An Economic Analysis of Indonesian Anti-Corruption Policies: Can the Government’s Allocation of Resources and Collection of Monetary Sanctions be More Efficient?

Abstract

International Development Organizations (IDOs) have promoted a global anti-corruption agenda, leading countries like Indonesia to create new agencies and adopt anti-corruption measures. However, these IDOs have often overlooked the enduring financial commitments of such policies and institutions, as well as how to ensure their sustainability amidst other pressing governmental priorities in developing nations. In Indonesia, the anti-corruption efforts suffered frequent setbacks during the Joko Widodo (Jokowi) administration (2014-2024) and faced persistent inadequate resources problems. This dissertation is a systematic inquiry of the efficiency of legal policy implementation, using the Indonesian anti-corruption policies as a case study. First, this dissertation identifies a perceived lack of political commitment during the Joko Widodo administration by focusing on the adequacy of budget allocations for implementing anti-corruption measures. Then, this dissertation applies a benefit-cost analysis (BCA) by gathering financial reports from 14 agencies tasked with anti-corruption efforts from 2014-2021 and conducting a contingent valuation survey of 2,114 Indonesian adults from every province (34 provinces) in Indonesia. Based on the BCA results, implementing the Indonesian anti-corruption policies was efficient, resulting in great net social benefit from the social benefit-cost analysis; thus, the Indonesian government needs to sustain the policies. However, from the fiscal perspective, the Indonesian government collected low monetary sanctions compared to the cost to enforce and prevent corruption. The cost to implement anti-corruption enforcement and prevention strategies was 18 times higher than the revenues collected from the monetary sanctions. Therefore, enforcing and preventing the crime of corruption had substantially adverse fiscal effects, as the government spent 18 times more than what enforcement yielded from defendants convicted of crimes of corruption. Second, this dissertation provides a more nuanced, comprehensive, and meaningful explanation of the practice and factors that contributed to the suboptimal collection of monetary sanctions, i.e., fines, restitutions, and asset forfeiture, to finance the implementation of Indonesian anti-corruption policies. Interview data from 33 criminal justice actors from various ranks and triangulation from documents revealed that three factors contributed to the low collection of monetary sanctions: (1) imprisonment preference among judges, prosecutors, and the public; (2) unpaid fines and restitution from defendants convicted of crimes of corruption who rationally choose additional imprisonment, and low socio-economic background; and (3) the lack of institutional resources and administrative/legal hurdles hindering the prosecutors’ efforts to collect more government revenue from asset forfeiture. All these factors are related to the economic rationality of individuals and institutions involved in the enforcement of crimes of corruption to act in their best interest. Although benefit-cost analysis (BCA) is rarely employed to evaluate legal policies, its application here, alongside qualitative interviews, has provided valuable insights for Indonesian policymakers and anti-corruption practitioners in the law and development arena. Specifically, this study addresses an empirical and methodological gap by combining economic assessments with insights from criminal justice actors, offering a clearer understanding of the "lack of resources" argument in implementing Indonesia's anti-corruption policies. These resourcing challenges suggest a lack of sustained political will to maintain the Indonesian government’s anti-corruption efforts, which were initially supported by the multilateral push, and insufficiency of revenue from the collection of monetary sanctions due to legal loopholes and misaligned incentives. These insights provide further support for moderate or “good enough governance” reforms that are not too big, much, and fast, by considering to the recipient country’s political will, capacity, and resources. Moreover, the government can be more efficient in allocating resources and optimal in collecting monetary sanctions by paying more attention to the incentive and resource