Finance Minister Agus Martowardojo:

Agus Martowardojo, 56, seems to spend his life dealing with numbers. This is not strange, considering his education and most of his life was in the world of finance. This year, he spent 122 days at the House of Representatives (DPR) answering summons from the various legislative commissions, to debate and discuss the fundamentals of state financing. With the end of 2012, which he described as a "burdensome but optimistic year," Agus uses numbers as indicators to measure economic performance: growth, subsidies, deficit, investment, just to name a few.

The Finance Minister is the final arbiter of state budgets, which has earned Agus Marto as he is known criticism for being "overly careful in monitoring fiscal policies." But there is no hesitation when he needs to block ministers' projects, even though they have been approved by the DPR, especially if he regards them as lacking in transparency. "The people will bear the burden if we make the wrong decision. So, if there is a request which I think is difficult to achieve, that's what I tell them," said Agus.

Agus has recently been named a party involved in the Hambalang case, a big news item. "The Finance Minister has been empowered by law to submit a written viewpoint on the exit meeting (a meeting between the auditor and the audited party). But until that report is submitted by the Supreme Audit Agency (BPK) to the DPR, that right has not been given to me," Agus explained.

The global economy is not expected to recover in 2013. But Indonesia has a fallback. "Investment contribution towards our economy next year will be bigger than domestic consumption," said Agus. But the fuel subsidy is certain to become a headache once again, although in the minister's view, dynamics is inherent in the responsibility to manage state finances. "I never bring office problems home. Once they are discussed, they end there," said the former banker who keeps in shape by swimming lengths three times a week.

Last week, in the middle of a hectic schedule discussing the budget at the DPR, he spoke to Tempo reporters Hermien Y. Kleden, Ali Nur Yasin, Adek Media Roza and Angga Sukma Wijaya, and photographer Aditia Noviansyah, at his official residence in South Jakarta. Excerpts:

What will be the priority of the Finance Ministry in 2013, based on the national economic performance this past year?

What we need to ensure is that our economy keeps on growing inclusively: providing equitable benefits to the people. The gap between the haves and have-nots must be narrowed. Based on the agreement with the DPR, we would like to see our economy grow by 6.8 percent.

Isn't that too high? That target was tied to May, when world economic growth was still optimistic.

We did discuss the 6.8 percent target in May this year, when global economic growth looked optimistic. Between July and October, the growth figure was corrected downward, but the government could not adjust it fast enough because of the law on the State Budget, which has been approved (by all parties). But we still want to ensure a growth of 6.8 percent.

Even in 2012, we had not managed to make the target of 6.5 percent.

Look. When other countries had problems in 2012, our economy grew at about 6 percent. For the past five years, Indonesia's economy grew an average of 5.9 percent. In my view, we will do well in the midst of a troubled global situation.

That may be, but achieving a target of 6.8 percent? Our exports are down, our exchange rate has plunged and the world economy shows no signs of improving.

Besides relying on investment, the realization of the (2013) budget, which is Rp1,683 trillion, must push for growth. State-owned companies (SOEs) must be more active in infrastructure projects, like ports, airports and toll roads.

SOE revenues have been good and their spending has not been as inflexible as the government's. In fact, we will provide tax stimulus to local governments so they can compete in attracting investors.

So investment will be the mover and shaker of the economy in 2013?

In 2012, besides domestic consumption, growth was backed by investment. Next year, investment's contribution to economic growth will be bigger than domestic consumption. For example, during January and September 2012, investment grew by 27 percent, compared to the previous year.

The reports by the McKinsey Global Institute and Fitch Ratings commended Indonesia's preparedness in facing economic crisis. The question is how much progress have we achieved?

The International Monetary Fund and the World Bank also cited such preparedness. But let me make a note here: although we were able to overcome the 2009-2012 crisis, we still need to improve in a major way. The infrastructure sector, for example, needs serious attention.

We should also remember that the past six years have always recorded a deficit at the end of each year.

But our deficits are around 1 percent, while those of other countries are 4 percent, some even going as high as 8 percent. When we look at the capital market, the index today is 4,300 compared to the situation 10 years ago, which was around 400. In 2005, Indonesia's State Budget was Rp500 trillion, while in 2012, it is about Rp1,500 trillion.

***
Subsidies for energy fuel and electricity in 2012 ballooned to Rp300 trillion, from a target change of Rp201 trillion. For 2013, Rp274 trillion will be allocated to subsidies. Is there a plan to raise fuel and electricity rates?

We have the DPR's approval to raise electricity prices by 15 percent. The implementation will be carried out by the Energy and Mineral Resources Ministry (ESDM). The DPR also agrees to adjust fuel prices if the macroeconomic assumptions change. But so far, we don't have such a plan. The impact of a rise in subsidized fuel will be felt not only on the economic side, but also on the social and poverty factors.

But isn't it true that fuel subsidies so far have benefitted only the middle and upper classes? Efforts at restriction, even though it's still in the form of recommendations, has proven to produce no result.

Subsidies must be studied seriously. The problem is that Indonesians don't feel they are in a crisis. For us, the quota of 46 million kiloliters of subsidized fuel is very worrying. If the economy grows, the demand for energy will be high, and the sale of private-owned cars can soar.

Correct. This year alone, 1.1 million units...

So, if there are no restrictions, the consumption of subsidized fuel in 2013 will be more than the quota. We have asked the responsible party the Energy and Mineral Resources Ministry, BP Migas (board overseeing downstream oil and gas activities) and Pertamina to exert controls. Subsidies will continue, but they must go to the right people.

This is our version: Rp274 trillion is allocated for subsidies, the differences in exchange rate, the 2013 budget will be raised. What do you think?

If we look at assumptions and growth of subsidized fuel exceeding the quota, that will raise the State Budget by Rp70 trillion. But I will make sure that our revenues also increase and that there will be savings from other spending.

Is it true you will push to raise taxes and royalties through negotiations on renewing mining contracts?

The president has given his instructions on the renegotiation of mining contracts. We need the multinationals and big companies. Negotiations of contract renewals will be done to achieve win-win contracts, so long as both parties have good intentions.

We heard you have only been invited once to these negotiations, even though the renegotiating team was formed back in 2011. So, how can you be pushing for results?

True, a team was formed by the Economic Coordinating Minister. If the Finance Ministry has only taken part once (in the negotiations), it's because the talks are still at the technical stage. But I hope there will be directions from a higher level so that the technical discussions can be carried out. I also hope the Finance Ministry will be involved to ensure taxation, non-tax revenues.

Do you dare to face the mining 'big boys' who are strong politically and financially?

No one does business over the problems of others, so there must be renegotiation. In our country, there have been too many win-lose deals, starting from the New Order days, and until today. I happen to come from a non-government background, so I know how businessmen think, even their wallets. So, without renegotiation to achieve a win-win contract, we will lose opportunities.

What do you recommend so that the renegotiations can result in win-win agreements?

Indonesia is listed as a country which honors contracts. If we carry out renegotiations with big companies, the government should be clear about its own coordination, planning and implementation, especially among those in the renegotiating team.

***
The results of the BPK audit found you to be negligent, enabling the Hambalang project funds to be (easily) disbursed.

The BPK is the highest state audit institution, which I fully support. But when its audit result was announced, there seemed to be a disconnect between facts and the conclusion. Article 16, paragraph 4 of Law No. 15/2004 on the BPK, says that if an audit is carried out, whether a general or specific one, the Finance Minister is given the right to provide his written views on the exit meeting. But until that report was submitted to the DPR, that right has not been given to me. This is important because I don't know what was done in the audit.

Have you asked the BPK about your right?

Not yet. I will convey it to the BPK officially, but right now I must finish up so much work before the end of the year.

May we know the contents of the official memo you received on December 1, 2010?

I was appointed minister on May 20, 2010 and I was aware of the Hambalang project on December 1, when I received some suggestions in the form of a memo. In that official memo, I was told I can provide an alternative decision.

Did you choose to agree or reject what was in the decision?

I did not choose to 'agree' or 'reject.' I chose to 'resolve' it in accordance with regulations. After that, I never heard again about Hambalang until the end of 2011.

How did the Finance Ministry allow the multi-year project fund to be disbursed with only the signature of the Youth and Sports Ministry secretary, and not the minister?

Each ministry and institution is responsible for its own budget. We are convinced that all activities in that ministry are the responsibility of its minister. In case of administrative problems, of course it must be audited, or investigated by law enforcers. I am still waiting for the internal Finance Ministry audit to know more details.

Has the Hambalang case made you more alert, and that's why you are holding up the disbursement of the Defense Ministry's Rp678 billion budget?

That budget has been approved by the ministry and the DPR Defense Commission, but there was a letter from the Cabinet Secretary, which suggested that we be alert, and it was copied to the president. So I detained it. The same letter was sent to the BPKP, which then requested a pre-audit on the prices of certain acquisitions.

How long will you detain that budget?

In principle, I can hold this budget until there is a clarification from the Cabinet Secretary, Pak Dipo Alam.

***
Some people are of the opinion that you are too protectionist, fiscally speaking, hence your reluctance to approve megaprojects, like the mass rapid transit (MRT), which reportedly you turned down.

The duty of the Finance Minister is to be the person responsible for fiscal matters. I support the MRT project. That project is 42 percent funded by grants and 58 percent by loans. After calculations, the ticket price comes to Rp26,000, which means the Jakarta administration must subsidize it (if it is to be consumed by the public). If Rp26,000 is too expensive, the project-cost must be reviewed, so as not to shift the burden to the central government. Because at the end of the day, it will be the public who will bear the burden. We need to talk nicely to JICA (Japan International Cooperation Agency, the organization the provided the loan).

Last August, the Energy and Mineral Resources Ministry set up a region-based, geothermal feed-in tariff. Is it true you disagreed with it?

If the Energy and Mineral Resources Minister issued the regulation on feed-in tariff, we at the Finance Ministry ask that it be reviewed because setting up tariffs according to location is not in accordance with best practices. Two factors are involved. First, the price should ideally be set based on geothermal resources on the ground. Second, basedon the supply, the operating cost and so forth. Only then can we set the tariff.

Why not look at it from the vantage point of the price, so it can attract investors?

If the supply of the geothermal energy is sufficiently significant, and the cost expended is cheap, and the tariff is set high, the company can reap big profits. But if supplies are limited, the extraction is difficult and the tariff is low, the company will not take it. So, if it is determined based on location, the price would be too expensive for the government but too cheap for the businessman.

Did you communicate this to the Energy and Mineral Resources Minister?

I told him during a discussion, a sharing session between government ministries.

How are your relations with the president? You are reported to have difficulties meeting him.

I don't have problems meeting him, but I know the president is very busy. If I am needed, I am sure the president will call me. But I send him all my reports, anyway.

Are you sure you will be able survive until 2014?

God Willing. I regard this job as a mandate. So, when the president appointed me and I accepted it, I decided to carry out my duties the best I can until 2014, or until my boss has other plans for me.

Who do you consider to be your boss?

Throughout my career, I serve only one master. As Finance Minister, I only have one superior, and that is the state of Indonesia, and of course, its leader, the president.

Agus Dermawan Wintarto Martowardojo
Place & Date of Birth
Amsterdam, The Netherlands, January 24, 1956
Education
Economics Faculty, University of Indonesia (1984) Course�Banking and Management at State University of Buffalo, New York
Stanford University, Palo Alto
Institute of Banking and Finance, Singapore
Career
CEO, Bank Ekspor Impor Indonesia (1998)
CEO, Bank Bumiputera (1995-1998)
CEO, Bank Permata (2002-2005)
CEO, Bank Mandiri (2005)
Finance Minister (2010 to date)

Tempo
No. 18/13, December 25, 2012