Village corruption in Indonesia : fighting corruption in the World Bank's Kecamatan Development Program
Barron, Patrick [editor] | Woodhouse, Andrea | Ashari, Luthfi [editor]
What works to limit corruption in a large rural development project in a country with endemic corruption, a weak legal system, and a history of top-down political control by a powerful state bureaucracy? The Kecamatan Development Program (KDP) is a $273 million World Bank-funded community-driven development project in Indonesia that funds infrastructure and small loans in over 20,000 villages nationwide. Its approach to combating corruption is based on an analysis of the political economy of corruption in Indonesian villages and is two pronged. First, it aims to change the conditions that breed corruption in villages by breaking existing monopolies over information, resources, and access to justice. Second, it aims to prevent corruption in the project itself by skewing the incentives of the project structure against corrupt behavior. The paper argues that corruption is primarily a problem of incentives, and can be fought effectively only by changing the costs and benefits attached to corrupt behavior. It also argues that local contexts and social norms are key to understanding how these incentives can be changed to reduce corruption. The first part of the paper examines the conditions that enable corruption to flourish in Indonesian villages. The second part of the paper examines corruption in KDP, based on a review of the KDP field experience and an incentives analysis of the project cycle. Corruption in KDP takes several forms, including budget markups, collusion, bribes, and kickbacks to local officials. The analysis reveals that the elements of the project most effective in limiting corruption are transparency, community participation, and the provision of independent channels for resolving complaints.
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