http://www.atimes.com/atimes/Southeast_Asia/FJ23Ae02.html
Indonesia's new cabinet united against corruption By Bill Guerin JAKARTA - "The time for talk and promises is over. It's time to work," said Indonesian President Susilo Bambang Yudhoyono when unveiling his United Indonesia Cabinet late on Wednesday. Yudhoyono, 55, who became the country's sixth president after beating incumbent Megawati Sukarnoputri in last month's election, has pledged to fight corruption, boost investment and create jobs. His 36-member cabinet combines old and new faces with experienced professionals as well as several political appointees, retired military officers and veteran politicians from earlier administrations. The new government will also set up a National Economic Council (DEN) and National Security Council (DKN) that will function as special advisory agencies staffed by professionals. The country's key economic ministers include Coordinating Minister for Economic Affairs Aburizal Bakrie, Finance Minister Yusuf Anwar, Industry Minister Andung Nitimihardja, Trade Minister Mari Pangestu and National Development Planning Minister Sri Mulyani Indrawati. Yudhoyono is expected to limit Vice President Jusuf Kalla's role in economic matters, after claims that the latter's straight-talking, pro-ethnic-Indonesian style alienated several prominent ethnic-Chinese figures just before the final election runoff in September. One of Indonesia's most influential and prominent indigenous business tycoons, Bakrie has a vast range of business interests. Some analysts have seen reason for concern with Bakrie's appointment because the Bakrie Group, the conglomerate founded by his family in 1942, ran up US$1 billion in debts during the regional financial crisis. The view is not one held by the new president, who said, when acknowledging that his cabinet lineup would not satisfy all parties and members of the public: "For me, what's important is their performance, hard work and service, so that in five years from now the Indonesian nation's condition will be better. Thus we must see this cabinet remain intact." Chairman of the Indonesian Chamber of Commerce and Industry (Kadin) for the past 10 years, Bakrie has said he will champion the cause of domestic businesses and the country's trade expansion. Indonesia lags behind its neighbors in terms of international trade, especially in pursuing bilateral free-trade agreements. In Melbourne this year at the opening of Kadin's first overseas office, Bakrie suggested that Australia should use Indonesia as a bridge to East Asia after the former's free-trade agreement with the United States. "The Australia-US agreement is natural," he said. "I am a believer in free and fair trade, and I believe if you have such a deal and also one with East Asia, that would be best. Indonesia can build a bridge between Australia and the East Asian economy," he explained. The Trade and Industry Ministry has been split into two new portfolios. Mari Pangestu, the new trade minister, is an outspoken free-market economist and a former executive director of the Center for Strategic and International Studies (CSIS). She said on Thursday that Indonesia should play a bigger role in East Asia, as a regional production center for electronic and automotive parts for the global market. Economic growth, driven mainly by domestic consumption, has been modest in recent years at around 4%, well below the 7% needed to provide work for new job seekers. But stronger growth is possible only through international trade and an open market economy, Pangestu said. Pangestu said that in order to boost exports, improving the productivity and efficiency of the manufacturing sector is a must. She also said her ministry will need to anticipate the negative impact of trade liberalization. "This does not mean that we should be anti-globalization. What is more important is that we must anticipate the negatives." Yet if Indonesia's trade position is to improve, Yudhoyono will need to get a handle on graft, unlike his predecessor, Megawati, who was widely criticized for her poor record in combating one of the country's major problems. A recent State Audit Agency (BPK) report said losses of state funds through corruption amounted to some Rp37.39 trillion (about US$4.1 billion) in the first semester of 2004 alone. In his inaugural speech hours after taking the oath of office on Thursday, Yudhoyono renewed his pledge to kick-start growth and lead the anti-graft drive, a show of his commitment to eradicate corruption. "The government will stimulate economic life to reach higher economic growth," he said. "The government will actively carry out a drive against graft that I will lead directly." Yet in a press release that same day, Berlin-based Transparency International (TI) announced that Indonesia remains one of the world's most corrupt nations, along with Angola, the Democratic Republic of Congo, the Ivory Coast, Georgia, Tajikistan and Turkmenistan. Based on interviews with business people in 15 cities across Indonesia, TI concluded that bribery and other unauthorized fees were widespread between business people and state officials in order to obtain business permits and during court trials (see Honesty skids on oil, Oct 22). The new minister of finance, Jusuf Anwar, was the Asian Development Bank's executive director for Indonesia. Though he previously served as chairman of the Indonesia Capital Market Supervisory Board (Bapepam) and is a long-serving official at the Finance Ministry, Anwar is decidedly lightweight in terms of his track record. The International Monetary Fund's Southeast Asia executive director, Sri Mulyani Indrawati, who had been widely tipped to become the new finance minister, was instead given the national development planning portfolio. Indrawati, a US-trained economist, was allegedly deemed to be too "pro-Western" and "pro-IMF" by the Islam-based Prosperous Justice Party (PKS), Yudhoyono's strongest ally in parliament Shortly after Megawati replaced Abdurrahman Wahid as president in July 2001, Indrawati quipped in an interview, "Indonesians liked the IMF when it helped in toppling a president. Now, they are just beginning to realize they must really do the IMF programs if they want the IMF loans." She cautioned at the time, however, that the IMF prescriptions were monopolizing the efforts of the new government's economic team and preventing it from developing broader policies that were critical to economic development. Yudhoyono has dismissed fears his cabinet would be influenced by the IMF, though it is unclear whether his government will continue with the economic reforms laid out in a government "white paper" launched under Megawati to follow up on the IMF-led reforms program. On Monday, Indonesia's senior Economic Ministry disclosed that the government had failed to achieve almost a third of the reforms targeted in the white paper for completion by the end of September. The programs are a series of action plans covering macro-economic stability, reform of the financial sector and the boosting of investment, exports and employment. The exports, investment and employment plans cover a wide range of targets, including legal reforms, promotion of small and mid-sized enterprises, infrastructure development, job-creation measures and improvements in tax and custom services. The draft state budget Megawati presented in August assumes foreign assistance of $3.1 billion in 2005, up 8% on this year. In an apparent show of support, representatives of the Consultative Group on Indonesia (CGI), which groups 30 bilateral and multilateral donors and is the country's main donor organization, met with Yudhoyono a week before he took over the leadership of the country. IMF officials continue to make regular visits to Indonesia to check the progress of reforms until the government settles its outstanding debt, estimated to be some $9.7 billion, to the fund by 2010. Manufacturers have long complained that the domestic investment climate is not conducive for doing business, and asked the government to scrap red tape, implement tax reform and improve the country's infrastructure. Newly appointed Minister of Industry Andung A Nitimihardja, who was previously a senior official of the Investment Coordinating Board (BKPM), said on Thursday that one of his immediate priorities is to review existing regulations that have hampered the performance of the manufacturing sector. There is some cause for optimism on the foreign direct investment front, however, with foreign investment approvals hitting a 2004 high in September of $4.24 billion compared with the previous monthly high of $799 million in April. Accumulated approvals for the first nine months of 2004 totaled $7.99 billion - up 24% from a year earlier. Foreign reserves have also been strengthening, another positive factor in regaining investor confidence over the country's monetary stability after its departure from the IMF programs. Foreign-exchange reserves are now at $34.81 billion, the central bank reported this week. A healthy foreign-reserve base also boosts confidence and will help protect against speculation on the rupiah. Though for the most part the early signs are good, in terms of promises and vows, Yudhoyono and his cabinet, swept into office on a wave of goodwill, will need to show some quick progress on the major fronts to avoid a backlash from a public with unreasonably high expectations of Yudhoyono's government. But the new president is no dreamer, and he warned Indonesians not to expect miracles. "Today's joyous atmosphere is blanketed with a great optimistic spirit. However, we have to remember we must go through difficult times and face heavy challenges to our economy," he said on Wednesday. Bank Indonesia (BI) governor Burhanuddin Abdullah needs to get closer to this reality. On the same day, Abdullah said glibly that the new economic ministers are seen as "market-friendly" figures who can bring about positive changes and meet investors' expectations. "The market is familiar with them and understands what the ministers want to do," he said. The truth is that one of the most pressing matters in hand for Yudhoyono is to signal the seriousness of his administration to both domestic and international audiences. This can only be achieved by communicating its policies to the public and explaining what it is doing and why. The markets, and investors, are looking for signs of a long-awaited strong governmental will, not soothing platitudes from the governor of the central bank. Bill Guerin has worked for 19 years in Indonesia as a journalist and editor. He specializes in business/economy issues and political analysis related to Indonesia. 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