Jamsostek tightens investment control

Jamsostek tightens investment control

Ridwan Max Sijabat, The Jakarta Post, Jakarta

PT Jamsostek, a state-owned company that operates most the
country's social security programs for workers, has tightened its
investment procedure to secure its assets and boost profits in
the coming years.

Jamsostek's investment director Samuel Tobing told The Jakarta
Post here on Monday that in July this year, his company set up a
new standard operating procedure (SOP) to assess all proposals
regarding investments in stocks, bond and long-term deposit
accounts.

"According to the SOP, all investment proposals have to be
assessed by the research and management risk unit before they are
passed to the company's investment committee and the board of
directors and commissioners for approval," he said.

In its assessment, Samuel explained, the research and risk
management unit was required to unveil the potential risks of an
investment proposal and make sure that the investments were done
in compliance with Law No. 3/1992 on social security programs,
Government Regulation No. 28/1996 on Jamsostek's investment
procedures and other rulings.

This procedure aims to ensure accountability and transparency
in the decision-making process over investment proposals, he
said.

Samuel made the statement in response to the results of the
Supreme Audit Agency (BPK) audit of the company's 2002 financial
performance.

BPK, which described the company's 2002 financial performance
as "ordinary without exception", said over the weekend that
Jamsostek had weak internal control of investment decisions as
evidenced by the fact that not all members of the board of
directors were involved in the decision-making process for
investments.

Many have alleged irregularities in the investment decisions
made by Jamsostek.

Samuel said under the new SOP, all daily deals in the stock
market had to have the approval from the investment director
while investment allocations, new investments and bond purchases
would require approval from the research and risk management
unit, investment committee and the boards of directors and
commissioners.

"So far, Jamsostek has funds totaling Rp 24 trillion ready for
investment and the regulation allows us to invest 10 percent of
the asset in numerous sectors, including stock and bond trading,
deposit allocations and asset purchase with the minimum gain
target of 14 percent, or 2 percent higher than the interest rate
of 12 percent of funds collected from workers under the pension
program funds," he said.

Jamsostek booked a Rp 982 billion profit in 2002.

Of the company's Rp 24 trillion in assets, Rp 17.9 trillion
came from the pension funds collected from more than 22 million
workers and 110,726 companies nationwide.

Samuel admitted that Jamsostek had purchased bonds worth Rp
1.2 trillion from many private companies in 2002. The companies
include PT Haji Kalla belonging to Coordinating Minister for
People's Welfare Jusuf Kalla, PT Sapta Prana Jaya, PT Arutmin
Indonesia, PT Volgren Indonesia and PT Suryaindo Pradhana.

He noted however, that Jamsostek had earned Rp 600 billion in
coupon and buyback payments from the companies.

Samuel, also former chief operating officer of the Jakarta
Initiative Task Force (JITF), said Jamsostek would no longer
purchase medium-term notes in the future to lessen possible risks
of default because the type of notes was not regulated in the
investment regulation being reviewed by the government.

"Medium-term notes are in a gray area because they are not
specifically allowed nor prohibited by the existing regulations,"
he added.

He said that Jamsostek would instead purchase shares of state-
owned companies to ensure the safety of the company's investment
in the future.

"We just purchased a part of state-owned Bank Mandiri and we
have decided to do the same with state-owned BRI's shares," he
said.