Wednesday, December 6, 2023 | 04:26 WIB

Rent-seeking behavior and solutions

Jakarta, IO – News about cronyism made headlines on Koran Jakarta on May 12, 2023. The article depicts crony capitalism at national and international levels. Globally, crony capitalists’ wealth has risen from 1% of the global gross domestic product (GDP) 25 years ago to USD 3 trillion or nearly 3% of global GDP now. 

In addition to reporting the growth of crony capitalists’ wealth, the news also highlights that hundreds of billionaires around the world are believed to gain fortune from sectors involving chummy dealings with the state. The growth of crony capitalism can be classified into behaviors in rent-seeking and non-rent-seeking sectors. 

Rent-seeking refers to increasing existing wealth by manipulating social and political conditions without creating new wealth. The growth of rent-seeking behavior in a country, especially in Indonesia, is unstoppable because the Government’s system and practice of implementing economic, financial and banking policies cannot escape cronyism, collusion and nepotistic practices. They mainly occur in the socio-political life of society – even a liberal one. 

This situation is also relevant to the presidential and vice-presidential candidate selection, which requires a fantastic amount of money; for presidential and vice-presidential candidates, it is estimated that around IDR 5 trillion will be needed, for governor and deputy governor candidates around IDR 1 trillion, and for mayor and regent candidates around IDR 500 billion. 

A “festival of democracy” without sponsorship or assistance from the private sector seems out of the question. Thus, it is pretty predictable how massive the influence of relations that are based on favors-exchange between the Government and its benefactors, even if they are not pro-people. This can impact Government’s decision-making in investment and construction projects. 

It has become public knowledge that the “call dibs” practices have been ongoing at the National Development Planning Agency (Bappenas). Therefore, in the New Order era, cronyism practices were massive during the Suharto regime, and inarguably, they continued to take place in Joko Widodo’s administration.


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