Nomination of Agus raises concern over reforms

At a time when far-sighted policies are needed amid global uncertainties, the Indonesian President’s decision to nominate Agus Martowardojo as the next central bank governor may expose the nation to risks and hamper Finance Ministry reform. Susilo Bambang Yudhoyono recently nominated Agus, 57, widely acclaimed for his integrity and toughness, to lead Bank Indonesia (BI). This would deny a second term to Darmin Nasution, whose appointment ends in May.

The move means that the pace of reform may be slowed at the Finance Ministry – and that BI is set to lose Darmin, who has been internationally acclaimed as one of the world’s best central bankers.

Economists have said strong monetary and fiscal coordination between Agus and Darmin has helped retain robust growth rates despite the global slowdown.

“With many economic challenges going forward, the President should not have changed the current composition of his economic team,” Tony Prasetiantono, an economist from Yogyakarta-based Gadjah Mada University, said. 

A Cabinet member who declined to be named said on Sunday that Agus had fallen victim to pressure by politicians and influential business executives whose interests had been impaired by Agus’ prudent policies. 

“It’s hard for the President to keep Agus. The pressure has just been too great from many sides,” the Cabinet member said. 

Agus was appointed finance minister in May 2010 and has been hailed for his commitment to reform and strong stance against politicians and politically-wired businessmen looking to benefit from the state budget and fiscal policies. 

The praise for Agus has been similar to that given to his immediate predecessor, Sri Mulyani Indrawati, a reform icon ousted as finance minister after less than five years in office. 

After Sri Mulyani bickered with the Bakrie family, whose chief patron Aburizal Bakrie is Golkar Party chairman and presidential candidate, Yudhoyono endorsed her appointment as a World Bank managing director, which lead to her resigning from government. 

Agus has also had run-ins with Golkar politicians and the Bakries over the government’s purchase of a 7-per-cent stake in gold miner PT Newmont Nusa Tenggara, which the Bakries had also been interested in. 

Agus, a former president of state-run Bank Mandiri, also ruffled feathers when he opposed construction of the Sunda Strait Bridge, a mega-project with a US$10 billion price tag, unless it complied with existing private-public partnership regulations. 

The project is managed by influential tycoon Tomy Winata through his Artha Graha Group.

Controversy over the project has also triggered disputes between Agus and Coordinating Economic Minister Hatta Rajasa, who is chairman of the National Mandate Party (PAN).

Hatta, whose daughter is married to Yudhoyono’s son, along with several other ministers have long supported the project which some have said would be Yudhoyono’s greatest legacy. 

Agus also recently came in the cross hairs of several senior Democratic Party politicians who blamed him for failing to insulate Andi Mallarangeng from graft allegations that forced his resignation as youth and sports minister. Andi, who has been named a graft suspect in the Hambalang scandal, was a top Democratic politician and a member of Yudhoyono’s inner circle. 

Agus also confronted internal opposition following his decision to continue the reforms started by Sri Mulyani at the ministry, such as the daunting task of ending the culture of corruption at the tax office and customs and excise office. 

Indonesia Corruption Watch coordinator Danang Widoyoko was critical of the decision to appoint Agus to the central bank, saying the nomination showed Yudhoyono was no longer comfortable with a minister of high integrity. “There seems to be an alliance between Yudhoyono and the owners of capital, particularly for preparations leading up to the 2014 general election,” Danang said.