The History of Ministry of Finance
In Indonesia, the history of
financial manager has existed since ages ago. From the era of kingdom until the
time being, Indonesia has had financial manager to be able to conduct the
economic development in its governance. Government financial management covers
all assets owned by Governments. The fund itself came from the society in the
form of tribute, taxes, customs and excise, and others.
As a part of Indonesia
government, Ministry of Finance is an institution, which has important role in
conducting economic development. Economic development will run smoothly if it
has good administration in managing State’s finance. The important role of the
Ministry of Finance is managing State’s finance and assisting the leader in the
state’s finance and asset. Therefore, the Ministry of Finance can be considered
as the guard of state finance (Nagara Dana Rakca).
BEFORE INDEPENDENCE DAY
The expulsion of the
Portuguese conducted by the Dutch made the Dutch post their authority in
the Netherlands East Indies, by delegating the authority to the VOC
(Vereenigde Oost-Indische Compagnie). VOC, which was led by
Governor-General Jan Pieterzoon Coen (1619-1623 and 1627-1629), was
given an octrooi rights to print money and conduct of economic policy.
Since 1600s, VOC issued
policies to increase the state treasury fund by stipulating the
regulations of verplichte leverentie (obligation to submit natural
resources to VOC), contingenten (agricultural products tax, restricted
the amount of spice plants to increase the price), and preangerstelsel
(obligation to plant coffee trees).
In March 1809, after
selling the Weltevreden land, Government of Daendels decided to build a
palace across the parade ground of Waterlooplein. This palace was
planned to be the center of Government and used for the interest of the
Governor-General, in order to decide policies. In addition, this
building also served as the place of detention.
Government of Daendels
was end and it was replaced by Governor Jansen. Governor Jansen had less
concern on the building construction, so that the construction did not
have any progress during his tenure. After Governor Jansen, Lt. Col. J.C
Schultze, an experienced officer who built Societet Harmonie building in
Batavi, continued that construction. However, the construction of this
palace was once ceased because the authority was switched from
Netherlands East Indies to English.
British rule chaired by
Thomas Stamford Raffles (1811-1816) issued a new policy, LANDRENT (land
tax), by changing the patterns of land tax applied by the Dutch before.
Raffles’ expectation by issuing that policy was to make the Netherlands
East Indies people have the money to buy British products. The point was
to expand market for produced products and make use the product for the
people. Raffles’ policy was failed because there was no support from the
local king, nobles, and people, who did not understand about money and
Netherlands East Indies
was then ruled again by the Dutch after having the English-Dutch treaty.
In this period, economic recovery began to implement. As the
Governor-General at that time, Du Bus (1826), continued the development
of that palace with the help of Ir. Tromp, and it completed in 1828. The
building was used as the office of the Netherlands East Indies
Government, which was inaugurated by Governor Du Bus himself. In the
same year, Du Bus also established De Javasche Bank on the basis of
financial condition in the Netherlands East Indies, which was considered
to need the control and regulation of payment systems.
In 1836, Van Den Bosch,
on his initiative, started enforcing the cultuurstelsel (forced
cultivation system), which aimed to produce various commodities that had
demand in world markets. This system was the replacement for landrent
system, in order to introduce the use of money in the Netherlands East
Indies public. Cultuurstelsel and forced labor could introduce a cash
economy in rural communities. This was seen from the increasing number
of people who performed economic activities. In addition, financial
reform had been repeatedly carried out, but it had had not given impact
in financial strength.
The following policy
conducted by the Government of Dutch in the Netherlands East Indies was
laissez faire laissez passer, in which the economy was given to the
private sector (the capitalists). This policy was carried out at the
insistence of the Dutch Humanist who wanted a change of better fortune
for citizen. This new land law, instead of giving better impact, gave
more suffering. At this time the Department van Financien was
established and located in the Daendels palace because the central
Government moved to another place. This building was used as the place
for coordinating the task implementation, training, and providing
financial administrative support to other places.
Lack of financial
experts made the Dutch Government hold a various courses for the Dutch
and Natives who were considered capable. The courses held were
controller assistant and treasury. The concentration on financial
management intended to facilitate control of state revenues and
expenditures. Bad economic situation was the main reason for the
establishment of departement of financien.
The outbreak of World
War II in Europe, which continued to go to the Asia Pacific region, and
bad condition of Dutch Government for Japanese invasion made the
position of Indonesia as the colony of the Dutch very difficult. Ahead
of the Japanese arrival in Java, President of DJB, Dr. GG van Buttingha
Wichers successfully moved all the gold reserves to Australia and South
Africa through the port of Cilacap.
Indonesia, Japanese made Jakarta as the central government. Departement
of Finance building was a place to do daily financial activities. This
building was used as the place to manage finance and decide economic
policy conducted by the Japanese. On March 7, 1943, Jan Pieterzoon Coen
statue, which was located in front of the Department of Financien, was
destroyed by Japan for it was considered as a symbol of the Batavia
Many Dutch financial
experts were captured by Japanese and some experts and experienced
people served as finance teachers for sons and daughters of Indonesia.
Japanese’s lack of financial teachers made Japanese educate the people
of Netherlands East Indies to take financial education.
Japanese implemented several policies, such as forced to give all banks
assets and performed ordonansi in the form of liquidation orders for all
Bank of Netherlands, Britain, and China. In addition, Japanese were also
making invasion money in Java Island, which was worth for 2.4 billion
guilders up to 8 billion guilders (in 1946). The invasion money
conducted by Japan intended to destroy the Dutch currency that had been
circulated in the Dutch East Indies.
The focus of the
Japanese occupation in the Netherlands East Indies towards the Pacific
war led Japanese to conduct policies that made financial crisis. Japan
did a massive overhaul in the economic structure of society. People’s
welfare fell sharply and food shortages disaster occurred due to the
production of castor oil. Japan did the depletion of natural resources
and crops, and made productive forces as forced labor (romusha). Hyper
inflation that occurred during this period led to an increase in
expenditure, while income from taxes and import duties fell
dramatically. Policies ala Dai Nippon army was harming Indonesia's
AFTER INDEPENDENCE DAY
After the Japanese
surrendered on August 15th, 1945, Indonesia immediately proclaimed the
independence of the Republic of Indonesia on August 17th, 1945 and
Jakarta was determined to be the center of Government. At the time
being, the Department of Financien building still served as the center
of daily financial management activities. The financial economy in the
early Independence Day was so bad. High inflation happened due to three
applicable currencies in the Republic of Indonesia, namely the currency
of the De Javasche Bank, the currency of the Netherlands East Indies
Government, and the currency of Japanese occupation. The Japanese
currency in circulation, which was around 4 billion, and red NICA money
caused high inflation.
Having this economic
problem, the meeting was held by BPKKP and BKR in the Surabaya region on
September 2nd, 1945. They were aware that aside from maintaining the
independence and army, fund was also needed to finance that struggle. In
the effort of earning the fund, there was Dr. Samsi, an economist and
the movement leading figure who was well known enough in Surabaya. In
the first presidential cabinet of RI on August 19th, 1945, Soekarno
inaugurated Dr. Samsi as the Minister of Finance. Dr. Samsi had
important role in the effort of earning the fund to finance the RI’s
struggle. He was informed that in the Bank Escompto Surabaya, there was
saving heritage from the Government of Netherlands East Indies which was
controlled by Japanese. Closed relationship between Dr. Samsi and
Japanese Government made him easier to disburse the fund, so that the
fund could be used for struggling. On September 26, 1945, Dr Samsi
resigned and he was replaced by A.A. Maramis.
On October 24, 1945,
Minister of Finance A.A. Maramis instructed united labour team G. Kolff
as a data researcher team to find money printing with relatively modern
technology. The result was the printing company of G. Kolff Jakarta and
Nederlands Indische Mataaalwaren en Emballage Fabrieken (NIMEF) Malang
was considered to meet the requirements. Then Minister stipulated the
establishment of the committee of Indonesia Banknote Printing Organizer,
which was chaired by TBR Sabarudin. Finally, the ORI (Oeang Republik
Indonesia) was first printed successfully. This printing of ORI was
handled by RAS Winarno and Joenet Ramli.
On November 14, 1945 in the era of Sjahrir I cabinet, the Minister of
Finance was Mr. Sunarjo Kolopaking. Mr. Sunarjo attended the economic
conference in February 1946, which aimed to obtain agreement in order to
address the problems of production and distribution of food, clothing as
well as the status and administration of plantation.
On March 6, 1946, the
Commander of AFNEI (Allied Forces for the Netherlands East Indies)
announced the enforcement of NICA money in the areas controlled by the
allies. This had led cabinet Sjahrir to follow up the announcement of
NICA by circulating ORI. Only, the circulation of ORI needed fund. The
first step of Sjahrir cabinet was to replace the Minister of Finance by
Ir. Surachman Tjokroadisurjo. The main effort conducted by Ir. Surachman
to overcome economic difficulties was to conduct the National Loan
Program with the approval of BP-KNIP in July 1946. In addition, he also
conducted blockade penetration by doing rice diplomacy to India and had
contracts with American private companies pioneered by American
entrepreneurs who were pioneered by the semi-governmental agency called
the Banking and Trading Corporations under the leadership Soemitro
Djojohadikusumo. He also was also going through the blockade of Sumatra
with destinations to Singapore and Malaysia, by opening trade
representative namely Indonesia Office (Indoff).
On October 2, 1946, Mr.
Syafruddin Prawiranegara was inaugurated to be the Minister of Finance.
Finally, the efforts of publishing Indonesia’s own money showed the
result, the issuance of FIRST EMISSION of ORI banknote on October 30,
1946. Government of Indonesia declared that date as the release date of
Oeang Republic of Indonesia (ORI), in which the Japanese currency, NICA
money, and Javasche Bank money were no longer valid. ORI was proudly
accepted by the entire people of Indonesia. That printed currency was
signed by Alexander Andries Maramis (15 currency period, 1945-1947).
October 30th was
stipulated as the Finance Day of the Republic of Indonesia by the
President based on the issuance of the Republic of Indonesia's first
emission money, which made the entire people of Indonesia proud. Money
is the ultimate symbol of an independent state as well as tool to
introduce a nation to the public. To appreciate the services of A.A.
Maramis, Department of Financien building or Daendels building was named
A.A. Maramis. This building became the center of the work for the
Minister of Finance as the head of the Ministry of Finance of Republic
of Indonesia during conducting everyday tasks. Along with the need for
coordination among units, since 2007, the building for Minister of
Finance was moved to Djuanda I building, which is located across the
A.A. Maramis building.
Following up the Law
No. 39 Year 2008 regarding the State Ministry in conjunction with
Presidential Regulation Number 47 Year 2009 regarding the establishment
and the Organization of the State Ministry, and refers to the circular
letter of the Secretary General of the Ministry of Finance No. SE-11
MK.1/2010 on Nomenclature amendment of the Department of Finance to be
Ministry of Finance, so, since 2009, the Department of Finance
officially changed its name to be the Ministry of Finance