Tuesday, July 28, 2009

No! Not From The EPF Please!

Saw this in Malaysian Insider: KUALA LUMPUR, July 28 — A government agency which is administrating two schemes under the first economic stimulus package is in talks with the employees’ pension fund for a RM5 billion, a business daily said.

The Malaysian Reserve, citing an unidentifed source today, said the Employees’ Provident Fund (EPF) was ready to fund the loan at an undisclosed rate to Prokhas, the government-owned special purpose vehicle.

The source added that Prokhas was also looking at other financing options including government bonds, private debt securities or a term loan that may give more competitive rates. Malaysia announced its first stimulus package of RM60 billion in March to shore up the export-reliant economy against the global economic crisis.


Prokhas manages two schemes under the package and was allocated 5 billion ringgit each, known as Working Capital Guarantee Scheme and the Industry Restructuring Loan Scheme, which is under the Ministry of Finance.

EPF’s talks with Prokhas may draw some criticism, as loans to government agencies and corporations have in the past been called bailouts for poorly performing local companies by critics and the resurgent opposition.

In 2008, the government said it would transfer RM5 billion from the EPF to state owned fundmanager Valuecap to be invested in undervalued Malaysian stocks. — Reuters


I can understand, even though I may not fully support EPF's role in lending to Valuecap, it is still a legitimate usage of funds to invest in equity. The rumours that Prohas is asking for RM5bn from EPF needs to be stopped even before it gets to Najib's desk. Past experiences have told us that the majority of loans to government agencies and corporations did not have a happy ending. History will tell us that in the end, the government will end up making up for the losses, in this case when EPF loses money on the RM5bn causing the public to be in total disgust.

People can understand why they lost money when its in stocks. People will not be so understanding when its used as Working Capital Guarantee Scheme and the Industry Restructuring Loan Scheme. There have been many great and long serving public servants, making damn sure over the decades that the EPF remains an institution of integrity, where the contributors' savings can be managed responsibly for their retirement. DO NOT undo the decades of disciplined investing philosophy by "forcing" EPF to do this - working capital guarantee and loan restructuring... certainly not EPF's forte, and neither do I think Prokhas has an edge in doing this. There is no guarantee of a return, its corporate restructuring, recovery, rehabilitation, valuation & disposal, breakup value assessment, etc .... certainly not EPF's normal mode or channel of investments.

EPF can and should only expose itself to a certain kind of risk (and its usually very very low). What risk are we exposing EPF to when it starts to "lend" this RM5bn?

Even if Prokhas can get the government to guarantee EPF's money and even a decent return... guess whose money is the government using to repay EPF??!! Its still our money. Just because we use different terminologies or canisters, it does not mean the money somehow does not belong to the people. I hope this will remain as just rumours.

If the scheme is solid and has the structure to stand on its own, go raise the funding from overseas banks. Why I don't see the Japanese, US or European banks and investment bankers lining up for this??? If this can only be "sourced locally", ask ourselves why... don't kid ourselves. If the foreign banks will not fund this, ask why. This is NOT to say we should not do this... in fact I think we should... but don't la play-play with EPF's money, its not a standby ATM-piggy bank for all to rape.

Dudes .... please...

p/s photos: Stephy Tang Lai Yan


Richard Cranium said...

Prokhas(anagram "Has Pork") will fund all the porkbarrel projects in those marginal BN areas.

Perhaps they might have another of those "tikam" sessions where contractors come up to the stage and ballot for projects?

Calling them fancy names is not an assurance that such funds will be applied judiciously.

This is THE ONE REASON I don't contribute to EPF since the eighties. All my fees are "contract" payments.

Present Value said...

EPF - it is a fund for retirement of most working adults in the private sectors.

Now that our fund is being fleeced and we must PROTECT our hard earned $$$ for the next few decades.

EPF must not be a "lender" other than to the Govt directly. It has to invest its funds entrusted to it by the millions of Malaysian responsibily and with a long term view REGARDLESS the Govt of the Day!!!

Most people can only withdraw their retirement portion in about 25-30 years from the time they start work....and it will be too late for the folks to realise its depletion in value let alone the devaluation of RM/purchasing power parity.

STOP using the EPF fund for Economic Stimulus packages...unless the Federal Govt can be for certain that it needs the RM5billion to built a new LRT line for the public with guaranteed minimum rate of return.

Hungry Moo said...

If you check out the Prokhas website (News section), it claims that "a total of RM2.69 billion had been realized into cash/bank guarantees as at 31 December 2008" from managing the Residual Recovery Assets on behalf of the Government (after Danaharta wound down its operations). With this much cash in hand, why is there even a need to borrow the entire RM5 billion? I totally agree with you that the EPF should not be used as the Government's piggy bank.

Chowpiao said...

Reuters at 5pm announced that EPF denied this and Prokhas also denied that they needed funds....hmmm.....no comments! (That's a comment already)