BI wants its role, status stipulated in Constitution

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)