How does a corrupt government stop corruption? What if that government is democratic, and must cultivate the support of political parties that are themselves corrupt? Is fostering reform in such a political economy the equivalent of trying to make snow in hell?

These questions may be overstated, but the dilemmas they convey are all too real. Witness the storm of concern triggered by the recent resignation of the highest-profile reformist in Indonesia, Sri Mulyani Indrawati, from her linchpin job as minister of finance in a country that was ranked the most corrupt and the most democratic in Southeast Asia in 2009.

Sri Mulyani waged unremitting war on graft. Under her stewardship of the finance ministry, more than 150 of its personnel were dishonorably discharged. Nearly 2,000 more were otherwise punished for infractions. She led a vigorous campaign against tax cheats. Among them were rich and influential people who had grown accustomed to absconding with funds they owed the government.

Euromoney named her ‘finance minister of the year’ in 2006—a post she had only taken up the year before. In 2008 and again in 2009 Forbes magazine admiringly listed her among ‘the 100 most powerful women in the world.’ Correspondingly, on the heels of her resignation on 5 May 2010, Indonesian stocks and rupiahs fell.

Indonesian president Susilo Bambang Yudhoyono (SBY) was directly elected to that office in 2004 and, for a second five-year term, in 2009. As president he has opposed corruption and championed reform. Fatefully, however, in 2004 he chose a wealthy businessman, Aburizal Bakrie, to join his government as coordinating minister for the economy.

In 2006 in East Java, a Bakrie-controlled company using an unprotected drill while probing for gas may have triggered a mud volcano that would swallow more than a dozen villages and render more than 15,000 people homeless. In 2010 the volcano continued to spew an estimated 100,000 tons of mud daily onto the surface. Bakrie’s reputation for probity was not enhanced when, reportedly against Mulyani’s advice, he insisted on denying responsibility for the disaster. Instead he blamed an undersea earthquake that had struck off the south coast of Java, some 250 kilometers away, two days before the mud erupted. Opinions remain divided as to what caused what.

An unambiguously man-made crisis in 2008, the global financial meltdown, shrank the Jakarta stock market, Bakrie’s holdings included. Trading on the exchange was temporarily suspended. Bakrie urged his fellow cabinet member Mulyani to extend the suspension. She refused. He was furious. Her relations with him worsened further when she slapped travel bans on certain Bakrie company executives accused of tax evasion.

In 2009 Bakrie became chair of the Golkar Party. Toward the end of that year he led a fierce campaign in the Indonesian legislature against both Mulyani and another nonpartisan technocrat, Indonesian vice-president Boediono, for malfeasance related to the government’s decision in 2008 to rescue an ailing financial institution, Bank Century. The bailout may have prevented a spiral of withdrawals, and thus helped Indonesia weather the global crisis, but the effort cost far more than expected, and some of the infusions apparently benefited key depositors more than the bank itself.

Legitimate financial questions were soon superseded, however, by a thoroughly political effort on the part of politicians and their supporters opposed to Mulyani and her reforms to oust not only her but the vice-president as well. Mulyani’s and Boediono’s opponents included, in addition to Bakrie, others whose circumstancial links to corruption she had uncovered.

An anti-Mulyani case in point is the Justice and Welfare Party (PKS). Despite priding itself on upholding Islamic ethics and opposing corruption, the PKS rejected allegations that one of its legislators, Muhammad Misbakhun, could have been implicated in a fictitious Bank Century letter of credit for US $22.5 million. When, at the end of April 2010, Misbakhun was arrested and detained on a warrant signed by the national police official in charge of economic and tax crimes, PKS leaders accused the police of having an ulterior motive. The party had by then, in effect, joined the anti-Mulyani chorus.

Subjected to intense and prolonged criticism by these politicians in the glare of the media, Mulyani had ample reason to quit the spotlight, resign, and leave Indonesia. (On 1 June 2010 she will become a managing director of the World Bank in Washington DC.) But her long record of nonpartisan tenacity in the struggle against corruption makes it hard to believe that she simply lost her will to fight. For the time being it is impossible to rule out that she was sacrificed for the sake of a restoration of political comity between SBY and his opponents.

The irony is that Golkar and the PKS had joined with SBY’s Democrat Party to form a ruling coalition, to which they continue to belong. SBY had built that coalition with the expectation that its members, having joined the government, would support it, including its campaign against corruption.

That inclusive or ‘rainbow’ strategy was a triple failure. First, cabinet posts that might have been held by competent and ethical nonpartisans motivated by a desire for public service were allocated instead to partisans whose skills and motives, shall we say, varied. Governance suffered. Second, coalition-party leaders who were given ministerial posts in return for ensuring broad legislative backing for the government in the legislature either would not or could not deliver that support. Cooptation failed. Third, some ruling-team politicians, who might have at least stood back from the fray, instead jumped in, seemingly hoping to blunt the government’s efforts to diminish corruption and improve governance while protecting themselves and furthering their own careers. Discipline frayed.

Mulyani has resigned. Has Bakrie won?

In a recent conversation, an off-the-record analyst anticipated ‘more stability, which, in Indonesia, correlates inversely with reform.’ He could be wrong. But it may not be coincidental that on 6 May 2010, one day after Mulyani announced her resignation, SBY met with ruling-coalition leaders. Or that the meeting launched a Coalition Parties Forum whose daily activities will be led by none other than the chair of the Golkar Party, Aburizal Bakrie. Or that Bakrie reported that SBY had agreed that the Forum would not try to bind the coalition to a common position. Or that, again according to Bakrie, whereas previously the coalition parties were only asked to help safeguard the government’s policies, henceforth they would be asked to help determine them as well. Much will depend on Mulyani’s replacement as minister of finance, and on whether he or she is told to stop rocking the boat.

If Mulyani’s remarkable legacy is indeed erased, illiberal circles in Singapore may think, ‘We thought so. Democracy does thwart reform.’ But my own judgment in hindsight will be less sweeping.

Indonesia’s Democrat Party is still basically an extension of the appealing personality of SBY. Over the six years since he was first elected president, more time, energy, and resources could have been invested in deepening the roots and popularity of the party itself. Had those assets been so spent, the Democrats might have been able, in the legislative elections of 2009, to enlarge their contingent of lawmakers enough to be able to rule, not by the dubious grace of Sri Mulyani’s antagonists, but in SBY’s and his party’s own right—subject to democracy’s checks and balances, yes, but freed of the need to cobble together a coalitional rainbow of colors that clash.

Donald K. Emmerson heads the Southeast Asia Forum at Stanford University and is also the editor of Hard Choices: Security, Democracy, and Regionalism in Southeast Asia. (Stanford/ISEAS, 2008/9)

A heartening number of analysts helpfully commented on an earlier draft of this essay.  While protecting their privacy by not naming them, I am grateful to them.  Complementing my focus here on the politics of Sri Mulyani’s exit is the economic context ably reviewed by Arianto A. Patunru and Christian von Luebke in their ‘Survey of Recent Developments’ in the Bulletin of Indonesian Economic Studies, 46: 1 (2010, 7-31.)

How does a corrupt government stop corruption? What if that government is democratic, and must cultivate the support of political parties that are themselves corrupt? Is fostering reform in such a political economy the equivalent of trying to make snow in hell?

These questions may be overstated, but the dilemmas they convey are all too real. Witness the storm of concern triggered by the recent resignation of the highest-profile reformist in Indonesia, Sri Mulyani Indrawati, from her linchpin job as minister of finance in a country that was ranked the most corrupt and the most democratic in Southeast Asia in 2009.

Sri Mulyani waged unremitting war on graft. Under her stewardship of the finance ministry, more than 150 of its personnel were dishonorably discharged. Nearly 2,000 more were otherwise punished for infractions. She led a vigorous campaign against tax cheats. Among them were rich and influential people who had grown accustomed to absconding with funds they owed the government.

Euromoney named her ‘finance minister of the year’ in 2006—a post she had only taken up the year before. In 2008 and again in 2009 Forbes magazine admiringly listed her among ‘the 100 most powerful women in the world.’ Correspondingly, on the heels of her resignation on 5 May 2010, Indonesian stocks and rupiahs fell.

Indonesian president Susilo Bambang Yudhoyono (SBY) was directly elected to that office in 2004 and, for a second five-year term, in 2009. As president he has opposed corruption and championed reform. Fatefully, however, in 2004 he chose a wealthy businessman, Aburizal Bakrie, to join his government as coordinating minister for the economy.

In 2006 in East Java, a Bakrie-controlled company using an unprotected drill while probing for gas may have triggered a mud volcano that would swallow more than a dozen villages and render more than 15,000 people homeless. In 2010 the volcano continued to spew an estimated 100,000 tons of mud daily onto the surface. Bakrie’s reputation for probity was not enhanced when, reportedly against Mulyani’s advice, he insisted on denying responsibility for the disaster. Instead he blamed an undersea earthquake that had struck off the south coast of Java, some 250 kilometers away, two days before the mud erupted. Opinions remain divided as to what caused what.

An unambiguously man-made crisis in 2008, the global financial meltdown, shrank the Jakarta stock market, Bakrie’s holdings included. Trading on the exchange was temporarily suspended. Bakrie urged his fellow cabinet member Mulyani to extend the suspension. She refused. He was furious. Her relations with him worsened further when she slapped travel bans on certain Bakrie company executives accused of tax evasion.

In 2009 Bakrie became chair of the Golkar Party. Toward the end of that year he led a fierce campaign in the Indonesian legislature against both Mulyani and another nonpartisan technocrat, Indonesian vice-president Boediono, for malfeasance related to the government’s decision in 2008 to rescue an ailing financial institution, Bank Century. The bailout may have prevented a spiral of withdrawals, and thus helped Indonesia weather the global crisis, but the effort cost far more than expected, and some of the infusions apparently benefited key depositors more than the bank itself.

Legitimate financial questions were soon superseded, however, by a thoroughly political effort on the part of politicians and their supporters opposed to Mulyani and her reforms to oust not only her but the vice-president as well. Mulyani’s and Boediono’s opponents included, in addition to Bakrie, others whose circumstancial links to corruption she had uncovered.

An anti-Mulyani case in point is the Justice and Welfare Party (PKS). Despite priding itself on upholding Islamic ethics and opposing corruption, the PKS rejected allegations that one of its legislators, Muhammad Misbakhun, could have been implicated in a fictitious Bank Century letter of credit for US $22.5 million. When, at the end of April 2010, Misbakhun was arrested and detained on a warrant signed by the national police official in charge of economic and tax crimes, PKS leaders accused the police of having an ulterior motive. The party had by then, in effect, joined the anti-Mulyani chorus.

Subjected to intense and prolonged criticism by these politicians in the glare of the media, Mulyani had ample reason to quit the spotlight, resign, and leave Indonesia. (On 1 June 2010 she will become a managing director of the World Bank in Washington DC.) But her long record of nonpartisan tenacity in the struggle against corruption makes it hard to believe that she simply lost her will to fight. For the time being it is impossible to rule out that she was sacrificed for the sake of a restoration of political comity between SBY and his opponents.

The irony is that Golkar and the PKS had joined with SBY’s Democrat Party to form a ruling coalition, to which they continue to belong. SBY had built that coalition with the expectation that its members, having joined the government, would support it, including its campaign against corruption.

That inclusive or ‘rainbow’ strategy was a triple failure. First, cabinet posts that might have been held by competent and ethical nonpartisans motivated by a desire for public service were allocated instead to partisans whose skills and motives, shall we say, varied. Governance suffered. Second, coalition-party leaders who were given ministerial posts in return for ensuring broad legislative backing for the government in the legislature either would not or could not deliver that support. Cooptation failed. Third, some ruling-team politicians, who might have at least stood back from the fray, instead jumped in, seemingly hoping to blunt the government’s efforts to diminish corruption and improve governance while protecting themselves and furthering their own careers. Discipline frayed.

Mulyani has resigned. Has Bakrie won?

In a recent conversation, an off-the-record analyst anticipated ‘more stability, which, in Indonesia, correlates inversely with reform.’ He could be wrong. But it may not be coincidental that on 6 May 2010, one day after Mulyani announced her resignation, SBY met with ruling-coalition leaders. Or that the meeting launched a Coalition Parties Forum whose daily activities will be led by none other than the chair of the Golkar Party, Aburizal Bakrie. Or that Bakrie reported that SBY had agreed that the Forum would not try to bind the coalition to a common position. Or that, again according to Bakrie, whereas previously the coalition parties were only asked to help safeguard the government’s policies, henceforth they would be asked to help determine them as well. Much will depend on Mulyani’s replacement as minister of finance, and on whether he or she is told to stop rocking the boat.

If Mulyani’s remarkable legacy is indeed erased, illiberal circles in Singapore may think, ‘We thought so. Democracy does thwart reform.’ But my own judgment in hindsight will be less sweeping.

Indonesia’s Democrat Party is still basically an extension of the appealing personality of SBY. Over the six years since he was first elected president, more time, energy, and resources could have been invested in deepening the roots and popularity of the party itself. Had those assets been so spent, the Democrats might have been able, in the legislative elections of 2009, to enlarge their contingent of lawmakers enough to be able to rule, not by the dubious grace of Sri Mulyani’s antagonists, but in SBY’s and his party’s own right—subject to democracy’s checks and balances, yes, but freed of the need to cobble together a coalitional rainbow of colors that clash.

Donald K. Emmerson heads the Southeast Asia Forum at Stanford University and is also the editor of Hard Choices: Security, Democracy, and Regionalism in Southeast Asia (Stanford/ISEAS, 2008/9).

A heartening number of analysts helpfully commented on an earlier draft of this essay.  While protecting their privacy by not naming them, I am grateful to them.  Complementing my focus here on the politics of Sri Mulyani’s exit is the economic context ably reviewed by Arianto A. Patunru and Christian von Luebke in their ‘Survey of Recent Developments’ in the Bulletin of Indonesian Economic Studies, 46: 1 (2010, 7-31.)

On February 26 and 27, 2010, the SPRIE-Stanford Project on Japanese Entrepreneurship hosted its second annual conference, "Entrepreneurship and Innovation in Japan" at the Bechtel Conference Center in Encina Hall at Stanford University, made possible through generous support from Cisco Systems and The Miner Foundation.

Scholars from universities across Japan and the United States gathered to present and discuss new papers seeking to understand the trends and dynamics of business and innovation in Japan through the lens of entrepreneurial companies, and institutions that affect those companies.

The conference agenda is below; presentation and other files will be linked as they are available.

On May 10 and 11  a select group of government, business, and academic leaders from the United States and Asia will be attending the invitation-only "Smart Green Cities: New Technologies, New Strategies, New Practices" conference for two days of expert presentations and fruitful discussion at Stanford University. The conference will enable participants to better lead to improved strategy, action, and outcomes for building the next generation of smart green cities.

The Korean Studies Program (KSP) of the Walter H. Shorenstein Asia-Pacific Research Center (APARC) is pleased to announce that Mr. John Everard will join the Center for the 2010-2011 academic year. Mr. Everard's research will be on North Korean life and society. During his fellowship at the Center, he will hold seminars related to his research project and will be involved in various projects on Korea.

With frequent appearances on BBC discussing North Korea, Mr. Everard, former British Ambassador to North Korea, 2006-2008, will bring extensive knowledge of North Korea, China and South America to APARC.  He served as British Ambassador to Uruguay in 2001-2005, and was head of the Political Section in Beijing 2000-2001.  He was responsible for political relations with the troubled states of West Africa and managed mutinational efforts to restore democracy to Bosnia, 1995-1998.  He became the youngest British Ambassador to Belarus in 1993.

Mr. Everard studied French, German and Chinese at Emmanuel College, Cambridge, and studied Chinese history and economics at Bejing University. He holds an MA from Manchester Business School.

Pantech Fellowships, generously funded by Pantech Group of Korea, are intended to cultivate a diverse international community of scholars and professionals committed to and capable of grappling with challenges posed by developments in Korea. We invite individuals from the United States, Korea, and other countries to apply.