Mon, 12 Jun 2000

Sri Mulyani: BI needs to be 'cleaned up'

JAKARTA (JP): The House of Representatives does not need to revise Law No. 23/1999 on the independency of Bank Indonesia, but the central bank needs to be "cleansed" of the problems resulting from past mistakes, a noted economist said.

Sri Mulyani, secretary-general of the influential National Economic Council (DEN), said a cleanup was needed to assure the public that Bank Indonesia would not abuse its independency, and so that it could implement its independent status effectively.

"The reputation of Bank Indonesia has so far been questioned due to various problems," Sri told a seminar on the weekend.

She said the possible abuse of channeling of massive amounts of Bank Indonesia liquidity support to ailing banks between 1998 and 1999 and a further delay in the publication of the audit results on the Bank Indonesia 1999 books were among the problems creating a negative image for the central bank.

She also pointed out that Bank Indonesia senior deputy governor Anwar Nasution once described the central bank as a "den of thieves".

Many analysts have said the former authoritarian government of president Soeharto had long abused the role of Bank Indonesia, especially as the central bank was still part of the Cabinet at the time.

Sri said prior to giving independent status to Bank Indonesia, the noted internal problems should have been cleaned up first to assure the public that the monetary authority could implement its job effectively.

"This kind of sequencing was not there when Law No. 23/1999 was approved. So what's happening now is that the law tends to provide protection toward efforts to correct the past mistakes," Sri said.

But she disagreed to calls for the House to amend the law now, particularly amid the conflict between Bank Indonesia Governor Sjahril Sabirin and President Abdurrahman Wahid.

"Revising the law now would not be appropriate because of the escalating clash between Sjahril and Gus Dur. People will be biased and not objective," she said, referring to the President by his popular nickname.

There has been growing pressure for the House to revise the Independency of Bank Indonesia Law, approved by the House in May 1999, following the outbreak of the showdown between the two prominent figures last week.

Sjahril was named a suspect in the high-profile Bank Bali scandal early last week by the Attorney General's Office.

But Sjahril denied any involvement, and told the public that this was merely a political ploy to force him out of the central bank before his term ends in 2003.

Sjahril also said the President repeatedly asked him to step down from the central bank or he would risk becoming a suspect in the Bank Bali case, raising concern that the President was intervening.

He also said calls to amend the law were part of efforts to oust him from Bank Indonesia.

Under the new law, members of the Bank Indonesia board of governors can not be dismissed unless they are proven to have committed a crime or are permanently unable to perform the job.

The law also ensures that Bank Indonesia is free from government intervention in designing its monetary policies.

Meanwhile, University of Gadjah Mada economist Arief Karseno supported calls to amend the law to allow the government to also coordinate with Bank Indonesia in designing economic policies.

Arief said under the current law, Bank Indonesia could freely design its own monetary policies without having to coordinate with the government.

He also said the current law did not clearly stipulate the jobs of Bank Indonesia.

He pointed out that chapter seven of Law No. 23/1999 only stipulated that Bank Indonesia's objective was to attain and maintain the stability of the value of the rupiah.

Arief said this did not mean that Bank Indonesia had a duty to control the exchange rate of the rupiah.

"This kind of situation will be dangerous to the economy," he said. (rei/swa)