Helping Indonesia to help itself

Foreign aid is damaging the development of democracy in Indonesia. It’s maintaining the handout culture inherited from the Dutch colonialism that kept Indonesia as a mendicant nation.

Aid also perpetuates the image that the country is backward; it is - though only in the reluctance to introduce change.

Indonesia doesn't need the $2-per-citizen given in non-emergency aid by the Australian government, a major donor. The country is rich enough and if administered properly (meaning the internal tax take is handled efficiently and leakages plugged) then it could be self-sufficient.

The Indonesian tax office has long run a banner and billboard campaign to persuade people to pay their tax to help grow the nation. It's been overwhelmingly ineffective; business people regularly brag that they dodge tax because they don’t want to support corrupt officials.

Most governments don't plead for citizens to pay tax - they threaten and enforce.

This year Darmin Nasution, director general of taxes, confessed that only a third of the nation's 3.3 million taxpayers meet their responsibilities regularly. He said the number of taxpayers should be about 25 million. (The workforce is four times larger but low earners are exempt.)

Indonesia has a value added tax but it's only enforced in upmarket hotels and restaurants. Most small business run cash-only transactions and accurate books aren't kept.

About 10 per cent of total government revenue comes from tobacco tax. According to WHO figures, tax as a proportion of the total cigarette price averages 31 per cent in Indonesia - one of the lowest rates in the region. Elsewhere it's more than double.

Despite the small tax base, these incomes contribute more than 70 per cent of the State budget. Imagine what could be gleaned if all defaulters coughed up.

Reform of the tax system doesn't need a reinvention of the wheel; there are plenty of efficient revenue administration systems around the world that the Indonesian government can adopt and adapt. But that needs political will.

The Indonesian Constitution states 20 per cent of the nation's budget has to be allocated to education. The government ignores this charge, arguing it doesn't have the funds. It allocates less than 12 per cent. In the latest published figures Indonesia spent only 0.9 per cent of its GDP on education; Malaysia earmarks nearly 8 per cent.

The result is a disaster. Most exams are tick-a-box tests. Rote learning is the norm. As emeritus professor Budi Darma, an acclaimed novelist bemoaned: “Students don’t want to read. They only want the synopsis of a novel. There’s no status in buying books.”

For many the idea of studying to better the mind is a foreign concept - education is about getting a certificate to get a job. If you're not smart enough to pass you pay the teacher to increase your marks or buy a forged diploma. In Central Kalimantan the local government claims more than 75 per cent of teachers aren't qualified and at least 20 per cent are absent at any one time.

None of these well-known problems need foreign intervention to fix. They do need to front the queue of priorities if Indonesia is not to slip even further behind its ASEAN partners as a dumbed-down nation.

Overseas aid experts have no magic formulae that are unknown to Indonesians on making banking and business controls watertight, crushing corruption and collecting revenues. All that's required is the same determination displayed by governments elsewhere who demand a clean corporate image.

The Indonesian land agency is clogged with almost 3,000 land dispute cases. Clashes over ownership are regular and often violent - four villagers were shot dead by the military when the army took over farmland in East Java in June. Property laws pre-date World War 11. Past Indonesian governments have had ample time to write new legislation, but that hasn't been on their list of “must-do” tasks.

The public service is cumbersome and bloated, the result of past policies to disguise unemployment by getting ten to do the job of one. The third largest bureaucracy in the nation is the Muslim-dominated Department of Religious Affairs.

Some Australian aid programs teach “good governance” and administrative reform. Worthy tasks, but they're pushing uphill against generations of corruption and indifference at all levels of society. Indonesia is a country where bureaucrats vie for postings to “wet” departments like taxation, customs and immigration where the illegal take is highest. It's almost impossible to get any official licence, permit or certificate without paying a bribe.

Although Western politicians continually praise Indonesia for its transition from a military-backed autocracy to a democracy it's a chorus that isn't echoed at the top in the Republic. Vice president Jusuf Kalla regularly comments that Western-style democracy isn't appropriate for Indonesia. He says economic development is being hampered because democracy allows workers and others to protest.

Employees are angry at pitiful wage levels and lousy conditions, but the unions aren't well organised. Some unions get bought-off by bosses. In most areas the legal minimal wage is about AUD $90 a month but many get far less. According to business groups the real reason developers shy away is because the rule of law isn't applied, the legal system isn't transparent and the system of getting permits is cumbersome, lengthy and corrupt.

The World Bank reports that Indonesia ranks badly against regional economies in starting a business, employing workers and handling permits. It takes, on average, 224 days to get all the licences needed compared with 147 days in other nearby nations.

President Susilo Bambang Yudhoyono, a former general, seems to understand the need for reform. He says all the right things but his orders often go AWOL down the line. Being the leader of a minority party beholden to his deputy's powerful Golkar party for support means he has to spend time hosing down threats rather than igniting change.

The president, who was directly elected by the people, leads the six-year old Democratic Party. This won only 7.5 per cent of the vote during the 2004 legislative election.

The “developing nation” label was hammered hard by former strongman Soeharto during his 32-year reign as president. It has become a mantra, recited unthinkingly by almost all Indonesians and insultingly accepted by overseas aid donors.

Developing? How long can a nation stay in perpetual puberty? Malaysia turned 50 this year and has long been a robust and independent adult. Modern Indonesia is 12 years older.

That many Indonesians are obscenely poor is not in doubt. Officially about 20 million are unemployed and a similar number under-employed. According to the Australian aid agency AusAID 7 per cent of a population of 242 million live below the international poverty line of US$1 a day.

The statistics don't lie. A visit to the crowded kampongs of Jakarta and Surabaya, or to remote villages, will prove poverty is real and wretched. Equally, a trip to any gated suburb in those same big cities will reveal the most ostentatious displays of gross wealth on a scale that would match Hollywood

Here are some more figures about Indonesian “poverty”:

• the Indonesian government claims its corrupt citizens have parked about US$100 billion in Singapore, money embezzled from banks and government projects;
  • one third of Singapore's 55,000 megarich are Indonesian citizens;
• the Soeharto family is alleged to have squirreled away US$15 billion during its 32 years in power; and
• in 2005 the Sampoerna family sold their tobacco company to Philip Morris and pocketed US$5.2 billion. Vice president Jusuf Kalla urged the family (the name translates as “pure”) to reinvest in their homeland but at last reports they were looking to buy overseas casinos.

Overseas non-emergency aid is mostly going to education, governance, infrastructure and health. The needs are genuine, but as long as paternalistic Australia does the job there's no need for Indonesia to get its act together and build better services for its own people, or make serious attempts to recover stolen cash. In a democracy that's what governments are supposed to do.

Despite all the deficiencies Indonesia isn't a failed state. It has all the civil engineers and skilled labor needed to build hospitals, schools, highways, rail lines, airports and bridges - all the factories required to supply the cement, steel and equipment - all the know-how to deliver potable water.

If Indonesia lacks some high-tech gear or specialised advice it can buy such goods and services from overseas. The only thing absent is the determination to pass and implement the laws, allocate the resources and get on with the job.

For every school in the archipelago funded by overseas taxpayers that's one less burden on local administrators, one more plush house for the military or luxury car for the bureaucrats.

Teachers and dedicated mid-level government officers who get some of the benefits from overseas aid are generous with their thanks. Others are suspicious. After Australia got involved in the East Timorese 1999 bid for independence, and since Australia has been supporting George Bush's Middle East adventures (always perceived as anti-Islam), many Indonesians believe our motives aren't pure.

Australia has some of the best fire-fighting skills in the world, truly tested by fire. Every year Indonesia has massive scrub fires in Kalimantan, usually deliberately lit, and that it can't control. The smoke haze has Singaporeans and Malaysians wheezing and weeping, sometimes for weeks. But Indonesian Forestry Minister Malam Sambat Kaban wants no help from outsiders. He said foreign aid would "disturb the country's sovereignty". This isn’t an isolated case.

The more fundamentalist Indonesians claim Western aid is part of a “Christianisation” campaign; others think foreigners are spying and scheming to promote regional separatism. Even among moderates there's a deep resentment against outsiders doing basic things that the local administration can and should do, and anger against their own idle governments who let foreigners take over.

There are about 40,000 Indonesians in Australia. The majority are fee-paying students and their families. Most are Christian Chinese Indonesians, rich because you have to be to pay the airfares and fees. They are not a representative sample of the Republic's citizens and they're not going to be the future administrators and politicians. The public service is almost entirely Muslim.

At the moment Australia gives “partnership scholarships” to 600 clever students chasing post-graduate qualifications. A further 270 are offered as “development scholarships”. The total cost is $78 million with most of the money going into the pockets of Australian educators.

Australia is widely perceived by Indonesians to be a nation that doesn't like Indonesians. This is despite its great generosity towards the victims of the 2004 tsunami in Aceh and the quake in Yogya. The perception has a lot to do with foreign policy, crass comments by senior politicians about pre-emptive strikes against terrorists and deputy sheriffs in South-East Asia, and tough visa application rules. Politicians claim Indonesian attitudes have moved on, but these issues still rankle on the street.

The $458 million we're spending in Indonesia this year would buy a lot of scholarships for the smart but poor who could pick up skills for use in their homeland - and learn that the West isn’t the hotbed of evil portrayed by fundamentalists.