The effect of troop withdrawal on extortion : decentralized corruption on trucking routes in Aceh

Understanding Conflict Dynamics and Impacts in Indonesia No.2/February 2010 Policy Brief Understanding Conflict Dynamics Conflict and Development and Impacts in Indonesia Program 53334 Edition II February 2010 The Effect of Troop Withdrawal on Extortion: Decentralized Corruption on Trucking Routes in Aceh Extortion by police and military personnel anti-corruption efforts elsewhere. First, it manning roadside security posts has been suggests that in many cases, a simple policy This note is based on the following a consistent problem in each of Indonesia's of reducing the number of roadside security article: areas of large-scale conflict. The staged posts on a road may lead to less corruption. withdrawal of security forces from Aceh Second, the case illustrates that tackling Olken, Benjamin A. and Patrick Barron following the 2005 Helsinki peace accord corruption by targeting the top level of an (2009). "The Simple Economics of presented an opportunity to observe the organization could actually lead to higher Extortion: Evidence from Trucking in effect of a reduction in the number of bribes being charged, if doing so causes Aceh." Journal of Political Economy security posts on the overall cost of illegal a centralized scheme of bribe setting to 117(3): 417-452. payments for trucks to transport goods. A become decentralized. Conflict and Development (C&D) program study found that troop withdrawals during the first six months after the peace INTRODUCTION agreement led to a decrease in extortion, The 2005 Helsinki peace accord between but that illegal payments decreased by a the Government of Indonesia and the Free Two series of Policy Briefs are smaller proportion than did the number Aceh Movement required the government published by the Conflict and of security posts. An 80 percent reduction to withdraw all security force personnel not Development program within the in the number of posts during the period permanently stationed in Aceh. As a result, World Bank Indonesia country of the study produced only a 51 percent 31,690 military and police personnel-- reduction in the amount of bribes paid at more than half the number in the province team. The first, "Understanding posts. when the peace accord was signed-- Conflict Dynamics and Impacts," summarizes the results of research were withdrawn in four waves between The discrepancy can be explained by September 2005 and January 2006. on conflict in Indonesia. These briefs draw out lessons for understanding thinking of extortion at security posts and responding to conflict in other in terms of a market of corruption, with The personnel withdrawn had been middle-income countries. The each post free to set the amount of illegal responsible for manning many of the second, "Evaluating Responses to payments it extorts. When troops were security checkpoints along Aceh's roads. withdrawn, changing the structure of the As has been the case in other conflict areas Conflict," summarizes the results corruption market, the remaining posts in Indonesia, these posts routinely extract of evaluations and assessments each adjusted their prices upwards, but illegal payments from truck drivers. In of conflict programs, and the Aceh, these payments have taken four main methodological implications of how not by enough to offset the effect on the overall level of illegal payments caused by forms: troops at security checkpoints may we can best measure the impacts of collect payments, trucks may pay a monthly the reduction in posts. Had the amount peace-building programs. All Policy of illegal payments extracted by the protection fee or pay for convoy protection Briefs are available at posts been set centrally, for instance by a by the police, or overweight trucks may pay www.conflictanddevelopment.org provincial commander, prices would have bribes to provincial transport officials at been expected to be raised sufficiently at weight stations. The amount of payments each post to keep the overall level of illegal extracted in late 2005 and the first half of payments constant. 2006 were large: the C&D study summarized in this note found that, on average, illegal payments amounted to 13 percent of the There are two implications for the cost of operating a truck for each trip, more Government of Indonesia's ongoing than the total wages received by the truck commitment to combat corruption and for driver and his assistant. Policy Brief | Conflict and Development Program - World Bank Office Indonesia 1 Understanding Conflict Dynamics and Impacts in Indonesia No.2/February 2010 Figure 1: Trucking routes to and from Aceh Since the 1990s, observers have (for instance, if a central authority would also change because no started to model systems of is setting an overall price for coordination between posts was corruption such as these security the road) or engaging in double taking place. posts in terms of conventional marginalization (a decentralized commercial markets (Shleifer and system where each post sets its own This note addresses two key ques- Vishny 1993). Corrupt officials act like profit-maximizing firms and the price). The withdrawal of troops tions: level of corruption is determined from Aceh provided an opportunity