Press Statement by Lim Guan Eng in Penang on Monday, 15th December 2008: 

Protect workers rights by cancelling the RM 5 billion injection of EPF funds into Valuecap following the Federal Government’s failure to convince EPF members that it will not be used to bail out politically-connected parties 

I have received many queries and expressions of concern by workers from Penang about the security of the government injecting RM 5 billion of Employees Provident Fund(EPF) into the Valuecap Sdn Bhd investment fund to buy under-valued stocks. Deputy Prime Minister Datuk Seri Najib Razak should reveal the full list of shares bought from the RM5 billion EPF injection, to assure the public that the monies will not be used to bail out politically connected companies.

Najib’s failure to do so has only strengthened public demands that the Federal Government proves its protection of workers rights by cancelling the use of RM 5 billion of EPF funds for Valuecap Sdn Bhd. So far, the public does not know whether the value of the shares bought by the RM 5 billion funds have increased.

There have been concerns that the RM5 billion injection from EPF was meant to pay off Valuecap’s loans of approximately the same amount which are due early next year to its shareholders. Valuecap owes RM5.1 billion to Khazanah, the Pension Trust Fund Council (KWAP) and Permodalan Nasional Berhad (PNB), but the government says the three institutions have agreed to extend the loan.

Why should EPF funds be channelled to a company that can not even fully pay up its loans but have to get an extension? Worse, EPF’s unaudited investment income in the third quarter had fallen more than 60 per cent from the second quarter will certainly put pressure on the government to defend the move to lend the retirement fund’s money to Valuecap.

EPF said the drop was caused mainly by the fall in income from equities. The investment income shrunk 60% to RM 2.06 billion during the third quarter of this year compared to the same period last year. The lower results were primarily due to provision of allowances amounting to RM 2.29 billion for diminution in value of equity investments due to the deterioration in market value.

The public has a right to demand full accountability from EPF in demanding answers as to what were the investments it made that required RM 2.29 billion in write-offs? And also which companies were the main culprits for such losses?

Such poor performance and 60% drop in investment income has raised serious qustions about EPF’s ability to maintain dividends at the same rate as last year of 5.8%. The EPF and its Investment Panel must seriously address these issues because the poor performance has raised doubts about its professionalism, expertise, management ability and integrity in managing RM 332.41 billion in contributions and assets belonging to nearly 6 million Malaysian workers

The poor performance of EPF’s investments has highlighted the dangers of EPF’s RM5 billion loan to Valuecap, which is for the stated purpose of investing in what the government says, are under-valued stocks. The question is who determines what company to be invested and how much they are under-valued is still hidden in a shroud of secrecy and wrapped in mystery. Unless these questions are answered, not only will the interests of workers be unprotected but the Federal government is not complying with the CAT principles of good governance by practicing compentency, accoutability and transparency.

* Lim Guan Eng, DAP Secretary-General & Penang Chief Minister