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February 18, 2025 | 04:24 pm
TEMPO.CO, Jakarta - Indonesia will soon launch bullion banks, or gold banks, as confirmed by Minister of State-Owned Enterprises (SOEs), Erick Thohir. According to him, the bullion banks can create up to 800 thousand jobs while increasing the country’s gross domestic product (GDP).
"In terms of the economy, the bullion bank is expected to boost Indonesia’s GDP by Rp245 trillion and create around 800 thousand jobs,” said Erick in a written statement on Monday, February 17, 2025.
Erick also mentioned that the bullion bank could potentially strengthen the downstreaming of the gold ecosystem by allowing people to conduct transactions like gold deposits, trading, savings, and financing. The minister believed the bank could drive the economic growth to 8 percent.
Previously, President Prabowo Subianto said he would inaugurate a bullion bank on February 26. The president said Indonesia lacked gold storage, which caused a considerable outflow of Indonesian gold to other countries.
"To date, we don't have a bank for gold. It doesn't exist in Indonesia. Hence, our gold is often mined and flows to other countries," said Prabowo at the Presidential Palace, Jakarta, on Monday, February 17, 2025.
Currently, there are only two companies that have obtained permits to manage a gold bank from the Financial Services Authority. Both are part of state-owned enterprises, namely Pegadaian and Bank Syariah Indonesia (BSI). In the future, Erick Thohir also encourages private financial service companies to run bullion banks.
"We encourage all of them, so that their gold reserves do not remain solely with the government but also with the people," said Erick after attending the MINDialogue event at Soehanna Hall, Jakarta, on Thursday, January 9, 2025
What is a bullion bank or a gold bank?
Bullion business activities are regulated by the Financial Services Authority Regulation (POJK) number 17 of 2024 concerning the Implementation of Bullion Business Activities. This regulation came into effect on October 18, 2024, and is derived from Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector (UU P2SK).
According to the definition in POJK 17/2024, bullion business activities are business activities related to gold in the forms of Gold Deposits, Gold Financing, Gold Trading, Gold Custody, and/or other related activities conducted by financial service institutions.
Based on a study conducted by the Coordinating Ministry on Economic Affairs, the establishment of a bullion bank provides benefits for the government, the gold processing industry, banks, and people who have gold deposits.
The government benefits from it as bullion banks can save the country's foreign exchange reserves, while the jewelry industry can buy gold from the bullion bank, and the central bank can conduct transactions on gold held with the bullion bank domestically.
Bullion banks are also beneficial for the gold mining industry. Mining operators can obtain project financing sources or enter into forward hedge contracts with buyers. This means that a bullion bank can act as an underwriter for project financing related to gold production or lend gold to mining companies in the form of a forward hedge contract.
Linda Lestari contributed to the writing of this article.
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