The government’s careful approach to parliament’s draft changes to central bank (BI) law the past few weeks may be a signal that delicate negotiations lie ahead on two key reforms being considered by the government of President Joko Widodo. The possibility that the most controversial parts of the central bank bill — indefinite debt monetization powers and executive influence over the central bank — could eventually become law cannot be fully discounted, but there will be months of negotiations ahead.
The first reform on deck may in fact be the omnibus bill on job creation, which according to Coordinating Minister for the Economy Airlangga Hartarto is already 90% complete. It is the most significant reform effort of the past two decades, especially if it can change the country’s rigid labor rules. The government is pushing for the bill’s approval by October.
Parliament has been drafting the law since early this year but kept its amendments to the labor law for last. Even now it has avoided disclosing the text, likely to avoid a confrontation with labor unions. However, with many of its other provisions likely to be controversial, the Widodo administration may prefer to stay on good terms with parliamentarians, including those tending to support the questionable changes to the central bank law.
The financial newspaper Kontan meanwhile reported that Finance Minister Sri Mulyani Indrawati wants Widodo to issue a decree-in-lieu-of-law (perpu) that would strengthen the capabilities of two regulators in case of financial crisis in the near term: the Financial System Stability Committee (KSSK) and the Savings Guarantee Agency (LPS). However, she also said this week that the government is aiming to submit a more comprehensive bill on financial sector reform sometime in March 2021, but also possibly as late as December next year.
Therefore, Sri Mulyani may be attempting to seek a middle path: avoid antagonizing legislators who support the controversial central bank bill by not publicly shooting it down so the administration can get legislative approval for the omnibus bill on job creation and the perpu for the KSSK and LPS. She could then push any discussions on the BI law towards the broader financial sector reform bill that will most likely be proposed only by the middle of next year.