JAKARTA - Indonesian President Susilo
Bambang Yudhoyono has exerted his authority over
his powerful vice president, sidelining a
billionaire tycoon - who helped pave the way for
their rise to power - as part of a shuffle in the
economic portfolios of his cabinet.
Among
other changes, Boediono, finance minister for
almost three years under former president Megawati
Sukarnoputri, takes over from tycoon Aburizal
Bakrie in the powerful position of coordinating
minister for the economy. He will oversee all
economic and finance portfolios.
As a
result of the shuffle, two US-educated economists,
Boediono (who goes by one name) and Sri Mulyani
Indrawati, take over the
key
portfolios in Southeast Asia's largest economy as
Yudhoyono's 13-month-old government struggles to
achieve higher growth needed to battle poverty and
slash the huge number of unemployed.
The
shake-up follows a year of soaring inflation. The
Central Statistics Bureau says the latest
year-on-year inflation blips of 17.89% in October
and 18.38% in November are a consequence of the
government's move to more than double average fuel
prices in October.
The central bank raised
its benchmark interest rate to 12.75% on Tuesday
in an effort to stem the rising inflation that,
coupled with higher interest rates, will hit
domestic consumption, which still accounts for
more than 60% of total annual gross domestic
product. It will also undermine the government's
official growth rate projection of 6% for 2005. If
the economy is to sustain its momentum, a sharp
boost in government spending is needed to
compensate for any shortfall.
Boediono,
62, is also a former central bank deputy governor
and has headed the National Development Planning
Agency (Bappenas). He won praise from economists
for bringing stability to the country's fiscal
accounts and leading the transition out of the
International Monetary Fund (IMF) emergency
borrowing program.
He was appointed
finance minister in August 2001. By 2003, the
average rupiah rate of exchange was Rp8,572 to the
US dollar, a 16.4% increase on the rate from when
he joined cabinet. This was at a time when
economic growth was little more than 4%.
Sri Mulyani Indrawati, 43, is the new
minister of finance and thus responsible for the
budget and macroeconomic policy. A former IMF
executive director for Southeast Asia, she was
Yudhoyono's original choice for the post when he
took office but following strong opposition from
nationalist politicians, some of whom see the IMF
as having been partly responsible for Indonesia's
struggle to recover from the financial crisis in
1997-98, she was appointed national development
planning minister instead.
Other changes
were: Paskah Suzetta replaced Indrawati; Fahmi
Idris, formerly the manpower minister, replaced
Andung Nitimiharja as industry minister; Erman
Suparno replaced Idris as manpower and
transmigration minister.
Political
dimensions Vice President Yusuf Kalla, who
was behind last year's appointment of Bakrie, has
consistently played down the need for major
changes. Bakrie, a former chairman of the
Indonesian Chamber of Commerce and Industry, has
now been sidelined from his position of economics
czar to the much-less influential position of
coordinating minister for welfare, though he
remains in the cabinet.
Peter Fanning,
chairman of the International Business Chamber,
called it a "brave move, a very positive one",
though many believe the president was forced to
retain Bakrie because of pressure from Kalla's
camp in the Golkar Party and in parliament.
The tycoon's business links and political
affiliation to Golkar, with its powerful and
prominent businessmen, could have led to a
conflict of interest, the argument goes. Moving
Bakrie out of an economic role was a wise move
because sometimes "perception is everything", said
Arbi Sanit, a local political analyst and lecturer
in politics at the University of Indonesia.
However, a major online news enterprise,
Detikcom, quoted Arbit as saying Bakrie's new
position could enable Golkar to receive big
projects for the ongoing rehabilitation and
reconstruction of Aceh province, devastated by the
December 26 tsunami.
Though commending the
appointments of Boediono and Indrawati, Sanit,
however, was quoted as asking about the Bakrie
appointment: "How could a capitalist person become
a socialist? Only yesterday he sucks from the
people, so how could he now be in charge of the
people?"
Kalla may have lost face now with
the sidelining of his man, but he has said the
Golkar Party, which he heads, will continue to
work with the government to reduce poverty and
help small business. "I always think about helping
the people and creating jobs."
He was
pleased with the cabinet changes, which should
improve macroeconomic stability, infrastructure
and economic growth, he added.
However, he
suggested the previous economic team should not be
held to account for events that were largely out
of its control, such as the record high world oil
prices that caused the drastic drop in the value
of the rupiah.
Yudhoyono continues to need
Golkar support - the party controls 23% of seats
while his Democrat Party holds only 10%. With
Golkar still promising this support, the president
can, in theory, be assured of winning crucial
votes in the House of Representatives.
Short term An increase in
government spending, particularly on
infrastructure, is expected. Indrawati said: "If
you look at our fiscal situation, both on the
revenue side and on the expenditure side, we need
to be more effective. From our most recent
experience, when we have the money we cannot spend
it quickly and effectively."
Jusuf Anwar,
whom she replaces, was a compromise choice in
2004. He is a career bureaucrat whose short tenure
in a government committed to deliver improvements
to the sensitive investment climate has produced
only one tangible policy - a draft tax law. The
legislation, now stalled in parliament, has been
slammed by local and foreign companies as being
too punitive.
Indrawati promised to review
the draft. "I think we should look at the
substance more carefully," she said.
Similarly, the long promised revamp of
crucial foreign investment guidelines has been
delayed because of opposition from within the
massive army of civil servants.
The
cabinet shuffle may also help free up deadlocked
negotiations between ExxonMobil Corp and the
state-owned oil and gas corporation, Pertamina,
over the development of the $2 billion Cepu oil
field, the country's largest new oil field in
decades. A Pertamina official said last week the
issue could be resolved through a joint venture,
possibly by the end of the year.
Rowing
the same boat In a speech broadcast
nationwide at the swearing-in ceremony on
Wednesday, Yudhoyono called on the six new
ministers to improve the macroeconomy by combating
inflationary pressure, creating more jobs,
accelerating infrastructure development,
revitalizing maritime and agriculture industries,
and reforming the state budget and taxation
system.
By close of business on the same
day, the local currency hit its highest level in
almost four months. The Jakarta Stock Exchange
Composite Index closed up 2.5%, or 27.930 points,
at 1151.365, the highest since mid-August.
Asked what his first steps would be,
Boediono said the aim was to strengthen economic
stability, including inflation, and the currency
exchange rate, while at the same time stimulating
growth in the economy.
In a recent
academic treatise, he said he believed the success
of former president Suharto's New Order regime
during the first few years was not only due to the
presence of a strong economic team, but the way
that team operated with the full trust and backing
of the president.
"Boediono has an
impressive track record and the credibility and
integrity" needed to do the job, said Fauzi
Ichsan, an economist for Standard Chartered Bank
in Indonesia.
Success in bringing the
macroeconomy under control will certainly depend
to a large extent on the individual abilities of
Boediono and Indrawati, and the way they work in
concert with the central bank and Bappenas.
The president has no doubt about what is
needed. "I want this cabinet to become more
effective, have better teamwork and better
coordination," he said Wednesday.
The most
pressing need of all, then, is for the government
to generate the three essentials lacking in every
administration since the downfall of Suharto:
teamwork, coordination and leadership.
Bill Guerin, a Jakarta
correspondent for Asia Times Online since 2000,
has been in Indonesia for 20 years, mostly in
journalism and editorial positions. He has been
published by the BBC on East Timor and specializes
in business/economic and political analysis
related to Indonesia. He can be reached at
softsell@prima.net.id
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