House to amend central bank law

JAKARTA (JP): The House of Representatives decided late on Monday to amend the central bank law in an effort to remove the legal obstacle over plans to replace Bank Indonesia Governor Sjahril Sabirin.

House deputy speaker Tosari Widjaja said that House Commission IX on state budget and finance would study the central bank law and submit revisions to the consultative body to be debated and finalized.

"The amendment will take place immediately ... There must be an amendment because we feel that there are weaknesses in the (current) central bank law," Tosari told reporters following a closed-door meeting to discuss a letter from President Abdurrahman Wahid calling for the amendment.

Tosari declined to say when the House would complete the amendment process.

Tosari also said that the House could not yet make a decision on the three candidates proposed by Abdurrahman.

He said that the House wanted the President to first clarify whether the three candidates were proposed to become the central bank governor or senior deputy governor.

He said that by law, the President could not propose a replacement for Sjahril because he had not resigned.

According to the central bank law, approved by the House in May 1999, the Bank Indonesia governor, senior deputy governor and six members of the board of governors can not be replaced unless they are proven to have committed a crime, are incapacitated or voluntarily step down.

The law says that the President proposes the candidates for the position of governor and senior deputy governor and the House makes the final decision.

Many question the plan to revise the central bank law, saying that it implies political intervention by the President to replace the current Bank Indonesia Governor.

But Tosari dismissed suggestions that the revision was a political interference in central bank affairs.

"The spirit of the amendment must maintain the independency of Bank Indonesia," Tosari said.

Meanwhile, University of Gadjah Mada economist Arief Ramlan Karseno supported the plans to amend the central bank law, arguing that the current law granted Bank Indonesia too much power.

Since assuming office last year, Abdurrahman has demanded a change in the central bank leadership, particularly its governor. But the central bank law prevents removal without proven misconduct.

Sjahril, now under house arrest for alleged involvement in the high profile Bank Bali scandal last year, has so far declined to resign. Attempts by several top legislators on Sunday to convince him to resign were fruitless, sources said.

Sjahril was reappointed last year for a five-year term.

Five members of Bank Indonesia board of governors including senior deputy governor Anwar Nasution, and deputy governors Miranda Gultom, Dono Iskandar, Burhanuddin Abdullah, and Achwan tendered their resignations late on Friday during a closed-door meeting with House Commission IX.

They will remain in office until successors have been appointed by the House.

The resignations were made following calls by the President that Bank Indonesia top management must be reshuffled in a bid to create a credible central bank.

Bank Indonesia has been troubled for a year due to a dispute with the government over the controversial emergency liquidity support provided to ailing domestic banks.

The government, via the central bank, injected some Rp 144.5 trillion in emergency loans to troubled banks between September 1997 and January 1999 to help reimburse depositors's money at a time of massive bank runs.

But the Supreme Audit Agency (BPK) revealed that Rp 138 trillion had been improperly disbursed by Bank Indonesia and Rp 80 trillion had been misused by recipient banks. The government demanded Bank Indonesia pay part of the losses.

Bank Indonesia finally reached agreement with the government that it could cover Rp 24.5 trillion, without having to be recapitalized by the government. The central bank would have been either recapitalized or liquidated had it been required to be responsible for a larger portion of the losses.

As part of the deal, five members of the central bank board of governors agreed to voluntarily step down.

Abdurrahman later proposed Anwar, and two other Bank Indonesia senior officials, Siti Fajriah and Hartadi A. Sarwono, as candidates for the new central bank governor and senior deputy governor.

Separately, Attorney General Marzuki Darusman said Monday that his office would summon several former and current Bank Indonesia top executives for their roles in disbursing the emergency liquidity facility.

"We will start with the person who knows best what has happened," Marzuki told reporters.

He was referring to former Bank Indonesia Governor Soedradjad Djiwandono. (rei/bkm/44)