Sun, 26 Oct 2008
Indonesia at the Crossroads (Sigh) Again

Written by Our Correspondent
Friday, 24 October 2008

In one direction beckons people like Sri Mulyani Indrawati, the country's finance minister. Clean, capable, she's the anti-politician Indonesians love and who foreign investors can't stop talking about.

Barely a month passes without Mulyani winning some sort of global gong; this month she's Euromoney Magazine's Finance Minister of the Year - for the second time. At 46, Mulyani symbolises the Indonesia that is possible, one that works properly, a competent resourceful Indonesia that wants to prosper away from the chronic corruption and cronyism that pollutes from the country’s grubby past.

Gesturing the other way is the tendency represented by Aburizal Bakrie, Indonesia's richest man (or at least he was until markets melted down). He sits with Mulyani in President Susilo Bambang Yudhoyono’s cabinet, somewhat perversely as the minister primarily responsible for Indonesia's poor, the Co-Ordinating Minister for People’s Welfare. Garrulous, oleaginous and a virtual law unto himself, the 62 year-old Bakrie is a holdover from the Suharto era, when the extent of one's fortune tended to be determined by one's proximity to the kleptator.

Bakrie is the patriarch of the resources-to-telecoms Bakrie Brothers group, Indonesia's biggest corporate entity. He's in the cabinet because he and his colleagues at Kadin, Indonesia's crony-heavy chamber of commerce, helped SBY's 2004 tilt at the presidency, along with South Sulawesi's wealthy patron Jusuf Kalla and the backing of Suharto's old fief, Golkar, now a Bakrie-Kalla domain. The vice-presidency was Kalla's payoff while Bakrie became Minister for the Economy. Foxes and henhouses, warned horrified Indonesians at the time.

A decade after the fall of Suharto, Mulyani speaks for the new Indonesia, where government business is transacted cleanly, transparently and democratically. She is regarded as fearless, overhauling two of the most corrupt and inefficient institutions in Indonesia; customs and the tax office. At the customs office, she removed 1,500 staff and replaced them with 800 new officers, paying them several times more while warning that if they took backhanders justice would be swift and harsh. Efficiency was improved but vested interests who liked getting their goods nodded through - for a 'fine' of course - were not pleased.

Bakrie is old Indonesia, operating in the shadows. Now the two of them seem to be on a collision course. Jakarta has been agog with their gathering feud since the financial crisis from the US subprime meltdown started rippling through Indonesia. The Bakrie group has been a victim of the growing economic crisis. Most of the listed component companies have spent more time suspended from stock exchange trading than having their shares transacted. Last week, the Indonesian government allowed state-owned companies to buy into stricken Bakrie companies, which are facing share price-linked loan defaults. It looks suspiciously like a bailout, the third Bakrie will have enjoyed.

Mulyani wasn’t pleased. "I am the Finance Minister, my job is to protect the state fund," she reportedly told Kadin. "Companies have a job to protect their own financial affairs. If they fail, it is their fault and they deserve to go bust."

This week the feud broke out all over the Indonesian media. On Wednesday, the Jakarta Post led with the story "Efforts Seen to Unseat Sri Mulyani."

The rub was in the second paragraph; "Efforts to topple the 'iron lady' intensified after she turned down requests from a major conglomerate for government assistance in saving its business empire in the wake of the global financial meltdown, sources said." Bakrie wasn't named but no other "major conglomerate" has been requesting government assistance in recent times.

On Thursday, the government was forced to deny that the cabinet was "cracking." The paper also reported a Wednesday meeting at VP Kalla's office on the crisis facing the Bakrie group. It was attended by Kalla, Mulyani, central bank governor Boediono and Aburizal Bakrie, who has long insisted that he has no day-to-day involvement in the business affairs of his family's empire.

The dilemma is a delicate one for SBY. The economy is fragile in the jittery global environment and he needs an internationally trusted figure like Mulyani to help salve foreign investors. A career technocrat, Mulyani has no domestic political muscle to speak of. With the election coming up next April, SBY needs Bakrie - or at least someone with his resources - but does not necessarily want him, for all that he represents.

But Bakrie isn't as rich as he used to be, and will be even poorer if his empire, the basis of his political power, fails. The Bakrie Group isn't a Fannie Mae or AIG but a failure of such a big corporate entity could ripple into a wider Indonesian economy.

There was also the matter of PT Lapindo Brantas, the Bakrie-owned gas company whose disastrous gas well blowout in East Java kicked off a mud volcano that so far has displaced 75,000 villagers from their homes and turned into the country’s biggest environmental disaster. Lapindo Brantas claims the rupture was caused by a distant earthquake fault. The government may have held its nose, but although Bakrie has so far paid out Rp4 trillion to the displaced villagers, Jakarta has assumed responsibility for cleaning up the disaster and the Environment Ministry even awarded Lapindo Brantas its “Oscar” for complying with safety and environmental standards.

The gulf between Mulyani and Bakrie was evidenced when Suharto died in January. A stream of deathbed wellwishers made their way to the Suharto compound on Jalan Cendana to bid the old tyrant farewell. Aburizal Bakrie was prominent among them. Sri Mulyani wasn't. The Bakrie family got rich in the Suharto era. Mulyani was an academic, and later represented Indonesia at the IMF, hardly the most popular multilateral agency in Indonesia after its handling of the mid-1990s financial crisis, when Suharto fell. Her own nationalism has been called into question because of her stint with the IMF.

Bakrie's feud with Mulyani comes as SBY pulls ahead in opinion polls from former President Megawati Sukarnoputri. But it also comes as Parliament debates how much electoral support presidential aspirants will need to allow their candidacy. Bakrie's Golkar and Megawati’s PDI-P dominate Parliament. SBY's Democrat Party does not. Golkar and PDI-P could push through whatever deal they concoct. But Golkar's problem is that no one in its leadership ranks is very popular. And the Indonesian electorate seem to be wising up to Megawati, a gormless shopaholic who seems to think a famous family name is birthright enough for a second term.

Where this all goes is hard to predict. A rising force is the Islamist Prosperous Justice Party, the Partai Keadilan Sejahtera, or PKS, which speaks for 10-15 percent of the population and is gathering more support on its mosque-based anti-corruption platform. The PKS is behind the recent anti-pornography bill, which has divided this secular nation. SBY has a sprinkle of religious parties represented in his Cabinet, and could draw closer to the PKS if Parliament makes odious rules on candidacy qualifications.

On the road ahead is next April's presidential election. SBY wants another five-year term, and so does Megawati, whose first stint in the Istana Merdeka from 2001-04 was hardly electric. Indonesia descended to near the bottom of Transparency International's graft league table, while bomb-happy Islamists threatened to transform Indonesia into Afghanistan East.

SBY won a landslide in 2004 campaigning to rid of both terrorism and corruption. The terror part he has largely succeeded with. Abu Bakr Bashir’s Jemaah Islamiah movement and its imitators have been largely neutralised, many of their adherents turned. Radical madrassas have been shut down or neutered, in what is the most telling success of the SBY era.

Corruption has proved trickier to tame. True, Indonesia no longer languishes in the bottom five of the TI table but position 142 of the 190 countries ranked hardly makes Indonesia Scandinavian in its regard for public office. Still, it's better than it was. Public officials from across the islands are now getting their collars felt.

Jakarta's newspapers daily titillate with tearful confessions and fascinating detail as to how deep-seated corruption is; parliamentarians for sale, and the central bank too. The fact that it is being publicly aired is evidence Indonesians crave to be normal, to want civil society. Whether Mulyani goes or stays will go a long way to letting them know if that is in the cards.




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