Government seeks new amendment on BI law

Government seeks new amendment on BI law

Berni K. Moestafa, The Jakarta Post, Jakarta

The government has resumed talks with legislators on the long
suspended amendment of the central bank law, expanding the scope
of discussion from Bank Indonesia's accountability to the entire
law if need be, a legislator said.

Legislator Paskah Suzetta of the Golkar party said the
government was seeking a comprehensive approach to resume talks
on the amendment of the central bank law.

But he ruled out major revisions to the law, saying discussion
would rest on adjusting the law to meet changes in the monetary
policy environment.

"We won't change the substance of the law....the titles of the
articles will remain the same but we might fine tune their
contents," Paskah told reporters on Friday, after the
inauguration of three new Bank Indonesia deputy governors by the
Supreme Court.

He said talks on the central bank law began on Thursday in a
closed-door meeting between the government and the House of
Representatives' Commission IX, which oversees financial affairs.

Commission IX member Paskah said there was no timetable to
finalize the talks, but added that the sooner the better.

Talks with legislators to amend Bank Indonesia Law No. 23/1999
came to a halt in the middle of last year, disrupted by the
political turmoil that led to the former president Abdurrahman
Wahid's being ousted.

Abdurrahman initiated the amendment two years ago, complaining
the present law was too weak to make the central bank accountable
for its policies.

That followed a report by the Supreme Audit Agency stating
Bank Indonesia might have played a key role in the abuse of Rp
138.4 trillion (US$13.3 billion) in liquidity support loans for
local banks.

But the current law bars the dismissal of a member of Bank
Indonesia's board of governors on the absence of proof of any
criminal wrongdoing, voluntary resignation or incapacity.

Governor of Bank Indonesia Sjahril Sabirin, who at that time
was in jail for his suspected involvement in the Bank Bali
scandal, held on to his position despite pressure from
Abdurrahman to resign.

The government then proposed a central bank bill, which
critics believed was designed to oust Sjahril and his deputies.

They said the bill put at risk Bank Indonesia's hard won
independence, and enabled the return of political interference.

The International Monetary Fund (IMF) criticized the planned
amendment, although it was whilst under the fund's supervision
that Bank Indonesia allegedly misused the liquidity support
loans.

Warning the government not to tinker with Bank Indonesia, the
IMF raised the stake on the issue, by pending the disbursement of
a $400 million loan package.

The central bank law, the missed sale of Bank Central Asia,
and a rift over whether or not decentralized provinces may issue
bonds were among the reasons why the IMF suspended the loans.

To bridge the gap with the government, the IMF sent a team of
experts to provide advice on the central bank law amendment. The
government has said it had included most of the team's
recommendation in the bill.

But Paskah added that any agreed changes in the bill would
remain subject to discussion.

"It's a new government.....their orientation has changed, now
it's not just about replacing the board of governors," he added.