BI board of governors resigns

BI board of governors resigns

JAKARTA (JP): Bank Indonesia's Senior Deputy Governor Anwar
Nasution and four other deputy governors resigned en masse here
on Friday night to take what they called moral responsibility for
several billions of dollars in emergency support loans extended
to bail out commercial banks in 1997-1999.

Anwar, who has been acting governor since the arrest of
governor Sjahril Sabirin in June over alleged involvement in the
bank Bali scandal, announced the resignation at a closed-doors
meeting at the House of Representatives.

"Hopefully, our resignation will help speed up the settlement
of the controversy over the emergency liquidity loans," Anwar
said in a prepared statement at the meeting between the
government, the House and the central bank.

Anwar did not include Sjahril and two other deputy governors,
Aulia Pohan and Achjar Iljas, in his statement of resignation.
Other deputy governors who quit are Miranda S. Gultom,
Burhanuddin Abdullah, Achwan and Dono Iskandar.

He added, however, that they would continue on their job until
their successors are in place.

Soon after Anwar announced the resignation, chief economic
minister Rizal Ramli said that a final agreement had finally been
reached which saved Bank Indonesia from the threat of
recapitalization or liquidation.

"We have agreed that Bank Indonesia will bear only Rp 24
trillion (US$2.6 billion) of the disputed Rp 144.5 trillion in
emergency loans, with the remainder taken up by the government,"
Rizal told reporters.

The central bank, he added, would issue to the government
bonds equivalent to that amount that became its responsibility.

Rizal referred to the row between the government and Bank
Indonesia over which should be responsible for the huge spending
after the Supreme Audit Agency found in an investigative audit
last year that Bank Indonesia had improperly extended Rp 130
trillion of the loans and that Rp 80 trillion of that sum had
been misused by recipient banks.

Rizal also disclosed that a number of senior officials and
businessmen who acted as economic advisors to former president
Soeharto were found morally responsible for the misuse of the
huge loan funds.

Included among the officials and businessmen he cited are
former presidents Soeharto and B.J. Habibie, Widjojo Nitisastro,
Mar'ie Muhammad, Bambang Subianto, Soedradjad Djiwandono, Glenn
Jusuf, Fuad Bawazier, Moerdiono, Mohamad 'Bob' Hasan, Sjahril
Sabirin, Boediono, Ali Wardhana.

"The meeting found both professional misjudgement and abuse of
power were responsible for the misuse of the emergency liquidity
support,"

Sources told The Jakarta post last night that House Commission
IX (finance and banking) would continue meeting until Monday
because President Abdurrahman Wahid is to propose on Saturday to
the House a list of candidates for the new central bank's board
of governors.

The government had previously threatened to take back the
treasury bonds it has issued to reimburse the central bank for
the loans after the Supreme Audit Agency (BPK) found in an
investigative audit last year that more than Rp 130 trillion of
the credits had improperly been extended by the central bank.

Earlier in the morning President Abdurrahman Wahid reiterated
his intention to replace the board of governors in a bid to clean
up the central bank.

Bank Indonesia's senior deputy governor said on Wednesday the
central bank was willing to bear Rp 24 trillion of the total
emergency loans.

Analysts said Abdurrahman seemed to use the loan transaction
as a way to force the reshuffle of the central bank management.

Some analysts have also expressed concern that the current
controversy over the recapitalization plan of Bank Indonesia was
another form of political interference by the President in the
central bank.

The Central Bank Law does not stipulate that a management
reshuffle is a precondition for the recapitalization of Bank
Indonesia. The law only says that the government shall
recapitalize the central bank if its capital drops to below the
minimum Rp 2 trillion level.

"Because of the current high political temperature, people
will think that if there's a change in the (BI) top management it
is more political interference than a legitimate concern over the
central bank's equity capital," said noted economist Sri Mulyani.

"If that happens, the financial market will think that the
independent status of Bank Indonesia is now over," she added.

According to the Central Bank Law, enacted in May 1999, the
board of governors are appointed by the House.

Since assuming office late last year, Abdurrahman has made it
no secret that he wants a reshuffle in the Bank Indonesia board
of governors.

But the President could not easily implement his intention,
because according to the Central Bank Law, the members of the
board of governors can not be replaced unless they are proven to
have committed a crime, are incapacitated or voluntarily step
down.

Bank Indonesia Governor Sjahril Sabirin was arrested in June
as a suspect in the high-profile Bank Bali scandal and is now
under house arrest awaiting trial.

Prior to his arrest, Sjahril had accused the President of
political interference in the independent central bank by asking
him to either step down or risk legal prosecution over his
alleged involvement in the bank scandal. (rei)