Slow road to reform

LIFE’S daily drama that is modern Indonesia can be glibly boiled down to an arm-wrestle between goodies and baddies. The reformist goodies are gathered under the moral and electoral authority of President Susilo Bambang Yudhoyono, now a year into a second five-year term and as popular as ever. Reform is sclerotic, but it is happening and Indonesians are starting to believe that democracy delivers not just a vote, but credible institutions.

The baddies are the remnants of the Suharto era, wealthy political and business cronies and their heirs who loved the old Indonesia, where business was corruptly transacted in kretek-laden shadows, where justice was for sale to the highest bidder. Indonesians often ruefully joke they have the best legal system money can buy. And the tax system is the stuff of comedy skits.

Rarely has that been better exposed than in the often amusing, always embarrassing and utterly compelling scandal that has gripped Indonesia and which neighbouring Singapore, with its self-styled squeaky-clean image, must wish wasn’t happening.

The case centres on whistle-blowing senior cop Susno Duadji, once Indonesia’s most senior detective, who is telling tales of institutionalised corruption including the story of a mid-ranking tax department official, Gayus Tambunan. Susno is accused of trying to destroy Indonesia’s widely admired anti-corruption authority, while Gayus allegedly accepted black money from some of Indonesia’s wealthiest and most powerful people in return for favourable tax rulings – this in a country where the tax take is around 15 per cent of what’s due.

There’s complex domestic politics in all this, not least the apparent hand in the machinations of SBY’s political opponents, led by the country’s richest man, Aburizal Bakrie, the head of Suharto’s old political fief, the Golkar party. He seemed intent on destroying SBY’s star cabinet performer, Finance Minister Sri Mulyani, but has been thwarted in that aim with Mulyani’s move to be one of the World Bank’s three managing directors.

But where it is telling in the context of an Indonesia trying to become ”normal” – reliable for foreign investment after 60 years of dictatorial misgovernance and chronic corruption – is in the fact it is being aired at all and in the spotlight it throws on aspects of Singapore’s connection to Indonesia.

The vast bulk of the money in Singapore’s vaults is clean. But some isn’t – one reason that despite ASEAN’s famous unity Indonesia and Singapore don’t have an extradition treaty.

In 2006, Merrill Lynch calculated that Singapore hosted around 20,000 Indonesian millionaires, fuelling a property and retail boom. Singapore’s crisis-decimated army of private bankers like to indiscreetly retail anecdotes over Friday night cocktails along Boat Quay, telling of nameless clients who do things like gamble millions in wrong-way foreign exchange bets, after accumulating fortunes doing civil service jobs barely paying $2000 a month in Jakarta.

These expensively coiffured financiers were known as ”briefcase bankers”, for the delectable array of investment products in their attaches, as they made the weekly run to service clients in Jakarta. But since the financial crisis, such ”exotics” have become unfashionable (if not illegal) in some jurisdictions, and the bankers’ flights from Changi Airport are not nearly as full as they were pre-Lehman’s collapse.

Singapore could lose if dodgy deposits were pursued by Indonesian legal authorities, forcing account holders to send their cash elsewhere – say, to Hong Kong, Singapore’s competitor as a financial centre. And there are influential Indonesians, such as too many of its parliamentarians, who wouldn’t welcome an intrusion into their affairs in their weekend bolthole. So the extradition treaty deal doesn’t get done.

But the Gayus case has changed that dynamic. Hiding out in Singapore, he was ”persuaded” by Indonesian investigators to return voluntarily to Jakarta, where he is disgorging ”tip-of-the-iceberg” revelations about corruption in the tax department, the police force and judiciary, and explaining how he came to have $3 million in a Singapore account (he was supposed to have dealt with 150 companies). The word in Jakarta is that the Singaporeans didn’t even know the Indonesian police were there to ”arrest” Gayus.

Does this mean the Indonesian authorities will now march on Singapore and seize wrongdoers? No, largely because the serious money remains protected by armies of expensive lawyers and influential patrons.

Still, Gayus is being prosecuted for money-laundering and, in a continuing hearing, gave evidence that the money in his account was from a businessman seeking help in paying taxes. But, he said, the businessman didn’t show up for an appointment, thus leaving the money in Gayus’s account, presumably for safekeeping.

Indonesians are resigned to accepting that corruption will take generations to purge or at least moderate and there are many who’d like the death penalty to be imposed on those with grasping hands in the national purse. But in the new Indonesia, cases like the Gayus-Susno scandal get healthily exposed and people go to jail, pursued by new institutions such as the Corruption Eradication Commission, now regarded as Indonesia’s most trusted authority. But some people in places such as Singapore like the old Indonesia because, protected by secretive banking disclosure laws, many dodgy Indonesians salted away ill-gotten money, and often themselves, in the comfy and well-fed city-state, out of reach of Indonesia’s reformist broom.

Indonesian taxpayers have doubled since 2005, albeit off a low base (only around 15-20 million of 250 million Indonesians pay tax). But if their hard-earned gets stolen or abused (or gets transferred to private accounts in Singapore), Indonesians are again asking, ”Why bother?” About 100,000 people have gone on Facebook urging protests against the Gayuses and Susnos by not paying taxes, an easy complaint to make in a land of bad roads and poor medical facilities.

What is slowly sinking in, though, is that the Indonesian bureaucracy is genuinely changing, and the tax models it is embracing are American, where Washington’s Internal Revenue Service has a near messianic zeal in pursuing evaders.

As for the singing, sleazy cop Susno, fingered by the anti-corruption agency for trying to destroy it with bogus investigations on behalf of person or persons still unknown, where did he head when the heat started to come down? When detained by officials, he was about to board a flight to Singapore.

(See original publication)