Martowardojo Moves Closer to Bank Indonesia Governor Role

President Susilo Bambang Yudhoyono made progress on his bid to appoint Indonesia Finance Minister Agus Martowardojo the next central bank chief as a parliamentary panel agreed to put the candidate through a fit-and-proper test.

“Agus Martowardojo meets the criteria,” Emir Moeis, chairman at the Indonesian parliament’s Commission XI, which oversees financial affairs, told reporters in Jakarta after a more than two-hour meeting late yesterday. “If we are to replace the finance minister again, this will create new risks and that’s what took us so long to consider.”

The president last month nominated Martowardojo as his sole candidate to succeed Bank Indonesia Governor Darmin Nasution, whose term ends May 23. Martowardojo, 57, was rejected for the top central bank post by the committee when Yudhoyono proposed him in 2008.

Last night’s decision advances Yudhoyono’s bid to reshuffle his top policy-making team as Southeast Asia’s biggest economy grapples with a weakening currency, a current-account deficit and inflation stemming from power-tariff increases and higher wages. The president’s choice of Martowardojo had met with mixed reactions as some analysts questioned his record as finance minister and others praised his banking experience.

Challenging Time

“It is important that parliament does not prolong the uncertainty,” Helmi Arman, a Jakarta-based economist at Citigroup Inc., said before the committee’s decision. “BI must not be left without a solid leadership, especially as the macro environment has become more challenging.”

The Indonesian rupiah was little changed at 9,688 a dollar while the Jakarta Composite index of shares rose 1 percent as of 11:07 a.m. local time today. The currency has fallen more than 5 percent in the past 12 months, the worst performer after the yen and Indian rupee among 11 Asian currencies tracked by Bloomberg.

The decision to proceed with Martowardojo’s nomination was unanimous, said Maruarar Sirait, a commission member from the Indonesian Democratic Party of Struggle. He said that it’s the president’s right to nominate only one candidate, adding that several factions suggested naming more than one.

“After this process, I think Martowardojo will become the BI governor,” Harry Su, a Jakarta-based head of research at PT Bahana Securities, said by phone today. “The biggest risk for Indonesia and the new governor obviously is maintaining both inflation as well as currency volatility.”

Panel’s Considerations

The finance committee has 14 members from Yudhoyono’s Democrat Party faction, 10 from the Golkar faction, and eight from former President Megawati Soekarnoputri’s Indonesian Democratic Party of Struggle faction among its 49 members. After a candidate passes the commission’s scrutiny, the decision would then have to be endorsed by a plenary session of parliament.

The commission will hold Martowardojo’s fit-and-proper test on March 25, with a decision probably as soon as the next day, said Achsanul Qosasi, a member from Yudhoyono’s Democrat Party. The finance commission decided to proceed with the test for Martowardojo to avoid a prolonged vacancy at Bank Indonesia, Sirait said. Still, the date chosen gives the president time to submit another name if he decides to do so, said Harry Azhar Azis, a vice chairman at the panel.

A rejection would have forced Yudhoyono to submit a new nomination, according to Citigroup’s Arman. Should the second candidate be turned down, the president can re-appoint the current governor to avoid a leadership vacuum, he said.

Prolonged Vacancy

The process underscores the difficulty that Indonesia’s political system can pose for a speedy succession at the central bank. Of the members of the finance committee, 12 are from opposition parties. Yudhoyono’s Democrat Party has the most number of people on the commission.

Nasution, 64, assumed the central bank governor post in September 2010 after more than a year as acting governor. It took the president about a year to nominate him after the previous governor, Boediono, resigned in May 2009 to become Yudhoyono’s running mate in the presidential election.

Martowardojo started his career at Bank of America Corp., according to the Finance Ministry’s website. He was president director of PT Bank Mandiri, the country’s largest lender by assets, before becoming finance minister. The Amsterdam-born banker holds a bachelor’s degree in economics from the University of Indonesia, according to Bank Mandiri’s website at the time of his appointment to the finance role.

Finance Minister

The finance minister “is a good choice,” Zulkieflimansyah, vice chairman at Commission XI, said Feb. 26. “There won’t be any problem for him to get it, most likely he’ll win it,” Zulkieflimansyah, who goes by one name, said then.

Yudhoyono hasn’t said who he would appoint to replace Martowardojo at the finance ministry should he win Parliament approval to move to the central bank. Julian Aldrin Pasha, a presidential spokesman, has denied rumors that Martowardojo and Bank Indonesia Governor Nasution will switch jobs.

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