Rizal says BI board of governors still active

Rizal says BI board of governors still active

JAKARTA (JP): Coordinating Minister for the Economy Rizal
Ramli reiterated Tuesday that members of Bank Indonesia's board
of governors who tendered their resignation last week would
remain in office until successors had been appointed.

Rizal said that senior deputy governor Anwar Nasution and four
other deputy governors were still responsible for the central
bank's monetary policy.

"They will remain active until the board of governors has been
formed. They still have the authority to determine monetary
policy," he told reporters following a meeting with President
Abdurrahman Wahid.

The resignation of Anwar and four other deputy governors,
namely Miranda Gultom, Dono Iskandar, Burhanuddin Abdullah and
Achwan, has raised concerns in the currency market that Bank
Indonesia would not be able to intervene in the market, due to
the vacuum of authority, if the rupiah dropped.

Two other deputy governors including Achjar Iljas and Aulia
Pohan did not resign.

The five members of the board of governors announced their
resignation late on Friday amid calls from the government and
legislators to reshuffle the central bank as part of an effort to
resolve the problem of the controversial bank liquidity support
facility. But Anwar said that they will remain in office until
their successors have been selected.

The rupiah ended slightly lower on Tuesday at Rp 9,455 per
U.S. dollar compared to Rp 9,445 on Monday as investors were
worried that Bank Indonesia would be a lame duck, unauthorized to
implement clear monetary policy until the new board of governors
was formed.

Dealers speculated that the general market perception was that
the appointment of the new leadership at Bank Indonesia might
take longer than anticipated due to the heavy political
bargaining process.

The House agreed late on Monday to the government's proposal
to amend the existing central bank law, which was enacted in May
1999, to remove the legal obstacles to the replacement of the
board of governors, including governor Sjahril Sabirin who is now
under house arrest awaiting trial for alleged involvement in the
Bank Bali scandal.

Director general of law at the Ministry of Justice and Human
Rights Abdul Gani Abdullah said on Tuesday that the amendment of
the central bank law would allow for the dismissal of members of
the board of governors if they had not been active in office for
more than three consecutive months.

Gani said that the proposed new clause would put an end to the
vacuum of leadership at Bank Indonesia.

"(The amendment) will provide an opportunity to possibly
replace a member of the board of governors who is indisposed to
do his or her job, for example, over three consecutive months,"
Gani told the Jakarta Post on the sidelines of a meeting with the
House's consultative body.

He added that the House could complete the amendment in two
weeks time.

Under the existing central bank law, members of the board of
governors can not be dismissed unless they have been proven
guilty of committing a crime, they are incapacitated or they
voluntarily resign.

Sjahril has not been active in office since June after he was
detained over alleged involvement in the high profile Bank Bali
scandal.

Sjahril has so far refused to resign despite calls from both
the government and legislators.

The move to oust Sjahril gained steam following the
resignation of Anwar and his colleagues.

President Abdurrahman Wahid had proposed to the House three
candidates including Anwar and two other Bank Indonesia officials
-- Hartadi A. Sarwono and Siti Fadjriah -- for the position of
new Bank Indonesia chief, but the parliament responded that the
President could not propose the replacement of Sjahril due to the
existing central bank law.

Gani said that the amendment of the central bank law also took
into consideration other issues, including boosting the
accountability of the board of governors and opening the way for
the Attorney General's Office to step into the central bank to
investigate alleged crimes.

Gani said that with the amendment, the House could ask members
of the board of governors to resign if they failed to meet the
monetary target set up by Bank Indonesia at the beginning of the
year.

He said that under the current law, members of the board of
governors could not be held responsible for failure.

He also said that under the existing law, the Attorney
General's Office could not enter into the central bank's affairs
to investigate any alleged criminal activity because it was
regarded as an intervention by the government.

Bank Indonesia has been roiled by the controversial Rp 144.5
trillion liquidity support injected by the government, via the
central bank, to ailing domestic banks between September 1997 and
early 1999.

Bank Indonesia has been accused of mismanaging the liquidity
support and of weak supervision which allowed the recipient banks
to misuse around Rp 80 trillion of the loan facility.

Meanwhile, the Indonesian Democratic Party for Struggle (PDI-
P) said Tuesday that it would support Siti Fadjriah as the new
chief of the central bank.

PDI-P executive Pramono Anung said that the party rejected the
other two candidates.

"Siti is the right choice for a regeneration of Bank
Indonesia," Pramono told reporters following the party's weekly
meeting with Chairwoman Vice President Megawati Sukarnoputri.
(rei/02)