Is Rini turning protectionist?

Is Rini turning protectionist?

The business community and many analysts hailed Rini
Soewandi's appointment as minister of industry and trade in
President Megawati Soekarnoputri's Cabinet in mid-2001. Her debut
greatly impressed businesses, which praised her as a no-nonsense
doer.

As former chief executive officer of Astra International, the
country's largest automobile company, and a senior executive at
Citibank, Jakarta, she is indeed very familiar with the pulse and
heartbeat of the business world. No wonder then, she quickly
succeeded in developing a very good rapport with the President
and became one of the Cabinet members most trusted by Megawati,
even though gender might also have played a part in this
chemistry.

Rini's portfolio, which covers most economic activities -- in
reality, trade and industry are what the entire economy is
fundamentally about -- also makes her policy actions one of the
most widely-covered subjects for the mass media and, in that
process, she has become one of the ministers constantly under the
most intense public scrutiny.

She soon found, however, that her leeway for decision-making
and fast action was not as ample as that she enjoyed as a
corporate CEO, and she was often bogged down or frustrated by
bureaucratic inertia and politicking within the government.

She also became frustrated by the incompetence and corrupt
mentality within the customs service, because rampant smuggling
sabotaged many of her policy initiatives to smoothen imports and
exports. Her proximity to the President has not always helped her
get things done the way she would ideally like to.

Witness, for example, how she got herself embroiled in open
spats with the finance minister over import tariff policies, and
with the agriculture minister over protectionist measures for
some farm commodities, notably rice, sugar, soybean, corn and
chicken drumsticks.

Understandably, she should strike a good balancing act between
facilitating trade, including imports and exports, and
stimulating the growth of domestic manufacturing. She often
declares that not only free, but also fair trade and market
competition are her main objectives.

Rini became so desperate after her futile attempt to tread the
slippery path of nurturing interministerial coordination in
policy-making that she tried to take a shortcut by setting up a
crisis center at her ministry. This operations center was
originally designed to become a nerve center for senior officials
of all economics ministries and business leaders to quickly
decide on and execute any policy measures needed to get the
economy moving faster. The initiative, however, faltered after a
few weeks due to lack of support from Coordinating Minister for
the Economy Dorodjatun Kuntjoro-Jakti.

Lately, however, Rini has increasingly been criticized by
analysts for what they see as her strong tendency to take
protectionist policies by raising nontariff barriers to imports
of sugar, rice, used clothes, certain categories of textiles and
steel products, and several other commodities. These measures are
to be assessed by the World Trade Organization in Geneva on
Friday(today).

Some analysts alleged that Rini has, of late, become weaker in
the face of strong business lobbyists, thereby often resorting to
protectionist measures, to the great benefit of some vested
interest groups, but at the expense of the long-term good of the
whole economy. She has also been suspected of flirting with
several vested-interest groups close to the President, especially
now that fund-raising campaigns for the 2004 general election
have started.

Her involvement in countertrade deals, as a means of
financing the controversial government purchase of Sukhoi jet
fighters and helicopters from Russia, was the last straw.

Rini's overambitious plan to bolster exports to new markets
through countertrade, which she has aggressively promoted since
last year, seems to have made her overlook whether the political
and legal procedure for the jet fighter procurement had been
correct or not.

Even though countertrade deals with Russia are being arranged
by the State Logistics Agency and not directly by her ministry,
many businesses that produce commodities included in the deal
have complained of being pressured by Rini's senior officials to
take part in the countertrade program.

Rini is well advised to magnanimously take the criticism as a
well-intended early warning, to prevent her from falling further
to the temptation to take narrow-minded policy measures that
could be detrimental to the long-term good of the economy.

A government facing an election often tends to see things
mostly within a short time horizon by introducing populist
programs that could threaten the long-term stability of the
economy.

Rini's position as an especially trusted aide of the
President, who is facing an election next year, could impair her
judgment to distinguish measures meant simply to distribute
political goodies to woo voters, from tough, yet vital policies
badly needed to strengthen the foundations for sustainable
economic growth.