Parliament should amend the EPF Act to provide for new EPF policy of accountability,  transparency and good corporate governance to 10 million EPF members on its RM186.95 billion investment decisions

Media Statement 
by Lim Kit Siang

(Penang,  Tuesday):  The shocking announcement of a 5% dividend declared by  the Employees Provident Fund (EPF) for last year, the lowest for 34 years since 1967, has again highlighted the need for a new EPF policy of accountability, transparency and good corporate governance to the 10.07  million EPF contributors on its RM186.95 billion investment decisions. 

Over the years, the EPF Board had ignored DAP calls that the EPF should adopt the  best practices of good corporate governance especially in terms of accountability and transparency, and it is most regrettable and deplorable that after half a century, the EPF is not prepared to establish a   mechanism whereby the EPF Board could be accountable to the over 10  million EPF members with regard to its investment policy and decisions and to allay  the concerns of EPF contributors about the safety, liquidity and yield of EPF funds. 

Last year, EPF invested RM39.77 billion or 21.28% its total investments of RM186.95 billion in loans and bonds, RM42.58 billion or 22.78% in equities and RM34.97 billion or 18.70% in money market instruments.  These are astronomical sums and the list of the beneficiaries of huge  EPF loans, the full details of the stocks and shares and money market instruments bought with EPF monies should be  made available to the  public in keeping with the highest standards of good corporate governance and the principles of accountability and transparency. 

EPF’s involvement in the RM1.88 billion Time dotCom IPO fiasco last year is the latest example as to why the investment decisions of the EPF Investment Panel, which at present operates without any supervision even from the EPF Board, must be subject to periodic scrutiny and review by a mechanism directly representing the interests of the 10 million EPF members to ensure that no investments, whether in stocks or loans, are made imprudently or as a result of improper influence. 

In the past, EPF had given dubious  and questionable loan facilities running into billions of ringgit to various mega-projects and companies, like the  billion ringgit loans to Perwaja Trengganu Sdn. Bhd. and  the RM500 million loan in 1996  to Time Telecommunications Holdings Bhd (renamed  Time dotCom).  What lessons have the EPF Board and Investment Panel drawn from these dubious  and questionable mega-loans? 

In Parliament in April, 1998 I had proposed that  the EPF  periodically issue public reports of its sales and purchase of shares in the stock market, giving a list of the shares concerned.  

The reply that I received was  that EPF did not give details of its purchase or sale of shares so as to avoid influencing the stock market as EPF investments were  very substantial, but I had pointed out that nobody was asking for immediate report of proposed individual shares dealings, but periodic reports in keeping with the principles of accountability and transparency, and which would not influence the stock market at all.  

During the debate on the EPF Act 1991, DAP Members of Parliament had demanded that there should be  worker representatives on the seven-man Investment Panel, but the then Deputy Finance Minister, Datuk Ghani Othman assured Parliament that the workers’ interests would be protected as the Investment Panel was finally answerable to the EPF Board. 

This has proved to be an empty assurance. The EPF contributors have all these years been  kept in the dark about the  EPF shares dealings, which came to RM42.58  billion last year. In fact, even the EPF Board members, in particular the workers’ representatives,  do not know what are the counters which had been bought or sold by the Investment Panel.  

Parliament should amend the EPF Act to  require the EPF Board to comply  with a new policy of accountability, transparency and  good corporate governance for its RM186.95 billion investment decisions by periodically publishing a detailed report of its investments, whether in loans and bonds, stocks and shares or money market instruments so that they could be subject to public scrutiny.


*Lim Kit Siang - DAP National Chairman