Leave the rupiah alone<\/p>\n
For better or for worse, the government's decision to detain
\nBank Indonesia Governor Sjahril Sabirin on corruption charges on
\nWednesday may have removed one major element of political
\nuncertainty that has bugged the rupiah over these past few
\nmonths. As long as the central bank and the government play their
\ncards right, then the latest twist in the power struggle between
\nSjahril and President Abdurrahman Wahid should be good for the
\nrupiah and the economy.<\/p>\n
With Sjahril removed from the board of governors, Bank
\nIndonesia can now focus its attention on restoring monetary
\nstability, restructuring the ailing banking system and
\nstrengthening the rupiah. There is still so much to do in fixing
\nthe economy that the last thing the central bank wants is to be
\ndragged into a protracted political battle with the government.<\/p>\n
The rupiah has already lost about 20 percent of its value
\nsince the start of the year; from about Rp 7,000 to the dollar to
\nabout Rp 8,700 on Thursday. The plunge of the rupiah has nothing
\nto do with the condition of the economy, but a lot to do with the
\npolitical situation in the country. And the standoff between the
\nPresident and Sjahril was a major contributing factor.<\/p>\n
Fundamentally in fact, the economy is stronger today than it
\nwas six months ago. In normal times, the rupiah would have
\nappreciated, given the rosy indicators of inflation, economic
\ngrowth and exports we have seen over these last six months. The
\nfact that it has depreciated means that public confidence in the
\ncurrency has grown weaker because of political uncertainty.<\/p>\n
Sjahril and President Abdurrahman must share the blame for
\npoliticizing the central bank, and in the process, for
\nundermining confidence in the rupiah.<\/p>\n
The President's relentless campaign to unseat the governor,
\nincluding his use of the carrot-and-stick approach, raises
\nquestions of political ethics. Aside from the criminal
\ninvestigation, his fixation to remove Sjahril borders on
\nintervening in the affairs of the central bank. This is in
\nviolation of a 1999 legislation which guarantees Bank Indonesia's
\nindependence.<\/p>\n
While it is for the court to decide whether Sjahril is guilty
\nor not in the Bank Bali scandal, the governor is already culpable
\nfor dragging the central bank into his personal battle with the
\ngovernment. He should know there was no way he could have
\neffectively conducted his job as long as he was facing a criminal
\ninvestigation, and a politically charged one at that. He further
\npoliticized the issue when he secured the support of the House of
\nRepresentatives and the Bank Indonesia Board of Governors in
\nrejecting the government's calls to stand down.<\/p>\n
Sjahril's detention will hopefully put an end to the
\npoliticization of the central bank. A lot depends on the future
\nactions of the caretakers of Bank Indonesia and the government.<\/p>\n
We hope that the buck stops with Sjahril and that the
\ngovernment's campaign to unseat him was based solely on suspicion
\nof complicity in a criminal case. If that is the only motive,
\nthen the government can count on public support. But if there
\nwere other hidden agenda behind the campaign, for example, to
\nreplace Sjahril with someone more subservient to the government,
\nthen we will never see the end of the conflict.<\/p>\n
The nation is still far from removing all the elements of
\nuncertainty which undermine public confidence in the rupiah.
\nThere are many other major political factors which have brought
\nthe rupiah's value far below its real worth. This is all the more
\nreason for everyone, the government and Bank Indonesia in
\nparticular, to work harder. They must now focus on the one thing
\nthat matters most to the people in this country: the economy.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/leave-the-rupiah-alone-1447893297",
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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