WITH
Susilo Bambang Yudhoyono (SBY) re-elected for a second
term as Indonesia’s president, the big question Jakarta
bankers are asking is whom he will appoint to his
cabinet.
Bankers
have been happy with the incumbent finance minister, the
capable and – more important for one of the world’s most
corrupt countries – clean Sri Mulyani Indrawati. Her
steady hand has stabilized the economy and has so far
managed to avert the worst of the global financial
crisis.
Indonesia
needs annual GDP growth of 6% or more to keep its doors
open and people in jobs and so far Mulyani has been able
to deliver.
Some
bankers forecast that she will be replaced by the urbane
Gita Wirjawan, JPMorgan’s former country head in
Indonesia, who now runs a prominent private equity
company, Ancora. Since SBY grabbed Bank Indonesia
governor and former finance minister Boediono as his
vice-presidential running mate, the central bank slot
has been formally vacant, with Mulyani filling in
part-time alongside finance.
Speculation in Jakarta banking circles has it that
Mulyani might move over to the central bank full-time
and begin fundamental reform of the scandal-racked
institution, while Wirjawan takes the finance portfolio.
More
likely, however – and an outcome that would placate a
market keen for an accelerated reformist direction of
SBY’s second mandate – is for Mulyani to finish her work
fixing finance, with a newer reformist face taking the
BI governorship.
A leading
contender is Agus Martowardojo, who has done a good job
heading state-owned Bank Mandiri, Indonesia’s largest
bank, which was created a decade ago out of the chaos of
the 1997-98 Asian financial crisis. Bank-of-America
trained, Martowardojo joined Mandiri in 2005 and has
successfully consolidated the bank out of the best of
four failed state banks. He was overlooked for the BI
governorship the last time it was on offer.
Wirjawan
could go into BI but he is more likely destined for the
state-owned enterprises portfolio, which really means
minister for Pertamina, the traditionally scandal-prone
state oil company, long a vehicle of patronage in which
Indonesian dictators park their allies.
At 44,
Texas-educated Wirjawan is close to SBY, who has long
wanted him to go in and clean up Pertamina, a chronic
underperformer. Pertamina’s 2008 revenue was $55.4
billion but it returned just $3 billion in profit. By
comparison, Malaysian equivalent Petronas turned in $77
billion in sales for $15 billion in profits. Wirjawan is
a Pertamina commissioner (director) and is expected to
make the leap to minister if he’s asked.
That doesn’t much please
many of the Pertamina staff, nor the holdover cronies
from the Suharto era who fear Wirjawan’s reputation as a
reformist cleanskin and who have enjoyed lucrative years
plundering Pertamina and other lumbering companies in
the ministry’s anachronistic portfolio. But if Wirjawan
does take on state-owned enterprises, he will have to
hand over control of his Ancora investment house, which
has taken a handful of strategic investments in key
resource plays in Indonesia.
In the banking sector the
outlook in Jakarta is mostly upbeat. Goldman Sachs has
found several reasons to "keep positive" on Indonesia’s
banks. It says loan growth is likely to accelerate in
the half of 2009 ending in December as the world economy
stabilizes, "allowing banks to re-adopt their growth
strategy, and [as] political stability allows for the
ramp-up in various government fiscal stimulus projects,
such as infrastructure build-up".
Goldman
says sector liquidity is improving. The loan-to-deposit
ratio dropped to 72% in May from a peak in mid-2008. And
asset-quality concern "is gradually reduced, thanks to
resilient domestic consumption, rising soft commodity
prices and the rupiah, and gradual recovery of the
global economy".
The US bank continues:
"We believe Indonesia’s banks are likely to return to
strong growth in the second quarter of 2009 with 10% to
17% full-year estimated loan growth despite the
weak/negative loan growth in the first half of 2009."
Goldman has raised its target forecasts on Indonesia
banks by 10% to 19% over the next year, suggesting good
times are ahead anyway, but even better times if SBY and
his reformist colleagues vigorously advance the work
they started in the president’s cautious first term.