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)