29 November 2021

According to recent media reports, personnel of the Indonesian Navy has sought to extort vast sums of money from operators of vessels anchoring in Indonesian waters, without presenting the required authorisation. These media reports draw attention to the impact that corruption can have on maritime operations in south-east Asia. Asia analyst Thomas Timlen has an analysis.

By Thomas Timlen, south-east Asia analyst

With a regional average score of 42 out of 100 in the Transparency International 2020 Corruption Perceptions Index (CPI), the south-east Asia region continues its struggle to combat corruption. Ranked third amongst 180 countries surveyed with a score of 85, Singapore is consistently one of the top south-east Asian performers on the CPI, followed by Brunei (60) and Malaysia (51), all scoring above the global average of 43. Conversely, Cambodia (21), Myanmar (28) and the Philippines (34) earn the lowest scores in south-east Asia.

Despite the media attention, Indonesia did not appear amongst the lowest ranking, however, that tells only part of the story. Prior to July 2010, when the UK Bribery Act came into force, officials at all levels and in countries across the globe faced few hurdles when demanding bribes from commercial stakeholders. Although there were many laws in existence prior to the UK Bribery act, such as the US Foreign Corrupt Practices Act which came into being in the 1970s, so-called ‘facilitation payments’ and other illegal compensation was regularly paid in order to avoid delays to operations.

This changed as companies realised that the UK Bribery Act made corporations liable for the actions of employees anywhere in the world. Suddenly all companies were compelled to initiate no tolerance policies for any form of illicit payments with preventive guidelines to back these up.

The important aspect to keep in mind here is that there are Indonesian laws that prohibit unauthorised anchoring in Indonesian waters with a scale of fines that apply to vessels in breach of the legislation. Operators flouting these laws face legitimate consequences stemming from such infractions, which can be avoided by coordination with Indonesian port agents prior to dropping the anchor. The reports of extraordinarily high demands for additional funds illustrate how a legitimate law can be leveraged by corrupt persons for their own gains.

Vulnerabilities to the consequences of corruption also vary greatly depending on which entities are involved. Despite Cambodia’s poor ranking, Risk Intelligence field work discovered that port agents at Cambodian ports can brush aside port officials requests for ‘gifts’ without suffering detrimental consequences, whilst, in contrast, a local contractor might not fare as well when applying for building permits. This illustrates a general trend in the region that local businesses face more difficulties stemming from corruption when compared with MNCs and international traders, which generally have a lower vulnerability.

As is true with most crimes, no initiative will result with a complete eradication of illegal activity, however, the UK Bribery Act has had a significant impact on the reduction of acts of extortion at ports and on the waters throughout south-east Asia. Further reducing the opportunities for corrupt port staff and other officials has been the transition to cashless transactions. Taking cash out of the process has shown to be an effective crime prevention measure, not least of all with respect to acts of extortion.

Users of the Risk Intelligence System can access regularly updated analysis reports of the impacts of fraud and extortion at ports, countries and areas globally. Although the trends have generally been favourable, it is advantageous to know about situations unique to specific areas prior to arrival, as awareness is one of the key elements of prevention.

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