News: Indonesia considers increasing pay of regional heads

Compensation & Benefits

Indonesia considers increasing pay of regional heads

To curb corruption the Finance Ministry of Indonesia is conducting a study on the possibility of increasing remunerations for regional heads like governors, mayors and regents.
Indonesia considers increasing pay of regional heads

With the Corruption Eradication Commission (KPK) having investigated 99 regional heads for graft, nearly all of whom were later found guilty, controlling corruption among regional heads becomes an important agenda for the government. The Finance Ministry has hence put in place a study to track whether a higher salary would discourage regional heads from accepting bribes.

Based on the findings of the study remuneration packages of regional heads (governors, mayors and regents) may be revised systematically and comprehensively. 

“We are conducting a study. We will also report the idea to the President because he also has concerns about the remuneration arrangements, particularly for officials in the regions,” said Finance Minister Sri Mulyani Indrawati. 

While many experts believe that corruption has its root in the desire to give a better life to the family, good education and health care facility and it may get abated by increased salary if a public servant has the propensity to follow ethics and morality. While, an alternative view, which relies on the concepts of ‘fair wages’ and reciprocity, demonstrates that motivational aspects can be strong even in high bribe environments, and corruption can be eliminated at wage levels that are not prohibitive.

A research done by C Van Rijckeghem, B Weder shows that the estimated relationship between corruption and pay is significantly negative but is neither very strong (as predicted by the fair wage hypothesis) nor very weak (as predicted by maximizing models). Further, some caution is needed in drawing policy implications or carrying out a cost-benefit analysis based on this estimated relationship. The paper suggests that it is actually strengthening the rule of law that will also have beneficial effects on corruption with wage policy.

While the Ministry does not disclose when the study started and when it would be turned into a government policy, they also welcome suggestions from all relevant parties in the matter, including the KPK, on how to remunerate regional heads so they would not be interested in involving themselves in graft. 

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Topics: Compensation & Benefits

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