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Thread: Harapkan Pagar, Pagar Makan Padi: Say goodbye to your EPF.

   
   
       
  1. #11
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    Tuesday, 07 February 2012 10:13

    Najib running out of money? RM1.5bil taken from EPF to fund Nong Chik's housing scheme


    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?

    Malaysia Chronicle
    Related Stories:

    Debate if you have nothing to hide, Pakatan dares Nong Chik over EPF loan scheme
    Govt did not consult union over EPF loan scheme
    py

  2. #12
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    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.


    Populist projects


    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.
    py

  3. #13
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    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??

    *Point 1.*

    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?*

    * *

    *Point 2.*

    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
    months.

    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
    arrears? *

    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
    fatten itself.


    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
    role.

    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,*

    *President, PERMAS*

    *Email: jotan@pc.jaring.my*

    *Hp: 019-214541*
    py

  4. #14
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    EPF defends loan to PutrajayaPatrick Lee
    | February 8, 2012


    Fund officials tell Pakatan the guarantee from the government will be 2.67 times the amount borrowed.


    UPDATED


    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.


    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

    py

  5. #15
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    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





    http://malaysia-chronicle.com/index....e-jar&Itemid=2


    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.

    Controversial NFCorp

    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.

    Malaysia Chronicle

    py

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