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Indonesia's Mari Pangestu (Int'l Edition)

Asian Cover -- Opinion Shapers


Easygoing and amiable, 41-year-old Mari Pangestu doesn't act like a revolutionary. Yet she was a key player in the overthrow of the Suharto regime. As executive director of the Center for Strategic & International Studies, Indonesia's most independent think tank, Pangestu analyzed for the World Bank the way Suharto-linked monopolies hobbled the economy. Her research heavily influenced the International Monetary Fund's decision to call for an end to these monopolies as a precondition for extending aid. Suharto's failure to implement that package led to economic chaos, popular upheaval, and his own resignation. And even when the army sent hundreds of youths to demonstrate outside the center last February, Pangestu never stopped arguing publicly for Suharto's ouster.

Pangestu, a seventh-generation ethnic Chinese in a country where the Chinese are often resented, also stood her ground while colleagues fled the country in fear. Now, she vows to continue to speak out because Indonesia has not yet contained cronyism, not by a long shot. Many observers see Pangestu as a strong contender for the post of Finance Minister in whatever government succeeds that of President B.J. Habibie. But she insists she would refuse the post on grounds that she's more effective "on the outside," where she can speak more freely.

Indeed, Pangestu is already seeing some of her recommendations put into action, including the dismantling of crony monopolies and conglomerates that are run by Suharto's children. Yet there are other reasons why Pangestu does not think that now is the ideal time for her to learn the rough trade of governing. If there's one thought that scares her, it's serving as Finance Minister of a country whose economy she believes will contract by 20% and see 100% inflation this year. "I don't think I'm cut out for that. I'm not tough enough," she says. Many observers, however, disagree.Return to top



Indonesian economist Mari Pangestu expects the Indonesian economy to contract by 20% this year, and she figures inflation will rise to 100%. The first Indonesian woman to earn a doctorate in economics overseas, she returned to her country in 1986 with a mission to liberalize the economy and drive out cronyism. She is now Executive Director of the Center for Strategic & International Studies (CSIS), an independent think tank in Jakarta, and has played a major role in pushing through reforms that led to the fall of the Suharto regime. Pangestu recently spoke with Business Week's Michael Shari. Here are excerpts from their conversation:Q: When your family bank was closed down last November, you found yourself the victim of reforms that you had championed. How did you feel about that? A: It was not a very pleasant experience for me. I'm a commissioner at Bank Umum Sejatera. Basically, it was inherited from my father, Pang Lay Kim, who was a professor of economics at the University of Indonesia. I'm there because we are only a very small shareholder in the bank. Q: I remember you giving Harvard economist Jeff Sachs a very flattering introduction when he delivered a speech here at CSIS in 1996. Do you share his critical views of the IMF's Asian bailouts?A: Jeff Sachs was the teacher of my teacher at the University of California, Davis. We might have our disagreements on how wrong the IMF was. Sometimes he goes a bit overboard. But I have a lot of agreement with him in that the IMF's initial responses were not appropriate, not appreciating the fact that the crisis was really because of a private-sector deficit and not a government deficit. The IMF made a wrong judgment call in beginning.Q: Was the IMF responsible for the riots in May by requiring that Suharto cut subsidies on kerosene and gasoline?A: The riots were more our own government's and the President's doing. Everyone questioned the wisdom of removing the subsidies. Everyone recognized that you had to remove them, but it was more a question of timing. He could have removed subsidies on most things but keep the subsidy on kerosene. That would have cost something, but that's the cross you have to bear. By then you already had people beginning to suffer.

Before they announced the price increase, there was already a lot of comment about whether they should increase it in stages or all in one shot. It's hard to know who made the final decision. They actually had until the end of the fiscal year [under the terms of the IMF package]. I probably would have waited. I would probably have done it in stages rather than all in one shot. I certainly would not have increased the price for kerosene and diesel all in one shot. Diesel is used for transportation. Kerosene is symbolic because it's used for cooking.Q: Suharto has resigned and Vice-President B.J. Habibie has replaced him as President. But have we seen real political change in Indonesia?A: Not yet. We can say we have a different government with some new people. But we don't necessarily have new governance, a new way of running the country.Q: Does Indonesia have the right people in place yet?A: It's a big question mark. People congratulated Suharto for making the decision to resign. But none of them really congratulated Habibie. They didn't even mention his name. We just don't know how long the full transition is going to take. As an economist, I think the transition has to be quickly resolved. Q: What role do you have to play?A: I always think of myself as providing an independent, objective viewpoint using my skills as an analyst, my ability to synthize facts. I refuse to work in government. I'm much more useful contributing to the debate.Q: Are you too young to serve in a Cabinet where ministers tend to be at least 60 years old? A: I'm 41. I don't think it's a question of age, though.Q: In a best-case scenario, if there's a democratic election that brings in a government that wants to do the right thing and is recruiting professionals, and you're offered a job as Finance Minister, would you refuse it?A: Probably. I see myself as more useful on the outside. I've never been a bureaucrat, and I'm not sure I could be a good bureaucrat. If you're a good academic, researcher, or analyst, you're not necessarily a good manager. Being a government person requires you not only to be bright but you also have to have good leadership and managerial capabilities. Whoever it is that's going to go into the next government has got a very tough job ahead of them. I don't think I'm cut out for that. I'm not tough enough.Q: You're ethnic Chinese, as are your husband and your two sons, and many ethnic Chinese have fled the country. Do you plan to stay in Indonesia?A: Yes. I consider myself Indonesian. I'm only a seventh-generation Chinese. I don't speak Chinese, we don't celebrate Chinese New Year at home. I don't know which province in China my ancestors came from. All I know is they came from Southern China. So I'm Indonesian.Q: Yes, but the Javanese rioters didn't stop to ask questions on May 14-15 when they burned and looted stores and houses owned by anyone they considered Chinese. You're not afraid?A: No. The riots were spontaneous. It was something that happened, tragically, because there was lax [military] control for a short period. It was only 48 hours that things were really scary and you felt there was no security around. A lot of people are still psychologically afraid. I was not physically affected. My neighborhood, Pondok Indah [a high-income suburb in South Jakarta], was not really affected. There were only two intersections and one street of shops that were damaged. It got quite close. Like most people, I'm still wary. Everybody has been affected by this incident. But I feel that my place is here in Indonesia. In my own way, I know I should try to contribute to rebuilding this country. We have a tough job ahead of us. And it will take a couple of years.Q: You don't feel any limits because you're ethnic Chinese, or that people might not want to listen to you?A: It depends on who you mean by "people." As for the general public, I hope we have not deteriorated far enough not to listen to certain people just because of their ethnicity. In public debate and the public domain, I never felt I was discriminated against just because I'm ethnic chinese. I would like to think people view me as an economist first and foremost. Whether or not that means you're listened to in the government is of course another matter. Q: How can Indonesia rebuild its economy?A: Unfortunately, my discipline as an economist doesn't help me here. I just have to follow my instinct that no economic policy can work without restoration of confidence. We need to restore a sense of security to allow the Chinese to go back into business. That's essential for foreign investors to return. We need to implement the reforms as prescribed by the IMF. It will take at least two years for the economy to recover. But first, we need a secular leadership that can make a clean break from Suharto. Only then can the government hope to recruit the best and the brightest. Return to top

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