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)