The Social Security System in Indonesia: Current Investment Issues and Future Prospects

This paper will elaborate the benefit of a mandatory employee social security system (Jamsostek) as a basic pension system. The potential of Jamsostek to be the largest invastor is sigruficant with which it has power to raise funds through a worlang society and administers their database. Jamsostek (formerly known asAstek)was founded in 1977 as a state entity which develops employment accident, health care, death and provident fund schemes for employees. Membership of Jamsostek was previously those working for medium to larger scale company's employees, however, recently the top priority to be given is directed toward the extension of coverage across smaller employers. In term of financing the schemes, eligible employers on behalf of their employees pay the contributim to Jamsostek. The current investment policy is conservative in shares because of the investment guidance which has been applied to Jamsostek limits the allocation of funds (which account for about 70% of total funds) is deposited into bank time deposits. Another problem which recently arises in particular for accumulating a long term fund is early withdrawal of provident fund account by the members. It can be met by the members so far as their membership has been at least 5 years and 6 months. The last is that they are undergoing a layoff from the employer.