By Peter Gelling – GlobalPost
Published: June 25, 2009 14:13 ET in Asia
JAKARTA — The impact Sri Mulyani, Indonesia’s current finance minister, has had on the country in the last few years is difficult to overstate.
Mulyani has, for starters, steered the country through the global economic crisis. Indonesia’s economy is growing — at a rate of 4.9 percent — faster than any of its regional counterparts and looks poised to come out of the crisis in a better position than it went in.
This is in no small part a result of aggressive reforms Mulyani pushed through the finance ministry, most notably the customs and tax offices — two institutions that for decades were the most striking examples of how corruption can destroy a nation.
Indonesia has always ranked as one of the most corrupt countries in the world, but has improved in the last five years — during Mulyani’s tenure. Corruption here is so widespread that there was little expectation that Mulyani, a career technocrat with no political experience, could make any real difference.
“You can really see how much of an impact one person can make,” said James Castle, an American economic and political analyst living in Indonesia. “The president gave her a lot of latitude and she has used it very well.”
Six months after Mulyani took over the Finance Ministry in 2005, foreign direct investment leaped almost 70 percent compared to the previous year. That kind of growth was maintained up until the economic crisis hit this year, a testament to the confidence foreign investors have in the minister.
In the process Mulyani has embraced fiscal and bureaucratic reform, both of which have consistently pitted her against powerful politicians and a resistant parliament — a group that is still considered one of the country’s most corrupt.
In a wide-ranging interview with GlobalPost, Mulyani said she is guided by simple principles and believes that she has now become one of the most trusted ministers among the notoriously suspicious parliament, which has enabled her to push through reforms. (The full interview with Mulyani is available to GlobalPost Passport members. For more information about Passport, click here.)
“The economy will never develop as long as the society does not trust the government,” she said. “So this has become quite an obsession for me. I want to be part of a government where the people trust you. It is not easy of course. But this idea has guided my decisions.”
In one of her more famous shake-ups she made herself the subject of ire from the country’s mining executives. Among them was Aburizal Bakrie, one of the country’s wealthiest men and the minister for people’s welfare. He was also a major contributor to President Susilo Bambang Yudhoyno’s campaign in 2004.
During an audit of the tax agency she found a dearth of income from the mining sector. As it turned out, mining companies owed millions of dollars in back taxes they were avoiding through an obscure understanding with former ministers of finance. Mulyani demanded the taxes be paid and when the executives, including Bakrie, protested, she barred them from traveling.
The public and the press celebrated.
“It created a lot of headlines. Even the president asked me what is going on and asked if I could do it without so many big noises,” she said. “But we had to set new standards. It definitely created some discomfort within the cabinet. But I think they finally understood.”
Mulyani is an unlikely leader. She is the daughter of two career academics. Born in Sumatra, she is the seventh of 10 children. She spent most of her young life in Semarang on the island Java, where her parents worked at a teaching college. She then attended the respected University of Indonesia before heading to the University of Illinois for her graduate degree.
She has served as both an executive director of the International Monetary Fund and as a consultant for USAID, both of which required her to spend time in the United States.
“As minister of finance, what first comes to my mind is the question, ‘Why are we stuck in this situation?’ When I was living abroad, I saw how an international audience perceived Indonesia. In a way I knew immediately when I assumed this responsibility that there was a serious problem of perception. I set out to change that perception,” she said.
The first thing she did was sack the directors of both the customs and tax offices. When she first started, she said there was a lot of skepticism among Jakarta’s elite businessmen and politicians. They were watching her, wondering if she’d be corrupted like the rest or if real change was coming.
“The directors of the tax and customs offices had strong reputations. But despite that, after six months here, I replaced them. I had to because it was important to have a new beginning. We needed to do something different. The first thing people want to see is a major change,” she said.
President Yudhoyono has enjoyed a lot of credit for choosing Mulyani and has now chosen another academic economist, Boediono, who goes by only one name, as his running mate for the July 9 presidential election, which Yudhoyono is widely expected to win.
Boediono served as an interim Bank Indonesia governor after the arrest of its previous governor, who was the second central bank governor to be arrested on corruption charges. Like Mulyani, Boediono has strong reformer credentials and was expected to help revitalize Bank Indonesia before he was tapped for the vice presidency.
Now it seems likely that Mulyani, in the next term, will work her magic at Bank Indonesia.
“I am proud that I do a job that I feel comfortable with and enjoy. I think I can assure myself that I have never compromised my principles — that is most important. It is very simple. I just want to make Indonesia better and respectable in the eyes of the world. When I am in international forums, I want the country to which I was born and in which I live to be well-regarded.
“I think I can also be quite proud that even with all the pressure, the pain and the loneliness, I have never sacrificed my principles,” she said. (Global Post)