BI faces growing pressure to redefine independency

BI faces growing pressure to redefine independency

JAKARTA (JP): Bank Indonesia is facing growing pressure to
redefine its independent status, particularly following this
week's high-profile standoff between central bank Governor
Sjahril Sabirin and President Abdurrahman Wahid.

"It's the right of the House of Representatives," Sjahril told
reporters on Friday in response to the growing calls for the
House to amend Law No. 23/1999 on the central bank, approved by
the House in May last year.

"But, for me, an independent Bank Indonesia is crucial," he
said.

Sjahril said that the calls to amend the law were merely a
maneuver designed by people trying to force him from his position
at the central bank.

"But I will not resign just because of political pressure," he
said.

The showdown between Sjahril and the President has grabbed the
headlines this week.

Sjahril was named a suspect in last year's Bank Bali scandal
early this week.

He pointed out that Gus Dur and Attorney General Marzuki
Darusman had previously "offered" him to name him a suspect or
ask him to voluntarily step down from Bank Indonesia.

Both Gus Dur and Marzuki have said that Sjahril should step
down as a consequence of his status as suspect.

Under the law, members of the central bank board of governors
cannot be dismissed during their term, unless they are proven to
have committed a crime, ask to step down or are declared
permanently unable to do the job.

Sjahril was first appointed Bank Indonesia governor by former
president Soeharto in early 1998. He was reappointed by the House
in May 1999 for a four-year term after the central bank obtained
its independent status.

Bank Indonesia was made independent to allow the bank to
design monetary policies free from government intervention.

The latest attack on the independent status of Bank Indonesia
came on Friday when the influential National Business Development
Council (DPUN) urged the House to amend the central bank law to
ensure a "reciprocal" principle between the government and the
central bank.

DPUN secretary-general Yusuf Faisal said that as the law
stipulated that the government was obliged to consult with the
central bank when designing economic targets, Bank Indonesia must
also do likewise.

Yusuf also said that a special House commission should be
assigned to supervise the central bank on a daily basis to ensure
that there was no abuse.

He said that the existing role of the House's commission IX
for finance and the state budget was not enough.

"To supervise the government the House has nine commissions.
So it makes sense if the House also has a special commission to
watch over the central bank," Yusuf said.

"So the law (on the central bank) has to be revised," he
added.

DPUN advises the President on various business issues.

Meanwhile, another DPUN executive, Haryadi Sukamdani, called
on Bank Indonesia to revise its ruling on bank loan loss reserve
requirements to allow domestic banks to resume lending to the
real sector.

Haryadi said that the relatively high loan loss reserve
requirements, between 15 percent and 50 percent depending on the
category of the loans, was one factor preventing banks giving
working capital or financing new investments.

He said that many banking loans were now focussed on consumer
loans.

Haryadi also criticized the central bank's policies, which he
said were often not market-friendly. He did not clarify.(rei)