Bank Negara remains one of the few regulatory agencies left in this country that has some credibility, says an opposition lawmaker who demands that a representative remain on the KWAP’s investment board. – The Malaysian Insider file pic, April 13, 2015.
An opposition lawmaker insists that changes to how the government-owned pension fund operates would weaken oversight on how the body manages its money, which is used to help pay the pensions of retired civil servants.
Pandan MP Rafizi Ramli said the response by Retirement Fund Inc’s (KWAP) top boss over the weekend to Pakatan Rakyat’s concerns about the changes did not reflect the reality of how financial scandals happen in Malaysia.
This is especially since KWAP is already snared in the 1Malaysia Development Berhad (1MDB) fiasco, after it lent RM4 billion to 1MDB’s former subsidiary SRC International Sdn Bhd.
“His response to our concerns is mechanical and completely ignored the reality and sentiment of trust that is the basis of how all funds operate.
“The reason we want a Bank Negara (BNM) representative in the fund’s decision-making processes is because BNM is one of the few regulatory agencies left in this country that has some credibility,” Rafizi told The Malaysian Insider.
“We want the comfort from knowing that a regulator is watching the investment panel.”
Taking out the BNM representative from KWAP’s investment panel is one of the changes the government wants to make via amendments to the Retirement Fund Act 2007.
StarBizWeek reported that other changes would allow KWAP to invest in a wider range of products and financial instruments and turn it into a full-fledged pension fund like the Employees Provident Fund.
These amendments will be debated in Parliament, in its second meeting in May.
Two days ago, in an interview with StarBizWeek, KWAP CEO Wan Kamaruzaman Wan Ahmad said BNM itself had requested that its representative be taken out of the investment panel to avoid possible conflict of interest since it is a regulator.
“We spoke with Bank Negara (on the matter) and it made sense... so we put in that clause,” Wan Kamaruzaman told the English-language daily.
“The Finance Ministry has also agreed. It was not that we indiscriminately took out the Bank Negara rep from the investment panel,” Wan Kamaruzaman said.
Rafizi, however, countered that this reasoning ignored the prevailing trust deficit when it came to the government’s management of public funds in light of the 1MDB fallout.
“The public does not trust KWAP, the Finance Ministry or Putrajaya any more. The question of trust is critical in this case. The issue of conflict of interest is mitigated by the fact the public trusts BNM.”
Rafizi said BNM needed to sit on the investment panel to prevent the fund from getting involved in shady deals or lending to questionable ventures.
If the changes were pushed through, BNM would only be able to come in once a suspicious deal had gone through.
Rafizi would also be tabling an amendment to the act to put an external auditor certified by the government on KWAP’s investment panel.
“So we would have the BNM rep and a qualified auditor. Auditors are usually more careful when it comes to their fiduciary duties.”
This would further strengthen oversight in KWAP and reduce the possibility of mismanagement, he said, adding that it was a preventive measure.
The need for preventive measures like having a regulator in KWAP outweighed the argument for reducing conflict-of-interest because Malaysia has a horrible track record of dealing with financial scandals.
“In our scandals, no one is punished, no one is held accountable and no money is recovered. In the end it’s always the public that has to foot the bill via new taxes,” said Rafizi.
“No matter how much noise we make this always happens. So is it unreasonable to have preventive measures?”
Case in point was the current 1MDB saga where even after problems were unearthed, regulators such as BNM failed to take action, said Rafizi.
“When bad investments are linked to vested interests what hope is there that action will be taken?”
At least with preventive measures like a regulator in KWAP, the alarm can be sounded before a scandal happens.
- TMI
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