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Greedy foes, ugly politics force reform minister out in Indonesia

Publication Date : 25-02-2013

 

At a time when far-sighted policies are needed amid prolonged global economic uncertainties, Indonesian President Susilo Bambang Yudhoyono’s decision to nominate Agus Martowardojo, 57, to be next governor of the central bank may expose the nation to economic risks and hamper reform at the Finance Ministry.

Yudhoyono recently nominated Agus, widely acclaimed for his integrity and toughness, to lead Bank Indonesia (BI), and denying a second term to Darmin Nasution, whose current appointment ends in May.

The move means that the pace of reform may be slowed at the Finance Ministry - and that BI is set to lose Darmin, who has been internationally acclaimed as one of the world’s best central bankers.

Economists have said that strong monetary and fiscal coordination between Agus and Darmin has helped the economy retain robust economic growth rates despite the global slowdown.

“With many economic challenges going forward, the President should not have changed the current composition of his economic team,” Tony Prasetiantono, an economist from Yogyakarta-based Gadjah Mada University, said.

A Cabinet member who declined to be named said on Sunday that Agus had fallen victims to pressures applied by politicians and influential business executives whose interests had been impaired by Agus’ prudent policies.

“It’s hard for the President to keep Agus. The pressure has just been too great from many sides,” the Cabinet member said.

Since Agus was appointed finance minister in May 2010, he has garnered a reputation for his commitment to reform and for his strong stance against politicians and politically-wired businessmen looking to benefit from the state budget and fiscal policies.

The praise given to Agus has been similar to that given to his immediate predecessor, Sri Mulyani Indrawati, a reform icon who was ousted as finance minister after less than five years in office.

After Sri Mulyani bickered with the Bakrie family, whose chief patron Aburizal Bakrie is the chairman and presidential candidate of the Golkar Party; Yudhoyono endorsed her appointment as a World Bank managing director, leading to her resignation from government.

Agus has also had a history of run-ins with Golkar politicians and the Bakries over the government’s purchase of a 7 per cent stake in gold miner PT Newmont Nusa Tenggara in which the Bakries had also been interested.

Agus, a former president director of state-run Bank Mandiri, also ruffled feathers when he opposed the construction of the Sunda Strait Bridge, a megaproject with a US$10 billion price tag, unless it complied with existing private-public partnership regulations.

The project is managed by influential tycoon Tomy Winata through his Artha Graha Group.

Controversy over the project has also triggered disputes between Agus and Coordinating Economic Minister Hatta Rajasa, who is also the chairman of the National Mandate Party (PAN).

Hatta, whose daughter is married to Yudhoyono’s son, along with several other ministers have long supported the project which some have said would be Yudhoyono’s greatest legacy.

Agus also recently came in the cross hairs of several senior Democratic Party politicians who have blamed Agus for failing to insulate Andi Mallarangeng from graft allegations that forced his resignation as youth and sports minister.

Andi, who has been named a graft suspect in the Hambalang scandal, was a top Democratic politician and a member of Yudhoyono’s inner circle.

“Agus was blamed for not warning Andi on the prudent use of the state budget, and for providing testimony that was not supportive of Andi to the KPK [Corruption Eradication Commission],” said a lawmaker on House of Representatives’ Commission XI for financial affairs who declined to be named to discuss the issue.

Agus has also confronted internal opposition following his decision to continue the reforms started by Sri Mulyani at the ministry, such as the daunting task of ending the culture of corruption at the tax office and customs and excise office.

Indonesia Corruption Watch coordinator Danang Widoyoko was critical of the decision to appoint Agus to the central bank, saying that the nomination showed that Yudhoyono was no longer comfortable with a minister of high integrity.

“There seems to be an alliance between Yudhoyono and the owners of capital, particularly for the preparations leading up to the 2014 general election,” Danang said. “The weaker the minister, the better for the vested interests.”

The position of finance minister, who oversees more than 60,000 employees, is considered more prestigious than that of BI’s governor, who supervises only around 5,600.

The central bank, which is independent of the Cabinet, has also been slated to have its teeth pulled, and will give its oversight role for the nation’s banking system, known to be a source of illicit funds for BI officials, to the Financial Authority Agency (OJK) over the next couple of years.

Several officials have been touted as Agus’ successor as minister, including Darmin and tax directorate chief Fuad Rahmany.

This is not the first time that the President has proposed Agus to lead BI: The House rejected his candicacy in 2008.

If the House rejects Agus as central bank chief again, it is likely to trigger a political crisis in the Cabinet, as the finance minister will have lost credibility among politicians, raising the specter that Agus will have to resign.

 

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