Indonesia Panel Vets Martowardojo for Central Bank GovernorNovrida Manurung
Indonesian lawmakers will assess today Finance Minister Agus Martowardojo’s suitability to become the next Bank Indonesia governor, testing support for the president’s bid to reshuffle his top economic team.
Commission XI, a parliamentary panel for financial affairs, will vet Martowardojo’s credentials for the job today and a decision is due tomorrow. President Susilo Bambang Yudhoyono last month nominated the finance minister, 57, as his sole candidate to succeed Governor Darmin Nasution, whose term ends May 23.
Yudhoyono’s nomination of a candidate who was rejected by the same committee for the top central bank post in 2008 has put the president’s influence in parliament under scrutiny. Success would also make way for a new finance minister 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.
“If he fails to get approval from the parliament, it postpones the result and will show that Yudhoyono has bad coordination with parliament,” said Agustinus Prasetyantoko, an economist at University of Atmajaya in Jakarta. “Martowardojo has background as a good banker previously and experience in fiscal policy,” and will help the central bank produce “solid” monetary policies, he said.
Central Bank Leadership
At stake is safeguarding the central bank’s leadership and curbing prolonged vacancies in an institution wrestling with inflation that exceeded 5 percent in February, a trade deficit that widened to a record in October, falling foreign-exchange reserves and a rupiah that’s weakened more than 5 percent in the past year.
During today’s session, Martowardojo answered lawmakers’ questions about his approach to issues including bank ownership rules and the principle of reciprocity regarding banking access.
“Indonesia invited foreign investors in ‘97-‘98 as it needed them at that time,” he said. “We were a bit aggressive then, and we can’t just suddenly come out with a new regulation to adjust their stake in banks.”
The central bank has tried to adjust for that by issuing regulations allowing for more than 40 percent ownership if the bank in question demonstrates good corporate governance, he said.
“We need a process for this as we can’t grow without foreign investors.”
At the same time Indonesia must have access to markets in other countries, Martowardojo said.
“We have to have reciprocity,” he told lawmakers. “If not, it means Indonesia won’t progress properly, even though I respect ownership up to 99 percent in the banking industry as they came here officially.”
Indonesia will have to create memorandums of understandings with all countries whose banks wish to invest in Indonesia, he added.
Yudhoyono, who can’t run for president in elections due next year after serving two terms, has had difficulty getting support in parliament for his proposals. He struggled to win backing from within his own coalition last year for a plan to raise fuel prices and contain subsidy costs. Indonesia limited the use of partially government-funded diesel in January, after protests in the world’s fourth-most populous nation derailed the plans to raise prices in 2012.
Still, earlier this month the parliamentary commission approved Perry Warjiyo to become the central bank’s deputy governor for monetary operations, a post vacant since 2011. His appointment was confirmed at a plenary session of parliament March 19.
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 must be endorsed by a plenary session of parliament.
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.
Finance Minister Replacement
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.
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.
“Right now, the market is waiting for who will be the next finance minister in this short-term period to replace him as Indonesia is facing serious problems in the current account and budget deficit,” said Wilianto Ie, head of research at PT Nomura Indonesia in Jakarta.