Indonesia's Reformasi Under Threat

Earlier this week, news broke that Indonesia's Supreme Court had ruled in favor of a Bakrie group-affiliated mining company embroiled in a Rp1.5 trillion ($160.5 million) tax evasion case with the tax office. Isthis part of, or a result of, the much-speculated "political compromise" that also, if you believe the buzz, forced Sri Mulyani Indrawati out as finance minister and brought in Aburizal Bakrie as the ruling coalition's political coordinator?

My personal belief is no. Why? Because Sri Mulyani told me so. I had the great fortune to get the last exclusive interview with Sri Mulyani for the Financial Times newspaper just before she left for Washington DC on Wednesday to take upher new post with the World Bank.

We had quite a discussion in the sitting room of her government-owned house in the Kebayoran Baru section of Jakarta on Monday afternoon. She was dressed in one of her typical business suits, but nearby, some personal items had been wrappedwith plastic and duct tape, waiting to be loaded onto a moving van, a reminder that she was no longer in President Susilo Bambang Yudhoyono's cabinet.

Over tea, she gave me the lowdown on her resignation. But more importantly, she warned that Indonesia's hard-won democracy andeconomic reforms were in danger of being "hijacked" by a certain group with narrow, personal vested interests, and that a battle for the country was underway right now.

First, let's get to the resignation. In April, Sri Mulyani was officially offered a job as a managing director at the World Bank. She said the growing partnership between Yudhoyono and Bakrie, chairman of the Golkar Party, and the continuing assault by lawmakers in the House of Representatives "made meless effective."

In a nutshell, she had had enough of the political games and personal attacks, and the World Bank offer became her escape hatch. She said she told World Bank officials that because she had signed on again as Indonesia's finance minister, she "couldn't ethically leave" her post. However, she said she nonetheless forwarded the job offer to Yudhoyono — and let him know that she was interested intaking it.

"I apologized as I did it," Mulyani told me, adding that by alerting the president about the World Bank offer, she was "not refusing this offer, but more importantly, it becomes a solution to the current political crisis."

Sri Mulyani said it was Yudhoyono's decision on whether she stayed or left. The president asked for a formalrequest from the World Bank, and then spoke by telephone with the Bank's president, Robert Zoellick.

Then Yudhoyono, who had publicly backed Sri Mulyani during the Bank Century affair, agreed that she could take the position, she told me. In other words, I surmised, helet her go. Convenient end of the political crisis.

"He also realized that it was going to be a great loss for his government, but healso understood the political context," Sri Mulyani said, adding that there was "a mutual understanding between the president and myself."

Forher part, Sri Mulyani said she was hamstring by what she called "irrational" personal and political attacks by members of the House. These attacks included boycotting meetings with her to discuss importantnational issues such as the state budget, and demanding that the Corruption Eradication Commission (KPK) treat her as a suspect in the Bank Century case.

The other problem dragging her down, she said, was the current political structure in Indonesia. She noted that under Yudhoyono's first administration, Jusuf Kalla was vice president and Golkar's interests in the cabinet were served. However, in the second administration, Bakrie, the new Golkar chairman, is outside the cabinet, which she said was a problem for her.

During our interview, she directly blamed Bakrie for the attacks against her over Bank Century, saying it was an example of a political figure pursuing narrow interests. I put this and other claims by Sri Mulyani to Lalu Mara Satriawangsa, a Bakrie family spokesman, who denied that the Golkarchairman had targeted her or forced her out of the cabinet.

SriMulyani said there were other figures at both the national and provincial level who were trying to "hijack" Indonesia's political and economic system for their own interests. She said these figures, who shedeclined to name, were trying to amass political influence and wealth ahead of the 2014 presidential election, which will be wide open becauseYudhoyono cannot seek a third term.

Sri Mulyani, noting that Indonesia is trying to build a system based on the rule of law and democratic elections, said the business community is also very concernedthat the country's system is being "co-opted for very personal and narrow interests." She also said that Yudhoyono and Vice President Boediono were both aware of the situation and certainly didn't want the country "co-opted by special interests."

One of the main themes surrounding the Sri Mulyani affair has been the presumed aversion to herreform efforts. In December, she said in an interview that Golkar politicians wanted her out because they disagreed with her reform program. Golkar officials have denied this repeatedly.

During our chat, Sri Mulyani said it was easier for her to initiate reforms during Yudhoyono's first administration, because the major political players all had cabinet positions, and also because the costs of the reforms didn't begin to hurt entrenched vested interests until 2008 and early 2009.

"It was not as easy to get preferential treatment" after the reforms took effect, she said.

Indonesia in particularis suffering, she said, because some of the vested interests she mentioned were also attempting to sidestep the tax system, her ministry's establishment of a tax unit for high-wealth individuals.

Thereare "people who are very rich, even in a regional or even global context, but the tax payments are very, very insignificant from high-wealth individuals in Indonesia," she said.

"It's certainlynot a weakness that can be blamed on all those people, because our tax department was so weak in the past, and we are trying to correct that," she said. "And that has become one of those factors that will affect a lot of people in Indonesia, especially those who are influential."

Thatcertainly goes some way in explaining the recent Gayus Tambunan tax case, not to mention Yudhoyono's instruction to the National Police to go after tax evaders, which obviously included companies linked to the Bakrie group and other tycoons.

Where does it all end? Sri Mulyani looked frankly relieved to be exiting the battlefield. And although she said she has no plans to run for public office in Indonesiain the near future, something tells me she will be rejoining the fight before this decade ends.

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