The Employees Provident Fund (EPF) will continue to adopt a "conservative" investment policy, the Dewan Rakyat was told today.

Deputy Finance Minister Chan Kong Choy said the government would not review the policy, although the pension fund last year declared its lowest-ever dividend rate in 40 years.

The reduced returns had led to nationwide pickets by the Malaysian Trades Union Congress, as well as earned EPF a sharp rebuke from DAP. The EPF is a mandatory saving funds for private sector workers in Malaysia.

Chan said the policy would be maintained in order to "ensure a reasonable return and to protect the contributions of employees into EPF".

He said the low dividend rate last year - 4.25 percent - was due to unavoidable factors such as the lacklustre performance of the stock market, but said EPF was taking steps to ensure a better rate in future.

"The government is conducting a study on the asset allocation of EPF (in search of) optimum returns. The EPF will give priority to investing in government securities and bonds which carry a lower risk," he said.

Criteria questioned

Chan was responding to Lim Bee Kau (BN-Padang Serai) during question time in the House this morning.

In a supplementary question, Lim expressed worry that EPF might continue to declare lower dividend rate in the coming years, due to the challenging investment environment arising from global developments.

Chan replied that EPF's investments currently focus on domestic investments, with foreign investments not exceeding1 percent of the portfolio.

He, however, said the government was studying a proposal to expand the scope of investment to include a larger proportion of foreign investment.

In another supplementary question, Tan Seng Giaw (DAP-Kepong) asked for the basis of EPF investments that may have led to last year's low dividend rate.

Chan said the main criterion for selecting sources is whether the companies concerned have been proven "safe for investment" by guarantors or banks.

The last time the EPF dividend rate dipped lower than 5 percent was in 1962 when it stood at 4 percent.

Two months ago, when the fund revealed the dividend rate for 2002, it attributed the continuing erosion of returns to the difficult investment environment of a low-interest-rate regime over the last four years.