Numerous studies concluded that developing countries with abundant natural resources are usually trapped in systemic corruption. Several African countries are good examples of the curse of natural resources.
Various concepts have been introduced to describe the contradiction. The logic is that countries with abundant natural resources should easily create development for people’s welfare. However, the fact shows that entrenched corruption widely exists in a number of countries with abundant natural resources.
Indonesia during the New Order regime enjoyed high price of oil, raking quite big income as oil producer. In fact, natural resources were the back bone of state revenue. However, we are aware of how the regime managed the country. Massive corruption occurred alongside epic exploitation of the natural resources. The situation is different in the countries that lack natural resources and depend on public tax as their major revenue source. These countries, however, known for low cases of corruption.
Why is that so? This phenomenon can be explained within the framework of rent seeking behavior and vertical accountability level of public officials in the countries with abundant natural resources and those depending on taxes. Natural resources are something given and innate, and state officials have full authority to regulate them without so much intervention from outside parties, including citizens. Therefore, the state authority to regulate licenses to explore and exploit natural resources gives birth to rent seeking behavior.
Mining companies then in competition to bribe state officials and the amount is sometimes quite fantastic to get mining license or contract. At the same time, natural resources management is a very complicated issue and too technical for the public to comprehend. The wide knowledge gap has resulted in ineffective monitoring. It is not clear how far the citizens contribute to the countries rich with natural resources, and public demand toward the state is not high. The situation is different in the countries with tax as the main revenue. As people pay taxes and contribute directly to the country, they have stronger bond and legitimacy to demand the accountability of public resources management to the state. This is probably why the countries that depend on public tax are ‘cleaner’ ones.
Indonesia has actually moved from reliance on the revenue from natural resources sector to higher tax income. The last few years have seen bigger portion of tax contribution to the development than other sectors, including natural resource. However, as natural resource in the country is still abundant, corruption eradication mechanism in this sector can be based on two approaches. First, strengthening anticorruption system at natural resource management sector. Law enforcement and early warning system provision in license and contract issuance for private sectors can help reduce bribery. Second, gradual phase-out of natural resources and the switch to more sustainable resources. Energy policy can reduce corruption by, for example, switching from coal as the main source of electricity source to solar energy. This way, rent seeking behavior in coal industry can be decreased. Unfortunately, Indonesia is still caught up on the first approach, whose effectiveness is dubious given the rampant corruption at natural resources sector.
Adnan Topan Husodo
Coordinator of the Indonesia Corruption Watch (ICW)