Tuesday, 3 July 2012

LOOKING FORWARD TO OJK’S RADICAL REFORMS


After long suspension, resistance from many parties and polemics, finally the Financial Service Authority (OJK) had their existence acknowledged as chairman and six board members of the organization were elected and installed. 

The public was expecting that the authorities who managed and controlled the financial service industry immediately prepare themselves to undertake their task ad responsibilities as per next year.

Six months of transition period was not a long period so they had to make the best of it that all would run as planned. OJK shouldered a great mission and responsibility. i.e. to manage and control the financial service industry which had a turnover of Rp 7,700 trillion or 66% of GDP.

The industry played a great role in national economy, so their task and responsibility was truly heavy. Whether the nation’ economy would rise or fall would be determined by OJK. The most important thing was how to set a proper rule of the game which ensured that the national financial service industry would develop sustainably.

Chairman of House by unanimous decision elected Muliaman D Hadad as Chairman of OJK Board of Commissioner, while election of 6 other Board members was done by voting. The result was that six persons was elected to flank Muliaman at OJK, they were Nurhaida who had 54 votes, Firdaus Djaelani 53 votes, Kusminangtuti S Sutiono 53 votes. Ilya Avianti 50 votes, Nelson Tampubolon 44 votes, and Rachmat Waluyanto 40 votes.

As elected chairman, Muliaman D Hadad would intensify efforts on inter-institutional integration, not just sector wide as there were many overlapping areas between the authority and Bank Indonesia.

OJK would first focus on internal consolidation in the period of control transition over banks, non banking institutions and capital market of BI and the Coordinating Board and capital market of BI and the Coordinating Board of Capial Market and Finance (Bapepem-LK) to OJK. It was expected that all would run well.

Beside internal condition other priorities which were not less important was supervision process in general, because it was only natural for OJK to run a control system which was more integrated instead of sectoral the way it had always been. Coordination with BI and the Ministry of Finance was also needed because administrative overlapping would be inevitable. Not less important was he task of building competent Human Resources which would support OJK’s performance.

In the process of Human Resources building, it was important to observe migration of employees from Bapepam-LK and BI. There should be no perception that these transferred employees were being “exiled” or “abandoned” which might provoke personal envy of social jelousy among employees.

To manage cases as such was not easy, so it was necessary to make truly wise decision based on the principles of justice. Stipulations on remuneration and fringe benefits etc, must consider various aspects so as not to create problems.

In view of members of Commissioners who were mostly important figures and whose qualifications were without doubt, with a wealth of experience in financial institutions, the public had reason to be confident and optimistic about the role of OJK.

Through their far sighted mess, it was expected that the financial service industry as the core of national economy would be ready to propel the nation’s progress. Besides, the public were not desirous of crisis and were against felonious cases in banking business and expected that fraud of the past would never happen again.

But the public must also understand that OJK had challenges and opportunities of their own. Beside various potentials OJK also had many considerable opportunities to be grabbed.

There were at least four opportunities that OJK had in doing their task as well as in managing in Indonesia. Firstly, OJK was not doing a completely new task but simply continuing the function of regulation and control which used to be carried out by BI and Bapepam-LK.

Hence all the preparations needed to do the task of OJK, hardware or software, were readily available for the types of assignment not known before or not exercised to the maximum.

Secondly, unlike BI, OJK did not have the obligation or authority to extend any aid of financial facility to the institution they supervised, so conflict of interest between regulator and the subject could be avoided. Hence OJK was expected to be more stringent in doing their assignment.

Thirdly, the financial services sector which had been developing significantly in the past few years in tandem with economic growth which was relatively high and stable. Under such circumstances the process of transfer and transition or regulating and control from BI to OJK was expected to run safely and smoothly.

Fourthly, OJK stood on firm legal grounds, i.e. Law no. 21 year 2011 on OJK which essentially regulated all relevant matters to OJK, whereby to do their role and function. The OJK Law, whereby to do their role and function. The OJK Law, even regulations or sufficiently regulated matters related to change in regulation function and supervision from BI and Bapepan-LK to OJK.

Now all the seven OJK executives plus two ex-officio of BI and the Ministry of Finance would have to face the main agenda that awaited. The main task was of course internal coordination of OJK. They were supposed to related to the need of this new institution.

When all was well with internal matters, the next mission was to integrate control over banks, capital market, and other financial institutions; hence financial regulation and control could be integrated.

Structurization of the new Indonesian Financial System (ASKI) was OJK’s next assignment. The point was there had to be clear guidance on the future projection of the financial system. ASKI had become important because of the high interconnections among financial institutions under OJK management. In the event that there was anything wrong about any financial institution systemic wise, it would have the potential to spread out to other financial bodies.

Moreover the current tendency was that conglomeration of units in the financial was that conglomeration of units in the financial industry was happening in nearly all financial sub sectors The practices of universal banking where a bank was functioning as a holding company of subsidiary companies as non banking institutions was a phenomenon to be observed by OJK.

Beside administrative and coordinative roles, OJK was expected not to be confined to managing financial industry. Not less important for OJK was to scheme up protection plan foe all customers of the financial industry. OJK must also improve the rule of the game which guaranteed protection for customers. As known, the way it had been customers had always been the victim of all the fraudulence and felony in the financial industry.

OJK must also be aggressive in investigating investment products (bonds) circulating in the market whereby to check its validity and legality in the effort to protect the capital holders. It must not happen that when OJK was operating there was any customer who was victimized by blank portofolio in vestments.  

Business News - June 29, 2012

 
  

No comments: