Jakarta. Ex-Deputy Foreign Minister Dino Patti Djalal is urging the government to tread more carefully on the MSCI mess, as he reminded Jakarta that the American index provider is “neutral”, unlike the old International Monetary Fund.

MSCI is mulling demoting Indonesia from the “emerging market” group down to the “standalone” club, a move that could trigger multi-billion-dollar passive fund outflows. Amid mounting market fears, the government had caught flak for its response to the proposal. In a fiery speech, President Prabowo Subianto told his ministers that the “powerful and brave” Indonesia refuses to be “intimidated” and “fears no one”.

In a social media post, Dino warned the government against making offhand remarks and treating the problem like a “game of macho nationalism”, citing the market’s current extreme sensitivity. He said that the MSCI is different from the IMF, whose blunders had dealt a blow to the country.

“MSCI is not the IMF, an international institution that used to have a certain economic agenda, could be influenced by the political interests of certain governments, and often provoked angry protests from the public,” Dino said on Saturday.

“MSCI is a neutral, independent and impartial non-governmental organization, which is why it is the main reference point for global investors,” Dino explained, while pointing to how MSCI “applies the same criteria” to other countries.

The IMF had left a trauma on Indonesia after it rolled out a $43 billion bailout package to weather the impact of the 1997-1998 Asian financial crisis. The intervention, however, worsened the country's plight. IMF’s order for Indonesia to close 16 privately-owned banks also fueled massive deposit withdrawals in other banks. 

Dino — who was Indonesia’s former US envoy — told the government to engage in negotiations by the end-June deadline, while reminding Jakarta to “avoid any attitude that comes across as denial”.

“There is no point in us acting tough today, with a million buzzers deployed to curse MSCI and spin conspiracy theories,” Dino said. 

“… only for the rupiah to collapse to Rp 22,000 tomorrow, investors to flee, confidence to crumble, exports to plunge, prices to rise, purchasing power to weaken, the people to suffer, and the government itself to be in serious trouble.”

Dino recently also expressed doubts that Singapore is behind MSCI’s threat, as some have claimed, citing the proven close ties and that any Indonesian economic turmoil could backfire on the city-state. Former Trade Minister Muhammad Lutfi had previously been accused of pressuring MSCI to downgrade Indonesia to buy the country’s assets at discounted prices.

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