BI reiterates concerns over amendment law

JAKARTA (JP): Bank Indonesia deputy governor Achjar Iljas reiterated on Friday concerns that the proposed amendments to the central bank law might threaten the independent status of Bank Indonesia.

Achjar said that amendment of the central bank law must be studied carefully.

"What needs to be carefully safeguarded are provisions that ensure there will be no policy reversal," he told the press, referring to BI's status before May, 1999 when the bank was treated simply as a government agency that had to toe the line of the ruling government.

He was speaking on the sidelines of a meeting between the House of Representatives special team and government representatives discussing the proposed amendments to the central bank law.

"The potential threat to the central bank's independence is there if it is not carefully safeguarded," Achjar said.

Concern over the amendment reemerged following agreement this week between the government and the House special team to change terminology relating to Bank Indonesia's status from "being independent" to "autonomous".

But Coordinating Minister for the Economy Rizal Ramli dismissed suggestions that the amendment to the central bank law would threaten the independent status of Bank Indonesia.

Rizal argued that the terms 'independent' and 'autonomous' were common in the world's central bank literature.

But he said that the term 'independent' had a connotation of political freedom that would make the central bank as if untouchable by law.

He said that the term 'autonomy' was better because it would not only ensure the freedom of the central bank to manage its functions, but would also put the central bank within the state system and answerable to the law.

The International Monetary Fund (IMF) also has expressed concern, particularly over plans by President Abdurrahman Wahid to oust Bank Indonesia Governor Sjahril Sabirin and his deputies.

The IMF has said that if the government's sponsorship of the amendment was intended only to facilitate dismissal of the incumbent Bank Indonesia board of governors, it would further erode investor confidence in the ailing economy.

The IMF has delayed the disbursement of its next US$400 million loan to the country, pending completion of the amendment of the central bank law.

The government proposed the amendment to the central bank law to the House in November. The House is expected to complete the amendment process in the middle of February.

Under the proposed bill, the Bank Indonesia governor and deputy governors can be dismissed by the House if they fail to meet the central bank monetary targets or if they fail to be active in office for three consecutive months.

Under the existing law, which was enacted in May, 1999 to make Bank Indonesia independent from government designs, the governor and members of the board of governors cannot be dismissed before their terms end unless they have been proven to have committed a crime, are incapacitated or voluntarily resign.

This has ensured the independency of Bank Indonesia.

Another concern is the proposal to allow senior members of political parties to be appointed to the central bank board of governors.

Critics have said that the entry of politicians to the central bank could make it vulnerable to intervention by the government or political party leaders.

Critics have said that the proposed amendment is merely designed to oust Sjahril and his deputies as part of efforts to clean up the central bank from corruption practices.

President Abdurrahman Wahid has long demanded the dismissal of Sjahril, who was first installed as Bank Indonesia governor during the last years of the former president Soeharto.

Rumors have it that Abdurrahman is planning to install his own people at the helm of Bank Indonesia. (rei)