Experts warn new BI chief of tough task ahead
The Jakarta Post, Jakarta
A chorus of support welcomed Burhanuddin Abdullah as the new governor for Bank Indonesia (BI), as the House of Representatives officially approved on Tuesday his election at a preliminary session.
Experts said the former top economic minister as the candidate least likely to meet with resistance from the public among those nominated, which bodes well for efforts to create a credible, independent central bank.
However, they also warned of the tough task ahead for Burhanuddin, especially in improving the country's monetary condition.
"Among other things, maintaining or even improving the current monetary condition will be crucial, as it has a significant impact on the economy," Citibank economist Anton Gunawan told The Jakarta Post.
"Although, I must admit that the central bank has done a good job in that area."
Bank Indonesia has been guiding its benchmark interest rate lower for the past year. After hovering around 17 percent early last year, the rate currently stands at 10.80 percent.
The challenge, Anton went on, was how to scale down the difference with the interest rate for bank loans, which now hovers between 17-18 percent.
Iman Sugema, a researcher with the Institute for Development of Economics and Finance (Indef), while he also welcomed the new governor, warned of the mountains of work at home that needed attention.
"We welcome Burhanuddin's election. Compared to other candidates, he will have less resistance from the public since he is clean from any scandals that can taint his image -- and that of the central bank.
"But, Burhanuddin may face a rough situation ahead, especially after Indonesia terminates the IMF economic reform program at the end of the year," he said.
Indonesia is expected to graduate from the existing IMF program later this year, a move which analysts have said had the potential to shake investor confidence in the country's economy, which would in turn put pressure on the currently stable rupiah.
Adding to this is the fact that the country is entering an election year, which is usually vulnerable to political friction.
Burhanuddin emerged as the winner in the race for the top post at BI after being elected by the House Commission IX on financial affairs, beating two other candidates, incumbent BI deputy governor Miranda S. Goeltom and Cyrillius Harinowo.
Burhanuddin is to replace Sjahril Sabirin on May 17 for a five-year term.
Sjahril was found guilty by a court of law for abusing funds, but his conviction was later overturned on appeal. The scandal, however, had already caused damage by tarnishing the image of the central bank.
Burhanuddin Abdullah was born in Garut, West Java, in 1947, graduated from Bandung-based University of Padjadjaran in 1974, and began his career at the central bank's credit division in 1981. In 1984, he obtained his Masters Degree from Michigan State University in the U.S.
He became deputy governor of Bank Indonesia in 2000, and held the post from July 2000 to June 2001, which was followed by an appointment as coordinating minister for the economy by then- president Abdurrahman Wahid.