The dangers of letting UMNO/BN putting their hands in the EPF; how will the government pay back?

No matter how secure the loans may be, it is unwise for the EPF to lend money to the now penniless UMNO/BN government.

Let us take a lesson from the same scheme by the Sri Lankan government in 2005 ending in their EPF being plundered to one being a lender to one that now needs a bail out.

In 2004 the Sri Lanka EPF was used to boost government securities but the return of 7.5 percent was overshadowed by the inflation rate at 18 percent thus the Sri Lankan government resorted to printing more money to finance the budget.

In June 2005 Sri Lanka’s government introduced a loan scheme to give subsidised housing loans, to beneficiaries of a state managed retirement fund, using money taken from the fund at rock bottom rates. Sri Lanka EPF provided the funds to approved banks and those banks managed the individual loans.

The scheme could not work because the loan given to the house buyers were at 5 percent and yet the EPF was to give more than 5 percent to its contributors, thus the Sri Lankan EPF had to take more risk in its investments elsewhere to counter balance the difference which resulted in disaster. The scheme was made worse because house buyers can borrow up to 75 per cent of the balance to build a house. The problem was further aggravated because of so many defaults in payments by the members.

Then in April 2008 the fear came to be true. Indeed Sri Lanka’s main private sector retirement fund has made billions real losses in in 2007 as the state used the monetary system to inflate away debt at the expense of the private sector workers in the country. The situation in Sri Lanka was so bad that even the International Monetary Fund has called for an independent governance structure for Sri Lanka’s Employees Provident Fund (EPF) amidst growing concern about real losses to the fund and its management at the hands of the Central Bank.

In November 2008 where by then the Sri Lankan EPF was nicknamed the “Cash Pot” for the government the EPF members concluded that the fund had not achieved its objective of providing ‘a reasonable retirement benefit to its members.’ Calls were made for independent management for Sri Lanka’s state-managed Employees Provident Fund and to stop the government having any control on the EPF which had been performing so successful for the past 50 years.

The Sri Lankan government refused to leave the EPF on its own and the EPF has continue losing every year until 2011 despite many flimsy efforts by its Central Bank to diversify the EPF’s investments in the best managed companies. These efforts are just for show and money-making schemes by insider trading in buying and selling shares of targeted companies.

Malaysia EPF future

As the mismanagement and plundering of the country’s funds continue, the EPF has already been targeted by the RM7billion loan to FELDA late last year with no news as yet on payments by FELDA, which is going to lose RM1.5 billion anyway,  and will continue to be used by the irresponsible UMNO leaders to invest more money-making schemes and in government securities, the real value (the value after discounting inflation) of the EPF will systematically be destroyed by the state in a sophisticated trick to help finance all the UMNO activities.

The RM1.5 billion loan for the hose buyers who can’t afford it is just a vote buying ploy by UMNO. When the banks have scrutinized the financial ability of the potential house buyer and find out that he or she is not qualified how on earth can he or she pay back the loan? They will simply default and the rest of the EPF contributors will suffer. This is a stupid way of doing business which Najib is really clever at. But please look at the disaster that happened to the Sri Lankan EPF and do not repeat the same mistake in Malaysia.

 When the EPF is the last fund that UMNO leaders are trying to siphon out, how can it pay back whatever that has been taken out? Unless Najib has already started his own money printing plant and of course managed by his crony and family members, with soft loans too, just like the Shahrizat Gemas NFC project.


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