Bank Indonesia sued for causing economic turmoil

Bank Indonesia sued for causing economic turmoil

JAKARTA (JP): A monetary consultant testified in court on
Tuesday that Bank Indonesia was responsible for the country's
economic turmoil because it failed to head off the rupiah's free
fall starting in August 1997.

"The central bank's policy to float the rupiah exchange rate
caused the collapse of the country's economy," Humala M.T.
Oppusunggu said in a statement at the hearing of his civil
lawsuit against Bank Indonesia at the Central Jakarta District
Court.

"It was worsened by the central bank's decision to abandon the
monetary instruments to resort to nonmonetary approaches."

He referred to the 1968 Law No. 13 on the central bank, which
stipulates the institution's main task is to manage and maintain
the stability of the rupiah's value.

Oppusunggu, a senior consultant on monetary affairs at Asia
Pacific Economic Consultancy Indonesia, said the plunge in the
rupiah's value against the dollar led many Indonesians to lose
their jobs as businesses and banks folded.

"Such a great number of jobless brought a serious impact on
people's lives, affecting their capacity to cover their daily
expenses," he said.

"It has also resulted in a decrease in the quality of
children's lives."

Date at the manpower ministry show there were 23 million
unemployed Indonesians last year.

Oppusunggu said in the lawsuit, which named the central bank
governor as the defendant, that the rupiah dropped to 15,000 per
U.S. dollar at the beginning of 1998, from 2,500 per dollar
before August 1997 when a region-wide economic contagion spread
to Indonesia.

The plaintiff demanded that the district court order the
central bank to restore the country's economy.

"The central bank must establish a special task force with the
responsibility to restore the Indonesian economy," he said.

"Other tasks of the team are to organize compensation payments
to people, closed banks and companies which suffered from the
policy."

During Tuesday's hearing, Oppusunggu handed over his
statement to presiding judge Ali Akmal Haky, witnessed by the
defendant's lawyers Yusuf Rigin and Aries Permadi.

The statement was a response to the defendant's statement,
which was presented to the presiding judge in the previous
hearing.

The defense team argued in its statement that the central bank
was not the sole institution responsible for the country's
economic problems.

"The governor of the central bank, along with the minister of
finance and other ministers in economic fields, are the parties
responsible for the country's economic turmoil," the defense
statement said, noting the parties were part of the Monetary
Council chaired by the finance minister.

The defendant asserted that the 1968 law was superseded by the
1999 Law No. 23 on the central bank.

"The plaintiff questioned the defendant's failure to carry out
his tasks from 1997 to present. With the replacement of the law,
it's now the Monetary Council's responsibility to manage and to
sustain the values of the currency."

Bank Indonesia urged the court to drop the indictment, which
it contended was flawed.

"The plaintiff has failed to name all responsible parties in
the indictment. Therefore the indictment must be declared
incomplete and must be dropped."

Ali adjourned the hearing until next week. (asa)