A Tale of Two Finance Ministers

 A Tale of Two Finance Ministers 

Why is Indonesia, one of the most corrupt countries on earth, part of the G20, representing 20 of the world’s largest economies?

Let’s look at the fiscal policies that shaped the nation’s growth for the past 15 years. 

Sri Mulyani Indrawati is an Indonesian economist who first served as the Minister of Finance in 2005 under then President Susilo Bambang Yudhoyono.

One of her first acts was to fire 150 corrupt tax and customs officers in the finance department and penalize another 2,000 officers.

She successfully reduced political corruption and initiated reforms in Indonesia's tax and customs office. She also revised incentive structures for civil servants in her ministry and began paying higher salaries to tax officials deemed to be "clean" so they would have less temptation to accept bribes.

Indonesia attracted $8.9 billion in foreign direct investment in 2005, Sri Mulyani's first year as finance minister, a significant increase from $4.6 billion in 2004.

In 2006, she was named Euromoney Finance Minister of the Year by Euromoney magazine. In September 2006, Emerging Markets selected Sri Mulyani as the Asia Finance Minister of The Year.

In 2007, Indonesia recorded 6.6% economic growth, its highest rate since the 1997 Asian financial crisis. In July 2008, Sri Mulyani was inaugurated as the Coordinating Minister for the economy, replacing Boediono, who was to head Bank Indonesia.

Growth in 2008 was 6% despite the Great Recession. By January 2009, public debt was reduced to 30% of gross domestic product from 100% in 1999, making it easier for Indonesia to sell debt to foreign institutional investors.

Having served 5 years under her post, Susilo Bambang Yudhoyono reappointed her after his re-election in 2009.

She continued to grow he Indonesian economy by 4.5% despite the Great Recession affecting most of the world economies. Along with India and China, Indonesia was one of just three major emerging economies to grow faster than 4% in 2009.

Under the supervision of Sri Mulyani, the government increased the number of income taxpayers from 4.35 million in 2005 to nearly 16 million individuals in 2010, and tax receipts grew by around 20% each year to more than Rp 600 trillion in 2010.

She was on to her 10th year as Minister of Finance but was disrupted because of her refusal to play politics. Amidst controversy, she resigned from her post.

Her resignation was viewed negatively; the Indonesia Stock Exchange closed down 3.8% after the news, amid a broad selloff in Asia, while the Indonesian rupiah fell nearly 1% against the dollar. The drop in Indonesian stock exchange was the sharpest in 17 months.

There was widespread speculation that her resignation was due to political pressure, especially from Aburizal Bakrie, a powerful tycoon and leader of Golkar Party. 

Bakrie had enmity toward Sri Mulyani due to her investigation into tax fraud by the Bakrie Group, her refusal to prop up Bakrie's coal interests using government funds, and her refusal to declare the Sidoarjo mud flow, which was caused by drilling by Bakrie's company, as a "natural disaster".

As soon as she resigned, Sri Mulyani was appointed as the Managing Director of the World Bank, responsible to work in 74 countries in South America, Caribbean, Eastern Asia–Pacific, Middle East, and North Africa.

Sri Mulyani began her work in uplifting these nations out of poverty and increasing the livelihood of its people. That was her expertise.

When President Joko Widodo won the elections, he immediately called for Sri Mulyani to return home despite being comfortably ensconced in the World Bank as Managing Director for 6 years. 

She heeded the call to serve her nation and, for 10 years, she continued to grow Indonesia and from 2017 to 2019, Sri Mulyani was named the best finance minister in the Asia-Pacific region three years in a row by FinanceAsia. In 2018, Indonesia recorded its smallest budget deficit since 2012.

During the pandemic, Sri Mulyani announced a 10.3 trillion rupiah economic stimulus package to mitigate the effects of the COVID-19 recession. In April 2020, during the COVID-19 pandemic, Sri Mulyani released a global bond series with a 50-year maturity, the longest loan offered in Indonesian history.

Indonesia’s MSMEs, retail, tech, and digital finance boomed during her time. The $10 billion dollar GoJek, or what Angkas aspires to be, the $100 billion Go-To, the local e-platform of Indonesia, and an increase in public listings.

Small-medium sized entrepreneurs and owners were given access to finance and encouraged to grow by limiting taxation. 

The principle is: all the goods bought by the people have already been taxed, if their personal income grows then there’s a higher chance to participate in taxation. Let their businesses grow first before taxing it since everything they bought have been taxed, their business spaces are taxed, their permits have tax. No need for VAT for small businesses. Let there be a cap, a threshold, and quit messing around with online sellers trying to make a buck from products they’ve purchased abroad that’s already been taxed.

And that, my friends, is how Indonesia remains to be the largest economy in Southeast Asia, one of the 20 largest economies on earth, and has grown economically and progressed industrially despite corruption. 

After a decade as Minister of Finance under then President Joko Widodo, Sri Mulyani was reappointed to the same post by President Prabowo Subianto, making her the only Minister to have served under 3 presidents.

Ralph Recto, the Secretary of Finance of the Philippines, is a veteran politician who will now tax the 6,000 pesos you earned for a year from your bank savings with 1.200 cut.

Isang taon mong tinipid pera mo sa banko, kumita ng 6 na libo, binawasan pa.

Kementerian Keuangan Republik Indonesia

Department of Finance