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Parliamentary democracy in our region is in serious trouble

By Jeffrey Wall - posted Monday, 19 July 2021

When the colonial powers – Australia, the United Kingdom and France – exited the South Pacific (apart from New Caledonia) one of the standouts was in every case the foundations for robust parliamentary democracy they bequeathed to the newly independent nations.

With the notable exception of Fiji where democracy was sadly derailed by military coups, parliamentary democracy has largely survived, with imperfections.

However in the last year or so the fabric of robust parliamentary democracy in just about all our regional neighbours is at best under pressure.


That is really troubling for regional stability – and for the genuine "Australian national interest". In these troubled times political stability and representative government are critical.

Robust parliamentary government is arguably the strongest bulwark against China's expansion and influence across our region.

Sadly, the true state of democracy in the South Pacific is largely ignored by the Australian media. Reporting is infrequent and when it does occur not always accurate.

In this contribution I want to update readers on the position in our region as frankly as I can in the hope it might alert our leaders to the alarming state of parliamentary democracy – and the potential for it to worsen even more.

I begin with Papua New Guinea. It has been my privilege to have advised a number of PNG leaders since my first engagement with our closest neighbour in 1978. For most of the time since, parliamentary democracy in PNG has been robust. It has been far from perfect but it has underpinned national unity.

Today parliamentary democracy in PNG is effectively "on hold". The national parliament has only met for TWO days this year, and is currently suspended until August. While the pandemic has been blamed, in reality the parliament has been in recess to avoid a motion of no confidence being moved against Prime Minister Marape before the national election in mid-2022.


However, a recent by-election in the urban electorate of Moresby North West raises real concern about just how free and fair the 2022 elections will be. The by-election process was a debacle. There are numerous allegations of serious malpractice some of which have been substantiated.

Sadly, if an urban by-election cannot be conducted without serious malpractice what hope is there for the conduct of the national elections across PNG next year? Rolls have not been updated, boundaries have not been amended to reflect population changes, and the capacity of the Electoral Commission to manage a nation-wide election in which there will be twenty or more parties and several thousand candidates is very questionable.

With the Covid virus still spreading across Papua New Guinea, and low testing and vaccination rates, the influence the virus will have on robust election campaigning across 112 electorates is a serious issue.

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Financial fraud in Indonesia is devastating the lives of ordinary citizens. For example, an honorary teacher in Semarang, the capital city of Central Java, has become entangled in an online loan network, Pinjol, to the tune of hundreds of millions of rupiahs. Pinjol is an illegal financial entity.

The teacher had initially borrowed only about Rp.3 million (around AUS$273.50) to buy milk for her children, but her debt ultimately swelled to Rp.206.3 million (around AUS$18,807.71 – a huge amount of money for people in Semarang given the minimum regional wage is only around Rp.2.8 million (around AUS$255.27) per month.

This is not an unusual event, and online loan networks are not the only type of financial fraud scheme currently running rife in Indonesia. Another type is illegal investment. For instance, pseudo cooperatives costing the public trillions of rupiahs have plagued Indonesia for the past decade.

It is sad to say that both illegal financing and pseudo investment are nothing new in Indonesia. According to the Investment Alert Task Force (SWI) , by the end of September 2020 there were around 126 illegal peer-to-peer lending (illegal fintech) entities, 32 investment entities and 50 pawn shops operating without a license from the Indonesian Financial Service Authority (OJK).

According to the chairman of SWI,fraudulent financing and investment activities have cost the country around Rp.114.9 trillion (around AUS$ 13.2 billion) in public monies in the last ten years. The actual figure for total loss might be even greater since this amount was calculated only from the losses of individuals who had reported. The high rate of financial illiteracy in Indonesia is often pinpointed as one of the main causes of the problem. However, to educate people requires costly resources, like time and money, and the results can not be seen immediately, so improved financial education is not a sufficient solution. We need an urgent breakthrough strategy.

Currently, most financial service businesses (i.e., peer-to-peer lenders, pawnshops) are under OJK's rules, but not yet regulated at national or regional levels. Under its rules, OJK cannot impose criminal sanctions in the form of imprisonment or fines. The Law of the Republic of Indonesia No. 5 of 2019 on Formation of Legislation mandates that criminal sanctions are only allowed at the national or regional level.

While banks, micro finance institutions, and financial cooperatives are regulated by national laws, studies in 2018, as reported by the BBC, indicated that even long prison sentences do not actually deter people from re-committing crimes. In addition, especially for economic crimes, long prison sentences for the fraudsters do not re-pay the funds lost by the victims of financial fraud.

Indonesia's laws do not yet consider civil remedy – that is, a party must pay the victim(s) of a wrong he or she has committed. This can be changed and I propose the Ultimum Remedium Principle (URP) approach. URP prioritizesadministrative sanctions (i.e., fines) rather than imprisonment. The main idea is to open up the opportunity for the victims to get their money back and bring the perpetrators of illegal financing service businesses to justice. These fraudsters masquerading as company managers must be held accountable for their frauds and if there is a loss, they must return the victims' money. Arguably, this legal remedy would prevent such scandals from happening in the future and prevent the fraudsters from enjoying money gained through illicit means.

Currently, the Indonesian Government and related stakeholders are drafting provisions for an Omnibus Financial Sector Reform Law, and we need to consider adding ultimum remedium articles in the Draft. The proposed articles would mandate that every finance service business and investment activity must obtain a business license. It would be subject to a fine if it operated without a license and would be subject to pay compensation for loss of property. If this obligation is not fulfilled a stiff prison sentence would be imposed, and if a victim had died because of the fraud, the prison sentence would be longer. This change to regulations would give OJK the authority to investigate bogus investment products or illegal financial services and business activities. They could be detected at an early stage, so that necessary actions could be taken to stop them before these "time bombs" explode, or, if victims had already lost their money, there would still be a chance to get it back. These changes to legislation could protect ordinary Indonesians such as the teacher who needed to buy milk for her children and ended up with a terrible debt.

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About the Author

Jeffrey Wall CSM CBE is a Brisbane Political Consultant and has served as Advisor to the PNG Foreign Minister, Sir Rabbie Namaliu – Prime Minister 1988-1992 and Speaker 1994-1997.

Other articles by this Author

All articles by Jeffrey Wall

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