MEMO TO EPF

MEMORANDUM

DEMOCRATIC ACTION PARTY

EMPLOYEES PROVIDENT FUND BOARD CHAIRMAN

TAN SRI ABDUL HALIM ALI

4.25 PER CENT EPF DIVIDEND RATE UNACCEPTABLE

The DAP expresses our shock and outrage at the 4.25 per cent Employees Provident Fund (EPF) dividend for 2002, the lowest ever in 40 years. It is totally unacceptable for EPF to declare such low dividend which is less than the 5 per cent dividend payout for 2001, considering that our country had recorded a higher national economic growth of 4.2 per cent for 2002 as compared to 0.4 per cent for 2001.

Under the circumstances, it is only justifiable that EPF declares a dividend rate of no less than 5 per cent. In fact, EPF should have been able to declare a dividend of at least 5.43 per cent for 2002 if not for the high provision of RM2.14 billion for paper losses in equity last year. If EPF did not have to set aside the amount for paper losses in equity and this amount could be released for the declaration of dividend, the 10.3 million EPF contributors would be able to get a dividend of 5.43 per cent.

The DAP also expresses our regret that the EPF Chairman, Board and Investment Panel had not been fully frank, accountable and transparent as to the total amount of paper losses in equity which had been incurred by EPF. EPF Board Chairman, Tan Sri Abdul Halim Ali had provided no details or explanation as to why EPF had to make the higher provision of RM2.14 billion for paper losses in equity, except for the technical explanation that it is “an additional prudent measure in line with international accounting principles”.

The real issue is not so much the “additional prudent measure” of higher provision for losses in line with international accounting principles but why the EPF had been so imprudent as to invest in equities which resulted in multi-billion ringgit losses dragging down the EPF dividend to the lowest level in four decades. This, together with the full list of the investments on the equities which had gone bad, their identities, the dates, volume and cost of the investments, and the losses incurred, the 10.3 million EPF contributors are entitled to know.

We also view with great concern published reports that EPF had been hit by a RM10 billion paper loss in equities and that it had been camouflaging these losses in its accounts, which the EPF Board and management had not denied. It would therefore be patently unfair for the 10.3 million EPF contributors to have to pay with their hard-earned cash from their life-savings for these paper losses as a result of dubious EPF investments.

In light of this, the argument that the low dividend of 4.25 per cent was “a reflection of the difficult investment environment of a low interest rate regime for the last four years as well as a lacklustre stock market” is not fully convincing and difficult to accept. Moreover, our country had weathered at least three difficult economic periods in the last three decades but never did the EPF dividend plummet to such lows.

The DAP therefore reiterates that the 10.3 million EPF contributors have the right to demand:

a higher dividend payout for 2002 of at least 5.43 per cent;
that EPF come clean on the RM10 billion paper losses in equity and to give a full detailed account;

3. amendment of the 1991 EPF Act to allow for direct representation of EPF contributors on the EPF Board and EPF Investment Panel;

a new EPF policy on accountability and transparency, as making public its shares dealings in the stock market and beneficiaries of its loans;

5. a mechanism for interaction between EPF contributors and the EPF Board, Management and Investment Panel; and

the establishment of an EPF Contributors' Association to further protect the interest of EPF contributors.

Unless there is a shake-up of the present form and structure of EPF and a new policy of full transparency and proper management to safeguard the rights and interest of the 10.3 million EPF contributors, we fear that the dividend for this year will be even lower than 4 per cent, which would be a throwback to the fifties when the EPF dividend rate was at the statutory minimum of 2.5 per cent. The onus is now on EPF to give a full-fledged explanation to the 10.3 million EPF contributors for the lowest dividend of 4.25 per cent in four decades.

YB Dr. Tan Seng Giaw

MP for Kepong

YB Tan Kok Wai

MP for Cheras

YB Teresa Kok Suh Sim

MP for Seputeh