Jakarta. Indonesia plans to establish its bullion bank, leveraging its growing gold production to strengthen the jewelry industry and provide a reliable safe-haven asset, Chief Economic Affairs Minister Airlangga Hartarto announced on Monday. The Financial Services Authority (OJK) is expected to appoint state-owned lenders Bank Rakyat Indonesia (BRI) and Bank Syariah Indonesia (BSI) as key operators.

“I’ve proposed to the OJK that BRI, as the holding company of state pawnshop Pegadaian, and BSI should spearhead this initiative,” Airlangga said during the 2024 Indonesia SEZ Business Forum in Jakarta, on Monday.

Indonesia’s rising gold production, on the back of Freeport Indonesia’s 60 tons annually at the Gresik SEZ, underscores the need for a bullion bank, according to Airlangga.

“This is the first time since 1967 that we’ve reached this milestone. From 1967 to 2024, we’ve produced substantial amounts of gold,” Airlangga said, adding that Pegadaian’s total gold reserves now stand at 70 tons.

Airlangga said that Indonesia has no reason to delay the establishment of a bullion bank, asserting it would benefit the domestic jewelry industry.

“In the past, we merely stored gold in warehouses and recorded its tonnage, not its value. Meanwhile, banks in other countries, including Singapore, list gold as an asset on their balance sheets,” he said.

Airlangga explained how Indonesia has historically missed out on capturing the full value of its gold production. “The jewelry industry often had to outsource tolling services abroad, such as in Singapore. This meant we only earned production fees but not the full value of the gold used in our manufacturing industry.”

Beyond supporting the jewelry sector, Airlangga described gold as a "safe-haven asset" during economic crises, making it imperative for Indonesia to manage its reserves independently.

“Over the past five years, we’ve faced numerous crises. It would be unwise not to utilize our own strengths to safeguard our economy,” he concluded.

A bullion bank serves as a financial institution specializing in the trade and management of precious metals, particularly gold and silver. It acts as a key intermediary in global precious metals markets and provides a range of related services, from trading to asset storage.