Market awaits deal on BI

Market awaits deal on BI

JAKARTA (JP): Analysts and businessmen believe the impending
reshuffle of Bank Indonesia's board of governors will not
adversely affect the already beleaguered rupiah because the
market has factored the trouble at the central bank into the
rupiah's exchange rate.

Nevertheless, they stressed it was imperative that the
government and the House of Representatives resolve the problem
quickly.

"Timing is crucial," economist Hadi Soesastro of the Centre or
Strategic and International Studies told The Jakarta Post Sunday
evening.

It would be good if the government could come up with a firm
statement early Monday morning to straighten out the issue, Hadi
added.

Businessman Sofyan Wanandi concurred that the sooner the
reshuffle of the central bank's board of governors was completed
the better it would be for the financial market.

"I don't foresee any major legal wrangles that could hinder
the decision on this issue as both the government and the House
seem to be in full agreement on the need to resolve the problem
as quickly as possible," Sofyan said.

Other economists, Djisman Simandjuntak and Pande Radja
Silalahi, agreed that both the government and House should work
quickly to amend the 1999 Central Bank Law to clear legal hurdles
to the replacement of Bank Indonesia's board of governors.

The central bank shake-up comes at a crucial time when the
country is grappling with ways to defend the beleaguered rupiah
which has fallen more than 20 percent this year.

Bank Indonesia's senior deputy governor Anwar Nasution, who
has been acting governor of the central bank since June, and four
deputy governors resigned on Friday night to facilitate a
management reshuffle.

But Bank Indonesia's Governor Sjahril Sabirin, who is
currently under house arrest awaiting trial on corruption charges
related to the Bank Bali scandal, and two other deputy governors
Ahjar Iljas and Aulia Pohan, have not resigned.

Bank Indonesia, aware of the repercussions of the resignation
of the majority of its board of governors, called for calm on
Saturday, reassuring local and offshore banks that business would
continue as usual.

"Bank Indonesia calls on the banks and financial institutions
both onshore and offshore and to all the people to remain calm so
as not to harm the economic recovery," the statement said.

"The central bank will continue its normal course," the
statement added.

The resignations did contribute to resolving the almost one-
year long disagreement between the government and the central
bank over which would take responsibility for the billions of
dollars in emergency loans given to failing banks after the 1997
crisis.

Chief economics minister Rizal Ramli announced immediately
after Anwar's statement on the resignations that both parties had
reached a final agreement whereby the central bank would take
responsibility for only Rp 24.5 trillion (US$2.6 billion) of the
disputed Rp 144.5 trillion loans and the government would take up
the remainder.

"This arrangement will not cause any need for recapitalization
of the central bank," Rizal added.

President Abdurrahman Wahid on Saturday recommended three
names to the House for the top two posts: Anwar Nasution, Hartadi
and Siti Chalimah Fadjriah, two other central bank executives.

Under the central bank law, the President proposes candidates
for the posts of governor and senior deputy governor, while the
other deputy governors are nominated by the governor.

But it is not clear how many of the central bank's eight board
positions are vacant and for which positions the President's
nominations were proposed, especially after the statement by
chief economics minister Rizal Ramli on Saturday.

In the statement, Rizal said, among other things, that "the
board of governors of Bank Indonesia tendered their resignations
at a board meeting this evening. President Wahid accepted their
resignations and thanked the board of governors for their
service."

But House Speaker Akbar Tandjung reiterated to reporters on
Saturday that the central bank still has a governor, namely
Sjahril Sabirin.

Therefore, Akbar added, the most the House could accomplish
early this week would be deciding on the new senior deputy
governor who would serve as acting governor.

However, some analysts seemed apprehensive of what amendments
would be made to the central bank law, arguing that if the
changes were designed only to expedite the replacement of the
board of governors but at the expense of Bank Indonesia's
political autonomy, the House might balk at such proposals.

Anwar Nasution said on Sunday he would not accept
reappointment unless he was given more authority to carry out his
duties.

"I will only accept if they give me more power and
legitimacy," Anwar told Reuters.

He also seemed unclear as to whether his nomination was for
his old job.

Anwar welcomed the other two candidates proposed by the
President, saying they were excellent choices as they are clean
and have very high personal integrity. (vin)