Giving people a sense of security in times of need
THE STATE-RUN SOCIAL SECURITY SERVICE OFFERS REGISTERED MEMBERS A VALUABLE SAFETY NET IN THE EVENT OF UNEMPLOYMENT OR DISABILITY

The financial crisis that swept across South East Asia during the late 1990s did much to underline the need for a safety net when hard times descend on society.
Fortunately, for some 20 million people employed by Indonesia’s private and public sector companies, help was at hand from the state-run social security service – PT Jaminan Sosial Tenaga Kerja (Persero), more commonly known as Jamsostek.
Although the worst of the crisis is fading from people’s memories, the damage has not been entirely repaired as yet.

ACHMAD DJUNAIDI President Director of Jamsostek

President Director of Jamsostek Achmad Djunaidi says: “Indonesia has a population of some 220 million people and a labor force of 40 million – of which six million are now unemployed.
“Jamsostek must give protection to the labor force, such as covering the economic and social risks for them. Employees should not only get their salary, but also a system of protection,” he adds.
Jamsostek provides several basic services for its members: compensation for disability, both temporary or permanent, as a result of an accident at work; healthcare; payments to the family or dependents after a member’s death; and a ‘provident fund’ that makes lump-sum payments available to members on retirement or unemployment.
“If they contribute to Jamsostek, they can get their money when they reach 55. If they are in work for five years and lose their job, they can also take out their savings,” Mr. Djunaidi adds.
Of Indonesia’s paid labor force, 18.7 million are registered with Jamsostek. In 2000 alone, 1.7 million new members signed up.

Founded in 1977, the system is supported by contributions lev-ied on employees and employers. Companies with 10 or more staff, or those with a total monthly payroll worth $113,140 or more, are obliged by law to enroll them in the social security system.
Employees pay two percent of their salary into the system, while employers pay 7.5 percent, taking the total to 9.5 percent of the company payroll. These subscriptions provide Jamsostek with a revenue base worth $1.9 billion, part of which is invested in the financial markets.

Jamsostek invests about $1.7 billion on behalf of its members. Around 50-60 percent of that total is placed in time deposits with the country’s private sector and state banks, and a further 35 percent is put into bonds, while the rest is indirectly invested through a securities company.
The company has opted for a program of portfolio investment, having abandoned an earlier policy of direct investment in projects after they failed to yield the expected rates of return.

COMPANIES WITH 10 or more employees are required by law to enroll them in the state security system.

Jamsostek prefers to place some of its investment funds into the state-backed bonds that were issued by the government to finance the recapitalization of banks and financial institutions undermined by the financial crisis.
The so-called ‘bank recap’ bonds are now paying higher interest rates than time deposits, says Mr. Djunaidi. Recent reports have suggested that Jamsostek is also buying up equity in several Indonesian banks, which are being restructured and refinanced following the crisis.

“Our investment strategy is one of making an effort to get the maximum profit with a calculated risk,” explains Mr. Djunaidi. “We have to secure a high income from our investments because we give that interest to the contributor.”
These investments currently generate an income that is equivalent to an annual interest rate of about 12 percent.

Despite Indonesia’s undoubted financial difficulties during the last few years, Jamsostek has been able to continue operating on a profitable basis. That has partly been the result of a concerted effort by the management to cultivate a corporate culture better suited to meeting the demands of a market economy.
According to a statement iss-ued by its directors, the board has set itself the target of administering “a social security program for workers in Indonesia that is efficient, reliable and trustworthy. To that end, we will endeavor to constantly broaden our service network, improve the quality of our services, and develop a more capable human resource base.”

Mr. Djunaidi adopts a cautious but optimistic attitude towards Indonesia’s future prospects. He believes the worst is over for most people and that the business community is now starting to respond to this.
“We do hope that foreign and domestic investors will come back to start new businesses and thus extend the opportunities for employment,” he says.
“I hope that investors from the U.S. in particular will come to Indonesia. They might be a bit confused about the situation in Indonesia now but they should come and see the reality here.
“This is a time of transition for us – we are changing from a democracy that was led by individual personalities to one that is a real democracy," adds Mr. Djunaidi.
“Step by step, we are going to complete that institutional transition.”