Indonesia Soon To Have A Bullion Bank, Gold Business Potential Reaches IDR 482.6 Trillion

Gold (Photo: Unsplash)

JAKARTA - The government will soon inaugurate the Indonesian gold bank or the bullion bank on Wednesday, February 26.

Meanwhile, Indonesia's gold bank was formed by the government to encourage the transformation, optimize gold reserves, strengthen the financial sector and increase the competitiveness of the national economy so that it can support economic growth.

Director of Investor Relations of PT Hartadinata Abadi Tbk (HRTA) Thendra Chrisnanda estimates that the potential value of the gold business chain from upstream to downstream will reach IDR 482.6 trillion per year.

"Based on an internal study from HRTA, the potential value of the gold business chain from upstream (gold mining), middle (gold purification and manufacturing), downstream (export, wholesale, and retail) reaches IDR 482.6 trillion per year," he said in his statement, Wednesday, February 26.

Meanwhile, based on a study by the Ministry of Economy, Bullion Bank has the potential to increase Indonesia's GDP by 0.15 percent, consumption by 0.28 percent, and investment by 0.32 percent.

"This domino effect will create more than 800,000 new jobs for the community. Meanwhile, the bullion business is not expected to have a significant impact on inflation, only 0.02 percent per year," he said.

Meanwhile, based on OJK data, the total assets of Indonesian financial institutions until 2024 reached around Rp. 16,628 trillion, assuming the allocation of 1 percent in the form of gold bullion, there was a potential for new demand of around Rp. 166.28 trillion per year for gold in Indonesia.

"If Indonesia can take advantage of this opportunity, Indonesia will become a major player in Asia, on par with Singapore and Dubai," he explained.

According to him, China has started a pilot project that allows their insurance companies to allocate 1 percent of assets in gold bullion starting February 2025, with a total value estimated at 27.4 billion US dollars.

"This policy is believed to be followed by other developing countries," he said.

On the other hand, Thendra explained that with the establishment of this bullion bank, Indonesia took a big step to become a major player in the global bullion market.

Thendra conveyed that the Government wants to establish its own gold bank because Indonesia is the 7th largest gold producer in the world with production reaching 132.5 tons in 2023 based on the World Gold Council.

"However, Indonesia is still in the lowest value chain in the gold business because it exports gold doses worth around US$5 billion per year, while still importing gold bullion worth US$2 billion per year," he said.

Thendra said that in the last three years, central banks around the world have continued to accumulate more than 1,000 tons of physical gold bullion per year, but Indonesia's gold reserves have not experienced significant changes since five years ago, remaining at 78.6 tons or only about 4 percent of Indonesia's total foreign exchange reserves.

"This percentage is much lower than the world's average central bank which is above 20 percent," he explained.