J. Soedradjad Djiwandono
Encyclopedia
Joseph Soedradjad Djiwandono (born 7 August 1938 in Yogyakarta) was the Governor of Bank Indonesia
, the nation's central bank
, from 1993 until his sudden dismissal in 1998.
Djiwandono received his bachelor's degree in economics
from the Gadjah Mada University
in 1963 and went on to receive a Ph.D. from Boston University
in 1980. Prior to accepting the position as Governor of Bank Indonesia in 1993, Djiwandono had expressed his concerns on the high number of bad debt
s in the banking sector to President Suharto.
The Asian Financial Crisis began to affect Indonesia by mid 1997. On 14 August, Bank Indonesia followed Thailand and Malaysia and moved to float
the Indonesian rupiah
. Under Djiwandono, the bank's "market-oriented response" to the crisis was praised by investors. However, it was also criticized for allowing Indonesia's banking system to grow too fast with 239 banks in establishment by September 1997. Of these banks, 16 were liquidated
in November. Djiwandono later defended the decision not to close more banks citing concerns that "had more banks been liquidated, a total collapse [of the banking sector] may have resulted".
He was dismissed from office by Suharto's 11 February 1998 presidential decree but was not officially informed of the decision until six days later. Although no reason was given, economists believed Djiwandono's opposition to a new fixed exchange rate
system for the rupiah contributed to the decision for his dismissal. The decision drew criticism from the International Monetary Fund
and United States President Bill Clinton
and placed a US$
43 billion aid package at risk of being reversed. He was succeeded by Syahril Sabirin
in a transfer ceremony on 19 February.
On 7 May 2002, Djiwandono was named a suspect in the investigation of former Bank Indonesia governors. He was charged with abuse of authority by extending Rp19 trillion (US$2.1 billion) in loans to failing banks between 1996 and 1998. Several years earlier, Djiwandono had defended the central bank's policies from allegations by three former finance ministers that it misunderstood the government's policies and improperly used the liquidity assistance program during the financial crisis. He remains free as of 2009 despite continuing investigations for former Bank Indonesia governors.
Bank Indonesia
Bank Indonesia is the central bank of The Republic of Indonesia. Bank Indonesia is currently governed by Darmin Nasution, former interim governor. The last governor before the interim phase, Boediono, resigned due to his vice presidential candidacy in the Indonesian presidential election...
, the nation's central bank
Central bank
A central bank, reserve bank, or monetary authority is a public institution that usually issues the currency, regulates the money supply, and controls the interest rates in a country. Central banks often also oversee the commercial banking system of their respective countries...
, from 1993 until his sudden dismissal in 1998.
Djiwandono received his bachelor's degree in economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
from the Gadjah Mada University
Gadjah Mada University
The Gadjah Mada University is the largest and the oldest national university in Indonesia . founded on December 19, 1949; although the first lecture was given on 13 March 1946. The name was taken from the name of Majapahit's Prime Minister, Gajah Mada.UGM is located in Yogyakarta, Daerah Istimewa...
in 1963 and went on to receive a Ph.D. from Boston University
Boston University
Boston University is a private research university located in Boston, Massachusetts. With more than 4,000 faculty members and more than 31,000 students, Boston University is one of the largest private universities in the United States and one of Boston's largest employers...
in 1980. Prior to accepting the position as Governor of Bank Indonesia in 1993, Djiwandono had expressed his concerns on the high number of bad debt
Bad debt
A bad debt is an amount that is written off by the business as a loss to the business and classified as an expense because the debt owed to the business is unable to be collected, and all reasonable efforts have been exhausted to collect the amount owed...
s in the banking sector to President Suharto.
The Asian Financial Crisis began to affect Indonesia by mid 1997. On 14 August, Bank Indonesia followed Thailand and Malaysia and moved to float
Floating exchange rate
A floating exchange rate or fluctuating exchange rate is a type of exchange rate regime wherein a currency's value is allowed to fluctuate according to the foreign exchange market. A currency that uses a floating exchange rate is known as a floating currency....
the Indonesian rupiah
Indonesian rupiah
The rupiah is the official currency of Indonesia. Issued and controlled by the Bank of Indonesia, the ISO 4217 currency code for the Indonesian rupiah is IDR. Informally, Indonesians also use the word "perak" in referring to rupiah...
. Under Djiwandono, the bank's "market-oriented response" to the crisis was praised by investors. However, it was also criticized for allowing Indonesia's banking system to grow too fast with 239 banks in establishment by September 1997. Of these banks, 16 were liquidated
Liquidation
In law, liquidation is the process by which a company is brought to an end, and the assets and property of the company redistributed. Liquidation is also sometimes referred to as winding-up or dissolution, although dissolution technically refers to the last stage of liquidation...
in November. Djiwandono later defended the decision not to close more banks citing concerns that "had more banks been liquidated, a total collapse [of the banking sector] may have resulted".
He was dismissed from office by Suharto's 11 February 1998 presidential decree but was not officially informed of the decision until six days later. Although no reason was given, economists believed Djiwandono's opposition to a new fixed exchange rate
Fixed exchange rate
A fixed exchange rate, sometimes called a pegged exchange rate, is a type of exchange rate regime wherein a currency's value is matched to the value of another single currency or to a basket of other currencies, or to another measure of value, such as gold.A fixed exchange rate is usually used to...
system for the rupiah contributed to the decision for his dismissal. The decision drew criticism from the International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
and United States President Bill Clinton
Bill Clinton
William Jefferson "Bill" Clinton is an American politician who served as the 42nd President of the United States from 1993 to 2001. Inaugurated at age 46, he was the third-youngest president. He took office at the end of the Cold War, and was the first president of the baby boomer generation...
and placed a US$
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....
43 billion aid package at risk of being reversed. He was succeeded by Syahril Sabirin
Syahril Sabirin
Syahril Sabirin served as the Governor of Bank Indonesia from 1999 to 2003, succeeding Sudrajad Djiwandono. In 2000 he was arrested in a fraud scandal surrounding Bank Bali. Sabirin had initially been sentenced to three years in prison in 2002, a sentence which the Supreme Court reduced to two...
in a transfer ceremony on 19 February.
On 7 May 2002, Djiwandono was named a suspect in the investigation of former Bank Indonesia governors. He was charged with abuse of authority by extending Rp19 trillion (US$2.1 billion) in loans to failing banks between 1996 and 1998. Several years earlier, Djiwandono had defended the central bank's policies from allegations by three former finance ministers that it misunderstood the government's policies and improperly used the liquidity assistance program during the financial crisis. He remains free as of 2009 despite continuing investigations for former Bank Indonesia governors.