Tag Archives: indonesia

Corruption – A receipt is not enough

13 Mar

There were signs all over Iloilo City when I was there – urging people to ask for receipts.

(Right next to those asking people to vote NO on the Reproductive Health Bill — making for an interesting political display of corruption and sex.)

Businesses had all sorts of clever incentives to encourage their customers to keep an eye out for their receipts — free goods, deductions from bills, or vouchers for subsequent purchases.

This is motivated by a desire to formalise the economy, reduce corruption — and ostensibly to increase city taxes.

Australia — model nation?

One thing I’ve discovered in my travels this year is that Australians are renowned for being uncorrupt, law-abiding citizens.

When I was in Ghana, a friend told me she wouldn’t move to Australia because “it would be too hard to do business.” In Greece I was told by a former Australian — with eyebrows suggestively raised — that it was “nice” to be able to negotiate directly with the person you are speaking to.

I guess this might be part of the reason I’m so oblivious to corruption. In Ghana I paid a bribe to a police officer without realising. The Philippines is renowned as one of the most corrupt countries in the world, and yet, despite doing business there I did not witness to any “unusual” interactions. In Indonesia I baulked at the tax rate, before I was told it was only a “special tax”, applicable only in “special” situations.

I just don’t get it

I just don’t.

I keep having faith in the rules. I just think — well, if you keep following them, you’ll get where you need to get to, eventually. Even where corruption is pervasive. With patience you’ll jump through all the hoops, pass all the red tape.

Except of course, in all those situations when you can’t.

When I was in India, I was told of a dedicated NGO worker who was building schools for disadvantaged kids, and had to pay $2,000 in bribes to extend his visa..

In the Philippines, I was told of a development project which received around $2,000 in funds. But these funds would not be released by the local government, unless a $200 “processing charge” was paid.

When I was in Mauritius, I was told of a lucrative exclusive mobile phone contract which was awarded, after a “gift” of several very luxurious cars was received.

C.K. Prahalad in his book Fortune at the Bottom of the Pyramid recounts story after story of agricultural workers, who were routinely exploited by the only purchasers they were able to access — middlemen who “weighed products incorrectly” and shifted purchasing prices at a moment’s notice.

What would you do?

I’d like to think I’d be a pillar of society in the face of corruption, just like this inspiring Acumen Fund project who stood his ground and refused to pay any bribe to a local government for his local development project.

But the reality is probably very different.

Would I want to stop working on a school project I was utterly dedicated to? Would I want my development project to stop? Would I want to be responsible for slowing cheap connectivity to Mauritius?

A friend in Nepal related a situation in his engineering work where a contractor had put a significant amount of pressure on him to approve sub-par work. His manager told my friend that he had no choice, he had to sign it off. If he didn’t, he might lose his job.

This reminded me of difficult situations I’d seen the engineers at my former workplace in.

Except in this case, my Nepali friend got paid (a significant sum) to sign it off.

A receipt is not enough

My friend in Mexico told me that I had no idea about how difficult it was to evade corruption. In Mexico she was labelled an evangelical for imploring her friends to stop encouraging corruption. They would laugh at her.

In theory, we all are on the side of my Mexican friend. Corruption reduces access to information — making business and general everyday life trickier. It takes even more power out of the hands of those who can least afford it.

But what would you do if your boss told you you would lose your job if you didn’t approve a set of shoddy documents?

And I’d been thinking it was enough to ask for a receipt.

Image:  Some rights reserved by toastforbrekkie

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<3 of the week: Poverty has fallen, the Arab world’s first ladies and happiness in Indonesian

8 Mar

  • Smiles all round in Indonesia

    Poverty has fallen in every region of the world from 2005 – 2008, according to The Economist this week. “Half the long-term decline is attributable to China… but the main contribution to the recent turnaround is Africa.”

  • A rather sombre story to link to on today, International Women’s Day, is this piece from the Guardian on the Arab world’s first ladies. From Syria: “When we explained that this was the worst kind of tyrant, Sarkozy would say: ‘Bashar protects Christians, and with a wife as modern as his, he can’t be completely bad.’”. This is followed by descriptions of how the household is run on “wildly democratic principles”.
  • After spending some time here, I was not surprised to read that 61% Indonesians rate themselves as “very happy” – making Indonesia the happiest country in the world.  The place is just brimming with laughter.

Image credit: The awesome Deli.

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Microfinance – does it actually work?

30 Jan

A village in Nepal, only accessibly by foot, that asked to be provided with remittance services

Microfinance is the provision of basic financial services to people who might not otherwise be able to access these services.

Winner of a Nobel Peace Prize in 2006, microfinance has long been lauded as the ‘silver bullet’ to poverty. But the industry has come under attack for failing to produce outcomes – and in some cases making matters worse – in the case of mass suicides of supposed overly indebted farmers in northern India.

Two recent books have studied the case for microfinance in detail – and have reached much the same conclusion. Portfolios of the Poor and Due Diligence: An Impertinent Inquiry both argue that microfinance allows the poor to better manage their lives – providing a safe place to save, smoothing income, and allowing them to acquire useful ‘lump sums’ of money.

But despite these benefits, both books point to a lack of evidence that microfinance itself reduces poverty. No study has successfully proven that microfinance alone has shifted any community out of poverty. In Portfolios of the Poor, the authors argue that microfinance needs to move from traditional rigid loan products to flexible savings products*. And interestingly, Roodman in Due Diligence argues that the real strength of microfinance is in the creation of a new industry – driving economic growth and creating jobs. Not necessarily lifting people out of poverty.

In my own experience with Good Return’s microfinance partners, I have seen examples of the benefit microfinance provides.

In the Philippines, women use ‘emergency’ loans to rebuild homes after storms and to pay for healthcare costs that might otherwise send a family to ruin. Others told me they only joined the institution to access life insurance that they wouldn’t otherwise be able to buy – “for my family, when I die”, they told me.

In Nepal women asked our partner microfinance institution to come to their village so they could access remittance services. Family members could then send funds home, without the time and security risk associated with carrying the money themselves.

And here in Indonesia, men have grouped together to take out a loan. They use the money to seize a rare opportunity – to buy land and extend their palm oil plantation. Their increased supply increases their bargaining power and means they can ‘erase the middle man’. “Now we get much better prices for our goods”.

Of course it would be easy to leave this argument as a series of anecdotes of the benefits.

And not mention the disgruntled customers who complain about significant interest rates, delinquent group members whose loans they must cover and long meetings which waste their time.

But for me, the point about microfinance is made in the developed world.

Given the choice, who keeps their life savings under a mattress? Given the choice, who doesn’t insure their property against frequent natural disaster? And who doesn’t feel nervous carrying a month’s salary on an overnight bus?

For me, poverty has many faces, many problems that need to be solved. (Lucky that there are so many of us!)

There is never going to be a single, simple answer. And we should be wary of anyone who says that there is.

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* As a point of interest – it is much harder for a microfinance institution to get permission to hold savings rather than just give loans. This is in the interests of client protection – for a loan the bank much trust the client. But for savings, a client must be able to trust the bank.

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<3 of the week: Indonesia business ideas

26 Jan

Interesting business ideas from West Borneo:

Valet Service at the Indonesia border

Many Indonesians cross over into Malaysia every day for work. At the border they leave their motorbikes with a valet service who parks them neatly and keeps an eye on them – while providing a unique additional service. He uses cardboard boxes to cover the seats, protecting the vinyl from the relentless Borneo sun.

Water holder

In Borneo, like many other places in the world, the water is not safe to drink. But instead of bottled water, many people drink from pre-packaged plastic water cups. I’ve seen these elaborate holders for the water cups in many homes and offices here.

24 hour petrol station (excited owner free)

These informal petrol stations dot the road side. There are plenty of formal petrol around – and the prices at the informal spots are high and the measuring system far from accurate. When I ask why they still exist I am simply told “they are 24 hours”. Not to mention the friendlier service.

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If you liked this post, you might also like Future Perfect.

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<3 Links, quotes and comments of the week

6 Jan

A water filter people "aspire to own"

  • Looking for somewhere to invest? Next Billion recently covered an Economist article which spotlighted Africa as a potential place for your hard  earned cash. While asking you to look at entire continent doesn’t exactly narrow your choices down, they do provide some interesting commentary– including the latest World Bank findings which showed that 78% of Sub-Sahara Africa countries improved their business regulatory environments in 2011. Also there is more on the role of China – “The country has signed bilateral trade agreements with 45 African nations (and) made investments in 49. The Chinese government provides enormous support to businesses engaging with the continent, and does so without pesky regulations like the Foreign Corrupt Practices Act to curtail back-room deals with shady officials.” In Ghana and Nepal I saw countless examples of essential infrastructure – roads, hydro power stations, telecommunications systems – being built by Chinese workers who could barely speak English, let alone the native language. And yet they were getting it done. Without “programs”, NGOs, subsidies, (shady back room deals aside). The entrepreneurial spirit of these individuals, the risks they were taking and how willing they were just throw everything in and see what happened was beyond inspiring to me.
  • On Monday one of my bucket list items was to pick a list of best books and read every single one. Well, I don’t know that I’m going to make EVERY single one, but I’ve picked my list and it’s here. A podcast which highlights a much more manageable selection is here. I’ll pick out some for review during the year.
  • I’ve met some interesting companies over the last few weeks – Project Alba, a start-go agricultural NGO with big plans (“why not target 2 billion farmers?”), YEJJ Group  – who are thinking about a Green Building Council for Cambodia and PATH, a global healthcare NGO. PATH’s take on selling the Bottom of the Pyramid (poor people) is fascinating. They are selling water filters to Cambodia families. They made the product look less like a bucket and more like something you’d see in an office – and sales went through the roof. And all this despite an almost doubling in price. People will pay for something they aspire to own, was the message.
  • Just recently I went to a pretty exclusive gym here in Phnom Penh. What made me think it was exclusive? The sign on the door – “No bodyguards, no weapons”.

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I’ll be Jakarta for a week starting tomorrow and then will head on to West Kalimantan to work with Good Return’s partner CUKK. If you know anyone around let me know!

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