Susilo wants finance minister to be next central bank chief

JAKARTA: The president has unexpectedly nominated Finance Minister Agus Martowardojo as the sole candidate to be the next central bank governor of Southeast Asia's largest economy, a parliament official said yesterday.

President Susilo Bambang Yudhoyono had been expected to re-nominate incumbent governor Darmin Nasution to do a second term at the helm of Bank Indonesia (BI) after his current tenure ends in May, or to nominate one of his deputies as an alternative.

Martowardojo, a former banker respected internationally for guiding the G20 economy's continued strong economic growth and falling debt levels that won the country an investment grade rating just over a year ago, will face a "fit and proper" test by parliament, said Speaker of the House Marzuki Alie.

"Investors don't need to worry, as he has experience in fiscal management," said Eric A. Sugandi, economist at Standard Chartered in Jakarta.

"In terms of monetary policy, it will be quite alike. But with rising inflationary pressure, we will need to see BI policy under his leadership."

Bank Indonesia, seen as pro-growth under Darmin, has kept interest rates at a record low for a year as it seeks to support economic growth at above six per cent in the face of faltering exports during the global downturn.

The central bank shows few signs of considering a rate change, though some economists expect it to be forced into rate rises this year to bolster a rupiah weakened by worries over a current account deficit. The central bank and Martowardojo were not available for comment.

The decision may also have implications for Singapore DBS Group's efforts to complete a US$7 billion (RM21.71 billion) takeover of local PT Bank Danamon, which appears to have stalled after nationalist Indonesian politicians pushed for greater access to Singapore's banking industry in return.

The central bank, following the DBS acquisition attempt, last year tightened the rules for bank ownership in Indonesia, limiting financial institutions to holding a 40 per cent stake in banks, down from 99 per cent previously.

Agus has himself come under pressure from lawmakers over his efforts to buy the government a remaining stake up for grabs in Indonesia's second largest copper and gold mine, run by Newmont Corp.

He once said he would resign if the government could not get the stake, a deal also yet to be finalised.

Given Agus' past clashes with lawmakers and the political sensitivity of the DBS deal, it is possible the parliament could reject him after questioning and ask Susilo for other candidates, though this would be unusual.

"Agus has done a pretty good job as the finance minister. He's a respected banker, which may bode well in terms of boosting the capability of local banks," said Gundy Cahyadi, economist at OCBC in Singapore.

"What's interesting is who is going to be the new finance minister." Reuters