Mulyani Pushes For Finance Safety Net
Finance Minister Sri Mulyani Indrawati urged lawmakers Tuesday to immediately pass a bill that would devise a contingency plan should the country risk be threatened by economic crisis.
The bill, dubbed the financial system safety net (JPSK), is crucial to preventing a possible systemic threat to the financial sector, and has currently been temporarily enacted by the government in the form of regulation-in-lieu-of-law.
"The House of Representatives has the responsibility of determining our future. I do not know what political interests lie behind their reluctance to pass it," Mulyani said in a press briefing.
She said the government had gone over the importance of the JPSK with the House several times, only to be met with resistance.
The JPSK bill must be passed this week before the House enters a one-month recess session starting on Dec. 19.
Should the lawmakers reject the bill, President Susilo Bambang Yudhoyono is required to issue a decree annulling the regulation, issued in October in response to the global financial crisis.
During a government meeting last week, the majority of factions at the House's commission XI for financial affairs rejected the JPSK bill, but considered passing two other regulations-in-lieu-of-law on Bank Indonesia (BI) and on Deposit Insurance Corporation (LPS).
Lawmakers argued that the JPSK in place of regulations-in-lieu-of-law could empower the government to have "super" authority, creating a "moral hazard".
Mulyani, however, said the JPSK was required to allow the Financial System Stability Committee (KSSK), led by the Finance Minister, to coordinate and respond immediately to any possible threats to the country's financial sector.
"The only reason the Finance Minister heads the KSSK is because he or she will be responsible for the taxpayers' money (used as bailout in the case of a bank collapsing)," she said.
Mulyani also argued the central bank's independency and the House's authority would remain unchanged, despite allegations by lawmakers that the government could become too powerful.
"KSSK is not powerful, and will not violate BI's independency or the House's authority. We would have to seek the House's approval anyway before giving out bailouts," she said, adding the JPSK would complement, among others, laws on BI, LPS, state budget and non-bank financial institutions.
According to the Finance Ministry, developed countries, including the United States, Australia, United Kingdom, Japan and Singapore have their owned KSSK-like committees to protect their economies against possible financial crises.
Mulyani said the concept of a KSSK originated from a 1999 law centered around BI that stipulated Indonesia should have a committee by 2004 at the latest to help prevent a possible crisis.
BI governor Boediono said the JPSK would provide crucial legal grounds for the government to act and coordinate immediately against a possible financial crisis.
"Without it, we may be reluctant to take measures against a possible crisis. We don't know how long the current condition will last," he said.
"We also don't know what we are betting on until we lose it, then we will certainly feel it."