Crony v reformer; fight becomes feisty in Jakarta

IT IS Asia’s feud of the year, and one that could define whether Indonesia makes it to international investment grade, or will spend some more time in the economic basket-case category.

In one corner is Finance Minister Sri Mulyani Indrawati; eloquent, stylish, almost an anti-politician; a cleanskin with a self-professed ”obsession” about the economic and structural reform of Australia’s most crucial neighbour. A former International Monetary Fund official, she’s the rare Indonesian with a positive international profile. It is often said in Jakarta that if the technocratic Mulyani were toppled, the stock and currency markets would go into free fall.

In the other corner is Aburizal Bakrie; a charming and crafty old Suharto mate, Mulyani’s recent cabinet colleague and occasional political kingmaker. One of Indonesia’s richest men, he is a resources mogul who rather likes the old Indonesia, where one’s proximity to power determined how rich one could be. He’s another Indonesian with an international profile, though his is mostly about how he has manoeuvred in Jakarta’s too-often opaque system to keep control of his Bumi Resources coal empire, Indonesia’s biggest company.

Mulyani says he is actively derailing her reform agenda, which is the bedrock of the recently re-elected Susilo Bambang Yudhoyono Government, which wasn’t able to find a place for powerbroker Bakrie, the former ”minister for the poor”. She believes Bakrie, the chairman of Suharto’s old fief Golkar, is trying to stitch her up over the state’s $A720 million bail-out of a crucial bank as Indonesia was tottering, in common with the world, in the face of last year’s financial meltdown.

Bakrie says that as a reformist Finance Minister, Mulyani makes a ”good cashier”. His contempt for her and frustration are palpable. By Indonesian standards, Mulyani is unusually direct, another reason why the foreign investment community likes her. She tends to tell it like it is, which can be confronting to many in a country that’s made an art form out of shadowplay.

Bakrie’s best work seems to be in the shadows. When I interviewed him in his Dutch-era ministerial office last year, as Bumi was tottering and there were questions about his fealty to state office, I asked him to place his hand on his heart and swear on the Koran that he had never done business in the four years he’d been in the cabinet.

His eyes lit up. “I have never done that! Never! Never! I am no longer a businessman. I know what [my family] is doing, but I’m not a businessman at all. I have devoted four years of my life to this job [in the cabinet]. I have never been involved in any business discussion.” Glancing at the CNBC ticker on a TV in the corner of his office, he admitted “I go to the company office to pray, yes. And if in the evening my brothers would like to report, yes, we discuss, that’s all.”

This feud has been building for a while. Last year, amid the global financial crisis, Bakrie was grumpy that Mulyani didn’t suspend trading at the Jakarta Stock Exchange, as Bumi shares went into free fall, losing 95 per cent of their value at one point. Her view was that the market would decide. She played it straight, but there were some who thought she might be enjoying Bumi’s discomfort.

Bakrie got through that crisis and Bumi survived, just. Then politics became the battleground, as always in Asia, closely connected to what happens in business and the economy. Formerly a coalition ally of Yudhoyono’s Democrats, Bakrie ran Golkar against the President in the parliamentary elections this year and got hammered. But Yudhoyono still didn’t have enough seats in the house to push through his reform agenda, of which Mulyani is the star. Bakrie, now out of cabinet, saw an opportunity and, after much horse-trading, came back to join Yudhoyono’s Democrats in a wobbly coalition.

This current episode of the Mulyani-Bakrie feud is about the bail-out of the mid-ranking Bank Century. She said she and then central bank governor – now Vice-President – Boediono did it to save the system, and Indonesia, from possible collapse. Golkar is widely spinning that powerful interests had accounts there, that it was a political mates’ deal, that it saved many political contributors. The wonderful irony is that the political party most historically associated with corruption and collusion, Golkar, is the one suggesting the bail-out was dodgy.

So where does it all go? For the moment, it’s the front pages of Jakarta’s now boisterous press, the media loving it all as a rare feud breaks out into the open. Public and investor sympathies are squarely with Mulyani, there’s even Facebook sites devoted to ”saving” her, and it seems she wouldn’t be going public without her patron Yudhoyono’s blessing, particularly as his running mate Boediono is also in the firing line. Though she’s never formally been a politician, many see her as a possible future president.

Beyond all this, Indonesia has had a good year, suggesting Mulyani’s move last year was prudent. The rupiah is the best-performing currency in Asia so far this year. Jakarta stocks have near doubled this year.

There’s a lot at stake in this feud, and to the victor will go the spoils. But Indonesia may be spoiled in the wash-up.

Eric Ellis writes for Forbes from Asia.

(See original publication)