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Legal Updates | Facilitating Payments in Indonesia

We understand that the Foreign Corrupt Practices Act (the “FCPA”) permits facilitating payments to be made to foreign officials for routine governmental actions to expedite the performance of their duties. Such payments are generally considered as not being intended to influence the outcome of the official’s action or decision, but rather to expedite an action or decision that is already a given. A facilitating payment, therefore, is an exception to the anti-bribery prohibitions in the FCPA.

In contrast, facilitating payments are not recognised under Indonesian law. Generally, there is no provision under the Anti-Corruption Law (Law No. 31 of 1999 regarding Eradication of Criminal Acts of Corruption, as amended by Law No. 20 of 2011) or in Indonesian law that permits facilitating payments or exempts such payments from the general prohibitions of the Anti-Corruption Law. In fact, unauthorised payment to any government official, regardless of the purpose, is very suspect and may be considered a bribe.

The Anti-Corruption Law expressly provides that gifts or gratifications given to a Government Official or State Organiser shall be considered a bribe if they are related to his/her position and are contrary to his/her official duty or obligations. The Anti-Corruption Law does not define the term “gift”. It merely provides that “gratifications” are “gifts in a broad meaning, which includes the giving of money, goods, discounts, commissions, interest-free loans, travel tickets, lodging, travel, free medical care, and other facilities”. Gratification shall also encompass any gift that is accepted outside the country and given by using electronic means or otherwise.

The term is thus meant to suggest any consideration of any kind, whether requested or not. In this regard, it is difficult to see any meaningful difference between a “gift” and a “gratification”. We believe it is prudent to give the term “gratification” a broad meaning such that it includes any consideration, in cash or in kind, for the personal benefit of the recipient, which is not required by law, administrative regulation, or similar enactment to be made and whether or not solicited by the recipient.

Based on the foregoing broad definition, we are of the view that a facilitating payment provided for the purpose of expediting or securing the performance of a routine governmental action by an official would constitute a gift and gratification within the meaning of the Anti-Corruption Law.

Corruption Eradication Commission

In 2015, Indonesia’s Corruption Eradication Commission (Komisi Pemberantasan Korupsi or “KPK”) issued Guidelines for Gratification Control. Separately, KPK Regulation No. 2 of 2014 regarding Guidelines for Reporting and the Determination of Gratuity Status requires state officials to report the receipt of a gratification to the KPK within 30 days of its receipt. While the KPK takes a hard line on this issue, it has not, to our knowledge, exercised its authority to prosecute people who make or receive such payments. These payments are considered relatively small in amount compared to the cases subject to the KPK’s other operations.

These types of payments are still very common in practice. It is often the case that government officials require certain unjustified fees for the issuance of certain permits. The problem is exacerbated by private companies or individuals voluntarily participating in the practice because they want to expedite the issuance of a permit that they are already entitled to, with the result being that such payments are rampant. The unofficial costs for obtaining permits in this way have ballooned over time, significantly increasing the costs for businesses. In an attempt to curb the practice, the Government of Indonesia formed a special task force (called Saber Pungli), which has nabbed several government officials and confiscated cash in a number of surprise raids over the past year.

SSEK - 8th August 2018

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Indonesia Snapshot

Capital: Jakarta
Population: 259 million (2016)
Currency: Indonesian Rupiah
Nominal GDP: $936 billion USD (IMF, 2016)
GDP Per Capita: $3,620 USD at Current Prices (IMF, 2016)
GDP Growth: 5.0% (2016)
External Debt: 36.80% of GDP (BI, Q2 2016)
Ease of Doing Business: 91/190 (WB, 2017)
Corruption Index: 90/176 (TI, 2016)