As finance minister in her native Indonesia for five years, Sri Mulyani Indrawati put the cleaners through her sprawling bureaucracy of 64,000 economists, bureaucrats, tax collectors and customs officials.
She fired hundreds of corrupt tax and customs officials, and gave pay rises to the clean ones. The number of income tax payers multiplied, revenues grew sharply, and foreign investment expanded, propelling Indonesia into its present high-growth trajectory just below China and India.
Then her campaign came up against one of Indonesia's most powerful figures, business tycoon Aburizal Bakrie, who also happened to head the Golkar party, a key player in Jakarta politics. After refusing to call off a tax demand on his business group, or socialise its problems by calling the disastrous mud-volcano from one of its gas wells a natural event, she found herself under relentless attack.
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With President Susilo Bambang Yudhoyono wavering in support, she was lifted out in May last year to become one of three managing directors at the World Bank in Washington.
In Australia this week, the 48-year-old Mulyani who has a PhD in economics noted the angst about the strong dollar, after the downsizing at BlueScope Steel and Qantas. It's the classic ''Dutch disease'' - named for the currency appreciation that hit the Netherlands after it tapped North Sea gas, the death knell for enterprises such as aircraft maker Fokker.
''It's happening here, in Latin America, in Indonesia, in Africa,'' Mulyani says. ''The challenge for the policymaker is how you are going to manage this booming sector and sterilise this impact that will disadvantage the other sectors, but at the same time without creating new distortions to the economy.
''The answer is more on the structural reforms that need to be adopted for the non-booming sectors, meaning that you have to invest in order to improve productivity and competitiveness of those sectors.''
She would no doubt regard a ''buy local'' rule to support the steel industry, as suggested by the Australian Workers Union chief, Paul Howes, as one such distortion, and probably frown at the growing attack on the Reserve Bank governor, Glenn Stevens, over the priority given to keeping inflation under control.
The fact is Australia ceased to be a significant manufacturing nation in the 1980s, when most civil and defence factories closed except for a few sectors sustained by lingering protection, notably car-making. It simply does not have the internal market or proximity to bigger ones to compete, except in specialised items, and there's no point preparing for World War II.
Compared with Brazil, which also sells iron ore to China, Australia is doing pretty well. It has inflation above 6 per cent, and its central bank has ramped up the key interest rate five times this year to 12.5 per cent, while taxes have been slapped on short-term investment flows. Its huge manufacturing sector, making everything from shoes to aircraft, is hit by Chinese competition.
According to The Economist's Big Mac Index (based on comparative prices of that identical hamburger around the world), the Brazilian real is 46 per cent overvalued, while the dollar is a modest 17 per cent too strong.
The Chinese yuan is 44 per cent undervalued by this index, while most of the other big non-Japan industrial countries in Asia have currencies undervalued too, ranging from 15 per cent for South Korea to 54 per cent for India.
But things are not quite that unfair. The Economist puts its fun index through a further filter, adjusting the ''raw'' Big Mac prices to gross domestic product per person to reflect local costs. The result is that China's yuan comes out 3 per cent above its ''correct'' value, and most other Asian countries move close to it or to over-strength. Brazil's real, however, becomes 149 per cent overvalued.
Our dollar's over-valuation drops to 12 per cent, with the proviso that the calculations were made on a dollar being worth less than US96¢ on July 25, when it was actually about $US1.01 - perhaps too much cholesterol from too many burgers clouding the calculations.
But would Australia rather not have this problem? As Mulyani pointed out, Asian markets are still quite vibrant thanks to strong domestic economies and intra-regional trade, though a prolonged crisis in Europe and the US will eventually impact growth. ''It's not totally decoupling, but they have the ability to withstand or at least to cushion themselves from the crisis,'' she said.
Governments are finding it hard to stand back and let market forces do their work, especially when it's not only manufacturing being hollowed out, but agricultural land is being devastated by mining and coal gas extraction. In mineral-rich eastern India, it is helping fuel the Maoist insurgency, in Australia's eastern states a more peaceful political backlash.
The rising power of big business vis-a-vis government is becoming a critical issue in diverse countries. In India, powerful companies have long made and broken ruling coalitions with suitcases of cash. Thailand has been racked for years by the power of the entrepreneur-politician Thaksin Shinawatra.
In Australia, the big mining houses easily stared down the Rudd government's clumsy effort at a super-profits tax, when the Henry report's original proposal for the proceeds to finance a five percentage point cut in company tax rates might have had small business, manufacturers and service companies cheering the government on.
In Indonesia at least, things are shaping up for a return bout. Earlier this month, a new political party registered itself in Jakarta. Its name, the Union of Independent People, in Indonesian yields the acronym SRI. Its founders hope to enlist Mulyani as presidential candidate in 2014 - in which case she might be running against Bakrie.
She feels honoured by the trust placed in her, but for the moment will concentrate on her role as an ''international public servant'', she says. ''Many Indonesians are proud about that, so I have to make sure they will not be disappointed.''
Source : http://www.smh.com.au/
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