Thursday, June 13, 2013

The Story of a New Sheriff in Town...

This is a short story about a new sheriff in town. 

His name is Agus Martowardojo. 

He has all the power to steer a large territory called "Bank Indonesia". 

Those of you who don't know what Bank Indonesia is, then it's time to wake up...

 It is the country's central bank which has majestic office buildings in the downtown of Jakarta.

Agus has been installed as the new governor of the bank on May, 24, 2013. 

He was sworn in under Presidential Decree No. 45/2013, replacing his predecessor Darmin Nasution, who has entered his retirement.

Unlike Darmin who has strong economic background and  has long engaged with the finance ministry as an official before...

he served respectively as director general in tax office and director general of financial institutions within the ministry.

Agus has been known as a sucessful CEO of state-owned bank --Bank Mandiri--

He then left the bank for the respectable position.

He suceeded Sri Mulyani Indrawati as finance minister in May, 2010.

In March 2011 Agus announced his first fiscal policies, focusing on how to promote real sector and boost investment. 

He removed the value-added tax (VAT) for the sale of houses worth less than Rp 70 million (US$7,910) compared with the previous Rp 55 million.

Not to mention, he eliminated taxes on the sales of cooking oil and bulk cooking oil for the poor.

He also provided in advance 50 percent of the funds needed by the State Logistics Agency (Bulog) for the rice for the poor program.

As a finance minister for about 3 years, Agus considered as a tough-minded reformer with few political ties. 

He was the only minister in economic team who said "No" to the construction of Sunda straits bridge. 

Later... destiny took the different route for him.

Agus was abruptly removed from his position as minister in circumstances that have yet to be fully explained by his boss, president Susilo Bambang Yudhoyono. 

His departure, with just a year and a half to go in the president's second and last term, raised a question mark for public.

It prompted worries of some investors at a time when regulatory issues have been erratic in a number of sectors. 

But, forgot the old days...


When Agus steps in to the new territory in the central bank... 

He instills confidence; he starts to make some blows

What kind of blows? The answer is simple... 


Perhaps not that really is for those who unaware of monetary issues. 

This week, within two days in a row -- yesterday and today-- 

Agus surprises markets with two unexpected decisions.

First, he raised the Fasbi rate yesterday by 25 basis points to become 4.25%.

Fasbi is the yield the central bank pays for commercial banks on funds they deposit at the central bank.

The magnitude in changing this rate is less than the impact of an adjustment in the BI rate.

Second, he raised the benchmark interest rate today, known as the BI rate by 25 basis point to become 6%

He said the bank saw rising inflation expectation ahead of the government policy to adjust fuel price later this month.

He said it also concerned with the stability of the ailing rupiah, which recently touched its psychological level at 10,000 a dollar.

He said the bank will guard the currency


Hiking the BI rate hike today is the best thing he could do

This is the first time since February last year.

So, surprising market two times in two days in a row with two decisions on interest rates, doesn't he deserve a name as a new sheriff in town?

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