Leading Trade Union warns EPF and workers’ funds face new threats

Leading Trade Union warns EPF and workers’ funds face new threats

4 July 2020 03:45 pm

While the COVID-19 situation is continuing to have its adverse impact on employment, livelihoods, earnings and savings of the working people of Sri Lanka, their life savings have come under renewed threat from vested interests to add to their woes, a union complained on Wednesday.

The Ceylon Federation of Labour (CFL), in a statement, said that Securities Exchange Commission (SEC) is making frantic moves in harmony with the Fund’s custodian, the Central Bank (CB) to mobilize part of the Employees Provident Fund (EPF), owned by the working people of the country, to bolster the share market.

Already, EPF investment is at around 7.8 percent, although the EPF Act had specific provisions confining its investments to government securities.

The EPF is the largest single fund presently holding Rs. 2 trillion in employee savings. Its travails began in 2000, when the Monetary Board, ignoring the statutory restriction placed on it, embarked on an investment strategy ostensibly to generate better returns for the EPF but with the hidden objective of developing the capital market, the CFL said.

Since 2002, governments have sought to tamper with the EPF on various pretexts with adverse consequences. The government of 2002 sought without success to get the EPF rolling through portfolio diversification to accelerate capital market diversification.

“In 2011, the then regime sought to lay its hands on the EPF through a spurious pension scheme for private-sector employees, defeated thankfully by the might of workers protest although it resulted in the death of an innocent young worker.

In September 2011 the Colombo Stock Exchange (CSE) developed strategies that included the outsourcing of the current in-house management of the EPF and ETF to the private sector.

In 2018 the government sought proposals from the Asian Development Bank to develop the capital market which envisaged the fragmentation of the EPF and management of its assets by private managers.

Under the present caretaker, government proposals had been made by influential quarters to dismember the EPF through a 20 percent handout to members of the Fund with a view to triggering consumption.

The pandemic situation and the precarious decline of the economy and business have now provided the SEC with the setting to persuade the CB to once again actively invest in the stock market,” it said.

The CFL said that it is public knowledge that since 2009 EPF investments in the equity market have been severely detrimental to the fund.

All audited reports since then have repeatedly drawn attention to the very many questionable and imprudent investments and transactions and loss of income from such investments. It has been accused as a collaborator of pumping and dumping, the union alleged.

The officially released Portfolio of Listed, Unlisted and Equity Investment as, at December 30, 2019, by the CB shows that the value of equities purchased for Rs. 83.7 million had decreased to Rs 66.3 million by that date.