Unionists insist on ‘security net’ as EPF invests more

By G. Manimaran, The Malaysian Insider

KUALA LUMPUR, Oct 18 — Unionists are asking for guarantees on workers’ contributions to Malaysia’s largest pension fund as the Najib administration turns to the Employees Provident Fund (EPF) to invest more on the local and foreign fronts.

They say it appears that the government is dependent on EPF funds in the Budget 2011 proposals tabled last Friday where it was allowed to triple investments abroad to 20 per cent from seven per cent previously.

The pension fund is also involved in re-developing the Malaysian Rubber Board (MRB) land in Sungei Buloh and a RM23 billion bid to take toll operator Plus Expressways Bhd private with UEM Group Berhad.

National Union of Bank Employees (NUBE) secretary-general J. Solomon said while EPF funds cannot be static without investments as dividends need to be paid out, it should not invest without any controls.

“It seems that way… I am not sure about past budgets but this time, I sense that the government is depending more on EPF funds,” he told The Malaysian Insider.

“EPF has a role to play in increasing the annual dividends to its contributors,” he added.

The statutory body declared a dividend rate of 5.65 per cent last year after it achieved its highest ever net income of RM19.63 billion in 2009. Workers deduct 11 per cent of their salary for their monthly contribution while employers top up with another 12 per cent.

“A security or guarantee net is needed to assure contributors that their contributions and savings is used well, invested carefully for suitable investments that can benefit them,” Solomon said.

He also said EPF has to be transparent and provide full details for its foreign investments now that its can invest more abroad.

“Who plays a role in these investments and where are these investments have to be told to the public… EPF must be transparent about their investments, unlike now where it only gives the total investments,” said Solomon, who asked for a review of the 20 per cent cap announced by Prime Minister Datuk Seri Najib Razak in Parliament last Friday.

Najib had said the MRB land in Sungai Buloh of 2,680 acres (1,085ha) will be developed by EPF for RM10 billion and is expected to be completed by 2025 with mixed development comprising affordable houses as well as commercial, industrial and infrastructure facilities.

Malaysian Trades Union Congress (MTUC) president Syed Shahir Syed Mohamad noted that the government has been using EPF funds over the past years in order to provide returns and dividends to the contributors.

He also pointed out that the contributions are guaranteed by the government but said the Najib administration must be careful in choosing investments for EPF.

“There are risks in investments but if we don’t, it is also hard… but we must be careful and cautious in making investments,’ Syed Shahir said, referring to investments abroad.

He said EPF investments must consider the lessons from the United States and Europe where the economy has soured after the sub-prime debacle.

The veteran unionist who sits on the EPF board also said EPF must ensure the funds are not used to bail out any company facing difficulties.

Apart from the MTUC, civil service union centre Cuepacs also has a representative on the EPF board.

Cuepacs president Omar Osman questioned the rationale to increase the limit for foreign investments as the dividend payout in recent years have not been encouraging.

“We allow the investments rate to rise using EPF funds but the dividend rate is just 5.4, 5.5 per cent .. its not that high. If the investment rate is high, the dividend rate must be high but it isn’t,” he said.

Last year’s 5.65 per cent dividend was higher than the 4.5 per cent paid out in 2008.

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