House delays amendment of BI law yet again
Evi Mariani, The Jakarta Post, Jakarta
Amendment of the central bank law faces another setback, as the government and Bank Indonesia continue to disagree on key issues.
Because of this, a special committee of the House of Representatives decided on Thursday to extend the timetable for deliberations on the amendment bill.
"We (legislators) and the government will work hard to resolve the thorny issues, but I cannot promise a deadline (to complete the work)," said legislator Paskah Suzetta, head of the committee assigned to deliberate the bill with the government.
The committee had initially expected to be able to resolve the issues on Thursday. It is still uncertain when the committee will resume the debate, but the current House sitting is scheduled to end on Sept. 26, to resume in late October. With the general election due to take place next year, lawmakers and the government are under pressure to wrap up deliberations before the end of this year.
The most difficult issue to crack is a strong rejection by the central bank of the government's proposal to set up an independent supervisory board for Bank Indonesia, to boost good corporate governance and accountability.
In a meeting on Wednesday with legislators, Bank Indonesia Governor Burhanuddin Abdullah said he opposed the plan, particularly if the proposed supervisory board had the power to recommend dismissal of members of the board of governors.
In Thursday's meeting, Minister of Finance Boediono insisted that the role of the supervisory board was crucial to ensure the accountability of Bank Indonesia.
He added that independent central banks in other countries were also overseen by independent supervisory boards.
"Now that Bank Indonesia is independent, we should establish balance by ensuring the accountability of the central bank," said Boediono, a former deputy governor of Bank Indonesia. "If there were no board to assure Bank Indonesia's accountability, I'm afraid it could get out of control."
Bank Indonesia became an independent central bank in 1999 with the passing of Law No. 23/1999. But as the government is developing new structures for the country's financial sector, the central bank law must be amended to accommodate changes in the sector. The debate on the bill had been on and off for about two years due to a variety of snags.
Another unresolved issue is a plan to set up a financial services authority (FSA), which would supervise the country's financial services industry. This agency would take over the central bank's role in overseeing the banking sector.
Bank Indonesia initially demanded a 5- to 10-year period for preparation of the FSA, while the government insisted the agency was urgent and had to be established by 2006.
The central bank and Ministry of Finance finally agreed on a compromise proposed by the House committee that the FSA should be ready by 2008.
However, Boediono urged the committee to approve immediately the proposed grand design of the FSA before next year's general election.
"I think the grand design should be decided right now. As to when it will be implemented, we (the current government) will grant full authority to a future government and legislators," he said.
Paskah, however, said that deliberations on the FSA bill still had a long way to go.