No end in sight for ‘endemic’ corruption in Indonesia’s ad industry

Transparency International graphic to represent corruptionIn this interview, an agency boss talks about corruption in the ad industry in Indonesia, one of the most talked about markets in Asia.

Corruption was in the news last week with the publication of Transparency International’s biannual public opinion survey, which shows that the problem is getting worse globally. In Indonesia, 54 per cent of respondents said corruption “has increased a lot”. But what about adland? Mumbrella’s Asia editor Robin Hicks talks to the CEO of a multinational agency in Southeast Asia’s largest economy, who wished to remain anonymous, about the ‘c’ word in a country that is no stranger to under the table dealings.

Corruption has different definitions in different countries, and in some cases it’s just a fact of life and a way of doing business. How would you define corruption in the context of Indonesia?

It’s very simple and very clear. Corruption in Indonesia is defined as the misappropriation of the business process for self-gain. And it’s no secret that there’s a lot of it going on in this country.

Click on this infographic for Indonesia’s score in Transparency International’s survey.

How prevalent is corruption in Indonesia’s ad industry?

It’s hard to say exactly how prevalent it is. But it’s very obvious in day to day business life. It’s endemic. And it’s most prevalent in dealings with government. That’s where the shit hits the fan. Government clients are very open about it. The question is simply, how much money are you going to give me if you want to work with us? This is the reason why most multinational agencies tend to stay well clear of state-owned firms. I would advise any agencies setting up in Indonesia to avoid government pitches.

What’s the cause of it, and who is mostly responsible?

It’s similar to a mafia culture where everyone has to pay a cut to the bosses. That culture runs through the fabric of Indonesian society. To get a job in a government agency, you have to pay your way in. If you want to be a doctor, a teacher or join the police academy, you have to pay someone. That’s how bad things are, and the advertising industry works in a similar way on many levels.

Do you feel that is as big a problem as in other markets in Asia?

The Philippines, Malaysia and Thailand are bad too. In Malaysian agencies, there will usually be an important person with government connections sitting on the board, because government contracts are where the big money is. Singapore is squeaky clean by comparison.

Is the problem is lessening or getting worse?

It depends on the sector, and whether you’re talking about a public-owned firm, a local company or a multinational. Corruption tends to be more prevalent in local companies. The big multinationals are properly audited. Those are the guys you want to work with. Also, some large local companies are just as scrupulous.

It is said that many of the big holding companies know that corruption goes on in markets like Indonesia, but prefer to ask no questions as long as the balance sheet is healthy. What’s your view?

I don’t think there are MNC agencies in this market who take the hear no evil, see no evil approach. I talk with the other agency heads about this issue a lot, and I don’t think anyone engages in corrupt activity. The minute they did that, they would be found out, and they would be kicked out.

We are very strict on how we do business, and our holding company is very clear on what we can and cannot do. We file compliance reports every quarter, and we are properly audited.

Our agency lost out on a US$1.5m piece of business because the client did not comply with our code of ethics and standards. There are clients who would pay us a lot of money, but we simply could not give them what they want.

The reason why local agencies can survive in this market is simply because of corruption. It’s the way they do business. On a client’s birthday, they will give them a car. That’s not an exaggeration and that’s not unusual. We could never do that. We can’t even take a client out for dinner unless it’s absolutely necessary.

How many times have you been offered bribes, and in what sort of situation?

Too many to remember. Corruption comes in many different forms in Indonesia. There are incidences where clients overtly ask for things that you simply cannot give them. They will say, if you want to have a long-term relationship with us, you need to do this or do that.

For a long time it’s been known that some agency TV producers have a particular preference for certain production houses. The agencies get a kick back of a minimum of US$100,000 for using the favoured production house.

Do you think the problem will ever go away?

No. Never. Well, certainly not in my life time. It’s the same in powerhouse markets like China and India, which are still very much corrupted markets. If you visited Indonesia tomorrow, I could get you a police escort to avoid the Jakarta traffic. It’s an accepted way of life and I can’t see an end to it.


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