Jamsostek to reduce investments in bank deposits

The Jakarta Post, Jakarta

State-owned social security firm PT Jamsostek plans to cut its investment in bank time deposits this year amid the current low interest rate environment.

The director of investment at Jamsostek, Samuel Tobing, said on Friday that the amount of money put in time deposits would be reduced to around 40 percent of the company's investable funds by the end of this year, from the current 50 percent.

"But we'll do it (the withdrawal) gradually," he said, pointing out that withdrawing the money at once would cause serious trouble in the banks.

He said that Bank Mandiri, the country's largest bank in terms of assets, received the largest part of Jamsostek funds allocated to time deposits. But he declined to mention the figure or give details about the withdrawal plan.

Over the past two years, the central bank has been aggressively cutting its benchmark interest rate amid a benign inflationary environment. This has triggered the commercial banks to also cut their interest rates on time deposits, which currently stand at around 6 percent. The real interest rate is much lower if last year's annual inflation of more than 5 percent is taken into account, thus making time deposits no longer an attractive investment alternative.

In comparison, the country's high flying stock market, which last year surged to record highs and is considered one of the best performing markets in the world, provided better yields for investors. So also do government bonds carrying fixed interest rates of around 11 percent.

Samuel said that Jamsostek would increase the share of its investable funds in bonds, both government and corporate, this year.

Currently, the share of investment in bonds is around 35 percent.

He said that this would increase to 40 percent, equal to the portion to be allocated to time deposits. Some 8 percent would be allocated to the stock market, while the remainder would be invested in other areas, such as property.

Jamsostek last year managed around Rp 26 trillion in funds. Samuel said the amount was projected to increase to Rp 31 trillion this year.

He said that the increase would come from higher returns on its investments in various instruments as well as from a rise in the number of workers participating in the company's insurance and pension schemes.