Sri Mulyani Indrawati: Indonesia’s Iron Lady

The inauguration last month of former military general Prabowo Subianto as Indonesia’s new leader caps “a remarkable turnaround” in his fortunes, says the Financial Times. An erstwhile commander of the country’s “feared” special forces, Prabowo was “once banned from the US for the alleged kidnapping of democracy activists”, which he denies.

Indeed, his chief leitmotif these days is social liberalism. Prabowo’s “Red and White” cabinet swept to power on a ticket of offering free school lunches, which alone is expected to cost $28 billion. He also aims to raise economic growth to 8% – fuelled by a big rise in debt.

These plans have spooked financial markets, more used to Indonesia’s historically conservative approach to fiscal policy, says The Diplomat. Step forward, Prabowo’s trump card. The new president has taken the precaution of retaining Sri Mulyani Indrawati as finance minister in the hope that her “trusted” presence will stabilise the economy and calm foreign investors. They, in turn, hope that Sri Mulyani will live up to her reputation as Indonesia’s “Iron Lady” and keep the brakes on some of Prabowo’s “riskier ambitions”. At 62, she becomes the first person to hold the position under three presidential administrations.

MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

The “highly respected” former World Bank director has been featured on Forbes’ rankings of the world’s most powerful women – a rare feat given the low profile of Indonesian politicians on the world stage. She is, says the South China Morning Post, nothing less than “the face of the Indonesian economy”. During Sri Mulyani’s first stint as finance minister in 2005, foreign investment nearly doubled within a year as she took on corruption and mismanagement so effectively – starting with her own department. “If you are corrupt, you are going to have to deal with me. I am not going to let you work here and I will put you in prison,” she told staff.

Hostility towards those who cheat the system was instilled in Sri Mulyani from an early age, says Worldfinance.com. For most of her early life, Indonesia was ruled by Suharto – “one of the most dishonest autocrats of all time”. Born to academics on a modest income, and one of nine siblings, Sri Mulyani won a scholarship to study economics at the University of Indonesia. It was there she had her “first experience of cronyism” – observing that classmates, including the president’s daughter, were fast-tracked into high-flying business roles and cabinet positions out of reach for other students. “That feeling of exclusion was very strong,” she told Bloomberg in 2017.

Sri Mulyani went on to pursue her studies at the University of Illinois – a connection that later helped her secure a role as an executive director of the IMF – returning home to work as a lecturer just as the 1997 Asian financial crisis began. It was a tumultuous period that culminated in the deposition of Suharto and the emergence of the democratic Indonesian state. Sri Mulyani’s reforms, from 2005 onwards, were key to shaping it.

Can Sri Mulyani Indrawati make it to the top?

Sri Mulyani’s anti-corruption drive proved a double-edged sword for her personally and “didn’t win many friends”, noted The Wall Street Journal in 2010. In particular, she came up against the vested interests of Indonesia’s powerful Bakrie family, who were rumoured to have forced her decision to resign in 2009. A new role as a World Bank managing director beckoned before she was lured back to the finance ministry in 2016 by former president Joko Widodo.

Many, including The Jakarta Post, have speculated that Sri Mulyani could, and should, go all the way to the top, notes the Australian Lowy Institute – even if her technocratic style, “more familiar to the halls of Brussels”, is at odds with Indonesia’s vibrant, flamboyant democracy. For the moment, she is ruling it out. Time will tell.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.