the past 7 years, we have 5 governors including the present one who has been in office for just over 1 year. however, it is important to note as well that sometimes the relationship between minister of finance and governor of a central bank turned sour not because of policy conflict but because of personality mismatch that led to eventual conflict. for instance, the current minister of finance and the present governor work well together and have great respect for each other. what then is the solution? i think the best solution is to legalize central bank independence by spelling out clearly in the central bank legislation the power, duties, responsibility and accountability of a central bank. according to the draft amendment of the bank of thailand act which is to be considered by the parliament in the near future, some such important features are : 1. a selection committee, comprising some outstanding thai senior statesmen, to nominate appropriate candidates for governorship. 2. a definite term of office for governorship ( 4 - 5 years is the norm and this can be extended for another term ). 3. clauses which spell out clearly causes for removal of governor. 4. a court of directors which comprises of the governor and deputy governors and at least five other members to oversee / manage / entrust the overall affairs of the bank of thailand. question remains whether governor should be chairman and ceo as well. there are pros and cons on this issue. 5. a monetary policy board chaired by the governor and consists of internal and external directors. external directors will be appointed by the government. responsibility and accountability of the board will be spelled out clearly. it is important to have qualified external directors to provide wider perspective and perhaps a counter balance views. since the draft amendment of the bank of thailand act will take time to be enacted because of a long legal and parliamentary processes ( we expect it to be enacted in the middle of next year ), we have decided to go ahead with the establishment of a monetary policy committee ( mpc ). the mpc consists of seven members with the governor chairing the committee. there are two external advisors who serve on the committee, providing independent thoughts and perspectives. the committee meets every six weeks on a pre - announced schedule. the main responsibilities of mpc comprises of : • setting the direction of the monetary policy with the objective of maintaining price stability, • examining and approving the monetary conditions and policy stance report, and, • overseeing the quarterly inflation report. why did we adopt and implement inflation targeting as our

against it, but he also has the ultimate prerogative of resigning from the governorship ”. dr. puey ungphakorn was an outstanding governor who gave great importance to the bank of thailand to carry out its functions as an independent institution free from political and governmental domination, undaunted by any influential powers - that - be. for the sake of his country - and using the delicate art of being a central banker, dr. puey protested against the government whenever it did not act righteously. dr. puey believed that the government must have faith in the central bank in providing benefits for the country as a whole. the governor and senior management should have enough courage to voice their critical, even dissenting opinion when such an action is necessary. his view was that the governor and his senior management cannot be saints, but must carry out their work adhering to the principles of honesty and integrity. neither can they act indifferently, because when it is necessary to reprimand the government, they must do so. dr. puey was determined to protect its officials from political interference. he issued regulations prohibiting bank of thailand officials to stand for political office or write articles on politics, which are still in force today. i totally agree with what dr. puey had thus said and practiced without fail. however, since governor puey left the office at his own will to concentrate on another job which he loved dearly, that is, rector of thammasart university, we have had nine governors over a period of almost 30 years. out of this nine, only two retired from the office, the other seven were either fired or pressured to leave the post by the government for some reason or another and in most cases the causes of removal had nothing to do with their performance in conducting monetary policy. how could this have happened? the answer lies in the current bank of thailand act which does not spell out or lay down mechanism for the central bank to achieve its independence. governor and deputy governor are political appointees. they are appointed by his majesty the king upon the recommendation of the minister of finance and approved by the cabinet. there is no definite term of office. there are no protective clauses in the act which clearly spell out causes for removal. the most popular reason given by the government when firing governors was one of “ suitability ”. none of the nine governors had the chance to resign from the office in protest of the government policies as advocated by dr. puey. in