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AWSJ AWise: MTUC Irked By Dividend - Will Picket As Planned
By Lynette Ong

9/5/2001 9:27 am Wed

[Jika anda membaca rencana ini anda seharusnya tidak mempunyai alasan untuk tidak berpiket nanti. Perhatikan graf di dalam rencana ini kerana ia membawa seribu arti kearah manakah wang anda telah diperjudi selama ini. Padahal yang mencarum semakin ramai dan yang berhenti tidak pula banyak sehingga perlu jadi begini. Piket MTUC ini harus diberi perhatian kerana ia jarang berlaku dalam negara kita yang terlalu mencengkam kesatuan sekerja ini.

Mengapa KWSP memberi dividen yang terlalu rendah sedangkan dana lain mampu memberi pulangan yang lebih tinggi seperti PNB dan ASN? Rencana ini mendedahkan KWSP selalunya menjadi tumpuan terakhir syarikat (kroni) peminjam yang sudah ditolak oleh bank kerana terlalu bermasalah (sehingga bank pun gerun). KWSP meminjamnya dengan saham sebagai kolateral seperti kes Time Engineering yang mendapat RM500juta. Syarikat ini tidak mampu membayar hutangnya kepada KWSP pada bunga 9% dan KWSP pula dengan bodoh menukar hutang itu kepada ekuiti time dotCom. Akibatnya ia rugi RM100 juta di atas kertas dalam beberapa hari sahaja.

MTUC kesal ketidak telusan panel KWSP yang mengandungi pegawai dari Menteri Kewangan dan Bank Negara yang membuat semua keputusan tanpa merujuk kepada lembaga pengarah. Walaupun MTUC mempunyai wakil dsalam KWSP, mereka tidak dapat berbuat apa-apa kerana tidak berkuasa menegur - mereka hanya menjadi patung hiasan sahaja.

Sikap KWSP ini meremukkan lagi imej keterlusan dan pengurusan koporat dalam negara. Standard and Poor baru-baru ini merendahkan lagi reputasi koporat Malaysia dari 'positif' kepada 'stabil'. - Editor]

Malaysian Union Irked By Dividend

By Lynette Ong, AsiaWise

3 May 2001 12:30 (GMT +08:00)

The Malaysian Trade Union Congress (MTUC), the country's largest trade union, has called on its half a million members to picket the Employees Provident Fund (EPF) offices on May 12. In a country where union power is weak and trade unions dormant, this is something worth paying attention to.

Under the Employees Provident Fund (EPF) mandatory pension scheme, employers currently contribute 12% of salary towards an employee's EPF account, while employees contribute between 9-11% of their monthly salary. The EPF's coffers are now swollen with the accumulated contributions of 10 million workers' forced savings -- about 184 billion Malaysian ringgit, or $48 billion.

Picketers will have a lot to talk about when they gather May 12. Last year's EPF dividend payout of 6% was the lowest in 26 years; then there's the EPF's purchase of TimedotCom shares -- they plummeted after the company debuted last year on the Kuala Lumpur Stock Exchange (KLSE); and the TimedotCom debacle is only a part of the debate about the EPF's lack of transparency and accountability in investment decisions.

The chart below shows the dividend rates of the EPF's payout since 1974. The rate stayed at or above 7% for 20 consecutive years during 1976-96. It rose to an all-time high of 8.5% between 1983-87. The minimum dividend rate cannot be less than 2.5% as stipulated in the EPF Act.

EPF Dividend rate 1974-2000

Source: EPF

The EPF's net income fell from RM10.24 billion in 1999 to RM10.18 billion in 2000 -- this was despite an increase of RM48 million in gross income and a decline of RM26 million in death and disability benefits payout over the period. The difference is the staggering loss in equity investment, which rose by 21% last year.

The EPF invested 22% of its assets in equities last year -- close to the maximum 25% permitted by law. Fund chief Abdul Halim Ali attributes the low dividend payout to the stock market crash in 2000. The KLSE plunged by nearly 50%, from a high of 1,014 in February last year to 589 in April this year -- but other state-backed fund managers managed to pay decent dividends. Permodalan Nasional Bhd., the country's largest fund manager, paid a 7.8% dividend last year and Amanah Saham Nasional paid 8.0% to subscribers.

Diminished stock market returns are only part of the EPF story. The truth is, because of its financial clout, the EPF often becomes a lender of last resort, offering loans to troubled corporations when no commercial bank -- operating on the principle of maximizing shareholder's value -- is willing to lend.

At the height of the 1997-98 financial crisis, the EPF's asset allocation for loans and bonds rose to over 26% from 17% in 1995 in an attempt to rescue many financially-troubled companies which would have otherwise gone under. The EPF often accepted shares of the troubled companies as collateral for loans -- indeed, that was the genesis of the Time problem.

In 1996, the EPF approved a RM500 million loan to Time Telecommunications Holdings Bhd., now TimedotCom, at 9% p.a. The company was unable to meet its loan repayment shortly after and the EPF agreed to take payment for half the outstanding loan in cash and the remainder in equity after TimedotCom's IPO. Priced at RM 3.3, shares were 75% under-subscribed. (They had been priced at the peak of the Internet bubble and judged grossly overvalued.)

The EPF was left with 81.6 million TimedotCom shares totaling RM100 million worth of paper losses. EPF's investment in TimedotCom was widely conceived as an attempt by the government to bail out its parent company Renong Bhd, which was formerly an investment arm of the ruling UMNO party.

The MTUC also bemoans the lack of transparency in the EPF's investment decisions. The EPF Investment Panel, which consists of officials from the Ministry of Finance and Bank Negara, makes the big decisions. But the panel is not accountable to the EPF's 18-member board in which the unions have some representation.

The EPF saga puts the country's already-dented reputation in the spotlight once again for its lack of transparency and corporate governance. Standard & Poor's recent downgrade of Malaysia's credit rating from 'positive' to 'stable' further supports this proposition. Malaysia is not the worst in Southeast Asia so far as corporate governance goes, but it has gone backward, not forward since the '97 crisis. It is going to take more than capital controls to keep foreign investors' money in the country.

The Asian Wall Street Journal
4th May 2001

Malaysian Trade Union Congress
Plans Protest at Pension Fund Office



KUALA LUMPUR, Malaysia -- The Malaysian Trade Union Congress vowed to push ahead with plans to picket the offices of the national pension fund on May 12 after a meeting with Malaysian Human Resources Minister Fong Chan Onn over union complaints about the fund's management ended in a deadlock.

Thursday's meeting was the latest step by the government to avert the unprecedented protest by the MTUC, which represents 550,000 workers in 230 unions. The Employees Provident Fund manages 181 billion ringgit ($42.53 billion or 47.63 billion euros) in retirement funds for 9.7 million salaried Malaysians, who make mandatory monthly contributions to the fund.

"At the moment, there's nothing conclusive" from the government in response to union complaints, MTUC Secretary General G. Rajasekaran said after the meeting. "[Dr. Fong] has not given us any reason to reverse our decision to picket." Union leaders expect the countrywide protest will draw about 50,000 workers.

Earlier this week, Dr. Fong met with EPF management and raised the issue at a government cabinet meeting in a bid to preempt the union picket.

Union leaders had promised to call off the picket if the government agreed to drop a controversial alternative pension scheme administered by private insurers and to rescind a decision by the EPF board last year to reduce a death and incapacitation benefit for workers. The reduction lowered that benefit to a flat rate of 2,000 ringgit from a range of 1,000 ringgit to 30,000 ringgit.

The union also wants the EPF to make it easier for workers to increase their monthly contributions -- currently set at a minimum of 9% of wages -- if they wish to do so. Dr. Fong said an agreement had been reached on this point, but said he could only offer possible compromises on the other two issues.

"We decided to focus on these three issues, provided they agreed to talk about the others later. But we didn't even get far on these three," Mr. Rajasekaran said.

The MTUC has also complained about a perceived lack of transparency and accountability in EPF investment decisions, which are made by the pension fund's investment panel. Union representatives have five seats on the EPF's 18-member board, but the MTUC is demanding that labor representatives hold at least half the board's seats.

The fund's investment practices came under fire in March after the EPF took a 3.22% stake in Time dotCom Bhd., a telecommunications company controlled by the politically influential Renong Group. The EPF agreed to take most of that stake as partial repayment for a 500 million ringgit loan the fund made to Time dotCom's parent, Time Engineering Bhd., in 1996. The loan wasn't repaid.

To compensate for the bad loan, Time Engineering agreed to repay half the loan in cash and half in the form of 78.7 million Time dotCom shares valued at their initial-public-offer price of 3.30 ringgit each. The EPF also bought another 2.85 million Time dotCom shares in January under a restricted sale offer in the run-up to the IPO in March.

Time dotCom's IPO was 75% undersubscribed and its stock price has plunged about 35% since its shares began trading, reducing the value of the EPF's investment by about 100 million ringgit on paper.

Write to Cris Prystay at