President wants bureaucratic reform, law enforcement to continue

Antara News, Wednesday, March 31, 2010 19:20 WIB

Tulungagung (ANTARA News) - President Susilo Bambang Yudhoyono has expressed hope bureaucratic reform and law enforcement will continue despite the discovery of a tax scandal involving a government employee.

The president expressed his hope following the case of Gayus Tambunan, an employee of the directorate general of taxes who is wanted by police for allegedly having embezzled Rp25 billion in tax-related money.

"In principle, the process of bureaucratic reform and law enforcement should continue in all areas," presidential spokesman Julian Pasha quoted the president as saying when visiting a goat breeding center in Tulungagung, East Java, on Wednesday.

Julian said the case of wanted tax official,Gayus Tambunan, was being handled by the taxes and excise directorate general as part of bureaucratic reform efforts at the finance ministry.

He said the government had formed a steering committee, led by Vice President Boediono, for integrated bureaucratic reform efforts.

According to Julian, President Yudhoyono after completing his East Java tour would receive a direct report from the vice president and finance minister on the bureaucratic reform concerning the arrest in Singapore of Gayus Tambunan who is suspected to have committed corruption and money laundering.

But the president had yet to make a direct statement about the Gayus Tambunan case.

Tambunan was arrested at the Mandarin Hotel-Meritus on Orchard Road in Singapore on Tuesday evening and would be flown to Jakarta later on Wednesday.

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AGO names more suspects in Foreign Ministry airfare case

The Jakarta Post, Wed, 03/31/2010 3:39 PM

The Attorney General's Office (AGO) has named five more suspects in alleged markup of airfares at the Foreign Ministry, bringing the total number of suspects to 10.

Junior attorney general for special crimes Marwan Effendy told reporters Wednesday that the new suspects were executives of travel agencies partnering with the ministry.

“There is the possibility of [us] naming more suspects in the case,” he said as quoted by Antara state news agency.

The case centered around the alleged markup of flights for ministry officials sent abroad, which reportedly cost the state up to Rp 20.3 billion (US$2.19 million) in losses.

The ministry has recovered Rp 9.29 billion ($1 million) of the total of the state funds embezzled during 2008-2009 by officials in the markup case.

Ministry files showed that the airfares for 273 of a total of 512 diplomat transfers (or 53 percent of cases) during 2009 were marked up, compared to 2008 when airfares for 329 of the 673 diplomat transfers (or 49 percent) were marked up.

The officials allegedly collaborated with seven travel agents to mark up the airfares.

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Indonesia woos investors

Strait Times

Apartment buildings are seen in a developing residential area in central Jakarta January 25, 2010. -- PHOTO: REUTERS

JAKARTA - INDONESIA is hoping to throw off its reputation for natural disasters and corruption and become a magnet for the foreign investment deemed vital to its plans to become an Asian powerhouse.

But Investment Coordinating Board chairman Gita Wirjawan said the mainly Muslim archipelago of some 235 million people has a long way to go before it can take its place alongside China and India in the so-called Asian Century.

'We've got a PR deficit... For foreigners, Indonesia is a country of tsunamis, earthquakes, terrorism, street demonstrations and scandals. That needs to be changed,' he told an economic conference in Jakarta. 'Nobody knows (that) Indonesia is the fourth-largest country in the world with 235 million people and the third-largest democracy.'

Spooked by the turmoil surrounding the 1997-1998 financial crisis and the fall of the Suharto regime, foreign investors have taken a long time to start to think again about Indonesia's potential, analysts said.

But it is now roaring back into favour, with its large and upwardly mobile domestic market and sound economic fundamentals catching the eye of fund managers with a new appetite for risk.

'Three years ago, Indonesia was not seen as a relevant country by international investors,' HSBC Indonesia chief executive Rakesh Bhatia said. 'Now we see a continuous flow on the stock market (up more than 80 per cent over the past year) ... And Indonesia has done a remarkable job in fiscal and monetary policy. The currency is stable and the banking sector is very sound.' -- AFP

WHY INDONESIA IS BECOMING MORE ATTRACTIVE

• Indonesia demanded attention as the rest of the world plunged into crisis in 2008-09, growing at 4.5 per cent last year, third only after China and India in the Group of 20 industrialised and developing countries.
  
  
• In addition to a growing middle class of 50 million people, Indonesia boasts low labour costs, vast natural resources, strong foreign currency reserves, low inflation and a recent record of sound economic management.
  
  
• Its young democracy is not without its rough edges, but the country last year voted for stability when it re-elected President Susilo Bambang Yudhoyono, a centrist ex-general, to a second five-year term.
  
  
• President Yudhoyono has promised to remove regulatory bottlenecks to investment and stamp out rampant corruption, but analysts said words alone will not be enough to open the floodgates for foreign capital.
  
  
• Poor infrastructure is another perennial problem which the government has vowed to address. Between 2004-2009, only 125km of toll roads were built in total, short of the 1,000km originally planned. China constructed 4,700km of toll roads in 2009 alone.'
  
  
• Indonesia hoped to attract US$90 billion (S$126 billion) of private infrastructure investment in the next five years, the lion's share of an ambitious US$140 billion infrastructure spending plan. -- AFP
  
  
  

KPK to Investigate Indonesian State Energy Bribe Case

Jakarta Globe, Nivell Rayda, March 30, 2010

Former Pertamina executives have been implicated in a bribery case involving a British company. (JG Photo)

The Corruption Eradication Commission on Tuesday formally requested legal documents from a British court in which chemical company Innospec Ltd. last week pleaded guilty to bribing former senior executives at Indonesia’s state-owned oil and gas company PT Pertamina and a former Energy Ministry official.

Haryono Umar, deputy chairman of the commission, also known as the KPK, said the commission had sent a letter to Southwark Crown Court on Tuesday officially requesting the documents, which would be used as “preliminary evidence” in an investigation of the officials allegedly involved in the case.

“The documents will become a lead for us to conduct our own investigation. We want to see what pieces of evidence have been obtained by the court,” he said.

Hikmahanto Juwana, an expert on international law, said the court documents would have no legal standing in Indonesia but could prove important in the fight against corruption.

“The KPK could use them to construct a solid case to begin its own investigation,” Hikmahanto told the Jakarta Globe.

However, he said the KPK would have to re-examine witnesses, including officials from Innospec, the British arm of the US chemicals firm.

“We have our own code of criminal procedures and law. So testimony made to British law enforcement officials does not have any legal standing in Indonesia,” he said.

Haryono said the KPK could summon Innospec officials to testify in Indonesia with the help of British officials.

“This will be decided once we have obtained the necessary documents,” he said.

According to court documents, between February 2002 and December 2006 Innospec paid bribes to ensure that its lead-based fuel additive, tetraethyl lead (TEL), was chosen for purchase over other unleaded alternatives. An Indonesia government regulation banning the use of TEL was issued in 1999 but did not take effect until 2006.

The Indonesian officials implicated in the case, according to the British court documents, are: Rahmat Sudibyo, director general of oil and gas at the Energy Ministry in 2001-02 and head of upstream oil and gas regulator BPMigas from 2002-04; Suroso Atmomartoyo, Pertamina’s director of refining from 2004-08; and Mistiko Saleh, Pertamina’s vice president from 2004-06.

According to court documents, the bribes were paid from $17.48 million in commissions that Innospec paid its local agent, PT Soegih Interjaya.

Former Energy Minister Purnomo Yusgiantoro on Monday sought to distance himself from the case, which occurred on his watch. Purnomo was energy minister from 2001 to 2009 before taking over as defense minister.

He said the decision to delay a ban on leaded fuel until 2006 was taken to save money and not because senior decision makers had been bribed.

Also on Monday, BPMigas head Raden Priyono sought to distance the regulator from the accusations, saying the agency is only responsible for the upstream sector, while the use of leaded fuel was a downstream issue.

“It was more related to the directorate general of oil and gas at the Energy Ministry,” Raden said. “It was only because Rahmat was head of BPMigas after he headed the directorate that our name was mentioned.”

Rahmat rejected allegations of wrongdoing when contacted by the Jakarta Globe on Friday, saying he had never been involved in the purchase of TEL from Innospec.

Suroso also denied any involvement in bribery.

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Sri Mulyani Outlines Antigraft Campaign at Ministry

Jakarta Globe

Indonesian Finance Minister Sri Mulyani (EPA Photo)

Finance Minister Sri Mulyani held a press conference on Tuesday outlining the ministry’s plans to investigate the Gayus Tambunan case and other possible instances of corruption within the tax office. Here are some key steps the ministry plans to take.

1. Investigate staff members; take legal action against taxpayers and Tax Court Judges as well, if they are implicated in corruption.
   
   
2. Review the tax payment system and form a team to investigate conflicts of interests in it.
   
   
3. Compile information and data on suspicious transactions reported by PPATK.
   
   
4. Increase information sharing with the PPATK. For instance, the ministry never received information about Gayus Tambunan’s bank transactions from the PPATK.
   
   
5. Starting next week, PPATK will report on all transactions by Finance Ministry employees, including officials.
   
   
6. Take action on suspicious transactions by any ministry employee.
   
   
7. Intensify monitoring of investigations, conducting weekly meetings to follow up.
   
   
8. Create a whistleblower mechanism to detect suspicious behavior among employees.
   
   
9. Evaluate how Gayus’s actions went undetected.
   
   
10. Evaluate the Tax Court system for problems in structure or personnel.
    
    

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Judge Caught Red-Handed Taking Bribe: KPK

Jakarta Globe, March 30, 2010

A worker cleans the facade of the KPK building in Jakarta. (Antara Photo/File)

A judge with the initials IB was arrested while accepting a bribe from a lawyer in Cempaka Barat, Central Jakarta on Tuesday, said Corruption Eradication Commission spokesman Johan Budi.

“IB and AS were arrested around 11 a.m. The alleged bribery was related to a case which is being tried at Jakarta’s State Administrative Court,” said Johan.

“We confiscated a black briefcase and Rp 300 million cash in a brown envelope.”

He said the arrest was the result of a tip from the public.

Both IB and AS were questioned at the KPK’s office. Their status has not been determined.

A dejected Ibrahim after hearing he will spend the next six years behind bars for receiving a bribe in a land dispute case. His lawyer said the only reason Ibrahim took the bribe was because he needed cash to pay for kidney dialysis. (Antara Photo)

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Officials’ tax returns will be inspected: Mulyani

The Jakarta Post, Mon, 03/29/2010 6:09 PM | National

Finance Minister Sri Mulyani Indrawati said Monday she had ordered tax officials liaising directly with taxpayers to submit their tax returns for inspection, in a bid to counter possible graft.

The tax office, under the auspices of the Finance Ministry, has come under the spotlight recently after a low-level official, Gayus Tambunan, skipped town recently on suspicion of having amassed Rp 24.6 billion (US$2.71 million) in bribes.

“Checking the officials’ tax returns is part of the existing procedure that makes up the bureaucracy reform [within the ministry],” Mulyani said as quoted by kompas.com.

Gayus had previously been acquitted of money laundering and embezzlement charges, but remains a central character in an ongoing tax fraud case.

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Gayus’s Wife Also Believed to Have Fled Indonesia

Jakarta Globe, Farouk Arnaz, March 29, 2010

Gayus, who is thought to have fled to Singapore, may be joined by his wife. (Antara Photo)

According to a source, the National Police are reeling from another setback after it emerged that fugitive tax man Gayus Tambunan’s wife, who is wanted for questioning in connection with the Rp 25 billion ($2.75 million) corruption scandal involving her husband, may have fled the country with him last week.

A police source told the Jakarta Globe on Sunday that investigators believe Milana Anggraeni flew from Jakarta to Singapore on Wednesday with Gayus, two days before he was declared a suspect for obstruction of justice. Gayus, a previously unknown 30-year-old tax official, was found by police to have Rp 25 billion in two bank accounts last year.

“We were supposed to summon Milana Anggraeni as a witness related to documents we had from the Financial Transactions Reports and Analysis Center [PPATK] that she also received money from Gayus,” the source said. “However, when we came to her luxury private house in Kelapa Gading, East Jakarta, on Friday, we failed to find her. We suspect that she left the country with her husband.”

The Globe was unable to contact Milana on Sunday to confirm that she had left the country. Last week, Gayus said in a phone interview with an Indonesian television station that he was in Singapore.

In the wake of their red-faced admission that Gayus was safely in Singapore, which has no extradition treaty with Indonesia, the National Police’s top brass took the economic crimes directorate off the case.

Comr. Gen. Heru Winarko, deputy chief of the force’s anticorruption directorate, said on Saturday that his officers were now heading the investigation.

The police source said investigators believe other relatives of Gayus may also have received money from him — possibly to conceal it — and that while police had managed to summon a younger brother of Milana for questioning, they were unable to contact her.

“There were several transfers of Rp 3.6 billion to Milana’s accounts between December 4 [2009] and January 11,” the source said. “We have to make it clear because we suspect that this money is also part of the crime.”

Gayus’s case gained national attention after Comr. Gen. Susno Duadji, the renegade former National Police chief detective, publicly claimed that the tax official bribed senior police officials to stop investigating his case.

The National Police declared Susno a suspect for defamation for implicating two high-level officals on the force last week before making a u-turn on Friday.

Police say only Rp 395 million of the funds in Gayus’s accounts were found to be illegal, which they reported to prosecutors. Gayus was then charged with money laundering, corruption and embezzlement. After transferring the case dossier, police unfroze Gayus’s accounts in PT Panin Bank and PT Bank Central Asia, which still held Rp 24.5 billion in funds.

On March 12, however, the Tangerang District Court acquitted Gayus of all charges.

Police said they had accepted earlier statements by Gayus that the Rp 24.5 billion in funds belonged to a Batam businessman named Andi Kosasih, who also testified the money was his and had been transferred to Gayus for property purchases.

Heru confirmed on Saturday that Andi had been arrested and he and Gayus could be charged with giving false testimony, corruption and money laundering.

“We will not giving him any privileges [while in detention],” he said of Andi. “We want to rebuild public trust and it can be used as momentum not only for the police but also for other law-enforcement agencies.”

National Police Chief Gen. Bambang Hendarso Danuri has acknowledged that something “strange” occurred during the investigation into Gayus last year because he was never arrested, and the dossier of another suspect in the case, believed to be fellow tax official Robertus Santonius, was never transferred to prosecutors.

The luxury residence of tax official Gayus Tambunan in Kelapa Gading, North Jakarta. The National Police say they will summon him for questioning over Rp 25 billion in a case of suspected police corruption. Gayus has already been acquitted embezzlement, but police have reopened the case after Susno Duadji said the funds were for bribes. (JG Photo/Safir Makki)

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Tax official Gayus Tambunan under police protection as he makes his way through a crowd of reporters and onlookers at Soekarno-Hatta Airport on Wednesday, having just flown back from Singapore, where he fled last week when allegations of graft emerged. (JG Photo/Yudhi Sukma Wijaya)

Indonesia Must Welcome Foreign Investors for Economy to Fulfill Potential: Experts

Jakarta Globe, Antara & Irvan Tisnabudi, March 28, 2010

The government must ease restrictions on foreign investors and overcome fears about opening up domestic markets to access the massive amounts of funding needed to build crucial infrastructure and stimulate growth, analysts, foreign envoys and government officials have said.

Indonesia is far ahead of the curve in terms of economic performance compared to rivals both regional and global. But to a large extent, the country’s brisk growth has been supported by household spending and high commodity prices that drive exports. Investment, especially from overseas, has lagged behind neighbors because of policies that make it frustrating to do business here.

Gita Wirjawan, chairman of the Investment Coordinating Board (BKPM), has said $140 billion to $150 billion in investment is needed over the next five years to retool the nation’s infrastructure and achieve the president’s target of 7 percent annual growth. The government, however, will only be able to provide as much as $60 billion of the total.

Ross O’Brien, corporate network director of the Economist Intelligence Unit, said at a seminar last week that he doubted local investors could cover the financing gap, making the need for overseas capital even more pressing.

Complicating this, however, was the government, which he said lacked the transparency and desire to transform the investment climate for the better, especially for foreigners.

“For something that should be as straightforward as investing, the Indonesian government, in my opinion, still lacks the consistency needed in order to make the process of investing easier,” O’Brien said.

He added that the government was dragging its feet in opening up the economy, pointing to the negative investment list’s (DNI) heavy restrictions on foreign participation in many industries.

“The negative investment list could bring in much needed investment to specific sectors but I don’t see the government trying its best to [make it happen]. Not all sectors will eventually be opened to foreigners and I think that’s a shame,” he said.

Despite the government relaxing investment road blocks in the health care, agriculture and creative industries, it still restrict foreigners from tapping 23 sectors such as telecommunication towers, broadcasting and alcoholic beverages, Gita told Reuters this month.

Responding to O’Brien’s criticism, Gita said the government had made a maximum effort to open the economy to foreigners, including cutting red tape to improve the investment climate. He said that the government deserved credit for lifting restrictions on the health care industry, in which foreign ownership of hospitals had been limited to a few cities such as Surabaya and Medan.

As part of reforms to attract investors, Gita said the BKPM was simplifying business licensing procedures. “At BKPM we now issue licenses faster. It previously took 30 to 40 days but now it can be done in seven days and five hours,” Gita said.

He acknowledged, however, that land acquisition and building permits still posed serious obstacles.

Zhang Qiyue, the Chinese ambassador, said Indonesia could learn a lesson from her country, where foreign direct investment has been the catalyst for unparalleled growth over the past 30 years.

“The government needs to realize that more potential will be uncovered if more foreign investment enters the country,” she said at the Economist seminar.

But with opportunity comes risk. The Asean-China Free Trade Agreement has stoked fears among textile and steel producers that they will not be able to compete with China’s industrial might. When asked about the impact of the trade deal, Zhang said that socialization and education were the key to overcoming public concerns.

“In China, we are trying to educate our people, not only those who live in the capital, but also in the provinces, on ACFTA and its implications,” she said.

Indonesian Trade Minister Mari Elka Pangestu agreed with Zhang that opening the economy to the world would require education.

“For a nation to thrive globally, its people and businesses have to be prepared,” said Mari.

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Indonesia's Broadcast Freedom Must Be Safe From China’s Meddling

Jakarta Globe, John Riady, March 28, 2010

Earlier this week, government authorities closed down Radio Era Baru, a radio station in Batam. The official reason: shortage of radio frequencies. Another view is that the closure is related to China’s opposition of the radio station’s links to and funding by the Falun Gong movement. In a letter addressed to the Ministry of Foreign Affairs, China warned of damage to Indonesia-China relations should the radio station not be shut down.

Whether or not a shortage of frequencies was merely a pretext remains to be investigated, but there is ample reason to be skeptical. The station was denied a license in 2007. If the shortage was real, why was it allowed to broadcast for the last three years? When its license was denied, why wasn’t a reason provided and why did claims of a shortage appear after public uproar? Many stations operate without a license. Why single one station out? Why not reorganize the frequencies during those three years, as was done in Jakarta a few years back? The radio station’s legal appeal has reached the Supreme Court and a decision is expected soon. Why deploy police to clamp down on broadcast freedom on the eve of a decision that might render such an extreme intervention unnecessary?

If the allegation against China is true, China’s intervention is offensive and the decision from Indonesian authorities is shameful. This is a critical issue and needs to be addressed using legal and quasi-legal remedies. Legal remedies can address the issue domestically, but to sanction China, more creative quasi-legal remedies are needed. Allow me to explain.

Legal Remedies

The argument is that the government’s closing of the radio station for reasons related to its links with Falun Gong violates Indonesia’s constitutional right to expression (Article 28) and is thus unconstitutional. A potential problem is that since Article 28 has not been litigated much, it is unclear what the boundaries of this freedom of expression are.

To solve this, the courts should look to international law for guidance, in particular the Universal Declaration of Human Rights and the International Covenant of Civil and Political Rights, which Indonesia has ratified. Given the near universal acceptance of the declaration, at least some of its provisions have reached the status of “customary international law.” This means that all countries, even those not members of the UN, can now be bound by those provisions.

The ICCPR’s guarantee of the right to expression is broad enough to be used in this case. Article 19 states that “Everyone shall have the right to freedom of expression; this right shall include freedom to seek, receive and impart information and ideas of all kinds … through any other media of his choice.”

While the ICCPR does allow the limiting of expression when necessary for the protection of “national security,” it was held that it does not allow nations to prohibit speech just because it advocates the ideology of a political enemy. China should take note.

The treaty’s operative principles imply that countries have positive and negative obligations — this would include having in place licensing procedures that are consistent with the principle of free expression and that prohibit the use of police to crack down on violations.

These two legal remedies — our Constitution and the ICCPR—should provide generous grounds for the protection of Era Baru’s rights. However, these measures do not facilitate possible Indonesian sanctions against China. Domestic courts and ICCPR remedies have no teeth against other countries. For this, we turn to quasi-legal measures.

Quasi-Legal

The idea here is to use trade sanctions to compel trading partners to adhere to principles that they have agreed to in nontrade agreements, in this case the Universal Declaration of Human Rights. This would require framing freedom of press and censorship not as an issue of free press but rather a violation of WTO rules on free trade of “market access” and “national treatment.”

In a case where China censored its press by prohibiting foreign media companies from operating in China, the WTO panel concluded that these measures were inconsistent with China’s obligation under the national treatment and market access clause of the General Agreement on Trade and Tariffs.

The idea of framing violations of free press in terms of violations of trade law has gained more and more acceptance. The European Union passed a proposal that would require member countries to classify any Internet censorship as a barrier to trade, and would require that the issue be raised in any trade negotiations.

Linking trade with press law is similar to the way in which trade is linked to environmental and labor standards — we do this all the time.

In light of the Asean-China Free Trade Agreement, this is a crucial point. Even though this trade agreement is separate from the WTO, there are significant parallels. China has much to gain from the establishment of a free trade area. If it is to reap the benefits of trade, it must not be allowed to pick and chose. Free trade comes in a package. With access to an enlarged market to which China is able to export its goods, it must also eliminate barriers to trade, which includes censorship and violation of free press.

Many in Indonesia complain that its domestic industries are not ready to compete with China. Proponents of trade argue that only when they are forced to compete will they then be ready. Now it is China’s turn to complain that they are not ready for free speech. To this we should say: sink or swim.

We need a thorough investigation to determine the real reasons for the radio station’s closing. If it turns out to be true that the closure was related to pressure from China, a strong stance needs to be taken. A free press at home can be protected using legal remedies. As for getting our point across with China, we need to resort to trade law.

John Riady is lecturer at the Pelita Harapan Universit y Law Faculty and editor at large at GlobeAsia. He can be reached at john@globeasia.com.

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