Rent-seeking is one of the more interesting economic concepts to have emerged from the academic literature since the 1960s, but it is still a rather neglected concept in the mainstream media. Perhaps this is because the term can be rather confusing at first glance; it has nothing to do with renting or rentals in the everyday use of the word. Rather it concerns the ability of the powerful to take large amounts out of an economic system without actually producing anything. When you are dealing with DIKNAS, the regulator of the Indonesian education system, you are looking at a classic non-productive money-grabber; to understand the language industry’s current woes in Indonesia , you need to understand that you are dealing with a voracious rent-seeker.

HOW DO ECONOMISTS DEFINE RENT-SEEKING?

This was the definition that we found most useful:

The practice of an individual, company or government attempting to make a profit without making a product, producing wealth or otherwise contributing to society. For example, a company may seek subsidies from the government, which would count as income for that company. Similarly, a government may seek rent by seizing control of natural resources and charging citizens for using them. Some rent-seeking is legal, while other forms, such as the extraction of bribes, is not. Rent-seeking behaviour is most common when the rent seeker is a monopoly or has sufficient economic or political power to act as one.

HOW DOES THIS APPLY TO DIKNAS?

While it is very clear that the police-officer taking bribes by the side of the road is a rent-seeker, it is much less clear in the case of DIKNAS. Some naive types even welcomed the DIKNAS regulations when they first appeared. Wasn’t it a good thing that the bar was finally being raised on education in the nation? Wasn’t it about time all the shabby, second-rate teachers were shown the door?The people spouting these views fell for the ruse; they took the regulator at face value. Sadly, Indonesia was recently ranked a lowly 114th in the world for corruption, tying with corruption-wracked Egypt. Those who welcomed the “English degree” requirement were being too sanguine about the Indonesian bureaucracy. These new regulations were not about “raising the bar”, they were about claiming a chunk of the cash pouring into the informal language academy sector.

RUMAH BAHASA AS A CASE STUDY

How do we know that DIKNAS is collecting rents rather than really trying to regulate the industry fairly? Well, it is pretty much an open secret. Recent online discussion in various forums confirms this view. People complain again and again that DIKNAS is doing nothing but lining its own pockets. Everyone has a story about a school they know which employs X number of people working without the right visa. The most egregious case is Rumah Bahasa, which numerous people have told us isn’t even registered as a legal company. They are completely unable to hire foreign workers as a matter of law; work visas can only be issued to legally registered companies. And yet Rumah Bahasa flagrantly violates the law, employing Native Speakers at “hypermarts” on main roads. DIKNAS is clearly turning a blind eye, and they are clearly in league with Frendy Horas in running his scams. Classic rent-seekers, they accept bribes from schools, abusing their position of authority and producing nothing of value for society. 

IS TBI A VICTIM OF DIKNAS?

In some online discussion, people close to The British Institute have gone further, insinuating that the struggling school chain is even a victim of the rent-seekers at DIKNAS. Why should TBI have to comply with the English degree requirement when some of their competitors don’t? They have all but suggested that the rent-seeking behaviour is an unfair commercial disadvantage being imposed on them but not others. The scammers from TBI feel hard done by themselves of late.

This view is nonsense and misunderstands the nature of the problem. DIKNAS is not actually playing favourites; they are collecting rents. The competitors, such as Rumah Bahasa, who pay “rents” / bribes are also worse off financially speaking as a result of their brush with DIKNAS. DIKNAS are engaged in a shake-down; they really don’t care who wins. Does the Mafia care about which business fares best? No. They just want money, and don’t care which of the businesses they squeeze comes out on top.

TBI has broken all manner of immigration and tax laws in the past. They are no paragons of virtue. The reason they haven’t coughed up money for the rent-seekers is because they want it for themselves. They have always been very stingy with paying out money to anyone for any reason. While DIKNAS certainly deserve our derision, The British Institute doesn’t deserve your sympathy.