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 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.
The second issue is how independence should a Central Bank be? I believe that a Central Bank should be independent within the government because it is the Minister of Finance who has to be accountable to the parliament on issues relating to macro economic, fiscal, monetary and financial system matters. I agree absolutely with Governor Paul Acquah that monetary and fiscal policies must be harmonized in order to achieve macro stability, meaning that a Minister of Finance and a Governor of a Central Bank must work hand in hand to achieve a proper policy mix of fiscal and monetary policies so that sustainable growth can be achieved. BIS Review 53/2002  3  Ladies and gentlemen, I feel that I have taken enough of your time already. Therefore, I would like to conclude that a Central Bank can be considered as having its independence when it can perform its duty of achieving and maintaining price stability without any political or governmental interference, and with honesty and integrity while working hand in hand with the Ministry of Finance to achieve a balanced fiscal and monetary policies mix that lead to macro stability and sustainable growth. Inflation targeting approach is an effective mean to achieve Central Bank independence because it encompasses 4 very important ingredients: operational independence, responsibility, transparency and accountability. Other means can be just as effective if they have these 4 required ingredients.