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)