After Jiwasraya Comes Asabri
Investment in low value shares has the potential to cost Asabri up to Rp16 trillion. Comprehensive reforms are needed
AFTER two state insurance companies were caught up in two large-scale fraud cases, with the same group of persons responsible, one cannot deny the chaotic state of affairs of government financial institutions.
The first company, Jiwasraya was defrauded of up to Rp13.7 trillion—equivalent to twice the city of Yogyakarta’s annual budget. In this case, the Attorney General’s Office (AGO) named tycoon Benny Tjokrosaputro and four other people suspects. Not long after the Jiwasraya investigation began, a second scandal appeared, namely the plundering of Asuransi Sosial Angkatan Bersenjata Republik Indonesia or Asabri. Once again Benny’s name was mentioned.
Exactly the same as with the Jiwasraya corruption case, the defrauding of Asabri was related to investments in poor quality assets. An audit carried out by the Supreme Audit Agency found irregularities in investments made in 2015 and the first half of 2016. There were a total of 15 findings. One of these was the purchase of shares in Harvest Time, a company owned by Benny. However, Asabri never obtained the shares worth Rp812 billion because they had already been sold to another party.
The Ombudsman estimates the losses resulting from the purchase of these low value shares by Asabri at last year at Rp10 trillion. Another calculation values the potential losses to Asabri at up to Rp16 trillion.
The Ombudsman also noted the regulations breached by the management. Financial Services Authority Regulation No. 3/2015 states that insurance companies responsible for managing pension funds such as Asabri are only allowed to procure stocks that meet the requirements for investment grade. This means that money can only be invested in blue chip shares which are liquid and have strong fundamentals. However only 12 percent of the shares held by Asabri meet this criterion. The remainder are second class stocks that have the potential to lose value.
The company management should understand about the risk of buying and selling second class shares. Their value rises and falls as a result of speculation by brokers. The performance of the companies issuing these shares is generally not good and they do not have proper underlying assets. It is right to suspect that these shares were purchased because of a broker promising commissions to an official who had the authority to make decisions on investments. It is not a coincidence that in the last two years, Asabri has not published its financial reports.
It is very strange that this embezzlement escaped the oversight of the commissioners and the shareholder—the state, represented by the of state-owned enterprises (SOEs) ministry—and also that the commissioners failed to detect any irregularities in the company that handles the funds belongs to solders of Indonesian Military. There is no choice for the AGO to immediately investigate the irregularities alongside the investigation into corruption at Jiwasraya. The investigations into these two high-value scandals need to happen simultaneously because they involve the same perpetrators.
At the same time, the money saved by these hardworking soldiers needs to be retrieved. The SOEs ministry also needs to reform Asabri because this is not the first time the company has been involved in criminal matters. In 2008, former Asabri CEO Subarda Midjaja and businessman Henry Leo were convicted of embezzling Rp410 billion of insurance and housing funds belonging to military personnel. To stop funds being stolen again, Asabri needs a professional and clean person at the helm. The Indonesian Military need to hand over management of Asabri, from retired generals, to persons who are both competent and expert in finances.