The Political Economy of Central Banks: Miranda Goeltom Edition

As noted yesterday, Miranda Goeltom was named a suspect in a corruption case relating to her appointment to Indonesia’s Central Bank in 2004.  Testimony from other witnesses indicates that about Rp. 24 billion ($2.7 million) was distributed to 41 of 56 members of Parliament’s finance commission who voted to confirm Miranda.  It is generally thought that Artha Graha Group of Tomy Winata is involved in providing the funds.  The case first emerged in 2008 and I’ve always wondered about the political economy of this case–what it is that those putting up the cash would want in return.  At least three possibilities were suggested in commentary this week.

O’Rourke in his Reformasi newsletter notes that there have been suspicions that the bribes relate to monetary policy and the preference of commodity exporters for a weak Rupiah exchange rate (Artha Graha Group’s portfolio includes palm oil plantations, which is one of Indonesia’s largest export commodities):

At the time of the bribery, suspicions revolved around the influence of resource-sector exporters over economic policy-making: specifically, a depressed exchange rate helps expand the profit margins of resource companies that export commodities, such as palm oil, pulp, paper and coal.

Yunus Husein, the Head of the Financial Transaction Report and Analysis Centre (PPTAK) and quoting an unnamed former Central Bank commissioner, suggests that most appointments are sponsored by problem banks that may require policy leniency or access to short-term financing for liquidity reasons:

“According to one of the deputy governors of Bank Indonesia who was questioned by the Corruption Eradication Commission (KPK), the selection of Bank Indonesia senior deputy governor usually involves sponsors.  Usually the sponsors are troubled banks,”said Yunus Husein, a member of the council that examined the travelers checks, at ICW’s office on Friday (27/1).

“Menurut pengakuan salah satu deputi gubernur Bank Indonesia kepada KPK yang waktu itu diperiksa di ruangan saya di PPATK, dalam pemilihan deputi gubernur senior BI biasanya ada sponsor-sponsor. Biasanya sponsor-sponsor itu bank-bank bermasalah,” kata anggota majelis eksaminasi kasus suap cek pelawat ICW, Yunus Husein, di kantor ICW, Jumat (27/1).

Yunus, speaking at ICW, also suggested that it relates to gaining access to inside information about Central Bank market operations:

According to [Yunus], by sponsoring a Bank Indonesia deputy governor, one can control information and access the Indonesian banking system.

“Moreover, many Bank Indonesia policies, such as open market operations and the sale and purchase of SBI (Bank Indonesia Certificates), relate to intervention in the market. If information is obtained [of these operations] it could of course bring benefits. At the very least one can guard against losses” said Yunus.

Menurutnya, dengan menjadi sponsor deputi gubernur BI, seseorang bisa menguasai informasi dan akses dunia perbankan Indonesia.

“Apalagi BI banyak policy (kebijakan) seperti open market operation dan jual beli SBI (Sertifikat Bank Indonesia) dalam rangka intervensi di pasar. Kalau informasi itu diperoleh, tentunya bisa memberi keuntungan. Paling tidak, mencegah kerugian bagi dirinya,” imbuh Yunus.

Quotes from Suara Merdeka article here.  h/t KP2KKN’s blog here.

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