DAP Calls for new accountability, transparency and good corporate governance in EPF starting with the appointment Of A MTUC representative on the  EPF Investment Panel

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Speech (2) on the Finance Ministry during the 2006 Budget Committee stage

by Lim Kit Siang  
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(Parliament, Thursday): Bank Islam suffered pre-tax losses of RM700 million with after-tax losses recorded as  RM 456 million for the financial year ending 30 June 2005 as compared to RM85.7 million profit last year.

This  shows not only a distinctive pattern of poor corporate performance and declining economic growth but also lack of internal control and proper regulation by Bank Negara.

What is wrong with Bank Negara’s supervisory capacity when non-performing loans in Bank Islam can rise nearly 150% to RM 2.2 billion from RM 900 million last year. To suddenly record non-performing loans of RM2.2 billion as compared to RM 900 million in 2004 shows that not only Bank Islam but Bank Negara requires a revamp and shake-up.

Bank Islam has confirmed that much of the bad loans were given out to companies in Sarajevo and South Africa, but the main branch responsible for disbursing such loans was the Labuan off-shore branch. This does not give a good impression of the Labuan Off-shore Finance facility efforts to attract genuine investment and not involved in dubious financial transactions.

Public interests demands that those responsible for the losses and bad loans to jump to RM 2.2 billion must be identified, exposed and punished. Clearly too much money was lent to less credit-worthy borrowers, and the bank didn't chase for payment.

DAP calls for the Appointment Of  MTUC representative as member of  EPF Investment Panel

The time has come for a new EPF accountability, transparency and good corporate governance starting with the appointment Of A MTUC representative on the  EPF Investment Panel.

MTUC represents the workers in the EPF Board. However there is no MTUC representative in the EPF Investment Panel, which is the main body deciding on how much of the hundreds of billions of EPF Funds and on what to invest. For such major investment decisions to be made without a workers’ representative, is unacceptable and irresponsible because there is no respect, no accountability nor transparency to workers.

DAP calls for a prudent and responsible assessment of investment policies by EPF, especially its stated intention to invest overseas. Public confidence in the competence and ability of EPF was seriously affected when EPF declared a dividend of only 4.75% last year, a rise of only 0.25% compared to the 4.5% dividend of 2003.

There is no economic rationale or logic that EPF could declare a dividend of 4.5% when the economic growth rate was 5.3%, a variance of only 0.8%, but not declare a higher dividend of at least 6% when the economic growth rate had improved to 7.1%.  In other words, why increase the dividend rate by only 0.25% when the economic growth rate had gone up by almost 2%?

Clearly the weaknesses and problems within EPF must be identified and dealt with immediately. To protect the interests of all Malaysians who are contributors towards this fund, DAP calls for the establishment of a Special Committee of Inquiry to resolve these problems.  After all how can EPF not record high dividends when it is allocated blue-chip shares, good investment opportunities that is both low-risk and high earnings returns.

Malaysia Building Society Bhd’s (MBSB) Dismal Financial Performance And RM 1 Billion Losses.

One of the reasons for EPF’s poor investment returns are due to EPF’s involvement in questionable projects and bad loans given out by its 63% owned subsidiary, Malaysia Building Society Bhd (MBSB). MBSB is notorious for giving huge loans to political cronies and well-connected companies of BN such as to the failed Perwaja plant. In Melaka alone, such bad loans by MBSB amount to more than RM 150 million.                                

Non-performing loan by MBSB reached a high of RM 4.45 billion in 2002 and is at RM 4.33 billion in 2003. No wonder MBSB achieved the dubious distinction of having the highest non-performing loan ratio of 62% amongst all banks in the country, against the banking average of 7.4% in 2002. MBSB lost almost RM 1 billion in profits from 1998-2002, reducing its shareholder funds of RM 1.1 billion to only RM 70 million.

If the government is serious about ensuring a prompt, efficient and effective delivery changes, the EPF Board and Investment Panel must be completely overhauled and revamped. 

Why Bank Negara wasting RM320 million of public funds to build the Financial Services Resoruces Centre (FSRC) when there are so many buildings in KL to be bought and refurnished at much cheaper prices

The controversy surrounding the FSRC building is not limited to Bank Negara’S surprise decision to award the RM320 million contract to a little-known company, H & I Niaga Sdn Bhd. Bank Negara needs to explain why it is wasting RM 320 million of public funds to build a new FSRC when there are so many empty buildings in Kuala Lumpur to be bought and refurbished at much cheaper prices.

According to Bank Negara, the FSRC is a knowledge and training centre, a Money Museum and the Bank Negara’s art gallery. Is there any need to put so much resources into a showpiece whose real rate of return or contribution to the nation’s economy, corporate governance and accountability, regulation of the banking system for the benefit of ordinary consumers is most limited?

On Sept 16 Bank Negara said the successful tender of the FSRC was selected through a rigorous evaluation process based on competitive pricing and expected to be completed in 2007. In a statement on Oct 17, the central bank said the criteria to award the contract included the tender price, track record, financial capability, quality as well as technical and commercial capabilities of the team that was put together to complete the project.  

To-date, Bank Negara has not explained the reasons behind the selection of the company over other big time contractors including publicly listed companies such as  Ahmad Zaki Resources Bhd, PECD Bhd, UEM Builders Bhd and Ranhill Bhd or practiced transparency by stating the tender prices bid? Such secrecy is also practiced by H&I Niaga Sdn Bhd.

Apart from the company being owned by one Amerudin Ismail (two million shares) and Ismail Mohd Hashim (three million shares), little is known about the company. The company has not filed profit and loss accounts with the Companies Commission of Malaysia since 2002. Its last submitted accounts for the financial year ended Dec 31, 2001, which showed that it had bank charges of more than RM40 million, while its net profit was RM14,500. How could Bank Negara award a RM 320 million contract to a company that had not submitted its profit and loss accounts for the past three years of 2002, 2003 and 2004 to the Companies Commission Malaysia?

Most important of all, Bank Negara must explain and justify the rationale and benefits to the public of spending RM 320 million on building a new FSRC, which is essentially a conference centre and art museum, and NOT choose the cheaper option of buying over the many empty buildings around Kuala Lumpur.

 
(27/10/2005)