Is there a sinister move to privatise the EPF?
Over the past one year or so, there has been a concerted attack by an
Opposition MP with strong US links to attack the management and
reputation of the EPF.
On the face of it, it may look like a normal opposition exercise
where the government and key government institutions are being attacked,
to disturb and distract the smooth functioning of the economy.
However, certain connected factors now seem to be emerging, which
when put together, suggests that the effort may be linked to a broader
strategy of privatising the EPF, and handing over of the management of
EPF funds to private parties.
A recent article by a well-known economist had pointed out, that for
years, there has been a demand that the EPF, being the largest source of
funds in the country, should invest in the stock market. Perhaps in
response to those regular calls and in keeping with EPF's evolving
investment strategy,there have been investments made by the EPF in the
stock market since the early 2000's.
From about 2009, the pace of these investments in the stock market
had accelerated, and it is seen that the EPF has now built up a sizeable
portfolio with considerable long term value, although prices may be
depressed at the current time.
Whilst this gradual accumulation of shares by the EPF was taking
place, some international fund managers, may have got wind of new
opportunities of managing a fund of this size and nature, and therefore
quite naturally,some of them have been known to be lobbying in various
informal groups to obtain a piece of this investment action.
However such a "hand over" of the investment function by the EPF to
outside foreign parties did not seem to be forthcoming, and the EPF
appeared to be quite content to handle its own investments.
As a result, a new strategy seems to have been developed during the
past year or so, by some of these interested parties to wrest control
the EPF funds from the Monetary Board and entrust the funds to
outsourced private sector parties, for management.
This new strategy seems to involve an informal lobby by a few
connected persons in certain business circles, while simultaneously a
parallel cry that the EPF is mismanaging its funds is being raised by a
vociferous group led by an Opposition MP closely connected to the US.
The fact that the EPF has been delivering substantial returns, which
have been well over the rate of inflation and much higher than that
credited by other similar funds during the past five years, has been
conveniently ignored, and these groups have since been relentlessly
pursuing their goal of discrediting the EPF. In the meantime, around
September 2011, a well-known US based consultancy firm, Mckinsy and Co.
had been given a consultancy assignment, said to be worth over Rs.150m
by the Colombo Stock Exchange, to propose strategies to broaden the
retail participation in capital markets and build a stronger unit trust
industry. This consulting firm has produced an action plan in December
2011 which sets out what they call "three key transformational themes".
Interestingly, but not surprisingly, the most important theme set out
by them is to outsource the current in-house portfolio management of the
EPF and ETF to private sector unit trusts.
Although this revolutionary idea has been mooted rather openly by a
well-known consulting firm, it is likely that those who were seeking
this outcome would have realised that this so called transformation was
not going to take place easily, given the stance of the present
Government.
In that background, those who were plotting such a move behind the
scenes,may have come to the conclusion that this transformation as they
call it, could take place only if sufficient pressure was brought upon
the Government and the Monetary Board,through a systematic allegation of
mismanagement of EPF funds, coupled with a call for a change in
management by influential agencies.
That may perhaps explain why, after the report of Mckinsy and Co. was
issued in December 2011, the attacks on EPF have been stepped up, with
the effort being spearheaded by the US linked, anti-China, Opposition
MP.
The suspicion that has now arisen is, as to whether these constant
attacks on the EPF are a part of a broader plan set in motion by certain
foreign interests to wrest control of the largest Fund that is owned by
the people of this country, which accounts for about 20 percent of the
country's financial sector.
Another factor that may merit consideration is that the management
fee which is normally charged by a unit trust or a fund management
company to manage a fund like the EPF is around 2 percent of the fund
value. On that basis, since the value of the EPF is now known to be over
Rs.1,000 billion, those who are planning this move may also be having
visions of pocketing around Rs.20b or $ 150m per annum, as their fees,
as well. Needless to say, those who may have laid plans for an exercise
of this nature, would not hesitate to handsomely compensate any persons
who engineer such a lucrative deal for them.
That is why,j just like terrorist links were investigated, this type
of suspected underhand economic attack must now be seriously inquired
into, so as to ascertain whether there is a connection between the
attacks on the EPF and the attempt to outsource the management of EPF
funds to private parties.
In these circumstances, all stakeholders must now be highly vigilant
about the efforts of these vociferous persons who may be the cat's paw
to carry out a sinister contract to transfer control of one of the
largest national assets that has been carefully safeguarded for over 50
years, to private parties with vested interests.
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