DAP giving EPF one week to give full and satisfactory explanation why the 6.7% EPF dividend for last year is the lowest in 22 years as well as its investment policy or we will launch a nation-wide movement to organise the nine million EPF contributors to demand for EPF accountability and transparency

(Petaling Jaya, Thursday): Malaysians, and in particular the nine million Employees Provident Fund (EPF) contributors, are most disappointed and dissatisfied that the EPF Executive Chairman, Tan Sri Sallehuddin Mohamed and the EPF Board has not responded to demands that they should act with greater responsibility, accountability and transparency and explain why EPF�s 6.7 per cent dividend for last year was the lowest in 22 years.

The 6.7 per cent dividend for last year was even lower than in the eighties when the country was in the deepest recession, when there was negative GDP growth of -1.0 per cent in 1985, 1.2 per cent in 1986 and 5.3 per cent in 1987 as compared to the government�s forecast of around 8 per cent growth for 1997 and 4-5% GDP growth for this year - although the Finance Minister, Datuk Seri Anwar Ibrahim said two days ago that the government may revise its gross domestic growth rate forecast for this year.

However, in the two years of 1985 and 1986, when the country�s GDP growth were -1.0 per cent and 1.2 per cent respectively, EPF�s dividend were maintained at 8.5%.

Can the EPF Executive Chairman and the EPF Board explain for this gross disparity in the EPF dividend for 1997, when the GDP growth was around 8 per cent, as compared with 1985 and 1986?

I had in fact suggested last Friday that Sallehuddin and the EPF Board members, which included trade union representatives like MTUC leaders like Zainal Rampak and N. Siva Subramaniam, should go on a nationwide roadshow to explain to the nine million EPF contributors:

• the full reasons for the lowest dividend in more than two decades, why EPF dividend could be 8.5 per cent in 1985 and 1986 when the GDP growth were -1.0 per cent and 1.2 per cent respectively, and whether there would be a preciptious drop in the EPF dividend for 1998 as the government is now revising its second forecast of 4-5 per cent growth for this year;
• the EPF investment policy to respond to concerns and fears that EPF monies had been used to bail out troubled companies and individuals and not in the highest interest of the nine million EPF contributors; and
• set an example of corporate governance in the country by fully submitting to the principles of accountability, transparency and responsibility to the EPF contributors.

Last weekend, when I visited 12 different areas in Kluang, Kulai and Johore Bahru districts, I find public dissatisfaction and concern about the 6.7 per cent EPF dividend as well as the accountability and transparency of EPF investment policy uppermost in the minds of Malaysians of all races.

The reason given by the Prime Minister, Datuk Seri Dr. Mahathir Mohamad last Thursday that the low dividend of 6.7 per cent declared by EPF was caused by foreign speculative pressure on the regional currencies and stock markets is something which is not shared by the majority of the people, as this would seem to exonerate the EPF Executive Chairman and the EPF Board members from all responsibility whether for the lowest dividend in 22 years or with regard to the wisdom of various shares transactions involving EPF funds in the second half of last year.

The nine million EPF contributors are fully within their rights to demand from the EPF executive chairman and the EPF Board the fullest accounting and transparency with regard to EPF�s equity investments on two major fronts:

• Firstly, the full details of the EPF equity investments which caused the EPF income from equity to drop from RM1.188.77 million in 1996 to RM994.27 million in 1997 - whether all these equities were acquired before the stockmarket turmoil in July or otherwise.
• Secondly, the losses suffered by EPF as a result of the EPF�s forays into the Kuala Lumpur stockmarket during the financial turmoils in the second half of 1997, and in particular, the role of and consequences to EPF in the RM60 billion government scheme to prop up certain stock prices from early September last year.

I had asked the EPF several times to confirm a local mass media report that EPF had lost RM4 billion in the Kuala Lumpur Stock Exchange last year, with full disclosures of the stocks concerned, the prices and dates they were bought, but the EPF has maintained a steely silence which does not promote public confidence or credibility of the EPF.

In the second half of last year, at the height of the stockmarket crisis, EPF was a very active player in the stock exchange. What the EPF should explain to the nine million EPF contributors is why massive EPF monies had been used in share transactions of what are generally known as troubled companies in need or bailouts.

For instance, EPF bought 128,221,305 Sime Darby shares on 31st October 1997. In the month of November, EPF acquired another 3,502,000 Sime Darby shares. In December, EPF increased its acquisition of Sime Darby shares to 131,922,305 shares in those three months. The nine EPF contributors are entitled to know whether EPF was privy to any information that although Sime Darby was the bluest of blue chips in the KLSE, it was heading for the red ink because of the colossal losses in Sime Bank.

The nine million EPF contributors are also entitled to know why EPF bought 65.91 million shares in the United Engineers Malaysia (UEM) between Sept. 30 and Oct. 31 last year, just before the outrageous RM2.34 billion acquisition of 32.6 per cent or 722.9 million Renong shares by UEM, which created a stockmarket earthquake whose tremors are still being felt today.

Sallehuddin and the EPF Board should be aware of the dissatisfactions over the EPF dividend as expressed on the Internet and EPF contributors as well as the Malaysian net-community are entitled to satisfactory answers, as for instance, in the following three postings:

(1) "Why the dividend is only 6.7 % while previous year was 7.7%. If I am not wrong, EPF should not invest more than 15% of its portfolio in equity market. As at 1996, it has over 120 billion ringgit and growing by more than a billion a year.If the balance 85% are in the money market or govt. securities,the returns should be far better than those of 1996. THe EPF board is responsible to its members or who ?"

(2)"Of course I am not very happy with the dividend of 6.7%. The loan interest is going up as high as 14% in some bank and FD goes up as high as 11%. I might as well draw it out and in bank better than these 'daylight robber' rates."

(3)"Attached an extract of the Business Times dated 5th March 1998 detailing EPF incomes and assets breakdown:

Remarks:

1) Why is the loans income lower than that of government securities. I suppose loans should carry higher risks and so should have a higher returns, much higher than the returns on Money markets.

2) Equity returns showed a deplorable returns of 4.05%. Moreover, more than 15% of assets sunk in the area of investment. I presume, players expect no less than 10%, otherwise put in FD.

3) Money Markets returns 7.85%. Even cagamas returns exceed 10%."

These and many other questions call for full response from the EPF to show its commitment to good corporate governance and the principles of accountability and transparency, and not a policy of complete silence and the dialogue of the deaf.

Equally of concern to EPF contributors is whether EPF funds would be used in the bail-out of troubled companies, despite repeated assurance by the Prime Minister, Datuk Seri Dr. Mahathir Mohamad, the Deputy Prime Minister and Finance Minister, Datuk Seri Anwar Ibrahim and the Economic Adviser to Government as well as Executive Director to the National Economic Action Council (NEAC), Tun Daim Zainuddin, that there would be no bail-out of troubled companies and individuals at public expense.

EPF should give a clear-cut statement whether it is involved in three of the five bail-outs underway, which are clear breaches of solemn public assurances and undertakings of no bail-outs and no corporate restructurings, the bail-outs of UEM, Sime Bank, KUB, Bank Bumiputra and Konsortium Perkapalan Bhd.

It has been reported that EPF would fund Rashid Hussein Bank in the bailouts of Sime Bank and KUB, with RHB issuing new shares to the Employees Provident Fund in exchange for cash to finance the acquisition of Sime Bank.

EPF contributors are entitled to a clear-cut statement whether EPF monies would be involved in the bail-out of Sime Bank and KUB.

At present, the EPF executive chairman and EPF Investment Panel behave as if the nine million EPF contributors do not have any right to demand accountability, transparency and responsibility from them.

There is a need for the EPF management to develop a culture of accountability, transparency and responsibility with regard to the RM130 billion funds belonging to the nine million EPF contributors and to develop a mechanism whereby EPF contributors in various parts of the country can have channels where such accountability, transparency and responsibility could be exercised. DAP is giving EPF one week to give full and satisfactory explanation why the 6.7% EPF dividend for last year is the lowest in 22 years as well as its investment policy or we will launch a nation-wide movement to organise the nine million EPF contributors to demand for EPF accountability and transparency

 (12/3/98)