VZCZCXRO5647
RR RUEHCHI RUEHCN RUEHDT RUEHHM
DE RUEHJA #0355/01 0550747
ZNR UUUUU ZZH
R 240747Z FEB 08
FM AMEMBASSY JAKARTA
TO RUEHC/SECSTATE WASHDC 8065
RUEATRS/DEPT OF TREASURY WASHDC
INFO RUEHZS/ASSOCIATION OF SOUTHEAST ASIAN NATIONS
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHKO/AMEMBASSY TOKYO 1545
RUEHBJ/AMEMBASSY BEIJING 4733
RUEHBY/AMEMBASSY CANBERRA 2031
RUEHUL/AMEMBASSY SEOUL 4411
RUEAIIA/CIA WASHDC

UNCLAS SECTION 01 OF 02 JAKARTA 000355 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EAP/MTS AND EB/IFD/OMA 
TREASURY FOR IA-SETH SEARLS 
SINGAPORE FOR SUSAN BAKER 
COMMERCE FOR 4430-BERLINGUETTE 
DEPARTMENT PASS FEDERAL RESERVE SAN FRANCISCO FOR FINEMAN 
DEPARTMENT PASS EXIM BANK 
DOJ/OPDAT FOR JOHNSON/LEHMANN/ALEXANDRE 
DOJ/AFMLS FOR SAMUEL 
 
E.O. 12598: N/A 
TAGS: EFIN EINV ECON PGOV PINR ID
SUBJECT: NEW CENTRAL BANK GOVERNOR NOMINEES - NO INSIDERS 
 
 
¶1. (SBU) Summary: President Yudhoyono nominated two outsiders to 
replace outgoing BI Governor Burnhannudin Abdullah, whose five-year 
term ends May 17, 2008.  Abdullah has been named in a corruption 
case involving payments to Parliament to pass banking legislation in 
2003/4.  Raden Pardede, an economist who has held several senior 
positions in the Government of Indonesia (GOI) is favored by fellow 
economists.  Agus Martowardojo is President Director of state-owned 
Bank Mandiri, Indonesia's largest bank.  The Parliament (DPR) must 
make a decision by March 15 on the candidates but has the option of 
rejecting both and requesting a new nomination.  End Summary. 
 
New BI Governor Nominees: No Insiders 
------------------------------------- 
 
¶2. (SBU) On February 15, President Yudhoyono (SBY) sent two names to 
the DPR as candidates for BI Governor for the next term, neither of 
them BI insiders such as the seven current Deputy Governors.  Media 
commentators and financial sector watchers believe that SBY named 
outsiders because of the ongoing corruption investigation against BI 
officials including Governor Abdullah (septel). 
 
¶3. (SBU) Raden Pardede is a respected macro-economist, Chairman of 
the Executive Committee of Indonesia's Financial Stability Forum 
(not to be confused with the international one) and Vice President 
of the State Asset Management Company (PPA).  PPA, the more 
transparent successor organization to the Indonesian Bank 
Restructuring Agency (IBRA), has the job of divesting shares and 
real property that came into GOI hands after bank bailouts in the 
1997/98 financial crisis.  PPA sunsets in 2009. 
 
¶4. (SBU) The other candidate, Agus Martowardojo, took over as 
President Director (CEO) of Bank Mandiri after KPK's information led 
to the conviction of Mandiri's previous CEO, Eddie Neloe of 
corruption.  Martowardojo has done a good job at Mandiri, cleaning 
up non-performing loans (NPLs) and improving management according to 
the International Monetary Fund (IMF) and many banking sector 
watchers.  While academic economists prefer Pardede, banking 
contacts believe that Martowardojo is the best choice, as the proven 
manager of a large organization.  (See biographic information 
below.) 
 
Parliament Not Pleased 
---------------------- 
 
¶5. (U) Several key members of the Parliament have indicated their 
disapproval of both of SBY's nominations.  BI insiders, according to 
them, are more market friendly.  Some analysts see SBY's decision as 
"insulting for BI as an institution."  Parliament will officially 
decide whether to accept or reject the candidates by March 15.  By 
Law No. 3/2004 on Bank Indonesia, Parliament has the right to 
decline candidates nominated by the President and would give the 
President one more chance to submit other candidates (one DPR member 
explicitly mentioned this possibility to us).  If the Parliament 
again disapproves the nomination, it will appoint a former Governor 
or one of the Deputy Governors. 
 
Abdullah Reasonably Good 
Performance as BI Governor 
-------------------------- 
 
¶6. (SBU) Though sometimes criticized for poor market communication, 
Abdullah has been generally well-regarded.  Under his supervision 
beginning in May 2003, BI has shepherded the economy toward strong 
growth with reasonable price stability, especially in the face of 
oil price shocks.  BI now has the highest foreign exchange reserves 
in its history and even repaid outstanding IMF loans.  Bank 
performance and supervision has been sound.  He has earned the trust 
of most commercial bankers.  While some monetary policy decisions 
have been late (as in the 2005 response to high oil prices) and 
others regarded as less-than-fully independent (as in the December 
2007 interest rate cut), Abdullah was generally liked and well 
respected by bankers and market participants.  One Indonesian senior 
banker said that he has been one of the most credible BI Governors 
in recent history.  Another Indonesian banking contact said in 
despair, "This is Indonesia, the good ones get hurt and the bad ones 
 
JAKARTA 00000355  002 OF 002 
 
 
stay on." 
 
Why Force Abdullah Out? 
----------------------- 
 
¶7. (SBU) One rumor from two Embassy contacts (although heavily 
discounted by others) is that SBY was considering Abdullah as a 
possible running mate in 2009.  Some say Golkar insiders, including 
Kalla supporters, did not want SBY to name BI Governor Abdullah as a 
running mate for 2009, and thus ensured damage to Abdullah both in 
his current position, and as a possible future Vice Presidential 
candidate.  The motivation behind the investigation, which 
originated BPK, is also bit murky.  Dr. Anwar Nasution, head of the 
BPK who first publicized the information against BI, is a former 
Deputy Governor of BI himself.  A Harvard-trained economist, he has 
been unhappy in his current job.  Some have speculated that Nasution 
"wanted back in" to BI so sought to tarnish the current lot or 
simply had an axe-to-grind with former colleagues. 
 
Bio for Raden Pardede 
--------------------- 
 
¶8. (U) Dr. Pardede is a prominent Indonesian economist.  He has held 
senior executive positions at PT Danareksa, a major Indonesian 
investment bank, and has served as a consultant to the World Bank, 
Asian Development Bank and various Indonesian Government 
departments.  Raden Pardede is Vice President Director of the 
State-Owned Asset Management Company or PPA (2004 to the present), 
on the Board of Commissioners of Bank Central Asia (2004 to the 
present), Chairman of the Executive Committee of Indonesia's 
Financial Stability Forum, Chairman of Finance for Indonesia's 
Infrastructure Development Team (2004 to the present), member of the 
macroeconomic policy team to the Minister of Finance (2006-present), 
and Advisor to the Coordinating Minister of Economic Affairs 
(2004-2005). 
 
¶9. (U) His earlier managerial positions included Executive Director 
and Chief of Economist at PT Danareksa (2002-2004), Deputy 
Coordinator of Assistance Team of Minister of Finance Republic of 
Indonesia (2001-2004), Chief Economist/Division Head at PT Danareksa 
(1995-2002), Founder of Danareksa Research Institute (1995), World 
Bank Consultant (1994-1995), Asian Development Bank Consultant 
(2000-2001), Staff of Planning in the Department of Industry 
(1985-1990), Process Engineer at PT Pupuk Kujang/Fertilizer Industry 
(1985), Guest Lecturer at the Institute for Technology in Bandung, 
the University of Indonesia and Business Institute Indonesia. 
Pardede has written more than 50 articles in English and published 
in several International Journals and Domestic Media.  A 
sought-after speaker for international seminars, he is active in 
speaking on macro and micro-economic issues.  He holds a Bachelor's 
degree in Chemical Engineering from Bandung Institute of Technology 
and a PhD in Economics from Boston University.  Pardede is a 
Christian. 
 
Bio for Agus Martowardojo 
------------------------- 
 
¶10. (U) Martowardojo is currently the President Director of Bank 
Mandiri (appointed in May 2005) replacing Eddie C.W. Neloe who was 
involved in alleged corruption case.  After graduating from the 
Economic Faculty of University of Indonesia in 1984, Martowardojo 
started his banking career at Bank of America and worked there until 
¶1986.  Between 1986-2002, he held several key position in Indonesian 
domestic banks; Niaga Bank (1986-1994), Bumiputera Bank (President 
Director; 1995-1998), Export Bank (President Director; 1998) and 
Permata Bank (President Director, 2002 - 2005).  In 2002 he was also 
the chief advisor and the vice chairman of Indonesian Banking 
Restructuring Agency (IBRA).  Martowardojo took several banking and 
management courses, at the State University of New York, Stanford 
University, and the Institute of Banking and Finance (Singapore). 
Martowardojo was born in Amsterdam in 1956 and is a Muslim. 
 
HUME