Why are corrupt companies rarely blacklisted? Richo Andi Wibowo  ;   A lecturer at the faculty of law, Gadjah Mada University; A PhD researcher at Utrecht University School of Law

JAKARTA POST, 11 September 2014

                                                                                                                       

                                                      

Government procurement is the process through which public-sector institutions acquire goods and services that are necessary for carrying out their functions. However, procurement has become one of the biggest sources of corruption. This is a common phenomenon all over the world. Many efforts have been designed to cope with corruption in this sector. One of these is the blacklisting mechanism. It refers to listing corrupt companies in a centralized database. The purpose of this blacklist is to allow the procurement divisions or departments of government institutions to reject any bids from the blacklisted companies. From the companies’ perspective, government procurement is a huge market. Hence, being rejected from this market will make them suffer a lot. By creating this mechanism, it is hoped that companies will behave well and avoid malfeasance to prevent themselves from being entered onto the blacklist. The aforementioned concept has been tested scientifically by the Humboldt-Viadrina School of Governance and it is valid. The school has surveyed hundreds of CEOs and their shareholders in many countries. It concluded that restricting business opportunities and operations for blacklisted companies is considered to be the most effective mechanism to motivate businesses to counter corruption. Fortunately, a blacklisting mechanism has been embodied in Indonesia’s procurement regulations via Presidential Regulation Number 54/2010 — including its last revision, Number 70/2012. Nonetheless, when one checks on the national blacklisting system (https://inaproc.lkpp.go.id/v3/daftar_hitam), there are hardly any companies entered onto it. The blacklisting system remains dormant. Upon checking, the blacklist does not even include companies implicated in corruption cases, like PT Citra Mandiri Metalindo Abadi (the procurement of driving simulators for the National Police traffic department) or PT Anugrah Nusantara (the procurement of laboratory equipment for Sultan Ageng Tirtayasa University). There are several reasons why this problem can happen. First of all, court decisions on corruption cases have focused mainly on punishing and sanctioning convicted persons. Only in a very few cases have courts sanctioned the companies implicated in the crimes. This reflects the perception of many, which is that law enforcers in Indonesia set aside the issue of corporate liability in criminal actions. This situation reduces the opportunities for the courts to blacklist corrupt companies. In addition, government officials are hesitant to directly impose the blacklisting sanction on corrupt companies. This is for two reasons: First, it is possible that the officials themselves are involved in corruption. Sanctioning their corrupt partners could prompt them to turn into whistleblowers. It is possible that they will take revenge on the officials by revealing to law enforcers the entire web of corruption in which they and the officials have been involved. Second, the regulation is less clear as to whether the officials of a procurement department have the power to impose the blacklist sanction in a corruption case. Unlike breach of contract, which is relatively easy to verify, corruption is hard to prove. Blacklisting companies means accusing someone of corruption. Government officials may be sued because of the accusation. Although the officials can defend themselves against such a lawsuit, they would consider this situation as a waste of time that creates additional and unnecessary work. Therefore, they are hesitant to take initiative and simply wait for the legal system to impose the blacklist through a court decision. The problem should be solved. Stakeholders should assist law enforcers in mainstreaming the concept of corporate liability in criminal activities so that the blacklist can be incorporated as an additional sanction against a corrupt company. However, changing the old mindset will take time. Furthermore, criminal proceedings may take years before they become final and binding. Imposing the blacklisting sanction should not wait that long. Therefore, this option should be backed up by a short-term practical solution. One good alternative is to revise the presidential regulation on the blacklisting mechanism. New provisions should be enacted to grant the administrative power to the procurement departments or officials, thereby enabling a particular government office to blacklist companies based on the interpretation of a first instance court decision. For example, when a district court finds the manager of a company guilty of corruption because he bribed officials to enable his company to win a government contract, the new regulation would empower the officials of the National Procurement Policy Institute (LKPP) to blacklist the company. The administration of Joko “Jokowi” Widodo and Jusuf Kalla should act firmly and quickly to revise the presidential regulations and decrees concerning the blacklisting mechanism for companies found guilty of corruption in a government procurement process. This could be one of the effective measures that the new government can take to enhance clean and good governance. ●