Wednesday, October 22, 2008

Our EPF Savings In Jeopardy

The Finance Minister, Datuk Seri Najib Tun Razak announced two days ago that the Government will inject RM5 billion into ValueCap Sdn Bhd to invest in “undervalued companies”, presumed to be those listed on Bursa Malaysia. This was part of the initial slew of high-level measures announced by the Finance Minister, who at the same time confirmed that there will be no cut in the budgeted expenditure for 2009, currently debated in Parliament.

He then further announced yesterday that the source of the RM5 billion additional investment will not be from the Government's budget but instead be sourced from Employee Provident Fund (EPF)!

To me, directing EPF to fund RM5 billion ValueCap investment to shore up Bursa Malaysia is an abuse of Government's authority and puts to risk hard-earned savings of millions of its contributors. This clearly is an example of Barisan Nasional's bad governance and damages the credibility of Datuk Seri Najib as our new Finance Minister.

This RM5 billion off-budget measure raises several very worrying questions and concerns:
  1. 1.What measures have been put in place to ensure that the RM5 billion will be utilised in a fair and transparent manner and not be used instead to bail out Government-linked or crony companies whose stock prices have plummeted during the current financial crisis? Will ValueCap for example, be investing a substantial amount into Malayan Banking Berhad who has been hit badly, to a large extent due to its purchase of Bank International Indonesia at exhorbitant prices?

  2. Secondly and more critically, how will supporting the prices of stocks listed on Bursa Malaysia actually change the fundamentals, including but not limited to the efficiency and productivity, of our economy and its companies? 

  3. Most importantly, while agencies such as the EPF are under the purview of the Finance Minister, he has no basis to direct the EPF to make particular investment decisions. EPF investments is led by an investment panel, headed by Y.Bhg. Tan Sri Samsudin b. Osman and they should be given the leeway to decide what they regard as the best investment approach to protect and grow the hard-earned savings of ordinary Malaysians.
As a trustee of members' savings, the EPF must discharge our responsibility with sincerity, honesty and trustworthiness at all times. The investment panel's key objective should be looking at making investments at best prices to maximise returns, instead of investing for the purposes of supporting the stock market which will inevitably put at risk the EPF contributors' interest.

The 2nd Finance Minister's attempt to reassure the public that ValueCap will make money for EPF isn't reassuring at all, as it fails to consider the very real possibly that ValueCap can at the same time lose money for the people!  Why must EPF be forced to invest via ValueCap when it has its own investment panel?

And since our financial institutions have been declared to be sound and financially stable, and hence not susceptible to the current global financial crisis, the Government should let the market dictate its stock prices, while the Government focuses its spending areas which will generate high economic multipliers for the economy.
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