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.