Frankly Speaking: March 23, 2009

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A historic momentThe 63rd Umno general assembly, to be held from March 24 to 28, will surely be remembered for a long time. When the party’s outgoing president, Datuk Seri Abdullah Ahmad Badawi, hands over the reins to his deputy, Datuk Seri Najib Abdul Razak, it will also mark the transition of power to Najib as the prime minister, in keeping with the convention that the Umno president heads the government.

As the Abdullah administration, with all its ups and downs, gives way to the Najib era, the winds of change that are blowing through the country’s key institutions are being heralded by many voices. There is talk of rejuvenating Umno, which is showing signs of being under severe strain, especially after the 12th general election last year.

Then, there are reforms of different magnitudes being undertaken, and perhaps the most radical of them all would be the one on the New Economic Policy, which needs to be reworked to mesh with a globalised world.

On the economic front, the collapse of export-led growth is redefining the landscape for the nation’s future development.However, there are signs that the impetus for change is not being welcomed by the status quo. The fact that voters are no longer easily swayed by racial and religious rhetoric, which they had signalled to the Barisan Nasional on March 8 last year, is being misread as a cue to fan communal sentiments.

The ennui that the people are feeling towards corruption and abuse of power does not seem to have registered with a segment of the leaders.

Will the Umno assembly reflect these ground realities, or give vent to the frustrations of a political class that is struggling to cope with an internal crisis? The answers that emerge this week will be truly historic.

Time for EPF to go abroadThat the Employees Provident Fund is paying a dividend of 4.5% for 2008 is hardly something to boast about, although times are difficult and many pension funds overseas have actually run up billions in losses.

Why? Despite the five-year bull run that began in 2003 and ended early last year, the EPF paid an average dividend of only 4.95% between 2003 and 2008 (the lowest being 4.5% in 2003 and 2008, and the highest being only 5.8% in 2007) to its members.

While contributors hadn’t really benefitted from the bull market, they were not too badly hit either. But going forward, the EPF will be under a lot of pressure to sustain even a 4.5% dividend, given that 70% of its investments is in fixed income assets.  A growing base of contributors also makes sustaining the current dividend rate more difficult. The EPF said that for 2008, it required RM3.18 billion in net income to pay every 1% dividend, compared to RM2.89 billion in 2007. For instance, to pay a 4.5% dividend for 2008 would require a net income of about RM14.3 billion, which is equivalent to the EPF’s total net income earned in 2008. There is no doubt that the EPF is well managed and professionally run. But perhaps it is now time to review its investment policies and strategies.

Being on a strong financial footing, the EPF is in a position to capitalise on the current global financial crisis by scooping up good investments abroad.

In fact, the EPF had last year obtained the approval of the Ministry of Finance to invest US$6 billion (RM21.91 billion) abroad, which is equivalent to 6.4% of its total funds of RM342 billion as of Dec 31, 2008. It is not known how much of the approved allocation has been utilised, except that the EPF has made a provision of RM3.2 billion for overseas equity investments for 2008.The provisions indicate that some of the EPF’s overseas investments could have been made at a wrong time, probably before the stock market crashed. But that doesn’t mean the EPF should hold back its efforts to look at investing more monies abroad. The retirement fund’s growing assets have outgrown the domestic financial market. At the end of the day, the potential for higher returns is in the overseas markets, and that’s where the EPF should be.That Limbang claimThe issue of disputed territories is constantly fraught with missteps.     The lastest instance of this involved a report by the national news agency last week, which carried a statement that Brunei was dropping its claim on Limbang.

It was puzzling that the oil-rich sultanate denied the statement made by Malaysia. The issue of Limbang, said a senior Brunei official, was not even discussed by the Malaysian officials and their counterparts from Brunei at the meeting.

The statement that Brunei had dropped its claim on Limbang hit the streets on March 16, and was followed by the usual feel-good pieces on the joy and relief of the Limbang folk. However, three days later, Brunei came out with its denial. A comeback by Malaysia’s officials saying that the issue of Limbang will be resolved once both countries sign an exchange of border agreements came across as a face-saver.

For the public, unfortunately, the impression created is that the information that is put out by the official media does not tell the true story.

The thinking is that if there can be conflicting official versions about an event that was supposed to have taken place, how can the public rely on subjective information, such as reports about economic matters and analyses, and now on the various stimulus packages? This article appeared inThe Edge Malaysia,Issue 747, March 23-29,  2009.