E-Procurement of Goods and Services to Reduce Corruption in Indonesia

Ahmad Sobari, SH., MH., Ph.D. (Indonesia)
On Seminar “New Legal Problems of Internet Market and Online Dispute Resolution”
Held by International Relations Law Center, HUFS Legal Research Institute,
Seoul, Republic of Korea, 14th October 2013

A. INTRODUCTION

History of the Internet in Indonesia started in the 1990s. Are some students who pioneered the Institut Teknologi Bandung, one of which is Onno W Purbo. Starting from their penchant to use amateur radio, and there was an idea to adopt the technology for the amateur radio TCP / IP in 1992.

Besides Onno W Purbo, a researcher from Space agency named Muhammad Ihsan also develop a network computer with amateur radio technology. He managed to connect the existing computer network in the ITB, the one on Space agency.

By utilizing the advancement of internet technology, currently the Indonesian government is making changes to the system of formation of clean and transparent governance (corruption suppress as much as possible), Community life is also demanding a public service that is able to meet the public interest, reliable and trustworthy and easily accessible interactively. One effort to it has made efforts to develop e-government. E-Government can be defined as a government organization which is based electronics in order to improve the quality of public services effectively and efficiently. The process of transformation towards e-government requires the development of management systems, by exploiting advances in information technology that is a combination of computer technology and telecommunications technology. Through e-government can be formed network transaction information and public services and an interactive relationship with the corporate world.

Further step is to conduct E-Procurement, E-Procurement can be translated as “the procurement of goods and services electronically” which is now internet based, so it can expand market access and help create healthy competition. The use of E-Procurement technology products, respecting the state of the organization, volume procurement, market situation and market readiness. Implementation of E-Procurement shows that technology can help fix the problems in the process of procuring goods or services from the government. E-Procurement is a user-friendly, Internet-based purchasing system that offers electronic purchase order processing and enhanced administrative functions to buyers and suppliers, resulting in operational efficiencies and potential cost savings.
The E-Procurement Service features the most modern business and commercial practices from the private sector and the most current technical capabilities offered by the Internet that will provide cost-saving opportunities to both suppliers and government.

B. LEGAL BASIS FOR THE IMPLEMENTATION OF E-PROCUREMENT

1. Law No. 11 of 2008 concerning Information and Electronic Transactions (State Gazette Year 2008 No.58, Supplement No. 4843);

2. Presidential Regulation Number 54 of 2010 Concerning Government Procurement of Goods or Services; That the Ministry / Agency / Local / Institution of Government must carry out procurement of goods or services electronically to some or all of the work packages in Fiscal Year 2011;

3. Presidential Instruction No. 17 of 2011 on the Prevention and Corruption Eradication Action in 2012. This Presidential Instruction, mandated that by December 2012, all goods expenditures by ministries / agencies should use the “e-procurement” by 75 percent. For local governments that use the Regional Budget, the expenditure of goods and services must use the E-Procurement by 40 percent.

4. Regulation of the Head of LKPP No. 2 of 2010 Concerning Electronic Procurement Service (LPSE), contains technical provisions for the operational procurement of goods or services electronically;

5. Regulation of the Head of LKPP Number 1 Year 2011 About E-Tendering;

6. LKPP Head Rule No. 5 of 2011 About Standard Document for Procurement of Goods or Services by the Government, which performed Electronic.

C. GOODS AND SERVICES PROCUREMENT PROCESS BEFORE E-PROCUREMENT

Issues related to the procurement of goods and services by the government before Presidential Regulation Number 54 of 2010 Concerning the Procurement of Goods / Services government, there are several criteria, including 1) no announced plans to procurement of goods or services, as well as the procurement process is not transparent; 2) determination of the cost documents are expensive. As a result, only certain groups can follow. 3) there are some people who can not access the announcement.

D. MODEL OF BUSINESS E-COMMERCE IN INDONESIA

Indonesia has a base of 55 million Internet users, and 57 percent of that figure is that active users shop online. There are many business models of E-Commerce in Indonesia. All of these business models have different needs that must be facilitated by different regulations. Indonesia has four E-Commerce business models are most commonly used today. The four models are:

Market place; Examples of E-Commerce site which uses the business model of “Market place” is Multiply.com, Tokopedia.com and Plasa.com;

Online Retail; Examples of online retail company is the famous Indonesian Gramedia.com and Bhinneka.com;

Daily Deals; Examples of E-Commerce sites that use business models “Daily Deals” is DealGoing.com;

Classified Ads; Examples of E-Commerce sites that use business models “Classified Ads” is Kaskus.us, Tokobagus.com and Berniaga.com.

E. LOSSES CAUSED BY THE CORRUPTION OF PROCUREMENT OF GOODS AND SERVICES

Throughout the years 2005-2009 the complaint to Corruption Eradication Commission on procurement deviations of goods / services the government is 2100 cases with potential losses to the state 35 percent or Rp 700 billion. While the Corruption Eradication Commission has handled 50 cases, with a project value of Rp 1.9 trillion. The modus operandi of these deviations as many as 94 percent of the procurement of goods and services through direct appointment and the remaining 6 percent through price bubbles.

Since its introduction in 2008, the total transactions for electronic procurement (e-procurement) until this year reached 214 trillion rupiah, with total savings of state funds around 18.895 trillion rupiah.

A total of 17 governors and 158 district heads and mayors entangled in corruption cases handled by Corruption Eradication Commission. Most of the local chief allegedly involved in corruption in the procurement of goods and services. More than 90% of cases of corruption involving the head of the region (Governors, Mayors,) associated with the procurement of government goods and services. Total budget of corrupted. l, 9 trillion rupiah. Overall, the rate of leakage in the procurement of goods and services the government, from 2005 to 2010 reached 35%.

Indication of leakage is due to 1) the number of government projects that are not on time, on target, not the right quality, and inefficient, 2) the number of devices that can not be bought and used a shorter lifetime, only reached 30%, in addition, 3 ) behavior of the obligation to provide a “bribe” by the contractor, the procurement committee, and project leadership to his superiors, the pretext for spending the organization, 4) difference in the price of similar goods is quite striking between the agency and other agencies as well as the existence of multiple invoices for one type of goods.

F. TRANSACTIONS OVER THE INTERNET, BEFORE THE PUBLICATION OF THE ACT ON ITE

Transactions Over the Internet, before the publication of the Act on ITE
Prior to the issuance of Law No. 11 of 2008 on Information and Electronic Transactions, the crimes committed via the internet is proving difficult, as well as all transactions and contracts made through the Internet is difficult to get recognition, because of evidence that is recognized by law in Indonesia for an criminal act, set in the Law No. 8 of 1981 on Criminal Procedure, Article 184 paragraph (1), knows only valid evidence in the form of: a) The witness’ testimony; b) Description of the experts, c) Letters d) Hints; e) Description of the defendant. As for the evidence for civil matters set forth in “Het Herziene Indische Reglement” (HIR) of Article 164 and Het Rechtreglement voor Buiten gewesten (RBg) Article 284, are: written evidence; b) evidence of witnesses; c) proof of prejudice; d) evidence of recognition e) The oath.

Although in 2004 Indonesia does not have a strong legal basis for the implementation of E-Procurement, but the government of Surabaya, East Java since 2004 been implementing E-Procurement. The latest development of e-procurement in Surabaya city government is upgrading the security of data transfer that received recognition in the form of ISO 27001:2005 certificate for the Security Management System.

Starting mid-2007, the Surabaya city government also launched a Smart Office Zone.
This service is a hotspot to access the internet facility provided for the 250,000 square meter area around Surabaya city government office complex. Integration of services procurement unit also conducted with the integrated services that have of One Roof Management System (SIMTAP). In terms of software, the development has been performed five times with a base Debian Linux open source program. The latest version of e-procurement is equipped with a Public Key Infrastructure. Stability of access to www.surabaya-eproc.or.id also secured by a back-up system that uses colocation in Jakarta. Of course the other security facilities for every transaction, such as passwords, user names, encrypted private key and the system has also been made according to the standard.

G. THINGS THAT PROVIDED IN LAW ON ITE

Indonesia since 2008 has had the Law No. 11 of 2008 on Information and Electronic Transactions that have been good enough to protect the people of Indonesia. Law No. 11 of 2008 has been to protect the people of Indonesia for some types of crime problems over the internet, which generally happens is: 1) proliferation of porn websites; 2) Hacker attacks on government websites; 3) Attacks against computer viruses; 4) fraud through the sale Online , 5) through Online gambling; 6) break-ins to the customer’s account through ATM; 7) spread false photograph of a person who has manipulated graphically; 8) deployment Short Message Service for fraud; 9) by cell phone credit theft. The things mentioned above are set in chapters 27, 28, 29, 32, 33, 34, 35, 36, 37, 45, 46, 47, 48, 49, 51, 52.

Articles of the law on the ITE which regulates the activities of E-Commerce in Indonesia, among others, is Article 9, which regulates product offerings through electronic systems, Article 10 on the role of Certification Bodies in the Implementation of Electronic Transaction Reliability, as well as Article 17 to Article 22 which regulates the process of electronic transactions more generally. While the issues of privacy and security in electronic transactions system is discussed briefly in chapter 30 and 31.

Things are not set firmly in the ITE law is about crimes committed via the internet from outside the Indonesian state in which the victims were citizens of Indonesia.

H. PROBLEMS IN THE IMPLEMENTATION OF E-PROCUREMENT

Non-governmental organization “Indonesia Corruption Watch” (ICW) said about the three problems found in the implementation of “e-procurement” in the procurement of goods and services sector by the government of Indonesia.

The first problem is the personnel who are not ready (human Resources), systems and infrastructure; committee or officer of maker’s commitment (PPK) are still many who can not operate the internet, some even do not have email. The same thing also happened on the service provider. In addition, in some areas is still often a blackout, so the auction process can be interrupted, so that the tender process be held invalid.

The second problem is the weakness of administrative law in Indonesia, so that at a certain point, the system “e-procurement” was considered not safe, because the secret is not guaranteed and easily breached by parties who are not responsible.

The condition was getting worse because of the lack of laws governing, particularly related to the settlement of the dispute which is difficult, because the data is determined at the course of the auction (“real time”).

The third issue is, even though it performed electronically, but still found irregularities in the procurement of goods and services over the internet during 2007.

In the development of e-government practices in Indonesian local government organization, stage of development that occurs is still different. There are areas that are still very far behind in terms of the use of information technology, there are even areas that until now have not had a website. But on the other hand there are already quite advanced that lead to e-government system that is transactional, allowing direct transactions with the government that is similar to the concept of e-commerce in private organizations.

Until now there is no more specific regulations governing the security and privacy issues in online transactions, one of the factors that hinder to the law made for E-Commerce in Indonesia, which is more specialized and specific, is that there are many business models of E-Commerce in Indonesia. All of these business models has different needs and should be facilitated by different regulations.

I. CONCLUSION

To support the development issues of E-Procurement, privacy and security in the world of E-Commerce, Indonesia needs regulation, which specifically regulates the legality of electronic business contracts, arrangements cyber crime and other regulations.

Regulation that is more specialized and specific really needed to stem the issues of ethics and regulations in the world of E-Commerce and E-Procurement in Indonesia. The rules that have been made in the Law No. 11 Year 2008 on ITE, and some government regulations, it is still not enough.

Regulations to be laid on E-Commerce and E-Procurement should be able to overcome the problems in the world of E-Commerce, both substantive and procedural. Regulation that is more specialized and specific needs for legal certainty and legal foundation laid for the Indonesian people before making various transactions online. With the presence of security guarantees to the public in conducting online transactions, then the users trust will increase and the implementation system of E-Commerce in Indonesia can be held properly and ethically.

“The main reason underlying the high risk of security in E-Commerce transactions are finding a lot of flaws in laws, regulations, and E-Commerce system itself as well as technology and the Internet”

REFERENCES

Law No. 11 of 2008 concerning Information and Electronic Transactions (State Gazette Year 2008 No.58, Supplement No. 4843);

Law No. 8 of 1981 on Criminal Procedure of Indonesia;

Presidential Regulation Number 54 of 2010 Concerning Government Procurement of Goods or Services;

Presidential Instruction No. 17 of 2011 on the Prevention and Corruption Eradication Action in 2012;

Regulation of the Head of LKPP No. 2 of 2010 Concerning Electronic Procurement Service (LPSE);

Regulation of the Head of LKPP Number 1 Year 2011 About E-Tendering;

LKPP Head Rule No. 5 of 2011 About Standard Document for Procurement of Goods or Services by the Government, which performed Electronic.

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