Changing a Civil Service Culture: Reforming Indonesia's Ministry of Finance, 2006-2010

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Abstract 

By the mid-2000s, Indonesia had recovered from a devastating economic crisis and made significant progress in transitioning from a dictatorship to a democracy. However, the country's vast state bureaucracy continued to resist pressure to improve operations. In 2006, President Susilo Bambang Yudhoyono tapped economist Sri Mulyani Indrawati to transform Indonesia's massive Ministry of Finance, which was responsible not only for economic policy making but also for taxes and customs. During four years as minister, Mulyani introduced new standard operating procedures, raised civil servant salaries, created a new performance management system, and cracked down on malfeasance. Her reforms turned what had once been a dysfunctional institution into a high performer. But ongoing resistance illustrated the difficulties and perils of ambitious bureaucratic reform in Indonesia.

This case study was drafted by Gordon LaForge based on research by Rachel Jackson, Drew McDonald, Matt Devlin, and Andrew Schalkwyk and on interviews conducted by ISS staff members from 2009 to 2015. Case published May 2016. Other ISS case studies provide additional detail about certain aspects of the reforms discussed in this case or about related initiatives. For example, see Instilling Order and Accountability: Standard Operating Procedures at Indonesia's Ministry of Finance, 2006-2007.

Keywords 
Standard Operating Procedures
performance management
salaries
spoilers
finance administration
civil service reform
Focus Area(s): 
Civil Service
Financial Management
Critical Tasks: 
Civil service corruption
Civil service recruitment
Evaluating performance
Job descriptions
Organization and staffing
Overcoming corruption
Performance management system
Salary structure reform
Sequencing reform
Core Challenge: 
Capacity (capability traps)
Institutional traps (spoilers)
Country of Reform: 
Indonesia
Type: 
Case Studies
Author: 
Gordon LaForge