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.