In and out of love with Bank Indonesia
The central bank is in turmoil as corruption investigations get under way. The hope is that newly appointed governor Boediono will be able to put the bank back on track. Eric Ellis reports from Jakarta.
"Here I am, the one that you love
Askin’ for another day
Understand the one that you love
Loves you in so many ways"
THE SOUNDTRACK WAS unlikely – a saccharine love song from Australian crooners Air Supply circa 1981.
And the occasion to serenade? The official inauguration of Indonesia’s new central bank governor in May.
In most countries, such a pairing wouldn’t normally be encountered. But Indonesia, still struggling to secure economic and political reformasi a decade after the ousting of dictator Suharto, remains some way from normal.
Although the sprawling archipelago nation has come a long way since emerging from 32 years of military dictatorship in 1998, not least becoming southeast Asia’s most robust democracy as it rebuilds capacity in weakened state institutions, it finds it hard to shake off a reputation as one of the world’s most corrupt countries.
Now the central bank has found itself at the centre of the latest of a long line of scandals that have plagued Indonesia’s re-emergence as a regional power. Bank executives have been accused by Jakarta’s anti-corruption commission of paying big bribes to government officials and parliamentarians to get much-needed banking laws passed, and of squandering billions in state funds, including some from the IMF-led $50 billion economic stabilization package raised when the Indonesian economy collapsed during Asia’s financial crisis a decade ago.
The Bank Indonesia drama has hit painfully at the heart of Indonesia’s economy, distracting from sorely needed efforts to bring prosperity to one of the world’s poorest countries. It has also distracted the operations of BI, regarded as one of Indonesia’s sturdier institutions. After decades in the thrall of dictator Suharto’s presidential palace, the central bank was granted its independence in 1999 as part of Indonesia’s reform commitment to the economic rescue effort. But with anti-graft investigators trawling through the bank’s ranks, an operational sclerosis has afflicted its sprawling offices on Jalan Thamrin, in Jakarta’s official heart. In March, BI governor Burhanuddin Abdullah was arrested and until new governor Boediono was installed in May, the central bank was run in part from his gaol cell. Now Boediono’s first critical task is to overcome what had become a besieged atmosphere at the bank, and restore public confidence in the institution.
As unwelcome as they have been, BI’s travails seem to have been forgotten, temporarily at least, at the investiture ceremony of the troubleshooter Indonesians hope will fix Bank Indonesia, and build integrity at this important institution. At 65, Boediono is one of Indonesia’s most-respected academics and economists, a former BI deputy governor in the 1990s who was moved across to the bank from the cabinet of president Susilo Bambang Yudhoyono, where he had been co-ordinating minister for the economy since 2005.
Although a trusted cabinet member, Boediono wasn’t Yudhoyono’s first choice to head BI. After Abdullah was arrested, SBY (as the president is known in Indonesia) proposed two preferred candidates for parliamentary approval: Agus Martowardojo, president of the state-owned Bank Mandiri, the merger of banks formed after the late-1990s’ crisis; and Raden Pardede, vice-president of the State Asset Management Agency, another key custodian of the economy. Although SBY’s Democrat Party holds just 10% of seats in parliament, limiting the president’s influence there, approval for either of the two had been expected because they had earlier passed muster for their present government jobs.
Rejection
But that didn’t happen. SBY’s two candidates were flatly rejected by parliament in what was interpreted as a humiliation for the struggling president, who is seeking re-election to a second term next year. The parliament’s presiding committee said it was because the two, although respected officials, had no previous understanding of BI bureaucracy, so necessary in this time of crisis at the central bank. Boediono, a finance minister in the Megawati Sukarnoputri government that SBY toppled in 2004, and before that a deputy BI governor from 1997 to 1998, was then proposed as a compromise candidate. The spin around the Istana Merdeka, Jakarta’s splendid Dutch colonial presidential palace, was that Boediono had actually been SBY’s first choice but had advised him that he was not interested in the job. Whatever the truth, and Boediono was too discreet to tell Euromoney, his candidature, the third one put to parliament, was promptly approved.
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Under pressure: Burhanuddin Abdullah arrives at Indonesia’s anti-corruption agency for questioning in Jakarta in February |
With election season approaching, Indonesia’s power intrigues seemed evident at the inauguration. Resplendent in ceremonial sarong and suit, some 500 of Indonesia’s power elite – but conspicuously not SBY – came to Jakarta’s supreme court to witness Boediono’s swearing-in. After he had taken the oath of office, the guests formed a long conga line, filing past to personally congratulate the new BI boss. With SBY absent, they were led by vice-president Jusuf Kalla, leader of the Golkar Party, Suharto’s old fiefdom, which has the most parliamentary seats. Kalla is an erstwhile ally of SBY but is tipped by many to run against him next year. Yudhoyono’s absence from the inauguration might have been telling. As president, he should have been there. His office said he was engaged on a long-standing important appointment. But the swearing in of a new central bank governor is one of the seminal events of any country and there were rumblings that SBY was miffed at not having got his way. Analysts have interpreted the BI governor saga as a political loss for the once-popular SBY, who recently fell behind former president Megawati in electoral opinion polls.
Two of the guests seemed to make a show of being photographed with the new governor: a beaming Kalla and then BI’s stoic deputy governor, Miranda Goeltom, who has twice been overlooked to move up to the top slot. (The well-groomed Goeltom, a favourite of Jakarta’s celebrity pages, had been filmed very publicly paying respects by Suharto’s deathbed before the old tyrant died in January). Then with the felicitations and photo opportunities completed, Air Supply started crooning over the courtroom’s speaker system as guests tucked into a celebratory buffet.