Investment funds of Jamsostek 'mismanaged'

JAKARTA (JP): The returns on investment by state-owned social insurance company PT Jamsostek are still below average as most investments are mismanaged, according to the Econit Advisory Group.

Econit's managing director Arif Arryman said yesterday that the return on Jamsostek's investment was only 11.6 percent last year, much lower than the average deposit interest rate of 15 percent during the period.

"In 1996, Jamsostek invested Rp 4.36 trillion. The investment gave a return of only Rp 503 billion, or 11.6 percent," Arif said at a press briefing.

He said Jamsostek's return on investment (ROI) was the smallest compared to the four other social insurance companies in Indonesia.

He noted that PT Jasa Raharja, also state owned, booked a profit of Rp 29.3 billion or about 43.9 percent of its Rp 66.7 billion in investment last year.

PT Asabri, a similar company, received Rp 76.9 billion in revenue in the same year -- about 15.8 percent of its investment of Rp 486 billion.

PT Taspen invested Rp 3.16 trillion and had a ROI of Rp 468.5 billion (14.8 percent) and PT Askes invested Rp 346.3 billion with a ROI of Rp 41.75 billion (73.13 percent).

The consulting company questioned the low level of Jamsostek's ROI given the healthy performance of its premium income.

"It should not happen because Jamsostek has a 29.52 percent ratio of claims versus premiums -- the smallest compared to other social insurance companies," Arif said.

Jamsostek is the biggest social insurance company in Indonesia, with assets of Rp 4.6 trillion and a premium income of about Rp 1.2 trillion last year.

Econit researcher Tri Handoyo said Jamsostek's ROI was unreasonably low because the company invested 81.4 percent of its money in safe instruments, such as time deposits (66.8 percent) and Bank Indonesia deposit certificates (SBI) (14.6 percent).

He said that from the two instruments -- assuming the average interest rate for a three-month deposit was 15 percent and the three-month SBI interest rate was 12.9 percent -- Jamsostek's investments should give a ROI of at least Rp 519 billion.

He added that Jamsostek also invested 8.9 percent in bonds, 0.2 percent in promissory notes, 1.7 percent in equity investment, 1 percent in land and property and 6.8 percent in portfolio investment.

He said if the ROI from the company's bonds was also included in the calculation -- assuming the ROI from bonds was 16 percent per annum -- the company's total profit from investment should have been Rp 581.2 billion last year, or Rp 77.3 billion higher than its actual return of Rp 503.90 billion.

"Jamsostek's actual return of investment last year was Rp 77.3 billion less than it should have been," he said.

He said the low rate of the company's ROI resulted from the mismanagement of its investment funds.

He said the funds' mismanagement was also reflected by the fact that its investment last year of about Rp 420.3 billion in commercial papers, property, direct equity and portfolio investment (about 18.4 percent of its total investment) suffered a loss of about 18.4 percent.

Arif said Jamsostek's mismanagement was regrettable because Jamsostek's funds could be used to finance the national economy.

He said that if Jamsostek -- which mostly focused its services on providing social insurance to workers -- could reach its target of 23.9 million people by 2000, the company's assets would climb to about Rp 11 trillion.

"Jamsostek's large amount of funds can be used as a reserve fund to help improve the ailing economy," he said.

Jamsostek has been in the spotlight following a report on the use of about Rp 3 billion of the company's funds to pay off legislators to help pass the controversial manpower bill.

Arif suggested that PT Jamsostek be managed by a team of professionals with workers' representatives on its management board.

He also said that PT Jamsostek's investment policy must be transparent and directed to improve workers' welfare.

"Econit also suggests that the government reform and rehabilitate Jamsostek's management as soon as possible, considering that Jamsostek is one of the biggest fund collectors," he said.

He said the government should consider not issuing a regulation which ordered all workers to join Jamsostek's program before the company's management improved. (gis)