What should be done about corruption in developing countries? Stephen Grenville discussed this issue in commenting on the recent work of the Indonesian Corruption Eradication Commission (universally known in Indonesia as the KPK or the Komisi Pemberantasan Korupsi).

It is important to note that the problem of corruption is hardly ignored in developing countries. In Indonesia, corruption has been at the top of the public policy agenda for decades. Indeed few topics attract more local attention than corruption. When a 'big fish' politician or official is caught by the KPK, it is headline news. TV programs cover the prosecution of leading politicians or officials in vivid detail.

And the KPK has caught some big fish. The recent arrest and subsequent sentencing of Ratu Atut Chosiyah attracted enormous press attention. Ratu Atut had been a high-profile governor of the province of Banten, just to the west of Jakarta. She and her family had built up an extraordinary political dynasty complete with extensive business links across Banten. But recently the KPK moved in on Ratu Atut. She didn't last long once the KPK focused on her and her family, and she is now in jail.

The KPK has caught quite a few other big fish lately too. So the problem of corruption is widely recognised in Indonesia, and institutions such as the KPK are landing some heavy blows.

But Stephen Grenville points to two worrying problems with this aggressive approach. The first is that unless there are reasonable checks and balances on the powers of corruption commissions, gross injustices can occur. The second is that if officials come to live in fear of aggressive anti-corruption campaigns, the bureaucracy will choke up because everybody will avoid taking decisions.

An example of the first problem appears to be recent suggestions that the Vice President of Indonesia, Dr Boediono, might be prosecuted by the KPK for decisions taken by Indonesia's central bank, Bank Indonesia, in 2008 when Dr Boediono was governor.

There are pros and cons to the decisions taken by Bank Indonesia in the midst of a banking crisis at the time. However, these were typical policy decisions that central banks all around the world are expected to take in the midst of a crisis. Yet for several years the KPK has been hounding Bank Indonesia officials for their decisions about monetary policy. KPK has put one senior executive of Bank Indonesia in jail. It seems quite remarkable. But the KPK has the bit between the teeth. The latest indications are that it is quite possible that the KPK will soon focus on Dr Boediono. If so, it will be a gross injustice committed against one of Indonesia's outstanding leaders (disclosure: Dr Boediono is a friend).

The second problem – that the Indonesian bureaucracy will choke up for fear of witch hunts – is just as serious. While the aggressive role of the KPK is to be welcomed, if the result is that bureaucrats all over Indonesia run for cover then government across the nation will clog up. If an attempted prosecution of Dr Boediono were to lead to reluctance on the part of the central bank to take difficult decisions in the midst of a financial crisis, then the consequences for economic management in Indonesia would be serious indeed.

Photo by Flickr user F Mira.