FOREIGN TRADE AND INVESTMENT IN INDONESIA MUST BE GRAFT-FREE

President Susilo Bambang Yudhoyono is aiming to attract Rp 2,000 trillion (US$ 214 billion) in foreign investment per year to help the nation reach a seven percent economic growth rate by 2014. To do this it is essential that he must first cleanse the legal system of corruption.

CORRUPTION = DESTRUCTION

Antonio Maria Costa, head of the United Nations Office on Drugs and Crime (UNODC), credits the rule of law with being a means to achieving all eight Millennium Development Goals: “There was a clear correlation between weak rule of law and weak socio-economic performance,” he says. “As a result, the 'bottom billion' of the world's poorest people were suffering the most from the effects of crime and corruption.”

Where a legal system is seriously dysfunctional, corruption, violence and poor legal competency are likely to be pervasive. So too will be the deleterious consequences of this, such as injustice, human rights abuse, conflict and distorted scarce resource allocation, manifested by poverty, unemployment, disaffection, environmental destruction and, perhaps, extremism.

The World Bank estimates that £1,000 billion worth of bribes are paid globally each year. In response, there is now a strong global trend toward tougher enforcement and extra-territorial anti-corruption legislation aimed at combating the payment of bribes to foreign officials.

ANTI-FOREIGN BRIBERY LEGISLATION

In 1997 and 2003, international conventions sponsored by the Organization for Economic Cooperation and Development (OECD) and the UN respectively came into force, requiring signatories to amend their domestic laws along lines similar to America's Foreign Corrupt Practices Act of 1977.

The OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions went into effect in 1999, and is important because its signatories account for most of the world’s exports and foreign investment. Parties to the convention are obliged to adopt legislation making it a crime to bribe foreign public officials, whether directly or through intermediaries, and establish corporate liability for foreign bribery.

Signatories to the convention include all 30 OECD countries - Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Korea, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Spain, Sweden, Switzerland, Turkey, United Kingdom, United States - and seven non-OECD countries - Argentina, Brazil, Bulgaria, Chile, Estonia, Slovenia and South Africa. With the addition of Israel in March, there are now 38 signatories to the convention.

The U.S. was, until recently, the only nation that had a significant track record of anti-foreign bribery enforcement; but now other nations are demonstrating a new interest in foreign anti-corruption enforcement. Indeed, Transparency International has praised fifteen countries, in addition to the U.S., for having made “significant enforcement” efforts.

INDONESIA, CORRUPTION & WEAK RULE OF LAW

Indonesia is considered to have the worst justice system in Asia. In December 2007, a Transparency International Indonesia study ranked the judiciary as the most corrupt institution after the police. The Corruption Eradication Commission (KPK), which is currently under siege, sees the Attorney General's Office as the least credible for fighting corruption, followed by the courts and the police.

Because the OECD convention signatories, such as the EU, US, Japan, South Korea and Australia, represent the majority of Indonesia's global trade and are also important investors in the country, Opentrial - using its staff, associates, informants and information from litigious adversaries - will be monitoring the Indonesian activities of companies from these countries very closely. This is not a witch-hunt, but an essential step, using the considerable leverage of OECD convention signatory countries, to significantly curb corrupt payments finding their way into the pockets of the Indonesian police, judges and prosecutors, thereby undermining the rule of law in the country.

Companies from OECD convention signatory countries, particularly when involved in litigation, will be carefully scrutinised and, where necessary, reported to prosecutors in their home countries where there is evidence they have transgressed their anti-foreign bribery legislation. If action is not then taken, Opentrial will report the matter to the media and even consider private prosecution where appropriate.

So riddled with corruption is the Indonesian justice system, it is Opentrial's contention that it is not ordinarily possible for foreign companies to operate effectively in the long term in Indonesia without paying bribes to justice system officials. In its publication, one company from an OECD nation put it this way,"The rule of thumb is that, as a foreigner, you can never win in an Indonesian court, at least not by playing fair," and "If you have been accused of something, be prepared to spend some money to keep your freedom. If you are the one doing the reporting to the authorities, make sure you have paid what you need to get results and ensure you use a middleman you can trust." Thus, if foreign companies are to trade with or invest in Indonesia and not contravene their home country's anti-foreign bribery laws, they will be obliged to enlist the assistance of their national governments to make representations aimed at ensuring a fair trial.

In this way the Indonesian justice system will be transformed, so that trade and investment can be undertaken without the huge impediment that corruption represents, thus both fuelling prosperity and advancing human dignity.

OPENTRIAL'S EYE IS ON YOU!

For more information on the OECD's work in fighting bribery and corruption visit: www.oecd.org/department/0,3355,en_2649_34855_1_1_1_1_1,00.html