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JAKARTA - It is really to be regretted that finding a solution for the Bank Indonesia case seems to take forever. Central banks anywhere in the world, are very respectable institutes, they are honored for their exalted position. Why? For reasons that our economy is no longer a primitive one, when everything was bartered for agriculture products.
More than that, because of outside influences we have arrived at a monetary level where derivative instruments are in use, albeit not as sophisticated as in advanced countries. This would imply that a quantitative reflection reveals that the entire real economy is under control of Bank Indonesia (BI) through the rupiah, either through internal (inflationa) and external values (conversion rate).
Of utmost importance is that the bank has to be trusted by the public, since the institute is keeping their savings in security. It is therefore understandable that the central bank as the bankers' bank status, honor, credibility and integrity, should in position, be as exalted as the heavenly bodies in the sky. What is going to happen to our economy if the central bank since the Bank Bali case until this moment, has been loosing its respectability and is gradually changing into a symbol of a nest of robbers? Going to extremes, even more sinister is the issue that it might be a nest of money counterfeiters, while the allegation has been voiced by someone in high places.
Who is responsible for all that? The government and Parliament, because of BI's independent status which has been achieved through a path that went uphill, but, which is not closed for improvement. Although mutual trust and a very harmonious cooperation between government and Parliament is called for, where tricking on both parts should be eliminated.

I have positioned myself on the basis of information published by the mass media. The President has since long been holding a grudge towards BI on account of Prijadi Praptosuhardjo, a friend of his, did not make the fit and proper test. The President wanted to make Prijadi Executive Director of Bank Rakyat Indonesia. BI was then asked to repeat the fit and proper test which also held implicitly the message to let Prijadi pass the test. BI showed no cooperation. Syahril Sabirin had three options. To rehabilitate Prijadi, resign, or appear in a criminal court. He chose the last option on account of a principle matter.
We do not know what went on in the mind of government. During the process when Syahril was detained at home, the BI Counsel of Directors were called upon by four high ranking officials on November 17 2000. Two deputy governors were absent which gave the impression that it had been pre-arranged. Those present were presented two options, appear in court or resign. Some chose to resign. And that meant the end of BI, except for two men who were not present at the meeting, Achyar Ilyas and Aulia Pohan.
The President accepted the resignations with the understanding that the outgoing deputy governors go about their daily duties until the replacements have arrived. It is clear that an outgoing management cannot be maintained for long, certainly not in such a vital institute as the central bank. It is hard to deny that government has created a crisis in the management of BI. It is interesting to find out what the reason could have been. The reason does not have to be negative, as many observers have expected. It is very well possible that government wishes to have a clean and respectable BI management, as soon as possible.
On the evening of November 19 the government urged Parliament chairman, Akbar Tandjung at home to finish the BI Law amendments in 1 week. The gist of it held only one matter, the BI Governor Counsel should also be dismissible when Parliament deems it necessary on the grounds of the counsel's poor synergy. In the amendment draft government inserted article II verse (1) which sounds, "With the onset of the law's validity, the entire Governor Counsel is hereby dismissed."
It is to be regretted that government chose to come forward in an ungraceful way. The government held a gun to the House when it said that the amendments should be ready in one week. The House was cornered to go along with them. Government thinks that it has done a clever stunt with presenting Anwar Nasution as their candidate together with two others. Making a choice here, compares with choosing a piece of gold from two pieces of rocks. Parliament immediately said that there is no choice. Besides, the way of suggesting was also wrong. First, the three candidates are to be elected as "Governor and/or Senior Deputy Governor."
According to BI Laws, the President has to present 3 candidates for Governor and three others for Senior Deputy Governor. When the names have returned from Parliament, government is to present the same names and clearly announce that it wants the House to choose one of the three as Senior Deputy Governor. However, at the back of Anwar Nasution's name, such explanations were scripted as "momentarily Senior Deputy Governor BI. This is wrong since Anwar Nasution had already resigned at the time.
The largest mistake was made when Parliament was instructed to elect a Senior Deputy as soon as possible (President's letter to Parliament on November 23 2000). Then, after Parliament accepted the government draft, Article II verse (1) stipulating, "With these laws now in effect, all members of the Governor Counsel are hereby Dismissed," came to pass. Imagine, if Parliament were to blindly folllow the wishes of government, Anwar Nasution would have to resign, then chosen as Senior Deputy to be dismissed once more because of article II verse (1).

What implications will these mistakes have in store? First, government's intention will come to light, that the post of Governor is imposed on Anwar Nasution. That explains the following wording, to choose from "Governor and/or Senior Deputy." Second, government has forestalled another choice for Parliament, which is only too clear by placing Anwar Nasution, compared to a piece of gold, next to two "pieces of rocks."
May be there is a show of too much self reliance or arrogance since government did not think that Parliament could reject all candidates. Second, Anwar Nasution who resigned and within one day announced his willingness to be nominated for Governor and, or Senior Deputy. Has destroyed his image. He had just resigned, then he states that he is ready for the nomination of BI Governor... Third, government has acted too soon, there is still a Governor, Syahril Sabirin. While still being detained, government presented Anwar Nasution as their candidate for Governor, blundering more by adding the words "and/or Senior Deputy."
Complications in connection with the BI amendments arose on their own accord. First, Parliament refused to complete the draft in one week. After extensive lobbying, they agreed that a comprehensive version would be ready on December 20, this would mean working during a recession. However, on December 9 2000, Bisnis Indonesia informed that the factions United Development, Crescent Star and Reformation, refused to work.
These developments generated an atmosphere of negligence and uncertainty. While the rupiah continues its downward flight. How do we get out of this mess? To normalize BI operations, there is no other way than holding friendly and honest discussions, rather on a personal basis which will have to be free from arrogance and tricks, between the President and the House of Representatives.

An Economic Analysis By Kwik Kian Gie

Posted in Economy @ 13 December 2000 by Jeroen · 'Blog' RSS feed · permalink

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