The Reason Why SBY Keeps Sri Mulyani

JAKARTA LIFE'S STYLE

Indonesia’s president dismissed talk that he plans to fire his reformist finance minister by the end of February over the minister’s role in the late 2008 bailout of a small bank, a local newspaper reported late on Monday. Presidential spokesman Julian Pasha was quoted in the Jakarta Post’s online edition as saying the talk was “not true”, hours after a Golkar Party official, who declined to be named, told Reuters the minister may be replaced “by the end of February”.

The conflicting comments from within President Susilo Bambang Yudhoyono’s coalition highlight a lingering political risk facing the otherwise improving prospects for Southeast Asia’s largest economy. The departure of Finance Minister Sri Mulyani Indrawati, a top reformer in the cabinet, would deal a severe blow to the president’s drive to reshape the economy into a more efficient one, efforts that have won broad praise from global investors.

Bambang Soesatyo of the Golkar Party early on Monday had said that Anggito Abimanyu, head of the finance ministry’s fiscal policy agency, would be the best replacement for Indrawati if she stepped down, but presidential spokesman Pasha denied that. “The information is not true. There is no official statement about changing (Sri) Mulyani (Indrawati) and Anggito Abimanyu,” Pasha was quoted saying.

Chief Economics Minister Hatta Rajasa, a close confidante of Yudhoyono, also earlier denied plans for any imminent cabinet reshuffle. Indrawati could not be reached for comment. Golkar is headed by tycoon Aburizal Bakrie, an old-style politician who has long resisted Indrawati’s reforms, resulting in tensions within Yudhoyono’s government.

Local markets and credit default swaps showed a muted reaction to the reports, but investors kept a wary eye on the saga, with the key focus on whether Yudhoyono would be able to find a successor capable of maintaining the reform drive. “The markets are concerned about the continuity of reforms and policy. Market sentiment could turn bad,” said Andry Asmoro, an economist at Bahana Securities. “The political risks are likely to increase if (she) quits.”

Some Scepticism

But some analysts were sceptical President Yudhoyono would sack his finance minister — who remains popular with the public and foreign investors — as he would be seen as bowing to pressure from non-reformers and could risk weakening his own leadership.

“I cannot conceptualise that the president would do something so silly. It would be an admission of defeat and it
would reveal an incredible chink in the armour,” said Kevin Evans, a Jakarta-based election analyst from Pemilu Asia.

“It would say ’You can bully me to do what you want’.” Aninda Mitra, senior analyst at ratings agency Moody’s
Investors Service in Singapore, said the political process would not seriously hurt Indonesia’s overall creditworthiness. Indonesia’s debts are still classified as non-investment grade due to concerns about corruption and unfriendly business environment in the country.

As finance minister, Indrawati made headlines for tackling the most notoriously corrupt departments. She cleaned up the tax and customs departments within the finance ministry,introducing more transparent practices and getting rid of those caught taking bribes.

Both Indrawati and Vice President Boediono, under attack from non-reformers over their decision in late 2008 to bail out Bank Century, have said the move was aimed at preventing the bank’s troubles from snowballing into a wider financial crisis.

Analysts have priced in the possibility of Indrawati’s ouster regarding the scandal over the 6.7 trillion rupiah
($729.4 million) government rescue of Bank Century, a Reuters survey showed last week.

The two technocrats, Indrawati and Boediono, were widely expected to play a critical role in attracting foreign investment into one of the region’s fastest growing economies and a member of the Group of 20 leading economies.
President Yudhoyono was re-elected in July on the back of his government’s economic policies, reforms, and efforts to tackle corruption.(KOMPAS)

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