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Can  Jamaludin Jarjis give an  assurance that the EPF dividend this year will be higher than the past two years and that the RM219 billion EPF funds would be managed and invested in the best interests of the 10.4 million contributors and not that of the regulator, the Finance Ministry?

Media Statement
by Lim Kit Siang

(Penang,  Tuesday): The second Finance Minister, Datuk Dr. Jamaludin Jarjis’ Sunday assurance to 10.4 million Employees Provident Fund contributors that  EPF has sufficient funds and is in no financial trouble would be more convincing if he had also given the assurance that the EPF dividend this year would be higher than the past two years, viz. 4.25% for 2002 and 5% for 2001.  As there is only one week to go before the end of the year, is Jamaludin able to give such an indication?

Jamaludin’s ground for his assurance is not re-assuring at all, as he said that the size of the EPF fund was in excess of RM219 billion and was growing at a rate of RM20 billion a year. (NST 22.12.03)  - as the size of the EPF fund and its annual increase have nothing to do with proper management, astute investment  and satisfactory performance.

Although the Cabinet last Wednesday took the unprecedented step to “discuss at length” and to reject the  EPF proposal to disallow contributors to withdraw their savings in a lump sum upon reaching 55, this should be a matter of grave concern for thinking EPF contributors.

Why had  the Cabinet “discussed at length” the EPF proposal when the Prime Minister-cum-Finance Minister, Datuk Seri Abdullah Ahmad Badawi and several Cabinet Ministers had already publicly declared their opposition to the proposal and  the EPF Executive Officer Datuk Azlan Zainol, had said that it was only “at the thinking stage” and that any final decision would have to get the approval of the Ministry of Finance? 

Was  this just a “political stunt” and “election gimmick” when in the past,  Cabinet Ministers had shown no interest or concern whatsoever  about the long-standing grouses of the EPF contributors, whether at the poor EPF dividend returns or the lack of transparency, accountability and good governance of EPF management and investments?

Or was  this because apart from the EPF’s proposal, there were other aspects about the quality and security of the RM219 billion  EPF funds, whether management or investment, which are legitimate causes for concern but which are privy only to the Cabinet Ministers but not known to the 10.4 million EPF contributors?

Last year’s lowest  EPF dividend  in 40 years could have been avoided, and be as high as  5.43 per cent instead of 4.25 per cent,  if the EPF did not have to set aside RM2.14 billion for “paper losses” in equity.

Up to now, there has been no proper explanation as to why in the five years  from 1998 to 2002, EPF had to make the astronomical total provision of at least RM5.09 billion for “paper losses” in equity, with  the EPF still sitting on some  RM14 billion of “paper losses”, with RM2 billion from the EPF’s ill-advised and disastrous venture as a housing and land speculator in the mid-nineties through the Malaysian Building Society Berhad (MBSB).

The most serious critique of the EPF management and investment of the RM219 billion EPF funds is the unresolved conflict of interests between the 10.4 million EPF contributors and the Ministry of Finance as the regulator, resulting in the serious failure to run the EPF in the best interests only of its members, which had to take second place  to other priorities, such as that  of the Ministry of Finance as the biggest borrower of EPF funds and  its  goal of development, including financing mega-projects.

When the Cabinet discussed “at length” the EPF last Wednesday, Ministers should have focused on resolving such  “conflict of interests” in the management and investment of the RM219 billion EPF funds, such as: 

  • Clear policy directive that the EPF must be run in the best  interests of the 10.4 million EPF contributors;
  • amendment of the 1991 EPF Act to allow for direct representation of EPF contributors on the EPF Board and EPF Investment Panel;
  • a new EPF policy on accountability and transparency, as making public its shares dealings in the stock market and beneficiaries of its loans;
  • a mechanism for interaction between the 10.4 million EPF contributors and the EPF Board, Management and Investment Panel; and
  • "green light" for establishment of an EPF Contributors' Association.

For a start, can  Jamaludin Jarjis give an  assurance that the EPF dividend this year will be higher than the past two years and that the RM219 billion EPF funds would be managed and invested in the best interests of the 10.4 million contributors and not that of the regulator, the Finance Ministry?

(23/12/2003)

* Lim Kit Siang, DAP National Chairman