Fiddling with the EPF and ETF

by Uditha Kumarasinghe

The EPF and ETF are progressive milestones in the well-being of the worker population. Today the EPF and ETF funds amounting to Rs.1.7 trillion, the largest fund in South Asia is administered by the Central Bank and the Ministry of Policy Planning and Economic Affairs.

The government has now proposed to set up a EPF-ETF combined National Pension Fund. The government probably wants to make it a more nationally productive enterprise helping beneficiaries and also a boost to the national economy. Meanwhile, certain sections of opposition political parties have raised objections on irrational grounds. The government has given a firm undertaking that it would implement the proposal only after extensive discussions with stakeholders.

Economic Policy Statement

Prime Minister Ranil Wickremesinghe presenting the government's Economic Policy Statement in Parliament on November 5 assured to take measures to secure the funds in the EPF and ETF and added that both these funds will be amalgamated to create a new National Pension Fund that will have a combined worth of Rs. 1.7 trillion. The Premier also said the government will not leave room for politicians and officials to waste resources of this new pension fund as they did with the EPF/ETF funds. The Constitutional Council will appoint a board of trustees for the Fund and a committee consisting of members of civil society, trade unions and chambers of commerce will supervise.

Accordingly, the changes in governments or ministerial positions will not affect these measures so that the funds belonging to the people will not be squandered. However, some opposition politicians and trade unions alleged that the government was trying to take control of this massive amount of funds under the cover of introducing a pension scheme for private sector employees.

Dismissing speculation, Deputy Minister of State Enterprise Development Eran Wickramaratne told the Sunday Observer the government has only put forward a policy statement and it has to be extensively discussed .The EPF and ETF are retirement funds. The only issue is they were managed by two seperate entities. These funds can be managed separately or can be put together. Therefore, the issue here is a management issue

People assume it is safe when their funds are in the custody of the Central Bank. But if you look at the records of the past few years, EPF investments have been made which which were detrimental to the interest of the owners. Normally, retirement funds are put into safe investments such as blue-chip companies. Despite this fund being under the Central Bank, it has not been managed in the best interest of workers. There is a conflict of interest with the Central bank managing these funds. The contention is that the Central Bank is the agent which mobilises government debt. The objective of the government is to mobilise debt at the lowest possible interest rate.

On the other hand, the Central Bank handled employees' funds and the people have really lost the market value for their EPF funds. At present, we are managing two conflicting objectives. The present proposal is to avoid that conflict and have an independent management authority. That is what the Prime Minister also proposed in his policy statement.

According to Deputy Minister Wickramaratne, the proposed management authority would be fully independent and its directors will be appointed by the Constitutional Council which will also be monitored by the Public Trustee. The Board of Directors will also include a worker representative.

Proposal

This proposal has been put forward for the betterment of the employees and make sure that they get the highest return. Therefore, lots of checks and balances are in place. The proposal put forward by the Prime Minister is progressive to safeguard the value of the funds of workers and wil enable the best returns. UPFA Parliamentarian Bandula Gunawardena is misrepresenting the facts. I would like to ask MP Gunawardena where he was when the Rs.500 million EPF funds were invested in Mihin Lanka. Former Ministers such as Gunawardena are now trying to sound like they are the great protectors. We have not made any changes to the EPF or the ETF. We are only putting forward a better proposal for public discussion.

LSSP Leader Prof.Tissa Vitarana said the LSSP is opposed to the move to take away the EPF and the ETF from the Central Bank and the amalgamation to be done by a private company which will thereafter be given the task carried out by the Central Bank. The Central Bank has been handling the EPF in a professional and efficient manner to the satisfaction of workers and trade unions. They have not made any request for change or have not pointed out shortcomings since the EPF was introduced by the then Labour Minister T.B. Illangaratne in 1958. There is no rationale for this change.

Prof. Vitarana pointed out these funds can be used at various stages when the government is faced with a liquidity crisis and this would again can lead to an uncertain outcome. The LSSP is opposed to any move to take the EPF out of the Central Bank. The government should come up with concrete proposals which would be discussed transparently with all stakeholders, particularly with trade unions and representatives of the workers. The present government has placed itself in a position where the IMF and the World Bank can control our policies. Since the present government took over from former UPFA government in January this year, foreign exchange reserves which were US$ 8.3 billion have come down to US$ 6.2 billion.

MEP Leader Dinesh Gunawardena told the Sunday Observer that the government's argument to amalgamate the EPF and ETF lacks credibility. When EPF and ETF funds are with the Central Bank, the people have faith that ii is in safe hands. We are not cannot comment on any shortcomings or disadvantages of the move, as the government is yet to present the details of the amalgamation. The government can dance according to the whims and fancies of the IMF, World Bank or any other international agency, but they have a responsibility towards the people. We have learnt enough lessons in the international arena, on the chaos and collapse of monetary and financial systems due to the advice of international monetary agencies. The government's revenue has dropped and it doesn't have a clear policy. Now they are trying to tap the resources of the working class which is kept safe to be used later by employees.

Positive move

A pension scheme for all is a positive move which even the Rajapaksa government proposed which was opposed by the then Opposition. We are still to see the draft proposal which can be worked out without touching the resources of the workers.

The former Chairman of the parliamentary watchdog:the Committee On Public Enterprises (COPE) D. E. W. Gunasekara said he doesn't know what the rationale is to amalgamate the EPF and the ETF, while taking away the EPF from the Central Bank.

The EPF-ETF have funds amounting to over Rs. one trillion and attempts to get the funds out of the Central Bank's control is wrong. The government says when these funds are in the Central Bank, there is a conflict of interest. ers would get a better rate of interest.

The move to amalgamate the EPF and ETF and move funds out of the Central Bank's supervision wasn't acceptable. Most feel that the Central Bank was the least corrupt state institutions. However, government legislators talk about political interference with the Central Bank.

We will have to ask from the government whether there will be no such meddling with the new institution that is going to be set up. The Board of Directors administering the fund are to be appointed by the Constitutional Council and the Communist party veteran queried as to whether the members appointed by the Constitutional Council will be independent.

Refuting allegations levelled by certain sections, Parliamentary Reforms and Media Minister Gayantha Karunatilake said that the proposed National Pension Fund with EPF-ETF amalgamation has been contemplated by the government in the larger interest of the worker population.

There is no finality reached as yet and discussions are being held with the stakeholders, mainly trade unions. The Opposition for the sake of opposing every progressive government legislation are back in their old game. Whatever decision is made will be in the interest of the working people's.