Indonesia shares progress towards UNCAC implementation

UNODC supports ASEAN countries to implement the UNCAC via the Implementation Review Mechanism (IRM), a peer-review process 

Posted on 11 January 2019.

 Corruption Eradication Commission (KPK) building in Jakarta, Indonesia @KPK


ASEAN countries have completed the first cycle of the United Nations Convention Against Corruption (UNCAC) Implementation Review Mechanism in 2015, covering Criminalization and Law enforcement and International cooperation. The second cycle has been completed this year in Indonesia and Malaysia, and is now being finalized in Thailand, Viet Nam, Myanmar and Lao PDR, covering Asset recovery and Preventive measures.

The UNCAC review cycles assists States in the implementation of the UNCAC into domestic laws, by identifying critical areas and recommendations via a peer-review process: each State party is reviewed by two peers. Last year, Indonesia was reviewed by Yemen and Ghana.

What have been the progress made in Indonesia since the release of the 1 st cycle of UNCAC Review in 2012?

On 27 November 2018, KPK convened a public discussion in Jakarta to share the results of the UNCAC process in Indonesia. Together with Thailand, Singapore and Malaysia in 2018, Indonesia has introduced corporate liability for corruption offences following the first UNCAC review cycle. As a result in 2018, KPK investigated five companies of corruption- among which the case of Lippo Group, linked to the $21 billion Meikarta real estate project near Jakarta and billed as the 'Shenzhen of Indonesia', which involved numerous government agencies in the issuance of construction permits.  In October 2018, KPK prosecuted an indicted publicly listed construction company in a graft case pertaining to the construction of a state university hospital in Bali, using another company name. This case became the first case with a corporation indicted in KPK's history, following the 2016 Supreme Court regulation on directives in handling corporate crime, drafted collaboratively with KPK and the Police. These examples illustrate a positive trend in the ASEAN region, where businesses are increasingly held responsible for corruption offences. Despite these major changes, the legal foundations for corruption in the private sector still require improvements identified in the UNCAC review, and foreign bribery in Indonesia is not clearly penalized: for instance, a representative from an Indonesian company bribing abroad for the benefit of the company would not be punished by law.

Another major advancement made in Indonesia following the second UNCAC review cycle includes the introduction of beneficial ownership: 'Indonesia is one of the first ASEAN countries to have introduced beneficial ownership, which increases transparency in the private sector, prevents conflicts of interests and money laundering, having all companies listed or registered sharing information publicly. In March 2018, a Presidential regulations gave companies one year to disclose the identities of their beneficial owners to the government' noted Mr. Budiarto, KPK representative. The enforcement of this new regulation is crucial to hold businesses accountable. For instance, a joint investigation published in December 2018 by Mongabay, The Gecko Project, Tempo and Malaysiakini, illustrates well this case, denouncing that 'the owners of the Tanah Merah project, an enormous palm oil development in Papua, remain in secrecy', revealing how it is impossible to tell who will benefit from the destruction of the rainforest in Papua province, and how important it is to enforce the regulation on beneficial ownership.

Speaking at the event, Mr. Y. Laoly. Minister of Law and Human Rights, highlighted that 'in addition to corruption in the private sector, illicit enrichment, trading in influence and asset recovery were critical areas identified in the UNCAC reviews and we are working to integrate these in our national legislative plan'. He also expressed the need for ' a clear mutual legal assistance commitment in the ASEAN region'.

During the discussion with the public, a speaker form Indonesia Procurement Watch raised the issue that there is no procurement law in Indonesia, although civil society organisations have proposed a draft legislation since 2012: 'public procurement accounts for 30-39% of the state budget per year in Indonesia', he noted. KPK representative recalled that public procurement is an important issue to address, adding that 83% of corruption cases occur via public procurement. Public procurement is one of the critical areas identified as a trend in the ASEAN region in the preliminary findings of the 2 nd cycle of UNCAC review, together with conflict of interests, asset declaration systems, revolving doors, access to information and beneficial ownership.

While Indonesia has made great progress in the implementation of the UNCAC into domestic laws, ' most importantly, implementation at local level will be pivotal' highlighted Mr. Francesco Checchi, UNODC Regional Advisor for Anti-Corruption. Indonesia is a vast country, with more than 17,000 islands. Strong decentralization reforms since 1998, aiming at better public services delivery, gave political powers and financial resources to local decision-makers and have also increased corruption risks. In this view, UNODC is also supporting KPK to prevent corruption at local level with a pilot project to assess and mitigate corruption risks in the forestry sector in Sumatra Province.

The Executive Summary of the 1 st and 2 nd review cycles have been published on UNODC's website.