Imagine you are watching a football match - your best striker is on-course to score a goal against a tough opponent. The goal is wide open and the goalkeeper has been wrong-footed. Then suddenly, the manager asks for time out and replaces the striker with another talented striker. That is exactly my feeling when I heard Sri Mulyani Indrawati was replaced by Agus Martowardojo as the Indonesian finance minister.
The issue here is not only the quality of the replacement. The more important issue is the timing of the replacement and the reason for it. Replacing the striker who has the best chance of scoring a goal deserve a logical explanation from the manager. The writer understands, it is a prerogative right of the manager to replace his player, however the manager also is accountable to the public for his actions.
Agus is a very highly credible individual with a clean track record and an impressive resume as a commercial banker. As a former banking analyst, I can try to provide a window on the world and thinking of a typical banker. The core concepts you will typically find in the make up of a commercial banker are: risk management, following rigid procedures - as commercial banks are in a highly regulated industry - maximizing profit and to be as friendly as possible to your customers. Bankers are also expected to be uncompromisingly opposed to political pressures on commercial decisions or loan criteria. Bankers also tend to focus more on microeconomic issues rather than macroeconomic issues.
On the flip side of the coin the core values and concepts you will not find in a typical commercial banker include: risk taking, social utility, fighting for reform and opposing businessmen who are typically your most important customers. Most importantly the typical banker will not put political considerations above commercial or economic decisions. Lastly you will seldom find a banker who is more macroeconomic oriented rather than microeconomic oriented.
What is the typical requirement for the world view of the finance minister of Indonesia at the current stage of Indonesia's development? First, Indonesia is facing a serious external threat given the fallout of the Greek debt problem. Second, Indonesia is in the process of reform in the Finance Ministry (tax reform, custom reform and capital market supervisory reform) where the battle against vested-interests is at level high. Third, Indonesia is in the process of looking for equilibrium between economic considerations and political considerations - following the Bank Century bailout dilemma. Fourth, the new finance minister is required to focus more on macroeconomic issues rather than microeconomic issues.
To be able to navigate the current global crisis, first of all, it requires a higher level of risk taking, with decisiveness and moral courage despite the risk of being politically crucified by politicians at the House of Representatives for taking unpopular but necessary steps. Second, to be able to continue the reform process, the new finance minister must stand up against the parties with vested interests which are blocking the reform process. Third, to be able to push the economic agenda, the new minister must balance between economic considerations and political considerations to ensure the government's economic agenda will not be blocked by politicians.
Since the pathetic outcome of the Bank Century investigation, the center of gravity of the Indonesian government has shifted from rational/economic considerations toward political expediency. As a result it is understandable for the executive to be pragmatic rather than idealistic.
I have no doubt about the integrity of Agus, in fact I will vouch for his integrity and capability as a former CEO of the largest commercial bank in Indonesia. To be a successful finance minister of Indonesia, he must have qualities beyond those of a successful commercial banker. Each individual has a unique capacity to lead in a given position and at given time.
However, the challenge for Agus is to move to the next level which requires a completely different mindset and set of skills. The new finance minister will be tested immediately by the current global crisis which also threatens Indonesia.
The new finance minister also will be tested by the behavior of the vested interests which have successfully removed the most influential reformer in recent memory. The new finance minister will also be tested by the same politicians who positioned themselves against him during the election for the governor of the central bank. All of us hope that the new finance minister will be able to show the quality of true leadership and statesmanship.
To be able to live up to public expectations, the new finance minister must adopt risk taking, fairness and social utility, as well as true commitment to reform. There is a lingering, unanswered question raised by the recent developments. Why did the President allow Mulyani to end her struggle prematurely when the country was on the brink of achieving an accelerated phase of bureaucratic reform.
This question deserves thoughtful analysis. In answering it, appointing a highly credible individual as the finance minister is only half the answer. The remaining half of the answer is highly dependent on whether the new finance minister will be able to adjust to the new challenges. Congratulations Pak Agus for your appointment, we are expecting the best outcome.
The writer is the founder of Independent Research & Advisory Indonesia
