Academic journal article The South East Asian Journal of Management

Government Financial Management, Strategy for Preventing Corruption in Indonesia

Academic journal article The South East Asian Journal of Management

Government Financial Management, Strategy for Preventing Corruption in Indonesia

Article excerpt


The Republic of Indonesia is a country lies on Southeast Asia and Oceania. Indonesia comprises of 17,508 islands. With a population of more than 240 millions inhabitants, it is the world's fourth most populous country. Indonesia has over 300 ethnic groups, each with its own unique culture. The national language is Indonesian, however, there are around 724 local languages. Indonesia is the largest economy in Southeast Asia and a member of the G-20 major economies. Indonesia's estimated nominal per capita GDP in 2009 was US$2,528 (Statistic Central Board, 2010). Administratively, Indonesia consists of 33 provinces, ve of which have special status and 500 districts. Indonesia's Corruption perception index was 2.3 in 2007, 2.6 in 2008 and increased again in 2009 of 2.8, and remain 2.8 in 2010 (Transparency International, 2010).

The government's commitment to improve people's prosperity is implemented by overcoming the real big problem that has been facing by the country. To prove its commitment, government agencies are working hard to improve their performance based on the set-up national development targets. By increasing performance, agencies will go forward to improve good governance with its three pillars, namely transparency, participation, and accountability.

The national goal as written in constitutional year 1945 is to achieve the prosperity of all Indonesian, anywhere, and anytime. Government should provide the best public services and prepare any programs and activities to improve economic growth and clean government. While struggling to improve the prosperity of the people by achieving the performance indicators, Indonesia has a very serious problem, corruption in almost every local and central government. During the era of President Suharto (1969-1998), corruption was practiced in any layers, such as in the government agencies, state owned enterprises, and other places. Corruption could be found anywhere, from petty corruption to big corruption. Corruption could be found during the planning, executing, reporting, and until controlling phase. Corruption is practiced from the cradle to the grave especially for the public services. People suffered because of corruption in terms of education, health, poverty, and unemployment.

To eradicate corruption, two strategies should be practiced, namely repression and prevention strategies. According to Law Number 8 Year 1981 of Criminal Procedure Code, there are three steps in repression strategy: pre-investigation, investigation, and prosecution. Aside from conducting arrests of corruptors, prevention strategy should be implemented to stop corruption. This strategy could be implemented by improving systems and procedures in order to improve the performance of the government agencies and creating the government which is free from corruption.

In order to improve the performance of the government agencies, the government released the Presidential Instruction Number 7 Year 1999 on Government Agencies Performance Accountability. This instruction rules that every government agency must prepare strategic plan, performance measurement, and accountability report. Concerning to the government nancial management, in order to be accountable, the government agencies should manage government nancial efciently, effectively, and follow the regulations.

The new public management and public services in Indonesia are being reformed by the modication of public policy, and nancial management. In terms of budgeting, some improvements addressed to change in goals, mechanism, and accountability. Instead of nancial control of input function, budgeting becomes a tool of economic policy. The nancial reform in Indonesia shows the change of budgeting system from the Line-Item Budgeting system becomes the Performance Based Budgeting. Besides of the modication in budgeting system, the scal planning which is related to compiling and stipulating of annual budget has to be developed in Medium Term Expenditure Framework. …

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