Tue, 16 Sep 2003

Jamsostek should be reformed

I am writing in response to your Aug. 30 article on the social security reform draft bill currently being considered by the House of Representatives.

In the article, you quoted a PT Jamsostek official stating that there has been no privately provided social security system anywhere in the world. To set the record straight, private social security schemes do exist in the world. Not only that, the number of countries that have chosen to adopt such schemes has grown during the past decade or so. Most of them are in Latin America (Chile, Argentina, and Mexico) and in Europe (United Kingdom, Sweden, Hungary, and Poland).

It has been recognized that public social security schemes have some fundamental flaws. They would not be able to keep up with demographic changes in society, where the number of elderly retirees surpasses the number of younger workers contributing to the scheme, causing the collapse of the system. They are also vulnerable to government intervention, causing investment decisions on the fund to be influenced by political pressure rather than rational economic arguments.

This is why the above countries have chosen to replace their public social security scheme with a private one and many other countries are seriously considering this reform. Given the many problems facing our social security system today, pursuing this reform is something that Indonesia should strive for.