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(Petaling Jaya, Saturday): Even though the Employees Provident Fund(EPF)’s dividend rate of five percent for 2005 is higher than 4.75% in 2004, it is still lower than the country’s economic growth performance of 5.3%. Clearly EPF’s dividend rate can be increased with more efficient, transparent, accountable and professional management of EPF’s RM 260 billion assets .
Last year I had asked why EPF could only pay a 4.75% dividend for 2004 when the country enjoyed an economic growth rate of 7.1%. The failure of EPF to explain a variance or difference between the 7.1% economic growth rate and poor dividend rate of 4.75% indicates something is wrong with the management of EPF’s assets resulting in poor investment returns.
The same rationale can be asked between 2005 dividend rate of 5% and growth rate of 5.3% even though the variance has grown smaller as compared to 2004. One of the reasons for EPF’s poor investment returns are due to EPF’s involvement in questionable projects and bad loans given out by its 63% owned subsidiary, Malaysia Building Society Bhd (MBSB). MBSB is notorious for giving huge loans to political cronies and well-connected companies of BN such as to the failed Perwaja plant. In Melaka alone, such bad loans by MBSB amount to more than RM 150 million.
Overhauling The EPF Investment Panel
To Include The Opposition And Trade Unions.
Non-performing loans by MBSB remain at least more than RM 1.3 billion in 2005 compared with the banking industry's average default rate of 9% for residential loans. To prevent such bad loans given to political cronies, there is a need for an independent EPF Investment Panel and EPF Board. To ensure accountability and transparency, qualified professionals and opposition parties must be represented to ensure that EPF performs its statutory duty as a custodian of Malaysian workers’ trust fund.
EPF chairman Tan Sri Abdul Halim Ali’s justification of the 2005’s dividend rate as good given the challenging global economic environment and the low domestic interest rate may not be applicable in 2006 following the the increase in interest rates, the latest being the 0.25% increase announced by Bank Negara two days ago. For 2005, the EPF needed to earn RM2.37 billion to pay a one percent dividend, compared to RM2.16 billion in 2004. This translated to RM210 million or 9.0 percent more to declare a one percent dividend in 2005 compared to 2004.
DAP believes that Malaysian workers will no longer accept low dividend payments from a clearly non-performing EPF. If the EPF and the government are serious about ensuring a higher dividend rate and a prompt, efficient and effective service, the EPF Board and Investment Panel must be completely overhauled and revamped.