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View all search resultsA governor can be replaced, institutional reputation cannot
Markets were not pricing the departure of one individual, but they were reassessing something far more valuable: the institutional reputation of BI.
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Then-Bank Indonesia (BI) governor Perry Warjiyo arrives at a media briefing on Jan. 19, 2023, at the central bank’s headquarters in Central Jakarta. (Reuters/Ajeng Dinar Ulfiana)
P
erry Warjiyo's decision to step down as governor of Bank Indonesia (BI) two years before the end of his term immediately sparked speculation.
Some accepted the government's explanation that the resignation was for personal reasons. Others linked it to growing political pressure on BI, disagreements over monetary policy or a broader reshuffling of Indonesia's economic team. Until Perry himself speaks, those explanations remain precisely what they are: speculation.
For Indonesia’s economy, however, the reasons behind Perry’s resignation are not the most important story. It is why financial markets reacted at all.
Within hours of the announcement, the rupiah weakened to around 18,000 per United States dollar and the Indonesia Stock Exchange (IDX) Composite index also slipped modestly, although BI's legal mandate had not changed. Its policy instruments remained intact and its institutional structure was exactly the same.
If the institution itself had not changed, why did investors immediately reassess Indonesia's outlook?
The answer, I would argue, is that markets were not pricing the departure of one individual, but they were reassessing something far more valuable: the institutional reputation of BI. That reputation can best be understood as a productive institutional asset, one that creates economic value by reducing uncertainty, anchoring expectations and lowering the cost of capital.
In the long run, countries rarely prosper because they happen to produce exceptional leaders. More often, they prosper because they build institutions that remain trusted long after those leaders have gone.
