Indonesia Without Sri Mulyani

Now that Sri Mulyani Indrawati has come and gone as Indonesia's finance minister, the question that has to be asked is whether reformasi, the creation of a more open and liberal political environment, has been effectively buried by the successors to the oligarchs of the New Order period ruled over by the late strongman Suharto.

The signs are not good, almost as if, having rejected a foreign organism, the body is now sealing itself against other invasions. President Susilo Bambang Yudhoyono, after a successful first term, is emerging as a weak leader with little desire for hard choices or tough action. The legislature, having promised the passage of 70 pieces of legislature this year, has not passed a single bill since October. They have now slashed their goal to 17. The post of Central Bank governor has been vacant since Boediono resigned to become Yudhoyono's vice president.

Sri Mulyani was regarded as speaking for a new Indonesia, in which business would be transacted transparently and cases would be decided hopefully on their merits. But almost immediately on her departure, Indonesia's Supreme Court ruled that a high-profile tax case involving PT Kaltim Prima Coal, a company controlled by the empire of Aburizal Bakrie, be dropped. Three Bakrie group companies, including Bumi Resources, are accused of evading a total of Rp 2.1 trillion (US$227 million) in taxes during the 2007 tax year.

The odds that the government will ever see any of that money are fast disappearing. The Supreme Court's ruling was followed almost immediately by a call in the House of Representatives to remove three top officials of the Directorate General of Taxation. In short order, Golkar, the political party that Bakrie heads, was said to be introducing legislation to abolish the directorate altogether.

The question is whether Yudhoyono, who has won international plaudits as a reformer, was ever as much a reformer as advertised. As Sri Mulyani told Joe Cochrane in an interview with the Jakarta Globe, and reprinted in Asia Sentinel on May 27, during the president's first administration, then-Vice President Jusuf Kalla made sure that the interests were served of Golkar, a party established by Suharto and dominated by the old order of businessmen who believed the government and its resources were there to protect them and to loot.

Bakrie was and is the chief exponent of that philosophy, the 64-year-old patriarch of Bakrie Brothers group, Indonesia's biggest corporate entity. On two occasions, as the Bakrie telecoms-to-coal mining interests fell on hard times, government money was used to bail them out. On the third, during the global financial crisis that began in October of 2008 and melted down Indonesia's stock market, laying bare a raft of Bakrie stock manipulations, Sri Mulyani got in Bakrie's way and refused another bailout. That set off a two-year confrontation between the two, which Asia Sentinel first reported in October of 2008.

Yudhoyono allowed Sri Mulyani to overhaul two of the most corrupt and inefficient institutions in Indonesia; the customs and the tax offices. At the customs office, she removed 1,500 staff and replaced them with 800 new officers, raising their pay. And while cleaning out the port system appeared beyond reach, there is little doubt that she had an impact.

Yudhoyono has insisted that reform will go forward. His appointment of the Netherlands-born Agus Martowardojo, CEO of the Bank Mandiri, the country's largest bank, to replace her, has drawn cautious endorsement from the investment community. But it is clear that Bakrie, having adopted a months-long confrontational stance to get rid of Sri Mulyani, has steered Golkar close to the president, and he intends to stay there. Whatever Martowardojo's clout, it won't be enough to overcome Bakrie's.

What will come of her reforms? As much as her crusade to get rid of corruption, Sri Mulyani's more important role was to steer the economy. And on that, she got superlative marks from the time she took over from Bakrie, who served in the cabinet as Coordinating Minister for Economic Affairs, and who made a hash of his job. He was moved by Yudhoyono to the post of Coordinating Minister for Social Welfare. The influential Indonesian-language Koran Tempo editorialized that under Bakrie, "the economy staggered to a crawl. Inflation rates soared. The rupiah plummeted. All thanks to poor coordination among the economic team under Bakrie's command."

A turn back to the Suharto era doesn't mean an economic collapse, and it isn't likely to go back that far in any case. Indonesia, with a vast consumer market of 230 million people and some of the world's richest natural resources, remains a relatively attractive target for foreign investment in spite of the uncertainty. Despite looting the public treasury, Suharto brought in a cadre of economic professionals who brought inflation under control, privatized natural resources, passed labor laws relatively favorable to multinationals, divested many – though not all – state-owned companies and solicited funds and advice from the International Monetary Fund and the World Bank.

In general, the country's economic progress, if slow, was steady until the 1997-1998 Asian Financial Crisis which exposed the extent of corruption of the Suharto family and their cronies. It does not appear now that Yudhoyono will become the center of the kind of personality cult that coalesced around Suharto. A lively and relatively sophisticated press, both English and Indonesian language, has grown up in the 12 years since the strongman was ousted. A flock of watchdog non-governmental organizations has come into being along with a growing middle class.

But no better metaphor for the government exists than a volcano of stinking mud that has been boiling out of the ground for almost exactly three years and shows no signs of stopping for years. It is Indonesia's worst manmade environmental disaster and it began on May 29, 2007 when PT Lapindo Brantas, a Bakrie-owned company drilling for gas in East Java allegedly didn't cap the well correctly. Lapindo Brantas claims the rupture was caused by a distant earthquake fault. Bakrie has not been held to account for the disaster and won't be. Jakarta has assumed responsibility for cleaning up the disaster and the Environment Ministry awarded Lapindo Brantas its "Oscar" for complying with safety and environmental standards a year ago. Impunity continues.