Once Bitten, Twice Finance Minister

Can a much-admired former Finance Minister bring back the magic in her second tour in the post?

Sri Mulyani Indrawati returns to Indonesian government with an economic mandate

During her first term as Finance minister of Indonesia, between 2005 and 2010, Sri Mulyani Indrawati steered the economy through the global financial crisis, slashed public debt and boosted investment and exports.

Can she safely steer Indonesia’s political economy through tricky waters again? Markets broadly welcomed the announcement this summer that Indrawati would come back to the post in the second cabinet reshuffle since president Joko Widodo took office two years ago. A beloved figure in Indonesia, Indrawati, 54, resigned in 2010 after political enemies accused her of mishandling the Bank Century bailout two years earlier—allegations never substantiated. She joined the World Bank as a managing director.

Indrawati’s choice to join what observers call an economic “dream team” is seen as a coup for Widodo. With her impeccable track record and her reputation further cemented by the stint at the World Bank, she is seen as a silver bullet in a technocrat-filled cabinet whose top mandate is to turbocharge the economy.

Those expectations, both inside and outside the country, may be too high. “One person can only do so much, and the Indonesian government is facing major problems dealing with the budgetary consequences of a weak global economy and with its own weaknesses—for example in tax collection,” says R. William Liddle, professor emeritus of political science at Ohio State University and a specialist on Southeast Asia. “But she understands the Indonesian economy and its global setting as well as anyone, and was a strong, even charismatic, leader in her first stint as minister of Finance.”

With Indonesia’s account balance stuck in a deficit since 2011, Indrawati’s homecoming could be ruined by global factors, such as the continued slump in commodity prices. On the other hand, her policies often met strong opposition in the past, but, owing to Widodo’s solid majority, she can now count on broad support in parliament. “That is different from 2010, when she was falsely accused of criminal conduct and basically chased out of the country,” says Liddle. That does not mean, he adds, that Indrawati will have carte blanche when it comes to making critical reforms and fully integrating with the global marketplace: “Unfortunately, protectionist forces remain strong in many government departments.”