Agus Triyono – The burden of making facilitation payments and paying bribes to government institutions is one reason businesses might have trouble paying higher minimum wages, according to an economic think tank.
And the government institution most commonly bribed by entrepreneurs wishing to get on with business is the police, said Enny Sri Hartati of the Institute for Development of Economics and Finance (Indef). Enny was speaking at a discussion, titled "Labor Speaks Out," on Saturday in the capital.
"Almost every institution demands bribes, but most commonly it is the police, with 48 percent [of respondents reporting being required to bribe the police]," Enny said, quoting a recent survey by Transparency International Indonesia.
Other institutions found to commonly require bribes were customs, to which 41 percent of respondents reported paying bribes, followed by immigration offices (34 percent), the Land Transportation Agency (33 percent), local governments (33 percent), and the National Land Agency (32 percent).
Surprising mentions were the Health Department (17 percent) and the Indonesian Council of Ulema (MUI) (10 percent). These two agencies' duties include providing certification for safety and halal status, respectively.
"It's interesting that the Health Department and the MUI require illegal payments. This is extraordinary, because if institutions with functions such as theirs can demand bribes, then what hope do we have with other bodies," Enny said.
Enny said that for many businesses, overheads including graft payments were so burdensome that non-wage costs constituted as much as 70 percent of all operating costs.
Meanwhile, a researcher at the Indonesian Chamber of Commerce and Industry (Kadin) said the government's announcement that unemployment fell from 10 million people to 7.7 million was misleading because it counted only "open" unemployment.
"Kadin has made a projection that if there is no policy implemented to deepen job opportunities, then 'hidden' unemployment will increase from 2011's figure of 18.7 million people to 20.3 million people by 2014," analyst and former lawmaker Didik Rachbini said.
Didik tied the unemployment figures to institutionalized graft. "Company money is being diverted to corrupt government officials," he said. "Workers' wages are low because of invisible costs – bribes that must be paid to various government agencies. Around 30 to 40 percent is going on bribes," Didik said, citing research. "What needs to be fixed is mostly the government sector, so that business costs can be reduced. Start with the police."
Last October, a global report by the International Finance Corporation, which is a member of the World Bank Group, on the ease of doing business saw Indonesia's rank fall from 126 to 129 out of 183 countries surveyed. Didik said the reason for the drop was simple. "The permit costs for setting up a business are expensive, and the bureaucratic processes are many and lengthy," he said.
[Additional reporting by Investor Daily.]