Govt conservative in the licensing of pension funds
JAKARTA (JP): An analyst yesterday hailed the government's conservative stance in licensing pension funds in view that the industry is somewhat new in the country.
"Awareness in establishing and participating in pension funds is a new phenomenon here. I think this development has something to do with the monetization process in our country," Didik J. Rachbini, chairman of the Institute for Development of Economics and Finance, said Saturday.
Didik suggested that the government has remained conservative about pension funds because they manage the people's money.
He said the government can learn from the liberalizing of the country's banking industry, which resulted in the country having more than 200 banks in operation.
"Learning from past experience with our banking industry, we should focus more on quality rather than quantity in developing pension funds," Didik told The Jakarta Post.
The Ministry of Finance has so far issued licenses to 191 companies to establish their own pension funds. It is still processing 252 other proposals to establish pension funds.
A number of parties criticized the government for what they called the government's slowness in processing proposals for the establishment of new pension funds.
Director General of Financial Institutions Bambang Subianto said last week that such slow license processing was often caused by the incompleteness or incorrectness of documents submitted with proposals.
Meanwhile, Director General of State-Owned Companies Bacelius Ruru said pension funds managed by 42 state firms -- mostly in the form of foundations -- are still underfunded by 43.4 percent.
Ruru added that because of such underfunding, the finance ministry, as the shareholder of state firms, is unable to approve their proposals to make their pension funds legal entities as mandated by the 1992 Pension Fund Law.
Under Law No. 11/1992 on pension funds, any pension fund run by a company should get approval from the finance ministry to make it a legal entity.
Didik suggested that companies which are unable to afford to establish their own pension funds better join existing reputable and reliable pension funds, like the one run by state-owned Bank Negara Indonesia 1946.
Requirements
He proposed that the government establish strict and rigid requirements to better control the establishment of pension funds.
"We can again learn from our experience. Just look at state- owned pension fund company PT Taspen, whose financial management is still not transparent, like how it channeled its fund to the Barito Pacific group," Didik said.
He said the government should not totally allow market mechanisms to dictate the pension fund industry. It should complement it with proper regulations so that the existing pension funds, and those wanting to set up new ones, can run their businesses more professionally. (rid)