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The customs of corruption

Source
Jakarta Post Editorial - June 28, 2005

Nothing seems to have changed within our customs service. It remains among the most corrupt public institutions in the country, together with the directorate general of taxation and the police.

Even former president Soeharto, fed by the strongly entrenched web of corruption within the customs directorate general, felt it necessary to ask for foreign assistance to rein in the department. He stripped the customs service of its authority to verify and clear imports, handing the job over to Switzerland's Societe Generale de Surveillance for 10 years beginning in 1985. However, it was business as usual after the contract with the Swiss company ended in 1995 and the customs service was handed back its authority.

Reforming the customs service was supposed to be at the top of the government's agenda between 2001 and 2003, under the supervision of the International Monetary Fund. Yet there has been little progress. Foreign chambers of commerce and import associations still see the customs department as the most corrupt public institution.

President Susilo Bambang Yudhoyono demonstrated his comprehensive understanding of the most pressing problems facing the economy by including the customs and taxation services among the four government institutions (Bank Indonesia and the Attorney General's Office were the other two) he visited during his first few days in office last October.

Yet the Economic and Social Research Institute at the University of Indonesia revealed last week that corruption remained a major problem in the customs service.

About 82 percent of 600 businesspeople the institute surveyed in April and May admitted to paying illegal fees to customs officials. The survey, conducted in cooperation with the World Bank, covered businesses at five major seaports: Tanjung Priok in Jakarta, Tanjung Perak in Surabaya, Semarang in Central Java, Makassar in South Sulawesi and Belawan in North Sumatra.

The respondents also complained of gross inefficiency in the customs service, saying it took at least six days to get a document cleared.

We wonder then what is the purpose of the Coordinating Team for Facilitating Imports and Exports, which is chaired by chief economics minister Aburizal Bakrie. Customs problems should be at the top of the team's agenda since an efficient and competent customs service is key to smooth trade.

Even though graft in the customs service is simply a reflection of the embedded culture of corruption in our nation, the government should realize that the impact of a corrupt customs service on the economy is more devastating than, say, malfeasance in the National Police or tax office.

The effects of malfeasance within the tax service are limited to the loss of state revenue as the government receives much less than is due it from taxpayers. But corruption within the customs service causes far-reaching damage, resulting in revenue loss and creating distortions in the domestic market because foreign goods pay much lower duties and taxes than mandated by law. This creates unfair competition for domestic products such as electronics, garments and produce like rice and sugar.

The customs service plays a vital role in facilitating the smooth flow of imports, which is vital for the domestic manufacturing industry due to its heavy dependence on imported goods.

No trade policy will be effective if the customs service, which is responsible for guarding the gateways (airports and seaports) to the country, remains as corrupt and technically incompetent as it is now. Put another way, there will never be fair trade without an efficient, fairly clean customs service.

The findings of the latest survey clearly show how technically inept the current customs and excise tax director general, Eddy Abdurrahman, is in managing his office.

Abdurrahman's comment that businesspeople should not pay illegal fees to customs officials and should report directly to him any corrupt customs officials indicates one of two things: He is either completely ignorant of what is really going on at his office, or the internal controls and internal audit system in his directorate general is ineffective.

True, the corrupt mentality at the customs service is a disease that cannot be cured in one or two years, and cannot be treated in isolation from other government and state institutions. But the finding of the University Indonesia-World Bank survey warrants an overall reform of the customs service that should start with its chief.

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