Causes and Consequences of Corruption

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Causes and Consequences of Corruption in Southeast

Asia: A Comparative Analysis of Indonesia, the
Philippines and Thailand
Jon S T Quah
Published online: 25 Feb 2014.
To cite this article: Jon S T Quah (2003) Causes and Consequences of Corruption in Southeast Asia: A Comparative
Analysis of Indonesia, the Philippines and Thailand, Asian Journal of Public Administration, 25:2, 235-266
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ASIAN JOURNAL OF PUBLIC ADMINISTRATION VOL. 25, NO. 2 (DECEMBER 2003)- 235-266
Causes and Consequences of Corruption

in Southeast Asia: A Comparative
Analysis of Indonesia,
the Philippines and Thailand
Jon S T Quah
Downloaded by [Northeastern University] at 12:34 18 November 2014
Corruption in Indonesia, the Philippines and Indonesia can be attributed to the

low salaries of the civil servants and political leaders, the ample opportunities for
corruption in many public agencies, and the low probability of detection and
punishment of corrupt offenders. The consequences of corruption are negative for
all three countries, but they are less serious for Thailand because of the National
Counter Corruption Commission s efforts in curbing corruption. The anti-corruption
strategies in Indonesia and the Philippines would be more effective if their political
leaders demonstrated their commitment to curbing corruption.
Introduction
Corruption is a serious problem in many Asian countries today. The

United Nations Development Programme (UNDP) has defined
corruption as "the misuse of public power, office or authority for
private benefit — through bribery, extortion, influence peddling,
nepotism, fraud, speed money or embezzlement" (United Nations
Development Programme 1999: 7). Fortunately, the research taboo
on corruption mentioned in 1968 by Gunnar Myrdal (1989) no longer
exists as a great deal of research has been done on corruption in Asian
countries since the 1990s.1
Southeast Asia refers to these 10 countries: Brunei Darussalam,
Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines,
Singapore, Thailand and Vietnam. Table 1 shows the ranking of seven
of these countries on Transparency International's Corruption
Perceptions Index (CPI) in 2003.2 From this table, it can be seen that
235
Singapore (ranked 5th) is the least corrupt Southeast Asian country,

while Indonesia (ranked 122nd) is perceived to be the second most
corrupt after Myanmar, which is ranked 129th among the 133 countries
surveyed.
This article focuses on the causes and consequences of corruption
in three Southeast Asian countries: Indonesia, the Philippines and
Thailand. These three countries are selected for comparison for two
reasons. First, enough research has been done on corruption in these
countries to facilitate comparative analysis.3 The second and more
important reason is that they provide between them several important
aspects for comparison: land area, population, GDP per capita,

colonisation, political system, the role of the military, and religion.
Table 1
Ranking of Seven Southeast Asian Countries on Transparency
International's Corruption Perceptions Index in 2003
Country CPI Ranking CPI Score
Singapore 5th 9.40
Malaysia 37th 5.20
Thailand 70th 3.30
Philippines 92nd 2.50
Vietnam 100th 2.40
Indonesia 122nd 1.90
Myanmar 129th 1.60

Source: http://www.transparency.org The scores range from 0 (most corrupt) to
10 (no corruption).
The article contends that while the causes for corruption in

Indonesia, the Philippines and Thailand are similar, the consequences
for corruption in these countries are different because of the varying
levels of effectiveness of their governments in minimising corruption.
Thus, of the three countries, the consequences for corruption are more
serious in Indonesia and the Philippines than in Thailand as their
governments have been less effective than the Thai government in
curbing corruption.
236
Causes and Consequences of Corruption in Southeast Asia
The article is divided into four sections. The first section describes
the policy context in Indonesia, the Philippines and Thailand. The
second section identifies the various causes of corruption in these
countries. The third section examines the anti-corruption strategies
employed by the governments in the three countries. The final section
assesses the consequences of corruption in the three countries in terms
of the effectiveness of their anti-corruption strategies.
Policy Context
Table 2 compares the policy contexts in Indonesia, the Philippines,

and Thailand in terms of several aspects. First, Indonesia is the largest
of the three countries as it is an archipelago with a total land area of
1,904,443 sq kms. Thailand is the second largest, followed by the
Philippines. Second, in terms of population, Indonesia has 214.8
million people, the Philippines has 77.1 million people, and Thailand
has 63.6 million people. Third, Thailand's GDP per capita is nearly
twice than of the Philippines, and 2.6 times that of Indonesia.
Table 2
Policy Contexts of Indonesia, the Philippines and Thailand
Policy Context Indonesia The Philippines Thailand
Land Area 1,904,443 300,000 513,115

(sq km)
Population 214.8 77.1 63.6

(million)
GDP per US$680 US$930 US$1,800

Capita
Colonizer Dutch Spanish and Not

Americans applicable
Political Democracy Democracy Constitutional

System Monarchy
Role of Military Important Not important Important
Dominant Religion Islam Roman Buddhism

Catholicism
Source: The Economist (2003: 152, 184, 214)
237
Fourth, Indonesia was colonised by the Dutch for 340 years (1602-
1942), the Philippines was colonised by the Spanish (1565-1898) and
the Americans (1898-1913), but Thailand was never colonised. Fifth,
Thailand is a constitutional monarchy, while Indonesia and the
Philippines have reverted to democracy after many years of
authoritarian rule under President Suharto (1966-1998) and President
Ferdinand Marcos (1965-1986). Sixth, the military has played an
important role in politics in both Indonesia and Thailand, but not in
the Philippines. Finally, the dominant religion in the three countries
is different as Indonesia is predominantly Muslim, the Philippines

Catholic, and Thailand Buddhist.
The above similarities and differences in the policy context of the
three countries should be borne in mind in the subsequent analysis of
the causes and consequences of corruption.
Causes of Corruption
In his comparative study of the control of bureaucratic corruption in

Hong Kong, India and Indonesia, Palmier has identified three factors
as important causes of corruption: opportunities (which depended on
the extent of involvement of civil servants in the administration or
control of lucrative activities), salaries and policing (the probability
of detection and punishment). Palmier's (1985: 271-272) hypothesis
is:
[B]ureaucratic corruption seems to depend not on any one of

the [three] factors identified, but rather on the balance between
them. At one extreme, with few opportunities, good salaries,
and effective policing, corruption will be minimal; at the other,
with many opportunities, poor salaries, and weak policing, it
will be considerable [emphasis added].
Thus, following this hypothesis, an effective anti-corruption strategy

should reduce or remove the opportunities for corruption, raise the
salaries of civil servants and political leaders, and ensure a high degree
of policing.
238
Low Salaries
Palmier has identified low salaries as an important cause of corruption.

"If the official is not to be tempted into corruption and disaffection,
clearly there is an obligation on the government to provide or at least
allow such benefits as will ensure his loyalty; one might call it an
implicit contract" (Palmier 1985: 2). Thus, "adequate pay" becomes
"an essential ingredient in reform" (Palmier 1985:6). Similarly, Mauro
(1997: 5) has argued that "when civil service pay is too low, civil
servants may be obliged to use their positions to collect bribes as a

way of making ends meet, particularly when the expected cost of
being caught is low."
In Indonesia, corruption was a serious problem during the Dutch
colonial period as the salaries of the Dutch East India Company's
personnel were inadequate. Day (1966: 100-103) observed that these
personnel "were underpaid and exposed to every temptation that was
offered by the combination of a weak native organisation,
extraordinary opportunities in trade, and an almost incomplete absence
of checks from home or in Java." Corruption became endemic during
President Soekarno's rule because his "disastrously inflationary
budgets eroded civil service salaries to the point where people simply
could not live on them and where financial accountability virtually
collapsed because of administrative deterioration" (Mackie 1987: 87-
88).
In 1969, Smith (1970:28-29) conducted a survey of regional civil
servants in Indonesia and found that "there is not a single official who
can live by his government income alone" as the "official income
amounts to approximately half of [his] essential monthly needs." A
more recent survey on corruption in Indonesia of 2,300 respondents
(650 public officials, 1,250 households and 400 business enterprises)
found that low salaries were identified as the most important cause of
corruption by 51.4 percent of the public officials, 36.5 percent of the
business enterprises, and 35.5 percent of the households (Partnership
for Governance Reform 2001: 39, Figure Gl).
Corruption was introduced into the Philippines during the Spanish
colonial period, when corruption prevailed as the civil servants were
poorly paid and had many opportunities for corruption (Corpuz 1957:
239
129). In contrast, the bureaucracy was less corrupt during the American
colonial period (1898-1913) as "the bureaucrats received higher
salaries and corrupt officials were promptly prosecuted" (Quah 1982:
159). Civil servants in contemporary Philippines describe their salaries
as "starvation wages" which are inadequate to meet the needs of their
families (Chua & Rimban 1998:154). Consequently, their low salaries
compel them to sell goods in the office, hold a second job, teach part-
time, practise their profession after office hours, work as researchers
and consultants, and resort to petty corrupt practices (Padilla 1995:
195-202, 206).
The origins of corruption in Thailand can be traced to the 16th

century, when civil servants withheld revenue collected for the King
for themselves as they were not paid regular salaries and sent only a
small amount to the King (Chai-Anan 1977: 1-4). This tradition of
officials retaining part of the royal revenue was difficult to eradicate,
and it remained even after the creation of the Revenue and Audit
Offices in 1873 by King Chulalongkorn, who later introduced a salary
system and ordered all tax collections to be returned to the King
regardless of the quantity (Chai-Anan 1977: 7).
Suwanagul (1962: 79-80) found that the low salaries of Thai civil
servants during the post-war period contributed to more bureaucratic
corruption as their low salaries were insuffucuent to meet inflation
and below those offered in the private sector. Recently, Thailand's
police chief, General Sant Sarutanond, admitted that Thai policemen
"are undereducated and underpaid and that is the reason why they are
corrupt." According to him, commissioned police officers should be
receiving a monthly salary of 20,000 baht (US$850) to meet their
expenses in the large cities, but they are actually getting a starting
monthly salary of 6,000 baht (S$260) (Straits Times [Singapore] 2002).
In short, "if bureaucrats are paid a high enough wage, even a
small chance of losing their jobs would discourage them from being
corrupt." Conversely, if the real salary of civil servants decreases
drastically, "even the most rigidly honest bureaucrats will be tempted
to go beyond the law to preserve their standard of living" (Banerjee
1996: 110).
240
Ample Opportunities for Corruption
The scope of public administration has grown and the role of the public
bureaucracy in national development has become important with the
advent of the modern administrative state (Caiden 1971: 23-24). The
expanding role of the public bureaucracy in national development
has increased the opportunities for administrative discretion and
corruption as "regulations governing access to goods and services
can be exploited by civil servants in extracting 'rents' from groups
vying for access to such goods and services" (Gould & Amaro-Reyes,
1983: 17).
In Indonesia, Warwick has introduced the interesting distinction
made by civil servants between "wet" and "dry" agencies, depending
on their budgets and access to the public. According to Warwick (1987:
43):
"wet" agencies . . . are generous with honoraria, allowances,

service on committees, boards, and development projects, and,
recently, opportunities for foreign training. They are
departments that deal in money, planning, banking, or public
enterprises. "Dry" agencies are those doing traditional
administrative work. Perceptions of unfairness about benefits
not only reduce staff morale, but lead to the feeling that illegal
compensation is a fair way to even out staff benefits across
agencies.
Thus, "wet" agencies like the customs, immigration, internal

revenue, and police will provide more opportunities for corruption
than "dry" agencies like research and administrative departments,
which do not interact directly with the public. According to Prawiro
(1998: 230-231,264), Coordinating Economics Minister in Indonesia
from 1989-1993, the tax office and the customs service were the most
lucrative of the "wet" government agencies in Indonesia. Indeed, as
"dry" agencies have reduced opportunities for corruption, "being
posted to a dry position is about the worst fate any official could fear"
(Loveard 1999: 111).
In the case of the Philippines, the "wet" or vulnerable agencies
241
are the Bureau of Immigration (BI), the Bureau of Customs, the Bureau
of Internal Revenue, police agencies, the Department of Public Works
and Highways, and the Department of Education, Culture and Sports
(DECS). For example, in 1996 retired Colonel Salvador Rodolfo, a
former intelligence consultant of the BI, identified the BI as "the worst
agency in the Philippine republic enmeshed in graft and corruption,
and the only language spoken from commissioners down to clerks
and janitors is money, money, dirty money" (Chua & Rimban 1998:
153). The police agencies are vulnerable "to being drawn to criminality
because of their proximity to criminals" and are usually involved in
drugs, gambling, prostitution or smuggling (Rocamora 1998: 17). A

final example is the DECS, which "is fertile ground for corruption
because it is oozing with money" as its budget in 1998 was 86.9 billion
pesos or 18.9 percent of the national budget (Chua 1999: 6). In Chua's
(1999: 7) words:
There is so much money at DECS that it drives officials into

a spending frenzy. The funds also draw a swarm of suppliers
and contractors, many of them unscrupulous. There is so much
available that even those outside DECS, especially politicians
and other officials, demand a piece of the action.
In Thailand, the Ministries of the Interior, Education, and

Agriculture had the most number of corruption cases during 1970-
1990. For example, the Ministry of the Interior had 857 cases of
corruption during 1970-1972, 569 cases during 1981-1987, and 710
cases during 1989-1990 (Pasuk & Sungsidh 1996: 29-30). A 1992-
1993 survey of 2,243 respondents in Bangkok and four regions found
that the Police Department was perceived to be the most corrupt
government agency by 33.7 percent, followed by the Ministry of
Defence (27 percent), the Ministry of the Interior (26 percent), and
the Department of Transport (22.5 percent) (Pasuk & Sungsidh 1996:
131, 155-156). Two Thai scholars have estimated that more than half
of the "regular policemen working in police stations are involved in
syndicated corruption. Low-ranking policemen are alleged to collect
money in various ways and pass it on to their seniors" (Pasuk &
Sungsidh 1996: 122).
242
Thus, vulnerable or "wet" government agencies in the three

countries provide ample opportunities for corruption because of their
substantial budgets and access to the population. Indeed, excessive
red tape and cumbersome administrative procedures in these agencies
cause delay and provide the incentive for their clients to pay "speed
money" to expedite the processing of their applications or to waive
the requirements.
Low Risk of Detection and Punishment

As corruption is an illegal activity in all countries, those individuals

found guilty of corrupt offences should be punished accordingly.
However, in reality, the probability of detection and punishment of
corrupt offences is low in Indonesia, the Philippines and Thailand as
the public in these countries perceive corruption to be a low risk,
high reward activity.
The Indonesian Civil Service's weak disciplinary control is
reflected in the difficulty in detecting corrupt behaviour among its
members and the absence or light penalty for such behaviour. In his
1969 survey of regional economic planners in Indonesia, Smith (1971:
30) found that apart from the lack of incentives for correct behaviour,
sanctions were also absent or rarely applied to those officials who
were under-performing as "cultural norms effectively preclude
punitive denial of the perquisites, however minor, that attend each
position." Smith (1971: 30) concluded that "the common procedure
for dealing with officials whose corrupt practices became open
knowledge is to transfer them to new jobs before their activities gain
wide attention."
Similarly, when a senior Indonesian civil servant was advised to
dismiss his indolent and corrupt subordinates, he replied that he could
not do so because they "had large families to support and needed
these jobs. Besides, they didn't earn enough anyhow" (Palmier 1985:
210). Finally, Palmier (1985: 280) found that corruption was rampant
in Indonesia because it was tolerated as corrupt officials were seldom
punished.
Indeed, former President Suharto was charged for corruption in
2000, but the case was dropped on medical grounds. His youngest
243
son, Tommy, was convicted in the same year for corruption, but he
escaped. He was subsequently jailed for 15 years in 2002 for ordering
the assassination of a judge (Associated Press, 2003). In August 2003,
the Attorney General's Office stopped an investigation into alleged
corruption by Suharto's eldest daughter, Siti Hardiyanti "Tutut"
Rukmana, when the prosecutors could not find any irregularities in a
deal involving a pipeline company owned by her and Pertamina, the
state-owned oil company (The Star [Malaysia] 2003). In short, except
for Tommy, no one else in "the Suharto clan" has been punished for
their corrupt activities.
When President Corazon Aquino assumed office in February 1986,

"there was high expectation that the end of the culture of graft and
corruption was near" (Varela 1995:174). She established the President
Commission on Good Government (PCGG) to identify and recover
the money stolen by the Marcos family and its cronies. Unfortunately,
Aquino's "avowed anti-graft and corruption" stance was viewed
cynically by the public as two of her Cabinet members and her relatives
were accused of corruption. In May 1987, Aquino created the
Presidential Committee on Public Ethics and Accountability (PCPEA)
to respond to increasing public criticism. However, the PCPEA was
ineffective as it lacked personnel and funds. In other words, Aquino's
"honesty has not been matched by the political will to punish the
corrupt" (Timberman 1991: 235).
Beschel (1999: 8) observed that sanctions were imposed
inconsistently in the Philippines, "with draconian punishment being
meted out for relatively minor infractions and major crimes receiving
lenient treatment — particularly when they are committed by the
rich, the powerful and the politically well-connected." Furthermore,
when he compared the successful prosecution of corrupt offenders in
Hong Kong and the Philippines, Beschel found that a person
committing a corrupt offence in Hong Kong was 35 times more likely
to be detected and punished than his counterpart in the Philippines as
the number of successful prosecutions in 1997 was 8.24 cases per
10,000 civil servants in Hong Kong and less than 0.25 case per 10,000
civil servants in the Philippines.
Thus, corruption has flourished in the Philippines because of the
low risk of detection of corrupt offences and the low probability of
244
punishment for such offences. In his memoirs, Senior Minister Lee

Kuan Yew (2000: 342-343) of Singapore has attributed the lack of
punishment of Marcos, his family and cronies for their corrupt activities
to the "soft, forgiving culture" of the Philippines. He wrote:
Only in the Philippines could a leader like Ferdinand Marcos,

who pillaged his country for over 20 years, still be considered
for a national burial. Insignificant amounts of the loot have
been recovered, yet his wife and children were allowed to
return and engage in politics . . . General Fabian Ver, Marcos's
commander-in-chief... had fled the Philippines together with

Marcos in 1986. When he died in Bangkok, the Estrada
government gave the general military honours at his burial.
In Thailand, the lack of policing was most obvious during 1975-

1998, when the Counter Corruption Commission (CCC) was
responsible for investigating allegations of corruption against civil
servants. The passing of the Counter Corruption Act (CCA) in February
1975 transformed the Counter Corruption Committee into the CCC,
whose members were appointed by the King with the approval of the
Senate and House of Representatives. Apart from investigating
allegations of corruption against public officials, the CCC also
submitted proposals for preventing corruption and for revising
administrative practices to the Cabinet and sent reports of its
performance to the Prime Minister, the Senate's President, and the
Speaker of the House of Representatives (Quah 1999c: 249).
Unfortunately, the CCC was ineffective and it was viewed by its
critics as a "paper tiger" without real teeth, as "it could only send
reports to the prime minister and the cabinet" since it lacked "direct
authority to punish public officials." Consequently, very few civil
servants were punished for corruption. The CCC's ineffectiveness led
to the CCA's amendment in 1987 to give it more power (Amara 1992:
242). However, in spite of this amendment, the CCC could not take
action against politicians as it only had "the power to investigate a
bureaucrat following a complaint." If the complaint was valid, the
CCC would report it to the accused official's superior, who could
order another investigation to decide whether the case should be sent
245
to the public prosecutor for criminal charges or settled through

departmental disciplinary action. Officials found "guilty" by the CCC
were usually reprimanded or disciplined within the department
concerned, as the public prosecutor would initiate new investigations
as he would not use the evidence collected by the CCC (Pasuk &
Sungsidh 1996: 180-181).
In sum, the three major causes of corruption in Indonesia, the
Philippines and Thailand are the low salaries of civil servants and
political leaders, the many opportunities for corruption in "wet" or
vulnerable agencies, and the ineffective policing or low probability
of the detection of and punishment for corrupt offences.
Anti-Corruption Strategies
Indonesia
The fight against corruption in Indonesia began after the 1955 election
as corruption was rife especially in the area of import licenses. This
led to the first attempt by the government to curb corruption and
resulted in the arrests of those involved, including civil servants and a
minister. In December 1967, President Suharto established the Team
Pemberantasan Korupsi (Corruption Eradication Team or CET) within
the Attorney General's Office to deal with corruption cases. However,
the CET was ineffective because its efforts were blocked by influential
men in the regime. According to a CET official, the "big fish" who
were corrupt were protected by powerful men (Palmier 1985: 215).
Student protests against corruption in Jakarta followed by press
criticism of the government resulted in the creation of a special
Commission of Four (Komisi IV) elder statesmen on 31 January 1970
by President Suharto to review the problem of corruption within the
civil service and to make suggestions for improvement. The
Commission presented seven reports on corruption in the state oil
enterprise, the rice procurement agency, and the state forestry
enterprise. However, its most important recommendation was the
passing of the Prevention Against Corrupt Criminal Acts Bill in 1971.
The Commission also recommended that civil servants should
submit an annual return of their personal assets. This recommendation
246
was accepted by President Suharto, who issued an Instruction in 1970

requiring all civil servants to conform to it. However, the civil servants
ignored this requirement for nine years as by 1979, only 90 percent of
them had submitted their annual returns (Quah 1982: 171).
In June 1977, President Suharto issued Presidential Instruction
No 9 of 84 which transferred the task of combating corruption to the
National Security Agency (Kopkamtib), which was instructed to take
action against "unofficial levies," including forced discounts, extortion
and bribes. Kopkamtib initiated Operation Orderliness by making
"lightning visits" to those "wet" government departments prone to
corruption, and dismissing those civil servants caught red-handed on

the spot. While some officials were arrested, Kopkamtib's major
handicap was its inability to take action against those generals and
senior civil servants involved in corrupt practices.
For the next 21 years until President Suharto stepped down in
May 1998, nothing was done by him to curb corruption among his
family, ministers and cronies. Indeed, he was "most reluctant" to
control the excessive behaviour of his children and grandchildren.
Suharto was succeeded by President B.J. Habibie, who introduced
two laws — the Law on the State Organization Clean and Free from
KKN (Law No 28 of 1999) and the Anti-Corruption Law (Law No 31
of 1999), which increased the penalty for corruption to a maximum
of 20 years imprisonment or one billion Rupiahs in fine and created
the Anti-Corruption Commission.
The anti-corruption efforts of the Habibie administration exposed
the problem of korupsi, kolusi dan nepotisme (KKN or corruption,
collusion and nepotism) but were ineffective for two reasons. First,
there was no serious attempt to "bring offenders to justice" during
Habibie's presidency as KKN was viewed as a legislative problem to
be resolved by introducing new laws. Second, the various institutions
created by President Habibie to eradicate KKN "failed to perform,
and no significant progress was made" (Assegaf et al 2002: 149).
President Abdurrahman Wahid's administration inherited "a
substandard legal system" and "a murky taxation system" which
provided ample opportunities for corruption (Smith 2001: 11).
President Wahid also inherited the new anti-corruption laws and the
Joint Team for the Eradication of Corruption (TGPTPK) was formed
247
in June 2000 according to Article 27 of Law No. 31 of 1999 to deal

with "criminal acts of corruption that are difficult to prove" (Assegaf
et al 2002: 168, fn 85). However, the TGPTPK team was ineffective
because of the poor work commitment of its members, the lack of
financing which resulted in the non-payment of its members' salaries
for several months, and its lack of authority to investigate corruption
cases which occurred before 1999 (Assegaf et al 2002: 169).
The major problem undermining President Wahid's efforts in
curbing corruption was that he was personally implicated in three
corruption scandals: the "Buloggate" scandal where his private
masseur, Suwondo, borrowed Rp 35 billion (about US$4 million) from

the State Logistics Agency (Bulog or Badan Urusan Logistik) and
distributing this amount among several persons and an airline company
in which Wahid and Suwondo were connected; the "Bruneigate"
scandal or Wahid's failure to declare to the state treasury a personal
gift of US$2 million from the Sultan of Brunei; and the
"Borobudurgate" scandal, which arose from Wahid's meeting with
Tommy Suharto to arrange a presidential pardon for his jail sentence
for corruption (Budiman 2001: 149). Needless to say, these scandals
damaged Wahid's image and undermined his credibility in curbing
KKN.
When Megawati Sukarnoputri became president in July 2001, she
inherited "a severely weakened presidency" and the unresolved
problem of KKN (Sen 2002: 17). In her first state of the nation speech
on 16 August 2001, she promised that her anti-corruption campaign
would begin with her family and that corruption must be eliminated
to strengthen Indonesia's democratisation. She also directed her cabinet
ministers and senior civil servants to declare their assets to the state
auditors. Furthermore, she indicated that her ministers would be held
responsible if they were found to have given unlawful benefits to her
relatives. She added: "If later it is found that any of the children have
benefited from any project, or anything else, it will be the minister
who will bear the blame" (BBC News 2001: 1-2).
Megawati's remarks must be understood in the context of the
rampant and blatant corruption perpetuated by former President
Suharto and his family during the 32 years of his rule. According to
Kingsbury (1998: 202):
248
Corruption exists from the very lowest levels of government

bureaucracy all the way up to the first family. Indeed, Suharto's
close associates and family have made an art form of creaming
off many of Indonesia's most profitable ventures (from the
media to property, agriculture, manufacturing, banking, high
technology, and so on), while being protected by monopoly
regulations and their relationship to the president.
Similarly, Backman (2001: 242) has referred to "the Suharto Clan"

which consists of 18 members and includes his late wife, Tien, three
sons, three daughters, six daughters-in-law and sons-in-laws, two
grandchildren, a half-brother, a cousin, and a brother-in-law of his
daughter, Titiek.
It is, of course, premature to make any final assessment of
Megawati's efforts in curbing KKN. She appears to be committed to
eradicating KKN, but it remains to be seen whether she will
demonstrate this commitment by supporting the new Anti-Corruption
Commission's efforts in enforcing impartially the new anti-corruption
laws. In June 2003, nearly two years after Megawati assumed office,
the Coordinator of Indonesian Corruption Watch, Teten Masduki,
accused President Megawati of not being committed in fighting
corruption as she has delayed the establishment of an anti-corruption
commission provided by the Anti-corruption Law No 30/2002 which
was passed in November 2002 (Jakarta Post 2003).
Three months later, the Chairman of the Supreme Audit Agency
in Indonesia, Satrio B Judono, criticised the government's "lackluster
efforts" in combating corruption as only 505 (or 8 percent) of the
6,162 suspected corruption cases reported by it were investigated by
the Attorney General's Office and the National Police. Indeed, "the
small number of cases actually acted upon by the government serve
as more evidence that the country's half-hearted efforts to stamp out
graft and corruption have again proven fruitless" (Xinhua News
Service 2003).
In the final analysis, the acid test of President Megawati's
commitment to fighting corruption would be the treatment of former
President Suharto: would she follow her predecessors' example of
249
leaving him alone? Or would she re-open the corruption investigations

against him in spite of his "ill health?" (Quah 2002: 34).
The Philippines
The fight against corruption in the Philippines began in May 1950,

when President Quirino created the Integrity Board consisting of five
members to investigate complaints of graft and corruption against
civil servants. However, this first anti-corruption agency was short-
lived as the lack of public support led to its dissolution five months
later (Quah 1982: 159).

After winning the 1953 presidential election, Ramon Magsaysay
established the Presidential Complaints and Action Commission
(PCAC) to reduce inefficiency and dishonesty in the civil service.
The first anti-corruption law was the Forfeiture Law of 1955, which
authorised "the state to forfeit in its favor any property found to have
been unlawfully acquired by any public officer or employer" (Alfiler
1979: 324-325). Unfortunately, this law was ineffective as there were
no conviction even after four years of its passage.
President Magsaysay's untimely death in an air crash in 1957 led
to the emergence of the Garcia administration (1957-1962), which
abolished the PCAC and replaced it with the Presidential Committee
on Administrative Performance Efficiency (PCAPE) and the
Presidential Fact-Finding Committee (PFFC) in 1958 to implement
the government's anti-graft campaign. In February 1960, President
Garcia formed a third agency known as the Presidential Anti-Graft
Committee (PAGC) (Alfiler 1979: 331-337). The second anti-
corruption law, the Republic Act (RA) No. 3019, entitled the Anti-
Graft and Corrupt Practices Act, was passed in April 1960. RA 3019
identified 11 types of corrupt acts among public officials and required
them to file every two years a detailed and sworn statement of their
assets and liabilities.
President Garcia was succeeded by President Diosdado Macapagal,
who served from 1962-1965. Macapagal created the Presidential Anti-
Graft Committee or PAGCOM. In 1965, Ferdinand Marcos replaced
Macapagal as President and abolished PAGCOM and formed in its
place, the Presidential Agency on Reforms and Government Operations
250
(PARGO) in January 1966. Three other agencies were created to assist

PARGO to fight corruption: the Presidential Complaints and Action
Office (PCAO), the Complaints and Investigations Office (CIO), and
the Special Cabinet Committee in Backsliding (Alfiler 1979: 339-
346). The third anti-corruption law, RANo 6028, which provided for
the formation of the Office of the Citizens' Counsellor, was passed in
August 1969, but was not implemented.
President Marcos' declaration of martial law on 22 September
1972 "ended over a quarter century of robust, if often irresponsible
and elitist, democratic politics" (Timberman 1991:75). The remaining
anti-corruption laws were the four Presidential Decrees (PD) issued

by President Marcos after the establishment of martial law. PDNo 6
identified 29 administrative offences and empowered heads of
departments to dismiss guilty officials immediately. This resulted in
the sacking of nearly 8,000 public officials. Two months later, PDNo
46 prevented public officials from receiving and private individuals
from giving gifts on any occasion including Christmas. Finally, PD
No 677 and PDNo 749 are amendments to RANo 3019, requiring all
government employees to submit statements of their assets and
liabilities every year, instead of every other year; and providing
immunity from prosecution for those willing to testify against public
officials or citizens accused of corruption (Alfiler 1979: 326-327).
The Philippines is the Asian country with the most anti-corruption
measures as it has relied on seven laws and 13 anti-graft agencies
since it began its fight against corruption in the 1950s (Quah 1999a:
19). The proliferation of anti-graft agencies is the result of the frequent
changes in political leadership as these agencies are either created or
abolished by the President. From May 1950 to January 1966, five
anti-corruption agencies were formed and dissolved as there were five
changes in political leadership during that period. Similarly, President
Marcos created another five anti-graft agencies during his 21 years in
power because the first three agencies were ineffective and lasted
between eight months and two years (Quah 1982: 168-169). In July
1979, President Marcos formed the Sandiganbayan (Special Anti-Graft
Court) and the Tanodbayan (Ombudsman) by issuing PDNo 1606 and
PDNo 1603, respectively.
As discussed earlier, President Aquino created the PCGG and
251
PCPEA to curb corruption but both were ineffective as some of the

PCGG personnel were corrupt and the PCPEA lacked personnel and
funds. The Ombudsman was "reborn" in 1988 but from 1988 to 1995,
it "failed to attract much public scrutiny" as the "limelight" was
"hogged by the more high-profile Sandiganbayan." Thus, instead of
"inspiring confidence in the judicial system," the Ombudsman has
elicited "only disappointment— if not contempt— among many of
those seeking redress for the wrong done them by public officials" as
it has taken a long time to process the complaints received by it (Balgos
1995:247-248). By December 1994, the Ombudsman had accumulated
a backlog of 14,652 cases, or 65 percent of its total workload. In August

1997, the Ombudsman still had pending cases from 1979 (Balgos 1995:
250-251).
In May 1992, Fidel Ramos was elected president for a six year
term. He created the Presidential Commission Against Graft and
Corruption (PCAGC) in 1994 to investigate violations of the anti-
graft laws by presidential appointees and appointed Eufemio Domingo
as its chairman. After serving for three years, Domingo lamented that
"the system is not working" because "we are not making it work"
and the anti-corruption laws, rules and regulations "are not being
faithfully implemented" (Balgos 1995: 267-268).
Joseph Estrada succeeded Ramos as president and in his State of
the Nation Address on 28 July 1998, he identified the struggle against
graft and corruption as his major priority. In early 1999, he had
requested the World Bank to formulate "a national strategy for fighting
corruption." However, President Estrada did not implement the World
Bank's nine-point strategy as he was himself accused of corruption.4
Estrada was succeeded by Gloria Macapagal-Arroyo on 20 January
2001. However, during her two years in office, improving economic
growth and fighting terrorism were her major priorities. Consequently,
the task of curbing corruption only became important in January 2003,
when she launched a war against corruption, which included "life-
style checks" on government officials. In August 2003, President
Arroyo said that she and her family were willing to undergo the anti-
corruption checks she had ordered for government officials in response
to opposition senator Panfilo Lacson's allegation that her husband
had "amassed huge sums through graft and money laundering" (Straits
Times [Singapore] 2003).
252
Thailand
In September 1972, the Board of Inspection and Follow-up of

Government Operations (BIFGO) was formed as Thailand's first anti-
corruption agency. It consisted of five members and was responsible
for investigating allegations of corruption against government agencies
and officials. However, BIFGO was not effective as its members were
not men of integrity, that is, they were guilty of corruption themselves.
Accordingly, BIFGO was dissolved after the October 1973 Revolution,
and in 1974 the Sanya government appointed a committee to probe

into the wealth of Field Marshal Thanom, Prapass and Colonel Narong,
who were the Chairman, Deputy Chairman, and Deputy Secretary-
General respectively (Quah 1982: 171-172).
In May 1974, Prime Minister Sanya appointed an Anti-Corruption
Committee (ACC) to investigate charges of corruption against public
officials and to report its findings to the Prime Minister or minister in
charge of the ministry concerned. As the ACC was an investigatory
agency, it did not have any quasi-judicial powers. This meant that it
had to rely on the Civil Service Commission and the Court of Justice
to take legal action against corrupt officials. The ACC had examined
more than 140 petitions by September 1974.
In addition to investigating corruption cases, the ACC was directed
to prepare an anti-corruption draft bill to supplement the Penal Code
because its provisions were inadequate for fighting corruption. The
draft bill was approved by the Cabinet in December 1974 and the
CCA was passed by the National Assembly on February 1975. As
discussed earlier, the CCA transformed the ACC into the CCC, which
was ineffective for three reasons: its lack of powers to punish corrupt
officials; the public perception in Thailand that corruption is acceptable
and not against the public interest; and the constant conflict between
the Cabinet and the Civil Service (Quah 1999c: 253-254).
In 1982, I described Thailand's anti-corruption strategy as
"hopeless" as its anti-corruption measures were inadequate and its
political leaders unconcerned about curbing corruption (Quah 1982:
175-176). However, the situation has improved in recent years after
Chuan Leekpai replaced General Chavalit Yongchai as prime minister
in November 1997. The Constitution promulgated on 11 October 1997,
253
or the "People's Constitution," is concerned, among other things, with

making elected politicians and public officials accountable by
introducing several measures to control corruption. Codes of conduct
for politicians and civil servants have been formulated to prevent
conflicts of interest. They are also required to declare their assets,
liabilities, and their income tax returns (and those of their dependents)
to the CCC when they assume and leave office and one year after
leaving office.
The CCC was strengthened and transformed in 1999 to the National
Counter Corruption Commission (NCCC), which can bring cases to
court and to cover the cases of politicians. The NCCC inherited the
CCC's workload and problems and its nine members are appointed by
the King for a term of nine years. It has a staff of 300 persons, of
whom 130 are investigators. As its request for additional staff and
funding was rejected, it devotes its efforts to auditing the assets of
elected officials, which is time-consuming.
The anti-corruption measures in the 1997 Constitution are an
indication of former Prime Minister Chuan Leekpai's commitment to
fighting corruption in Thailand. However, his weak political position
as the prime minister of a coalition government and his inability to
improve the economy, led to his defeat in the January 2001 general
election, which was won by Thaksin Shinawatra's Thai Rak Thai Party.
However, it remains to be seen whether Prime Minister Thaksin will
be committed to fighting corruption as his predecessor as his relations
with the NCCC are unlikely to be smooth because he was charged for
falsely declaring his assets by the NCCC but this charge was not upheld
by the Constitutional Court, which voted 8-7 in favour of exonerating
Thaksin. Furthermore, the appointment of General Chavalit and others
who are not known for their honesty in the Cabinet might also hamper
theNCCC's anti-corruption efforts.
Consequences of Corruption
In 1964, Leff (1964: 8-14) contended that bureaucratic corruption

had positive effects and contributed to economic development by
providing the incentive for entrepreneurs to mobilize the bureaucracy,
by reducing uncertainty and increasing investment, by promoting
254
innovation, by introducing competition into the economy, and by

providing a safeguard against the losses of bad economic policy.
However, more recent studies have shown that corruption has toxic
rather than tonic effects (Carino 1986: 163-194).
More specifically, the report on Human Development in South
Asia (1999: 96, 105) concluded that:
Corruption is one of the most damaging consequences of poor

governance. It undermines investment and economic growth,
decreases the resources available for human development
goals, deepens the extent of poverty, subverts the judicial

system, and undermines the legitimacy of the state. In fact,
when corruption becomes entrenched, it can devastate the
entire economic, political, and social fabric of a country . . .
corruption breeds corruption — and a failure to combat it
effectively can lead to an era of entrenched corruption.
Corruption became institutionalized during President Suharto's

32-year reign as his cronies and family were deeply involved in corrupt
activities. In May 1999, one year after Suharto stepped down from
power, Colmey and Liebhold (1999: 16) estimated that Suharto and
his children had amassed "a $15 billion fortune in cash, property, art,
jewelry and jets." In June 2003, Kartorius Sinaga, an Asian
Development Bank (ADB) consultant, revealed that 40 percent of
ADB loans allocated for development projects in the provinces of
North Sumatra, East Java and West Nusa Tenggara, were lost to
corruption. The ADB had provided a total of US$1 billion in loans to
support 72 development projects in these three provinces during 1998-
2003 (Antara [Indonesia] 2003).
In December 1999, the World Bank estimated that the Philippines
government had lost US$47 million annually or a total of US$48 billion
to corruption during 1977-1997 (Torrijos 1999: 4). Another estimate
by Morgan Stanley Research indicated that a sum of US$204 billion
was lost to corruption during 1965-2001 (Philippine Daily Inquirer
2003). In July 2003, Senator Edgardo Angara revealed that the
Philippines government was losing P22 billion annually to corruption
in the procurement of supplies and bidding of government contracts
255
(Clapano 2003).
Finally, in the case of Thailand, Pasuk and Sungsidh (1996: 39,
41) found that:
[T]he rate of corruption was highest in the Chatichai period

at 633.3 million baht per year, as compared to 86.3 million
for Sarit, and 60 million baht in the case of Thanom-Praphat
. . . When the corruption amount is expressed as a percentage
of the government budget, then the Sarit period leads. Sarit's
proven revenue from corruption amounted to 6.3 percent of
the capital expenditure budget compared to 1.0 percent by

Thanom-Praphat and 1.1 percent by Chatichai and his
ministers.
While all three countries have suffered from the negative effects
of corruption, especially in terms of lost revenue, a more careful
assessment of the consequences of corruption can be made by
examining how these countries fare in terms of their ranking on the
CPI and two indicators on the Global Competitiveness Index.
Ranking on the CPI, 1995-2003
Table 3 shows that Thailand's ranking and score on the CPI from 1995-
2003 are consistently higher than those of the Philippines and
Indonesia, except for 1998-1999, when the ranking and score of the
Philippines are higher than those of Thailand. In all three countries,
their ranking was the highest in 1995, and the worse ranking was in
2003, when Thailand was ranked 70th, the Philippines 92nd, and
Indonesia 122nd. In sum, Thailand is perceived to be less corrupt
than the Philippines and Indonesia especially after 2000, which is a
reflection of the NCCC's efforts in combating corruption in recent
years.
Ranking on Global Competitiveness Index, 1999-2001
To supplement the CPI, we will compare the ranking of the three

countries on two indicators of the Global Competitiveness Index (GCI)
256
Table 3
Ranking of Indonesia, the Philippines and Thailand on
the Corruption Perceptions Index, 1995-2003
Year Indonesia The Philippines Thailand
1995 41 (1.94) 36 (2.77) 34 (2.79)
1996 45 (2.65) 44 (2.69) 37 (3.33)

1997 46 (2.72) 40 (3.05) 39 (3.06)
1998 80 (2.00) 55 (3.30) 61 (3.00)
1999 96(1.70) 54 (3.60) 68 (3.20)
2000 85(1.70) 69 (2.80) 60 (3.20)
2001 88(1.90) 65 (2.90) 61 (3.20)
2002 96(1.90) 77 (2.60) 64 (3.20)
2003 122(1.90) 92 (2.50) 70 (3.30)
Average 78 (2.04) 59(2.91) 55(3.14)
Source: http://www.transparency.org The scores are indicated within

the brackets.
from 1999-2001: the competence of public officials, and public trust

of politicians in Tables 4 and 5.
Table 4 shows that in terms of the competence of public officials,
Thailand's average rank is 39, followed by Indonesia's 45th ranking,
and the Philippines' 51st ranking. Similarly, Table 5 shows that the
level of public trust of politicians is higher in Thailand (37th ranking),
followed by Indonesia (44th ranking), and the Philippines (53rd
ranking).
257
Table 4
Competence of Public Officials in Three Countries on
the Global Competitiveness Index, 1999-2001
Country 1999 Rank 2000 Rank 2001 Rank Average Rank
Thailand 37 35 44 39
Indonesia 43 43 48 45
Philippines 49 45 58 51
Source: The Global Competitiveness Report 1999 (2000: 242); The Global
Competitiveness Report 2000 (2001: 238); and The Global Competitiveness

Report 2001-2002 (2002: 399).
Table 5
Public Trust of Politicians in Three Countries on
the Global Competitiveness Index, 1999-2001
Country 1999 Rank 2000 Rank 2001 Rank Average Rank
Thailand 45 30 37 37
Indonesia 41 39 53 44
Philippines 49 57 52 53
Source: The Global Competitiveness Report 1999 (2000: 327); The Global
Competitiveness Report 2000 (2001: 253); and The Global Competitiveness
Report 2001-2002 (2002: 408).
In short, the two indicators on the GCI from 1999-2001 also

confirm that Thai civil servants are more competent than their
Indonesian and Filipino counterparts, and that the level of public trust
of politicians in Thailand is also higher than that in Indonesia and the
Philippines. What is also surprising is that the Philippines has a lower
ranking on both indicators than Indonesia even though its average
ranking on the CPI is better than that of Indonesia.
Conclusion
Our comparative analysis of the causes and consequences of corruption

in Indonesia, the Philippines and Thailand shows that, first, corruption
258
is a serious problem in all three countries because of the low salaries

of civil servants and political leaders, the ample opportunities for
corruption in the "wet" public agencies, and the low probability of
detection and punishment of corrupt offenders. Second, while
corruption has negative consequences for all three countries, judging
from their average ranking on the CPI from 1995-2003 (78th position
for Indonesia, 59th position for the Philippines, and 55th position for
Thailand), the consequences for Thailand are less serious because of
theNCCC's efforts in curbing corruption since its inception in 1999.
The promulgation of the 1997 People's Constitution and the
subsequent formation of the NCCC in 1999 show that, unlike their

counterparts in Indonesia and the Philippines, the Thai political leaders
have demonstrated the political will to fight corruption. While the
battle for corruption in Thailand has not been won yet, the creation of
the NCCC and its efforts in investigating "big fish" including Prime
Minister Thaksin Shinawatra, augurs well for the future and
demonstrates that Thailand is no longer a "hopeless" case. Thus, the
situation in Indonesia and the Philippines in terms of curbing corruption
will only improve if their political leaders follow the example of the
Thai political leaders by creating an independent anti-corruption
agency to enforce impartially the anti-corruption laws in their
countries.
Notes
1. For examples of such research, see Palmier (1985), Carino (1986), Quah
(1999a), Quah (1999b), Lindsey and Dick (2002), and Kidd and Richter (2003).
2. Brunei Darussalam, Cambodia and Laos have not been included in the CPI
from 1995-2003.
3. For Indonesia, see: Holloway (2002), Lateef (2003), Quah (2002), Robertson-
Snape (1999), Soetjipto (2002), and Sunaryadi (2001). For the Philippines, see:
Batalla (2001), Chua (1999), Coronel (1998, 2000), Moratalla (2000), and Quah
(2003). For Thailand, see: Borwornsak (2001), Laird (2000), Maneewan and McLean
(2003), Pasuk and Sungsidh (1996), Sakkarin (2000), and Thinapan (1978).
4. For two assessments of Estrada's fall from power, see Doronila (2001) and
Laquian and Laquian (2002).
259
Asian Journal 0/
of Public Administration
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266

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On: 18 November 2014, At: 12:34

Asian Journal of Public Administration

Causes and Consequences of Corruption in Southeast

To link to this article: http://dx.doi.org/10.1080/02598272.2003.10800416

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Causes and Consequences of Corruption

Corruption in Indonesia, the Philippines and Indonesia can be attributed to the

Corruption is a serious problem in many Asian countries today. The

Singapore (ranked 5th) is the least corrupt Southeast Asian country,

aspects for comparison: land area, population, GDP per capita,

Myanmar 129th 1.60

The article contends that while the causes for corruption in

Table 2 compares the policy contexts in Indonesia, the Philippines,

Land Area 1,904,443 300,000 513,115

Population 214.8 77.1 63.6

GDP per US$680 US$930 US$1,800

Colonizer Dutch Spanish and Not

Political Democracy Democracy Constitutional

Role of Military Important Not important Important

Dominant Religion Islam Roman Buddhism

Source: The Economist (2003: 152, 184, 214)

is different as Indonesia is predominantly Muslim, the Philippines

In his comparative study of the control of bureaucratic corruption in

[B]ureaucratic corruption seems to depend not on any one of

Thus, following this hypothesis, an effective anti-corruption strategy

Palmier has identified low salaries as an important cause of corruption.

servants may be obliged to use their positions to collect bribes as a

The origins of corruption in Thailand can be traced to the 16th

Ample Opportunities for Corruption

"wet" agencies . . . are generous with honoraria, allowances,

Thus, "wet" agencies like the customs, immigration, internal

drugs, gambling, prostitution or smuggling (Rocamora 1998: 17). A

There is so much money at DECS that it drives officials into

In Thailand, the Ministries of the Interior, Education, and

Thus, vulnerable or "wet" government agencies in the three

Low Risk of Detection and Punishment

As corruption is an illegal activity in all countries, those individuals

When President Corazon Aquino assumed office in February 1986,

punishment for such offences. In his memoirs, Senior Minister Lee

Only in the Philippines could a leader like Ferdinand Marcos,

commander-in-chief... had fled the Philippines together with

In Thailand, the lack of policing was most obvious during 1975-

to the public prosecutor for criminal charges or settled through

of the detection of and punishment for corrupt offences.

was accepted by President Suharto, who issued an Instruction in 1970

corruption, and dismissing those civil servants caught red-handed on

in June 2000 according to Article 27 of Law No. 31 of 1999 to deal

masseur, Suwondo, borrowed Rp 35 billion (about US$4 million) from

Corruption exists from the very lowest levels of government

Similarly, Backman (2001: 242) has referred to "the Suharto Clan"

leaving him alone? Or would she re-open the corruption investigations

The fight against corruption in the Philippines began in May 1950,

later (Quah 1982: 159).

(PARGO) in January 1966. Three other agencies were created to assist

anti-corruption laws were the four Presidential Decrees (PD) issued

PCPEA to curb corruption but both were ineffective as some of the

a backlog of 14,652 cases, or 65 percent of its total workload. In August

In September 1972, the Board of Inspection and Follow-up of

and in 1974 the Sanya government appointed a committee to probe

or the "People's Constitution," is concerned, among other things, with

In 1964, Leff (1964: 8-14) contended that bureaucratic corruption

innovation, by introducing competition into the economy, and by

Corruption is one of the most damaging consequences of poor