Prijadi who?
Prijadi who?
Some may argue that it is prejudiced and entirely unfair to
give the thumbs-down to President Abdurrahman Wahid's new Cabinet
before the ministers have even been installed, let alone started
working. Others may also contend the reasons why analysts raised
so much hell about a single minister (Minister of Finance Prijadi
Praptosuhardjo) out of a 26-member Cabinet.
But that is precisely the verdict meted out by the market. The
rupiah made a 5 percent freefall and the Jakarta Stock Exchange
fell more than 4 percent immediately after the announcement of
the Cabinet lineup on Wednesday afternoon. On Friday, the rupiah
regained only 0.70 percent of its loss on Wednesday and stock
prices inched up very little.
That is the way the market operates and we have to live with
this reality. The very negative market reaction to the Cabinet's
economic team is based on the perception of possibilities and
risks, and this perception is formed by what market players know
about core members of the team.
The market foresees at least three big risks inherent within
the new Cabinet in so far as the process of economic recovery is
concerned. The greatest risk lies in the questionable
qualification of the finance minister, Prijadi Praptosuhardjo,
whose appointment to the Cabinet seems to be based only on his
long personal friendship with the President. Prijadi's only track
record known to the market is his recent failure to pass a
central bank test of his professional and ethical qualifications
for the presidency of state Bank Rakyat Indonesia.
Appointing someone, whose professional and ethical
qualifications are in doubt, to such an important portfolio
completely unnerved the market. The problem is that the economic
condition is so fragile that a very small mistake could have a
devastating impact. This sense of foreboding is understandable
because the finance minister is responsible not only for fiscal
policy and the state budget but, after the disbandment of the
ministry of state enterprises, for the oversight of the 162 state
companies as well.
On top of that, he also oversees the Indonesian Bank
Restructuring Agency (IBRA) which manages around Rp 600 trillion
(US$71.4 billion) worth of assets taken over from closed and
nationalized banks. This means that almost 80 percent of
production units in the country and all the largest banks fall
under his jurisdiction.
Some may still argue that a minister is only a political
appointee who can come and go anytime, such as in Japan or
Thailand where the cabinet can change without causing much impact
on the bureaucratic capacity for policy execution. But
Indonesia's condition is much different due to the weakness of
its bureaucratic institutions, stifled by 32 years of former
president Soeharto's authoritarian system whereby personality was
paramount, loyalty was fickle and patronage the rule.
Abddurrahman's stubbornness in bringing Prijadi to the Cabinet
against all odds also spooks the market. In spite of his widely-
recognized moral authority and political skill, Abddurrahman is
also known for his disinterest in complex economic issues.
Therefore, he is not seen as the best judge of the qualifications
of a person to fill the position of finance minister.
Moreover, Abddurrahman's dogged insistence on appointing
Prijadi indicates his soft spot for cronysm. This is seen as an
ominous sign and an indication that the President may intervene
in policy measures on the back of cronies' ill advice, while the
ministers, as 'all the President's Men,' may not have the courage
to stand up against such unwarranted interference. Such a
sycophant attitude on the part of Cabinet ministers under
president Soeharto brought the nation into its current multi-
dimensional crisis.
The market also sees a big risk in the virtual exclusion of
Vice President Megawati Sukarnoputri's Indonesian Democratic
Party of Struggle and the Golkar Party, since Megawati is
supposed to be in charge of the day-to-day operations of the
government. An adversary relationship with the House of
Representatives, which is dominated by the two parties, is the
last thing the President needs right now, given that most
decisions on the reform measures, sorely needed to lead the
nation out of its almost three years of crisis, will have to be
approved by the House.
It is indeed a daunting task for Vice President Megawati to
correct the flaw inherent in the new Cabinet. In spite of her
apparent disillusionment with the formation, this is a great
opportunity for her to show the quality of her stateswomanship by
discarding her personal feelings and doing her best to lead the
Cabinet, seeing to it that her major faction in the House will
not resort to an inordinately adversary stance against the
government.