EPF home loan scheme at standstill

KUALA LUMPUR, March 5 — Putrajaya’s controversial plan to lend an initial RM300 million from the Employees Provident Fund (EPF) to unqualified homeowners in the capital has hit a deadlock over security conditions demanded by the country’s largest pension fund.

The Malaysian Trades Union Congress (MTUC), the umbrella body that represents 800,000 workers from 390 labour unions, told The Malaysian Insider that negotiations between EPF and Kuala Lumpur City Hall (DBKL) have stalled since early this month.

“EPF chief executive Tan Sri Azlan Zainol told me that DBKL cannot agree to these conditions. We were briefed on February 16 on the proposal and up to now, there have been no developments,” MTUC secretary-general Abdul Halim Mansor said.

According to MTUC president Khalid Atan, EPF has insisted that 25 per cent of the loan must be held in security by the pension fund while land titles must not be handed over to the 20,000 city dwellers who are still renting and unable to borrow from banks until they have serviced 20 years of the EPF loan.

However, Khalid said he was unclear over the function of the 25 per cent security as “we have not seen the actual black-and-white proposal.”

“Although we sit on the board, the investment panel appointed by the Finance Ministry handles negotiations and decides on EPF’s portfolio,” he said of the fund which is worth nearly half a trillion ringgit.

The EPF had said on February 8 that it is in talks with the federal government but a deal has not been inked for the initial sum of RM300 million to be loaned to a special purpose vehicle linked to the Federal Territories Foundation (FTF).

The foundation is directly controlled by Federal Territories and Urban Well-being Minister Raja Datuk Nong Chik Raja Zainal Abidin.

It is unclear why DBKL has refused to accept the conditions but handing over land titles to city dwellers before elections that must be called by April next year would boost the ruling Barisan Nasional (BN) in the capital where it won just one of 11 seats in Election 2008.

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EPF home loan scheme at standstill
March 05, 2012 – TMI

Nong Chik, answer for EPF housing loan fiasco

Permas is totally shocked and disappointed with the recent statement by the Federal Territories and Urban Wellbeing Minister Raja Nong Chik Raja Zainal Abidin who announced that the Kuala Lumpur City Hall (DBKL) is offering low cost housing loans to low income earners from a funding of up to RM1.5 billion obtained from the Employees Provident Fund (EPF).

It is very obvious that the federal government seems to have run out of ideas to tackle the issue of housing for the poor. The people’s savings stored in the EPF has become the scapegoat of the Minister Raja Nong Chik and the federal government in their bid to try and fulfill promises of housing for the poor, or perhaps is it a sad but risky ploy to buy favour and votes from the rakyat?

Point 1:

We recall clearly that this same minister was reported in the Malay Mail dated July 19, 2010 to have said that Prime Minister Najib Razak had instructed Bank Negara to take the initiative to ensure the banks assist the interested buyers and that a meeting was held between the ministry, DBKL and bank institutions resulting in nine major banks expressing they were willing to partake in the effort. The minister had further announced a special fund would be set up, backed by these selected banks and that the Credit Guarantee Corporation was willing to act as a guarantor for their housing loans.

Raja Nong Chik was also reported to have said that, “There should be no cause of concern for the banks to provide financial assistance to the PPR flat buyers as this is a secured asset.” And that the ministry would also continue to monitor the development between loan-applicants with the banks on this matter.

Permas questions the sudden turnabout of decision of detracting the responsibility of bank loans from these nine banks to the EPF. Is it because these banks who had agreed to partake in the special scheme pulled out and the government had to resort to desperate measures to fulfill what was promised one and half years ago?

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Nong Chik, answer for EPF housing loan fiasco
Tan Jo Hann
Feb 12, 2012 – Malaysiakini Letters

Filthy paws in EPF pool

FMT

The EPF has become a convenient tool to finance the bad dreams of crooked politicians in power.

The Employees Provident Fund (EPF) is a cash cow with billions in its coffer. To be more accurate, it has about RM407 billion, which easily makes it one of the largest funds in the world. All this billion represents the collective sweat and toil of the 13 million members. They contributed to the huge pile through compulsory deduction of their monthly salary. The money does not come from business ventures. This is a social security organisation and not a profit-making company.

But over the years, this growing gold mine began to attract the eyes of rapacious politicians in power. They saw in EPF a useful medium to bail out ailing companies. They began to put their hands in the pot and draw out huge stacks to invest in the stock market. Some RM5 billion was reportedly dumped to “shore up Bursa Malaysia” to mitigate the “effect of a global economic meltdown” a few years ago. In reality, the money was used to save a badly-hit company.

Soon the EPF tap was turned on more often to help other troubled government-linked companies and political cronies. What was once the property of the millions of workers became practically the sole ownership of the greedy government. It now sees the mountain of cash as its personal piggy bank – to use and abuse according to its whims and fancies. EPF loans were given out like nobody’s business and all shrouded in secrecy. It is estimated that some RM55 billion worth of loans were approved “without any government guarantees”. The hard-earned savings of the innocent public had disappeared into the maw of the money-grubbing crooks.

With a general election drawing near, the political masters have yet again dipped their filthy paws into the cornucopia. This time they want to champion the welfare of the poor to make themselves look good. They proposed taking out RM1.5 billion from the EPF cash machine to help finance a housing scheme for the urban low-income earners. The risks involved in this undertaking were ignored. The decision-makers must surely be motivated by pure altruism. But scratch the surface and what do the people see beneath this layer of generosity? A devious attempt to buy the loyalty – and the votes – of the urban poor. Using EPF money for a political purpose is tantamount to committing a grievous crime against the interests of the workers.

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Filthy paws in EPF pool
February 10, 2012 – Hornbill Unleashed

Pakatan: EPF housing loans bid to hide debt

Pakatan Rakyat today charged that the government’s move to use RM1.5 billion from the Employees Provident Fund (EPF) for a low cost housing loan scheme as an attempt to hide its national debt.

In a joint statement by Lembah Pantai MP Nurul Izzah (right) and Petaling Jaya Utara MP Tony Pua, the duo said the move was unusual as welfare programmes are normally funded through tax revenues or by issuing bonds.

“We can only conclude that the government did not want to borrow directly from EPF, and passed the buck to EPF to lend directly to the low-cost housing purchasers because the government does not want to further increase its much criticised and already high debt levels.”

The national debt, they added, had reached RM456 billion at the end of 2011, an 88.4 percent increase from 242 billion in 2006.

“Instead of issuing debt papers, the Finance Ministry is attempting to hide its debt exposure by issuing government guarantees instead.

Risking financial crisis

The scheme that the government has proposed asks the EPF to set aside RM1.5 billion as loan to those who fail to secure bank loans for low cost housing purchases.

The loans will also be ‘guaranteed’ by the federal government, which means the amount will not be reflected as an increase government debt, said Pua and Nurul Izzah.

“In the event that some of these guaranteed loans go into default, then the federal government will be directly exposed to the debt and this will trigger a debt induced financial crisis in Malaysia.”

For example, they said, the government’s guarantee for RM3.6 billion Port Klang Free Zone has resulted in the government having to extend at least RM4.6 billion in loans to bail out the project.

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Pakatan: EPF housing loans bid to hide debt
Feb 6, 2012 – Malaysiakini

RM1.5 billion EPF funds abused by MoF for low-cost housing

Joint Media Statement by Nurul Izzah Anwar, PKR Vice-President and
Member of Parliament for Lembah Pantai and Tony Pua, DAP National
Publicity Secretary and Member of Parliament for Petaling Jaya Utara

The abuse of EPF to extend soft loans to low-cost housing purchasers is a blatant attempt by the Ministry of Finance to circumvent the need to add to the Federal Government debt

What appears to be a routine and noble scheme to assist the poor who are unable to secure bank financing to purchase their low-cost housing units has stirred controversy ove-r how the Employees Provident Fund is being abused by the Federal Government for political motives.

Under normal circumstances, any welfare programmes will be funded by the Federal Government through its tax revenues. In the event that tax revenues prove insufficient, the Federal Government may issue bonds to raise money to finance its deficit expenditure. Again under normal circumstances, EPF could subscribe to the bonds issued by the Federal Government, hence in effect lending to the Federal Government.

It is hence extremely odd that the Minister of Federal Territories and Urban Well-Being, Datuk Raja Nong Chik Nong Raja Zainal Abidin announced that the Employee Provident Fund will be extending RM1.5 billion in loans directly to those who failed to secure commercial loans to purchase their houses.

The difference between the two approaches is that the Federal Government is considered a low-risk borrower and hence the contributions by Malaysian workers to the EPF are considered safe, while the loans to those who failed to obtain commercial housing loans
are considered very high-risk borrowers.

We have over the past week attacked the Government for putting EPF funds at risk. However, the fact that the Government could have easily circumvented the entire controversy and still achieve the objectives of helping the poor by issuing bonds to the EPF, arouses suspicion that something is amiss.

We can only conclude that the Government did not want to borrow directly from EPF, and instead passed the buck to EPF to lend directly to the low-cost housing purchasers because the Government does not want to further increase further to its much criticised and already high debt levels. The Federal Government debt has reached RM456 billion as at the end of 2011, which is a 88.4% increase from RM242 billion 5 years ago in 2006.

Will our debt levels expected to increase significantly in the next year as a result of massive infrastructure projects such as the RM53 billion Klang Valley MRT, the RM7.1 billion West Coast Expressway, the Ministry of Finance (MoF) is attempting all means to reduce its debt obligations.

Instead of issuing debt papers, the MoF is attempting to hide its debt exposure by issuing Government guarantees instead. Therefore, the EPF is being asked to lend RM1.5 billion to those who failed to secure loans from banks, and the loans will be in some form “guaranteed” by the Federal Government. This way, the RM1.5 billion will not be reflected as an increase Federal Government debt.

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Nurul Izzah Anwar & Tony Pua Media Statement on RM1.5 billion EPF funds abused by MoF for low-cost housing
6 February, 2012

Loan scheme for unqualified home buyers violates EPF Act

KUALA LUMPUR, Feb 4 — Putrajaya’s plans to use RM1.5 billion from the Employees Provident Fund (EPF) to give home loans to unqualified buyers is in breach of the EPF Act 1991, which sets out permissible investment activities for the fund, Tony Pua said today.

The DAP publicity chief said that while the EPF may lend to money to federal and state governments, corporate bodies and even members of the fund to buy or build a house, it cannot provide loans to individuals for the purposes of acquiring low-cost apartments using the property as collateral.

Pua said the EPF is not a lender of last resort for the poor. — File pic
“The fund is committed to preserving and growing the savings of its members in a prudent manner in accordance with best practices in investments and corporate conduct.

“Therefore, the EPF is not a lender of last resort for the poor and neither is it a social welfare organisation,” he said in a statement.

Pua also dismissed Federal Territories Minister Raja Datuk Nong Chik Raja Zainal Abidin’s assurance that the transaction was guaranteed by Kuala Lumpur City Hall (DBKL), noting that the loans would be made out directly to property owners who may or may not have contributed to the EPF.

The Petaling Jaya Utara MP said that if the low-cost properties were collateral-worthy due to their market price being higher than the purchase price — as the prime minister has claimed — the loans could easily be made via commercial banks instead.

“If DBKL is able to provide the guarantee, and the guarantee is even ‘better than normal corporate property’, then surely, banks will be rushing to provide the loans and not shy away from them…,” he said.

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Loan scheme for unqualified home buyers violates EPF Act, say Pakatan reps
February 04, 2012 – MI

Govt abusing EPF to fund home loans

KUALA LUMPUR, Feb 1 — A plan to pipe RM1.5 billion from the Employees Provident Fund (EPF) into a scheme offering home loans for those who cannot qualify for bank assistance has sparked outrage from a DAP MP.

Tony Pua called the Barisan Nasional (BN) government’s move an abuse of public funds for political reasons.

The opposition Pakatan Rakyat (PR) lawmaker was responding to news reports that quoted Federal Territories and Urban Well-being Minister Datuk Raja Nong Chik Raja Zainal Abidin as saying the funds will be used to help some 20,000 people who are still renting in the city to buy homes under the Federal Territories Foundation.

Pua said he supported the government’s move but questioned its motive in resorting to money from the EPF, which is to safeguard the retirement funds of its 11 million members.

“The EPF is not a lender of the last resort for the poor and neither is it a social welfare organisation,” he said.

“By setting a precedent for it to be used as ‘social welfare’, the EPF could in future be further abused to finance political programmes to win votes under the guise of the same,” he added.

He pointed out that channelling RM1.5 billion of workers’ hard-earned cash to house-buyers whom the government has said were unable to secure loans from banks “will only jeopardise their retirement funds and is clearly an abuse by the government.”

“If the housing unit is indeed a credit-worthy collateral, why can’t commercial banks take it as a collateral? Why are EPF funds being mobilised for housing loans?” Pua pressed further.

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Putrajaya abusing EPF to fund home loans, says Pua
February 01, 2012 – MI

Should BN be allowed to treat our EPF money as their personal kitty?

…
Malaysia has not learned from history and from the events in other countries. The Greek financial crisis is the latest economic blunder that can happen to Malaysia. Apart from Greece, other unscrupulous and rogue governments include Ireland, Mexico and Russia. Like Malaysians, their citizens stand to suffer. The next country could be Italy but Malaysia is surely one disaster in the making, as Minister in the PM’s Department Idris Jala has admitted.

Malaysia’s Employment Provident Fund has always been used as a source of capital for businesses and investments all over the world by the BN government. In fact the EPF has always been active in investing contributors’ money in many financial activities over a wide spectrum, partly to play safe and in the end, to divide the gains amongst the contributors. As prudent practice, the EPF should never put all its investments in one basket.

Now with the recent revelations by Husam Musa of PAS that besides the loan EPF’s of RM79.4 billion to the Federal government, as revealed by deputy finance minister Awang Adek Hussin, there are other security and federal government bonds purchased by EPF. Husam further said that “As far as I know, if the security and bonds are totalled, EPF’s loan to the government debt will be a whopping RM240billion!”

And this is not all. The figure is not inclusive of the EPF’s loan to government-linked companies. What the total figure actually is, is anyone’s guess!

Anyway, based on RM240billion, Husam concluded that 52.6 percent of the Federal government’s debt amounting RM456 billion in 2011 was actually from EPF. The government has also not been able to reduce the national debt as the amount for 2010 is RM407 billion.

Besides servicing the EPF loans, which surely should not be granted interest free, the government also has to pay pension for retired civil servants or at least gratuity upon retirement. Where would the money come from when the government has not created any specific savings for this or invested or created some sort of mechanism in which to disburse the money to the pensioners? Can it even service the EPF interest, let alone repay the loans.

In the yearly budget, the government has to state the amount of pension money and gratuity, and obviously this will have to be borrowed from somewhere. And the easiest would be from the EPF. So, there goes our retirement fund.

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Should BN be allowed to treat our EPF money as their personal kitty?
2 December 2011 – Malaysia Chronicle

More to it in EPF’s loan to Federal govt

PAS vice president Husam Musa has queried the Employees Provident Fund’s loan of RM79.4 billion to the Federal government, as revealed by deputy finance minister Awang Adek Hussin.

“Has this figure taken into account the other security and federal government bonds purchased by EPF? As far as I know, if the security and bonds are totalled, EPF’s loan to the government debt will be a whopping RM240 billion!” Husam said in a statement.

He pointed out that the figure of RM240 million had yet to include EPF’s loan to government-linked companies.

Based on RM240 million, Husam said 52.6 percent of the Federal government’s debt amounting RM456 billion in 2011 was actually from EPF.

“If the Federal government’s debt continues to rise, then it should, without statistical manipulation, breach 55 percent allowed by law which will mean the loans are to be taken seriously.

RM456 billion of debt in 2011 represents 54.3 percent of gross domestic product (GDP), only 0.7 percent more to breach 55 percent,” Husam added.

With budget deficit of RM45 billion for the 15th consecutive year, the 55 percent would have been breached, he said.

In order to cover this up, Husam, who is also the Kelantan state exco, claimed that two statistical manipulations could be carried out, either by making the GDP higher at 6 percent or increasing the 2012 GDP by including inflation rate.
…

-Harakahdaily

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Husam: More to it in EPF’s loan to Federal govt
2 December 2011 – Malaysia Chronicle

Is our EPF being looted?

On the 23rd of June 2011, the EPF (KWSP) tabled its annual report to the parliament, declaring a 5.8% dividend and explained that 27% of its investments were in Malaysian Government Securities (MGS) and 32% were in loans and bonds to Govt agencies. A simple chart below summarises the report. At RM 440.52 billion, the EPF is one of the largest funds in the world and represents the life time savings of 12 million private sector employees.

The question is why is it that over 60% of EPF funds are in loans to the Govt and Govt bodies? Is the Malaysian Government a good borrower?

Let’s look at the BN Govt’s financial record….

Below is a summary of the Govt’s annual deficits. The 2012 budget will mark the 15th year of budget deficit with no signal of financial prudence. And as you can see below, there have been supplementary budgets on top of the annual budgets every single year.

Govt debt as at Dec 2010 stands at 407 Billion ringgit. 60% of this or 240 Billion is owed to the EPF. This means the BN Govt of Malaysia has already spent 60% of all your savings in the EPF!

After running deficit budgets for 14 consecutive years, and funding those deficits by borrowing, Malaysian Govt Securities (MGS) are rated at CC(-)ve. At CC minus, what is the annual yield? Folks, it’s an unbelievable 3% and below!! Why? Because MGS are not auctioned!! There is a ready buyer for MGS and apart from the endless new PNB funds like the 1Malaysia bond, the main buyer of Malaysian debt papers is the EPF.

“Fair Value” rate for lower grade papers of single A and below is an annual yield of 5% and above. Greek Govt bonds for example are being traded at yields exceeding 21% per annum

The constitution of Malaysia caps Govt debt at 55% of GDP. As at 30th June 2011, Govt debt stands at 433 billion, which is 53% of GDP. At 55% the Govt will be officially in crisis and the constitution will need to be changed to increase borrowing and possibly even require a bail out.

Recently the EU central bank agreed to extend financial aid to the Govt of Greece on the condition they adopt massive austerity measures and that the lenders take a haircut of 50% of all outstanding loans. After all, they continually lent to a borrower who showed absolutely NO commitment to cut expenses and begin to service their debts. Just imagine if the EPF is asked to take a 50% haircut of their debts from the Malaysian Govt!

Even worse than that …

An even worse scenario was painted recently by Pakatan Rakyat when they reported that much of govt debt was unreported as it is largely hidden from public eye in the form of debt owing by Govt agencies.

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Is our EPF being looted?
Written by Colin Nathan
09 November 2011 – Malaysia Chronicle