Mulyani’s exit should raise alarm

Mulyani and Yudhoyono in happier times

The shock resignation of Indonesian Finance Minister Sri Mulyani Indrawati should give pause to those who want to gloss over the country’s problems and focus only on its investment potential. Widely seen as the best minister in the cabinet, her departure for a prestigious position at the World Bank should be seen as a humiliating rejection of an irredeemably corrupt system.

After months battling lawmakers bent on ousting her and preserving the graft-riddled status-quo, the respected economist and independent policy expert seems to have washed her hands of Indonesian politics and walked away for the sake of her dignity, her self-respect and her family.

Veteran Indonesia-watcher John McBeth, of the Straits Times newspaper, put it this way:

Some Indonesian observers want to dismiss it all as politics, but that is just too easy considering the President’s failure to protect his most valuable minister and the venal nature of the anti-reform forces that were aligned against her from the start. No matter what the circumstances, the President will now be seen to have bowed to the pressure exerted by Golkar Party chairman Aburizal Bakrie, the businessman-political financier whose companies still owe the government more than US$200 million (S$280 million) in unpaid taxes…

International finance officials say that while Indonesia will no doubt come up with a suitable replacement to manage the economy, it will be a lot more difficult to find someone who is as willing to take on the tough task of bureaucratic reform as was Dr Sri Mulyani.

 McBeth could have been refering to people like the Lowy Interpreter’s Stephen Grenville when he talked about observers who want to “dismiss it all as politics”. It’s a lot more than mere politics; it goes to the heart of what sort of country Indonesia is and will become as it continues to mature as a post-dictatorship democracy. Mulyani’s departure isn’t the end of the world, but it’s a sign that all is not well for the democratic reform movement. It should worry those who bought President Yudhoyono’s promises to stamp out corruption, which is not only retarding the country’s young democracy but causing genuine suffering to its people.

It’s also turning off foreign investors who are supposed to keep Indonesia’s economy afloat over the next five years. A survey of 33 senior managers in the oil and gas sector by PriceWaterhouseCoopers last month found corruption and legal uncertainty (read contracts being torn up or dishonoured) remain two major concerns about doing business in Indonesia despite six years of Yudhoyono rule, with all his promises of good, clean governance.

A key test for Yudhoyono and his government will be who it chooses to replace Mulyani. There are fears that Golkar, the ruling party throughout the Suharto dictatorship and a reactionary force against reform, will make sure it’s a yes-man who will not repeat Mulyani’s genuine efforts to clean up the bureacracy. Transparency International Indonesia chief Teten Masduki has said he is worried that the next finance minister will not have the courage to stand up to the likes of Bakrie.

Her departure will badly affect bureaucratic reform in Indonesia. The next finance minister could be easily pushed around. The finance ministry is a huge source of money. It will be a target for corruption, especially for political funding.

Meanwhile, The Jakarta Globe said in an editorial: “All eyes are watching us closely and the slightest sign of backtracking, of a rolling back of fiscal discipline and structural reforms, could spell disaster”.

(Photo courtesy of London Summit via Flickr)


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