Fri, 27 Jun 2003

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.