Poverty hampers RI social security system

JIMBARAN, Bali (JP): Aside from mismanagement, poverty and overpopulation have aggravated the development of a social security system in Indonesia.

Bambang Purwoko, the director of program development and member service affairs at state-owned social security company PT Jamsostek, said disadvantageous economic and demographic conditions impeded government efforts to provide people maximum social security protection.

He noted that the successful development of a social security system often depended on economic and population growth, apart from the government's political commitment.

It is generally easier for a social security system to develop in a steadily growing economy with low unemployment, said Bambang, who earned his doctorate in social insurance at Australian National University in 1994.

Bambang said that in Indonesia around 60 percent of the 207 million population currently lived at or below the poverty line, while some 80 percent of the 80 million workforce were still earning the regional minimum wage.

Bambang, who was in Bali last week to attend the ASEAN Social Security Association's annual meeting, further remarked that the current situation was aggravated by the millions who had become unemployed due to the economic crisis.

He cited as an example the fact that Jamsostek could only extend limited benefits to workers, because 60 percent of employees participating in the social security program were only able to contribute a limited amount of money due to their low wages.

Jamsostek has collected Rp 10.29 trillion from around 10 million workers participating in its programs. Much of its assets have been invested in Bank Indonesia certificates, commercial papers and bonds, banking deposits and stocks.

Bambang said Singapore, Malaysia, the Philippines and Thailand had been more successful than Indonesia in developing their social security systems because of their higher per capita incomes.

Malaysia, with a population of 22.7 million, has a per capita income of more than US$3,000; Singapore, with a population of 3.9 million, has a $22,000 per capita income; while the per capita income in Indonesia is about $460, he said.

According to Bambang, in Malaysia the social security program -- consisting of occupational accident coverage, health care and death benefits -- was compulsory for workers earning 2,000 ringgit or less a month.

Malaysian employers are obliged to confer an equivalent of 1.25 percent of their employees' gross salary to the Social Security Organization.

Workers in Malaysia pay 11 percent of their monthly wage into a pension fund, while their employers contribute 12 percent to the scheme under individual employees' names.

"Malaysia's Employees Provident Fund (EPF) and Singapore's Central Provident Fund have played a dominant role in the two countries' stock exchanges because of the huge amount of assets raised through their workers," Bambang said, adding that EPF recently purchased a small number of shares in Indonesia's PT Astra.

He said Indonesia should learn from these two countries, where the investment profits were accumulated to provide benefits for workers. He further highlighted the fact that social security institutions in these countries, unlike in Indonesia, were not taxable.

Reform

Bambang also said it was vital that Indonesian social security companies were revamped.

He argued that the five state-owned social security companies -- PT Jamsostek, PT Askes, PT Taspen, PT Asabri and PT Jasa Raharja -- should be dissolved and a single independent organization be established to handle social security programs for workers, civil servants and servicepeople.

"Such a merger is an urgent need in order to make the companies efficient in social security management," he said.

He said the new independent organization should be run by an executive board comprising representatives of the government, workers, civil servants, servicepeople and professionals.

The executive board should have full authority in managing and investing all funds raised from participants in the social security program, he said.

He lamented the fact that the government had yet to show the political commitment to provide better social security for the people.

"According to the Constitution, it is the government's obligation to provide social security protection for the people, and not to use (social security) for business purposes," he said, adding that a lack of monitoring contributed to past mismanagement of social security funds.

Bambang claimed financial leakage in the five state-owned social security companies was still rampant.

The financial leakage has a lot to do with the government's intervention in the five companies, he charged without elaborating.

He said the government should strictly enforce the 1992 Law on Social Security, which makes it compulsory for companies employing 10 workers or more to participate in social security programs.

"Of the 80 million workforce, only 8 percent, or around 10 million, participate in social security schemes," he said, adding that most workers were unaware of the advantages of joining a social security program. (rms)