Tackling corruption to improve housing services in Indonesia

Corruption is widespread in Indonesia. In the capital Jakarta, corruption in the delivery of housing services is particularly damaging to poor people. What can be done to combat corruption? What lessons can be learnt from the anti-corruption initiatives in the Solok District of West Sumatra Province?

A report from Loughborough University in the UK provides a case study of corruption in the housingsector in Indonesia. Examining the experiences of Jakarta and Solok District, the report shows how improvinggovernance to reduce corruption can improve service delivery.

Jakarta has a population of 8.3 million and its greatermetropolitan area (Jabotabek) is home to around 23million people. The population has grown faster than the local government’scapacity to provide housing and other services for residents. Land prices in Jakarta have risen and housing has become unaffordable forthe majority of people who work in the capital. The city’s transport system hasalso come under increasing pressure.

A number of governmentpolicies have been introduced to improve housing provision for poor people. Astate-owned property development company – Perum Perumnas – is responsible forproviding affordable housing for low income groups. There are also regulationsto ensure that every new property development includes some low cost homes.However, deeply rooted corruption in Jakarta has undermined these initiatives.

Key findings of the researchinclude:

• Corruption at Perum Perumnas has resulted in financial losses and a lackof strategic focus on housing for low income groups.
• There is briberyand corruption related to granting business licences. This discourages privatesector participation in providing affordable housing.
• Corruption hasled to the over-development of luxury homes and a lack of affordable housing inJakarta. One consequence of this is environmental damage andincreased flooding risk

Reducing corruption andsimplifying bureaucratic processes in the housing sector would greatly increasepoor people’s access to housing in Indonesia. The Governor of the Solok District of West SumatraProvince has been working to reduce corruption since 1997. The District hasintroduced a range of successful anti-corruption initiatives which haveimproved service delivery. Among the policies introduced are the ‘one door’ scheme, which simplifies the business licence applicationprocess and enhances freedom of information.

The author concludes that:

• Eliminating corruptionand cutting bureaucratic procedures would encourage the private sector to buildaffordable homes.
• The ‘one door’scheme in Solok District could be replicated in Jakarta.
• The government inJakarta needs to reassess its budget priorities and shift theemphasis from law enforcement to housing provision.
• Perum Perumnas needs to bereformed to rid the company of corrupt practices.
• A financefacility could be set up to provide housing finance for people excluded fromcommercial financial services.
• In the longer term,the Indonesian government should explore policies to encourage new economiccentres outside Jakarta.