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Indonesian Finance Minister Departure No Win-Win

Posted By Walter Lohman On May 7, 2010 @ 5:30 pm In International | Comments Disabled

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The economic world for good reason is focused intently on Greece and the potential for financial contagion in Europe.  But there’s been another interesting development on America’s Pacific-side.  One of the of most talented public servants in Indonesia, Finance Minister Sri Mulyani Indrawati [2] – by some accounts, the world’s best finance minister [3] – has resigned her cabinet post to take a position with the World Bank.

It’s always necessary to put Indonesia in some context [4].  For the record, it is the fourth largest country in the world by population.   It is the heart of Southeast Asia, representing 40% of the region’s 600 million people, more than 40% of its geographical area, and a third of its economy.

Competent stewardship of Indonesia’s economy matters immensely to Southeast Asia and by extension to the rest of Asia, the U.S. and the world.

There is a cheerful narrative developing in Indonesia that holds Mulyani’s departure as a win-win.  For many months, she and the country’s Vice President Boediono, another highly regarded economist, have been under political fire in connection with the $700 million bailout of a big Indonesian bank in 2008/2009.  Taking a job at the World Bank as one of three Managing Directors who report to World Bank President Bob Zoellick, this view holds, ends the political controversy and offers Mulyani a face saving way out.  Plus, from her perch at World Bank, she’ll be in position to help Indonesia even more.

I’m not Indonesian, and this is a highly charged domestic political issue there, but I think our friends could use a bit of outside perspective. The win-win narrative is very sadly wrong.  Sri Mulyani’s departure is a bad sign about the Indonesian government’s wherewithal to address corruption and undertake systemic reform, something it desperately needs to do.

Mulyani was well-known for addressing both priorities and for a deep understanding of Indonesia’s macroeconomy.

Indonesia is full of economic talent.  Certainly a professional can be found to fill her role.  But will he or she be inclined to follow in Mulyani’s brave path of resistance to corruption and profit through government connection?  Will they feel empowered, or at least sufficiently protected, to restructure the bureaucracy or fire inept officials?  Doubtful.  Mulyani’s boss, President Susilo Bambang Yudhoyono (SBY), has always shown up to the fight over her future after the sides have been separated and the help is cleaning up the broken glass.  She resigned her post, but certainly under political pressure.  Good for her that she has someplace to go.  Her replacement may not be so lucky.  The next finance minister will feel compelled to keep his head down.

SBY wants to be known for fighting corruption.  That effort has been severely wounded with Mulyani’s departure [5].

Now the other part of the win-win narrative; the “bonus” that now Mulyani will be in position at the World Bank to help Indonesia.  Sri Mulyani has sacrificed for her country for five years.  She’s been very gracious in her departure to acknowledge her loyalty to Indonesia.  I’m sure she’ll help where she can.  But Mulyani is a professional, and she’s not been hired at the World Bank to be an advocate for Indonesia.  Besides, Indonesia is just a small part of a massive responsibility she will have [6], covering Latin America and Caribbean, Middle East and North Africa, and East Asia and Pacific.

With regard to the charges against Mulyani in Indonesia in connection with the Bank Century bailout, it probably goes without saying that they do not appear to have caused the World Bank any substantive concern.  I’ll take the World Bank’s objective judgment over that of a politically divided Indonesian House of Representatives (DPR). As an outside observer of Indonesian politics, I know I’m not alone in that regard.

It’s not the end of the world.  Indonesia always manages to click along.  They will find a finance minister.  Hopefully the Vice President will remain in place to provide the markets some reassurance.  But the political class chasing Finance Minister’s Sri Mulyani out of Jakarta is bad for Indonesia.  It is a clear sign that Indonesia will continue to only click along – underperforming, absorbed in its own politics, oblivious to the critical eye of the outside world.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2010/05/07/indonesian-finance-minister-departure-no-win-win/

URLs in this post:

[1] Image: http://www.foundry.org/wp-content/uploads/Indrawati.jpg

[2] Finance Minister Sri Mulyani Indrawati: http://www.newsweek.com/id/178817/output/print

[3] some accounts, the world’s best finance minister: http://www.euromoney.com/Article/1079138/Title.html

[4] It’s always necessary to put Indonesia in some context: http://www.heritage.org/Research/Reports/2009/02/Secretary-Clintons-Asia-Trip-Indonesias-Role-in-the-Spotlight

[5] That effort has been severely wounded with Mulyani’s departure: http://www.heritage.org/Index/Country/Indonesia

[6] Indonesia is just a small part of a massive responsibility she will have: http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:22568571%7EpagePK:64257043%7EpiPK:437376%7EtheSitePK:4607,00.html

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