Government agrees to allow politicians to run BI

Government agrees to allow politicians to run BI

JAKARTA (JP): The government agreed on Thursday to allow
political party members to be appointed on Bank Indonesia's board
of governors, paving the way for the country's senior politicians
to become the central bank governor.

"But the government also wants to stress here that members of
the board of governors of Bank Indonesia must be able to act
independently and be nonpartisan in order to avoid a conflict of
interest while still being active on the board of governors,"
Coordinating Minister for the Economy Rizal Ramli said.

The minister was speaking at a plenary session of the House of
Representatives, debating the draft of the amendment of the
central bank law.

Rizal did not provide any further explanations to the
statement.

The government submitted the draft of the amendment to the
legislature earlier this week and the House factions debated it
on Wednesday.

The factions approved the government plan to amend the central
bank law, but the Indonesian Democratic Party of Struggle (PDI
Perjuangan) also demanded that the clause prohibiting party
members from becoming members of the board of governors be
dropped.

According to the existing central bank law, any members of the
board of governors who are active in a political party should
resign.

There have been rumors that certain major political parties
are vying to put their people at the helm of the central bank.

PDI Perjuangan, the largest political party in the legislature
and a supporter of the embattled President Abdurrahman Wahid, is
rumored to be planning to install Laksamana Sukardi as Bank
Indonesia governor or Benny Pasaribu, the head of House
Commission IX on state budget and banking, as one of the deputy
governors.

The financial market appears to be nervous with the prospect
of politicians managing the country's central bank.

The rupiah fell to Rp 9,535 to the U.S. dollar late on
Thursday from Rp 9,480 on Wednesday, partly due to fears over the
appointment of political party leaders in the central bank's
board of directors, analysts said.

The House is expected to approve the amendment of the central
bank law on Dec. 6 before the House starts a month-long recess.

The amendment particularly focuses on allowing legislators to
dismiss members of Bank Indonesia's board of governors who have
failed to meet the central bank monetary target or have not been
active in office for at least three consecutive months.

Under the existing central bank law, approved by the
legislature in May 1999, members of the board of governors cannot
be replaced unless they are proven to have committed a crime, are
incapacitated or voluntarily resign.

Some have said the planned amendment was made to accommodate
the wishes of Abdurrahman to oust Bank Indonesia Governor Sjahril
Sabirin.

Sjahril, currently under house detention over his alleged
involvement in last year's high profile Bank Bali scandal, has so
far declined to resign despite pressure from the President.

But Rizal denied the suggestion that the amendment of the
central bank law was aimed at replacing a particular member of
the board of governors.

He said the amendment was aimed at making a more credible
central bank through greater public accountability.

Rizal said the government also agreed with the proposal from
PDI Perjuangan, that upcoming members of the board of governors
must not be involved in the alleged misuse of the government
liquidity support facility, in counterfeit bank notes or in money
laundering.

PDI Perjuangan said four of the eight current members of the
Bank Indonesia board of governors were linked to former president
Soeharto. The party said the board members had committed certain
corrupt and collusive practices, including the above mistakes,
and the acquisition of the troubled Indover Bank by Bank
Indonesia in the past.

Indover was previously owned by well-connected businessmen.

The government injected about Rp 144.5 trillion liquidity
support to ailing banks between 1997 and early 1999, but about Rp
80 trillion was misused by certain bank owners close to Soeharto.
(rei)