Why Sri Mulyani Indrawati is Asia's best finance minister

A laser-like focus on increasing tax income helps Indonesia's finance minister stand out. The country's economy is likely to continue improving, although infrastructure remains a concern.

For the majority of Asia's finance minister, our Finance Minister of the Year study will have made uncomfortable reading. 

Most ministers failed to capitalise on the global economic upswing to instigate meaningful structural reform in 2017 ahead of an inevitable rise in interest rates. 

Instead, finance ministers continued to luxuriate in record-low interest rates to maintain towering government debts and persistent budget deficits. 

Indeed, the majority of the ministers in the list could easily have been ranked lower down; it was harder to name the losers than it was the winners.  

In the end, one name stood out above her rivals.


Tax collection is a thorny problem in Indonesia where the tax-to-gross domestic product ratio is 11.8%, one of the lowest in the world according to a report issued by the Organisation for Economic Cooperation and Development (OECD) last July. The OECD average is 34.3%.

Indonesia’s finance ministry knows mobilising revenue is critical to funding public services which is why Sri Mulyani Indrawati set a goal of raising Rp1,450 trillion in taxes in the 2017 state budget. In January she announced she had missed the target by nearly 10% and pointed to low compliance as the main culprit. The OECD reckons Indonesia has an estimated 44 million people who should pay tax but only 27 million who are on the books, and of these, less than 40% pay the full amount.

Still, Indrawati told media in Jakarta in January that the Rp1,340 trillion raised was a significant improvement. “It is the greatest performance in the last three years,” she said.

Indrawati has a laser focus on revenue, aware that higher tax collection will free the country from the vagaries of nontax income generated from commodity sales which go up and down with global markets. When she became finance minister in July 2016 she promised to take a hard-line on wealthy Indonesians and claimed to have video tape evidence of them dodging taxes.

Despite falling short of the 2017 target, the government has set a new target of Rp1,420 trillion in tax collection for 2018.

Looking at the bigger picture it is hard to fault Indrawati’s track record. In 2017 the country’s gross domestic product hit the $1 trillion mark for the first time, with GDP growth set to register 5%. Government spending remained within limits and the state budget deficit was 2.57% – lower than the projected 2.92%. Inflation and the exchange rate remain stable.

As the country prepares for elections in 2019, key performance indicators are only likely to improve. Global coal and mineral prices are on the increase, while the flow of foreign direct investment and portfolio investment is expected to intensify after the international ratings agencies raised Indonesia’s credit ratings last year.

In the 2018 budget announced in August, the deficit is projected to narrow to 2.2% of GDP, based on an 8.2% increase in revenues and a 3.3% rise in spending.

These targets will rest on a 5.4% growth in GDP. In a report on the country’s prospects, Moody's analyst Anushka Shah said the outlook on the Baa3 rating is still positive with the government emphasising macroeconomic stability over a prior focus on short-term growth.

One of the challenges for the new government will be to succeed where President Joko Widodo has under-delivered – on strengthening the country’s infrastructure and improving connectivity across the archipelago nation.

Indrawati has openly questioned whether state-owned companies are “actually investing in infrastructure” and lamented that Indonesia’s infrastructure push has done little to help the private sector.  

Moody’s points out the country still scores poorly in worldwide governance surveys. A complex regulatory regime, little control over corruption and the rule of law all contribute to institutional weakness.

Indrawati retains her title as Asia's Finance Minister of the Year.

In acknowleding the award, Indrawati emailed FinanceAsia to say: "Indonesia is striving to accelerate its economic growth that emphasizes on quality, equity, and inclusivity. This is done by bolstering exports that is based on productivity and competitiveness. We are also aiming to improve our investment climate through policies that facilitate investments and simplification of regulations that suppresses investments."

Let's hope next year sees some of her rivals up their games.

This article has been updated to include Indrawati's acknowledgement of the award

The article has also been corrected to show the correct economic forecasts by Moody's


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