Bank Indonesia Museum, Jakarta – Indonesia
Establishment of Bank Indonesia
In 1951, there was a solid push to establish a central bank as a manifestation of the economic sovereignty of the Republic of Indonesia. Therefore, the Government decided to form a DJB Nationalization Committee. The nationalization process was carried out through the purchase of DJB shares by the Government of Indonesia, with an amount reaching 97%.
The Government of the Republic of Indonesia, on 1 July 1953, issued Law No. 11 of 1953 concerning Principles of Bank Indonesia, which replaced DJB Wet of 1922. On 1 July 1953, Bank Indonesia was officially established as the Central Bank of the Republic of Indonesia.
Law No.11 of 1953 was the first provision that regulated BI as the central bank. BI's task is not only as a circulation bank but also as a commercial bank through the provision of credit. At this time, there was a Monetary Council (DM) whose job was to set monetary policy. The Minister of Finance chairs the DM, with members being the Governor of BI and the Minister of Trade. Furthermore, BI is tasked with carrying out monetary policies determined by DM.
Banks As Revolution Tools
The Sabang-Merauke Fighting Bank Conference was held to align with the government's aspiration to submit as an instrument of revolution. The result, the Struggling Bank Doctrine, mentions, among other things, "the unity of spirit among the banking community" and "the integration between the banking struggle and the struggle of society." This concept led to integration between government banks, culminating in forming a Sole Bank under the name Bank Negara Indonesia.
Revolution of Several Periods of Rupiah Currency:
Towards a Modern State
Since becoming independent and sovereign, Indonesia has never experienced so many difficulties in various fields as in this year's report. Economic development has taken place in an unsatisfactory atmosphere, with many signs indicating a setback that is worrying. That this setback needs to be stopped immediately. - Report of the Republic of Indonesia for the Accounting Year 1953-1958
Country State
New country, trouble blue
The young Republic of Indonesia was immediately confronted with significant problems. Rebellions erupted in various regions, politics was in constant turmoil, and the economy was stagnant. Exports still depend on primary products such as rubber and petroleum. The government's finances were also in a significant deficit. Amidst such an atmosphere, Bank Indonesia was formed and immediately carried out a critical mandate.
BI position
Youth, a gigantic task
The tasks of Bank Indonesia in the Young Republic were crucial: to regulate the value of the rupiah, organize money circulation, and advance credit and banking affairs. In addition, BI is obliged to help cover the budget deficit. He did this by providing advance loans by printing money. BI leadership comprises the Monetary Board, the Directors of Bank Indonesia, and the Advisory Board.
PERIOD 2 (1959-1966)
Building a National Attitude
1960-1965 was a period in which State Government was based on the Political Manifesto. During this period, the entire economy was regulated within the framework of guided economy and guided democracy, which eventually led to etatism where the state intervened more and more in all economic life." -Radus Prawiru, Governor of BNI Unit 1, in the 1960 Opening Year Report - 1965.
Building a storefront, forgetting the foundation
The government wants Indonesia to have a strong personality, emphasizing nation and character-building. Unfortunately, during this period, economic development was neglected. Indonesia also runs a politics of confrontation. As a result, the economy is in chaos, and hyperinflation occurs. Nonetheless, the lighthouse project built in this era has become the pride of Indonesia until now.
BI position
The central bank is under the control of a guided economy
Government spending on development projects is enormous, while revenue is minimal. As an instrument of revolution, BI is a cashier for the government and helps cover the budget deficit. During this guided economy period, the Minister of Finance can take actions that deviate from the BI Basic Law if deemed necessary, and all the authority of the Monetary Board changes hands to the Cabinet. The Governor of BI sits in the Cabinet as Minister of Central Bank Affairs.
PERIOD 3 (1966-1983)
The economy as the Direction of the State
"As was to be expected, the devaluation had a more direct effect on non-traditional export goods, particularly industrial and handicraft products. The export value of these goods soared as the world market prices for exported goods increased. This development resulted in a surplus in the balance of payments. Which is much larger than the previous period.” -Rachmat Saleh, Bank Indonesia Report for the 1979-1980 Bookkeeping Years
Country State
It is time for the economy to reign supreme
The regime change changed the course of Indonesia. Now it is the turn of economic development to be commander in chief. The New Order took steps that succeeded in stabilizing and encouraging economic growth. One of the contributing factors is the two oil booms. The banking sector began to improve. The function of Bank Indonesia as the central bank was restored.
BI position
Formerly agents of revolution, now agents of development
Thanks to the increased foreign exchange reserves, BI and the government were able to provide various credit schemes.
What is prioritized is the productive sector so that inflation can be controlled. BI can also focus more on encouraging bank growth. The Monetary Council is active again, but only as a coordinating body.
The independence of Bank Indonesia is marked because it is outside the department, and the Governor of BI does not double as a minister.
PERIOD 4 (1983-1997)
Economic Globalization: The Disappearance of National Boundaries
"The mainstay of hope for driving the Indonesian economy in the 1980s was the non-oil and gas sector in a broad sense. The budget sector, as well as [soft] foreign loan, could not be relied upon, so the only hope and need to be encouraged was the public or private sector." -Arifin M. Siregar: Governor of Bank Indonesia, Suara Karya, 12-16 December 1989.
Country State
Skyrocket before freefall
The economy during this period progressed so rapidly thanks to the deregulation packages. The banking and real sectors are growing, and investment and foreign loans are flowing. However, this condition is accompanied by something other than proper caution. Efforts to correct people who demand transparency are always considered disobedience. This economic glory was swept away after the rupiah exchange rate fell instantly.
BI position
Complicated dependencies
In this period, the Governor of BI was appointed as a ministerial-level official. This non-independent position makes it difficult for BI to carry out its functions as a central bank, such as in monetary control and promoting economic growth. As an aide to the government, BI also had to issue policies that were in line with changes in the government's strategy, which at that time wanted to encourage the role of the private sector in financing development. Bl did this by extending bank credit and empowering the interbank money market. BI continues to provide subsidized liquidity credit for high-priority economic sectors. But it has reduced the provision of KLBI.
PERIOD 5 (1997-1998)
Crisis on All Lines
Rupiah was in free fall
Houses were hit following the Thai Baht exchange rate crisis. BI's combined intervention efforts with the monetary authorities of Singapore and Japan did little to help stabilize the Rupiah's value. Foreign capital is attracted by speculation in the money market, and the foreign exchange market is rife. After the riots in May 1998, the Rupiah worsened—16,500 per dollar in June 1998. Before the crisis, one dollar was around Rp. 2,300.
At the end of 1998, the value of the Rupiah began to move steadily in the range of Rp. 7,500-Rp. 8,000 after a largely positive attitude towards economic developments and new government policies. Pe 1999, which went smoothly, had a pot effect, and the Rupiah strengthened.
PERIOD 6 (1999-2004)
Post-Crisis Clean Up
• Position and Duties of Bank Indonesia Based on Law No. 23 of 1999,
• Bank Indonesia's role based on Law No. 24 of 1999 concerning Foreign Exchange Flows and the Exchange Rate System,
• Improving Indonesian Banking Architecture,
• Clearing System,
• The role of Bank Indonesia Based on Law No. 24 of 2002 concerning Government Bonds.
PERIOD 7
• Refocusing the Role of BI
• Amendments to the BI Law
• Implementation of Payment System
• Ministerial Control in Government Antural Relations
• Inflation Targeting Framework (TF) What is it?
• Improvement of the Central Bank's Lender of the Last Resort (LOLR) function
• Currency
• Transfer of Bank Supervision Duties
Crisis? Anticipate and overcome by strengthening institutional coordination.
With coordination with the government and strengthening governance, the independence of BI based on Law No. 23 of 1999 is easier to implement. International financial integration has impacts that need to be anticipated. This situation is the background for the amendment to Law No. 23 1999.
Islamic Bank Period (1905-2003)
Seeking Blessings Through Sharia Banks
• Bank Seeds Without Interest
• Emergence of Bright Spots
• First Islamic Bank Period (1992-1999)
• New Services and Products for New Needs
• A Challenging Beginning
• After Crisis Sweet Dikais
• The Growth Period of the Islamic Banking Industry (1999-2008)
• Drive and Maintain growth
• Road Map for the Audience
• Always Asked for Interest
• Post Islamic Banking Law Period (2008-2013)
• Strengthening the Horses
• Indonesia is the champion
• Sukuk, The Securities
• Differences between Islamic Banks and Conventional Banks
