The new central bank chief

The House of Representatives election of Burhanuddin Abdullah as the new governor of Bank Indonesia strongly proved that high morality and integrity were the most important factors assessed in the interview process of the three candidates that were submitted by President Megawati Soekarnoputri in February.

That was precisely called for by the 1999 Central Bank Act, which stipulates, among other things, that the central bank governor shall possess high standards of morality and integrity.

Burhanuddin, 56, will thus become the first governor of the central bank that underwent a democratic selection process at the House since Bank Indonesia became a politically independent institution in May 1999.

Thirty four, or 64 percent, of the 52-member House Finance and Banking Commission voted on Monday night for Burhanuddin, a career central banker, and the other 18 members for Miranda Swaray Goeltom, currently a deputy governor at the central bank.

Cyrillus Harinowo, though highly respected for his high moral and impeccable integrity, predictably failed to gain even a single vote because he was virtually unknown to the major factions at the House commission.

Miranda, who commands a high degree of popularity thanks to her role as the articulate spokesperson of the central bank, was initially tipped as the favored candidate to win the Bank Indonesia top slot, especially because she was backed by the single largest faction, the Indonesian Democratic Party of Struggle (PDI Perjuangan).

However, her chances were hurt over the last few weeks by wide disclosures of her questionable involvement in businesses and questionable transactions in Bank Indonesia securities. Her special questioning by the commission in charge of verifying the personal assets of state officials (KPKPN) also raised many eyebrows regarding her probity.

Burhanuddin's appointment will certainly be welcomed by the market. Even though he was a career central banker, he was never implicated in any of the scandals and allegations of corruption and collusion which beleaguered Bank Indonesia during the peak of the economic crisis in 1997-1999.

During this period, Burhanuddin was a director in charge of foreign economic relations before he was appointed a deputy governor in early 2000. He is therefore well-positioned to make a clean break from the central bank's scandal-tainted past.

His four years of working experience at the International Monetary Fund executive board from 1989 to 1993 should have broadened his expertise in global monetary affairs.

His one month stint as the chief economics minister in June 2001, should have provided him with a good opportunity to understand the operations of the government bureaucratic machinery, thereby making him more able to manage good coordination with the fiscal authorities.

Hence, in terms of integrity, technical competence, managerial capability and leadership, Burhanuddin appears to be the most qualified to lead the central bank in exercising its function as the bedrock of the monetary system, the guardian of monetary policy and the arbiter of the financial system.

Technical competence is indeed crucial for the chief of the central bank because monetary policy is the most-closely watched indicator of economic policy, and monetary policy action tends to have a fairly immediate impact on real economic activities.

In fact, it is the integrity and leadership of its chief that inspires market confidence in an institution, notably such a politically independent one like the central bank.

The central bank has thus far performed fairly well, despite the politically turbulent period it underwent in 2000 when the current governor Sjahril Sabirin was found guilty of corruption but was eventually acquitted of all charges by the Supreme Court.

Nevertheless, the challenges facing Burhanuddin are no less daunting, especially with regard to the urgent need for restoring the institutional integrity of the central bank. Moreover, unlike central banks in most other countries which are tasked only with either maintaining currency stability or guarding inflation rates, Bank Indonesia is responsible for maintaining the stability of the rupiah, general price stability (low inflation) and banking supervision, at least for the next three to five years.