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Indonesia

Panama Papers underscore need for fair tax systems

Sri Mulyani Indrawati's picture

High-rises and hotel buildings in Panama City, Panama. © Gerardo Pesantez/World Bank

The so-called “Panama Papers” scandal reminds us that concealing wealth and avoiding tax payments is neither uncommon nor — in many cases — illegal. But the embarrassing leak exposes something else: The public trust is breached when companies, the rich and the powerful can hide their money without breaking the law. If this breach is left unaddressed, those who aren’t rich enough to hide money will be less willing to pay and contribute to the social contract in which taxes are exchanged for quality services.

As finance minister in my home country of Indonesia, I saw firsthand how a weak tax system eroded public trust and enabled crony capitalism. Shadow markets arose for highly subsidized fuel, family connections secured jobs, and bribes helped public servants beef up their salaries. Tax avoidance among the elites was common and the country couldn’t mobilize the resources we needed to build infrastructure, create jobs, and fight poverty.

Why investing in forests is money—and time-- well spent

Tone Skogen's picture
Togo_Andrea Borgarello / World Bank

It is widely acknowledged that reducing emissions from deforestation could bring about one-third of the greenhouse gas emission reductions we need by 2030 to stay on a 2-degrees trajectory. But protecting and managing forests wisely does not only make sense from a climate perspective.  It is also smart for the economy. Forests are key economic resources in tropical countries. Protecting them would increase resilience to climate change, reduce poverty and help preserve invaluable biodiversity.

Here are just a few facts to illustrate why forests are so important. First, forests provide us with ecosystem services like pollination of food crops, water and air filtration, and protection against floods and erosion. Forests are also home for about 1.3 billion people worldwide who depend on forest resources for their livelihood. Locally, forests contribute to the rainfall needed to sustain food production over time. When forests are destroyed, humanity is robbed of these benefits. 

The New Climate Economy report shows us that economic growth and cutting carbon emissions can be mutually reinforcing. We need more innovation and we need more investments in a low carbon direction. This requires some fundamental choices of public policy, and the transformation will not be easy. However, it is possible and indeed the only path to sustained growth and development. If land uses are productive and energy systems are efficient, they will both drive strong economic growth and reduce carbon intensity.

Already, the world's large tropical forest countries are taking action. 

Measurement matters in preschool quality

Amer Hasan's picture
Children and teachers in an early childhood education center in rural Indonesia
Photo credit: Amer Hasan


Recent studies in neuroscience and economics show that early childhood experiences have a profound impact on brain development and thus on outcomes throughout life. A growing number of impact evaluations from low- and middle-income countries underscore the importance of preschool for children’s development (to highlight a few: Cambodia, Mozambique, and Indonesia).

Indonesia: Testing a new approach to improve public management for better service delivery

Zaki Fahmi's picture
The district of Bojonegoro in East Java is planning to improve public management for better services, such as maternal health care.



In post decentralization Indonesia, the responsibility to deliver services falls largely at the hands of the local government. So, too, does the management of public money. Local governments currently manage about half of Indonesia’s public finances. Transfers to the regions increased by more than threefold in real terms since the onset of decentralization.
 
However, with few improvements in health and education indicators, the results of these increased transfers are not encouraging.

Open decision-making: better governance through deliberative transparency

Jim Brumby's picture
YouTube: not just a source of endless entertainment.


YouTube is a source of endless entertainment. It also has more meaningful content, such as video recordings of meetings between then deputy governor of Jakarta Basuki Tjahaja Purnama, city council, and local government agencies.

The objective, according to Purnama—who is now governor—is for citizens to be able to understand exactly why certain decisions were made or not made. Indeed, one video in particular of Ahok, as he is commonly known, meeting with the City Department of Public Works generated much press. In it, he uncovered an appraisal that should have only been Rp 30 million (approximately US 2,300) was marked as Rp 1 billion (US 75 thousand), prompting someone in the meeting to dramatically call out, “we’ve been discovered!”

Through the proactive disclosure of relevant, accessible, timely, and accurate information, transparency is increasingly seen as critical for the World Bank’s twin goals of ending extreme poverty and boosting shared prosperity. Transparency helps ensure that governments are efficient and effective by opening up information to public scrutiny and thus making public officials answerable for their actions and decisions. Limited resources go farther when decisions about their allocation and use are well informed, publically scrutinized, and accountable.

Malnutrition denies children opportunity and stunts economic development

Axel van Trotsenburg's picture

Nearly 50 years ago, books such as Asian Drama: An Inquiry Into The Poverty Of Nations, by the Swedish economist and Nobel laureate Gunnar Myrdal, offered a dire prediction of famine and poverty for the region in coming decades.

Seeing the impact of forest fires in South Sumatra: a view from the field

Ann Jeannette Glauber's picture
Indonesia, burned forest. photo by Ann Jeannette Glauber / World Bank

This past autumn, I saw a shocking headline: Forest fires in Indonesia were creating as many greenhouse gas emissions as the entire United States economy.
 
Between June and October 2015, an estimated 2.6 million hectares—or 4.5 times the size of Bali— burned to clear land for production  of palm oil, the world’s highest value non-timber forest crop, used in food products, cosmetics, biofuels.
 
Recently, along with Vice President for Sustainable Development Laura Tuck and Indonesia Country Director Rodrigo Chaves, I visited South Sumatra, one of the provinces hardest hit by the fires.
 
We saw scrubby fire-adapted landscapes that had replaced biodiversity-rich peat swamp forests.
 
We spoke with local communities who explained how they covered doors and windows with wet towels, to help reduce the smoke.  These families are among the half million people who suffered from fire-related respiratory infections, skin and eye ailments; their children were among the 4.6 million students who missed school last year due to fires, some for weeks at a time.
 
While some of these families lost earnings or assets due to the fires, others spoke of how fire improves soil quality. 
 

Mining leaders focus on governance during the commodities downturn

Paulo de Sa's picture
Photo via Shutterstock

At this year’s Investing in African Mining Indaba in Cape Town, South Africa, leaders are not hiding their concerns about the commodities downturn.

Government representatives express their frustration for not having benefited enough during the boom. Policymakers lament the lack of planning that has left their countries with no cushion in their budgets, and companies are looking to cut costs so they can weather the storm. And most importantly, communities are feeling the economic impact as mines purchase less local supplies, generate fewer jobs and halt some operations. 

Not only are things slowing down, but it seems a golden opportunity has passed us by. Fatima Denton, Director of the United Nations Economic Commission for Africa, highlighted that Africa is less industrialized today than it was in 1990. After the minerals super cycle of 2000-2013, the percentage of manufacturing of African economies actually declined from 12% to 11%. 

How to scale up financial inclusion in ASEAN countries

José de Luna-Martínez's picture
MYR busy market

Globally, around 2 billion people do not use formal financial services. In Southeast Asia, there are 264 million adults who are still “unbanked”; many of them save their money under the mattress and borrow from so-called “loan sharks”, paying exorbitant interest rates on a daily or weekly basis. Recognizing the importance of financial inclusion for economic development, the leaders of the Association of South East Asian Nations (ASEAN) have made this one of their top priorities for the next five years.
 
Last week, the World Bank Group presented the latest data on financial inclusion in ASEAN to senior representatives of the ministries of finance and central banks of all 10 ASEAN member countries (Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam). The session, held in Kuala Lumpur, is one of the joint activities the new World Bank Research and Knowledge Hub and Malaysia is undertaking to support financial inclusion around the world.
 

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