The ministry will propose amending the issue in the draft law during the National Legislative Assembly's session, said Pranee Tinakorn, an adviser to Finance Minister Chalongphob Sussangkarn.

Earlier, the ministry proposed to establish a Financial Supervisory Agency, which would have supervisory power over financial institutions, brokers and insurance companies. The agency was to be a unit of the ministry. However, the idea came to nothing following strong criticism from the central bank and the Insurance Department.

Apart from removal of supervisory power, the ministry would amend the draft law to require the central bank to disclose its secret information to the public and provide alternative ways to remove the BOT's governor, in addition to the finance minister.

However, Pranee did not mention what the alternative options were.

Pranee, who is a lecturer at Thammasat University, explained why Chalongphob had had to reverse initiatives made by former finance minister MR Pridiyathorn Devakula on the appointment and removal of the central bank governor so that the central bank could have instrumental independence but not policy independence.

Pridiyathorn wanted to change the Bank of Thailand Act, which authorises the finance minister to seek Cabinet approval for the central bank governor's appointment and dismissal, in an effort to make the central bank a politically free body. He then proposed that an independent committee and senators should be in charge of appointing the governor.

Pranee and Chalongphob, however, do not agree with the draft law proposed by Pridiyathorn and approved by the Cabinet.

Pranee said that although the government was the administrative power and had authority to dismiss the governor, it could not do so easily.

The Thaksin government did not dare to oust Pridiyathorn as media and public support shielded him from political pressure, she noted.

Pridiyathorn was at that time in conflict with former finance minister Somkid Jatusripitak and now-deposed prime minister Thaksin Shinawatra over the management of state-owned Krung Thai Bank.

The current practice is appropriate, and central bank governors in many countries are appointed by administrative body, via the finance minister or president, Pranee said.

In the United Kingdom, the chancellor of the exchequer appoints the governor of the Bank of England. In the United States, the president picks the chairman of the Federal Reserve and seeks approval from the Senate.

In Japan, the Cabinet appoints the central-bank governor and seeks approval from the House of Representatives and the House of Councillors.

Chalongphob is familiar with the UK system, Pranee said.

She also insisted that no central bank in the world had policy independence, only instrumental independence, because monetary policy was part of macro-economic policies and the government was in charge of economic policies. If macro-economic policies fail, the government must be held accountable, she said.

There are three pillars of macro-economic policy: price stability, full employment and growth, and the Bank of England and the Federal Reserve have committed to key economic objectives, she noted.

Pranee is unhappy with the Bank of Thailand and claims that it runs monetary policy mainly to maintain price stability without paying adequate attention to employment and growth.

For instance, the central bank has responded slowly to the present economic slump and is preoccupied with curbing inflation. It should have cut interest rates in December, she said.

She added that the ministry also wanted the Securities and Exchange Commission to make public information that was now secret.

Wichit Chaitrong

The Nation