BI wants its role, status stipulated in Constitution

JAKARTA (JP): Bank Indonesia wants its role and status to be explicitly stipulated in the country's Constitution, which is currently undergoing an amendment process, to provide a greater guarantee of its independence.

Bank Indonesia deputy governor Achjar Iljas said that the measure would help prevent politicians from forcing changes on the independent central bank during any temporary shift in the country's political direction in the future.

"This can provide Bank Indonesia with greater confidence in the implementation of its monetary policy," he told a press conference following a discussion about the legal and economic implications of Bank Indonesia's inclusion within the Constitution.

Bank Indonesia became independent in May 1999 after the new central bank Law No. 23/1999 was approved by the House of Representatives.

But the new administration of Abdurrahman Wahid submitted a controversial bill to the House in November last year proposing amendments to the central bank law.

The government has claimed that the amendment is needed to boost the accountability of Bank Indonesia, which had been plagued by massive corruption during the authoritarian rule of former president Soeharto.

But many groups, including the International Monetary Fund (IMF), believe the amendment could jeopardize the independent status of Bank Indonesia. The IMF delayed the disbursement of a US$400 million loan tranche to Indonesia late last year partly due to this concern.

Some analysts also said that the amendment was only proposed so that Abdurrahman would have the power to dismiss Bank Indonesia governor Sjahril Sabirin and his deputies.

Under the existing law, the governor and senior deputy governor are appointed by the House. They cannot be replaced unless they have been proven to have committed a crime, incapacitated, or they voluntarily resign.

A panel of international and domestic experts, jointly set up by the IMF and the government to help address the concerns, has recently completed reviewing the government-proposed amendment. Although government officials said that the panel supported the amendment process to improve the accountability of Bank Indonesia, it also said that the independence of the central bank must be preserved. Full details of the panel's recommendations have yet to be disclosed to the public.

The House is expected to resume debate of the proposed amendment next month.

The current Constitution, formed in 1945, does not explicitly outline the role and function of Bank Indonesia as a modern central bank. It briefly mentions "circulation bank", which is only part of the function of a modern central bank.

The People's Consultative Assembly (MPR), the country's highest legislative body, is scheduled to approve the amendment of the Constitution at its annual session in August.

Former justice and human rights minister Yusril Ihza Mahendra, who recently resigned from the current Cabinet, supported the idea of putting Bank Indonesia's role and function in the Constitution.

"There's no guarantee that there won't be new conflict between the government and Bank Indonesia in the future," Yusril said.

Analysts, however, warned that the move should be made carefully because once the role and function of Bank Indonesia was stipulated in the Constitution it would be impossible to make any changes necessary in the future.

"So the trick is not to put too many details (about Bank Indonesia's function) in the Constitution," said one economist.

Elsewhere, Achjar said the amendment of the current central bank law should be made after the amendment of the Constitution was completed.

He pointed out that the Constitution was a reference for any law-making process. (rei)