Indonesian Corporations, Cronyism, and Corruption

Abstract

This paper is concerned with cronyism and corruption in the Indonesian corporate economy. It employs detailed corporate evidence, verifying the inter-penetration of diverse political, bureaucratic and economic institutions. Although the emphasis is on the 1990s, the historical developments since 1950 within the institutions of the presidency, the military, private Chinese and pribumi corporations, as well as state-owned enterprises, are analysed in detail to identify the sources of this corruption. Equally important are the failures of the bureaucracy, the legal infrastructure, in curtailing corruption and introducing effective corporate governance. The relationship of this spiralling corruption to the 1997 financial crisis is clear. The final section is concerned with the reforms introduced after the crisis. This section also appraises the differences in corporate structures and networks between Western companies and the Indonesian conglomerates, identifying the need for institutional change.