BudgetCommittee)Mafia                                                                                                                                             Analysis by FITRA Sec-gen Yuna Farhan, 30 September 2011

The general public was stunned by the boycott on budget discussions imposed by the Budget Committee (Banggar) of the House of Representatives (DPR) following the recent summoning of 4 of its leaders to appear before the Corruption Eradication Commission (KPK). Instead of adding value to budgetary discussion processes as they should, Banggar chose to hand the whole process over to the DPR’s leadership.

Of course, the Constitution endows the DPR with the power to disagree with budget proposals submitted to it by government.  But, in this instance, Banggar acted ill-advisedly: Any agreement or disagreement with government budget proposals must be based on issues of substance.  Clearly, in the case of this boycott, issues of substance in the draft 2012 State Budget (APBN) were not at stake. And thus, on this occasion, the power to accept or reject government proposals was wrongly used by Banggar leaders as a bargaining chip in their efforts to avoid facing accusations about decisions they had taken and submitting themselves to legal processes.  By acting in this way, Banggar’s leaders violated their oath of office: That they would always put the national interest first, to the exclusion of all private interests be they personal or political.  It would, of course, be a different story if Banggar’s refusal to discuss the budget was founded on issues of substance.  If the DPR refused to discuss government budget proposals that were not pro-people and, in their place, suggested much better approaches, the general public would be on the DPR’s side.

Norton (2003) identifies three models for a legislature’s role in budget processes: simply agreeing to budgets submitted; having influence over budgets; and actually framing budgets of its own.  During the New Order period, the DPR followed the first of these models: It had little authority or capability to modify proposals submitted by the Executive; and thus functioned as a rubber stamp for government proposals.  In the wake of the third amendment to the Constitution, the DPR was empowered to modify or even reject proposals from the Executive; but its capabilities did not extend to framing alternative budgets of its own making.  But in the current era politics and survival of political parties have proved to be an expensive business.  As a result, the DPR’s budgetary functions have become mired in “pragmatism” and rent seeking.

So, the KPK’s decision to question Banggar’s leadership means the KPK is heading in the right direction. Budget mafia activities in the case under investigation have to be looked at against the backdrop of policies decided upon within Banggar.  It was the Fund for Accelerated Development of Regional Infrastructure (DPPID)—that appeared for the first time in the mid-year revised budget for fiscal year 2011—that was the springboard for the mafia activities under investigation in this case.

Banggar has neither the power nor the technical capability to decide upon DPPID allocation levels or choose appropriate recipient areas.  Banggar’s powers are clearly delimited in paragraph 2, Section 107 of Law No 27 2009 concerning Indonesia’s elective institutions including the DPR: Banggar shall only discuss budget allocations already agreed upon by relevant Standing Committees of the DPR. Despite the delimitation, Banggar took it upon itself to make decisions on DPPID allocations during its “budget optimization” discussions (which take place in final stage of State budget discussions).  Unfortunately, DPR standing orders do not contain rules to guide and control the scope of “optimization” discussions. As for technical capability, Banggar simply does not have the technical expertise to fix DPPID allocation levels and identify appropriate recipient areas.  As a result, its distribution of DPPID funds has only served to compound problems already plaguing efforts of Center-regions fiscal transfer mechanisms to reduce fiscal gaps among regions.

FITRA’s analysis has shown that no correlation exists between DPPID allocations and fiscal or poverty indices of recipient regions.  Indeed, viewed nationally, regions with high poverty indices—read large numbers of poor—receive smaller DPPID allocations than others.  The apparent allocation pattern is one of equal shares for all recipients: in this respect, it can be safely asserted, DPPID funding is masquerading as a sort of DPR “aspiration fund”.  These funds allocated by the DPR for expenditure in DPR electorates on aspirations of constituents’ of each DPR member. The level of such received by a particular region depends upon its degree of access to the DPR and its lobbying powers; and upon its capacity to put money aside for kickbacks or to use contractors prepared to “pre-purchase” the right to eventually implement DPPID-funded projects.

DPPID funding also runs the risk of doubling up on funding provided under the Special Allocation Fund (DAK).  At least 10 sectors receive allocations of both DAK and DPPID funding.  In this case of bribery within the Ministry of Labor and Transmigration, 10 regions that were already receiving central government funding for activities co-administered by them and the Center also received DPPID allocations for those same activities.

So the question naturally arises: Why are these different sources of funding not brought together under the DAK umbrella?  The DAK is, after all, regulated by law and has clear operating parameters and criteria.  It is precisely the DPPID’s lack of clear allocation criteria that has led to budget mafia activity in this instance, resulting in mistargeted and ineffective budget appropriations.   The oft-repeated Ministry of Finance warnings about circulation of falsified documentation in regions on DPPID funding are evidence that something is amiss with the DPPID; and that it is fertile ground for undercover budget agents.  Those warnings also leave no doubt that the Ministry of Labor and Transmigration case is just the tip of iceberg—easily repeatable in other sectors funded by DPPID.

In 2003 the Organization for Economic Cooperation and Development (OECD) classified discussions within the DPR as being “generally open”. But, be that as it may, the DPR continues to make informal, unpublicized decisions behind closed doors.  Thus, in one case that involved a Banggar member—the construction of seaports in eastern Indonesia—a decision to raise the overall price-tag for the project was taken in a hotel where other Banggar members just happened to be staying.  More generally, many working level Banggar meetings are held away from the public eye.   More generally, unlike other institutional components of the DPR, Banggar does not publicize outcomes of its meetings on the DPR’s website.

Banggar’s handing over of budget discussion to the DPR’s leadership presents an opportunity for reform of the mechanisms used by the DPR to discuss budgets.  Banggar should go back to its charter: it must confine its discussions to appropriations already decided upon by DPR standing committees; it should play no more than a coordinating role: bringing committees’ suggested appropriations together into a unified whole; discussing underlying macro-economic and revenue assumptions; and examining budget allocations by category, purpose and organization. As for standing committees, their role is to discuss appropriations for programmed activities with their respective government counterparts and to put forward proposals including on fiscal transfers to regions for sectors under their purview.

DPR standing orders should set down rules on budget allocations emerging from Banggar’s budget optimization discussions that occur late in the process and cannot be referred back to standing committees.  It is not surprising that, even after the DPR in plenary has approved a State budget, standing committees and their government counterparts continue to discuss programs and activities.  So too does Banggar: it busies itself allocating DPPID funds.  It is especially at these times that the door is open for budget mafias to become involved: discussions are, after all, taking place far from the public eye.

To prevent this from happening, budget optimization discussions should only be allowed to plug or reduce the size of budget deficits.  The plenary session approving the State budget should be the last word both on the content of budget programs of activities and on fiscal transfers to regions.  No further discussion of a State budget should be permitted once plenary has approved it.  Furthermore, all budget-related discussions, including meetings of working groups/committees, should be held in open session and within the DPR’s precincts.

We are not advocating the abolition of Banggar or a weakening of DPR budgetary functions.  But, at the same time, we do not want to see the DPR become a place where nefarious plans are concocted or where budget mafias feed off the public purse.


Yuna Farhan


Indonesian Forum for Budget Transparency (FITRA)

30 September 2011

English Translator: Denis Fisher

Source: http://nasional.kompas.com/read/2011/09/30/0922013/Mafia.Badan.Anggaran

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