25 Apr 2016

State Structural and Institutional Transformation and the New Dynamics of Business Power, Corruption and Clientelism In Indonesia

Mohammad Faisal
University of Queensland

Abstract
Since the collapse of the New Order regime in 1998, Indonesia has embarked on a shift from an authoritarian to democratic polity and from a centralised to a decentralised system of governance, transforming the country into the third largest democracy and one of the most decentralised states in the world. This thesis investigates the relationship between business and government in the context of structural and institutional transformations in Indonesia following the demise of the New Order. As its central question, this thesis asks to what extent democratisation and decentralisation in Indonesia has altered the pattern of business and government relations, with a focus on clientelism and corruption as the key dependent variable, and probes how/to what extent this has changed as a result of such transformations and the ensuing shifts in business and government relations.

This thesis examines changes at two levels i.e. the national level and the regional level. At the national level, it examines whether democratisation and the more open political system has helped shift business to pursue wider sectoral and business-wide activism and collectivism, which is expected to help reduce corruption and clientelism. This thesis argues that democratisation and a more open politics have not resulted in a major shift amongst business interests from pursuing individual-clentelistic lobbying to collective lobbying through business associations despite the increasing proactiveness, assertiveness, and independence of business associations after democratisation. Despite a greater attention of the government in combatting corruption and a greater involvement of business groups in broader policy issues and advocacy, democratisation and a more open politics have not necessarily fostered business collective action and a broader, more encompassing pattern of business lobbying and activism.

At the regional level, this thesis examines whether decentralisation has increased business structural power and subsequently increased corruption and clientelism in the regions. For this purpose, this study selects the case studies of timber logging and coal mining industries in the Indonesian Province of East Kalimantan. This thesis argues that decentralisation has helped propel corruption and clientelism at the regional level. However, the proliferation of corrupt and clientelistic practices has resulted mainly from weak local governance combined with the exercise of business instrumental power rather than the exercise of the structural power of business. Therefore, the structural transformation of the Indonesian state has reshaped the relationship between business and government, but has not significantly shifted the underlying pattern of corruption and clientelism at both the national and regional levels. While signs of improvement in the implementation of good governance as a result of democratisation have not been significant in the national context, decentralisation has certainly not been able to help reduce corruption and clientelism in the regions.

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