Gus Dur's intervention in BI justified

President Abdurrahman "Gus Dur" Wahid's conflict with Bank Indonesia Governor Sjahril Sabirin is another blow to the battered economy. Secretary of the National Economic Council (DEN) Sri Mulyani Indrawati thinks the conflict is a zero-sum game.

Question: Is Gus Dur's recent request for Sjahril to step down a form of intervention in the central bank or an effort to boost the bank's performance?

Mulyani: Let me start by saying that we have to support the implementation of Law No. 23/1999 on the autonomy of Bank Indonesia (BI), which provides a legal basis for its independence.

But the problem is that prior to the introduction of the legal basis for its independence, the central bank was not restructured in terms of its personnel or as an institution.

In terms of its personnel, it has been alleged that some of its officials have been involved in various scandals and financial fiasco, which have yet to be disclosed and legally processed in order to promote public confidence in the bank's credibility.

In terms of it as an institution, the relationship between the bank and the government, as well as the House of Representatives (DPR) and other related institutions, needs to be restructured, so that the bank's performance can be supervised properly.

Perhaps Gus Dur wants to have Sjahril replaced in a bid to rid the central bank of such problems. If that is the case, intervention, when it is constructive, is an objective necessity, so that auditing its personnel could be introduced.

I think Gus Dur's institutional intervention in the bank can be justified as long as his pure motivation to improve its credibility can be understood by the general public. But the fact that DPR members and politicians are suspicious of Gus Dur's motivation indicates that the President's good intentions have been misunderstood.

Q: Do you think Gus Dur is dissatisfied with Sjahril's performance?

M: Bank Indonesia, under the leadership of Sjahril, has performed impressively in its monetary management. During the past 12 months, for example, Bank Indonesia curbed the inflation rate from about 78 percent to less that 3 percent per annum. The bank has also improved its discipline in issuing internationally standardized monetary indicators regularly.

However, the central bank has yet to improve its nonmonetary tasks -- supervising the performance of commercial banks and screening personnel being considered for managing commercial banks through fit and proper tests. It seems that Gus Dur's complaints are related to these tasks.

Q: Do you think Sjahril's defiance is aimed at upholding Bank Indonesia's independence or to assure that he is not involved in the Bank Bali scandal?

M: You can add another reason to your question -- whether Sjahril is trying to accommodate pressure from an internal group of officials who will feel insecure if he is replaced.

Surely I don't know his real reason. If he is not involved in the Bank Bali scandal, he would certainly be going all-out to defend the independence of Bank Indonesia. The question becomes more complicated if Sjahril has personal problems, so that we cannot distinguish between institutional and personal motivation.

But public discourses on the dispute have worsened the problem because several parties have used the issue to meet their own interests. This has affected the country's economic development. So, what is the use of defending the independence of the central bank if, at the same time, they are damaging the bank's essential function of maintaining monetary stability?

My concern is why Gus Dur, as president, has fired too many bullets at a time when the political atmosphere is so murky. In fact, he should have packaged his proposal well if he wanted to properly achieve his goal. Sjahril's recent visit to the DPR to garner support also indicates that he has made a political move, thereby inviting more parties to ride on his dispute with Gus Dur for their own interests.

Q: Who do you think will win the dispute?

M: Everyone will be a loser in the conflict because there will be no win-win solution. If, for example, Sjahril survives, the damage would have already been done and the legal process against him would affect public respect for the central bank. If Sjahril is eventually replaced, it would not mean Gus Dur won either because society would no longer respect the President, who would have toppled the central bank governor improperly.

Q: What should Gus Dur and Sjahril do to reduce the damage?

M: They both must restrain themselves and look for the best solution that would favor the economy.

If the DPR and the People's Consultative Assembly (MPR) want the government to concentrate more on economic recovery, they must also have a feeling of responsibility by not fanning the flames of the conflict.

Personal and institutional reconciliation between the central bank governor and the President is also needed to curb the damaging effect of the conflict. The dispute has thus far affected our efforts at economic recovery because it is damaging both public confidence and the government's credibility, two factors that initially caused the economic crisis. (Rikza Abdullah)