View Full Version : Harapkan Pagar, Pagar Makan Padi: Say goodbye to your EPF.
30th November 2011, 10:30 AM
No high-risk lending by EPF, says Finance Ministry
5:01PM Nov 29, 2011
The Dewan Rakyat was informed in Kuala Lumpur today that the Employees Provident Fund (EPF) only provided loans to asset-rich government linked companies and not to high-risk corporations.
Deputy Finance Minister Dr Awang Adek Hussin said EPF’s investment panel carried out risk assessments and monitored all its investments, in the form of loans, to ensure they were safe.
“The Finance Ministry screens and approves the panel's decisions. I’m confident high-risk investments would not be made,” he said in response to a supplementary question from Ismail Kasim (BN-Arau).
Ismail had wanted to know if EPF was actually monitoring all its investments, especially the high-risk ones.
Awang Adek said there were several experts on EPF’s investment panel including Bank Negara deputy governor and Treasury deputy secretary-general.
Answering Azan Ismail’s (PKR-Indera Mahkota) initial question on EPF’s total loans to corporate institutions, Awang Adek said it came up to RM83.7 billion as of June 2011.
He said RM79.41 billion or 95 percent of these loans were guaranteed as it was to the government, while the balance of RM4.31 billion went to corporate institutions.
He added that EPF was constantly striving to pay its members higher dividends by ensuring its investments yielded higher returns and did not just depend on government guarantees.
2nd December 2011, 01:55 PM
Friday, 02 December 2011 08:36
Husam: More to it in EPF’s loan to Federal govt (http://malaysia-chronicle.com/index.php?option=com_k2&view=item&id=23861:husam-more-to-it-in-epf’s-loan-to-federal-govt&Itemid=2)
Written by - (http://malaysia-chronicle.com/index.php?option=com_k2&view=itemlist&task=user&id=64%3A2011-12-02-04-55-37&Itemid=2)
PAS vice president Husam Musa has queried the Employees Provident Fund's loan of RM79.4 billion to the Federal government, as revealed by deputy finance minister Awang Adek Hussin.
“Has this figure taken into account the other security and federal government bonds purchased by EPF? As far as I know, if the security and bonds are totalled, EPF’s loan to the government debt will be a whopping RM240 billion!” Husam said in a statement.
He pointed out that the figure of RM240 million had yet to include EPF’s loan to government-linked companies.
Based on RM240 million, Husam said 52.6 percent of the Federal government’s debt amounting RM456 billion in 2011 was actually from EPF.
“If the Federal government’s debt continues to rise, then it should, without statistical manipulation, breach 55 percent allowed by law which will mean the loans are to be taken seriously.
RM456 billion of debt in 2011 represents 54.3 percent of gross domestic product (GDP), only 0.7 percent more to breach 55 percent,” Husam added.
With budget deficit of RM45 billion for the 15th consecutive year, the 55 percent would have been breached, he said.
In order to cover this up, Husam, who is also the Kelantan state exco, claimed that two statistical manipulations could be carried out, either by making the GDP higher at 6 percent or increasing the 2012 GDP by including inflation rate.
“That is why there is noticeable difference between the total GDP recorded in budget book and the statistics report,” said Husam .
Although with the statistical manipulation the ratio of debt to GDP has yet to breach 55 percent, he explained, in reality it has already soared beyond the figure.
“There is no sign that the national economy will grow by 6 percent next year. Any drop in the country’s economy will increase the ratio of debt to GDP.
"The Federal government’s expenditure is not helping either,” he stressed, referring to high operational and maintenance costs involving defence purchases and residences of the prime minister and his deputy.
Husam said the Federal government’s debt could be lowered with prudent spending.
“If not, EPF will only become a cheap piggy bank for the Federal government to squander public funds,” he warned.
7th January 2012, 08:52 AM
Thursday, December 22, 2011
EPF in Trouble (https://www.facebook.com/notes/enough-already/epf-in-trouble/167330666702198)
EPF IN BIG TROUBLE
SEE FOR YOURSELVES
AND LET ALL EPF CONTRIBUTORS KNOW.
Will you get back your EPF money?
· One of the largest funds in the world – RM 440.52 billion
· Represents the life savings of 12 million Malaysians
· BN govt already spent 60% of the people's savings
23 June 2011, EPF said that 60% of its funds have been borrowed by the Malaysian govt.
Dec 2010, the govt still owes EPF about RM 240 billion.
This means the BN govt has already spent 60% of all your savings.
DO YOU THINK you will get your money back?
See the chart (attached). 2012 will mark the 15th year of budget deficit with no sign of financial smarts.
The Constitution of Malaysia caps govt debt at 55% of GDP. As of 30 June 2011, govt debt stands at 53%. When it touches 55%, the BN govt will officially be in crisis and the Constitution may need to be changed to increase borrowing and possibly require a bailout.
What happened to Greece recently? They had to write off 50% of outstanding govt loans. Just imagine if EPF is asked to take a 50% cut of outstanding debt owed by BN. More than half your EPF money will be lost, and you just have to accept it, after 40 years of working.
Most Malaysians know that the government has been using EPF money. However, not many know that the majority of EPF's investments are actually loan to the Malaysian government. It would be okay if the government use money for productive purposes that give good returns. Unfortunately, that's not the case. Read the article & find out for yourself.
EPF annual report 2010
Money Market 5%
Is the EPF being looted?
On the 23rd of June 2011, the EPF (KWSP) tabled its annual report to the parliament, declaring a 5.8% dividend and explained that 27% of its investments were in Malaysian Government Securities (MGS) and 32% were in loans and bonds to Govt agencies. A simple chart below summarises the report. At RM 440.52 billion, the EPF is one of the largest funds in the world and represents the life time savings of 12 million private sector employees.
The question is why is it that over 60% of EPF funds are in loans to the Govt and Govt bodies?
Is the Malaysian Government a good borrower?
Let’s look at the BN Govt’s financial record….
Below is a summary of the Govt’s annual deficits. The 2012 budget will mark the 15th year of budget deficit with no signal of financial prudence. And as you can see below, there have been supplementary budgets on top of the annual budgets every single year.
Govt debt as at Dec 2010 stands at 407 Billion ringgit. 60% of this or 240 Billion is owed to the EPF.
This means the BN Govt of Malaysia has already spent 60% of all your savings in the EPF!
After running deficit budgets for 14 consecutive years, and funding those deficits by borrowing, Malaysian Govt Securities (MGS) are rated at CC(-)ve. At CC minus, what is the annual yield? Folks, it’s an unbelievable 3% and below!! Why? Because MGS are not auctioned!! There is a ready buyer for MGS and apart from the endless new PNB funds like the 1Malaysia bond, the main buyer of Malaysian debt papers is the EPF.
"Fair Value" rate for lower grade papers of single A and below is an annual yield of 5% and above. Greek Govt bonds for example are being traded at yields exceeding 21% per annum
The constitution of Malaysia caps Govt debt at 55% of GDP. As at 30th June 2011, Govt debt stands at 433 billion, which is 53% of GDP. At 55% the Govt will be officially in crisis and the constitution will need to be changed to increase borrowing and possibly even require a bail out.
Recently the EU central bank agreed to extend financial aid to the Govt of Greece on the condition they adopt massive austerity measures and that the lenders take a haircut of 50% of all outstanding loans. After all, they continually lent to a borrower who showed absolutely NO commitment to cut expenses and begin to service their debts.
Just imagine if the EPF is asked to take a 50% haircut of their debts from the Malaysian Govt!
An even worse scenario was painted recently by Pakatan Rakyat when they reported that much of govt debt was unreported as it is largely hidden from public eye in the form of debt owing by Govt agencies.
Budget 2012 where it goes
Corporate Subsidies 10B
Civil Service pay 64B
Operating Expenses 88B
As you can see above, the 433 billion owed by the Govt is represented by the red and Orange bars. On top of official figures, an additional 184 billion is owed by various Govt agencies.
Take a look here at another explanation,
So…. Is the EPF being looted?
I say yes it is. Let me explain how.
A summary on the 2012 budget is below,
Of the total 233 billion, total operating expenses is at 162 billion and over 64 billion is allocated for the civil service in pensions and wages. Of the massive 233 billion, only 51 billion is going to development, of which over 80% is to construction projects, designed to specifically benefit a few lucky fellows. And talking about lucky fellows, over 10 billion in subsidies paid for by us, are being paid directly to corporate bodies!
And how pray tell will they pay for all this? By borrowing of course! Do they even bother that it is we who will be paying for the debt servicing including interests? Najib even announced that employee’s contribution to the EPF will increase to 12% of salary. Which means even more will be tied up in the EPF
in order to enable more borrowing! And if you earn less than RM 5,000, your contribution will increase to 13%.
These are indeed hard times for us, the people. And the Govt has done fabulously well to recognise this by granting pay increments of 7 to 13% to all Govt employees while carefully avoiding the minimum wage issue for private sector employees.
The Govt currently collects about 4 billion from the GST already in place. A one time payment of RM 500 to civil sector employees will cost the Govt over 2.6 billion.
Civil service remuneration cost 20 billion in 2004. This year it will cost 64 billion.
So the bottom line conclusion, again and again is the same. They are looting the EPF to please their vote bank of 1.3 million civil servants.
Hard times indeed… And yet DRB Hicom is buying 237 armoured personnel carriers from Turkey for RM 1.7 billion and selling it to the ministry of defence for RM 7.55 billion. The Malaysian Govt is buying 6 Littoral Combatant Vessels to enhance our Navy. These are the most advanced naval vessels in the world, able to shoot aircraft, ships and submarines… The ONLY other country that has such ships is the US navy. They have 2. We are buying 6 at a cost of 10 billion ringgit. The MRT can be built for 19 billion. But Idris Jala recently indicated that MMC Gamuda may incur more that the originally estimated cost of 54 billion to build it.
The Govt can reduce its subsidies for rice and sugar by opening up the market for other players, but no, both commodities are controlled by the same Govt crony. Syed Mokhtar Al Bukhary is the owner of all the companies mentioned above. Since this person took over the exclusive supply of these commodities in 2008, prices have doubled. This is despite the Govt’s subsidy of 60 cents per kilo of rice and 20 cents per kilo of sugar.
The Govt can easily buy the LDP highway for 1.5 billion ringgit, but no, it’s probably better that they continue to collect toll from us and receive 1.5 billion in subsidy from the govt. Our IPPs buy gas at 10 ringgit cheaper than companies in Thailand and 15 ringgit cheaper than Singapore (Per CuM) but the Govt still needs to feed them billions in subsidy.
Year after year after year, the Auditor General’s annual report details all the financial mismanagement in Govt depts. But nothing is done. Take this year’s AGs report for example. The MACC went into high gear and opened 36 investigation files to investigate all the rubbish. And the cases are now closed. They found no element of corruption or deceit. Another thing the AG highlighted is the treasury’s contingency fund of 1.5 billion is now only 79 million ringgit. 1.4 billion is missing…..
The tolled highways were built at a cost of 26.4 billion and the operators have already raked in 37.7 billion and received another 2.1 billion in subsidies from the Govt. And they are planning to raise the rates again soon.
The Govt machinery of Barisan National is a system that benefits and enriches cronies with massively one sided contracts. It also ensures loyalty from a vote bank of 1.3 million civil servants who enjoy all kinds of benefits at the expense of the tax payer. The tax system is designed to exclude the majority of civil servants from actually paying any tax. And Govt debt is going through the roof. In 2004, the total Govt debt was 217. As at 30th June 2011, it stands at 433 billion. Najib’s administration is milking us dry. And they are using our funds in the EPF to run all these excesses, to enrich themselves, and to bribe the civil service into loyalty.
We EPF investors are 12 million. Vote against Corruption, vote against poverty, and vote against the looting of your EPF savings.
2nd February 2012, 06:08 AM
This will be the same story for the EPF money loaned to the urban poor. It will go up in smoke when loans are made to people who cannot afford to buy houses.
US housing still weak. In other news, the sky is blue (http://www.sovereignman.com/expat/us-housing-still-weak-in-other-news-the-sky-is-blue/)
by Simon Black (http://www.sovereignman.com/author/simonblack/)
February 1st, 2012
The latest Case-Shiller numbers released yesterday showed that the US residential housing market is still very weak. After three straight months of declines, home prices are now at 2003 levels. Duh.
To some, it was a shocking revelation. The pundits I saw discussing it yesterday practically had a seizure they were in such disbelief. CNBC even ran an article (http://www.cnbc.com/id/46206075) on their website in response, extolling the strong fundamentals of US housing.
Let’s look at those fundamentals:
1) Most people cannot afford to write a check for $200,000 or more (roughly the median home price), which means they’ll require bank financing. Consequently, speculators and investors aside, home prices must be a function of income– do buyers make enough money to be able to afford the monthly mortgage payment?
2) Mortgage affordability is tied directly to income levels, and where there’s no job, there’s no income. When you aggregate that notion across an entire economy with high unemployment, it restrains housing affordability.
3) Millions of people have been taken out of the housing market as potential end-user owners. These are the ‘former’ homeowners who have lost their jobs and/or been foreclosed on. They can no longer qualify for a mortgage, particularly at the ultra-low rates we’re seeing now.
4) There’s a lot of talk about how low interest rates are making homes affordable. Maybe so, at least to the people who qualify for a mortgage. And while it’s possible that interest rates could go lower, there’s a lot of potential for rates to rise. And when rates rise, homes become more UNaffordable.
Example: if you can afford $1,500 per month to spend on a home, you would be able to afford a $300,000 home at today’s low rates. If rates go up to 6%, $1,500 per month only buys you a $250,000 home. If that’s what the average guy can afford, that’s where home prices will converge.
5) Many local governments are completely bankrupt; we’ve read about looming municipal defaults and laying off cops and fire fighters. Property taxes will likely rise as a result, adding an additional cost in buyers’ monthly payments.
Again, if a buyer can only afford $1,500/month, and his property tax rises by $600/year, that takes about $10,000 off the price of the home s/he would be able to afford.
6) Ditto for homeowners’ insurance rates, which are rising rapidly.
7) There are currently 15 million vacant homes in the US according to the latest census figures, and every day, more people are being foreclosed and getting kicked out of their homes. Housing prices can’t have any meaningful rise as long as there’s such excess supply in the market.
8) In bad economies, people double up in homes. Roomates. Live-in relatives. The number of households is contracting, and this is a demographic issue– too many homes, not enough families to fill them.
9) Even if every unemployed American were simply given a home to live in, it would still leave millions of vacant homes on the market.
10) Given how US Homeland Security treats everyone like a criminal terrorist, foreigners aren’t exactly lining up to tighten the slack.
Ultimately, while there are bright spots in any market, the fundamentals for US housing remain poor.
It can be tempting to jump into the market as an investor with prices so low. But gobbling up a low-grade track house simply because it’s cheap is not a sound investment strategy. There are a lot of things in this world that are cheap. That doesn’t mean the price will go up. It just means that they’re cheap.
A great investment is one that is both cheap, -and- has a catalyst for growth. Median housing in the US has few, if any, catalysts to growth. If you want to invest, stick to the highest quality assets you can find– premium homes in the best locations. They’ll be the first to recover.
2nd February 2012, 06:13 AM
Pua: Don't abuse hard-earned EPF funds (http://malaysiakini.com/news/187975)
1:26PM Feb 1, 2012
While supporting government initiatives to put in place low-cost and affordable housing schemes, the DAP has warned against the use of contributions to the Employees Provident Fund (EPF) for these projects.
"Such programmes must not be financed by the EPF, as its mission is to protect the hard-earned retirement income of 11 million working Malaysians by maximising returns with the lowest possible investment risks," DAP national publicity secretary Tony Pua said today.http://media1-cdn.malaysiakini.com/317/a82a4f17ba2896fc59a452f82b2a1ea2.jpgPua pointed out that EPF's key role was to ensure financial security after retirement as it was committed to preserving and growing the savings in a "prudent manner in accordance with best practices in investments and corporate conduct".
"We call upon the government to source its own funds for the housing programmes and not direct EPF to fund its social welfare schemes," he said.
On Monday, The Sun reported that EPF would be contributing RM1.5 billion for an "easy financing scheme" for the sale of houses under the National Economic Action Council's People Housing Programme (PPR) and Kuala Lumpur City Hall (DBKL) public housing.
Prior to that, the newspaper quoted Federal Territories and Urban Well-being Minister Raja Nong Chik Raja Zainal Abidin as saying the funds would be given to the Federal Territories Foundation (FTF) to help some 20,000 eligible tenants and the loans would be repaid over a period of 15 to 25 years.
"The EPF is not a lender of the last resort for the poor and neither is it a social welfare organisation," retorted Pua, who is also the Petaling Jaya Utara MP.
Banks should use the houses as collateral
He said the money would be loaned to house buyers who were unable to "secure financing from commercial banks" and therefore, it would be jeopardising their retirement funds.http://media1-cdn.malaysiakini.com/434/3e7d6a7843e511cae42ab5429021a3f7.jpg"This is clearly an abuse by the government. Raja Nong Chik tried to allay fears that EPF could be at a losing end if the buyers default on their loans, by giving assurance that the loan is secure as it is guaranteed against the housing unit itself.
"However, if the housing unit is indeed a credit-worthy collateral, why can't commercial banks take it as a collateral? Why are EPF funds being mobilised to give housing loans?" he asked.
Instead of using the EPF, Pua suggested that the government makes full use of existing institutions such as Bank Rakyat or Malaysia Building Society Bhd (MBSB) by channelling a special allocation to the banks through the social welfare and housing funds approved in the annual budget to provide soft loans to those in need.
"By setting a precedent for EPF to be used for social welfare, the EPF could in future be further abused to finance political programmes to win votes under the guise of the same. It is a slippery slope which will jeopardise the future savings of Malaysian EPF members," Pua said.He also urged EPF's Board and Investment Panel to thoroughly re
view the scheme to ensure that the interests of workers are prioritised and to reject proposals that might harm their financial returns.
2nd February 2012, 09:58 AM
People Housing Programme: simple math don't look right (http://wangsamajuformalaysia.blogspot.com/2012/02/people-housing-programme-simple-math.html#more)
By Lee Wee Tak at 2/01/2012 05:33:00 PM http://img1.blogblog.com/img/icon18_email.gif (http://www.blogger.com/email-post.g?blogID=7306009336680641277&postID=9176339503532102487)http://img2.blogblog.com/img/icon18_edit_allbkg.gif (http://www.blogger.com/post-edit.g?blogID=7306009336680641277&postID=9176339503532102487&from=pencil)
As an EPF contributor and tax payer, I am most perplexed and worried by this latest pre- general election allocation of our statutory life savings.
EPF loan guaranteed: FT Foundation
Last updated on 31 January 2012 - 12:18pm
KUALA LUMPUR (Jan 31, 2012): The RM1.5 billion loan from the Employees Provident Fund (EPF) to be used for a special funding scheme for public housing is in safe hands, the Federal Territories Foundation said yesterday.
Foundation executive director Datuk Mohd Idris Mohd Isa said the money will be guaranteed by the foundation for repayment within 25 years.
The money is to be channelled for an "easy financing scheme" for the sale of houses in National Economic Action Council's People Housing Programme (PPR) and KL City Hall (DBKL) public housing.
Raja Nong Chik had yesterday told theSun that the funds will be given to the foundation to help some 20,000 eligible tenants and interested buyers living in the urban PPR and KL City Hall public housing units.
A typical unit in a public housing programme in Kuala Lumpur costs below RM35,000.
Take a look at the numbers below. It seems that the abovementioned allocation is meant for more than 20,000 households. If typically a public house only cost RM35,000 then the fund can cater for more than double the 20,000 number of household announced by the minister
The minister should clarify himself because the numbers do not look right. Unless, of course another minister got misquoted yet again.
Numbers aside, why do the entire nations’ contributors have to fork out for people in Kuala Lumpur only? Why do retirement fund of a Negeri Sembilan, Sarawak and Kelantan contributor have to do with the housing woe of a person in Kuala Lumpur?
We have already paid income taxes, service tax stamp duties, assessments and custom duties. When companies pay taxes, they collect from tax payers via their selling price so how come we tax and EPF contributors have to pay again?
Public Housing programmes should be financed from various taxes collected. It has been like this for so long, why the sudden need to get extra money from EPF?
Port Klang Free Trade Zone scandal was reported to cost tax payers RM12.5billion and that foul up could pay for more than 8 rounds of this seemingly inflated project.
If the Barisan Nasional administration exercise commonsense and discipline with our money, the above mentioned expenditure would be nicely taken care of by taxes collected.
4th February 2012, 05:04 PM
MTUC: EPF should build, not finance homes (http://www.themalaysianinsider.com/malaysia/article/mtuc-epf-should-build-not-finance-homes/)
By Shannon Teoh
February 04, 2012
File photo shows a row of low-cost houses. MTUC today slammed Putrajaya’s plans to use RM1.5 billion from the EPF to give home loans to unqualified buyers.
KUALA LUMPUR, Feb 4 – The Malaysian Trades Union Congress (MTUC) slammed today Putrajaya’s plans to use RM1.5 billion from the Employees Provident Fund (EPF) to give home loans to unqualified buyers, insisting the “giant institution” was capable of developing housing projects on its own.The umbrella body, which represents 802,323 workers from 390 labour unions, pointed to EPF’s RM10 billion development of 1,085 hectares of Malaysian Rubber Board (MRB) land in Sungai Buloh as an example of projects the retirement fund should be pursuing.
“Instead of just being a financer or partner, EPF should lead and develop projects on its own to gain better returns for its 5.7 million active members,” said MTUC secretary general Abdul Halim Mansor told The Malaysian Insider.
He added that EPF could develop housing projects to provide homes for workers, estimating that half of EPF’s active contributors still did not own a home.
The government was forced yesterday to allay fears that the housing loan scheme for those who cannot qualify for commercial financing would result in losses for EPF.
Federal Territories and Urban Well-being Minister Raja Datuk Nong Chik Raja Zainal Abidin said the loan was secure as it is guaranteed by the Kuala Lumpur City Hall (DBKL), a government agency.
Under the scheme, applicants will receive a 100 per cent loan, with a repayment period of up to 25 years to allow loan borrowers to make “smaller” monthly repayments.
But the opposition has raised doubts over the minister’s assurances, stating that with such a guarantee, banks would be rushing to provide the loans instead of shying away.
Under the deal, the EPF earns 5.5 per cent interest per annum in repayments made by every home owner.
But Abdul Halim pointed out today that 5.5 per cent was below the normal rate of return for EPF, which dished out 5.65 and 5.8 per cent dividends in the last two years.
“You can even deposit in a bank and get maybe less 1 per cent but it is far less risky than giving it out as loans to underqualified homeowners.
“EPF should be seeking out better returns with more aggressive investments rather than just playing a secondary role,” he said.
5th February 2012, 03:09 PM
Pua tells EPF employee reps to reject loan scheme (http://www.themalaysianinsider.com/malaysia/article/pua-tells-epf-employee-reps-to-reject-loan-scheme)
By Yow Hong Chieh
February 05, 2012
KUALA LUMPUR, Feb 5 — DAP MP Tony Pua today urged employee representatives on the Employees’ Provident Fund (EPF) board to reject the proposed RM1.5 billion low-cost housing loan, saying it would open up the fund for further “political abuse” in future.
The DAP publicity secretary said Putrajaya’s bid to use the retirement fund’s monies to extend easy home loans to those with “extremely poor credit rating” would set a bad precedent and turn EPF into a lender of last resort for social welfare programmes, in breach of the EPF Act.
“While the prime minister, Datuk Seri Najib Razak, has tried to play down the scheme by claiming that the RM1.5 billion loan is only a fraction of EPF fund size, if approved, the scheme could well be expanded and extended to other states in the country,” he said in a statement.
The EPF board employee representatives comprise Malaysian Trade Unions Congress (MTUC) president Mohd Khalid Atan, National Union of Teaching Profession (NUTP) secretary-general Loke Yim Pheng, Sarawak Bank Employees Union (SBEU) president Hadiah Leen and Sabah Commercial Employees Union (SCEU) general secretary Azlin Awang Chee.
Pua (picture) also called on the three professional representatives who sit on the board — Tan Sri Lee Lam Thye, Heng Hock Cheng and Halim Din — to call for a review of the easy home loan scheme to uphold public interest.
The EPF board of directors must also exercise their powers in the interest of contributors above any other interested parties, including the government, the Petaling Jaya Utara MP added.
“The directors must insist that any loans in this case, must be extended directly to the federal government and not to the individual low-cost house purchasers,” he said.
“It is for the federal government to bear the responsibility of social welfare by providing a roof over the head of all Malaysians, and not the responsibility of the EPF.”
6th February 2012, 05:30 PM
Pakatan: EPF loan scheme masked to hide federal debt (http://www.themalaysianinsider.com/malaysia/article/pakatan-epf-loan-scheme-masked-to-hide-federal-debt/)
By Clara Chooi February 06, 2012KUALA LUMPUR, Feb 6 — Pakatan Rakyat (PR) lawmakers accused Putrajaya today of abusing monies from the Employees Provident Fund (EPF) to hide its current debt levels under the guise of offering a purportedly “noble” housing scheme for lower-income earners.
Slamming the move, DAP publicity secretary Tony Pua and PKR vice-president Nurul Izzah Anwarwarned in a joint statement here that the scheme could throw Malaysia into a “debt-induced financial crisis” should borrowers default on their loans.http://www.themalaysianinsider.com/images/uploads/2012/february2012/06/tony-feb6.jpg
Pua (left) and Nurul Izzah said workers should not bear the burden of the BN government’s follies. — File pic“
The Ministry of Finance (MoF) and the Federal Territories Ministry must hence come clean on why it has chosen to risk workers’ retirement savings and the real reason why the government can’t fund the housing for the poor directly.“
MoF must solve its own financial problems and not for the Malaysian workers to bear the burden of the BN (Barisan Nasional) government’s follies,” they said.
Pua and Nurul Izzah, who are the MPs for Petaling Jaya Utara and Lembah Pantai respectively, explained that under normal circumstances, any welfare programme to assist the poor would be funded by the federal government through its tax revenue.
Should the monies prove insufficient, they added, the government may issue bonds to raise money to finance its deficit expenditure.
As such, the duo pointed out that Putrajaya could have issued such bonds to the EPF and still achieve its objective of helping lower-income earners secure home loans.“
It is hence extremely odd that the Federal Territories and Urban Well-Being Minister Datuk Raja Nong Chik Nong Raja Zainal Abidin announced that the EPF would be extending RM1.5 billion in loans directly to those who failed to secure commercial loans to purchase their houses.“
The fact that the government could have easily circumvented the entire controversy... arouses suspicion that something is amiss,” Pua and Nurul Izzah said.
The only explanation, they said, was that the MoF was attempting to hide its debt exposure by asking EPF to directly lend the RM1.5 billion to borrowers and issuing government guarantees for the loans.“
This way, the RM1.5 billion will not be reflected as an increase in federal government debt,” they said.
The country’s federal debt level reached RM456 billion at the end of 2011, they pointed out, which is a marked 88.4 per cent increase from the RM242 billion in 2006.
Multibillion ringgit infrastructure projects approved by the government like the Klang Valley MRT and the West Coast Expressway would only see the level increase significantly in the following years, they added.
“Unfortunately, to be constantly perceived by the rakyat as the champion for the poor, the government is now coming up with a new and ill-thought scheme — utilising EPF monies to hide its current debt levels,” Pua and Nurul Izzah said
7th February 2012, 09:29 AM
Union reps say clueless over EPF loan scheme (http://www.themalaysianinsider.com/malaysia/article/union-reps-say-clueless-over-epf-loan-scheme/)
By Shazwan Mustafa Kamal
February 07, 2012
http://www.themalaysianinsider.com/images/uploads/logomix2/0604epf.gifKUALA LUMPUR, Feb 7 — The government did not consult the Employees Provident Fund’s (EPF) board of employee representatives when it decided to use RM1.5 billion from the EPF to give home loans to unqualified buyers, union officials have said.
Former Sabah Commercial Employees Union (SCEU) general secretary Rebecca Chin, who sat on the EPF board from 2007 to January 31 this year, charged that she was not informed of the new loan scheme during any of the EPF board meetings.
“By convention, we should have been informed. I was a representative of SCEU until January 31, but I was not even aware of this. We were not aware of it until the announcement was made and we had to read it in the newspapers,” she told The Malaysian Insider.
Asked whether it was unusual that she was not informed about the new scheme, Chin responded by saying “we know the government system, and how it works... I’ve yet to be briefed or notified about this.”
Her remarks come after Federal Territories and Urban Well-being Minister Raja Datuk Raja Nong Chik Raja Zainal Abidin said last week the government had approached a few potential funders before announcing the project, and that it was the EPF’s management that “came forward” to offer to fund the home loan scheme.
But he did not explain why the government did not use its own funds for the loan scheme, saying that the RM1.5 billion would be drawn out from the EPF “in stages”.
“What do we know about this scheme? So many questions come to mind... if I am not part of EPF, am I allowed to take out money from EPF?
“Also, if you are talking about a fund that is supposed to be on a national scale, why is the loan only for people in Kuala Lumpur? What about Sabahans? What is the minimum wage here? We have no money too,” Chin said.
“As a representative for Sabah, is this fair for Sabah people?” she said, adding that she wanted to know which stakeholders were consulted before the government announced this loan scheme.
Those on the EPF’s board of employee representatives include the Malaysian Trades Union Congress (MTUC) president Mohd Khalid Atan, National Union of Teaching Profession (NUTP) secretary-general Lok Yim Pheng, Sarawak Bank Employees Union (SBEU) president Hadiah Leen and newly-appointed SCEU general secretary Azlin Awang Chee.
http://www.themalaysianinsider.com/images/uploads/2012/february2012/07/khalid-atan-feb7.jpgMohd Khalid (picture) told The Malaysian Insider that the MTUC was not made aware of the loan scheme, and that he “could not recall” the matter being discussed in any of the board meetings with the union representatives.
“It is difficult to comment on this. I was unwell for the better part of last year, and only attended the meetings in June or July. But since then I cannot remember or recall being informed of this plan during any of the meetings.
“It was not deliberated to us... I found out about this when it came out in the newspapers, along with the announcement made by the prime minister,” said the MTUC president.
He said the MTUC, which represents 802,323 workers from 390 labour unions, was not invited for a special briefing on the new home loan scheme organised by Raja Nong Chik at the KL City Hall (DBKL) last Friday, and that MTUC was concerned with the sketchy details surrounding the terms of the scheme.
“If this is a loan to the government, there will be some security. But it is not, we do not know the details... EPF has to clarify. We need security.
“Generally, I don’t think anyone will be happy without a guarantee of security,” Mohd Khalid added.
He said MTUC has scheduled a meeting with the EPF board on February 16.
“We have arranged a meeting to discuss the matter. We want clarification so that we, being employee representatives of EPF, know what is going on.”
MTUC had over the weekend slammed the proposed loan scheme, saying that the government was capable of developing housing projects on its own.
The NUTP’s Lok however was tight-lipped when asked to comment on the matter, and told The Malaysian Insider she would only speak once she met up with the rest of the EPF board.
Attempts by The Malaysian Insider to contact other EPF board representatives have been unsuccessful so far.
Pakatan Rakyat (PR) lawmakers have accused Putrajaya of abusing monies from the EPFto hide its current debt levels under the guise of offering a purportedly “noble” housing scheme for lower-income earners.
But PM Datuk Seri Najib Razak said on Friday the use of RM1.5 billion of EPF funds in the home loan scheme will not be detrimental to EPF contributors.
This, he said, was because the amount needed to finance the loan scheme was not big compared to EPF’s funds.
Najib said that Raja Nong Chik would be asked to further explain the scheme to the public, adding that it was designed to help the lower-income group who failed to obtain loans from financial institutions to own houses.
Raja Nong Chik himself gave a guarantee earlier that the government would safeguard EPF’s interests, saying the deal ensured secure financial returns for the EPF.
He had recently said EPF funds will be used to help some 20,000 people who are still renting in the city to buy homes under the Federal Territories Foundation.
7th February 2012, 03:22 PM
Tuesday, 07 February 2012 10:13
Najib running out of money? RM1.5bil taken from EPF to fund Nong Chik's housing scheme (http://malaysia-chronicle.com/index.php?option=com_k2&view=item&id=27640:najib-running-out-of-money?-rm15bil-taken-from-epf-to-fund-nong-chiks-housing-scheme&Itemid=2)
Written by Maclean Patrick, Malaysia Chronicle
At a time when other governments are looking into austerity programs to cushion themselves from a global recession, Malaysia is spending its retirement fund on ill-guided projects. And when a government of the day - the UMNO-BN - unceremoniously plays around with money its citizens have toiled hard for and set apart for their retirement needs, one thing is clear - nothing is safe anymore.
The use of RM1.5bil from the Employees Provident Fund in a scheme offering home loans to those who cannot qualify for bank financing will not be detrimental to EPF contributors, claimed Prime Minister Najib Razak. FT minister Raja Nong Chik gave further guarantee that the government would safeguard EPF’s interests, saying the deal ensured secure financial returns for the EPF.
When so hush-hush then
Yet, the Najib government did not consult the EPF board of employee representatives when it decided to use the RM1.5 billion to give the home loans to unqualified buyers, union officials themselves reported. The EPF board of employee representatives comprise Malaysian Trade Unions Congress (MTUC) president Mohd Khalid Atan, National Union of Teaching Profession (NUTP) secretary-general Loke Yim Pheng, Sarawak Bank Employees Union (SBEU) president Hadiah Leen and Sabah Commercial Employees Union (SCEU) general secretary Azlin Awang Chee. All these officials were left in the dark as to the EPF's plans in financing 20,000 homes in the Kuala Lumpur city area.
With no consultation or even a discussion with their stakeholders, the EPF's management in collaboration with the Najib administration is robbing the contributions of hard-working Malaysians to basically finance something the government could do with its own funds. And for the purpose of giving Raja Nong Chik a filip when he contests in the 13th general election. Nong Chik will get to boast, while Malaysian workers fret over whether their loan will turn into a bad debt.
EPF is not UMNO's piggy-bank
Why the need to rob workers of their retirement money? And does not the BN government know that our EPF money is not a piggy bank they can simply dip their hands into just to finance their political schemes?
Has Najib taken into account the sentiments of the workers in Sabah and Sarawak who also contribute to the EPF? After all, the RM1.5 billion will be used to finance a “charity program” faraway in the nation's capital, when East Malaysians are desperately in need of basic infrastructure - as fundamental as clean water and electricity.
And in robbing EPF to fund 20,000 houses in Kuala Lumpur, Najib has ignored the 4.92 million East Malaysians who are also citizens of Malaysia. This deal must surely hurt Malaysians from Sabah and Sarawak, it is a huge snub from the federal government. Once again, they are left at the mercy of tyrant chief ministers Musa Aman and Taib Mahmud because they never seem to appear on the radar of the UMNO-led federal government.
Rich in resources, yet Sabahans and Sarawakians are forced to remain poor and reliant on clumsy home-improvisations while fellow citizens in Peninsula Malaysia get the best deal. Additing salt to the fund is that a lot of Malaysia's prosperity is funded on the resources of Sabah and Sarawak.
Najib's weakest of weak explanations
Najib’s own explanation that the EPF money was to “sponsor” the housing scheme shows his own apathy towards the plight of the East Malaysians.
“The scheme does not undermine the interests of the EPF because the value of the housing units in the market is far higher than the purchase price. If a buyer is unable to or does not repay the loan, the unit can be sold for a higher price. We always safeguard the interests of the EPF,” said the prime minister.
According to Najib, the amount taken was also not substantial compared to the EPF’s funds. The prime minister made it seem it was all a business deal and nothing more. He was right and wrong. It is a business deal between the government and the EPF. But the EPF is not on its own, the funds it manages belong to the workers and if decisions are not taken at arms' length, this shows how corrupt Malaysia has become.
And it does not matter if it is RM1.5 bil or RM1-50, system checks should have been put in place a long time ago ensure that such 'funny' deals are taboo and can never be transacted, otherwise the politicians and the EPF directors sanctioning the deals should all be sacked!
The Najib administration is running out of money
Very important to note that by dipping their hands into the EPF cookie jar, the Najib administration is also saying that they do not have the money to run this “charity” program. It is really scary when the federal government can't support such a relatively miniscule project on its own. Bankruptcy must be closer than we think, surely earlier than 2019, no matter what Idris Jala, minister in the PM's Department, says.
The country’s federal debt level reached RM456 billion at the end of 2011, which is a marked 88.4 per cent increase from the RM242 billion in 2006. The debt level will further increase, once projects like the West Coast Expressways, valued at RM7.07 billion, or the Klang Valley MRT project kicks in.
And 'small' though the RM1.5bil KL housing scheme may be to Najib, can he guarantee returns when he dare not even chase back for a RM250 million soft loan granted to the family of Women's minister Shahrizat Jaili to manage in the NFC scandal?
Debate if you have nothing to hide, Pakatan dares Nong Chik over EPF loan scheme (http://malaysia-chronicle.com/index.php?option=com_k2&view=item&id=27641:debate-if-you-have-nothing-to-hide-pakatan-dares-nong-chik-over-epf-loan-scheme&Itemid=2)
Govt did not consult union over EPF loan scheme (http://malaysia-chronicle.com/index.php?option=com_k2&view=item&id=27637:govt-did-not-consult-union-over-epf-loan-scheme&Itemid=2)
7th February 2012, 04:16 PM
Filthy paws in EPF pool (http://www.freemalaysiatoday.com/2012/02/07/filthy-paws-in-epf-pool/) February 7, 2012
The EPF has become a convenient tool to finance the bad dreams of crooked politicians in power.
The Employees Provident Fund (EPF) is a cash cow with billions in its coffer. To be more accurate, it has about RM407 billion, which easily makes it one of the largest funds in the world. All this billion represents the collective sweat and toil of the 13 million members. They contributed to the huge pile through compulsory deduction of their monthly salary. The money does not come from business ventures. This is a social security organisation and not a profit-making company.
But over the years, this growing gold mine began to attract the eyes of rapacious politicians in power. They saw in EPF a useful medium to bail out ailing companies. They began to put their hands in the pot and draw out huge stacks to invest in the stock market. Some RM5 billion was reportedly dumped to “shore up Bursa Malaysia” to mitigate the “effect of a global economic meltdown” a few years ago. In reality, the money was used to save a badly-hit company.
Soon the EPF tap was turned on more often to help other troubled government-linked companies and political cronies. What was once the property of the millions of workers became practically the sole ownership of the greedy government. It now sees the mountain of cash as its personal piggy bank – to use and abuse according to its whims and fancies. EPF loans were given out like nobody’s business and all shrouded in secrecy. It is estimated that some RM55 billion worth of loans were approved “without any government guarantees”. The hard-earned savings of the innocent public had disappeared into the maw of the money-grubbing crooks.
With a general election drawing near, the political masters have yet again dipped their filthy paws into the cornucopia. This time they want to champion the welfare of the poor to make themselves look good. They proposed taking out RM1.5 billion from the EPF cash machine to help finance a housing scheme for the urban low-income earners. The risks involved in this undertaking were ignored. The decision-makers must surely be motivated by pure altruism. But scratch the surface and what do the people see beneath this layer of generosity? A devious attempt to buy the loyalty – and the votes – of the urban poor. Using EPF money for a political purpose is tantamount to committing a grievous crime against the interests of the workers.
Despite the outcry against the “theft” of public money, the pleas have fallen on deaf ears. It seems likely that the policymakers will go ahead and channel the RM1.5 billion into their pet project on the specious argument that there will be good returns from this investment, which is dubious. The amount may be a drop in the EPF ocean, but it does not give you the slightest right to take away any portion simply because you do not have any claim on it. What belongs to the workers is sacred. No one, not even the most powerful man in the country, can put his fingers in the cash box and run away to finance his projects, big or small. It would be unconscionable and despicable for the government to keep the employees’ money in its pocket.
There may be many more populist projects – and grandiose ones even – in the pipeline. Money must be found for all of them and the EPF is one sure source of ready cash. 1Car for the poor? 1Care for the sick? 1Dole for the jobless? 1Milk for the kids? 1Meat for the country? 1Space for a moon ride? 1Party for political supremacy? Rub the EPF lamp and all these can materialise. “A world-class social security organisation” will become nothing more than a convenient tool for questionable business ventures. Even worse, its money will continue to be siphoned off to bail out ailing government-linked or crony companies. The contributors can only watch helplessly as their retirement savings is subjected to all kinds of abuses.
In the end, the EPF will morph into a new creature – 1EPF. Everything will be possible under 1EPF. It will come under the complete control of the political honchos who will not hesitate to grab any amount to bankroll their dreams, their visions, their quest for power. It will become like a water spigot for anyone to turn it on whenever they thirst for money. While the workers slog for their daily bread, the 1Visionaries will be concocting all kinds of projects to make profit for themselves and their buddies. Good money will be chasing after bad ideas.Their fingers will be burned but it does not matter. 1EPF will cover up the losses. The only way to stop this “rampage” is for the workers to vent their anger through the ballot boxes. This will send a clear message down the corridors of power: keep your hands away. This is my money.
7th February 2012, 09:06 PM
Raja Nong Chik must answer to using EPF funds for low cost housing loans
*PRESS STATEMENT (FOR IMMEDIATE RELEASE)*
*7th February 2012*
PERMAS is totally shocked and disappointed with the recent statement by the
Federal Territories and Urban Wellbeing Minister Datuk Raja Nong Chik Raja
Zainal Abidin who announced that the Kuala Lumpur City Hall (DBKL) is
offering low cost housing loans to low income earners from a funding of up
to RM1.5 billion obtained from the Employees Provident Fund (EPF).
It is very obvious that the Federal Government seems to have run out of
ideas to tackle the issue of housing for the poor! The people’s savings
stored in the EPF has become the scapegoat of the Minister Raja Nong Chik
and the Federal government in their bid to try and fulfill promises of
housing for the poor, or perhaps is it a sad but risky ploy to buy favour
and votes from the rakyat??
We recall clearly that this same Minister was reported in the Malay Mail
dated July 19th 2010 to have said that Prime Minister Datuk Seri Najib
Razak had instructed Bank Negara to take the initiative to ensure the banks
assist the interested buyers and that a meeting was held between the
ministry, City Hall and bank institutions resulting in nine major banks
expressing they were willing to partake in the effort. The minister had
further announced a special fund would be set up, backed by these selected
banks and that the Credit Guarantee Corporation was willing to act as a
guarantor for their housing loans.
Raja Nong Chik was also reported to have said that "There should be no
cause of concern for the banks to provide financial assistance to the PPR
flat buyers as this is a secured asset." And that the ministry would also
continue to monitor the development between loan-applicants with the banks
on this matter.
PERMAS questions the sudden turnabout of decision of detracting the
responsibility of bank loans from these 9 banks to the EPF. *Is it because
these banks who had agreed to partake in the special scheme pulled out and
the government had to resort to desperate measures to fulfill what was
promised one and half years ago?*
The Minister was reported to have also announced that “This is a pure
business transaction by the EPF with returns of 5.5 per cent guaranteed by
City Hall.” He also explained that DBKL would only offer these loans to
residents who had no outstanding debts with City Hall.
He also explained that the deal was guaranteed on many levels including a
20 per cent retention account held by City Hall and the EPF and City Hall
could take back the property and sell it to one of the almost 30,000 other
buyers in the waiting list in the event a buyer defaulted payment for six
But once again we recall that in July 2010, this Minister had explained
that City Hall is not a registered financial institution under Bank and
Financial Institution Act (BAFIA) and thus cannot be the administrating
body of a home-purchase scheme and not authorized to offer hire-purchases
of the PPR low-cost homes.
And yet today Minister Nong Chik declares that DBKL will stand as guarantor
for these loans and will back with their reserve of RM 1 billion. *The
question that begs to be asked – Can DBKL act like a financial institution
and play this role since the Minister himself had explained that DBKL is
not registered under BAFIA?*
*Point 3 *
The Minister also said that “Not more than 10 per cent will default,” and
he expected the figure to be as low as five per cent. He said that those
renting DBKL flats with good track record, have good chances of buying the
houses and that under this scheme, no deposit is required and applicants
are eligible for 100% loan.
However the same minister had informed the public just 18 months ago that
"Right now, we have the rental arrears amounting to RM30 million and that
the rent arrears could increase to RM90 million if the hire-purchase scheme
were to be realized."
Now another question begs to be asked –* If the Minister has said that back
rentals has accumulated to RM30 million, now what is the guarantee that the
housing loans currently pedaled by the Minister funded by the EPF and
guaranteed by the DBKL will not go sour just like the accumulated back
In fact it is well known fact that banks are very wary to extend these
housing loans because of the high risk of non repayment or errant
transactions happening. That is why for many years PERMAS and other NGOs
have been urging both the state and the Federal government to step in to
facilitate this process between the financial institutions, the people and
the housing developers.
Lastly PERMAS would like urge the government to act as the guarantor to
special housing loans which must be provided by a group of banks who must
show their corporate social responsibility by providing low interests bank
loans especially to the poor. The government can stipulate such provisions
if it is not already in existence.
Banks have to start acting more humanely rather than merely doing public
relations stunts to promote itself as a caring financial institution. They
should start to sincerely and genuinely contribute to community building by
helping the poor to own homes instead of merely accumulating wealth to
We would also like to reiterate our call to the government to reintroduce
the “sewa-beli” (rent to buy) scheme which was implemented in the early
1980’s for government housing projects such as the PPR schemes. If DBKL
cannot stand as the administrative body for this scheme, then make sure to
identify the appropriate government agency or body which can play that
Minister Raja Nong Chik, using EPF funds to finance housing loans to the
poor is like offering housing loans to the poor at the expense of the
rakyat’s EPF savings including the poor who are also EPF contributors!
*Tan Jo Hann,*
8th February 2012, 08:29 PM
EPF defends loan to PutrajayaPatrick Lee (http://www.freemalaysiatoday.com/author/patrick/)
| February 8, 2012
Fund officials tell Pakatan the guarantee from the government will be 2.67 times the amount borrowed. (http://www.freemalaysiatoday.com/2012/02/08/epf-defends-loan-to-putrajaya/)
KUALA LUMPUR: The government has to provide a guarantee worth 2.67 times the amount it is borrowing from the Employees Provident Fund (EPF) for the controversial “easy financing scheme” purportedly aimed at helping buyers of Public Housing Project flats.
This is according to Pakatan Rakyat MPs who said they received the clarification from EPF officials this morning.
Federal Territories and Urban Wellbeing Minister Raja Nong Chik Zainal Abidin announced the scheme last week and initial reports said the loan from the EPF would amount to RM1.5 billion.
But the Pakatan MPs, led by DAP’s Tony Pua, PKR’s Nurul Izzah Anwar and PAS’s Dzulkefly Ahmad, said EPF officials told them the loan amount would be only RM300 million “at this point in time”.
The MPs submitted a memorandum to EPF, asking it to ensure that public money would not be given out in such “high risk” loans.
Pua said EPF’s Deputy CEO for Investments, Shahril Ridza Ridzuan, told the MPs that EPF was not lending money directly to the buyers of flats, but to the government.http://www.freemalaysiatoday.com/wp-content/uploads/2012/02/epf1.jpg (http://www.freemalaysiatoday.com/2012/02/08/epf-defends-loan-to-putrajaya/epf1/)
The so-called People’s Housing Programme undertaken by the National Economic Action Council and Kuala Lumpur City Hall (DBKL) has been widely criticised since Raja Nong Chik announced it.
Prime Minister Najib Tun Razak has said that the scheme was to help low-income earners in Kuala Lumpur buy houses. He has also said RM1.5 billion was a not a big amount considering the sum available in the EPF.
EPF is well protected
In a media statement released later, Shahril further defended the loan to the government, calling it “within the risk appetite of the EPF”.
“The terms of the loan agreement are within the risk appetite of the EPF as it is secured against assets and cash flow with a suitable guarantee on repayment of the loan made.”
“Based on the terms and the security arrangments that we have put forth, the EPF is well protected and the annual 5.5% profit rate imposed on the loan is fair,” he said.
The statement added that EPF was currently meeting with a special body that was part of the Federal Territories ministry, known as the Federal Territories Foundation (or SPV FT Foundation) over the loan.
Confirming the Pakatan Rakyat MPs’ comments, EPF said that the loan came with an “initial facility” of RM300 million.
Further loans, the EPF added, would only be granted at the EPF Investment Panel’s discretion, which would also depend on SPV FT Foundation’s conduct in handling the loan.
It also said that EPF would look into this 12 months after the date of the last drawdown of the RM300 million loan.
EPF has also asked SPV FT Foundation to get a “suitable financial institution” to manage the scheme’s credit administration and “good conduct of the individual accounts”.
EPF also clarified that if the public was interested in this housing scheme, they would have to go to the FT ministry, and not through the EPF.
People taking part in this scheme, the statement said, would enter into a lease arrangement with SPV FT Foundation, with the latter holding on to the houses until it was settled by the interested participants.
“The loan to the SPV FT Foundation will be well secured as all housing units will be charged or assigned by the SPV FT Foundation to the EPF, with security cover of at least twice the loan amount,” the statement said.
It added that there would also be a cash retention of 25% of the disbursement of the EPF loan to SPV FT Foundation.
This retention, the statement said, was to be set aside in a liquidity reserver account assigned to EPF, “together with the assignment of all cash flows
14th April 2012, 04:31 PM
They have a good point there. How can the EPF pay 5 - 6% yearly, when their loans eart 2 - 3%? It means they have to sell off the shares to earn the profit to pay dividends. And the dividend is paper-money only. You don't get to see it until you are 55, by which time, it may be gone! The longer UMNO stays, the worse it gets.
Saturday, 24 March 2012 09:29
Umno has turned the EPF into its private cookie jar
Written by Moaz Nair, Malaysia Chronicle
The Employees Provident Fund (EPF) is one of the largest savings funds in the world which has accumulated more than RM 440.52 billion in 2011. And this represents the life savings of about 12 million Malaysians. Of course money kept under the pillow would not generate more income. It has to be invested prudently. The issue now is has the EPF under UMNO-led government invested the hard-earned savings of Malaysians judiciously. Until 2011 the government has already used 60 per cent of the people's savings on various loans and investments.
The 12 million EPF contributors are not somewhat contented with the government. Many EPF contributors surveyed across the nation have the perception that they have been taken for a ride by the government. Their life-long savings is not giving them good returns. “The government is taking big loans from the EPF. Could this be the reason why the EPF is now getting employers to increase their mandatory contributions from 12% to 13%?” asked a 50-year-old single mother attached to a government-linked company (GLC).
Government still owed the EPF RM240 billion
On 23 June 2011, the EPF said that 60 per cent of its funds have been lent to or borrowed by the Malaysian government. As at Dec 2010 the government still owed the EPF about RM240 billion. In other words, the UMNO-led government has already spent or used 60 per cent of all the savings. The fact is it does not really have a good track record of how to manage the economy sensibly. 2012 will spot the 15th year of budget deficit by the Federal government with no sign of financial intelligences.
If money lent to the government is used for profitable business they are wondering why the dividend to the EPF contributors is so low – hovering around 4 to 5% before 2011. “They are paying us a paltry dividend. We are bearing the burden of diminishing returns,” said a senior clerk attached to a chemical industry in Kemaman. “The paltry dividend only indicates that the EPF money is not invested in rewarding business but those with links to UMNO,” she added.
“Even the latest 6% dividend came as no surprise to the contributors. This is a one-off affair that only happens when UMNO is facing a general election. All figures will normally go up during this time – dividends for PNB unit trusts (more than 7 per cent including bonus), Tabung Haji (6 per cent) and so on,” she reproved.
High-risk – no-return investments
The EPF contributors are now worried that their money has gone into high-risk – no-return investments. The Auditor-General’s Report 2010 indicated that the EPF had approved loans worth an astounding RM55.1 billion not backed by government guarantees. The 13 debtors however were not named. The Auditor-General’s Report 2010 also found only one of the 13 debtors was qualified to obtain a loan without such a guarantee. That particular debtor was extended credit worth RM21.3 billion.
This form of lending must have obviously side-stepped good practices and apposite financial procedures. It also reflects on the lack of transparency and accountability on the government part.
“They are gambling with the people's life savings for their retirement and old age. Things are never transparent and we don’t actually know what’s happening to our savings. A lot of things are hidden from us. What are the trade unions doing? The board of directors and the ministry of Finance?” chided a 43 year-old senior manager with a manufacturing company.
Instead of issuing bonds that has a better liquidity the borrowers find a short-cut to put their hands into the EPF’s till. These are usually borrowers who cannot secure loans from the banks or from any international sources. Taking a huge loan from the EPF – usually with a very low interest rate – is one sure way of getting their business going regardless of its competitiveness. On this basis too the government is indebted to help if these companies fail in their business;
There will be massive financial implications to the country's economy and the EPF when these companies were to default on their payments or go bankrupt. However, the EPF can give cheaper loans than commercial banks to GLCs and crony companies to save them from bankruptcy and in some cases make big profits from the people’s hard-earned contributions.
“This is not money that belongs to the state. It's the people's pension fund. But it is being used and abused for chiefly political purposes,” said a lecturer in a local private university.
How they can pay dividends
It is interesting to find out how the EPF can pay dividends of 4 to 5% when their returns from their huge loans are usually not more than 2 to 3%? They are practically not making much money out of these investments when the interests are charged at these figures. And when it comes to paying dividends this does not come from business profits but they have to sell some of their interests in the listed companies, or else nothing much could be paid to the workers.
“Or else how can the government pay a dividend of + or - 5 % when banks’ FD rates are less than 3.5%, some trust funds are losing money, some GLC's are also doing badly?” chided another 39-year-old bank executive
In other words, the EPF is actually not doing any viable business but assisting the government to help some UMNO-linked companies and the GLCs. When these businesses fail the government has again to bail them out and money from the EPF, among other sources, is used.
“The Employees Provident Fund (EPF) sold a whopping RM441.09mil worth of Malaysia-listed equities on March 7 alone, in line with its trend of active disposals over the last two weeks.” reported a local daily.
“Bursa Malaysia filings showed that on March 7, the EPF along with its portfolio managers dumped a total 83.68 million shares on the open market, substantially more than the 7.4 million shares it had acquired the same day. The number of shares disposed of represents almost half the total volume traded that day, which stood at 173.14 million shares. Fund managers reckon that the fund was merely taking profit.”
To the economists, the EPF needs the money to pay the “feel-good” pre-election dividend of 6% to the contributors.
Unlike dealing with commercial banks dealing with the government or the EPF which is under government control the interests incurred would normally be around 2% or less for any loans given out. Take for instance the controversial NFCorp . It was given a soft loan of RM250 million from the government with only 2% interest rate and a five-year grace period before repayment. Even earning from this amount is quite controversial as in many cases they end up as non-performing loans and when payment is defaulted the lender will be in trouble. But in most cases the government will step in to bail the failed companies by using taxpayers’ money, the EPF or Petronas dollars.
“Being an EPF contributor, I am not surprised. The EPF has been giving an average 4 to 5 % return over the past 10 years. Now we know with facts why they are giving only such low rate of return. Take in the unofficial inflation rate of 4%, this makes our real return at only 1 % or nil,” quipped a 54 year-old-worker in a private firm.
Rightfully, workers should not be happy with 5% per cent dividends in this context. All savings will have to take into consideration of depreciated value of their savings due to inflation.
“Just imagine if the EPF welcomes the extension of retirement age to 60 then that contributors cannot withdraw their savings for another five years. This will only benefit the government more,” said a 43 year-old lady executive with a local bank.
RM6.5 billion loan to Felda
RM6.5 billion loan was taken by Federal Land Development Authority (Felda) from the Employees Provident Fund (EPF). It seems the EPF statement had stated that the company regarded the loan as an investment that could contribute to a “better dividend achievement” for its contributors. But if Felda, as claimed by the government is in sound financial shape why the RM6.5 billion loan from the EPF? Why not from the banks or other international lenders? Of course these lenders would look into Felda’s risk rating and the interest rate will be higher. It cannot be a meagre 2% interest. Thus using the EPF money will be the most convenient for the government to avoid all these hassles.
Beyond that, if Felda has a healthy bank balance or cash reserves and claims to have assets worth more than RM19 billion why must it bother to take a huge loan from the EPF? And is the government transparent on all transactions involving the EPF – the amount of loans taken, who are those given the loans, their credentials and the profit and the loss incurred thus far? A senior manager of a company has this to say, “the EPF has not been transparent in its dealings, especially pertaining to its investments and "unrealised losses".
Government debt stands at 53%
Government's borrowing is not risk free. If the government borrows disproportionately in relation to its GDP and without exercising judiciousness on the projects it is financing, the long-term implication can be disastrous. The country’s federal debt level reached RM456 billion at the end of 2011, which is a discernible 88.4 per cent increase from the RM242 billion in 2006. This debt level will further increase with more borrowings to develop more projects.
The Constitution of Malaysia caps government debt at 55 per cent of GDP. As of 30 June 2011, government debt stands at 53 per cent but this figure only includes government borrowing, not public borrowing. When both government and public borrowings are encompassed the figure may surpass far more than the 55 per cent cap. Seemingly when it touches 55 per cent, the BN government will officially be in crisis and the Constitution may need to be changed to increase borrowing or possibly it will require a bailout. But with all the uncertainties in the world economies, with less prudent financial management the Malaysian economy can crumble at any time due to this “financial crunch”.
Unlike developed countries with strong fundamentals like the US, where debts and spending go more than savings a small country like Malaysia cannot sustain the pressure of a ‘financial crunch”. Foreigners will lose confidence in the Malaysian economy like what has happened to Greece. Printing more money will not resolve the problem as high inflation will set in and money will lose its value. This will affect local and international businesses.
It's when rating agencies such as S&P's or Moody downgrade Malaysia's sovereign rating by 2 or 3 points will indicate the country has exceeded the limit. And this will cause an abrupt plunge of the ringgit. That's what has happened to Greece where the government had to write off 50 per cent of their outstanding government loans. And if this happens to Malaysia, the EPF will be asked to take a 50 per cent cut of outstanding debt owed by the government. More than half of savers’ EPF money will be lost and the UMNO-led government would then plead to the people to remain patient and be patriotic. And after more than 30 to 40 years of working hard worker’s EPF savings would shrink. Dividends paid will totally diminish and even the money saved will become half the value. Printing more money is not going to help.
Refused to grant the funding
Venturing into any non-profitable housing scheme will undermine the interests of the EPF because the buyers will not be able to or will not repay the loan. The government has the SPNB (Syarikat Perumahan Negara Bhd) that was initiated in1997 to provide for affordable homes to the poor. Now comes PR1MA (Perumahan Rakyat 1Malaysia), which is supposed to be for 20 000 house buyers in one precinct under an UMNO leader using the EPF money.
The use of RM1.5bil from the EPF in a scheme offering home loans to those who cannot qualify for bank financing will be disadvantageous to the EPF contributors. The government is not safeguarding the EPF’s interests again, as this deal cannot ensure secure financial returns for the EPF. But this is not UMNO’s concern. UMNO is more interested in politics and its own survival in the next GE.
There is a big risk in this scheme, as the three banks approached by the government had refused to grant the funding to these 20,000 house buyers. Why must the government involve the EPF then? If the government wants to hold the responsibility of any default, then rightfully the government should be involved directly to finance this scheme. This is the right way to safeguard the interests of the EPF.
The EPF is not UMNO’s cookie jar. The money belongs to the workers and should not be used to achieve a political goal. If this is a charity program as claimed by UMNO then it is the onus of the government to support such a project on its own.
Not be used as a cash cow
Billions of ringgit from The Employees' Provident Fund (EPF) today has been used to rescue failing companies listed on the Malaysian stock Exchange. Although the EPF is one of the biggest pension funds in the world, the workers feel that it should not be used as a cash cow to bail out financially troubled Government agencies or companies. “The workers must not be left in the dark. Every decision made by the EPF must be above board. If they can prove that after investing the money in a proper way, they still cannot get good returns, that is fine, we can accept it,” commented a senior bank manager.
But taking the EPF funds for political reasons, to bail out failing companies or to lend the money out to UMNO crony companies is undeserved. This becomes a political agenda and not business. UMNO-BN cronies and their patron political select are actually feathering their own nests to the impairment of national interests and the rightful owners of that pension fund.
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