Analyst Q&A: Mulyani Joins World Bank

KATE WOODSOME: What does [Sri Mulyani Indrawati's] appointment to the World Bank say about Indonesia's role in the global economy?
NICHOLAS CASHMORE: Indonesia for the last 10 years has played a very small role in international affairs. It's only been recently as the economy has gathered momentum. We're now about a $600 billion GDP economy, and we're part of the G-20, and as one of the largest countries with a large Islamic population, increasingly it's being seen as an alternative. I think you're starting to see the country play a bigger role in a number of institutions overseas. Indonesia's been a very quiet achiever in that sense, and it's been seen as a non-threatening participant in a lot of discussions.
KATE WOODSOME: Indonesia has been plagued by pretty rampant corruption. The finance minister has been known to tackle this. Are some people in Indonesia happy to see her go?
NICHOLAS CASHMORE: Oh for sure, a lot of people will be indeed. She's been renowned for her corruption fighting willingness and she's been a large part of the reform program in the last few years to clamp down on the corrupters within Indonesian society. And it's a cultural issue as well within the country itself to change cultural habits of a generation. And that's not going to be very easy. And so, certainly there are going to be elements within society who will be glad to see Sri Mulyani out of the government. But I think it's going to be difficult for them to assume that Indonesia will go back to the bad old days. Because democracy in this country is fairly well entrenched and there are just as many people within society who are keen on taking this country forward and trying to reform a lot of the institutions.
KATE WOODSOME: Do you think her departure is related to some of the political pressure she received at home?
NICHOLAS CASHMORE: I'm sure that may have played some part in her decision to take this role with the World Bank. She is very well regarded by the capital markets. She speaks eloquently on the stage about the challenges and opportunities for Indonesia in the years ahead. She's really been a beacon of the reform agenda for Indonesia. And this role is going to offer her more money for less stress. So it's certainly a win-win for the World Bank but not so much for Indonesia.
KATE WOODSOME: In Indonesia, Sri Mulyani is a pretty divisive figure. She's facing a criminal investigation for allegedly mishandling funds from a $700 million bank bailout. Now, she denies wrongdoing, but how could this play out on the Indonesian stage, and also on the global level?
NICHOLAS CASHMORE: Despite a police investigation, there's been no criminal investigation filed against her and it's generally considered that this is a politicking by various elements in society who want to derail the reformist within the SBY administration. And this emerged funnily enough soon after he won a strong mandate for reform in the last presidential election in 2009. For a lot of foreign observers, [it's] a bit of a stretch of imagination that the finance minister who's done the most to pursue and clamp down on corruptors is going to be guilty of corruption herself.
KATE WOODSOME: Without Sri Mulyani, what will happen to Indonesia's reforms?
NICHOLAS CASHMORE: I think Indonesia is much bigger than just Sri Mulyani herself. I don't believe country's reforms are going to be derailed. A lot of the macro-economic changes have been secured in over the last few years. Public debt to GDP is down. The government runs a very conservative fiscal position. The budget deficit will probably be about one percent of GDP. We have cut taxes, there is less corruption than there would have been five years ago. And so we're still on track to secure an grade investment rating from the debt agencies in the next 12 to 15 months. But obviously SBY now has to reaffirm his reformist credentials by appointing someone to that post who can maintain the confidence of the markets. And that's going to be his next big test.
KATE WOODSOME: Nicholas Cashmore of CLSA, thank you very much.
NICHOLAS CASHMORE: Thank you.