She Belongs To The World Now (Part II)

Posted on July 13th, 2010 at 10:04 am by Bambang


A former Indonesian finance minister who built her reputation fighting corruption now wants to do the same at the World Bank without choking off development.

Sri Mulyani Indrawati, 47, said her experiences at home taught her how to reform an emerging market economy and when to seek outside help — skills that will serve her well as the World Bank’s newest managing director.

In 2008, Forbes Magazine named her one of the world’s most powerful women due to her hard-driving reforms that included firing corrupt officials and conducting secret raids on staff to keep them honest.

Her background in Asia is vital at the Washington-based institution looking for new ways to be more relevant to emerging market economies that may not need its cash but still have huge development challenges and widespread poverty.

“It’s not always easy,” Indrawati told a small group of journalists in Washington recently as she reflected on her own battle to tackle Indonesia’s deep-rooted corruption.

Indrawati will oversee East Asia and the Pacific, the Middle East and North Africa, Latin America and the Caribbean, as well as governance and corruption.


She knows well that success as a reformer can carry a political price. In Indonesia, Indrawati faced strong opposition from the entrenched political and business elite that dated back to the rule of President Suharto.

Her decision to quit as finance minister in May followed pressure from enemies over the reforms and a decision to bail out the small Bank Century during the 2008/2009 financial crisis.

A parliamentary inquiry failed to find any evidence of corruption in the bailout, and the president backed her decision.

Her reforms included an overhaul of the tax and customs offices, traditional hotbeds of corruption, to increase state revenues and crack down on tax evaders.

She moved funding from ministries toward social spending such as community programs, health insurance and school funding.

In addition, she implemented merit-based incentives for government workers that included hiring practices and pay hikes to reduce the temptation to accept bribes.

Indrawati said that trying to clean up corrupt and opaque systems by putting in place too many checks and balances can slow development.

The Bank has often been criticized for slowing the flow of funds as it tries to stamp out graft.

“A lot of work needs to be done in terms of how you are going to design the right decision-making process in the Bank … that will make sure good governance and anti-corruption should not be perceived as a burden” for client countries.


Indrawati said the World Bank’s knowledge and expertise were its strongest assets for helping emerging countries.

World Bank advice was important to her own efforts to reform Indonesia’s finance ministry, and its emergency loans were critical when to stabilize the economy in the financial crisis.

Indrawati can also draw from Indonesia’s efforts to halt greenhouse gas emission from deforestation, and the financial incentives to be gained from protecting tropical forests.

Indonesia is the world’s third-biggest emitter of greenhouse gases due to deforestation, ranking only behind the vast industrial pollution of the United States and China

The World Bank has helped develop a fund that allows developing countries to earn money by preserving its tropical forests, which absorb carbon dioxide from the atmosphere.

Indrawati said the Bank needs to better integrate climate change strategies into mainstream lending. In particular it must help countries to adapt to changes in weather, farming, water supply and other resources.

“Funding, mitigation and adaptation are not separate issues for development,” Indrawati said. “We must say countries have to adapt because the threat of the change in climate is so obvious.”


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