Bank Indonesia Acting Governor Darmin Nasution is the “strongest” pick to fill the job permanently, a presidential aide said, an appointment that may bring an end to a one-year impasse over the central bank’s leadership.
Economic Minister Hatta Rajasa, who has advised President Susilo Bambang Yudhoyono on cabinet selections, declined to say in an interview yesterday if and when Yudhoyono will name Nasution, 61, to the job. Nasution was head of the nation’s tax office before becoming senior deputy governor and acting chief last year.
The central bank governor post has been vacant since Vice President Boediono resigned in May 2009 to become Yudhoyono’s running mate in last year’s presidential election. An appointment would plug a vital gap in the country’s top economic leadership, after Yudhoyono named Agus Martowardojo as Indonesia’s finance minister this week.
“Indonesia today is different even from a year ago and Nasution would be a safe pair of hands to help steer the big tanker that the country has become,” Wellian Wiranto, a Singapore-based economist at HSBC Holdings Plc, said in an interview yesterday. “He’s done a good job holding the fort and it will provide continuity and stability.”
Dyah Nastiti Makhijani, director of communication and planning at the central bank, declined to comment on Nasution’s possible appointment.
Rajasa held the position of State Secretary, the Indonesian equivalent of chief-of-staff to the president, until he was appointed as Coordinating Minister for Economic Affairs in October.
Any nominee for Bank Indonesia’s top position needs to pass a parliamentary hearing before getting an approval from lawmakers. If confirmed, Nasution will be the 14th governor in the central bank’s 57-year history.
Yudhoyono inaugurated Martowardojo, a career banker, as finance minister on May 20. The president director of PT Bank Mandiri, the country’s largest lender, will replace Sri Mulyani Indrawati, who joins the World Bank as one of its three managing directors next month after a tenure marred by an opposition campaign accusing her and Boediono of abusing their authority.
“Nasution was floated as one of the names for the finance minister job and now that has been filled, it leaves him clear to assume the position” of central bank governor, Wiranto said. “If that turns out to be the case, the appointment will be another key support factor in Indonesia’s drive to push its economic growth to a structurally higher level.”
The benchmark Jakarta Composite Index has surged 39 percent in the past year as growth in Southeast Asia’s largest economy accelerated. Gross domestic product increased 5.69 percent last quarter from a year earlier, the fastest pace since 2008, while inflation has stayed below 4 percent for 11 months.
Standard & Poor’s raised Indonesia’s sovereign credit rating to a 12-year high of BB from BB- on March 12, with a positive outlook. S&P and Moody’s Investors Service both rank Indonesia two levels below investment grade, while Fitch Ratings on Jan. 25 raised it to one step below investment.
Nasution received his doctorate in economics from University of Paris, Sorbonne, France in 1986, according to the Bank Indonesia website. He was chairman of Indonesia’s Capital Market and Financial Institution Supervisory Agency, or Bapepam, in 2006.
“Besides working on the measures on monetary policies and inflation, the new governor should be able to prepare strategies to handle capital inflows and outflows,” said Juniman, chief economist at PT Bank Internasional Indonesia in Jakarta. Nasution “knows how to handle short-term funds’ inflow and a sudden reversal of these funds.”
Indonesia won’t impose capital controls and will instead manage the volatility of foreign-fund inflows, Ahmad Fuad Rahmany, chairman of Bapepam, said May 7 after a plunge in U.S. stock markets earlier this month.
Foreign holdings of Indonesian bonds fell to 145.8 trillion rupiah ($16 billion) as of May 20 from 148.6 trillion rupiah on May 7, according to data from Indonesia’s debt management office.
Bank Indonesia has left its benchmark interest rate at a record low of 6.5 percent since August 2009.
The central bank has been “rattled” by a leadership vacuum, threatening investor confidence, former governor Adrianus Mooy said in an interview last month.
Bank Indonesia is led by a board of governors and the law “clearly specifies” its policy decision-making mechanism even in the absence of a governor, the central bank’s Makhijani said in an e-mail yesterday.