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)