DAP calls for amendments to EPF Act 1991 to provide for statutory mechanism to allow the 8.2 million EPF members to hold the EPF Board to greater accountability on its RM140 billion  investment policies and decisions

Media Statement
by Lim Kit Siang  

(Petaling Jaya, Tuesday): The Employees Provident Fund Executive Chairman, Tan Sri Sallehuddin Mohamed  yesterday sought to assure the 8.2 million EPF members that their RM140 billion EPF is financially strong and that its fundamentals are sound.

He said that concerns expressed by some EPF members and others over EPF’s liquidity, safety and investment of funds and their returns should not arise.

He said: "Fundamentally, EPF is financially strong, subscribes to prudent investment policies and is committed to ensuring that members’ savings achieve reasonable yields."

He denied that the EPF was facing liquidity problems to the extent that members’ withdrawals were paid in instalments instead of in lump sums.

The concerns of EPF contributors about  the EPF Board’s investment policy and decisions and the safety of their EPF monies is not of recent vintage, but has been gaining momentum in the past year.

It bespokes volumes about the lack of sensitivity and even accountability of the EPF Executive Chairman and the EPF Board that it has taken the EPF a full year  to officially and publicly respond to such concerns. It is clear that the EPF Executive Chairman and the EPF Board is completely cut off from the ordinary EPF membership and this is a very unhealthy and undesirable state of affairs which should be rectified immediately.

In January this year,  DAP Members of Parliament had requested a meeting with the EPF Executive Chairman on the concerns of EPF contributors about the EPF’s investment policy and decisions, especially in its heavy investment in shares of troubled companies as well as being involved in "white elephant" mega-projects, but the EPF Executive Chairman did not even have the courtesy to respond to such a request - as if asserting that he is not the servant of the 8.2 EPF contributors but the servant of the government of the day!

In fact, even EPF Board members representing trade unions and workers have not been able to assert accountability on the EPF investment policy and decisions, as  the EPF Board knows nothing about the shares which the EPF Investment Panel had invested with EPF monies, and it  had never been provided with a list of the shares bought or sold by the EPF Investment Panel.

Sallehuddin’s belated assurance that the EPF’s fundamentals are sound and strong is a mere bureaucratic statement which does not address the root concerns of the EPF contributors for  greater accountability and transparency in EPF investments.  In fact, statements about "fundamentals being strong and sound" are more likely to exacerbate concerns in view of such repeated statements about the Malaysian economy last year - which did not save the Malaysian economy from plunging into its worst crisis in the nation’s history.

The greatest concern of the 8.2 million EPF contributors is whether the EPF would be hijacked to  bail-out troubled crony companies and how to develop an EPF culture of responsibility, accountability and transparency where EPF
monies are not used for mega-projects meant to satisfy anyone’s ego or to bail out any companies of cronies in Malaysia.

The EPF Act stipulates that it must invest at least 70% of its total investments in Malaysian Government Securities (MGS).  However, as there has been a marked reduction in new issues of MGS, the government has given its exemption to the EPF as the EPF’s holding in MGS as a percentage of its total investment has declined below the minimum legal requirement.

In 1997, the EPF’s investment in MGS had declined to RM38.07 billion, lower than the investment in 1996 of RM38.75 billion.  In terms of proportion, MGS formed 29.42% and 33.64% of the fund’s total investments in 1997 and 1996 respectively.

Earlier this year,  the EPF Executive Chairman had forecast that although the MGS still formed the largest portion of the EPF investments in 1997, "the decline in our investment in MGS is expected to continue".

However, there is now clearly an abrupt change in the EPF’s investment policy as indicated by Sallehuddin’s statement yesterday.

The EPF Executive Chairman said yesterday that the regional economic crisis had affected government income resulting in new MGS issues to finance activities under the National Economic Recovery Plan.

He said that "Even if the reported budget deficit of RM26.2 billion (1998 and 1999) were to be fully subscribed by EPF alone, it will only represent 47 per cent of EPF’s total investment of RM138.8 billion as at Aug 31, 1998", which was well within the 70 per cent stipulated under the Act.

Sallehuddin’s statement is most disturbing, not for what he said but what he had omitted.

The National Economic Action Council (NEAC) has recommended that the government issue RM20 billion worth of long-term bonds to the EPF, Petronas and insurance companies to kick-start the economic recovery in the country.  I had estimated a few months ago that the EPF would probably be required to contribute about RM10 billion for this purpose, but from Sallehuddin’s statement, it could be very much higher.

The government is looking for some RM60 billion for its national economic recovery plan.  Will a substantial part of this money be coming from the EPF?

After the low EPF dividend of 6.7 per cent for last year, the 8.2 million EPF contributors are rightly worried about the safety of their EPF monies, whether they would be used to bail out crony companies or in mega-projects.

The new changes in EPF investment policy and decisions as hinted by Sallehuddin yesterday  has made it even more urgent that the EPF Act 1991 should be amended  to provide for statutory mechanism to allow the 8.2 million EPF members to hold the EPF Board to greater accountability on its RM140 billion  investment policies and decisions.


*Lim Kit Siang - Malaysian Parliamentary Opposition Leader, Democratic Action Party Secretary-General & Member of Parliament for Tanjong