For the second year running, FinanceAsia has ranked the finance ministers of the Asia-Pacific region’s 12 largest economies.
FinanceAsia considers several factors when thinking about how to compare the performance of these men over the past 12 months. The role’s responsibilities and powers vary between countries but each minister contributes to fiscal policy and the budget, accesses capital markets, regulates financial institutions, and drives reform. Investor perceptions are one way to view how good a job they are doing, particularly when times are tough.
But the hardest criterion is independence. Most finance ministers serve at the pleasure of their prime ministers, presidents, or military dictators. Their ability to get things done requires political deftness, mastery of policy, sway over the bureaucracy, and the will to fight for the public interest.
Today's finance minister oversees an economy that has faced stuff challenges from collapsing commodities prices but has responded with some intelligent decisions.
Ranked No4: Bambang Brodjonegoro, Indonesia
The collapse of the commodity cycle hit Indonesia hard. The nation had relied heavily on selling raw materials to sustain its economy over the past 10 years, in particular exporting to China. Drops in commodity prices left it exposed.
The country was also hamstrung by a strengthening US dollar, which caused the rupiah to lose value and made external borrowing more expensive. Indonesia’s annual GDP growth rate fell to 4.7%, well under the 5.5% averaged since 2010.
The government of Joko Widodo has made one bold step in its struggle to deal with the country’s reliance on commodity exports and imports. Widodo appointed Bambang Brodjonegoro in October 2014 and he, together with the president and energy minister, capped the subsidy on diesel fuel at Rph1,000 ($0.08) per litre, before eliminating the petroleum subsidy altogether in January 2015.
It was a smart call; previously the subsidy fixed the maximum price locals paid for diesel and petrol, which had a costly and unpredictable impact on the government’s budget. The subsidies were estimated to cost up to 13% of the 2015 budget before the change was implemented.
Greater spending certainty has helped underpin Indonesia’s credit ratings (Baa3/BB+/BBB-) and ensured it could issue well-received international bonds during 2015.
Bambang also remained in his position when the government shifted its economic policy team in August, adding more technocrats to spearhead genuine change. Since then the government has announced a raft of investment policies and raised capital spending to 90% of its full-year target in the fourth quarter, versus 60% at the end of September, according to finance ministry data. On January 10 Widodo said he wanted to raise local and foreign investment in manufacturing, to help bolster the sector’s growth by up to 17%.
However, weaknesses remain. Indonesia raised Rph1.06 quadrillion in tax revenues in 2015, the first time it had exceeded Rph1 trillion. But falling commodity revenues meant this total was 18% below 2015-2016 budget predictions, the worst shortfall in a decade, according to the Jakarta Post. As a result, the government’s budget deficit sits at 2.8% of GDP, close to the 3% legal limit.
Revenue collection must improve if Jakarta is to conduct the infrastructure investments the country desperately needs. The government has a tax revenue target of Rph1.36 quadrillion for 2016.