Finding Sjahril Sabirin's successor

Finding Sjahril Sabirin's successor

Pitan Daslani, Publisher, indocapital.com, Jakarta

Who would be the right candidate to replace Sjahril Sabirin,
the incumbent governor of Bank Indonesia now approaching
retirement age? Should it be one of the three senior bankers that
President Megawati Soekarnoputri handpicked for a fit and proper
test? Logically and officially, yes. But wait a minute.

More important is the question of the fit and proper test
itself. Legitimacy apart, is the Bank Sub-Commission of the House
of Representatives (DPR) really qualified enough, by
international professional banking standards, to conduct a test
when it is composed of politicians with no experience in
international banking -- except for their textbook knowledge and
local economic background, not to mention presumed temptations on
the part of the Commission in the run-up to the 2004 general
elections?

A number of well-known economists have surprisingly made
affirmative comments on the candidates, the very people they had
previously attacked over the scandal of the Bank Indonesia
liquidity support (BLBI) funds.

A big question that disturbs many observers is why the
name of outspoken Senior Deputy Governor Anwar Nasution is not
on the list.

There are at least three different streams of political
business interests which have taken Miranda Goeltom, Burhanuddin
Abdullah and Cyrillus Harinowo closer to Sjahril Sabirin's chair.

First, is the political agenda for the next general elections.
A stable and preferably generous central bank headed by an ally
would certainly be a desirable choice for those wishing to wink
at the highest monetary authority.

Second, are the maneuvers of white-collar bandits -- or
corrupt officials --- trying hard to conceal their fortune behind
the walls of BLBI deadlock. Such officials with terrible track records
are not unknown to the Supreme Audit Board (BPK).

Deny Daruri, director of the Center for Banking Crisis, was
blunt when he said on Jakarta News FM radio station on Feb. 18
that in fact, when President Megawati revealed the bankers'
names, people immediately remembered a BPK audit report on the
misuse of BLBI, which contained the names of two of the
candidates.

"We simply cannot accept them...they need to be tested against
good moral standards and integrity, apart from professionalism.
If people like (House Speaker) Akbar Tanjung support their
candidacy, it's only because he doesn't have integrity," Daruri
said.

The Center for Banking Crisis believes these three candidates
are incapable of conducting a "policy revolution" for the central
bank. Besides, in Daruri's words, "they can easily be intervened
with", by authorities above them.

Banking analysts doubt that Miranda, for instance, though seen
as a good professional and preferred candidate, has the courage
to say "no" to the President in the way that Sjahril Sabirin did
to former president Abdurrahman "Gus Dur" Wahid, who personally
disliked him and sent him into detention.

In the years until his ouster, Gus Dur was at war with
Sjahril, but the latter never wanted to bow to the then-
president's pressure, even though it cost him time in court and
behind bars. It would be a disaster if his successor had a
weaker personality.

The third stream of interests is the political vehicle on
which conflicting interest groups ride in Indonesia's relations
with such international institutions as the IMF.

This is more of a dark tunnel with no light at its end, except
for the outcome of interactions involving the central
bank, the international lending institution, Indonesia's Bank
Restructuring Agency (IBRA) and state-owned "recap" banks.

This is also the mysterious domain in which the BLBI scandal
emerged, submerged and disappeared. IBRA came into existence as a
logical consequence and right vindication of a wrong start. The
government's injection of Rp 480 trillion worth of recap bonds
and other expenses totaling Rp 650 trillion in state debt to
state banks and corporations -- for which it has to pay Rp 70
trillion every year in interest obligations -- also existed in
this mysterious domain, as did IBRA's newfound hobby of
selling off state assets.

Combine the three streams of interests as described above, and
the only assumption is that BI is sitting at the center of all
these maneuvers. Its governor, therefore, cannot be selected
merely from considerations of professionalism alone. There are
more than enough professionals at BI to run daily activities.

What the central bank won't have when Sjahril leaves office on
May 17 is a strong leader with a clear vision of the monetary
authority's role as a decisive factor in stabilizing Indonesia's
economy.

That aside, now, the question of the fit and proper test.
Given the crucial role that BI plays, especially at this juncture
of economic crisis and global uncertainty, leaving the selection
task to a handful of politicians at the Bank Sub-Commission,
which represents only a third of Commission IX membership, is too
risky a proposition -- unless it is a ploy to cover up a
predetermined decision.

Against the backdrop of our current situation, the question of
the fit and proper test for BI Governor cannot be confined to the
authority and legitimacy of the legislature alone.

Unlike other institutions in the country, BI is part of the
international monetary market and its existence cannot be
inferred merely from its physical presence on Jl. M.H. Thamrin in
Central Jakarta.

Selecting a chief for BI, therefore, is not as simple a
question as selecting a professional to head the office in
Central Jakarta. Perhaps it is time that the government
considered inviting, for instance, the U.S. Federal Reserve or
the Bundesbank of Germany to provide world-class
consultancy services.

These services could range from the formulation of the
parameters, scope, content and modalities of the fit and proper
test in provision of an expanded cooperation, under which BI
could be better facilitated in its domestic monetary
stabilization programs, as well as in responding to policy
changes that affect the global money market.

The legislature's Commission IX in charge of financial
affairs, especially the Bank Sub-Commission, should not be fooled
by the notion that a new BI Governor should be put in place as
quickly as possible only because Sjahril is retiring.

President Megawati actually has final authority; if she
wishes, she could extend Sjahril's term of office by another
year, during which time she could find better candidates to from
whom to select a governor.

During such an extension period, the House could perhaps
review or even amend Law No. 23/1999 to cement BI's independence
-- but at the same time, open a leeway through which possible
manipulative practices behind BI's walls can be probed.

This would positively pare down BI officials' pride, if not
arrogance, of being blunder-free super-humans.

Like the director of the Center for Banking Crisis who cannot
choose any of the three candidates the President has forwarded,
many banking analysts agree that BI needs a much stronger
personality than that already proposed to sit on top of its
leadership in the post-Sjahril era, especially in the
run-up to the 2004 elections.