House delays amendment of BI law yet again

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.