The main opposition United National Party this week accused the government of EPF investments in the stock market and in particular in banks which was only for the ‘benefit of their own stooges but not for employees who are contributing to the fund’. The action taken by the ruling party to appoint directors and now even a chairperson, former Central Bank Deputy Governor and present advisor to the President, Ranee Jayamaha to Hatton National Bank (HNB) was a clear violation of the Central Bank (CB)’s mandate, said economist and UNP member of parliament Harsha de Silva.
Dr Jayamaha is tipped to head the bank being a nominee through government stock in the bank.
One feature of the EPF Act, enacted in 1958, is the introduction of the dual control system. The administration and the enforcement of the Act has been vested with the Commissioner of Labour, a governmental authority, while the maintenance of accounts, payment of benefits and investment of funds have been handed to the Monetary Board of the Central Bank, the country’s monetary authority. The appointment of Dr. Jayamaha as the chair person of HNB creates a conflict of interest, as she is the advisor of the finance minister as well as a former Central banker, he said.
In the highly manipulated stock market in which friends and relations of the present regime are minting money, the EPF is buying up shares in banks and other third rate companies where the return is uncertain, and if the shares are not sold then the EPF shareholders get only a negligible dividend and not any capital gain, Dr de Silva said.
The Government’s plan is to take control of banks and other companies by buying shares and appointing directors and chairmen, he alleged.
He pointed out that the CB’s action to invest EPF money in shares of banks and several other blue chip companies is a violation of all good governance procedures and against its own ethical investment guidelines. According to CB guidelines "the Fund cannot invest in stocks of the banking and financial sector since the Monetary Board regulates both EPF and banks and financial institutions.” However a senior CB said the EPF has, under its own rules, authority to invest anywhere.
The official said that the banking and financial sector is the largest contributor to the Sri Lankan equity market with more than 20 % of the total market capitalization. This sector has always been performing exceptionally well. That is why the EPF has decided to invest in banking sector shares with the intention of creating more wealth for millions of EPF members in the long run.
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