The senior deputy governor

The senior deputy governor

Miranda Swaray Goeltom, the articulate monetary expert, will
soon reenter Bank Indonesia at a crucial time as the rupiah
exchange rate has been weakening and highly volatile due to the
strengthening of the American dollar. The House of
Representatives approved the appointment of Miranda through a
voting process at a plenary session on Monday.

One of three candidates proposed by President Megawati
Soekarnoputri for the position of senior deputy governor at Bank
Indonesia to replace Anwar Nasution, Miranda had earlier defeated
the other two candidates in an elaborate screening process
conducted by House Commission IX for the state budget and
finance. Most analysts have agreed that Miranda is indeed the
best of the candidates.

She will be a worthy deputy to Bank Indonesia's governor
Burhanuddin Abdullah, who last June became the first governor of
the central bank that underwent a democratic selection process at
the House after Bank Indonesia became a politically independent
institution in May, 1999.

As a former deputy governor of the central bank from December
1997 to 2003 and its spokesperson, Miranda, besides being highly
technical competent and well-experienced in monetary management,
also has an extensive international network of contacts at
central banks overseas.

This extensive network, especially in major developed
countries, is vital in helping Bank Indonesia achieve its primary
objective, which, according to the law on the central bank, is to
achieve and maintain the stability of the rupiah against goods
and services, as well as foreign currencies.

Even though the country adopts a floating currency system,
cooperation and solid contacts with other central bank executives
are still crucial, because, when it comes to currencies, their
prices (exchange rates) are set not by the market but by the
central banks. Each central bank still has a monopoly on the
currency it issues, and uses that monopoly to dictate the price.
The monetary policy decisions by each central bank sets its
foreign exchange rate, whether intentionally or not.

Technical competence is also pivotal for the senior deputy
governor, as the second top executive, because monetary policy is
the most closely watched indicator of economic policy. Moreover,
monetary policy action tends to have a fairly immediate impact on
real economic activities.

No wonder that almost all analysts and state bankers, as well
as private ones, welcomed the selection of Miranda, pointing out
that her monetary expertise and experiences would help reassure
the market of Bank Indonesia's monetary management.

However, technical competence is obviously only one of the
basic requirements that have to be met by the new senior deputy
governor. No less important is integrity and the ability to stand
up against political pressures or interference, while, at the
same time, maintaining smooth coordination with the fiscal
authorities (government). It is integrity and leadership that
inspire market confidence in an institution, particularly such a
politically independent one as the central bank.

Several non-governmental organizations, including Transparency
International Indonesia, have opposed the appointment of Miranda,
as well as the two other candidates, arguing that none of them
has the required qualities -- including integrity -- for such an
important position.

There have been a wave of rumors, notably pointed at Miranda's
integrity and her alliance with a number of senior politicians,
but none of them has ever been substantiated. Nor has she ever
been formally charged over any wrongdoing with regards to her
former position at the central bank.

Miranda should have fully realized the importance of
maintaining integrity to build the credibility of the central
bank's monetary policies. Anyway, as policy decisions at Bank
Indonesia are adopted through the consensus of the board of
governors, there is little chance for any member of the board to
pursue his or her personal agenda.

On top of that, the amendments to the central bank law that
were enacted early this year stipulate the setting up of a
supervisory board consisting of five banking and monetary experts
to help the House of Representatives oversee Bank Indonesia.

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