SRI Mulyani Indrawati could teach her APEC colleagues something about structural reform. In a society investors judge as one of the most corrupt in the world, Indonesia’s award-winning Finance Minister is spearheading a radical, unorthodox campaign to wipe out corruption.
When APEC ministers and officials talk about structural reform – as they are doing in Melbourne this week – the point of it often is as clear as mud. When Sri Mulyani talks about her war on corruption, it’s as clear as the midday sun over Java.
Last September she launched a campaign to clean up the Supreme Court, the audit office, and her own ministry – including the tax office and the customs service, long seen as havens for officials on the take.
Her tactics were not mere exhortation. At the Customs Office she transferred all 1300 staff, replaced them with 800 new officers, who were paid roughly four times as much as their predecessors – and told them that if they took bribes, they’d be put on trial.
“If people are not receiving salaries of a realistic level, it is impossible to ask them to work properly,” Sri Mulyani explains. The new salaries, she says, were still below private sector pay, but “eliminated the most basic distortions”. Without that, she says, she could not have begun.
“I told them: ‘If, after this, you act corruptly, I will not apologise for punishing you with the harshest of punishments.’ ”
She was not expecting an overnight miracle, but concedes it hurt when some months later, acting on a tip-off, the Corruption Eradication Commission raided the customs office at Jakarta’s port, Tanjung Priok, and found envelope after envelope of banknotes stuffed in filing cabinets, office drawers, even down officers’ socks. That haul found about $60,000 – some of it in Australian dollars.
Sri Mulyani apologised to Indonesians, but does not concede defeat. “Was I expecting that after six months, everybody would become clean?” she asks. “Certainly not. I have 62,000 people working for me. Will all the judges immediately become good? No, this is going to be a continuous battle, which leaders must wage constantly.”
Transparency International’s 2007 chart ranks Indonesia among the 40 most corrupt countries in the world, as judged by investors. In transparency, Indonesia ranks with Russia as equal 143rd of 180 countries. To give you an idea of how bad that is, China and India are equal 72nd, Malaysia 43rd and Singapore equal 4th.
Corruption is widely seen as a brake on Indonesia’s ability to attract foreign investment, and hence, growth. The OECD’s recent report on Indonesia – another first for the OECD under the new leadership of Angel Gurria – notes that its growth rate has picked up to 6% plus, which is not enough to reduce poverty rapidly, and Indonesia lags behind Asia’s leaders in attracting foreign investment.
Sri Mulyani says she would rather have solid sustainable growth than a world-beating pace. One of the Government’s top priorities, she says, is to stop illegal logging on Sumatra and Kalimantan, and reverse Indonesia’s deforestation by planting more forest than is cleared. She likes the Garnaut report’s idea of Australia allowing firms to offset carbon emissions by preserving forests in Indonesia and Papua New Guinea.
A frequent visitor here, Sri Mulyani has long been seen as a rising star. The daughter of an academic in Semarang, Central Java’s biggest city, she studied at the elite University of Indonesia, becoming a protege of Widjojo Nitisastro, head of the “Berkeley mafia” of free-market economists who shaped Soeharto’s very successful reforms of the ’60s and ’70s. After postgraduate studies in the US, she returned to head a think tank at her old university, married and had three children, became an economic adviser to former president Abdurrahman Wahid, then went back to the US and became the International Monetary Fund’s executive director for East Asia and Pacific, until President Yudhoyono summoned her to join his cabinet.
She was minister for development planning when the tsunami struck Aceh. Amid the tragedy, she saw the opportunity to rebuild not only infrastructure but institutions. Her ally, Kuntoro Mangkusubroto, another on Jakarta’s short list of notoriously clean ministers, was put in charge of Aceh reconstruction, and revolutionised the system by appointing a small staff, paying them something like private sector wages, and insisting that all accounts must go to the Finance Ministry to reduce the scope for corruption.
Soon Sri Mulyani was Finance Minister, tackling tax reform, introducing a new foreign investment law, reforming state finances to make them more transparent, reducing fuel subsidies – and tackling corruption. For two years in a row she has been named Finance Minister of the Year by specialist magazines: Euromoney (2006) and The Banker (2007).
When heads rolled recently at Bank Indonesia – after the revelation that it had paid $3.7 million of state funds in 2003-04 in bribes to MPs to pass new banking laws – chief economics minister Boediono took charge of the central bank, and Sri Mulyani took on his job as well as her own.
The Jakarta Post, not always easy to please, applauded her as the best choice for the job. “She has proved her technical skills in managing the macro-economy,” it said, “and shown courage, consistency and impeccable integrity in treading the messy politics of development in a newly democratic system like Indonesia.”
Online celebrity site TokohIndonesia.com describes her as “a prima donna, smart, attractive and popular”. But prima donnas don’t last. Sri Mulyani has rolled with the punches and hung in there to keep reform going. She can tell Wayne Swan how to do it. [The Age, August 5, 2008]