Todung Mulya Lubis, Senior Partner, Lubis Santosa & Maramis, on corruption and legal uncertainty

Todung Mulya Lubis, Senior Partner, Lubis Santosa & Maramis

Corruption is not new. It is as old as the history of human beings. And it will always be with us, because there will always be people who want to live in luxury, to be part of the jet set community, to be closer to the centres of power. No one can eradicate corruption completely, but there are ways to minimise it. In the case of Indonesia, eradication seems of highest priority because Indonesia still ranks among the most corrupt countries on earth, despite drastic action to combat it.

Non-compliance with the rules of good governance may become a serious issue. It may cause both material and immaterial losses. Worse, it may degenerate into fraud, or even corruption. The Indonesian public has already witnessed many corruption cases unfold due to non-compliance with the law and good governance practices. Hundreds of civil servants, businessmen, politicians and high-ranking officials have been jailed for their failure in these matters.

Almost every law enforcement agency in Indonesia is generally perceived not only as weak but as unclean and partial. To report a criminal offense to the police can cost the offended a great deal of money before their report even gets past the filing stage. To ask a prosecutor to pursue a criminal offense requires a financial transaction. To commence civil litigation in court often ends in bargaining for a favourable decision at a huge cost. It is like a black market of justice. Those who are unwilling or unable to pay often end up losing the case. The lawyers who represent the plaintiff often play the role of mediator, or even broker. Striving for justice is like bargaining for the highest price. It is therefore no surprise that the business community, and especially foreign investors, refuse to settle their legal disputes in Indonesian courts unless forced to do so.

From a business point of view, a corrupt legal system is not only discouraging. It also means investors face a predicament. They see investing in Indonesia as very attractive due to the size of its market and the abundance of its natural resources. but they also know they will have to do business in an environment where no legal certainty is provided. This is a hard choice. However, since the potential gain is greater than the potential loss, no reasonable foreign investor wants to miss the opportunity of doing business in Indonesia, which has thus far managed positive economic growth despite the financial crisis in the US and Europe.

In 2015 the ASEAN region will become a single market, and many trade barriers will be eased. The economic logic is that doing business in this part of the world will be very attractive, and therefore the corrupt legal system will have to be dealt with. It may be a disincentive, and it may be a cost, but foreign investors will have to make sure they are in compliance with existing laws and regulations. Regular lobbying and deliberations between the Indonesian business community and government agencies must be conducted in the hope that recommended actions to clean up law enforcement agencies are pursued. Improvement of the legal system apparently has to be done gradually. It will take time, but at the moment there is no other choice.

This is an odd state to be in. But in a growing and borderless society, the responsibility to right the wrongs, perfect the imperfections, and clean up unclean governance falls not only to the host government but to the community doing business there. Politically and legally, it is not impossible or inconceivable. Multilateral cooperation and an engaged civil society would lead us to a condition in which reform is possible. Good governance both in government and in corporations, compliance with the law, and various audits – these seem to be the fruits of transnational and cross-sectoral endeavours. It is our conviction that in the future more tools will be introduced to bring about legal certainty.

We live in a world not only of national but of global governance, and there is in fact a positive correlation between the two. In the end, business will not be a matter merely of national jurisdiction; it will go beyond traditional boundaries. The legal uncertainty and judicial corruption surrounding it must therefore be dealt with by all interested parties with wisdom and realism.

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Todung Mulya Lubis

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The Report: Indonesia 2014

Legal Framework chapter from The Report: Indonesia 2014

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