T

he House of Representatives agreed on Tuesday to annul a government regulation in lieu of law (Perppu) on the financial system safety net (JPSK), paving way for deliberations over a more extensive law that could safeguard the Indonesian economy against external risks.

After the annulment, the House confirmed that it would soon begin discussion with the government over the JPSK bill, which was forwarded to lawmakers by President Joko '€œJokowi'€ Widodo on July 3.

The draft law is among the National Legislation Program (Prolegnas) to be passed into law between this year and the next.

Once the JPSK bill was passed into law, it would encourage policymakers to act decisively when the economy faced pressures, Maruarar Sirait, a lawmaker from the ruling Democratic Party of Struggle (PDI-P), said after the House plenary
session.

'€œAn economic crisis could happen in every country at any given moment, so it is important to give legal backing [for the involved policymakers],'€ said Maruarar, a member of House Commission XI overseeing economy and finance.

'€œThe policymaking process in crisis is different compared to in normal times, so there must be a law that regulates how the policymakers can act swiftly and correctly,'€ he said.

The Perppu was issued in October 2008 by then president Susilo Bambang Yudhoyono at the height of the global financial crisis. The government regulation detailed crisis-prevention measures as well as how policymakers should act to maintain stability in the financial system.

A revocation of a Perppu is mandatory before talks between the House and the government on the JPSK bill can resume.

The government had repeatedly called for deliberations of the JPSK bill and, then, pass it into law, but such an effort failed as politicians fretted over the planned legal immunity for policymakers, which is feared to give morale hazard in the decision-making process.

Nevertheless, the JPSK law is seen as urgent to be passed this year, given the imminent interest rate hikes in the US, which might create shocks in the global economy, in addition to recent heightening volatility in the financial markets due to the economic woes facing Greece and the European region.

'€œIf we reflect on the current global condition, it is really unexpected that a case like Greece could transform into something really serious. So, the key here is that we must be really prepared against any shocks that could hit our financial system,'€ Finance Minister Bambang Brodjonegoro briefed reporters after the plenary session.

Bambang explained that Indonesia currently had various laws regulating the decision-making process at times of crisis, but noted that such regulations were still separated in different legislations: Bank Indonesia (BI) Law, the Financial Services Authority (OJK) Law, or the Deposit Insurance Corporation (LPS) Law, or others.

'€œWe now have a chance to have an all-around law that could act as a basis in making decisions to safeguard our economy, when there is a shock in our financial markets,'€ the finance minister said.

The JPSK Law is expected to encourage policymakers to make the needed decisions during critical times, in response to controversies surrounding the Bank Century bailout in 2008.

Top government officials, such as former vice president Boediono and former finance minister Sri Mulyani Indrawati, are now still being investigated over their decision to inject Rp 6.7 trillion (US$501 million) of state funds into the ailing bank.