BI reiterates concerns over amendment law

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)