The Employees' Provident Fund (EPF)'s decision to declare a dividend of 6.7 per cent for 1999, similar to the dividends it offered over the past two years, has drawn criticism from both politicians and NGOs. The 6.7 per cent EPF dividend is the lowest offered in more than two decades. It is even lower than the 8%-8.5% dividend during the recession in the late 80s when the economy plunged to negative growth

EPF DIVIDENDS 1980-1998

Year

Percentage

1980-1982 8.00
1983-1987 8.50
1988-1994 8.00
1995 7.50
1996 7.70
1997 6.70
1998 6.70

Gerakan vice president Dr. S. Vijayaratnam said the public had the right to question the low- dividend decision since the EPF is a statutory body responsible for managing the workers' retirement fund.

He said the low dividend was acceptable in 1998 as the country was facing an economic slowdown but since the economy had picked up and the share market is on the rise, workers who made their monthly EPF contributions are expecting an increase in the dividend.

"There should be at least a moderate increase, instead of being the same as last year," Vijayaratnam told malaysiakini . He felt that the EPF's decision failed to reflect the improvement in the economy and hoped that the EPF would reconsider the proposed amount.

It was reported in New Straits Times early this month that the EPF board had agreed on the 6.7 per cent dividend and the proposal had been sent to the Finance Ministry for approval. The dividend rates of EFP is determined by its net income and the total value of its cumulative contributions for the year.

With 9.45 million members, EPF's investments had increased to RM158 billion as of September last year, compared with RM145.9 billion in 1998.

MTUC general-secretary G. Rajasekaran said he could not understand the EPF's decision as other funds such as Tabung Haji, Tabung Perwira and Amanah Saham dividends were more than 8 per cent.

"If the dividend is based on its income, then why were the earnings so poor?" asked Rajasekaran. He said that EPF should have perform better as it has more money and a bigger proportion of contributors compared to other funds. He said EPF must explain the reasons behind such low dividends.

"If they are not accountable to the public, our confidence in EPF will be shattered," he added.

He suggested that the government should allow the establishment of private provident funds to break the monopoly of EPF in collecting the contributions of Malaysian workers to fund their retirement.

"If there is more than one provident fund, the people will have more choice, and the EPF will no longer enjoy its monopoly status. It would then be forced to work harder," he told malaysiakini .

Rajasekaran said the EPF Act allows for private provident funds, but the Treasury had made it difficult to approve such private funds.

According to Federation of Malaysia Consumers Association president Hamdan Adnan, given that the unit trust Asnita offered a dividend of 8 per cent, the EPF's decision to maintain its dividend at 6.7 per cent was surprising.

He said that Fomca would discuss the matter with civil servants union Cuepacs, National Youth Council and MTUC to find out the actual reason behind the move. Both Cuepacs and MTUC are members of the EPF board.

"If the EPF's top management prove to be inefficient in their job, they should resign. It is undesirable for them to stay on as the fund is for us when we retire," he said.

He added that the public do not know what much about the EPF as the body was not transparent in their investments. Rajasekaran said that the MTUC representative on the EPF board could not reveal the reason for the low-dividend decision because all discussions by the board were confidential.

During the recession in the 1980s, EPF was raided to fund certain dubious transactions resulting in the EPF-Makuwasa scandal, causing huge losses to the statutory body. The EPF-Makuwasa scandal came about because the government wanted to recoup the RM600 million losses suffered in a misguided attempt to corner the London tin-market through the Maminco operations in the early 80s.

It is understood that the EPF has offered low-interest loans in the past few years to fund a number of government-linked projects, which draw low income for the fund.

Former opposition leader Lim Kit Siang said that EPF was also used as a ready cash-rich source to bailout troubled companies. He said contributors must exercise the highest vigilance to prevent the use of their funds in the current economic crisis to bailout troubled companies with special connections to the political establishment.

"It has been rightly pointed out that while troubled companies do not want the IMF (International Monetary Fund), they want the EPF," he said. "Therefore, the nine million EPF contributors must ensure that their funds are not used for any such bailouts whatsoever."