Indonesia's new cabinet united against
corruption By Bill Guerin
JAKARTA - "The time for talk and promises is
over. It's time to work," said Indonesian President
Susilo Bambang Yudhoyono when unveiling his United
Indonesia Cabinet late on Wednesday. Yudhoyono, 55, who
became the country's sixth president after beating
incumbent Megawati Sukarnoputri in last month's
election, has pledged to fight corruption, boost
investment and create jobs.
His 36-member
cabinet combines old and new faces with experienced
professionals as well as several political appointees,
retired military officers and veteran politicians from
earlier administrations. The new government will also
set up a National Economic Council (DEN) and National
Security Council (DKN) that will function as special
advisory agencies staffed by professionals.
The
country's key economic ministers include Coordinating
Minister for Economic Affairs Aburizal Bakrie, Finance
Minister Yusuf Anwar, Industry Minister Andung
Nitimihardja, Trade Minister Mari Pangestu and National
Development Planning Minister Sri Mulyani Indrawati.
Yudhoyono is expected to limit Vice President
Jusuf Kalla's role in economic matters, after claims
that the latter's straight-talking,
pro-ethnic-Indonesian style alienated several prominent
ethnic-Chinese figures just before the final election
runoff in September.
One of Indonesia's most
influential and prominent indigenous business tycoons,
Bakrie has a vast range of business interests. Some
analysts have seen reason for concern with Bakrie's
appointment because the Bakrie Group, the conglomerate
founded by his family in 1942, ran up US$1 billion in
debts during the regional financial crisis.
The
view is not one held by the new president, who said,
when acknowledging that his cabinet lineup would not
satisfy all parties and members of the public: "For me,
what's important is their performance, hard work and
service, so that in five years from now the Indonesian
nation's condition will be better. Thus we must see this
cabinet remain intact."
Chairman of the
Indonesian Chamber of Commerce and Industry (Kadin) for
the past 10 years, Bakrie has said he will champion the
cause of domestic businesses and the country's trade
expansion. Indonesia lags behind its neighbors in terms
of international trade, especially in pursuing bilateral
free-trade agreements.
In Melbourne this year at
the opening of Kadin's first overseas office, Bakrie
suggested that Australia should use Indonesia as a
bridge to East Asia after the former's free-trade
agreement with the United States.
"The
Australia-US agreement is natural," he said. "I am a
believer in free and fair trade, and I believe if you
have such a deal and also one with East Asia, that would
be best. Indonesia can build a bridge between Australia
and the East Asian economy," he explained.
The
Trade and Industry Ministry has been split into two new
portfolios. Mari Pangestu, the new trade minister, is an
outspoken free-market economist and a former executive
director of the Center for Strategic and International
Studies (CSIS). She said on Thursday that Indonesia
should play a bigger role in East Asia, as a regional
production center for electronic and automotive parts
for the global market.
Economic growth, driven
mainly by domestic consumption, has been modest in
recent years at around 4%, well below the 7% needed to
provide work for new job seekers. But stronger growth is
possible only through international trade and an open
market economy, Pangestu said.
Pangestu said
that in order to boost exports, improving the
productivity and efficiency of the manufacturing sector
is a must. She also said her ministry will need to
anticipate the negative impact of trade liberalization.
"This does not mean that we should be
anti-globalization. What is more important is that we
must anticipate the negatives."
Yet if
Indonesia's trade position is to improve, Yudhoyono will
need to get a handle on graft, unlike his predecessor,
Megawati, who was widely criticized for her poor record
in combating one of the country's major problems. A
recent State Audit Agency (BPK) report said losses of
state funds through corruption amounted to some Rp37.39
trillion (about US$4.1 billion) in the first semester of
2004 alone.
In his inaugural speech hours after
taking the oath of office on Thursday, Yudhoyono renewed
his pledge to kick-start growth and lead the anti-graft
drive, a show of his commitment to eradicate corruption.
"The government will stimulate economic life to reach
higher economic growth," he said. "The government will
actively carry out a drive against graft that I will
lead directly."
Yet in a press release that same
day, Berlin-based Transparency International (TI)
announced that Indonesia remains one of the world's most
corrupt nations, along with Angola, the Democratic
Republic of Congo, the Ivory Coast, Georgia, Tajikistan
and Turkmenistan. Based on interviews with business
people in 15 cities across Indonesia, TI concluded that
bribery and other unauthorized fees were widespread
between business people and state officials in order to
obtain business permits and during court trials (see Honesty skids on oil, Oct 22).
The new minister of finance, Jusuf Anwar, was
the Asian Development Bank's executive director for
Indonesia. Though he previously served as chairman of
the Indonesia Capital Market Supervisory Board (Bapepam)
and is a long-serving official at the Finance Ministry,
Anwar is decidedly lightweight in terms of his track
record.
The International Monetary Fund's
Southeast Asia executive director, Sri Mulyani
Indrawati, who had been widely tipped to become the new
finance minister, was instead given the national
development planning portfolio. Indrawati, a US-trained
economist, was allegedly deemed to be too "pro-Western"
and "pro-IMF" by the Islam-based Prosperous Justice
Party (PKS), Yudhoyono's strongest ally in parliament
Shortly after Megawati replaced Abdurrahman
Wahid as president in July 2001, Indrawati quipped in an
interview, "Indonesians liked the IMF when it helped in
toppling a president. Now, they are just beginning to
realize they must really do the IMF programs if they
want the IMF loans." She cautioned at the time, however,
that the IMF prescriptions were monopolizing the efforts
of the new government's economic team and preventing it
from developing broader policies that were critical to
economic development.
Yudhoyono has dismissed
fears his cabinet would be influenced by the IMF, though
it is unclear whether his government will continue with
the economic reforms laid out in a government "white
paper" launched under Megawati to follow up on the
IMF-led reforms program.
On Monday, Indonesia's
senior Economic Ministry disclosed that the government
had failed to achieve almost a third of the reforms
targeted in the white paper for completion by the end of
September. The programs are a series of action plans
covering macro-economic stability, reform of the
financial sector and the boosting of investment, exports
and employment.
The exports, investment and
employment plans cover a wide range of targets,
including legal reforms, promotion of small and
mid-sized enterprises, infrastructure development,
job-creation measures and improvements in tax and custom
services.
The draft state budget Megawati
presented in August assumes foreign assistance of $3.1
billion in 2005, up 8% on this year. In an apparent show
of support, representatives of the Consultative Group on
Indonesia (CGI), which groups 30 bilateral and
multilateral donors and is the country's main donor
organization, met with Yudhoyono a week before he took
over the leadership of the country.
IMF
officials continue to make regular visits to Indonesia
to check the progress of reforms until the government
settles its outstanding debt, estimated to be some $9.7
billion, to the fund by 2010.
Manufacturers have
long complained that the domestic investment climate is
not conducive for doing business, and asked the
government to scrap red tape, implement tax reform and
improve the country's infrastructure.
Newly
appointed Minister of Industry Andung A Nitimihardja,
who was previously a senior official of the Investment
Coordinating Board (BKPM), said on Thursday that one of
his immediate priorities is to review existing
regulations that have hampered the performance of the
manufacturing sector.
There is some cause for
optimism on the foreign direct investment front,
however, with foreign investment approvals hitting a
2004 high in September of $4.24 billion compared with
the previous monthly high of $799 million in April.
Accumulated approvals for the first nine months of 2004
totaled $7.99 billion - up 24% from a year earlier.
Foreign reserves have also been strengthening,
another positive factor in regaining investor confidence
over the country's monetary stability after its
departure from the IMF programs. Foreign-exchange
reserves are now at $34.81 billion, the central bank
reported this week. A healthy foreign-reserve base also
boosts confidence and will help protect against
speculation on the rupiah.
Though for the most
part the early signs are good, in terms of promises and
vows, Yudhoyono and his cabinet, swept into office on a
wave of goodwill, will need to show some quick progress
on the major fronts to avoid a backlash from a public
with unreasonably high expectations of Yudhoyono's
government.
But the new president is no dreamer,
and he warned Indonesians not to expect miracles.
"Today's joyous atmosphere is blanketed with a
great optimistic spirit. However, we have to remember we
must go through difficult times and face heavy
challenges to our economy," he said on Wednesday.
Bank Indonesia (BI) governor Burhanuddin
Abdullah needs to get closer to this reality. On the
same day, Abdullah said glibly that the new economic
ministers are seen as "market-friendly" figures who can
bring about positive changes and meet investors'
expectations. "The market is familiar with them and
understands what the ministers want to do," he said.
The truth is that one of the most pressing
matters in hand for Yudhoyono is to signal the
seriousness of his administration to both domestic and
international audiences. This can only be achieved by
communicating its policies to the public and explaining
what it is doing and why. The markets, and investors,
are looking for signs of a long-awaited strong
governmental will, not soothing platitudes from the
governor of the central bank.
Bill
Guerin has worked for 19 years in Indonesia as a
journalist and editor. He specializes in
business/economy issues and political analysis related
to Indonesia. He has been a Jakarta correspondent for
Asia Times Online since 2000 and has also been published
by the BBC on East Timor. He can be reached at
softsell@prima.net.id.
(Copyright 2004 Asia
Times Online Ltd. All rights reserved. Please contact content@atimes.com for
information on our sales and syndication policies.)
