Indonesian MPs air doubts over president's nominee for central bank

JAKARTA (Reuters) - The Indonesian president's candidate to become the next central bank chief ran into opposition on Monday, as one member of a parliamentary panel that has the last word on selection doubted his integrity and another doubted his grasp of macroeconomics.

Late on Friday, President Susilo Bambang Yudhoyono unexpectedly nominated Finance Minister Agus Martowardojo to replace Darmin Nasution, whose term as Bank Indonesia (BI) governor ends in May.

The president has given no reason for pushing out Darmin, who is generally seen as having kept a firm hold on monetary policy, with inflation under control, though the rupiah currency has weakened sharply during his tenure.

"For the BI governor nomination, we don't only look at technical capability. We also look at integrity and national interest. Agus Martowardojo's involvement in the Hambalang (graft) case makes us doubt his integrity," said Dolfi OFP, a member of the parliamentary commission on financial affairs. The commission has the final say in the selection.

Dolfi, a member of the opposition Indonesia Democratic Party-Struggle (PDI-P), was referring to a corruption scandal surrounding the construction of the Hambalang sports complex.

The controversy has already toppled one minister and the chairman of Yudhoyono's ruling, but increasingly unpopular, Democratic Party.

Martowardojo was questioned last week by Indonesia's anti-corruption agency as a witness in relation to the case.

The government later issued a statement saying Martowardojo had been selected for his success as finance minister, including his fiscal management, his banking and finance expertise and for his professionalism and integrity. It made no mention of the outgoing governor.

The announcement has had little impact on local financial markets, with one trader noting uncertainty over whether the nomination would be approved by parliament. The rupiah has fallen 0.8 percent since the beginning of the year and was emerging Asia's worst performing currency last year.

It is the second time Yudhoyono has nominated the career banker to head the central bank. Martowardojo was rejected in 2008, along with another candidate proposed by the president, though that was seen more as an attempt by parliament to flex its political muscle than any particular dislike of Agus.

Martowardojo, 57, took over as finance minister in 2010 from the reformist Sri Mulyani Indrawati, who fell foul of members of the business and political elite with her anti-corruption drive.

The Dutch-born finance minister raised his profile when he headed the main state bank, Bank Mandiri, which he managed to turn around.

Some media reports suggested that the parliamentary commission might go back to the president and demand another candidate.

"Agus's understanding of macroeconomics is insufficient, which is important for a BI governor," Kontan daily quoted commission member Harry Azhar Azis as saying. Azis belongs to the ruling coalition member Golkar Party.

The appointment could become the latest hurdle to an already complicated $7.2 billion takeover proposal by Southeast Asia's biggest bank DBS Group, which has been postponed for almost a year.

Martowardojo voiced his concern over the deal when it was announced last year.

Indonesia's central bank and government have been pushing for equal treatment from Singapore's regulator for their banks to be allowed to operate in the city-state.

The change at the central bank comes at an especially sensitive time in the run-up to next year's parliamentary and presidential elections when Yudhoyono comes to the end of his second, and under the constitution, final term.

There is no clear front-runner to replace him.

There was some media speculation that the reshuffle had as much to do with pushing Martowardojo out of the cabinet because of his very public opposition to two major issues involving influential businessmen.

One relates to his insistence that the central government buy a stake in a gold mining company, an issue which involves the Bakrie family. One of the Bakrie brothers is the Golkar Party's presidential candidate.

Another concerns a project to build a bridge linking the islands of Java and Sumatra. Martowardojo has opposed the project, which is headed by wealthy businessman Tommy Winata, in its current form.

There has been no word on who might be the new finance minister, if Martowardojo's appointment to the central bank goes through, though some speculation has focused on Deputy Finance Minister Anny Ratnawati, Trade Minister Gita Wirjawan, and investment chief Chatib Basri, all seen as close to Yudhoyono.

(Reporting Jakarta Bureau, Writing by Jonathan Thatcher; Editing by Simon Cameron-Moore)