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Darmin acting governor of BI
Tax Director General Darmin Nasution, who was installed as Bank Indonesia (BI) senior deputy governor to replace Miranda S
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ax Director General Darmin Nasution, who was installed as Bank Indonesia (BI) senior deputy governor to replace Miranda S. Goeltom on Monday, will automatically serve as the acting governor of the central bank because President Susilo Bambang Yudhoyono has yet to nominate a successor to Boediono, the vice-presidential-elect.
Since Yudhoyono will most likely retain Finance Minister Sri Mulyani Indrawati in her current portfolio, the new governor is better selected from among members of the current board of governors (from within the bank) to create a strong monetary management team.
Two complete outsiders in the two top positions at BI would not measure up with the uphill challenges the central bank is facing amid the persistent uncertainty in the financial market and weakening global economy.
The governor and senior deputy governor should make up a team with a well-balanced combination of macroeconomic knowledge and experience in coping with international financial markets, which is a key prerequisite to execute the functions of the central bank as the bedrock of the monetary system, the guardian of monetary policy and the arbiter of the financial system.
With two of its former governors and four former deputy governors currently languishing in jail for corruption, BI badly needs to rebuild its good reputation and Darmin, highly praised throughout the country for his successful reform model implemented at the tax office over the past two years, is most qualified to do that job.
The reform Darmin will conduct at the central bank will greatly help rehabilitate its tarnished integrity and credibility, which is crucial for such a politically independent institution such as BI.
There should be no doubt about the political independence of the central bank under his leadership. Darmin, like Sri Mulyani, his former boss at the finance ministry, is the kind of person who is able to stand up against political pressure or interference from the government.
In terms of integrity, technical competence, managerial capability and leadership, Darmin is thus most qualified for the position. And as the former chief supervisor of the capital market and non-bank financial institutions, Darmin is also expected to speed up preparations for the establishment of the Financial Service Authority, which will take over the supervisory function of banks and other finance companies from the central bank in early 2011.
The central bank should take care not only of the macroeconomic stability but the financial plumbing behind it as well, and experiences from the recent global financial crisis have shown that regulatory credibility is key to the stability of the financial system.
Darmin himself stressed at his selection hearing at the parliament last May that strengthening BI governance would be on top of his working agenda. The 61-year-old University of Sorbonne-graduate economist realizes that since the financial sector functions as the heart of the economy, the financial service industry needs institutional rules and strong regulatory and legal frameworks.
Darmin’s position at the central bank also will strengthen coordination between the monetary and fiscal authorities, under the leadership of his former mentor Sri Mulyani, in facing the complex challenges posed by international financial uncertainty and a deep economic slump.
