How Co-ordinating Minister Boediono has led the economic recovery of Indonesia in the wake of the 1997 Asian Financial Crisis.
What appears from the outside to have been the most remarkable feature of the Indonesian economic recovery since 1997 is how much has been achieved without obvious controversy. There certainly have been controversies and conflicts but rather less than might have been anticipated. One important reason for this has been the continuance of the policy first seen under General Suharto, the dictator who presided over a period of political suppression but reasonable economic growth. Suharto identified a group of economist technocrats who became popularly known as the Berkeley Mafia who were American-trained and who were isolated from political pressure by a series of what are known as ‘Chinese walls.’ What this means is that mechanisms were put into place to protect the economists from influence by external political influences. The same approach was used in 1997 when a man named Boediono, another American-trained economist, was chosen to become the Co-ordinating Minister for the Economy. Co-ordination is a particularly important function in the Indonesian government because lack of political will in the civil service and political elite interference can prevent policies which have been approved by the highest level of government end up not being brought into reality.
Boediono has not been entirely protected from external interference: indeed, the role of his apparent rival Yusuf Kalla, Vice-President and a fully-fledged pro-business technocrat elite member, has engaged in some public knock down and drag out fights over policy. While there is always a danger of over-simplifying the nature of conflicts, it does appear that while Beodiono has led factions aimed at identifying reforms which will satisfy the IMF agenda, Kalla has been identified with other factions aimed at either blocking those reforms or endeavouring to make sure that the benefits flowing from them would go to his political allies. The reality, of course, is rather more complex than this but that does not mean that there is no truth in this description.
One particular example is the cancelling of US$15 billion worth of fuel subsidies for the Indonesian people. This pleased the IMF because subsidies are regarded as ‘distortions’ to the free market and its pricing mechanisms; it was also deeply unpopular among the poorer Indonesian people, who relied on the subsidies to keep their families in what they considered to be a decent standard of living. It also meant that US$10 billion worth of cash could be redistributed to ‘development projects’ of various natures. No doubt Boediono could use that money to improve the lifestyles of millions of Indonesian people, yet the opposition mounted by Kalla has meant that 70% of the money has yet to be spent, several years after the policies to spend it were passed. Whether this is a justifiable attack on opacity or an attempt to seize more power and rewards for personal allies depends on the point of view. What it does mean is that Indonesia’s economy takes a step forward, two back, a quick quick slow advance.
