Indonesia’s Fearless Finance Minister Is Ready for Her Next Fight

Rekindling her youthful activism, Sri Mulyani Indrawati wants to recharge Southeast Asia’s largest economy


The mood at the meeting should have been tense. Seventy bank analysts gathered in January at the Indonesian Ministry of Finance, a sprawling stylistic mix of art deco and 19th century East Indies colonial, and made their way to a tower dubbed “the devil’s building” for the hexagram formed by its blue-tinted windows.

Hostile questions for the finance minister, Sri Mulyani Indrawati, seemed inevitable; some of the attendees might even stage a protest. JPMorgan Chase & Co. analysts had, following the U.S. presidential election, put a sell order on Indonesia’s equities. The finance ministry’s response was swift, decisive, and resolute: the immediate termination of all business partnerships with the bank. Now two weeks had passed, and JPMorgan had reversed its bearish call, but the shiver was still reverberating through the research arms of global banks as the ministry considered preventing them from issuing negative reports. (JPMorgan declined to comment.)

Sri Mulyani Indrawati
Photographer: Dimas Adrian for Bloomberg Markets

Indrawati—a stylish, 54-year-old economist who combines Indonesian batik with Anne Klein kitten heels—has earned a reputation for toughness. She’d been finance minister in the 2000s and returned to the job last year, charged with a reform agenda that’s so ambitious it seems audacious.

As she addressed the quarterly meeting of analysts, she likened those who are impatient with the government to her 3-year-old grandson when he got restless during car journeys. Although such behavior might be expected of a toddler, she said, it was uncalled for from investors who wished the government would just hurry up, jump through the necessary hoops, and get on with the reform agenda. “I don’t want you to ask me, ‘Are we there yet?’” she said. “If you ask me that, I would think you’re unprofessional or you’re not competent.”

Indrawati was clearly back in town, and the message was coded but simple: her ministry, her rules. She was going to clean house—and, if she had to, break some glassware in the process.

And the bankers? Rather than protest or hurl hostile questions at Indrawati, they mobbed her for selfies. Before long, social media sites were awash in images of the smiling finance minister and the analysts who fell under her spell. It was a striking display of respect, if not affection.

Since joining Joko Widodo’s “dream team” cabinet in Southeast Asia’s largest economy last July, Indrawati has been the president’s chief instrument in a push to get millions of Indonesians to take part in a tax amnesty. The tax reprieve, which ended on March 31 and was a key plank in Widodo’s reform agenda, levied generous penalty rates as low as 2 percent to allow those who’ve been hiding their true wealth to clear up their affairs, no questions asked. It’s already prompted businesses and individuals who’d stashed money at home and abroad—including Aburizal Bakrie, former chairman of Golkar, a major political party, and Tommy Suharto, son of the country’s former dictator—to bring more than $330 billion to the attention of the tax office.

A former university academic, Indrawati fought graft during her first spell as finance minister from 2005 to 2010. She was forced out after making enemies of powerful Indonesians, including Bakrie. Before returning last year, she won praise during six years as managing director of the World Bank in Washington.

Back in her old job, Indrawati has also vowed to clean up the tax office itself, an institution long beset by corruption. It was a challenge she took up with mixed success the first time around. She’s confronting it again: In a country of 260 million people, only about 10 million filed a tax return in 2015. Now Indrawati plans to revamp the overall taxation system and double the number of auditors to widen the tax base.

The tax cleanup is politically crucial for Widodo and therefore Indrawati herself. He won his bid for the presidency in 2014 on a campaign pledging zero tolerance of corruption. Having once run a furniture business, he came from outside Indonesia’s traditional political elite and enjoyed a meteoric rise since entering politics in 2005 to run for mayor in his hometown of Solo, Central Java.

If the reform agenda stumbles, Indonesia, for all its economic potential, could end up looking like a nation adrift—“ambling around,” as Achmad Sukarsono, Indonesia analyst at Eurasia Group Ltd. in London, puts it. The world’s fourth-most populous nation and most populous Muslim nation, Indonesia is blessed with some of the richest reserves of natural resources on the planet, and, crucially, it’s a near neighbor to China and its voracious consumer demand. And yet its promise has been heralded for decades—and fallen short. “Indonesia has suffered from its reliance on commodities, and that’s still the case,” says Rajeev de Mello, Singapore-based head of Asian fixed income at Schroder Investment Management Ltd. “But there are signs of efforts to diversify.”

Indrawati wants to be part of her country’s turnaround. “Indonesia is a bit of an outlier,” she says. She’s sitting in her outer office, where she prays five times a day, surrounded by thick volumes on economic policy and coffee table books depicting the riches of the 3,100-mile-long Indonesian archipelago. “People say, ‘Oh yeah, I know about Indonesia.’ But it’s a little bit distant on your mental map. Indonesia is vulnerable to this, because people don’t really understand it that well.”

Indrawati grew up in Semarang, Java, in a home where books and research papers were the family’s main sources of entertainment. She was one of 10 children born to education professors who, in turn, coaxed their offspring into careers as academics, doctors, and engineers. Indrawati and her siblings still return home during the Eid al-Fitr holiday to a peach-and-green house so frequently flooded by a nearby river that the children pooled funds to build a second floor for their parents.

When Ani, as she’s known to her family, was growing up, money was tight. Her mother, to supplement what she made at Semarang State University, ran a food co-op and sold an inexpensive traditional fabric, lurik, commonly worn by Javanese farmers. Splurging on birthdays meant a whole chicken to share at the crowded family table. “Well, we weren’t poor, we had just enough to get by,” says one of Indrawati’s sisters, Nining Indroyono Soesilo. “The joy is in the solidarity of sharing one chicken.”

When Indrawati announced that she was going to study economics—her way of stepping out of the shadow of her academically gifted older siblings—her parents thought she would end up a bank teller. Getting as far as she has was “an accident,” she says. Attending economics classes at the University of Indonesia, she saw the unequal opportunities afforded to a clique of students surrounding a privileged student, Siti Hediati Hariyadi, known as Titiek, daughter of then-President Suharto. It was then that she knew what she wanted to pursue in life. “That feeling of exclusion was very strong,” Indrawati says. “If you’re not a friend of those people, then your career path is going to be very different, and that is exactly what influences very strongly the way I think about economics and the economy in Indonesia.”

She may not have been part of Titiek’s crowd, but Indrawati was among the handful of students the university chose to study overseas on scholarships. This placed her on a well-trodden path for elite graduates of the University of Indonesia, which has been a breeding ground for many of the country’s finance ministers, central bank governors, and presidential economic advisers. Her selection reflected a practice the Javanese call ijon, meaning to buy something before it’s ripe and at a lower price than you might pay otherwise. “So even then,” says Ari Kuncoro, a classmate who’s now dean of the university’s economics department, “she showed promise.”

With her scholarship, Indrawati pursued a doctorate degree in economics at the University of Illinois at Urbana-Champaign from 1988 to 1992 before returning to Indonesia to teach at her alma mater. She became the head of the university’s economics research arm in 1998, just in time to witness students taking to the streets in May of that year. They rose up to protest the government’s response to the devastating impact of the Asian financial crisis the year before: widespread layoffs and bankruptcies, with more than half the population slipping below the poverty line.

This was a crucial time for Indonesia—and a formative one for Indrawati. Indeed, her evolution as a technocrat and a politician with, as she says, “the fire in your belly” can be traced back to those days. Most other faculty members at the state-owned university refrained from joining the demonstrations, but the research center Indrawati ran was independent, so she went along to the manifestations at the Parliament building.

Within days, the 30-year reign of Suharto, whom Transparency International would later classify as one of the most corrupt leaders of all time, came to an end. What followed was a hopeful but turbulent period known as Orde Reformasi, the era of reformation. 

Indrawati recalls those days with bittersweet nostalgia. “I was an activist at that time,” she says. “I was very active in really advocating against what we saw as the wrong policy, the wrong approach.” She also remembers the anguish she felt when she learned that several student protesters had been shot and killed. “It was televised,” she says. “I was in a TV interview, crying.”

The Asian financial crisis and its aftermath racked Indonesia. “The crisis destroyed the foundation of the financial system,” she says. “It had been abused, only to become a machine for reproducing this kind of wealth and welfare for an elite.” But those days, she says, also laid the groundwork for real reform—“an opportunity for rebuilding.”

The rebuilding began with Megawati Soekarnoputri, daughter of Indonesia’s founding father, Sukarno. After she became president in 2001, she set a 3 percent legal limit on the budget deficit, boosted tax revenue 50 percent in four years, and established the Corruption Eradication Commission, which has brought to justice government ministers, among others.

Photographer: Dimas Adrian for Bloomberg Markets

In the parallel world of nongovernmental organizations, meanwhile, Indrawati was doing her bit. She worked as a U.S. Agency for International Development consultant engaged in strengthening local government institutions and in training budding journalists how to hold finance ministers and central bankers accountable. In 2002 she moved on to represent Southeast Asia as an executive director on the board of the International Monetary Fund.

Eventually, the Indonesian economy revived, aided by a commodities boom, China’s surging growth, and reforms to the banking sector and exchange rate mechanisms. By the early 2010s, Moody’s Investors Service Inc. and Fitch Ratings Ltd. had lifted the government’s debt out of junk status and, since then, signaled the possibility of more upgrades soon. S&P Global Ratings Inc., the only one of the three main rating companies that has a junk score on Indonesia’s credit, said in a Jan. 10 report that it may raise the country’s rating in 2017 or 2018 if the books continue to improve.

For its part, the Widodo government is pumping money into roads, ports, airports, and railways and is aiming to achieve 7 percent growth at some point during the final three years of the president’s current term.

At the height of the global financial crisis in October 2008, midway through her half-decade as finance minister, Indrawati was in Jakarta drafting an emergency economic response to the meltdown when she learned that her mother had died. She stepped out of the room to hear the news, then immediately went back in to continue working. Just before midnight she flew home for the funeral in Semarang. The next day she returned to Jakarta to announce the emergency measures she’d drawn up. “Mother was a very tough woman whose message has always been, ‘Fight for the country and be professional,’” says Indrawati’s sister Nining. “That’s why Ani was strong enough to stay and finish her job.”

Three years earlier then-President Susilo Bambang Yudhoyono had persuaded Indrawati to take over the finance ministry. His charge to her: Cool inflation, almost 18 percent at the time, without choking the wider economy. But Indrawati had other things on her mind, too. Wayne Swan, who was treasurer of Australia at the time, says Indrawati gave voice to the developing world as prime ministers, presidents, and finance ministers crisscrossed the globe in a scramble for solutions to the financial crisis. She was “laserlike” in her focus, Swan says, and through her, “the developing world had a seat at the table.”

Having risen well beyond the bank teller’s job her parents once worried she’d have to settle for, Indrawati lost her lofty position in 2010. She’d been under fire for some time. In the aftermath of the crisis, opposition politicians claimed that she abused her authority in granting a 6.7 trillion-rupiah ($503 million) bailout of PT Bank Century in 2008 to prevent the collapse of 23 other banks. Also that year, she clashed with Bakrie, the ex-Golkar party chairman, when she opposed closing the Jakarta bourse as shares in companies linked to him plunged. “They had a difference of opinion,” says Lalu Mara Satriawangsa, a spokesman for Bakrie, “but it was never personal.”

It was a harrowing time, and it ended in tears. Following her resignation and before she flew off to Washington to work for the World Bank, Indrawati held a press conference. “I can finally cry now, because I’m no longer the minister of finance,” she told reporters. “If the minister of finance cries, then the rupiah will be volatile.”

Despite what Indrawati went through during her first stint as finance minister, her family understood why she returned last year to have another crack at it. Her siblings never said to her, “Your life was better in Washington,” according to her sister Nining. She had been making good money at the World Bank: $409,950 in 2015. As finance minister in Indonesia, her base salary would now fall to about 220 million rupiah a year, or about $16,500. Coming home to serve her country was what her parents would have wanted Indrawati to do, Nining says: “We knew her reason for coming back was simple.”

The activist spirit kindled back in 1998 is still there. During an interview in her office at the Finance Ministry, with some of her team present, she expresses disdain for the kind of person who “loves the power, who loves the money, and is simply greedy.” She says she wants to “slash them away,” adding, “We have the moral authority to cut and chop those people.”

Indrawati lives behind the Indonesia tax office building in an official residence that’s part of a complex of ministerial houses. She’s married to Tonny Sumartono, an economist; they have two sons and a married daughter (the mother of the toddler who featured in Indrawati’s January parenting lesson to bank analysts). Given her reputation for toughness, people who know Indrawati joke that it’s no coincidence that she keeps a feisty bantam rooster in the backyard and fighting fish in a tank in her dining room. “I have never really struggled with speaking my mind,” she says. 

John Lipsky, a senior fellow at Johns Hopkins University and a former first deputy managing director of the IMF, who knew Indrawati in Washington, says, “She is not typically enamored of squishy, soft ideas. Her eye is always on producing results.” In Jakarta political circles, there’s periodic speculation that Indrawati might one day run for elected office. But if she harbors such ambitions, she hasn’t signaled them publicly.

Her diary is chockablock with meetings suggesting the challenges that she—and Indonesia—face. One day she met with a clutch of generals at the Defense Ministry, admonishing them for the amount of money going to salaries. She recalled for them a time during her first spell as finance minister when she was asked to take a flight on a military helicopter to see firsthand how dated the equipment was. “That was 10 years ago,” she said, “and now I see the biggest proportion of your budget is still going to salaries.”

Tax reform is at the heart of what she does. A popular meme lit up social media after Indrawati returned to Jakarta last year. It showed her gripping a pistol and taking aim at an imagined tax dodger, with the words “Who hasn’t joined the tax amnesty?”

The tax program, which Widodo introduced before Indrawati left Washington, had raised 116 trillion rupiah by late March. The compliance record of Indonesians is notoriously poor. Even so, the amnesty—under which tax-avoiding individuals and companies pay as much as 10 percent in penalties, or about a third of the top income tax rate—has its critics. The Organization for Economic Cooperation and Development says the program favors those who cheat and penalizes those who don’t.

To no one’s surprise, Indrawati was embarrassed and indignant last year when a midranking tax official was arrested in connection with an alleged scheme to help a businessman avoid a $5.8 million bill. She sent copies of a handwritten note around to tax office staff, saying she was “devastated by those unfaithful acts, which betray the values and integrity we all hold. Still, we should vent our disappointment by working even better, even harder, to achieve even higher. We will, together, sanitize our Ministry of Finance from such individuals who bring down the reputation of our institution.”

In January she brought her message in person to the tax office. She addressed more than 500 mostly male tax officials dressed in sky blue shirts and navy ties following a rousing rendition of the tax agency’s official song. “From my house,” she told them solemnly, “whenever I look over I can see the lights still on at the tax office building, and I know you are all working hard. So if someone calls you lazy, you wouldn’t be offended; it’s not true. But if someone calls you incompetent or unprofessional, you would be offended because it’s partly true.”

She lightened the mood with some humor. She told the sea of blue that her title might as well be “minister for tax” given how large the issue looms in the government’s agenda. “It’s always about tax, tax, and tax,” she said. “Last night even my husband told me, ‘Ani, you were talking in your sleep again about tax.’”

For all the credit she’s received as a tax crusader, doubts remain over whether Indrawati can meet government income targets. “Seeking a 20 percent revenue increase this year is too aggressive when you don’t have that massive boost from the tax amnesty program,” said Joshua Tanja, local country head of UBS Group AG, at an investment outlook seminar in March. “What we’ll end up seeing is another adjustment to government spending.” 

Indrawati’s handling of the JPMorgan affair didn’t go over universally well either. “I don’t agree with Sri Mulyani with this kind of action against analysts,” says Eurasia Group’s Sukarsono. He says it’s wrong for a minister to seem to be placing limits on analysts’ assessments. “If you want to give good analysis,” he says, “then you have to have the freedom to make it.” In addition, says Bakrie spokesman Satriawangsa, “A good friend would criticize even when it’s unpleasant. She should know and accept this.”

Alan Richardson, an investment manager at Samsung Asset Management Ltd. in Hong Kong, says Indrawati’s run-in with JPMorgan needs to be put in context. “I wouldn’t fault Sri Mulyani,” he says, “because I suspect she was frustrated that structural reform progress is being overlooked. After all, the government has made progress in sustaining fiscal discipline, namely committing to and remaining below the fiscal deficit target of 3 percent of GDP, implementing structural reforms such as the tax amnesty and removal of fuel subsidies—both of which should enhance future fiscal performance.”

As for Indrawati, she says that of course analysts shouldn’t be limited to saying only “good things” about Indonesia. “This isn’t the case,” she adds. But without addressing the JPMorgan issue directly, she makes it clear that her job is to promote and defend her country. Even if that means breaking some glassware. “It’s again touching the issue of justice,” she says. “Where is the justice if the country has been treated unfairly?” 

Curran is the chief Asia economics correspondent in Hong Kong for Bloomberg News; Ho is on the speed desk in Jakarta; and Salna covers economics in Indonesia.

This story appears in the April/May 2017 issue of Bloomberg Markets magazine.