President Joko Widodo’s cabinet reshuffle on July 27 represents more of an earthquake than a changing of the furniture. A number of new appointments are politically significant and appear to strengthen Widodo’s hand as the master of his own house.
The changes on the whole reinforce the perception of Widodo’s government as outward-looking, with a number of figures friendly to foreign investment. On the other hand the shift of former Coordinating Minister for Politics, Security and Legal Affairs Luhut Panjaitan to oversee energy and maritime affairs sends a far more nationalistic picture.
One major appointment sees Sri Mulyani Indrawati return to her old position as finance minister, from which she was unceremoniously dumped by former President Susilo Bambang Yudhoyono in 2010.
Her departure for a post as a managing director of the World Bank in Washington followed a brutal battle with then Golkar Party chairman Aburizal Bakrie, with Indrawati demanding that his coal companies pay back taxes. Yudhoyono, keen to keep Bakrie on side and aware that the tax bill would have broken the businessman, sacrificed his respected finance minister.
After being hounded out of office by Bakrie and his allies over her role in the Bank Century bail-out, she hit out at the businessman turned politician in comments to a meeting of what was described as the progressive and intellectual elite in May that year. She described them as rapacious and “just like the New Order” of the late dictator Suharto, according to a report in The Australian.
She said her enemies were involved in politics purely for personal gain. “Although she did not mention by name businessman Aburizal Bakrie…her reference to him was too pointed to miss,” the report stated.
“You yourselves can see, when government officials with business backgrounds, even though they say they have put aside all their businesses, but everyone knows that their siblings, their children, who knows who else from their families, are still running the firms,” she said.
Known to be tough on tax, Indrawati can be expected to aggressively pursue Widodo’s demand for greater tax compliance. She replaces technocrat Bambang Brodjonegoro, who while playing a careful role in his time in the job, has stayed very much within the rails of pure fiscal policy, without verging into political issues. Indrawati may present a more investor-friendly posture and certainly she will not be keen to defend the old guard of Indonesian business.
Brodjonegoro moves to head the National Planning Board (Bappenas), pushing aside Sofyan Djalil, one of a group of politicians close to Vice President Jusuf Kalla who have lost out in the reshuffle.
Golkar stays on
The return of Indrawati does not represent a defeat for Golkar, only for its old guard. The younger generation of the party is now represented in the cabinet by Airlangga Hartarto, who was one of the party’s also-rans as a candidate for the party leadership at the congress earlier this year that elected Setya Novanto as chairman.
Hartarto now finds himself sitting in the same office at the Industry Ministry on Jakarta’s Jl. Jend. Gatot Subroto that his late father, a stalwart of the Suharto era, occupied in the 1990s.
He is a former head of the Association of Listed Indonesian Companies and has served as president commissioner at paper products supplier PT Fajar Surya Wisesa and as a commissioner of PT Sorini Agro Asia Corporindo, a subsidiary of US commodities giant Cargill. He was head of Commission VII at the House of Representatives from 2006 to 2009, overseeing energy, environment and technology.
Born in 1962, the younger Hartarto has been described as one of Indonesia’s richest politicians. A graduate in technical engineering from the University of Gadjah Mada (UGM), he also has an MBA from Monash University in Australia and a Master of Management Technology from the University of Melbourne.
Head of the Indonesian Chamber of Commerce and Industry (Kadin) Rosan Roeslani was quick to praise Hartarto’s appointment, saying that he had both political and business experience. He certainly offers hope of a more progressive view of the future of Indonesian industry than the man he replaces, the hapless Saleh Husin, a politician from the People’s Conscience Party (Hanura).
Trade or investment?
Roeslani also praised the appointment of Enggartiasto Lukito as trade minister, saying he also shares Hartarto’s combined experience in business and politics. He pushes out Thomas Lembong, who was hailed in the August 2015 cabinet reshuffle as a liberal-minded influence.
Lembong moves to head the Investment Coordinating Board (BKPM) in place of businessman Franky Sibarani. While many see that as a demotion, Lembong’s international exposure and outlook will be well-suited at BKPM, where he will be an eloquent salesman for Indonesian investment, as opposed to the somewhat brash Sibarani.
It is also arguable that pretty well anyone could be Minister for Trade, a portfolio where negotiations on issues such as trade pacts move at snail’s pace, penetrating new markets is a fine principle but hard to turn into practice, and where such issues can in any case be handled by the ministry’s competent staff of senior bureaucrats.
That is convenient, since Lukito does not appear to have many qualifications for his new job. A former Golkar politician before joining Hanura, his business background is mainly in the property sector. He served as the chairman of the Indonesian Real Estate Association (REI) between 1992 and 1995 and has held positions at a number of real estate companies including PT Unicora Agung, PT Kartika Karisma Indah, PT Kemang Pratama, PT Bangun Tjipta Pratama and PT Supradinakarya Multijaya.
Bad mark on human rights
The most controversial appointment is retired general Wiranto as Coordinating Minister for Politics, Security and Legal Affairs. He was indicted by the United Nations in 2003 for gross human right violations in East Timor. The appointment prompted Australian Indonesia-watcher Liam Gammon to ask on Twitter if Wiranto would still be ineligible for a US visa due to such concerns about his record on human rights.
Wiranto, on the other hand, did stand up to Suharto and refused to move against students pressing for the old autocrat’s overthrow in 2008. As Armed Forces commander and Defense Minister, he is also believed to have blocked a move by Prabowo Subianto, at the time the commander of the Army’s Strategic Reserve (Kostrad), to take control on Suharto’s resignation.
He is known to be on less than friendly terms with Luhut Panjaitan, whose position he takes. The pair are reported to have fallen out over a romantic attachment dating back to the late 1990s, in which Wiranto intervened and blocked Panjaitan’s rise to power in the military, an action for which he has never been forgiven.
The placement of the two former generals appears to send the message that Panjaitan can now only play in the maritime and energy sector, while Wiranto looks after defense and security. It is less than clear that Wiranto will get on with his former subordinate in the ranks, current Defense Minister Ryamizard Ryacudu.
If this is a balancing act, it represents a wily move by Widodo to limit the power of the former senior generals by setting them against each other, leaving himself free to act in other areas.
The energy factor
Panjaitan has no reason to complain about the shift in his position. While Fisheries and Maritime Affairs Minister Susi Pudjiastuti will run her own power game in that area, Panjaitan has succeeded in getting his own nominee into the position of Minister of Energy and Natural Resources.
Archandra Tahar, an executive at Houston, Texas-based utility firm Petroneering, was appointed to the Energy and Mineral Resources Ministry post, replacing Sudirman Said. Tahar is known to have been influential in the decision to switch the Masela Block gas development in eastern Indonesia to an onshore program, and in developments in the Natuna area.
While the Masela decision happened to coincide with the position of outgoing coordinating minister Rizal Ramli, the latter was seen as simply too disruptive to retain. He can now be expected to return to his normal position as a bitter critic of government, and is likely to particularly oppose the “neo-liberal” positions that have been pinned on Sri Mulyani Indrawati.
Tahar, meanwhile, is on record as supporting a major expansion of state energy company PT Pertamina. An oil and gas professional, he has three patents to his name on technical issues related to the industry.
He is close to Darmawan Prasodjo, who fell from grace when he was implicated in a botched lobbying attempt connected to Widodo’s visit to the White House in October 2015. Working in the US up until 2012, Prasodjo was an advisor to elements of the US Congress and the US government on energy policy.
On his return to Indonesia, he took on a number of senior advisory positions in the energy sector with government. On his return, he stated in a blog post that he “was fully aware that concepts in the area of national energy are vitally required for the development of national energy policies and for the benefit of the people of Indonesia.”
He also co-wrote a paper with Tahar in 2012 entitled “The revival of Pertamina” in which they praised a move by the company “to regain its position as the leading producer in Southeast Asia. It has now shifted its strategy to emphasize growth, acquire advanced technology and make a strong move into the market.”
Prasodjo, before his fall from favor, was a senior figure under Panjaitan at the Presidential Office. His close association with Tahar clearly makes the latter Luhut’s man, while the outgoing minister, Sudirman Said, was seen as close to Jusuf Kalla.
Tahar can be expected to pursue the interests of Pertamina in any way possible. The state-owned energy giant can only do so much, however, and has already taken on a lot of acquisitions elsewhere in the world. It remains to be seen how it can handle projects like the Mahakam Block, where Total and Inpex appear to be being less than cooperative about the handover to Pertamina at the beginning of 2017. Then there is the headache of the East Natuna block, where it is expected to perform miracles that ExxonMobil didn’t feel competent to tackle.
Nor is it clear that Tahar has much interest in other aspects of his portfolio: electricity and mining. There, senior officials may at least at first be more influential than the minister.
The cabinet appears to be a careful balancing act by the president. It distributes plums of office to the political parties and to the military old guard, but tends to diminish some of the power that Panjaitan was amassing for himself, with many people tending to believe that the president was little more than a puppet of Panjaitan.
Jusuf Kalla’s influence over the cabinet continues to wane. The move of Sofyan Djalil to the inconsequential position of land affairs and spatial planning and the ouster of Sudirman Said leaves him with little real power. Megawati Sukarnoputri’s Indonesian Democratic Party of Struggle (PDI-P) remains untouched, despite widespread sentiment that her daughter Puan Maharani is a failure as Coordinating Human Resources Development and Culture Minister. Golkar gets a powerful post through Airlangga Hartarto, and other changes mainly represent the replacement of lack-luster ministers with alternative candidates of the same political stripe.
For the foreign investment community, the signals are mixed. While Sri Mulyani Indrawati will run a tough shop at finance and Tom Lembong will be a persuasive salesman at BKPM, the changes of power in the energy sector raise more questions than they answer.
A version of this article was first published by Concord Review on July 27, 2016. Free trial subscriptions are available.
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