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Wed, 26 May 2010

FT/Indonesia warned of opposition to reform

The departing Indonesian finance minister has warned that economic and democratic successes in south-east Asia’s largest economy are in danger of being “hijacked” by vested interests opposed to reform.

Sri Mulyani Indrawati, who last week resigned as finance minister to take up a post at the World Bank, told the Financial Times that personal attacks against her by a small cabal of political and business figures forced her to step down. “The [Indonesian] business community is not supportive of having the system co-opted for very personal, narrow interests,” she said in an interview.

“If they start to allow one party to hijack it, it is at the cost of everyone else,” she said. “It is really a concern. It is a battle for Indonesia now.”

Mrs Sri Mulyani is widely credited with spearheading key economic reforms that helped Indonesia become the world’s third-best performing economy in 2009. She has also been praised by the World Bank for her reform drives and anti-corruption efforts. She was replaced last Thursday by Agus Martowardojo, a banker, who is expected to continue her reform programme.

Her sudden departure is seen as a compromise to end battles between the government and the House of Representatives where powerful lawmakers spent months trying to orchestrate her ousting over her approval of a $730m (£508m,€593m) bail-out of Bank Century, an ailing private lender, in 2008, which by a close vote the House determined was illegal.

While Susilo Bambang Yudhoyono, the Indonesian president, publicly backed her, lawmakers in recent weeks ramped up their attacks and even boycotted meetings at parliament. The tussle has been widely portrayed in the media as a battle between honest reformers versus vested business interests from the era of Suharto, the late authoritarian president. Mrs Sri Mulyani told the FT that there were a small but determined group who were attempting to co-opt Indonesia’s political and economy system to amass influence and money ahead of the presidential election in 2014. Mr Yudhoyono cannot seek re-election and the field is expected to be wide open.

Mrs Sri Mulyani singled out Aburizal Bakrie, one of Indonesia’s richest men and chairman of the powerful Golkar party, who had called on her to step down over the Bank Century bail-out. Mr Bakrie and Mrs Sri Mulyani publicly sparred when they served as ministers in Mr Yudhoyono’s first cabinet. Last December, Mrs Sri Mulyani said Golkar lawmakers wanted her out because they disagreed with her reform programme. “This time it’s [Bakrie] ... But I’m not denying that there aren’t others,” Mrs Sri Mulyani said, referring to the powerful businessman.

Mrs Sri Mulyani denied rampant public speculation that Mr Yudhoyono had ordered her to resign, or that her departure was part of a political agreement with Mr Bakrie. She said that the World Bank approached her with an offer to become a managing director, and she conveyed her interest in taking the position to Mr Yudhoyono.

The Indonesian president and Mr Bakrie have denied there was a political deal to remove her from the cabinet in return for ending legislative action over the bank bail-out. Mr Bakrie has also said he harbours no ill will toward her.

“Mrs Sri Mulyani has accepted the appointment by the World Bank. She chose the World Bank, so she has to resign as finance minister. It’s not related to Mr Bakrie,” said a spokesperson for the Bakrie family.

“The Bank Century case was used to attack me personally, so I realized that my role as minister of finance was being used by a particular group in parliament,” said Ms Mulyani. “Also, the use of money to mobilize public opinion made me less effective.”

Because of that, Ms Mulyani said she chose to move to the World Bank in hopes that her replacement, who was sworn in as finance minister last Thursday, would be able to carry on the reform programmes.

“The chance for the reforms to be successful will be better,” she said. “That was the calculation.”