Weekly Insights and Analysis

Indonesia Stunned as Finance Minister Sri Mulyani Leaves to Join World Bank

May 12, 2010

By Laurel MacLaren

Last week, Indonesia was stunned by the World Bank’s announcement that Indonesia’s Finance Minister, Sri Mulyani, has been appointed to one of the Bank’s most senior positions. Of immediate concern for investors in Indonesia is how the country will manage to retain the hard-won progress in economic reforms made under Mulyani’s leadership. More broadly, her departure has left civil society uneasy that Indonesia’s rough-and-tumble politics could seemingly squeeze out such an accomplished civil servant. At the same time, many Indonesians are filled with pride that the reformer has been recognized so visibly on the world stage.

Sri Mulyani

Sri Mulyani is credited for the solid macro-economic policies that have enabled Indonesia to outperform its neighbors. Public domain photo, Wikimedia Commons.

Mulyani is a highly respected economist, and is credited for the solid macro-economic policies that have enabled Indonesia to outperform its neighbors. Under her leadership, Indonesia has registered positive growth over the past five years, even as the rest of the world was hard-hit by the 2008-09 financial crisis.

Mulyani took head-on an entrenched and corrupt bureaucracy, and introduced sweeping reforms that have been credited with curbing corruption, increasing investor confidence, and successfully cracking down on tax evasion. For the past two years, she has made the Forbes magazine list of “100 most powerful women in the world.”

Yet in recent months, Mulyani became ensnared in politically motivated criminal charges related to the bailout of a privately held bank. During the height of the global financial crisis, Mulyani – alongside Bank Indonesia’s head, who is now Indonesia’s vice president – oversaw a $743 million bailout of the failing Bank Century. Soon after, the bank’s assets were looted by its owners, one has since been jailed and two remain fugitives. When Parliament launched a criminal investigation against Mulyani, headlines screamed that she might lose her post. Pundits speculated that long-standing conflicts between Mulyani and the leader of Golkar, the country’s second-largest political party, were at the root of the attack on Mulyani in Parliament. Although it is widely expected that the minister will be cleared of any wrongdoing in the Century case, it has poisoned relations between Mulyani and Parliament. Recently, some Parliamentarians tried (unsuccessfully) to bar the minister from attending deliberations of the State Budget, which is under her purview.

Reaction to news of Mulyani’s departure has dominated the headlines. Indonesia’s stock exchange dropped almost 4 percent on the day the World Bank made the announcement. Many in the business community, particularly foreign investors, went as far as to express devastation. In Jakarta, anti-corruption activists voiced concern that the swift pace of reform set by Mulyani will slow considerably in her absence.

In the days following the news of her departure, it is increasingly clear that much politicking is afoot. Despite vigorous denials from the Presidential Palace, many commentators mused that President Yudhoyono orchestrated Mulyani’s Bank appointment to avoid further conflict with Parliament. An announcement over the weekend that the president’s Democratic Party and Golkar were re-aligning their coalition structure through a joint secretariat further cast doubt that the appointment of Mulyani’s successor will be free of political influence. The media have been quick to discuss potential candidates, while investors both at home and abroad will most certainly be watching this carefully. It is a clear opportunity for President Yudhoyono to signal his commitment to reform, and many are hopeful that he will stand his ground. However, there are increasing doubts that coalition politics – seen as responsible for Parliament’s gridlock – will be able to safeguard the roots of reform sown by Mulyani.

Mulyani has declined media requests to discuss her decision, honorably foregoing opportunities to take a final parting shot at her adversaries. In her official statement to the press, she announced her belief that the culture of reform was “in the blood” of her Ministry, and boldly warned officials that her departure is not a license to steal. Having put Indonesia’s economy on firm footing should remain Mulyani’s legacy. Her integrity, talent, and fierce courage will be sorely missed.

Laurel MacLaren is The Asia Foundation’s Deputy Country Representative in Indonesia. She can be reached at

Related locations: Indonesia
Related programs: Economic Opportunity


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