{"id":2188,"date":"2020-02-19T21:07:27","date_gmt":"2020-02-19T21:07:27","guid":{"rendered":"http:\/\/aiccusa.org\/?p=2188"},"modified":"2026-04-08T18:13:38","modified_gmt":"2026-04-08T18:13:38","slug":"salvage-job","status":"publish","type":"post","link":"http:\/\/aiccusa.org\/?p=2188","title":{"rendered":"Salvage Job"},"content":{"rendered":"\t\t
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by Wayne Forrest<\/em><\/p>

Building Indonesia\u2019s new capital in East Kalimantan may turn out to be easier than preserving its current capital. However, the \u201ccapital\u201d I mean is what has been invested in Indonesia\u2019s state-owned insurance and pension system, not Jakarta, a city sinking due to ground water loss and climate change. Once again a major scandal, involving at least $1 billion in losses at the state-owned life insurer PT Jiwasraya, has emerged with possible systemic risks to Indonesia\u2019s financial system as well as the potential for politicization reminiscent of the $700 million Bank Century scandal of 2008. Jiwasraya made high risk investments with its 17,000 customers\u2019 capital in mutual funds offered by a highly suspicious company promising 12% annual returns. In effect, it was a state-run \u201cponzy\u201d scheme. A similar scandal is brewing at the Armed Forces Social Insurance fund, also a life insurance investment program. Losses are estimated between $700 million and $1.2 billion. Each of these bankruptcies alone are staggering numbers for an emerging economy.<\/p>

The funds in many of these enterprises are often accrued by payroll deductions with a lack of transparency regarding benefits. In the 1990\u2019s AICC had a corporate member, ASI, skilled in actuarial sciences, that was invited to help President Soeharto create a modern social security system by restructuring the death benefit company PT Astek. In reviewing Astek\u2019s books, ASI was astounded to learn that less than 2% of its accrued funds were paid out in any year as survivors\u2019 death benefits. Plagued by years of mismanagement and corruption, Astek had a poor record paying claims and worse, had little to no outreach to educate policy holders and beneficiaries. ASI\u2019s project was ultimately scrapped by the 1998 Asian Financial Crisis.<\/p>

The $700 million Bank Century bailout plagued the SBY administration. To this day accusations remain that President SBY, Vice President Boediono and Finance Minister Sri Mulyani made decisions that favored Bank Century\u2019s well-connected depositors and some go as far as to accuse them of personally benefiting, charges that were never substantiated. But in the face of the global unwinding of 2008, the bailout was justified and eventually investigations by the anti-corruption commission (KPK) led to arrests and convictions of the bank\u2019s owners as well as a central bank deputy governor.<\/p>

Although arrests have been made in the Jiwasraya case and the new state-owned enterprises minister, Erik Thohir, has begun to discuss a bailout plan, details have yet to be released and rumors are already circulating that \u201chigher ups\u201d are being protected. The attorney general is leading the criminal investigation of Jiwasraya in coordination with the anti-corruption commission (KPK), now operating under a new, controversial law. Both entities are pursuing leads, identifying and interrogating suspects. This a positive sign, however, Parliament\u2019s relegation of its own inquiry to a low-level committee rather than a full inquiry raises concerns that independent oversight to guard against a cover-up may never materialize. The scandal also sheds a negative light on the Financial Services Authority (OJK) and its anemic monitoring\/compliance efforts. These must be revamped.<\/p>

In a nation struggling to modernize its capital markets, lower risk premiums, and attract direct investment, revelations such as these are very disturbing and need to be addressed swiftly with transparency not just for the unfortunate customers whose retirement incomes are threatened, but for investors (local and foreign) in general.<\/p>

Chances are there may be more Jiwasrayas with the same ability to flood Indonesia\u2019s capital markets with uncertainty and higher risk. This capital, however, cannot be moved to Kalimantan.<\/p>

(These views are the author\u2019s and do not necessarily reflect those of AICC or its members.) <\/em><\/p>

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by Wayne Forrest Building Indonesia\u2019s new capital in East Kalimantan may turn out to be easier than preserving its current capital. However, the \u201ccapital\u201d I mean is what has been […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"elementor_theme","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-2188","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"http:\/\/aiccusa.org\/index.php?rest_route=\/wp\/v2\/posts\/2188","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/aiccusa.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/aiccusa.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/aiccusa.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/aiccusa.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2188"}],"version-history":[{"count":5,"href":"http:\/\/aiccusa.org\/index.php?rest_route=\/wp\/v2\/posts\/2188\/revisions"}],"predecessor-version":[{"id":9884,"href":"http:\/\/aiccusa.org\/index.php?rest_route=\/wp\/v2\/posts\/2188\/revisions\/9884"}],"wp:attachment":[{"href":"http:\/\/aiccusa.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2188"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/aiccusa.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2188"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/aiccusa.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2188"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}