Financial Times

ETF transformed by new management

The Employees' Trust Fund has been streamlined and made more efficient, its chairman Dinesh Weerakkody said.

"We have crossed the initial threshold, the future is in the hands of the team we have put together with much effort," he said in the chairman's review for 2002.

The Annual Report for 2002 marks the watershed for enduring change at the Employees' Trust Fund, which commenced from last March, Weerakkody said.

The objective of the re-structuring was to deliver value to the members and to introduce more transparency in board's operations.

Excerpts:

The scenario was dismal before the beginning of 2002, where it took one to six months to process a claim, while Annual Members' Statements were snagged up since 1998. The ETF had neither focused on operational effectiveness nor financial efficiency.

There were questions of efficiency relating to maximizing the returns on investments in the equity and debt market. The customer was seen as someone separated from the board's operations, the focus was mainly internal. The branch network was more an attempt at appeasing the political powers that be, than one where efficiency and effectiveness counted. The IT system was dysfunctional and could not support the processing of member information and was a major cause for the non-remittance of Annual Members' Statements, which in turn had biased public opinion against the board.

The most significant development in the re-organization was the rationalization of the branch network. Prior to this all of the ten branches except one were operating at a deficit. The new management matched 25% of the employers, contributing 80% of the revenue, where the concentration was on Colombo zone (1-7), Colombo zone (8-15), Colombo Suburban Office as well as the main regional branches at Gampaha, Kandy and Galle. The rest of the network was converted to liaison offices or sub-branches to service members in Hambantota, Hatton, Badulla, Ratnapura and Kurunegala. A new sub-branch was scheduled to be opened in Anuradhapura at the beginning of this year.

The result: tremendous cost savings with all branches operating at a surplus. The compliance rate among employers increased by 12%.

The monthly collection averaged Rs. 300 million from the previous average of Rs. 270 million. Enforcement too was strengthened and registered a 100% increase on account of income from surcharges.

In 2002 ETF's investment income grew by 16% while income from other sources grew by 100%, enabling the declaration of an annual dividend of 12%.

The customer service interface was strengthened through a dedicated Customer Service Unit. Introduction of a fee-based "Express Service" which processed a claim in two working days, while normal claims were processed within 21 working days on average with 65% consistency during this period. We also were able to process Special Claims, for the benefit of those who cannot afford Rs. 1,000/= for the "Express" channel, but still needed their dues processed quickly due to urgent necessity.

The board took several meaningful steps in bringing the board closer to the employers. Whereas the employer relationship previously was one of enforcement, we bridged the divide through many "employer forums" firstly to educate them on what was happening to their contributions in terms of investment income and secondly what benefits were available to their employees inter alia benefit schemes.