One last insult for Indonesia's Sri Mulyani

Sri Mulyani Indrawati, arguably Indonesia's most respected public figure internationally, was given a rude sendoff as Finance Minister Thursday by the House of Representatives, with most opposition legislators either being absent or boycotting her presentation of the 2011budget.

Sri Mulyani is due to join the World Bank as a deputy director on June 1.

The walkout by members of the opposition Indonesian Democratic Party of Struggle (PDI-P), which failed to appear in the House entirely, and the People's Conscience Party (Hanura) was a piece of political theatre ostensibly connected to a House investigation into the former finance minister's role in bailing out the midsized Bank Century during the global financial crisis of 2008.

But in fact, rather than driving Sri Mulyani out over corruption charges, most of the house seemed to be breathing a sigh of relief because President Susilo Bambang Yudhoyono's most prominent reformer was leaving them to their own devices. Lawmakers Wednesday almost immediately went after the Directorate General of Taxation, which comes under the finance ministry's command, because of private fears the tax office was being too zealous in going after tax cheats.

Jakarta is buzzing with speculation that the former finance minister's resignation is connected to a new and major political realignment that gives her arch-enemy, tycoon and Golkar Party chief Aburizal Bakrie, new sway in the government and national politics. Yudhoyono, who is increasingly being regarded as a relatively weak leader who more approximates a prime minister that a president, took pains to deny that, saying the new finance chief must "work as hard as Sri Mulyani has over the last five years."

After going after Sri Mulyani fang and claw during the Bank Century probe and facing Yudhoyono's wrath, Bakrie has since changed tacks and come closer to the president. One of the signals for the realignment was Bakrie's appointment in early May as managing chairman of a new political joint secretariat that is likely to play an important role in determining government policy. The secretariat was created at a closed meeting of ruling coalition parties at the home of President Susilo Bambang Yudhoyono, just two days after Sri Mulyani said she was leaving.

Both Sri Mulyani and President Yudhoyono have denied that her move to become managing director of the World Bank was the result of a political deal. But it is now largely accepted as fact that a realignment is coming in Indonesian politics which will give Bakrie more power and pull in the horns of the reformers. On Tuesday, Sri Mulyani, in a public address said she could "not afford" to be part of a new political realignment.

"The news that Finance Minister Sri Mulyani Indrawati was leaving the government to take up a senior position in the World Bank caused a flurry of negative investor sentiment," wrote UBS emerging markets economist Jonathan Anderson. "Sri Mulyani was widely seen as the ‘top reformer' within the Indonesian administration, and her departure has been billed as a serious blow to efforts to increase transparency in government and the market orientation of the economy."

At that, though, the flurry of negative sentiment appears to have been brief.

"Indonesia does okay with or without her," said a Jakarta-based analyst. "The markets don't care that much. Corruption is factored in and fundamentals are sound. SBY is weak and behaves as if he was a PM instead of a president. Everybody knows it's corrupt and they work with it."

The appointment of Agus Martowardojo as Sri Mulyani's replacement appears to have drawn at least moderate approval.

"We have noted that Sri Mulyani's exit was a political compromise between the government and influential members of the legislature, and not necessarily a sign of unwillingness to undertake fundamental reforms in the economy," Anderson wrote. "And the appointment of Agus Martowardojo, currently president of Bank Mandiri, as her replacement has been well received by foreign investors."

Martowardojo, who assumes the new job on Aug.1, is currently president director of PT Bank Mandiri, the country's biggest bank. He has little political experience, but he has been given high marks for turning around the distressed Bank Permata prior to joining Bank Mandiri. He graduated from the University of Indonesia in 1984 and worked at a variety of local banks. He was nominated as a candidate for central bank governor in 2008, but he and the other candidate at the time, Raden Pardede, were both rejected by a parliament that appeared keen to flex its political muscle. Analysts and economists had considered both candidates suitable for the post.

The president ridiculed the idea that he had engineered Sri Mulyani's World Bank position as a way out of the standoff between her and lawmakers like Bakrie. Nonetheless, it is increasingly apparent that Bakrie has emerged as a big winner with the former finance minister's departure, no matter how tough Martowardojo turns out to be.

In her speech earlier this week, Sri Mulyani made it clear that the political battle that began late last year when the Golkar Party led a House investigation into the Century affair had resulted in an uncomfortable reality.

"I am not a politician, but I understand politics," she told a packed ballroom at the Ritz-Carlton Hotel in the Pacific Place shopping center. "There has been a marriage of two political sides and it will not uphold the public's needs. I cannot afford to be part of it."

There is widespread speculation in Jakarta that the appointment presages Bakrie's emergence onto the national scene in 2014 as a candidate for president to succeed Yudhoyono. There is also a considerable groundswell of support for Sri Mulyani to comeback from the World Bank at that point to run for president as well. That would set up a clearly-defined difference in philosophies between the old Indonesia represented by Bakrie, and a new one which is taking an interregnum.