Protect Our Finance Minister, Mr. President

photo: Dwianto Wibowo for Tempo Magazine

It could look a little bit déjà vu if this three-week drama of cabinet reshuffle concludes with the dismissal of Indonesia’s tough Finance Minister Agus Martowardojo from President Yudhoyono’s administration.

Previously, Yudhoyono had let go another stellar Finance Minister, Sri Mulyani Indrawati, due to pressure from his mischievous coalition partners that were spearheaded by the Golkar party last year.

There is a possibility that last year’s drama could repeat itself this year with the same protagonist, same villain, and same ending: The villain bullies the protagonist, the protagonist is afraid and bows to the villain’s demand, and the ending wraps up with the protagonist ends up as the losing side.

The protagonist is of course President Yudhoyono, who decided to let go Mulyani last year even though she was arguably the best minister he ever had in years.

Yudhoyono clearly did not learn from his past mistake as Agus Martowardjojo, the current Finance Minister, is currently on the hot seat again. Just like last year, Yudhoyono did not give Agus enough protection to shield the Finance Minister from politicians’ perpetual harassments, leaving Agus standing alone in his battle to defend the state’s interest.

On the other side of the ring, the villain in is still the same as well: Golkar chairman Aburizal Bakrie who, impressively, managed to dictate many important decisions in Yudhoyono’s presidency and made the president himself very much like a controlled puppet.

After succesfully expelled Mulyani last year, the ousting of Agus from the Finance Minister post this year would reflect both Aburizal’s massive clout in the administration and Yudhoyono’s lame leadership. By driving Agus out, the message delivered by Aburizal was clear: You can mess with Yudhoyono, but don’t ever try to mess with me or my party.

Like Mulyani, Agus maintained a tough stance towards the Golkar party politicians and their power-hungry peers at the House. Agus was especially known for his clash with Golkar politicians over the government’s plan to purchase Newmont shares –a plan that Agus strongly believed would benefit Indonesia.

Lawmakers were against this plan and slammed Agus’s proposal. They furiously insisted the shares must be acquired by West Nusa Tenggara’s local administration, which is supported by a joint venture of a business unit that is owned by Golkar’s Aburizal.

The Finance Minister vs. House lawmakers battle repeated again last week over debates on the fuel subsidy quota, in which Golkar lawmaker Melchias Markus Mekeng lambasted Agus and described him as ‘does not have the authority to dictate the House’.

The fact that many Golkar politicians dislike persons with integrity such as Agus Martowardojo, Sri Mulyani, or even Trade Minister Mari Elka Pangestu (a Golkar lawmaker once uttered a racist statement and baseless accusation against her) is very much incomprehensible. For neutral political observers, it could only show that the party’s ideology is more about power and money, not the advancement of Indonesia to become a better nation.

Besides, if Golkar’s politicians and President Yudhoyono really care about Indonesia, they should understand that the timing of Agus’s exit could not be worse than now.

On Thursday last week, President Yudhoyono stated that he “would focus the next cabinet reshuffle to harness global economic challenges”. In truth, his decision to eject Agus from the Finance Minister chair would prove otherwise.

It is no exaggeration to say that if the current situation remains unchanged, we could bump into one of the world’s biggest economic crises next year. The European and American politicians are particularly responsible for the mess: Eurozone leaders are yet to reach agreement on what to do with their problematical currency, while the Republicans and Democrats legislators in United States are busy scuffling for their respective interests for the 2012 elections rather than controlling the country’s soaring fiscal burden.

Consequently, investors were scared off by recent developments in the West and symptoms of worldwide-scale economic crisis started to surface In Indonesia in the last few months. The once-strong rupiah –which once touched the level of 8,650 against the US dollar on August– has been under heavy pressure lately, while the Indonesian Stock Exchange index has plunged from the psychological level of 4,000 to 3,200 in a very short period.

By the time the crisis turns from symptoms into veracity next year, there is no doubt that the leadership of Agus –a former top dog CEO who successfully transformed Bank Mandiri to become one of Indonesia’s largest banks during the global financial fiasco– would be sorely missed.

There are signs that President Yudhoyono would try to minimize the issue by not ousting Agus at the upcoming reshuffle, but merely moved him to other ministerial post, such as the Investment Coordinator Board to replace Gita Wirjawan.

But this strategy makes little sense for two reasons. The first is the fact that the Finance Minister post is very vital, and there is no doubt that our current Finance Minister, who is a highly respected figure among investors and the global economic community, is among the few persons –if not only– capable for the job

The second is moving Agus Martowardojo to other ministerial posts is the same analogy with a football manager who plays his tough centre-back as forward.

In other words, Mr. President: It's like you have the best defender in disposal, yet you still leave a huge loophole in your defensive line as you give the crucial centre-back position to a less capable player.

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Why Sri Mulyani Could be the Next President

VOTE FOR VENDETTA. 2014 is payback time, during which this Iron Woman will set to bring Indonesia's bureaucratic reform to the next level and take her vengeance to those corrupt lawmakers and politicians.

Six years ago, Susilo Bambang Yudhoyono certainly could remember what it felt like being treated unfairly by his supervisor when he, apart from his position as Coordinating Minister of Political and Security Affairs under Megawati Soekarnoputri, was actually neither invited nor involved by her in several cabinet meetings concerning various political and security matters.

But for Yudhoyono, it seems that every cloud has its own silver lining –so does Megawati’s harsh treatment to him which eventually led to his resignation from his ministerial post on March 11 2004.

This is because in the end, it’s Yudhoyono who had the last laugh. Megawati’s decision to expel Yudhoyono from the other cabinet members –as well as the cruel words from Taufik Kiemas (Megawati’s husband), who added fuel to a fire and accused Yudhoyono of exaggerating things and being ‘too childish’– backfired and contributed to her loss in the presidential election to Yudhoyono at the same year.

In fact, Megawati’s story of how a president made the most of her authority to bully her own subordinate had without doubt helped Yudhoyono to win sympathy from many Indonesians; eventually leading him to win the presidential election and trounce Megawati by a wide margin.

What Indonesia had in the past is somewhat identical to the situation at present, where now finance minister Sri Mulyani Indrawati suddenly turns out to be a media-darling figure and draws sympathies from many Indonesians following her heroic role as the sacrificed bishop to save her king from his inconvenient position in the political chessboard.

For Sri Mulyani, it is worth noting that there were several cases besides Yudhoyono’s story above, particularly women, when someone rose to prominence and eventually ended up on top level in politics because she was able to gain sympathy of the people.

In Pakistan, the father of the legendary Benazir Bhutto was unjustly ousted from power by his political foe through a military coup and was sentenced to death. This later sparked a deep-rooted indignation among the Pakistanis which helped the Pakistan People Party, of which Benazir Bhutto was the chairperson, to gain massive support from the people.

Benazir Bhutto, who once headed finance ministry like Sri Mulyani, finally reached the pinnacle of her politics career when she took oath as the first and the only woman ever to become a prime minister in Pakistan.

The preceding tale was also similar to Megawati Soekarnoputri whose tear-jerking past helped her a lot to be recognized in Indonesia politics and won the sympathy of the people. Her father Soekarno, a national hero who proclaimed Indonesia’s independence, was exiled and sullied when Soeharto took over and Soekarno’s descendents, including Megawati, had to endure 32 years of oppression and tribulation from Soeharto and his cronies.

Prior to her seemingly reluctant move to World Bank, actually Sri Mulyani has drawn many sympathies already for her role of being the shield to the president himself during the fallout of Bank Century bailout, protecting Yudhoyono from the scorching political bullets while at the same time her own boss apparently was more interested in washing his hands clean on the subject.

Besides, Sri Mulyani was, without doubt, the person who deserves the largest share of the credit for Indonesia’s striking economic performance during the last financial crisis which, ironically, was the backbone of Yudhoyono’s victory in the last presidential election.

And now instead of protecting Sri Mulyani from the business and political rascals who have been unsettled by the bureaucratic reform which she initiated, Yudhoyono decided to forgo her and bow to the given pressure.

Fortunately, those cruel treatments of Yudhoyono’s to his meritorious finance minister may be a blessing in disguise for Sri Mulyani herself as well as many Indonesians who have been longing for a fearless, intellectual figure who has the capability and guts to become a president and reform Indonesia from the very top of the bureaucracy itself.

Thanks to the enormous exposure from the press –as well as numerous analysis and insights from high-profile intellectuals in various media–, in addition to the growing sympathies to Sri Mulyani her departure has also opened the eyes of many Indonesians about how brilliant this person actually was and how much she has done to Indonesia’s economy during her tenure as finance minister.

As an old saying goes, you never know what you get until it’s gone. It’s like when Michael Jackson passed away and, because of massive coverage from various types of information media all over the world, all of a sudden all music fans worldwide realized the fact that his contribution to the music industry had actually been so immense.

The difference is that Sri Mulyani is still alive and when she finishes her four-year term as World Bank’s managing director in 2014 and comes back to Indonesia as she has promised, she could be one of Indonesia’s highest profiles for our election during that year.

For Sri Mulyani, the moment could not be better. She is only 47 at present, and if she really wants to bid for presidential post in 2014, she will be 51.

If one still considers her to be too green to be a president, she still has a lot of time behind her back. If Sri Mulyani only runs as a vice-president candidate in 2014 then runs again for president five years later, then she is still 56 at 2019. And bidding at the age of 56 will put her still even younger than Prabowo Subianto, who ran at the age of 57 during the last presidential election and in fact was still the youngest among his counterparts.

One problem that emerges is Sri Mulyani is a well-known technocrat, and it is still questionable whether she possesses such political motivation to be a president –or even as a vice-president.

But Sri Mulyani should reflect to Michelle Bachelet, Chile’s first woman president, who was said to be initially hesitant to run for presidential post because she actually never possessed such ambition. In the end, due to the unprecedented surge on her popularity and pressure from her own supporters, she ultimately changed her mind and the rest that happened in Chile afterwards was history.

There is no doubt that Sri Mulyani’s recent popularity among Indonesians will definitely make political parties slaughtering each other to get her signature four years from now. And if at that time she is equipped with a decent political wheel, the spines of Indonesia’s corrupt businessmen and politicians will surely shiver like they never before.

The bureaucratic reform which Sri Mulyani spearheaded may suffer a temporary setback following her exodus to United States. But when she comes back here to run for a more strategic role to bring a broader scale of bureaucratic reform, she has more than enough ammunition already to get her revenge towards those corrupted evils who have colluded to kick her out from the country that she loves the most.

This article was published in Asia News Network on Tuesday, June 2 2010

Why Bank Century Bailout was the Right Decision

HIGH-STAKE DISCUSSION. Finance Minister Sri Mulyani Indrawati and Vice-President Boediono are trapped in the middle of the Bank Century bailout fray, with House of Representatives inquiry team ceaselessly firing them using rifles loaded with political motives bullet.

Imagine yourself being an experienced doctor who acts as the head of a hospital which, because of one mistreatment or two that someone did in the past, is on the brink of a crisis and people don’t seem to put faith in your hospital as they were used to. Just last year you were addressed by the hospital’s directors about the importance of doing what is necessary to prevent the crisis from becoming any worse.

In this situation, you simply realize that another mistreatment or death of a patient will trigger a catastrophic crisis of confidence to the hospital. People around the city will lose faith in the hospital and will never come for treatment anymore. Your own patients can also move away to another hospital. Eventually, as the hospital loses profit and goes under, the worst thing that could possibly happen is your workplace will go bust and you will ended up derided by the hospital’s directors for your lack of competence in handling the hospital’s management.

You can only hope that you will not be tangled in such circumstances –yet what happens next doesn’t really align with that expectation of yours. One day a nurse runs all the way through the hospital alley to your office to bring you urgent news that a male patient is dying and you need to make a swift decision about his treatment. The nurse presents you all the options available as well as her advice:

1. You can cure him with a remedy. Unfortunately after diagnosing his symptoms, the price of the proposed remedy is astronomical since it is worth Rp. 6.6 trillion and, because of some hospital’s insurance policy, it is the hospital not the patient who has to pay for the whole treatment.
2. You can just let him dead. But the nurse reminds you that the whole hospital is overwhelmed with crisis of confidence at the moment and if you let him dead, there is a possibility that no one will come to your hospital anymore and patients inside the hospital are likely to move away to other hospital too. Choosing this option will save Rp. 6.7 trillion, but puts approximately Rp. 1,900 trillion of hospital money at risk.
3. You can reduce the impact of the crisis of confidence by applying blanket guarantee –a hospital policy which ensures the life of all patients inside the hospital–, and then let the patient dead. Unfortunately the nurse informs you that the vice-executive director of the hospital is renowned as a great opposition of a blanket guarantee policy. This option is simply not feasible since he will surely overrule the policy if it is to be implemented.

The doctor in this story, Sri Mulyani Indrawati, ended up choosing the first option among the three options available. And she, with the advice of the nurse (Boediono), eventually decided to inject a lavish remedy worth of Rp. 6.7 trillion in the form of bank bailout to the patient; Robert Tantular and his ailing Bank Century. One year afterwards, instead of thanking her of rescuing the hospital from collapsing, the hospital’s directors (the House of Representatives) furiously point their fingers on she and her partner Boediono as they think the costly remedy was not actually necessary.

Rather than recognized as heroes who secured Rp. 1,900 trillion of hospital money, both the doctor and the nurse is considered as the perpetrators who cost the hospital to suffer a great loss of Rp. 6.7 trillion. The hospital’s directors are also in the notion that the theory of deeming the patient’s death will generate greater loss to the hospital was completely baseless, while both the doctor and the nurse think otherwise.

Now who’s right and who’s wrong?

The lingering debate of the Bank Century bailout is always about whether the bank poses a systemic threat or not if it goes broke. Initially considered as a necessary policy to be implemented at the moment when financial crisis looms, the bailout later turns into one complex twist of controversy. Many people argue that both the doctor and the nurse, as depicted in the hospital analogy, should have taken the second option and let the patient dead instead of giving him such costly remedy.

The fact that even Sri Mulyani and Boediono could not present any solid proof whether the collapse of Bank Century will cause bank rush among Indonesian depositors –whose money in the financial system is accumulated in the level of Rp. 1,900 trillion– is unassailable. The calculation of the possibility of possible crash in Indonesia’s financial system, however, comes mostly from the intuition of both those technocrats themselves.

But, because people’s physiological level is difficult to measure (especially during crisis period as people become more volatile), there is also no solid proof that such panic and bank rush will not happen. In fact, the argument of saying that ‘Bank Century will not pose a systemic threat’ comes also from the intuition and somewhat one-dimensional analysis of the critics and oppositions of the Rp. 6.7 trillion bailout.

In economics, the expression of every argument has to be always supported with solid data –so do every argument in the debate to judge whether Bank Century bailout is necessary or not for Indonesia’s economy. So far, the only solid data which we have now is Indonesia, with various economic policies that Sri Mulyani and Boediono implemented during last year’s hard times (including their decision to give bailout to Bank Century), successfully managed to weather a financial crisis that see many countries’ economies slumping to their lowest level.

Thus, based on the data of our various bright macroeconomic indicators we have at the moment, we have absolutely no proof that the government’s decision to hand bailout to Bank Century was a wrong one.

And when you argue that something is wrong but you cannot prove it, you cannot really say that it is wrong.

As no one have the proof indicating what they did was wrong, Sri Mulyani and Boediono surely did not deserve what they were encountering few days ago. Besides, up to now they have always done things right: it is all because of their economic proficiency and decisive actions that our economy is still standing tall at the time when most of the economies in the world are engulfed in a calamitous recession. Instead of receiving blistering words from the House members and several universities’ so-called activists, in fact Indonesians should have given them credit and praise for all of their hard work.

If only Bank Century inquiry committee members –as well as university students who humiliated Sri Mulyani and Boediono by referring them as thieves– really understand what situation and trade-off that these policymakers were into at that time. Talk is cheap, but if they were the decision makers, would those university students and Bank Century inquiry committee members have the guts to salvage Rp. 6.7 trillion with the risk of putting Rp. 1,900 trillion in jeopardy and wrecking the entire of Indonesia’s economic framework?

And before they deliver their answer, it is better to remind them that when they make the decision, it’s the life of 200 million Indonesians which they put at stake.

This article was published in The Jakarta Post on Tuesday, January 19 2009

Bank Century Bailout: a Necessity or Not?

PUT THE MONEY IN. Feared by the likelihood of a systemic failure caused by Bank Century's bankruptcy, the government sparked controversy by injecting a massive amount of US$ 670 million bailout money into the bank to thwart it from collapsing.

When US Congress passed Hank Paulson‘s US$ 800 billion bailout bill in October 2008 to prevent the economy from slumping any further, several US citizens’ initial response was very much the treasury chief had expected, “Are you nuts? We’re the taxpayers and that’s the money we’ve been paying to you for years. Now you just hand over that massive amount to those Wall Street financial institutions?”

But as US treasury chief, surely Mr. Paulson was smarter than the average US taxpayers and knew that the money was put in good use. Shaded with the trauma of the Great Depression of 1929, where many banks in United States went bust that lead to the severest economic downturn the world has ever witnessed, he did numerous efforts to prevent the history from repeating itself –and as an economist, he definitely knows that the bailout plan was one of the most compulsory endeavors.

Yet he was not mistaken and now look at how his bailout plan swerved United States from encountering what they have had in 1929. It may be too soon to conclude that the bailout plan has succeed, but without doubt the US treasury under Paulson performed really well in handling the 2008 financial crisis and deserved a better score than their compatriots in 1929.

And thanks to the bailout now the dust has settled –while the US economy in the Great Depression took about 10 years to fully recover, the US economy (now headed by the new treasury secretary Tim Geithner) starts to show several encouraging signs of recovery at the moment and many economists believe it won’t take that long for the whole nation to finally convalesce.

Funny, here in Indonesia we are dealing with a similar situation. Many people are in disagreement regarding the $670 million Bank Century bailout and argue that it would be better if such amount of money is allocated in other sectors.

For many Keynesians economists, who are educated in throwing money during bad times through aggressive spending to prevent the economy from dreadful downward spiral, an insolvent bank’s bailout is among the list of where the money should be thrown.

There is no doubt that if we do not want to be bumped into another financial fiasco, we should be all Keynesians by now. And basically in Keynesian economics throwing bailout money in this kind of circumstance proved to be necessary –in other words, if government really wants to prevent a systemic failure, giving bailout for an insolvent bank whose collapse can severely damage the economy is never a question.

And this left people in Indonesia treasury in a tight spot; if they don’t lend Bank Century that huge amount of money and let the bank fold, the domino effect from the collapse will be immense and will bring other 23 banks into bankruptcy as well and trigger the crisis of confidence among the market–and eventually the impact for Indonesia’s economy will definitely be much bigger than only $670 million money which the treasury proposed to bail the bank out.

As our economy is performing really well at the moment and various economic indicators signify a brighter future for this country, we cannot allow the havoc to happen and surely we don’t want to return again to the gloom that we experienced during the 1998 financial crisis.

Here in economics we face trade-off; when things don’t work according to the original plan, sometimes you have to sacrifice something in order to achieve a more desired ending.

It is hard being government officials like Sri Mulyani and Hank Paulson these days; things don’t really work according to their plans as a catastrophe named global financial crisis has hit many countries really hard and put many treasury chiefs, including them, in the eye of the storm.

It never rains but it pours for our treasury chief; in her attempt to fix the situation, political dispute regarding the bailout proposal is rising. People question whether there is a political background behind the plan or not and do not believe that such massive amount of bailout is really necessary.

But instead of wrangling over the political dispute of the bailout ahead of the necessity of the bailout to the economy itself, we should realize that Sri Mulyani is the one who raised Indonesia as the unlikely winner in this global financial crisis as she helped Indonesia to record a positive 4% economic growth amid the current turmoil.

She has proven to us that she has the capacity to usher us through the storm, so by putting the $670 million Bank Century bailout proposal forward, certainly she is not that dumb to throw her entire hard work to waste and put Indonesia’s economy at stake by prioritizing few politicians’ self interest above the country’s.

Or if you were her, would you do that with the risk of losing all of your flawless credibility and previous achievements as treasury secretary?

If your answer is negative, then it should clean your mind regarding whether there is a political motive or not behind the bailout plan as well as unfolding the importance of the money for her to rescue the economy and keep it firmly on the right track.

Appointed as a treasury secretary, in economics undeniably Sri Mulyani is smarter than the average of us and comprehends the problem better than we do –and she will not bet that huge amount of money if she thinks it is not really necessary.

Hence let’s halt this hassle and simply put our faith in her like what the Americans did to Hank Paulson. Still have doubts about the money’s huge amount? Think in the long-run and consider it as a trade-off for saving more in the future.

This article was published in The Jakarta Post on Wednesday, September 9 2009

A Sense of Nationalism in FEUI

The last day of final exams for fist-year students at the University of Indonesia's Department of Economics (FEUI) took place on June 5, and as I put my exam paper on the front desk and walked out of the classroom, I knew that I had just completed my thrilling first year at FEUI.

Regarded as one of the best economics departments in Indonesia, I have discovered that studying economics at FEUI is not only about the knowledge, but also the inspiration and motivation from people who have dedicated their lives to Indonesia.

During my first year at FEUI, I have attended the classes of Sri Mulyani Indrawati, Miranda Gultom and Dorodjatun Kuntjoro-Tjakti, and I see a resemblance between all three, in that they all apply their knowledge to make Indonesia a better place.

For people like them, with their busy schedules, it is unfeasible they can attend classes and give lectures every week, and most of their lectures are given by other lecturers or teaching assistants.

Their attendance comes on rare occasions only and, therefore, is quite special.

The most remarkable moment for me was when Finance Minister Sri Mulyani Indrawati, taking time out of her busy schedule, lectured us on macroeconomics.

Yes, it has been three months since she came into the classroom and gave a memorable lecture to about 40 first-year students, but what she said still reverberates in my mind. During the class, her comprehension and experience in economics nailed me and my friends to our seats. Beyond that, we were dazzled not only by her intelligence, but also her ability to inspire us with her motivating words.

In a lecture that ran for more than three hours, she presented more than just economics knowledge. She taught us about nationalism; the gratification of being a servant of Indonesia and doing the utmost to surmount its problems.

For her, helping Indonesia to overcome its numerous predicaments is a challenging yet welcome task. She portrayed it by telling us about her various experiences as finance minister, which impressed us enormously. Asked why she chose the path to be a minister, she said it was just one tangible form of her dedication and devotion to Indonesia.

Being a mother of three and a minister at the same time is not easy, but she deems it a great honor. It is, she said, a call that has to be answered to fulfill her responsibility to the country.

"When you are young, you study. Then collect wealth, as much as possible, until the age of 40. Afterward, dedicate yourself for several years to the country in which you were born.

"After you have dedicated yourself to Indonesia, you will be relieved that you have already done something for your motherland and you can live your later life in serenity," she said.

The most striking moment was when she addressed us young students as the ones who are responsible for the future of the country. Given the complexity of the various problems in Indonesia, her words made me realize that in the future it will be our duty, as students of economics, to apply our knowledge to help Indonesia grow in prosperity.

The economics that I study at FEUI is not the science of greed; it is knowledge that can be applied to solve important social problems that Indonesia is dealing with at the moment.

Perhaps it is true that most of the younger generations of Indonesians are ashamed of their country, but count me off that list. This is because in my first year at FEUI, I was taught that nationalism is defined simply as: what makes you allowed to criticize your country when you have never done anything for it?

I share this feeling with other young Indonesians, so that we will have the willpower to roll up our sleeves and help Indonesia overcome its problems.

Although Indonesia is gifted with wonderful land, diverse cultures and plentiful natural resources, the country is currently in a situation it is not supposed to be in.

It is time for Indonesia to stand at the level where it belongs, and like Sri Mulyani Indrawati said, we hold the responsibility to make this a reality.


This article was published in The Jakarta Post on Thursday, June 26 2008