Jakarta – The Jiwasraya scandal is a reflection of how atrocious monitoring of financial services in this country. Investor trust in financial markets could rapidly dissipate.
Resolution of the Asuransi Jiwasraya case is the high stakes on the roll for the credibility of the financial services industry of this country. Shored up in the capital market, the suspicion that a crime took place in the handling of investment funds under the guise of Jiwasraya insurance could very well mow down investor trust in the financial sector, a sector currently much needed to bolster the state of the economy.
Jiwasraya is a truly particular irony in the finance industry. In the past eight years, the state-owned enterprise (SOE) grabbed tens of awards as an insurance company with sterling financial performances year in year out. Their JS Saving Plan, a savings product coupled with accident protection benefits launched in 2013 was a bestseller. In its heyday, the product boosted the assets and profit base of the enterprise.
Only five years later, the result of failure to pay a claim that had reached maturity, it turned out that Jiwasraya's hefty profits were good only on the books, with the reality a skinny joke. Up to the end of 2019, the company could not make claims arrears to the tune of Rp12.4 trillion.
In October 2018, the Jiwasraya fund bubble of trillions of rupiah continually plowed into shares and its high-risk mutual funds finally burst. Investment profits in the Jiwasraya ledgers, it turned out, did not translate into hard cash in the company's coffers. Moreover, the old management it seemed was in cahoots with fund managers to cook the shares. The aim? For investment asset valuation in the Jiwasraya financial reports to continually appear impeccable. The Attorney General also suspects fraud – foul play to pad personal pockets and those of others – in these fund management schemes.
The case is incommodious because there is suspicion of a crime conducted within the finance industry, a sector rigidly set up to waylay a repeat of the financial crisis in 1998. Supervision had already been tightened since the formation of the Financial Services Authority (OJK), an independent body that took on the role of supervision of financial institutions from the hands of the Central Bank and the Capital Market and Financial Institutions Supervisory Agency. But all these steps failed to prevent the losses currently suffered by Jiwasraya customers – and also possible losses to be sustained by the state.
The biggest portion of the blame should rest on the OJK. The body failed to smell a rat in the early stages and reveal suspected misconduct in Jiwasraya. Yet, since 2016, audit results by the Supreme Audit Agency (BPK) had pointed out a series of anomalies in Jiwasraya's investment books of 2014-2015. Thus, it is only right that the BPK has widened its investigation audit of the Jiwasraya case to also include OJK's problematic supervision.
To ensure the case reaches a full resolution, an investigation needs to highlight efforts to claim responsibility from all parties involved. They cannot be targeted only with articles on corruption, but also with the capital market crime.
If it turns out the investigation fails, public trust, the mainstay of the financial services sector, can dissipate. This is no small risk. In the face of the current global economic flux, the finance market is the government's pillar to shore up ongoing financial transaction deficits.
Obviously, the government cannot be haphazard in preparing a rescue scheme for Jiwasraya. The demand by several parties for a bailout by the state for the losses of an SOE should be turned down. Policyholders should understand that assurance of a return on their investment in the JS Saving Plan is entirely the responsibility of the enterprise. The state will sustain even bigger losses if the bailout option is taken.
Read the Complete Story in this Week's Edition of Tempo English Magazine: https://magz.tempo.co/read/36291/dangers-in-jiwasraya-case