Aqida Salma – From the 1960s to the early 1990s, Indonesia's development strategy was famously shaped by the influence of the "Berkeley Mafia", a group of US-educated technocrats – including Widjojo Nitisastro, Mohammad Sadli, Emil Salim, J. B. Sumarlin, and Ali Wardhana – so named for their association with the University of California, Berkeley.

These men held key roles in the finance ministry, the central bank, and other economic institutions, where under the protection of Suharto's autocratic regime they emphasised pragmatic economic policies, fiscal management, and risk-sensitive governance. After Suharto's fall, a new generation of PhD economists, such as Sri Mulyani Indrawati, Chatib Basri, Bambang Brodjonegoro, and Suahasil Nazara, inherited the Berkeley Mafia's dominant influence over Indonesia's fiscal policies.

However, following the presidency of Joko Widodo (Jokowi), the technocratic landscape began to shift, with bankers and professional investors gaining greater influence. Like academic technocrats, these bankers and investors are neither elected officials nor formal party members. However, their credentials stem from careers in the private sector – particularly in banking and investment firms – where their expertise in asset pricing, risk assessment, and corporate finance contrasts with the policy-oriented, analytical focus of PhD-trained economists such as the Berkeley Mafia technocrats.

In this article, I define a "technocrat" as a government official, policymaker, or leader appointed based on technical expertise and professional skills rather than through election.

The emergence of banker technocrats began with figures such as Agus Martowardojo, who served as Minister of Finance (2010-2013) and later as central bank governor (2013-2018). As CEO of the state-owned Bank Mandiri (2005-2010), Agus played a key role in deepening Mandiri's integration into capital markets following its stock exchange listing in 2003.

This trend gained momentum during Jokowi's first term (2014-2019), particularly with the rise of Budi Gunadi Sadikin, who served as Minister of Health under Jokowi and now under President Prabowo Subianto. As Bank Mandiri's CEO (2013-16), Budi played a central role in facilitating the 2018 acquisition of a majority stake in the US-owned Freeport McMoRan by Indonesia's state-owned mining firm Inalum.

A distinction needs to be drawn between banker technocrats and professional investor technocrats, despite the often-blurred boundaries between the two. While bankers are by their nature professional investment advisors, not all professional investors come from banking. But does this distinction carry real significance? More importantly, how do their differing professional backgrounds shape their approach to governance?

Bankers largely emerged from the post-reform era of Indonesia's banking system – particularly within state-owned banks – which tend to adopt a conservative stance on risk. In contrast, professional investors arose from coalitions of conglomerates, creating investment vehicles such as private equity and asset management firms. These conglomerates turned to non-bank financial institutions in response to post-reform regulations that made it difficult for them to establish their own banks.

These divergent professional paths have shaped not only these two new groups of technocrats' career trajectories, but also their political networks and technocratic styles once they enter government.

The emergence of bankers and professional investors

In the early 1990s, conglomerate-owned banks lent freely to their affiliated companies without oversight, effectively transferring money between entities. This corrupt practice significantly weakened Indonesia's banking sector, contributing to the 1998 financial crisis.

As a result of this experience, a key priority of Indonesia's post-crisis banking reform was to strengthen oversight mechanisms. The reformed regulatory institutions – including the central bank (Bank Indonesia, reformed in 1999), the Indonesia Deposit Insurance Corporation (Lembaga Penjamin Simpanan, established in 1998), and the Financial Services Authority (Otoritas Jasa Keuangan, established in 2011) – have closely monitored bank operations and loan disbursements to ensure financial stability and debt repayment capacity. These efforts have been crucial in maintaining capital circulation between banks and corporations.

The upshot for Indonesia's state-owned banks of being subject to this regulatory regime was that they have remained relatively independent from political influence compared to other state-owned enterprises (SOEs) like Pertamina, which are often plagued by corruption and vested interests. As a result, Indonesian SOE banks have remained largely free from scandals, have adopted a conservative approach to risk, and have maintained sound financial performance, as reflected in the capital markets.

At the same, it became increasingly difficult for Indonesian conglomerates to establish banks due to tighter regulations, many shifted toward more flexible investment vehicles. This shift gave rise to a new wave of domestic investment firms in the early 2000s, including Recapital, Saratoga Capital, Principia, and Northstar Group. These firms fund various domestic projects, often linked to specific businesses groups or conglomerates. For conglomerates, investment vehicles offer greater flexibility than conventional banks. They enable stock buybacks when prices are low, allow investments in high-risk projects that banks might reject, facilitate direct funding from other business groups, and help avoid high bank interest rates and maximise profits.

Their rise to power

The banking sectors and investment vehicles have created two cultures of financial experts in Indonesia – one often risk-tolerant, and the other risk-averse. But who are these professionals, and how did they get into the government?

Banker technocrats are represented by figures such as Budi Gunadi Sadikin (Minister of Health, former CEO of Mandiri), Pahala Mansury (former Vice Minister of Foreign Affairs and SOEs, former C-level at Mandiri), Ridha D. M. Wirakusumah (CEO of Indonesia Investment Authority) and Kartiko Wiratmojo (Vice Minister of SOEs, former CEO of Mandiri). Professional-investor technocrats include figures such as Rosan Roeslani (Minister of Investment, CEO of Danantara), Pandu Sjahrir (CIO of Danantara, AC Ventures), Thomas Lembong (former Minister of Investment, Principia Group), and Patrick Walujo (CEO of Gojek, North Star Group). Walujo is the only one who has not held a government position, but he remains politically well connected.

In terms of how they operate, there are two key differences. The first is managerial depth: bankers tend to focus on financial management and operational efficiency. These skills are shaped by a regulatory environment where reputation is defined by the ability to minimise non-performing loans (NPLs) in the conventional banking sector. In contrast, professional investors emphasise valuation and deal-making. Their investment approach typically avoids long-term relationships with assets. Instead, they prioritise gains from selling assets in the capital markets or direct selling, where quick returns are often preferred over long-term holdings.

The second difference relates to political connections – professional investors often leverage their high-level networks, while bankers rely on institutional relationships. Most leaders in the investment sector come from privileged, well-connected backgrounds. Pandu Sjahrir earned his undergraduate degree from the University of Chicago and an MBA from Stanford; he is also the nephew of Luhut Binsar Pandjaitan, one of Indonesia's key political figures. Rosan Roeslani, a US-educated investor, is a close friend of Sandiaga Uno (former Minister of Tourism) and Erick Thohir (Minister of State-Owned Eterprises). He also maintains strong ties with the Bakrie family, one of Indonesia's most influential conglomerates. For these figures, connections are crucial in securing investment opportunities.

Many bankers also come from privileged backgrounds, though not to the same extent as professional investors when compared to the current elite among banker technocrats. For example, Budi Gunadi Sadikin earned his undergraduate degree from Bandung Institute of Technology (ITB), while Kartiko Wirjoatmodjo and Pahala Mansury graduated from the University of Indonesia. They later pursued master's degrees at overseas universities, but only after establishing themselves as bankers.

For banker technocrats, their institutional careers in SOE banks serve as a direct pathway into government, making the banking sector their primary political ladder. In contrast, professional investors have relied much more heavily on high-level social networks to gain access to government circles. Because of that, professional investor technocrats face greater risks from changes of administration and other political shifts among elites. If Luhut Binsar Pandjaitan, for example, were to have a political dispute with President Prabowo or his inner circle, it would immediately affect Pandu Sjahrir's political capital. High-level connections are effective but vulnerable to elite competition. Banker technocrats, on the other hand, are less exposed to these risks since their credentials were built through careers in the SOE banks. In this sense their careers resemble those of academic technocrats, who also maintained a degree of insulation from elite political conflicts, allowing them greater stability in navigating government transitions.

What this means for Indonesia

The idea that technocrats are free from political interests has always been misleading – none are truly politically independent. However, the degree and layers of political influence on technocrats are vary.

While academic technocrats will continue to play a key role, particularly in the Ministry of Finance, the growing influence of bankers and professional investors in strategic economic positions will create competition between different sets of technocratic groups over state economic policies and asset management. This shift gives Indonesian president alternatives in shaping technocratic policies. They can choose from academic technocrats, bankers, professional investors, combination of these backgrounds, or technocrats from other backgrounds.

Source: https://www.newmandala.org/beyond-the-berkeley-mafia