Amendment of law on BI delayed

Dadan Wijaksana, The Jakarta Post, Jakarta

The government acknowledged on Monday that some contentious issues on the proposed amendment of the central bank law remain unsettled.

This was apparently the reason why the passage of the bill on the amendment, initially scheduled for Monday, had been delayed indefinitely by the House of Representatives, as its special committee in charge of the matter had requested additional time to settle the unfinished issues.

Director General for Financial Institutions at the Ministry of Finance Darmin Nasution who also is leading the government team in the discussion with the committee, conceded that the deliberation talks had hit several snags on a number of issues.

"There are a few (problems), but the basic ones center probably on Bank Indonesia's board of governors and its supervisory board, aside from stressing its function as the lender of last resort," Darmin said.

The bill in question, which has been on the table for almost two years between the government, Bank Indonesia and the House, will allow the amendment of law No. 23/1999 on central bank activities.

The deliberation was also put on hold at the height of the political confrontation between then president Abdurrahman Wahid and legislators several years ago.

At that time, the proposed bill was widely believed to be one of the government's efforts to oust then governor Sjahril Sabirin and his deputies, which sparked criticism as the move was deemed as putting the central bank's independence in danger.

Elsewhere, Darmin said that among all the unfinished issues, the planned establishment of a supervisory board at the central bank was the hardest nut to crack.

"We still have differences on that, but not on the substance. It's more of how it operates and all the related mechanisms," he said.

He said the board would focus on setting up a control mechanism to supervise and monitor the performance of the central bank's board of governors.

"The board will handle the accountability of Bank Indonesia's board of governors."

Darmin did not elaborate on the reasons for setting up such a supervisory board, but the fact remains that the current central bank law puts the status of each member of Bank Indonesia's board of governors so high that they are very difficult to replace. There are only three ways for them to be replaced: resignation, incapacitation or tenure expiration.

As for the Bank Indonesia's board of governors itself, Darmin also pointed out some issues of contention.

"The government wants revision to the current law, especially on a clause on selection of candidates for Bank Indonesia governor. While the current laws allow the president to nominate up to three names, we want it to be just one," he said.

The move is widely seen as a way to minimize unhealthy competition -- even avoid illegal practices such as bribes -- among candidates.

Given the variety of the issues to be settled, it is unlikely that the talks will be completed anytime soon.

Another hot issue that could take time is Bank Indonesia's stance over the establishment of the Financial Services Authority Institution, which will also be included in the amendment bill.

The institution will take over the role of Bank Indonesia in supervising the banking sector, something that many view as the reason behind its reluctance to accept the concept.