“Siamese Twin” Indonesian Business & Politics at the height of the Pandemic

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“Siamese Twin” Indonesian Business & Politics at the height of the Pandemic
Illustration: LEONARDO A. PUTONG

IO – To characterize a politics-business nexus in this article, I used the term “Siamese twins.” George Junus Aditjondro, a lecturer and expert in the sociology of corruption at Newcastle University in Australia, coined the word. He produced a manual for anti-corruption campaigners and investigative journalists on investigations of reported misconduct in early 2001. This term specifically refers to a situation in which politics (including civil servants and other public officials) and the business/private sector collude, if not actually coalesce, blurring the line between state administrators (either from political parties or professional backgrounds) who abuse their authority to make decisions and use public resources, and the business sector, where the “basic instinct” is to squeeze maximum economic benefit from any business they run.

There will be fertile ground for corruption if there are no clear “rules of the game” controlling the connection between public officials and business persons. The main corrupt actors in the many corruption cases revealed, as stated in Indonesia Corruption Watch’s yearly report on corruption and sentencing trends, are typically state officials, civil workers, and businesses. The shady relationship between the two has resulted in a slew of anomalies, legal transgressions, and financial losses for the state and society as a whole. This is why, in countries with good governance, there are a slew of rules in place to keep public officials and government employees from succumbing to conflicts of interest, a phenomenon that occurs when public officials are unable to make fair and objective decisions because they have a personal interest or stake in the outcome.

To avoid a conflict of interest, George Junus Aditjondro strongly advises public officials who also own businesses to completely withdraw from any business activity (rather than simply becoming inactive) by, for example, relinquishing share ownership and reporting to relevant authorities on businesses still run or managed by family members. In this setting, it is impossible for public officials to manage a business at the same time. This is vital to ensure that choices are made solely in the public’s best interests and to prevent them from abusing their position.

I’ll use this lens to examine what’s happened with Covid-19 in Indonesia, notably the recent accusations of PCR profiteering hurled in numerous national news outlets, including Tempo. The names of public figures suspected to have a direct connection to the PCR “enterprise” were revealed as part of its investigation. Strong protests and categorical denials have been issued, particularly by the two ministers whose names are mentioned, Luhut Binsar Pandjaitan, Coordinating Maritime Affairs and Investment Minister, who is also Deputy Chair of the Covid-19 Handling Task Force and Coordinator of Java-Bali public activity restrictions enforcement (PPKM), and Erick Tohir, State-Owned Enterprises (SOE) Minister. Even though it is controlled by a for-profit corporation, their spokesperson stressed that they merely acted out of good will to assist the government in providing laboratory facilities to administer PCR tests. President Jokowi, according to Luhut, believes that he and Erick did not profit from the venture.

Is “making a profit” the only requirement that prevents public officials from doing business, even if it is under the guise of assisting the state? While the general public is left in the dark about whether or not to believe the unilateral claim of such public offcials? What was the foundation for the “non-profit” conclusion? Is this backed up by a formal financial statement from the company in question? Is the report open to the public for the purpose of transparency? There may be claims that the corporation is not needed to be accessible to the public because the private sector is only accountable to its shareholders. Isn’t the business, however, connected to the public affairs handled by the people in question?

“Siamese Twin” Indonesian Business & Politics at the height of the Pandemic
Illustration: LEONARDO A. PUTONG

PCR business: Loss-making or Proftable?
This article will attempt to give primary and secondary facts to describe the backdrop of the PCR industry in Indonesia so that it does not fall into “circular dispute.” The key data source is the National Disaster Mitigation Agency’s (BNPB) procurement record for PCR, VTM, and RNA reagents between April and September 2020, when it was assigned by President Jokowi to coordinate efforts to contain the pandemic, particularly in the health sector.. Because it was the first phase of the government’s response to the pandemic in the setting of a national emergency, this time was chosen. The consequence is that medical gadget prices are sky high, owing to a supply shortage and rising demand. This background is intended to dispute the assertion that the cost of a PCR test is truly high, and that individuals should expect to pay a high price for it.

The price of a PCR test is made up of numerous cost components, including laboratory, lab technician salary, Personal Protective Equipment (PPE), PCR reagents, PCR kits, and others. A PCR test cost at least Rp2.5 million during the early days of the pandemic. This could be a “psychological” price paid as a result of the global concern about a virus that is still wreaking havoc in numerous places. Nonetheless, according to BNPB procurement data, the price of PCR, VTM, and RNA reagents manufactured in China and Korea in April-September 2020 only ranged from Rp150,000 to Rp300,000. Referral laboratories for PCR testing were only available at the time.

Why did the government (in this case, the Health Ministry) just release Circular HK.02.02/I/3713/2020 on October 5, 2020, seven months after the pandemic began, setting the PCR price at Rp900,000? Why wait so long? Furthermore, the cost of PCR, VTM, and RNA did not reduce signifcantly. According to the most recent data from the Ministry of Health, the number of PCR laboratories has nearly doubled to 742. So, was it solely out of a sense of patriotism that entrepreneurs jumped into the PCR game? Was it true that there was no profit to be made?

Let us now calculate the costs that the general population must bear as a result of being obliged to submit to and pay for a PCR test, whether for mobility, a business trip, or to determine whether or not they have received the virus. ICW’s computation will be discussed in this post. The study used the price of Rp900,000 as a benchmark when it was initially published on October 5, 2020, because it lasted for 10 months and was only dropped to Rp495,000 on August 16, 2021, before lowering to Rp275,000 on October 27, 2021.

“Siamese Twin” Indonesian Business & Politics at the height of the Pandemic

The 10-month span between October 2020-August 2021 included a period where Indonesia was ravaged by the second wave, sparking rocketing demand for PCR tests. In July-September 2021 alone, test specimens hit more than 16 million. According to ICW, during that 10-month period, around 25,840,000 PCR tests had been administered for various purposes. As those cost Rp900,000 a pop, this means an eye-watering Rp23 trillion in revenue had been generated by PCR laboratories across Indonesia.

As the Health Ministry further slashed the price to Rp495,000 on August 16,
2021, and assuming that various components that make up the PCR price remained the same, then there is a very significant price difference pocketed by PCR laboratories: Rp405,000 per test. If we multiply this by the number of PCR test specimens gathered in the 10-month period, we can roughly estimate the profit: a whopping Rp10 trillion!

This obviously demonstrates how lucrative this industry is. It’s no surprise that the number of PCR laboratories has multiplied so rapidly. Everyone appeared to be anxious to come on board and obtain a piece of the PCR test cake. So, does the notion that the PCR industry is unprofitable still stand?

Second, there was a reaction from PCR industry operators after the Health Ministry pressured the price down to Rp495,000 and then to Rp275,000. One excuse they frequently used was that the PCR test’s quality was deteriorating, and that quality PCR kits could no longer be obtained at the increased price. PCR kits are only available in China. According to a BNPB document, practically all of the kits have come from China and South Korea since the outset. Can PCR players demonstrate that they have purchased PCR kits from developed countries such as Europe or the United States?

“Siamese Twin” Indonesian Business & Politics at the height of the Pandemic

Can the Siamese twins be separated?
The polemic of PCR pricing, including mandatory PCR tests as a requirement for travel, especially on public transportation, has sparked accusations of a confict of interest. This is not entirely baseless, due to the fact that several public officials have direct links to the PCR enterprises, or hold concurrent positions as commissioners in SOE engaged in the health care sector.

It is indeed ironic that the public is made to shoulder the cost of PCR tests out of their own pockets, while at the same time state institutions failed to effectively manage the budget for Covid-19 prevention. Otherwise, the state could have provided subsidies for PCR tests in tracing and testing efforts. For example, the realization of Covid-19 budgets for the health sector only reached Rp99.5 trillion (63.6%) in 2020. Note that as of October 2021, almost a full year later, only Rp193.9 trillion (53.9%) of a separate budget had been disbursed.

Even though a budget was provided, the community had to shoulder an additional burden due to the state’s failure to respond to the pandemic. On the one hand, they were deprived of their source of income due to mobility restrictions, while on the other side, they were forced to pay for PCR testing with their own money. The health sector subsidy system for PCR tracing and testing, from the standpoint of PCR commercial participants, would diminish their prospects of making big profits. Likewise, for public officials involved in the PCR business, it is easier for them to make a proft without any subsidy because at the same time they may also be the policymakers setting the direction for pandemic policy.

The entanglement of ulterior motives to turn a profit from the position, responsibility and signing power of public officials is a natural consequence if the political-business Siamese twins are maintained. Actually, there is already a regulatory framework in place, designed to prevent any conflict of interest by public officials. For example, Article 1(14) of Law 30/2014 on Government Administration defnes a conflict of interest as a condition where government officials have personal interests to enrich themselves and/or others in using their authority to influence the neutrality and quality of a decision and/or action made and/or taken.

Furthermore, Article 43 (1) of the same Law stipulates the prohibition of public officials from making decisions or taking actions based on personal and/or business interests. The problem is, there are no regulations that explicitly prohibit public officials from doing business. Article 23 of Law 39/2008 on State Ministry, for example, only prohibits ministers from holding concurrent positions as commissioners or directors, either in state-owned or private companies.

Meanwhile, provisions to create good governance, such as Law 28/1999 on the implementation of a clean government free from Corruption, Collusion and Nepotism (KKN) does not reflect today’s context, where public officials are simultaneously engaged in the private sector. The Law explains that criminal offences of corruption, collusion and nepotism are not only carried out by state organizers, between state organizers, but also state organizers with other parties, such as cronies, family members and businessmen. So, what happens when a public official is also a businessman, one who not only has a dual role, but also provides products/services where he/she as a public offcial has a sway over the policy or a decision affecting his or her business?

Meanwhile, the Corruption Eradication Commission (KPK) itself has not taken any stance regarding PCR pricing and policy inconsistency, considering there is a mandatory PCR test requirement for public transportation users. Even though recently there have been reports made by members of the public indicating corruption by public offcials in the PCR business, the public is pessimistic that the “revised” KPK will have any “fangs” to launch a probe against Jakartan political and business elites.

Apparently, history is repeating itself. What George Junus Aditjondro had warned about in 2001, that Indonesia must rid of the political-business Siamese twins to eradicate the root of corruption, has actually taken a reverse course. The political-business nexus that became the bedrock of the New Order regime for 32 years have now reemerged in various iterations. In the name of pandemic handling, the PCR business has become a showcase of how business and politics are always bedfellows. (Adnan)