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Indonesia's drama: All's well that ends well



17 May 2010 13:44

Peter McCawley is a Visiting Fellow at the Indonesia Project, ANU.

The news last week that Indonesia's feisty Finance Minister, Sri Mulyani (pictured), was resigning to take up a key job with the World Bank in Washington sent shock waves across the Jakarta political stage.

Well, parts of the stage anyway. Sri Mulyani has been widely regarded as one of the most energetic reformers within the Indonesian Government, so pro-reform political activists and many media commentators expressed noisy dismay at the prospect of her departure. 

But interestingly enough, the news was received with a certain calmness in top political circles in Jakarta. The President himself (universally known as President SBY) seemed surprisingly unruffled. It would seem to be no small thing for Indonesia to lose a successful Finance Minister, especially just six months into the term of a new government. What's going on?

Sri Mulyani's resignation is, in fact, the latest development in a row, Shakespearean in scale, that has been causing enormous strains within the Indonesian Government for well over a year. There have been many actors and subplots in the saga but there are three main threads that run through it.

Part of the story revolves around the theme of reform. President SBY started his first term as president nearly six years ago after campaigning on a theme of reform. He promised, especially, to introduce measures to curb corruption. Other reforms introduced in recent years have included tougher tax collection programs, civil service reforms, and steps to improve the Indonesian finance and banking sector.

Sri Mulyani in her role as Finance Minister has been an enthusiastic supporter of these reforms. Perhaps too enthusiastic. It seems clear that quite a few of these reforms began to irritate people whom President SBY could hardly afford to have fights with — such as quite a few senior members of the Indonesian Parliament, and leading Indonesian business tycoon Aburizal Bakrie.

The second part of the story is about a struggle for authority between the Indonesian parliament and SBY. This type of tug-of-war — king versus parliament, president versus congress, administration versus legislature — occurs in many countries. Basically, it is a vital struggle for power.

In Indonesia the battle-lines are still ill-defined. Two of Indonesia's most powerful presidents, Sukarno and Soeharto, dominated the nation and emasculated the parliament for much of the period from the late 1950s through to Soeharto's downfall in 1998.

During the last decade, the Indonesian parliament has become much more influential, seemingly attacking senior government ministers at will. But the parliament is also disorganised, almost dysfunctional. It is full of raucous and ill-disciplined members. Stephen Sherlock provided a vivid description of the mess in his article on the debate over the anti-pornography bill in the parliament in 2007.

These matters are relevant to Sri Mulyani's departure because last year an influential group of MPs decided to launch an attack on a decision (taken in late 2008) to extend emergency financial support to a mid-level bank in Indonesia, Bank Century. The key decision to support Bank Century was taken, as Stephen Grenville recently explained, by Sri Mulyani and the then-Governor of Bank Indonesia, Dr Boediono. Boediono has since become Vice President of Indonesia.

In launching the attack (complete with numerous hearings and inquiries) on these two key members of SBY's cabinet, the parliament is in effect attacking the President himself.

The row over Bank Century has been particularly nasty in recent months. Both Boediono and Sri Mulyani have been repeatedly mauled in parliamentary and other inquiries. However, despite the fuss, relatively little has come to light. The view of many experienced observers is that most of the fuss is politically-motivated by a coalition of MPs and business groups who don't like the idea of reforms which threaten their interests.

But the drawn-out Bank Century row has caused huge problems for SBY. The case has received widespread coverage in the Indonesian media and has greatly restricted the ability of the President to run the Government. It is easy to believe that the President has been increasingly keen to find some way of putting an end to the Bank Century row.

The third part of the story is personal. Enter business tycoon Aburizal Bakrie. Mr Bakrie is, without doubt, one of the most powerful people in Indonesia. He is immensely wealthy, he is a former cabinet minister (he was Coordinating Minister for Welfare in President SBY's first cabinet), and he has recently become Chair of Golkar, one of the key political parties within the coalition which supports SBY's Government. SBY, not to put too fine a point on it, needs to be friends with Mr Bakrie.

However, during the past year or so, Sri Mulyani has chosen to tangle with Mr Bakrie in various ways. She damaged his financial interests by blocking certain share dealings concerning his firms in late 2008, and more recently, has allowed the Indonesian Tax Office to pursue his companies for some hundreds of millions of tax said to be overdue. All signs are that Mr Bakrie has been less than amused by Sri Mulyani's efforts to introduce good governance reforms in these areas.

Faced with this sea of troubles, SBY may well feel that Sri Mulyani's exit from the Indonesian political stage provides him with an opportunity to wipe the slate clean. He may feel that perhaps now, over six months after he won a second term in a seemingly sweeping victory, he can at last get on with the job of running the country. 

One of his first measures in this direction was quite startling. Before the ink was dry on Sri Mulyani's resignation letter, Aburizal Bakrie was appointed chair of a new committee to coordinate the work of pro-government coalition parties. The precise powers that Mr Bakrie will have as chair of this committee are unclear but on the face of it, it is a handy position for him to have.

Indeed, the current deal would seem to suit all of the central players in the drama. President SBY has the chance to bring closure to the Bank Century row. Aburizal Bakrie gains considerable political power and, quite likely, a more cooperative Finance Minister. And Sri Mulyani will become the newest Managing Director of the World Bank, said to carry a salary of close to $US 500,000 per year. This intense drama has been about power and money, both of which are close to heart of government in all countries across the world.

But where do all of these events leave the future of reform in Indonesia? Does the departure of Sri Mulyani mean that the reform movement is stalled? Probably not. But these are questions which are now vital for the future of Indonesia. They will be addressed in my next post.

Photo by Flickr user London Summit, used under a Creative Commons license.

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