Wed, 22 Nov 2000

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)