General Investors

Domestic financial institutions dominate the debt market. Other investors include mutual funds, pension funds, foreign financial institutions, insurance companies, and individuals. The link below provides a breakdown of government bond ownership.

Generally, there are no restrictions on foreign investors owning Indonesian government and corporate bonds.

Asset Pooling Industries

Pension Funds

State funds dominate the pension fund industry in Indonesia: Jamsostek for non-government workers and Taspen for civil servants.

Certain investment restrictions apply to pension funds. Ministry of Finance Decree No. 78 KMK017/1995 states that the investment of pension funds must be directed towards the following: 1.Bank time deposits and certificate of time deposits; 2.Corporate shares and bonds as listed in Jakarta Stock Exchange; 3.Promissory notes; 4.Corporate equity; and 5.Land & buildings.

Investment in corporate shares and bonds has a maximum allotment of 20%, while other investment funds have maximum allotment of 10%.

Insurance Companies

Indonesia’s insurance industry is fairly small, but has been growing steadily since 2000. In 2006, total insurance premiums stood at IDR52 trillion. Life-insurance comprises about 52% of total insurance premiums, while non-life insurance accounts for the remaining 48%.

Insurance companies are important institutional investors in Indonesia’s capital market. In 2007, the insurance industry held about 9% of tradable government bonds.

Insurance companies are also allowed to make offshore investments, but such investments should be no more than 20 per cent of their total assets.

Mutual Funds

Indonesia’s managed-fund industry has grown considerably since 2000. However, in 2005 BAPEPAM issued new regulations requiring fixed-income funds to be valued using mark-to-market system rather than cost/accrual basis. This caused the value of fixed-income funds to fall. Consequently, investors panicked and huge amounts of fixed income mutual fund withdrawals affected the industry in 2005. In October of the same year, investment in fixed income securities with greater than one year maturities was restricted by BAPEPAM.

A considerable portion of investment-fund assets were in fixed income assets before 2005. After the near collapse of the industry, BAPEPAM allowed fund managers to introduce protected mutual funds. Protected mutual funds are still not risk-free but will offer a form of guarantee for a return equal to the initial investment.

Mutual funds are allowed to make offshore investments provided information on the securities is accessible through electronic or mass media. Further, offshore investments should be no more than 15% of an investment manager’s total net assets.

As of end-2007, net asset value of mutual funds was at IDR91 trillion. A list of mutual funds registered with BAPEPAM-LK can be found at the link indicated below.