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Managing social security

Jakarta Post - November 21, 1997

[A huge row has broken out about use of money in the social security agency Jamsostek to give hospitality and bribes to members of Parliament to enact the very controversial Labour Law that was adopted in the last days of the old Parliament. The following editorial gives a good summary, in unusually frank terms, about scandal which involved the Minister for Manpower, Abdul Latief - Tapol.]

After some hesitancy, PI Jamsostek, the state-owned social security company, has admitted that it took Rp 3.1 billion (US$1.3 million at the old exchange rate of Rp 2,400 per $1), out of its huge fund for what really amounted to "servicing" honorary members of the House of Representatives in deliberating the government-sponsored manpower bill this year.

On Wednesday, Jamsostek president Abdillah Nusi confirmed the allegation which had been circulating for three days. But he defended the move as being the company's contribution toward the new law which he insisted was designed to give greater protection to Indonesia's 90-million-strong workforce. "What's Rp 3.1 billion if it means protecting millions of workers?" he said smugly.

Jamsostek and senior officials of the Minister of Manpower had been ducking the question for three days since copies of the correspondence between the ministry and the insurance company found its way to reporters Monday. Some, like Minister of Manpower Abdul Latief, tried to hush persistent reporters. Others even issued outright denials.

The ministry, which oversees PT Jamsostek, represented the government in the deliberation of the manpower bill which the House endorsed in September.

The bill had been a source of controversy from the start, with labor activists, including those from the government-backed Federation of the All-Indonesia Workers Union, denouncing it as a step backward. Deliberation was postponed until after the May election. When the House started debating the bill, it did so in a swift manner, working overtime, while often taking the deliberations to luxury five-star hotel. Hence so the argument goes, the huge contribution from PT Jamsostek.

While Wednesday's admission by Abdillah Nusi was welcomed is is but a first step toward clarifying what some newspapers have already described as a scandal. There remain many unanswered questions about the purpose of the money, the amount involved, the extent to which the Minister of Manpower can dictate to PT Jamsostek and about the way Jamsostek's huge fund is managed, or more aptly perhaps, mismanaged. There are also questions about the delay in clarifying the issue, and about the apparent lack of candour among officials. In all fairness to Jamsostek executives, some of these questions should be answered by Minister Latief. Already, some labor activists suspect collusion between the government and the House in ensuring the bill's smooth passage.=

Jamsostek's fund - the company collected Rp 1.1 trillion in premiums from workers last year - is essentially money entrusted by hundreds of thousands of people to the social security program. How the fund is managed, therefore, should be more transparent. It is not enough to simply state that all its spending had been approved by the board of commissioners, like the Rp 3.1 billion for the deliberation of the bill.

The latest disclosure adds to the list of questionable investments or expenditures that Jamsostek has made this year.

Last week, the Supreme Audit Agency ordered a reappraisal of the cost of constructing the Rp 319.5 billion Menara Jamsostek, a luxury office building on J1; Gatot Subroto, noting an unusually high markup. Then there was the disclosure that Jamsostek had Rp 125 billion deposited in five of the 16 banks that were liquidated by the government this month. Jamsostek has also admitted that it lost Rp 100 billion from the Rp 250 billion it invested in the stock market because of the plunge in share prices.

Accountability is one thing, but good management is another. At the end of the day, Jamsostek may be able to account for every rupiah it spends and invests, and it may have valid excuses for some of the investments that go sour. But if some of these investments and spending look questionable, it is hardly comforting to the real shareholders=97the workers.

This negative publicity does not bode well for PT Jamsostek's own campaign to recruit more participants into its social security program. Despite a law compelling companies to enlist their workers, PT Jamsotek at the last count had only managed to recruit workers in 83,100 of the country's 400,000 registered companies.

Jamsotek's management and its supervisors of the Ministry of Manpower must do a lot more explaining if it wants to convince more and more workers to entrust their money - and therefore their fate and future - with the= company.