include:

simplifying financial formats so that they can be understood easily by villagers

transferring funds directly into collective village bank accounts

Although these measures have had some success, corruption in KDP persists. This paper examines where, why and how this takes place. Its findings are based on a series of in-depth, ethnographic field interviews, a review of the KDP field experience, an incentives analysis of the KDP project cycle and a survey of the existing literature on village governance in Indonesia. The paper aims to get a sense of the anatomy of corruption in KDP villages: of how the actors perceive their interests, what motivates them, what kinds of constraints they face, and what kinds of steps they take to resolve their problems. The underlying aim is to assess what kinds of anti-corruption measures are likely to succeed in a local-level project that exists in a systemically corrupt environment and whose size and breadth (20,000 villages nationwide) makes centralized control and monitoring of funds impossible. The paper use corruption also as a lens through which to view snapshots of social and political change in Indonesian villages.

The paper argues that corruption is primarily a problem of incentives, and can be fought effectively only by changing the costs and benefits attached to corrupt behavior. It claims also that local context and social norms are key to understanding how these incentives can be changed in order to reduce corruption.

The first part of the paper examines the conditions that enable corruption to flourish in Indonesian villages. Corruption in Indonesian villages is encouraged by a combination of factors. High levels of bureaucracy and red tape multiply the loci of rent-seeking in villages. A history of impunity for corruptors, combined with a legacy of oppression for whistleblowers, means that it is almost never in the interest of any individual villager to protest corruption. The Indonesian state’s administrative structure concentrates power in village elites which, combined with a weak and corrupt judicial system, impedes poor people’s access to justiceand control over decision-making. Finally, the Suharto government’s conscious strategy of de-politicizing villages, combined with the use of development funds as a means of patronage and control, has created an environment where corruption is rarely resisted.

The second part of the paper examines corruption in KDP, based on a review of the KDP field experience and an incentives analysis of the project cycle. Corruption in KDP takes several forms, including budget mark-ups, collusion, bribes and kick-backs to local officials. The analysis reveals that the elements of the project most effective in limiting corruption are transparency, community participation, and the provision of independent channels for resolving complaints. Information and local control are key elements in both preventing and fighting corruption: the most successful strategies for fighting corruption in KDP have hinged on publicizing anti-corruption activities, garnering wide local support, and using sanctions credibly. Project facilitators are also key to fighting corruption: they provide a channel of information to villagers that is independent of local government and, because they are backed by the central KDP structure, they have more protection from threats and intimidation than ordinary villagers. There is evidence also of some governance spillovers from KDP, illustrated by examples of villagers using their experience of KDP as a precedent for protesting against corruption in other projects.

The incentives analysis of the project cycle identifies the stages of the project cycle that are most vulnerable to corruption. These lie at the stages of proposal preparation (formation of false borrower groups forsmall loans); release of funds (collusion among bank account signatories to embezzle funds); and implementation (collusion and corruption in procurement). The analysis highlights several ways in which corruption in KDP could be better prevented. These include improving information dissemination; working with social sanctions to make the incentive structure less conducive to corruption; increasing incentives for KDP staff to fight corruption; instituting measures at specific stages of the project cycle intended to limit monopoly, clarify discretion, and improve accountability; and supporting the capacity of project facilitators to come up with flexible local solutions to their problems.

A c k no w le dg e m e nts

Several people gave me help and advice at all stages of the report. It is the result of their efforts as much as mine.

First of all, I would like to thank Scott Guggenheim, whose help and guidance provide the foundation for the entire paper. Second, I would like to thank Bob Klitgaard (RAND), who has continually gone far beyond the call of duty as a peer reviewer and has advised me not only on the paper itself but also on how best to make it useful. Third, I would like to thank Sarwar Lateef, who has given considerable ongoing support to the research and its wider aims.

The KDP team in Jakarta helped me at all stages. I would like to give special thanks to Ela Hasanah (KDP’s project historian and a member of the team that originally designed KDP), who collaborated with me at every stage of the research. I am grateful to Pieter Evers, who contributed an analysis of the rural judiciary in Indonesia to this paper and whose work on village governance informed many of my initial ideas. Ibnu Taufan, Susan Wong , Susanto Simanjuntak, Victor Bottini and staff from KDP’s “Handling Complaints Unit” helped identify problems, arrange fieldwork and assess field findings. Milissa Day gave me invaluable advice on fieldwork and writing.

Several people helped me with fieldwork. These include the villagers who participated in the research; my field assistant, Liebe Ibet; and local KDP field staff: Martius, Subeyang, Idrus, John Masengi, Sentot Satria and several kecamatan facilitators. The facilitators deserve special mention for helping me despite their already-overstretched workload. They are the front line for anti-corruption activities in KDP and deserve credit for their efforts to fight corruption despite the risk of threats and intimidation involved in doing so.

I am indebted to many people who read the draft and suggested improvements. These include my peer reviewers, Susan Rose-Ackerman (Yale), Robert Klitgaard (RAND), Michael Richards (World Bank) and Paul McCarthy (World Bank). They also include Surendra Agarwal, Vivi Alatas, Judith Edstrom, Ben Fisher, Cyprian Fisiy, Richard Holloway (UNDP), Kai Kaiser, Menno Pradhan, Naseer Rana, Unggul Suprayitno and Stefanie Teggemann. I would like to thank Stephen Woodhouse (Unicef) for sharing his insights on social development in Indonesia, and would like to thank David Madden and Claire Smith for their comments and ongoing support throughout the analysis.

I am grateful for having had the opportunity to present and discuss my findings with classes of students at the John F. Kennedy School of Government at Harvard University and the Center for Agrarian Studies at Yale University. I would like to thank the students themselves for their insightful comments, and would like to thank Lant Pritchett (Harvard) and Michael Dove (Yale) for inviting Scott Guggenheim and me to their classes. I am also grateful to Peter Eigen (Transparency International), who gave me the same opportunity as part of his anti-corruption course at the School of Advanced International Study (SAIS) at Johns Hopkins University.

Introdu c tion

A consensus is emerging in a large number of countries that effective poverty reduction requires a strong governance framework: accountable institutions, participatory political systems, transparency and the rule of law. Fighting corruption is an essential part of this. Corruption hampers growth; it diverts public services from the poor; and it discourages foreign investment in developing countries.3

The World Bank’s anti-corruption strategy calls for action in four key areas:

Preventing and reducing corruption in World Bank projects

Assisting countries that ask for help in reducing corruption

Incorporating concern for corruption into country analysis and lending

Contributing to the international effort to fight corruption

This report is about the first area of action: preventing and reducing corruption in World Bank projects. A first step towards this is an examination of different types of existing projects to see how corruption takes place in them, which design features work to allow it or prevent it, and what lessons can be drawn from their experiences so that future projects limit corruption instead of contributing to it.

This report supports that aim. It consists of an analysis of where, why and how corruption occurs in a large decentralized community development project in Indonesia, the Kecamatan Development Program (KDP).4 KDP is one of the first World Bank projects to make anti-corruption measures an explicit element of its design. Reviewing the analytical framework and samples of the project’s field experience gives us useful material for improving future programs that are similar in design.

The key assumption of the report is that corruption is primarily a problem of incentives, and can only be fought effectively by changing the incentive structures attached. The paper is divided broadly into three parts:

An examination of the context of community development in Indonesia

An analysis of KDP, based on field research, to see

- what kinds of corruption there are in KDP

- where the incentives in the project cycle lie for corruption

- which project design features enable or prevent corruption

- what the best strategies have been for fighting corruption in the project

Recommendations for improvement

3 On the effect of corruption on growth, see Mauro, Paulo. “Corruption and Growth,” Quarterly Journal of Economics, Aug. 1995, 110 (3), pp. 681-712. For the effect of corruption on public service delivery and foreign investment, see World Bank. Helping Countries Combat Corruption: the Role of the World Bank. Washington, DC: Poverty Reduction and Economic Management (PREM) Network, 1997, or World Bank. Helping Countries Combat Corruption: Progress at the World Bank since 1997. Washington, DC: Operational Core Services (OCS) and Poverty

Reduction and Economic Management (PREM) Network, 2000.

4 For information about KDP, see its annual report. Kecamatan Development Program. Second Annual Report 1999/2000. Kecamatan

Why KDP?

Why study KDP? Three features of KDP make it an especially interesting subject of study when thinking about how to fight corruption in development projects.

First, KDP is different from traditional development projects. It takes as its starting point the question ‘what do villagers want?’ rather than ‘what do villagers need?’, drawing on community development experience that suggests both that communities themselves are best at identifying what they need and that the results, when they do so, are more likely to be sustainable. In other words, it is demand-driven. It is also highly decentralized. Most decisions are taken not at the center but in over 900 sub-districts (kecamatan) and 20,000 villages across Indonesia.

KDP’s ‘different-ness’ makes it interesting for a few reasons. First, its size and disparateness make it impossible to control from the center. This diminishes the usefulness of traditional anti-corruption instruments, such as audits and central monitoring. Instead, KDP tries to enable villagers themselves to become agents of anti-corruption, by trying to ensure broad participation and transparency. Second, KDP is an experiment. The hypothesis, borne out by the findings of a growing body of research, is that this kind of project will work better than centralized, supply-driven projects in terms of sustainability, benefiting poor people, and—of special interest to this report—in terms of corruption.5 But we don’t really know. Such projects are fairly new for the World Bank and for Indonesia, so the sample of experience from which to draw on is limited. That is why it is important to investigate how KDP works and, more importantly, why it works the way it does.

Despite its differences, KDP is still similar enough to other development projects to provide useful cross- project comparisons. It is large, and covers an area of great geographic and cultural diversity. Like all World Bank projects, it works through government channels. Unlike bilateral or NGO projects, the funds are in the form of a loan to the Government of Indonesia (GOI), so KDP could not bypass the government completely even if it wanted to do so. And like other projects in the country, KDP is in Indonesia. The connection here is not spurious: it means that the project operates in a very specific sociological and historical context, certain features of which—such as the administrative setting—have a concrete effect on how the project can be run.

Second, KDP is in a country at a critical juncture in its history. Indonesia’s reform process is unstable. Although great changes have taken place, many of the authoritarian power structures of the Suharto-led ‘New Order’ period remain in place, and corruption is entrenched.6 The proposed reforms threaten the interests of some powerful forces in Indonesia, including those of the influential military.7 Against this background, Indonesia is trying nevertheless to push ahead with its ambitious program of reforms. KDP is at the front of this reform agenda. It is as much a governance program as a poverty alleviation program

5 For a discussion of the links between participatory, demand-driven community development approaches and sustainability, see Gross, Bruce; van Wijk, Christine; and Mukherjee, Nilanjana. Linking Sustainability with Demand, Gender and Poverty. Water and Sanitation Program:

December 2000.

7 Only about 25% of the military’s budget comes from government sources. The rest comes from off-budget activities, including businesses and protection rackets in local areas. Reforms that threaten to reduce their power thus directly threaten their material interests. For a discussion of the role of the military, see International Crisis Group. Indonesia: Keeping the Military under Control. International Crisis Group: 2000. Retrieved

and, where it works as it should, challenges elite control of village resources and decisions. The question is whether, in such a political context, a program such as KDP can itself be a significant agent of change, crystallizing nascent trends towards democracy into concrete changes in how village decisions are made. Corruption is a lens through which to view this.

Third, KDP’s network gives us a unique window onto the state of village governance in Indonesia. Although rapidly urbanizing, Indonesia is predominantly rural: most of its population live in villages. But, whereas a great deal of attention is being paid to the effect of democratization at national level, very little is known about the extent to which such changes are reflected at village level. Villages are sites of hierarchy that, institutionally, have favored the interests of the powerful. KDP works closely with village institutions and has a network of over 2000 facilitators working in over 20,000 villages across Indonesia. It thus affords us a rare inroad into seeing what is happening in these villages, yielding a rich and unusual information set about social change in Indonesia. Focusing on corruption enables us to examine issues closely related to this change, such as accountability, participation and control of resources.

This report thus has a dual purpose. large, decentralized, community-level snapshots of social transformation in

Its primary purpose is to ask how corruption can be prevented in a development project. Its subsidiary purpose is to gain interesting side Indonesia: how is it happening, and what does it look like?

A n alytic al fra m e w ork

In order to ask how corruption can be prevented in a project like KDP, this report starts with explaining what we mean by corruption and by outlining our analytical approach.

Definitions

Corruption does not consist simply of bribes in grubby envelopes, but comes in many forms. It exists when firms collude to fix prices above the market rate. It exists when civil servants demand a cut of funds ‘to process’ public projects. It exists when officials hire their relatives for jobs that others could do better. The forms of corruption are wide and various.

The World Bank uses a simple definition that covers many types of corruption: the abuse of public office for private gain.8 This kind of definition is common in the corruption literature.9 It is broad enough to encompass most types of corruption, including those that are difficult to measure, such as nepotism. However, it is focused enough to draw parameters around corruption: to distinguish, for instance, between bribery in the public sphere and gift-giving in the private sphere.10 Furthermore, by mentioning neither the law nor morality, it allows two important distinctions to be made: (a) between what is corrupt and what is illegal; (b) between what is corrupt and what is immoral. Although there may be large overlaps among these concepts, their contours are distinct and it is important to keep them analytically separate.

8World Bank, Helping Countries Combat Corruptionp. 8.

Picking the right kind of analytical approach to combating corruption is instrumentally as well as theoretically important. Many anti-corruption strategies fail. Often, this is because they do not make the right analytical distinctions and are excessively legalistic or moralistic. The anti-corruption literature suggests that such anti-corruption campaigns are unlikely to have lasting effects.11

Legalistic anti-corruption strategies attempt to combat corruption through strengthening laws or creating rules. They focus on creating a regulatory environment that tightens the loopholes for corruption. The assumption is that corruption can be fought by strengthening regulations against corrupt behavior.

Taken by itself, this assumption is flawed. Although regulations are arguably a necessary condition for fighting corruption, they are not a sufficient condition. Almost all countries have anti-corruption laws on their books, yet the incidence of corruption among countries varies widely, without correspondence to the strength or number of existing rules. Anti-corruption drives that are limited to regulations may paradoxically increase opportunities for corruption, through breeding regulations and red tape. More fundamentally, though, they fail to distinguish clearly between rules and the motivation for following rules. Fighting corruption demands focusing on motivations and opportunities, not the rules themselves.

Anti-corruption strategies couched in terms of morals fail for similar reasons. Such anti-corruption strategies talk of ‘cleaning up’ and of the return of ‘honesty’ and ‘values’ in public life. They imply that corruption would be rooted out if only corrupt officials were replaced by honest, public-spirited individuals. The problem with this is that the proper locus of morality ultimately is people, whereas corruption lies in systems. Combating corruption effectively demands regarding it as a problem of systemic rather than personal failure. When an official steals money from a development budget, her motive may simply be to send her son to a good school; and the important failure is not in her but in that her system allows her to get away with stealing. Fighting corruption sustainably demands changing the system of rewards and punishments so that stealing is no longer in her interest or anyone else’s.

With both legal and moral approaches, success is subject to circumstance; when they succeed they do so on an ad-hoc basis and with largely temporary effects. This is because they fail to recognize that corruption is a problem of incentives, not of wickedness or rules. The most important element of any sustainable anti- corruption strategy is

to change the underlying system of incentives so that agents are no longer motivated towards corrupt behavior.

This is the key premise of this report. In this kind of framework, legal actions are important, but only insofar as their enforcement changes the cost-benefit equation.

The premise contains a hidden assumption about the way people act. It assumes that people are rational and self-interested—that, given a choice, they follow whichever course of action benefits them most. The assumption, however, need not be narrow or economistic. It can be made with varying degrees of strength. A strong version of the claim might define self-interest as allegiance only to the individual self and define benefits in material terms. We make a weaker version, which may have diminished explanatory power but

which we believe captures better why people act the way they do. Here, ’self-interest’ may encompass allegiance to one’s family or peer group as well as to oneself, so that the claim can explain human behavior motivated by feelings of solidarity or social bonds. The benefits need not be calculated materially, but may include social status, power or some other intangible reward. And, although this version still implies that at some level self-interest is a universal phenomenon, it leaves room for its content to vary widely across different cultural settings.

Indeed, one assumption of this report is that social norms have a significant effect on how people perceive their interests. The practical challenge for projects wishing to minimize corruption is to understand how the social norms work in the particular context of the project and to set up the incentive systems accordingly. The way that actors in a village-level community project in Indonesia perceive their interests will differ from the way that those in a national highways project in China perceive theirs, and the effectiveness of different anti-corruption instruments will vary accordingly.

The difference, however, lies not simply in the social norms themselves, but in how they get expressed through institutions. The more grassroots and local the project, the more important the social norms and personal relationships characteristic of village institutions are likely to be. The opposite is true of a large- scale project whose participants are unknown to one another.

It is precisely for these kinds of reasons that an anti-corruption project design or strategy cannot be formed a priori. It demands instead a knowledge both of local context and of the experience of similar types of projects. Knowledge of local context is best formed with the involvement of local participants, who often know best which kinds of incentives will have relative importance.

In the framework of incentives, we can see that

Corruption exists where the benefits outweigh the costs

 The benefits may include the amount of money the agent stands to gain, the social benefits that might accrue from this money, and the increase in power that might come from the transaction

 The costs will include the severity of punishment, the monetary value of any fines, and any associated social costs.

 The calculation of benefits and costs will depend on the risk of getting caught and being held accountable. This ratio will be lower where the agent has wide discretion over the transaction—in other words, where few other agents are able to see what is happening—and where there are few checks and balances over the agent’s actions.

Methodology

The report is not a survey. It is an investigation of process. Its aim is to get a sense of the anatomy of corruption in KDP villages: of how the actors perceive their interests, what motivates them, what kinds of constraints they face, and the steps they take to resolve their problems.

With this in mind, we attempted for the first part of the analysis to reconstruct a limited number of corruption cases in different KDP locations. In each village, we tried to interview most of the people involved in the corruption case, from ordinary villagers to local government officials, ‘corruptors’ included, to see how each of the main players experienced and perceived the case. We attempted also to get the stories of those unconnected with the case. This enabled us to get a multi-layered, ‘thick’ description of what had happened. Sometimes, interviewees participated by drawing maps and social diagrams of the village.

The second major part of the research involved a review of samples of the KDP field experience and a cost-benefit analysis of the KDP project cycle. The project is too large and complex to be susceptible as a single entity to a cost-benefit analysis. To do it, therefore, we (a) broke the project cycle down into a series of discrete steps, small enough to be analyzed in terms of incentives; and (b) analyzed each step of the project cycle in terms of incentives for corruption. We did this by asking, at each stage of the project cycle:

Who are the main actors?

What are the main operations under their control?

What discretion do they have over their actions?

What interest do they have in engaging in corrupt practice?

What sanctions apply? What is the risk of being discovered?

What are the accountability mechanisms attached? Do the actors have to explain themselves?

What are the social norms attached? Do these affect how the actors will perceive their interests?

The findings were drawn from an analysis of KDP corruption cases, field research, and the views of KDP staff. In assigning weight to incentives they attempt to take into account as much as possible the views of project participants.

I. T h e c ont e x t of c o m m unity d e v elop m e nt in Indon e sia

Politic al change & de c entralization

Indonesia is in transition. At least two elements of this transition are likely to have a major impact on village life in Indonesia. One is the effect of political change. The other is decentralization.

Political change

People… aren’t really scared to report problems. They’re not scared because things have changed. Before, people used to be scared of the army, or the police. They’re not anymore.

District-level KDP consultant, Toli-Toli district, Central Sulawesi

The Indonesian political environment has changed significantly since the demise of the New Order. It has been characterized by a trend toward democratization and the strengthening of civil society, an attempt to redefine the position of the military in political life, and the devolution of power to local government. It has been characterized also by a breakdown of law and order, a rise in civil unrest, separatism, and inter- communal violence.

These changes have affected village life in Indonesia in several ways. In some places, they have served to make latent conflict overt. The New Order government placed an emphasis on order and harmonious social relations, and potential conflict was largely stifled.

Political changes at the center have altered this. Exacerbated by economic difficulties and enabled by a breakdown in the will and ability of the security apparatus to impose order, they have removed the underpinnings of an apparent stability. In its space, tensions have emerged over issues such as land, access to resources and political power—tensions manifested often in ethnic terms. What it means for these villages is that once-set relationships are in flux: old hierarchies are being redefined and cross-cut with new cleavages, leading to a shift in the way villagers perceive their respective interests.

Political reform (reformasi) has also changed the landscape. The impact of reformasi at the national level, manifested in open criticism and protest, has been significant.12 Its impact at village level is unclear. Almost no evidence has come forward to suggest what type of impact, if any, reformasi is having on political expression in villages. Anecdotal evidence from this report suggests that there has been some kind of trickle-down effect, whereby villagers have some awareness of national changes and are conscious of increased possibilities for protest.13 There thus seems to be some scope for a renewal of political expression in villages, if limited at present to a heightened optimism in people’s minds. However, whether

this changes local power dynamics remains to be seen, given that many New Order institutions remain in place at village level.

Decentralization

In January 2001, Indonesia started to devolve most functions of national government to its 362 districts (rural kabupaten and urban kotamadya). If fully implemented, this will make Indonesia one of the most decentralized countries in the world. The legal framework for decentralization makes provision for changes in village government. These changes could change quite substantially the way that Indonesian villages are run, although vagueness in the wording of the laws means that in practice there may be little change.

The spirit of the legislation points towards greater democracy at the local level: Law 22 of 1999 states that the basis for village government regulations will be “diversity, participation, real autonomy, democratization and people’s empowerment”.14 The law introduces a new village representative body, the Badan Perwakilan Desa (BPD), whose members will be elected directly by villagers. This contrasts sharply with the body it replaces, the Lembaga Musyarawah Desa (LMD), whose members were effectively appointed by the village head. Under the new system, the village head can be held accountable at BPD meetings, and the BPD has the right to ask that the village head be removed. This could dilute quite substantially the present concentration of village power in the village head.

The BPD was made… after the regional autonomy system came into place. The BPD are elected by us. That gives a greater degree of control. Now, the people have more power… the BPD system also gives us a way to resolve problems we have. There’ll be fewer problems of corruption now because we can check and control them.

Villager in Pagar Batu village, North Sumatra

However, despite their spirit, the laws provide few specific guidelines for how local empowerment will materialize. For instance, specific regulations surrounding election to, the operation of and powers of the BPD have been left unclear, so whether its formation effectively increases popular control over village government may be determined on an ad-hoc basis. The law also gives wide discretion to district governments in determining village affairs.15 This means that there could be wide variation in village government: some areas could have democratic, accountable local governments whereas others could maintain or even strengthen their hierarchical and autocratic governance structures.

The impact of decentralization on village life is thus uncertain. Village structures could become more authoritarian in some places, limiting accountability and increasing yet further the possibilities for corruption. Alternatively, they could become significantly more democratic, opening up avenues of transparency and accountability and raising the perceived costs of corrupt behavior.

14 Law 22 of 1999, cited in Antlöv, Hans. Village Governance in Indonesia – Past, Present and Future Challenges. Paper presented at the

PERCIK conference “Dynamics of Local Politics in Indonesia”: Yogyakarta, July 2000.

15 See Evers, Pieter, Resourceful Villagers, Powerless Communities (Rural Village Government in Indonesia). Jakarta: World Bank/Bappenas

Village life in Indonesia

The experience of village life and of previous village projects is a crucial factor in influencing how actors in KDP perceive their interests and rights. It affects how actors calculate the costs and benefits of corrupt behavior and affects the will and ability of villagers to protest if they suspect foul play. Thus any understanding of how to fight corruption in KDP, of what motivates its agents, and of what factors enable corruption must rest on an understanding of what life in an Indonesian village is like.

It is not an easy understanding to reach. Indonesia is diverse and so generalizations are hard to make. Yet despite this, there are some family resemblances among villages that enable a rough picture to be drawn.

A village (desa) is the lowest unit of government administration in Indonesia. Many villages came into existence only with Law 5 of 1979, which imposed uniformity in form and structure onto Indonesian communities. Beforehand, many of these were smaller and organically-formed.16 Because villages are political and not social units, their boundaries may cut across traditional boundaries of land drawn according to adat (local custom). They are divided up into hamlets (dusun), groupings that, being small and generally homogenous, are often socially more cohesive than villages. Hamlets are sometimes physically far apart from one another, and levels of communication among different hamlets vary. Sometimes one hamlet may consist of people from an ethnic group entirely different to that of another hamlet in the same village, usually because one consists of migrants from another part of Indonesia. In Java, many villages are extremely large. This limits cohesiveness and control.

A village is led by a village head (kepala desa), who is paid by the government. In rural villages, the village head is elected by villagers but ratified by the district head. In urban villages (kelurahan) the head (lurah) is appointed. Village regulations ensure that almost all power is concentrated in the village head, who is accountable not to villagers but only upwards to the district head.17 Because running for office is expensive, village heads tend to be from richer families in the village, although not, in recent years, from the traditional land-owning elite, for whom the gains to be had from the post are often not worth the effort.18 The cost of running for office places pressure on village heads to use their time in office to recoup as much money as possible.

Apart from the village head, there are a few other officials—mainly the hamlet chiefs—and a couple of village councils, which are deliberative fora for villagers to communicate their views on village issues and priorities. For the most part, though, power rests with the village head. The councils have little decision- making power and the village head and his officers tend to predominate in them19

Three aspects of Indonesian village life have an especially important effect on the workings of village corruption. The first of these is the influence of a heavy, centralized state bureaucracy, government rural policy and state administrative mechanisms upon the incentives for corruption in villages. The second is

16 Law 22 of 1999 replaces Law 5 of 1979. The preamble to the law considers that Law 5 of 1979 is ‘no longer suitable with the spirit of the 1945 Constitution and the significance to acknowledge and to respect the privileges of Regions ‘ (my italics). From Law 22 of 1999 text,

17 See Evers, Resourceful Villager, Powerless Communitiesfor details.

18 An interesting discussion about how this applies in Java can be found in Frans Hüsken’s article ‘Village Elections in Central Java: StateControl or Local Democracy?’ in Antlöv, Hans and Cederroth, Sven. Leadership on Java. Surrey, UK: Curzon Press, 1994. Hüsken studied 50 candidates for village head in 9 villages in Central Java in 1989 and found that “the traditional elite families are hardly represented…Asked why they had withdrawn, their answer was perfectly simple and straightforward: the advantages of being alurah no longer outweighed the burden of the job”.

the effect of a corrupt and inaccessible legal system upon village accountability and corruption. The third is the way in which development projects themselves have been run.

The state, politics & village corruption

Villages are institutional battlegrounds for control over people and resources. Historically, the state has given material and institutional backing to village elites in an attempt to co-opt potential opposition. State backing of some groups over others has created serious problems. One of these is that it has created the conditions for widespread corruption.

The environment in an Indonesian village is one where corruption flourishes easily and is difficult to root out. It is peculiarly embedded. To understand why, think of a stable structure locked into place by several pillars. If enough pillars are removed, the structure collapses. But removing only one or two simply distributes the load to the others.

Corruption in a village is somewhat the same. The central pillar of support is the omnipresence and omnipotence of the state. Indonesian villages are characterized by the massive presence of both the government bureaucracy and, through the ‘territorial command’ structure that matches it, the military. Almost all of an Indonesian villager’s dealings with the outside world or with government involve bureaucratic procedures of one kind or another.20 Such high levels of red tape breed opportunities for village officials to gain small—or, in the case of land transfers, large—amounts of money through embezzling funds and extorting fees for services. The participating officials have a monopoly over these procedures and have wide discretion over their actions.

The history of impunity acts as the second pillar of support, enabling village officials to exploit such rent- seeking opportunities. Village officials know that the sanctions for corruption have been few and rarely enforced. This lessens the perceived cost of corrupt behavior. For their part, villagers know that whistleblowers have few protections and low likelihood of redress. They also know that most previous attempts at fighting corruption have been futile. This increases the costs associated with an attempt to fight corruption, meaning that in most cases the strictly rational course of action for any individual villager is apathy—in other words, to do nothing. This enhances even further the culture of impunity.

[The villagers] are used to old-style bureaucrats, who are like kings, who think they are like kings, who are never wrong. And nothing will happen. In their experience, if they report problems to a bureaucrat, there will be no response, so why bother?

Civil servant, Kecamatan Palipi, North Sumatra

20 Hans Antlöv describes the multitude of paperwork required in his article ‘Village Leaders and the New Order’ in Antlöv and Cederroth, Leadership on Java. “Let me exemplify the variety of official letters by the experience of a young man, Dadang, who wanted to join the Navy.

A third pillar of support is deference and fear. The average Indonesian village is characterized by hierarchy, with a tradition of not questioning those in power. Its traditional social arrangements might not be hierarchical, as this varies across Indonesia, but it almost certainly has a hierarchical political culture. Indeed, a visitor to a village at least during the period of the New Order government might think it curiously de-politicized, with a paternalistic political culture and an emphasis on bowing to ‘consensus’—a direct result of New Order policies towards rural areas.21 Such hierarchical political relations limit popular pressure on the powerful.

Holding the structure together is an administrative setting that gives villagers few formal avenues to complain. Although elected by villagers, the village head is formally accountable only upwards to the district head. This gives him wide discretion over his actions and lowers the costs associated with corruption. Indeed, it may increase the costs associated with not acting in a corrupt way, since the village head may be put under vertical pressure to collude with his superiors. Complaints are resolved by musyawarah, a process of discussion and consensus–building. But it is the village head who in the first instance organizes the musyawarah, and only if popular pressure is extraordinarily strong does he have an incentive to pursue problems in which he or his peers are implicated.22

Rural justice & village corruption

Justice is for the rich man, the man who has power.

Villager, Kotabumi, Lampung

The failings of the formal justice system lock this structure of village corruption even further into place.23 Some of these weaknesses are peculiar to the Indonesian legal system and its particular set of problems. Others are a function less of the Indonesian system but of the special problems of rural life. Both types of weakness have a strong effect