Inadequate budgets and salaries as instruments for institutionalizing public sector corruption in Indonesia

Soeharto used the Indonesian bureaucracy to generate rents that could be harvested by 'insider' firms, while also encouraging it to extort money from 'outsider' firms and individuals. This necessitated incentives that would ensure strong loyalty and minimize internal opposition. Government entities were provided with insufficient budget funding to cover their costs, and their officials were expected to generate cash from illegal activities, making public sector employees financially dependent on corruption. Any employee who opposed this system could expect to be restricted to earning no more than the pitifully low formal salary entitlement. The system therefore became strongly self-reinforcing

Improved Methods for the Diagnosis and Control of Bluetongue in Small Ruminants in Asia and the Epidemiology and Control of Bovine Ephemeral Fever in China

Livestock Production/Industries,

Control of Footrot in Small Ruminants of Nepal

Footrot, a bacterial disease which attacks the feet of sheep and goats causing lameness and high levels of flock mortality, was endemic in the western districts of Nepal. As a result of the collaborative efforts between Nepalese, Australian and British scientists within ACIAR projects AS2/1991/017 and AS2/1996/021, the virulent form of this disease has been eradicated from the livestock industries of the country. The economic benefits stemming from this achievement are described and quantified in this report. Over the 1993–2022 period, ACIAR invested $A1.5 million in research designed to improve the management of footrot in Nepal. Based on levels of disease prevalence reported at the beginning of the projects and a probability of the disease spreading to other districts, disease eradication will result in a realised net present value of$A2.8 million. A benefit–cost ratio of 2.9:1 was estimated for the projects, which indicates that for each dollar invested, 2.9 dollars of project benefits will be generated. Several other countries, such as Bhutan and possibly Australia, could benefit from the footrot vaccination practices developed in these projects. Sensitivity analysis outlined in the concluding section of the report indicates that these benefits could be substantial and their inclusion would increase the value of ACIAR-supported research.Footrot, ruminants, bacterial disease, Nepal, Australia, livestock, economic benefits, net present value, benefit-cost ratio, disease eradication, Farm Management, International Development, Livestock Production/Industries, Production Economics,

Leading for a purpose - Managerial leadership and strategic performance in public organisations

Public sector organisations exist to achieve outcomes that will benefit the society or community they serve.1 The extent to which they succeed in this can be termed their strategic performance. Many factors influence the performance of public sector organisations in this respect. In particular, the operating environment, political leadership, and internal managerial leadership can all affect their strategic performance. Of particular interest is the way the operating environment (and especially its political leadership dimension) interacts with strategic leadership efforts by executives to affect strategic performance in public organisations. Understanding this interaction better should help to improve the strategic performance of public organisations. This paper is based on a research project, undertaken as part of the Master of Public Management degree at Victoria University of Wellington, which explored perceptions of strategic leadership issues in New Zealand local government organisations. The project involved a review of the literature on leadership in organisations and managing and leading public organisations, and a piece of primary research. Strategic leadership in public organisations is about leading an organisation so that it can contribute effectively to the realisation of beneficial outcomes for the community it serves. This has to be done in an environment where the outcomes to be pursued and the broad strategy for pursuing them are determined by a politically elected or appointed body. The research was concerned with a specific instance, the New Zealand local authority. The political body in this case is the elected council responsible for a region or municipality, and the organisation (also, confusingly, usually referred to as ‘the council’) is the council’s chief executive and employees. The research explored leadership and goal and strategy formulation with a small group of executives from local government organisations, in the context of the environments in which they operate. Research participants, who were drawn from three council organisations, answered questions in an interview process on their understanding of various factors influencing strategic leadership efforts in their organisations. From this exploration, some tentative conclusions about relationships between political leadership, strategic leadership efforts by executives and strategic performance can be drawn, with the proviso that the sample is small, and the data consists of participants’ perceptions and opinions rather than hard evidence

After Soeharto: prospects for reform and recovery in Indonesia

With Soeharto’s demise, Indonesia gained democracy but lost effective government. The economy has been slow to recover from the crisis, and even modest growth of around 3–4% may not be able to be maintained: neither stagnation nor decline is out of the question. It is therefore urgent to overhaul Indonesia’s public sector institutions, which had been co-opted by Soeharto into his economy-wide ‘franchise’—a system of government devoted to the objective of redistributing income and wealth from the weak to the strong while simultaneously maintaining rapid growth. This franchise has disintegrated in the absence of a clear ‘owner’, with its various component parts now working at cross purposes rather than in mutually reinforcing fashion. The result has been a significant decline in the security of property rights and the postponement of a convincing economic rebound. To reform the public sector institutions it will be necessary to undertake a radical overhaul of personnel management practices and salary structures, with the objective of providing strong incentives for officials to work in the public interest. The prospects for such reform, however, seem slight

Indonesia’s new deposit guarantee law

The blanket guarantee introduced in 1998 in response to the emerging banking and economic crisis resulted in $50 billion of losses to the general public. The government has now introduced a law that enables the phasing out of this blanket guarantee, but which also allows for its reinstatement in the event of any threatened collapse of the banking system. Rather than eliminating the possibility of any repetition of the previous banking disaster, the new law effectively mandates an almost identical approach to handling system-wide banking collapses in the future, suggesting that the authorities and their advisers learned very little from the recent bitter experience. It is argued here that the crucial starting point for formulating policy in this field is to correctly specify the exact purpose that government intervention is intended to serve: namely, the avoidance of major macroeconomic disruption as a result of bank failures

Second and third thoughts on privatisation in Indonesia

Indonesia’s economic policies began to become much more market oriented during the 1980s. Various policy reforms were implemented, notably in the field of international trade (Fane and Condon, 1996). In addition, there came to be a new emphasis on privatisation, although this was nearly all talk and no action (Hill, 2000:103-5). In 1989 the then Finance Minister announced that 52 state-owned enterprises (SOEs) would be listed on the Jakarta Stock Exchange between 1990 and 1992 (Habir, 1990:101); in the event, almost none were. In 1993, the then Minister for Research and Technology, B. J. Habibie, claimed that a similar number could be sold quickly (McLeod, 1993:7); again, almost nothing came of this. Nevertheless, although there was a conspicuous lack of progress with privatisation as normally conceived, there are several examples of effective privatisation, provided this term is interpreted sufficiently broadly

Management of Fruit Flies in the Pacific

Crop Production/Industries,

The ill-fated currency board proposal for Indonesia

Abstract. In February 1998 Indonesia toyed briefly with the idea of introducing a currency board system as a means of extricating itself from the Asian financial crisis. Although the then president Soeharto announced his government’s intention to implement such a system, international and domestic opposition was so vociferous that he aborted the plan. In my view this opposition was ill-informed. Moreover, it was motivated, to a considerable extent, by a desire to use the crisis to force a president widely disliked among the urban intelligentsia to discontinue some of his favoured economic policies—if not to bring about an end to his presidency—rather than giving top priority to dealing with the crisis itself. The nature of the crisis as it played out in Indonesia remains poorly understood, such that an analysis of the currency board proposal provides an opportunity to correct some misunderstandings and dispel some of the myths about this major episode in Indonesia’s modern history. In this paper I argue that in fact Soeharto’s embrace of the proposal was sensible, and that it was motivated by the desire to restore macroeconomic stability—which would have been not only to his own benefit but also that of Indonesia’s citizens.Keywords. Currency board; Proposal; Indonesia.JEL. F11; F12; F13

Banking collapse and restructuring in Indonesia, 1997-2001

Most of Indonesia’s banking system collapsed during the 1997–98 financial and economic crisis. We estimate that the net cost to taxpayers of the government’s blanket guarantee of banks’ liabilities, issued in February 1998, is about 40 per cent of annual GDP. Large banks fared worse in the crisis than small ones and state banks fared worse than private ones. Despite this, and despite the fact that bank capital turned out to have been inadequate, the government reduced the capital requirements for all banks, transferred the assets of closed banks, together with the lowest quality loans of those that were recapitalized, to a state-owned holding company, and thus excluded the private sector from participating in the process of liquidating these assets. The government offered to recapitalize several banks jointly with the private sector, but participation was restricted to the former owners, and even they could only participate on very unfavorable terms. As a result, too many banks were closed, too many nationalized and several were unnecessarily merged. We propose a more market oriented approach that would have strengthened banks by raising capital requirements and also minimized fiscal costs by auctioning those that failed to meet these requirements. In the case of insolvent banks, bidders should have been invited to submit tenders for taking over both their assets and liabilities. In all cases, bidders should have been able to choose between liquidating banks and keeping them operational, after injecting enough cash to meet the new capital adequacy requirements