Indonesia

Abstract

Indonesia provides an illuminating example of a political finance regime whose most important feature is its habitual abuse. The illusion of an effective regulatory regime is a facade behind which parties and candidates collect almost limitless donations and turn to oligarchs to get involved in their political parties: this is particular acute after the effective deregulation of political parties with the huge reduction in state subsidies to party headquarters introduced in 2005. This reduction in public subsidies was accompanied by a tightening of disclosure rules on the use of public subsidies and donations, although these reforms have not managed to curb corruption. The oligarchization in the top tiers of political parties has increased. Moreover, politicians are increasingly diverting state resources to fund their private political operations and provide benefits to voters. Poor implementation can render a sophisticated regulatory regime useless and perpetuate traditional patronage and rent-seeking behaviors.