Post-Boediono appointment: The challenges

A'an Suryana , Jakarta | Tue, 04/08/2008 2:55 PM

With the government proposing chief economics minister Boediono as the sole candidate for the post of central bank governor, the debate over who should assume the post seems to have come to an end.

Unlike earlier elections, with their power struggles pitting the State Palace against lawmakers, the election of Boediono is expected to be much smoother.

Everybody seems comfortable with Boediono's track record and experience, making it likely he House of Representatives (DPR) will endorse the government's candidate as the next Bank Indonesia governor.

With Boediono appearing certain to lead the central bank, the debate no longer centers on whether he is fit for the post, but rather whether he can weather the challenges ahead. These challenges are expected to be enormous. Not only does he have to put the central bank's house in order, but he has to deal with the usual external pressure from politicians seeking favors from the bank for their own gain.

External pressure has always been a challenge for the central bank, given its position as the nation's currency issuer, the guardian of the exchange and interest rates that guide the nation's economy. The pressure can be seen, for example, in every election of central bank governor, which is always a troubled process.

The latest election saw incumbent BI Governor Burhanuddin Abdullah recently being named a suspect for involvement in an internal bank meeting in 2003 that approved the institution handing over Rp 31.5 billion to 16 lawmakers.

The meeting was attended by several deputy governors who otherwise would have had a good chance of being elected BI governor to replace Burhanuddin on May 17 this year. The fact that the meeting was held years ago but was only pursued ahead of the BI governor election this year suggests a struggle for power involving outside parties.

A similar fate was faced by Burhanuddin's predecessor, Sjahril Sabirin. Sjahril was allegedly threatened to meet a request made by a high-ranking official, and when he turned down the request, he was eventually sent to jail. He faced prosecution, but was eventually acquitted on all charges by the Supreme Court.

But it is not only outside powers that have taken their toll on the central bank. Corruption and inefficiency within the institution have been legendary. While it will take time to prove whether Burhanuddin and others are really guilty of misusing public money, there have already been a good number of cases that have shown corruption is rampant within BI.

To name a glaring example, in 2005, the Supreme Court overturned a verdict by lower court and sentenced three BI high-ranking officials to 18 months in jail for swindling Bank Indonesia liquidity assistance (BLBI) funds.

Even as the investigation into Burhanuddin proceeds, the institution is being rocked by another finding that has further damaged its image. It was reported in Koran Tempo few days ago that besides allegedly funneling Rp 31.5 million to the 16 legislators, the central bank was also found to have handed over money to House members on the banking commission.

The money was largely meant as an allowance for House members going abroad, including Ganjar Pranowo of the Indonesian Democratic Party of Struggle (PDI-P), who confessed that he got money from BI. The money channeled to Ganjar was a per diem paid to him by BI during a trip with bank officials to London and New York in March last year.

Scandal after scandal at the central bank should serve as a wake-up call for anyone slated to lead BI, including Boediono. If he is elected, establishing the BI's independence should be his number one priority because it is key to preventing more corruption within the institution.

Being qualified to lead BI is not enough. Boediono has to be strong in cleaning house, including getting rid of corrupt BI officials and instilling an anti-corruption culture. And he must be tough in resisting adverse interests preying on BI.

The task ahead is even tougher given that the global and local economy is expected to slump this year following the sub-prime mortgage problem in the U.S, but we are confident Boediono will be able to weather the challenges. Not only is he known as independent and a figure with high integrity; Boediono is also known for his long experience in dealing with the bureaucracy and politicians across spectrums, and he is familiar with global and local monetary and macro-economic issues.

The author is a staff writer with The Jakarta Post. He can be reached at sportman1974@yahoo.com.

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