News Focus: DARMIN NAMED BI GOVERNOR AMID WALK-OUT BUT ALSO HIGH EXPECTATIONS By Eliswan Azly

Jakarta, July 29 (ANTARA) - The naming of Darmin Nasution as Bank Indonesia (BI) governor at a plenary session of the House of Representatives (DPR) here on Thursday was marked by a walk-out by some legislators as well as high expectations about BI reform.
Legislators representing the Indonesia Democratic Party of Struggle (PDI) and the People's Conscience Party (Hanura) abandoned the session over what they said was a violation of the House's rules of procedure in endorsing Darmin's appointment.

After members of the two parties walked out from the meeting room, House's plenary session chairman Priyo Budi Santoso asked the legislators who had remained in their seats whether they agreed to the naming of Darmin or not. All of them expresed their approval to Darmin as the new BI governor.

According to PDIP faction Chairman Tjahyo Kumolo, the walk out was conducted as a decision was made during the plenum that was against the House's rules of procedure.

Tjahyo said according to one House rule, if a plenum had to decide the fate of a person by a vote, the vote should be taken secretly whereas the chair had decided to collect members' votes on Darmin openly. By the walk-out, the PDIP faction wanted to demosntrate it did not want to be held co-responsible for the violation of the House rule.

Prior to the approval of Darmin Nasution as the BI governor in the plenary session, the decision would be taken through election or open voting. But in the process at the House's Commission XI, it was agreed that the decision through acclamation could be taken after the walk out of legislators from two party factions.

After raising tough questions on a number of sensitive issues related to tax fraud, the House of Representatives Commission XI finally agreed by acclamation to name former director general of taxation Darmin Nasution as the new central bank governor.

"All sides agreed by acclamation to appoint Darmin Nasution Bank Indonesia governor," Emir Moeis, the chairman of the House Commission XI overseeing finance and banking said.

The fit and proper test held by the commission to select Darmin as the central bank's number one man began on Wednesday. House members referred to a number of the government's controversial decisions in providing special tax treatment, for example, to Paulus Tumewu, the founder of the Ramayana business group, US-based oil and gas company Halliburton, as well as to business conglomerates Sinar Mas and Astra.

Darmin denied all allegations, saying most of the tax cases raised by House members took place before his tenure as director general of taxation.

Darmin who was born in Tapanuli, North Sumatra, served at the tax office before being elected as the central bank's senior deputy governor in July 2009, replacing Miranda S. Gultom. He was subsequently appointed to be the central bank's acting governor following the resignation of Boediono, who is now vice president.

Speaking to reporters after a closed-door meeting, Moeis said all the parties in the commission supported Darmin's election 'but with tough caveats.

In response to Darmin's naming as the BI governor, President Yudhoyono hoped that Bank Indonesia (BI) governor-elect Darmin Nasution would continue to maintain economic stability and manage the central bank carefully, a presidential spokesman said.

"Hopefully, (Darmin) will be able to maintain prudent BI policies and performance and maintain monetary and economic stability," Julian said.

The government named Darmin Nasution as the sole candidate for the Bank Indonesia governorship, said Julian. The government had nominated him as it was convinced he had the capability for he was senior BI deputy governor.

"The government considered a few things about Darmin. He is very professional in performing his tasks (as Acting BI governor,Ed), " said Julian.

President Susilo Bambang Yudhoyono nominated Darmin, 61, to be central bank chief in June, seeking to plug a gap in the country's economic leadership after the previous governor, Boediono, resigned in May 2009 to become Yudhoyono's running mate in last year's presidential election. Indonesia has left its benchmark interest rate at a record low of 6.5 percent since August 2009.

"The approval is expected to increase market confidence after the post was left vacant for more than a year," said Juniman, an economist at PT Bank Internasional Indonesia in Jakarta. "The market wants to know what monetary policies will be taken by the central bank."
Darmin was elected as BI governor for the 2010-2014 period by the House of Representatives on Thursday night. He would be the 14th BI governor since Bank Indonesia was established in 1953.

In addition, Bank Mandiri`s chief economist Mirza Adityaswara hoped Darmin Nasution could really conduct reform in the central bank.

"Mr Darmin is good. The hope is internal reform in BI will really work," he said.

Mirza said the expected reform include reform in employment and organization to improve bank monitoring system and regulation.

Apart from that Mirza also hoped BI could maintain monetary stability that has been created so far. "BI only has to monitor three things," he said.

Some indicators that need to be monitored are inflation and imports. "If imports continue while the rupiah continues to appreciate sooner or later the current account deficit which is now positive will become negative," he said.

According to him, the weakening of the US dollar and the Euro should also be monitored because private companies seemed to start looking funding from abroad.

"Loans are not a problem if it is monitored. Do not allow them to be used for unproductive things. Imports must not be for production but for consumption purposes," Mirza said.

Indonesia has held back from tightening monetary policy even as neighbors from Malaysia to India raised borrowing costs this year to avert asset bubbles and contain inflation in a region that's leading the global economic recovery. The country's benchmark interest rate is at the lowest level since it was introduced in July 2005.

Southeast Asia's largest economy expanded 5.7 percent in the first quarter from a year earlier, the fastest pace since 2008. Consumer prices, which rose 5.05 percent in June, are forecast to climb in a range of 5.8 percent to 6 percent this year, Bank Indonesia Deputy Governor Hartadi Sarwono said on July 20.

Darmin's naming as BI governor will help improve the central bank's performance in the future. Bank Indonesia is led by a board of governors consisting of one governor, one senior deputy governor and six deputy governors.