## In the Trenches: Relentless Reformer

## Source details

**Canonical URL:** [In the Trenches: Relentless Reformer](https://www.imf.org/en/publications/fandd/issues/2024/12/trenches-relentless-reformer-sri-mulyani-indrawati)

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## Bibliographic details
- Authors: NICHOLAS OWEN
- Published: November 22, 2024

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### Economic transformation and key statistics
- Indonesia increased its GDP fourfold over the past two decades, to $1.4 trillion.
- Population cited as 270 million people.
- Geographic span described as stretching 3,300 miles from west to east.
- Share of the population living on less than $2.15 a day has fallen tenfold, to less than 2 percent.
- Jakarta’s average income compared to Poland and "not far off from Portugal."
- Sri Mulyani Indrawati’s timeline:
  - First served as finance minister in 2005.
  - Worked as a managing director at the World Bank in 2010–16.
  - Returned as finance minister under President Joko Widodo and was reappointed in October under President Prabowo Subianto.
- Served as one of three external advisors to the IMF–World Bank Bretton Woods at 80 initiative.
- Indonesia’s G20 presidency cited as occurring in 2022.

### Macroeconomic strategy and institutional reforms
- Restoring macroeconomic stability and credibility of macroeconomic policy identified as the most important factor behind Indonesia’s turnaround.
- Institutional and policy measures highlighted:
  - Established an independent central bank.
  - Consolidated financial sector supervision and monitoring.
  - Maintained fiscal prudence regarding budget deficit and debt-to-GDP ratio.
  - Created market infrastructure to increase competitiveness.
  - Opened up to international trade and revised the investment law (reform momentum continued during the COVID-19 pandemic).
  - Invested in infrastructure: roads, ports, electricity, telecommunications.
  - Invested in human capital: spends 20 percent of the budget on education.
  - A scholarship fund has paid for 50,000 people to study at the world’s best universities.
  - Developed public-private partnerships and improved the business and investment climate.
- Resulting macro outcomes:
  - Current account and primary fiscal positions moved from large deficits (when in the "fragile five") to accounts in surplus.
  - Financial sector described as resilient.
  - Emphasis on deliberate policy to avoid fragility rather than it occurring by chance.

### Industrial policy, extractive sector strategy, and incentives
- Downstreaming policy in extractive sectors (notably EV-battery related minerals) described as a deliberate long-term strategy with negotiations beginning in some cases in the 1990s.
- Key principles and measures:
  - Aim to add more value domestically rather than exporting unprocessed resources.
  - Use of incentives: tax and other incentives to make domestic processing competitive.
  - Regulatory requirement: mining companies are told they cannot export unprocessed minerals and must build smelters.
  - Infrastructure upgrades and improvements to competition, labor, and environmental laws to create a "welcoming ecosystem."
  - Positioning presented as "win-win": strengthen Indonesia’s resilience while allowing investors to make a profit.
- Rejection of forced expropriation: policy does not force companies to build "at all costs and then expropriate their investment."

### Political economy of reform and governance practices
- Strategies for advancing controversial reforms as a technocrat:
  - Leverage political momentum toward democracy and openness that arose after the Asian crisis.
  - Engage directly with status quo interest groups and skeptics—"reach out to them"—to build confidence and explain objectives.
  - Anticipate difficulties, be honest about distributional effects (for example, some people may suffer from price increases), and develop sustained dialogue.
  - Use media outreach (chief editors, reporters) to build public support; public opinion and free press provide political backing.
  - At the finance ministry, enforce high standards of conduct and performance—"sweeping out the work-shy and the greasy-palmed."

### Geopolitics, multilateralism, and the Bretton Woods institutions
- Views on geopolitical fragmentation:
  - Historical context: Indonesia’s nonaligned movement initiated 75 years ago; constitution emphasizes freedom, peace, and social justice.
  - Concern that recent shifts toward nationalism and inward-looking policies challenge the institutions and ideas that supported globalization and poverty reduction over the past 30 years.
  - Indonesia’s larger role: size and leadership among emerging economies enable it to act as mediator and offer constructive solutions (illustrated by G20 presidency in 2022).
- Recommendations for IMF and World Bank relevance:
  - Assess whether institutions have enough capital and human resources and whether they possess the right instruments for diverse problems.
  - IMF’s agenda should expand beyond traditional focuses (exchange rates, monetary system, financial stability) to include climate change, demographic challenges, digital technology, and social safety nets—creating prioritization challenges.
  - Maintain and strengthen international cooperation among sovereign members and build catalytic partnerships with private nonstate actors, recognizing concentrated capital and power outside the sovereign space.

### Leadership, role modeling, and personal reflections
- Public role and expectations:
  - Indrawati acknowledges being a visible role model for women; when first appointed in 2005 there were no women in top management at the finance ministry, and while there are now women in top management, they remain a minority.
  - She emphasizes personal discipline and public scrutiny, while noting she continues personal pursuits (singing, running).
  - On advising women: receives many questions about juggling responsibilities; she prefers to inspire by example rather than intentionally promote herself as a role model.
- Closing note: The interview has been edited for length and clarity.

*Source: F&D Magazine interview "Relentless Reformer" with Sri Mulyani Indrawati, December 2024.*

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_Source: https://www.imf.org/en/publications/fandd/issues/2024/12/trenches-relentless-reformer-sri-mulyani-indrawati_