Indonesia names Hatta Rajasa as acting finance minister

JAKARTA (REUTERS) - Indonesia's chief economic minister Hatta Rajasa was handed the additional role of acting finance minister in a surprise move on Friday that gives the potential presidential candidate considerable sway over the biggest economy in Southeast Asia.

The news raised eyebrows and put pressure on Indonesian shares, with some economists questioning Rajasa's lack of expertise in financial management. He studied to be an engineer and his daughter is married to one of President Susilo Bambang Yudhoyono's sons.

"I am surprised. .... Hatta Rajasa is more suitable as a coordinating minister (his current job) because he doesn't have the background to manage fiscal affairs," Josua Pardede, economist at BII in Jakarta, said.

"From my point of view, the appointment is more political. It is clear that strategic posts are being filled with (the president's) ... trusted people'."

Rajasa, nicknamed "silver fox" for his hair colour, will take over from Agus Martowardojo, who is moving to head the central bank in late May.

Aged 59, he becomes the third finance minister in as many years as Yudhoyono heads into the last stretch of his final term, which ends late next year.

The statement on Friday by the cabinet secretary's office did not say whether Rajasa would stay in the position for the remainder of Yudhoyono's term.

OCBC Bank's Gundy Cahyadi said the appointment did suggest policy continuity.

"It does make sense to appoint someone from within the cabinet, given that the 2014 elections are not too far away."

Following the announcement, the main Jakarta share index dropped 0.28 per cent, slipping below the 5,000 mark and Thursday's record high. It had been 0.14 per cent up at midday, with one economist raising doubts over Rajasa's ability to implement key policy change.

There has been widespread speculation that Rajasa could be Yudhoyono's preferred candidate to replace him as leader next year of the world's fourth most populous country.

Before Friday's announcement, many were betting that Yudhoyono would pick the outgoing central bank chief Darmin Nasution or Chatib Basri, who heads the Investment Coordinating Board.

Traditionally, the job of finance minister in Indonesia has been held by someone with a strong economic or financial background.

One of Rajasa's first major challenges is how to soften the impact of fuel subsidies which eat up some 15 percent of the budget, a figure that is likely to grow. So far the government has baulked at major changes, fearful of adding to inflation and nervous of the social tension an increase could trigger.

The shift of the current finance minister to the central bank had sparked speculation that the president wanted him out of the way in the run-up to next year's elections and because Martowardojo had upset leading business interests.

Rajasa also heads the National Mandate Party (PAN) which is part of the ruling coalition.