More troubles surfaced last week in the government and Bank Indonesia's (BI) efforts to cover the costs of the disastrous bank bailout of the late 1990s just as many of those responsible for the catastrophe put their names forward for the position of central bank governor.

State Secretary Bambang Kesowo was quoted in the press Sunday as saying that three names had been forwarded to the House of Representatives as possible replacements for current BI governor Syahril Sabirin. He did not reveal the candidates.

Sabirin's term expires on May 17, although he is still eligible to stay on for another five-year term, and the candidates' names must be submitted by the President three months before the end of the sitting officer's term to allow time for the 'fit and proper test' carried out by legislators.

Speculation in the media on possible replacements has centered primarily on: Minister for State Enterprises Laksamana Sukardi, Minister for National Development Planning Kwik Kian Gie, Syahril himself and his deputies Miranda Gultom and Aulia Pohan.

Others attracting attention are former finance minister Bambang Sudibyo, former coordinating minister for the economy Burhanuddin Abdullah, BI deputy governor Achjar Ilyas, current Finance Minister Boediono and Subarjo Djoyosumarto.

Spokespersons for House Commission IX on financial affairs have repeatedly stated that the next governor should be independent and able to guide market confidence.

Whether Sabirin, who began his career at the central bank in 1969, meets the criteria is a matter for intense debate although few would deny his tenacity in hanging onto the job thus far.

A corruption felony conviction and temporary detention at the Attorney General's Office during the investigations under former President Abdurrahman Wahid did not deter him.

The Jakarta High Court later upheld Sabirin's appeal although the case is now proceeding to the Supreme Court.

The case, involving payments to Bank Bali at the height of the financial crisis of the late 1990s, is just the tip of the iceberg of crimes linked to the Bank Indonesia Bank Liquidity (BLBI) program in which the central bank under Sabirin channeled over Rp140 trillion in government funds into the collapsing banking sector.

Despite the fact that an audit conducted by the Supreme Audit Agency (BPK) in 2000 revealed that over 90% of the funds had been misused by bank owners and channeled into currency speculation or affiliated interests, Sabirin's role has managed to go largely unscrutinized by the government, regulatory bodies and the courts.

Miranda Gultom and Aulia Pohan are also implicated in the scandal but this was no obstacle to their reappointment to their current BI positions in 2001.

Dislodging the rotund career central banker is no certainty and the man himself has remained tightlipped on his renomination prospects.

New Deal The BLBI mess is now at a turning point as the government and BI push ahead with plans to cover the enormous cost of the bailout through the issuance of so-called Capital Maintenance Notes (CMN).

Having failed to agree on the division of responsibility over the BLBI program and the bank recapitalization bonds issued at the time, the two parties have already proposed at least three mechanisms for covering the debt at the central bank.

Now, as Finance Minister Boediono admitted to the press Thursday, the government has run out of ideas and the CMN issuance must go ahead – even if it means undertaking the messy task of rewriting the central bank law.

As revealed last week, BI and the government agreed to a package with several points, among them an agreement on the BLBI funds in question – Rp159 trillion – and an agreement not to verify the accuracy of that total.

Boediono said the State Audit Board (BPK) had already verified the figure but this has not stopped critics accusing the parties of attempting to fudge the extent of the BLBI disaster, reported detikcom.

The agreement also attempted to allow leeway in servicing the debt and maintaining the liquidity of the central bank.

Under the proposal, if BI's capital ratio falls below 5%, the government is obliged to inject funds from the state budget to meet the minimum 5% requirement.

On the other hand, if the ratio increases to over 8%, the surplus would then be used to retire outstanding CMN.

The central bank is also not obliged to pay interest on the CMN papers it holds, is not subject to tax in the event of a surplus and no longer sets aside 30% of its surplus for 'appropriated reserves'.

The government stands to ease its fiscal burden under the deal because it does not have to pay interest on the debt and has delayed retiring the debt at the central bank.

However, the provisions for the CMN conflict with the central bank law, particularly Article 62, reported detikcom.

The article allows for only 'appropriated surplus' and general surplus with no mention of any other mechanism. In addition, the article states that BI's minimum reserves must be maintained at Rp2 trillion. That is, not defined in terms of the bank's capital ratio.

BPK has raised these and other issues numerous times and has objected to the proposal's lack of clarity on issues such as the unclear timeframe and lost interest.

The Finance Minister is adamant the CMN solution will go ahead but prolonged reviews and debate, with the BPK in particular, are expected.