Pension funds plan to shift investment in bonds
By Reiner S
JAKARTA (JP): Local pension funds plan to invest more of their money in bonds this year as government bank recapitalization bonds now offer a better yield.
The investment director of state-owned PT Jamsostek, Andi R. Alamsyah, said that the pension company would boost its investment in bonds by more than 200 percent this year to about Rp 3 trillion (US$323 million) compared to only Rp 969 billion last year.
"Government bonds are now more attractive than time deposits because they offer a better yield," Andi told The Jakarta Post on the sidelines of a hearing late last week of House of Representatives Commission IX on finance and the state budget.
He pointed out that the yield from government bonds would be more than 18 percent compared to the monthly interest rate of time deposits of about 14 percent.
He said that Jamsostek would reduce its investment in bank time deposits to 70 percent from 80 percent of its total funds.
Last year, Rp 9.2 trillion in funds were invested in time deposits, mostly at state banks, while the remainder was invested in stocks and A-rating corporate bonds.
The finance ministry will soon issue a new ruling to allow local pension funds to invest up to 100 percent of their money in government bonds to help activate the trading of the bonds in the secondary market.
Currently, pension funds can only invest 20 percent of their money in a single bond issue in order to spread the risk. But government bonds are deemed to be a risk-free investment.
The government has issued about Rp 430 trillion worth of bonds to help finance the country's bank recapitalization program.
The bonds, which have varying maturity periods, carry a fixed interest rate of 12 percent and a variable interest rate linked to the interest rate of Bank Indonesia's SBI promissory notes.
In December last year, the government issued a new ruling allowing banks to exchange part of their fixed rate bonds with staple bonds, which partly carry a higher interest rate of 16.5 percent, to lure investors.
The amount of money managed by pension funds in 1999 totaled Rp 27 trillion. Most was invested in bank time deposits.
President of another state-owned pension fund company, PT Taspen, Ahmad Subianto also hinted that the firm would invest more of its money in bonds, particularly government bonds, this year.
"But we'll see what the condition is first. If bonds are really that good, we'll go for it," he said.
"We still want to keep at least 50 percent of our money in time deposits because deposits are more liquid than bonds," he added.
Ahmad said that Taspen managed around Rp 15 trillion funds last year, with about 80 percent invested in time deposits.
Ahmad also suggested that the government eliminate the 0.03 transaction tax to make investment in bonds more attractive.
Jamsostek's Andi agreed. "I think the 0.03 percent tax must be removed to make bonds more attractive."
Director general of financial institutions Darmin Nasution said last week that his office was in discussion with the directorate general of taxation on whether the transaction tax should be eliminated.
According to Andi, investing money in the equity market for the time being is not so promising due to the high risk.
"We'll not buy stock rights now, although some people are recommending that it's time to buy stocks ... We want to stay out of trouble," Andi said.
Ahmad said that Taspen would not invest in stocks either.
He said the company planned to divest all of its investment in publicly listed companies as demanded by the finance ministry.
Taspen has invested in around 12 companies, including publicly listed firms. The finance ministry has instructed Taspen to divest the investment.
One of Taspen's investments is in publicly listed timber giant PT Barito Pacific Timber (BPT). The company has more than 105 million shares in BPT.
Ahmad declined to say when Taspen would sell its BPT shares.
"We'll only sell when the share price has reached the level at which we made the purchase," he said.
Andi also said that Jamsostek would not make direct investment in the near future as such investment in the past was steeped in corruption, nepotism and collusion.
"We'll stop direct investment because its a source of corruption and nepotism," he said, and as an example cited the company's investment in retailer PT Sarinah which turned sour.
Separately, Jamsostek president Djunaidi was quoted by Bisnis Indonesia daily as saying that he would file suit against PT Ramako Gerbangmas and Abdul Latif next month if the two failed to settle their debts with Jamsostek.
"If Ramako and Latif fail to pay by the end of this month, we'll settle it in court," he told legislators during a hearing.
Ramako is a license holder of fast-food chain McDonald's Indonesia, while Latif is a former minister who owns the Sarinah Pasar Raya department store.