Corruption and Asian Value’s in Indonesia: The Case of The Suharto Family Business



Julius Ary Mollet

Faculty of Economics and Business, Cendrawasih University, Jalan Kampwolker Waena, Jayapura, Provinsi Papua, Indonesia 99358.


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DOI: http://dx.doi.org/10.31014/aior.1991.01.02.22


Abstract

The subject of corruption in Indonesian life has been neglected as an area of social research. Many studies suggest that Asian values have a strong connection with the Asian communities’ corrupt conduct and that they underpin several factors that contribute to individual or society’s corruption. In the context of Indonesia, President Suharto successfully developed Indonesia, establishing a strong foundation for the Indonesian economy. This achievement brought President Suharto the title of “Father of development”. He involved his family businesses in all sectors of the economy and the family became one of the top ten businesses in Asia. Indonesian businessmen close to Suharto received protection and concessions from the President. This paper examines Suharto’s and his mates’ collaboration in business corruption in Indonesia. The study shows that after the Suharto step down from presidency the Suharto family businesses collapse due to their practice of corruption and nepotism.


Introduction

Corruption has received a considerable amount of attention from sociologists, in particularly the causes of corruption in developing countries. Barr (2000) investigated the issues of corruption Asia and the Pacific regions and explored the relationship between Asian values and corruption. Lindsay and Dick (2010) investigated government and corruption the Asian countries, while Fan (2012) explored the implications of Confucian ethics (Asian values). Later, Moktan (2015) found that economic expansion in Asia and the Pacific led to an increase in the negative impact of bribery in business. More specifically, Aditjondro (2002) investigated Indonesian businessman involved in collusion, corruption and nepotism in order obtain concessions from the central government.


The Indonesian economy exhibited remarkable development from mid 1968 until 1997, the growth of real GDP reaching an annual average of 7.1 percent (van der Eng, 2009). The country shifted from being a low income country to a lower middle income country (Tobar, 2015). According to Elias and Noone (2011), the country’s economic performance was shaped by government policy, the country’s endowment of natural resources and the growing labor force, and its socio-economic progress supported President Suharto’s regime across the three decades.


Suharto succeeded in boosting economic development and developing a strong economic foundation in Indonesia by promoting the industrial sector, where industries supporting agricultural development became crucial to economic growth. The most remarkable achievement of the Suharto program in agriculture was the surplus in rice production in the mid-1980s. In the financial sector, Suharto formulated a policy which aimed to encourage savings and provide a domestic source of finance required for growth. The policy, named “October Package of 1988”, eased the requirements for establishing banks and increased competition in the banking system (Bennett, 1999). During the time, banks grew significantly in Indonesia, with the Suharto family also establishing businesses in the banking sector. The progress of development in Indonesia brought Suharto the title of “Father of development”. The success of the Suharto development in Indonesia, however, led to the involvement of the Suharto family in corruption, collusion, and nepotism. The Suharto family and its relatives became involved in business, as President, Suharto had the power to provide government concessions to protect the businesses of his family and his mates.


This paper examines the Suharto family businesses and the corruption of the conglomerate business environment in Indonesia. The paper begins with a discussion of several theories of the corruption, which is followed by a brief definition of Asian values. An overview of the Suharto family businesses is followed by a discussion on their future..


Our paper makes two important contributions to the research on corruption and on the family businesses of the former Indonesian President. First, it provides the empirical evidence in the literature of the role of the Suharto businesses in the Indonesian business environment, which itself was characterized by corruption. Second, and maybe more importantly, it investigates the practice of corruption and nepotism by the Suharto family businesses.


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