Independent panel supports amendment of BI law

Independent panel supports amendment of BI law

JAKARTA (JP): An independent panel set up to review the
controversial bill on amendments to the central bank law supports
the government's move to improve the accountability of Bank
Indonesia, a senior government official said on Monday.

Dipo Alam of the Office of the Coordinating Minister for the
Economy said the panel saw some weaknesses in the current Bank
Indonesia law regarding the accountability of the bank's board of
governors.

"But they fully agree that the independency (of Bank
Indonesia) must be maintained," Dipo announced.

The panel of international and domestic experts completed its
one-week review of the government-proposed amendments to the
central bank law on Sunday, providing the necessary climate for
the long-awaited visit of the International Monetary Fund mission
to Jakarta.

The government proposed the bill on the amendments to the
House of Representatives in November. The government has claimed
that the amendments were meant to boost the accountability of
Bank Indonesia, which allegedly had been plagued by massive
corruption in the past.

But the IMF has expressed concern that the amendment would
jeopardize Bank Indonesia's independency, obtained in May 1999
when the current law became effective. The IMF delayed the
disbursement of its crucial next US$400 million loan tranche to
Indonesia late last year partly due to this concern.

Dipo declined to comment on whether the panel agreed with the
government proposal requiring the current Bank Indonesia board of
governors to resign once the bill on the amendments was approved
by the legislature.

This proposal is one of the most controversial provisions of
the bill, which some analysts claim was made to accommodate the
wishes of President Abdurrahman Wahid to dismiss Bank Indonesia
Governor Sjahril Sabirin and his deputies.

Dipo said the recommendations made by the panel would still be
discussed by the government.

The legislature is expected to resume debating the bill next
month.

The panel, set up at the request of the IMF, consists of New
Zealand Reserve Bank Governor Donald T. Brash, former Chilean
central bank governor Roberto Zahler, former Bank Indonesia
director Boediono and local banking law expert Sutan Remy
Sjahdeni.

The IMF mission is expected to arrive in Jakarta on Wednesday.
The visit should pave the way for the disbursement of the $400
million tranche, part of the total $5 billion loan promised by
the IMF early last year.

The IMF mission normally stays for about two weeks to help the
government design a new letter of intent (LoI), which basically
contains the government's new economic targets and reform
program. The new LoI will be sent to the IMF board in Washington
for approval, before the loan is disbursed.

The IMF delayed the disbursement of the loan in December also
due to signs of the government wavering in the implementation of
key economic reform programs, including the sale of government
ownership in publicly listed Bank Central Asia (BCA) and Bank
Niaga.

The government recently obtained approval from the legislature
to proceed with the divestment program.

The government has also agreed to the demand from the IMF to
temporarily ban provincial and district administrations from
making borrowings despite the implementation of the new fiscal
decentralization policy.

Sjahril said last week that the visit of the IMF mission was
expected to provide support to the ailing rupiah and to give room
for the central bank to allow interest rates to decline. (rei)