{"id":97365,"date":"2020-01-06T16:07:23","date_gmt":"2020-01-06T23:07:23","guid":{"rendered":"http:\/\/www.lankaweb.com\/news\/items\/?p=97365"},"modified":"2020-01-06T16:07:23","modified_gmt":"2020-01-06T23:07:23","slug":"the-government-of-sri-lanka-needs-to-consider-establishing-an-independent-organization-to-manage-superannuation","status":"publish","type":"post","link":"https:\/\/www.lankaweb.com\/news\/items\/2020\/01\/06\/the-government-of-sri-lanka-needs-to-consider-establishing-an-independent-organization-to-manage-superannuation\/","title":{"rendered":"THE GOVERNMENT OF SRI LANKA NEEDS TO CONSIDER ESTABLISHING AN INDEPENDENT ORGANIZATION TO MANAGE SUPERANNUATION"},"content":{"rendered":"

BY EDWARD THEOPHILUS<\/strong><\/em><\/span><\/h2>\n\n\n

Historical\ninformation indicates that the superannuation system to Sri Lanka was brought\nby the British colonial rulers and originally, it was limited to a government\npension program to its employees. The superannuation system was broadened by\nthe establishment of the Employees Provident Fund (EPF) and the system further\nenhanced by the establishment of the Employees Trust Fund (ETF) by Mr.\nAthulathmudali. The management of superannuation system passed to deviating\nplaces such as Central Bank, ETF, Labour Department, and Government Pension\nDepartment and other private institutions. This situation created risks and\nultimately the consequences of risk passed to retired personnel. At the\ninternational level, the superannuation management has allowed to diversified\ncompanies with a view to minimizing risk and to offer a competitive return to\nfund members, however in the case of Sri Lanka the superannuation management\nhas been subject to higher risk by diversification in various places without\nproper regulation and the supervision of the government doesn’t seem effective\nand from the point of views of economists, government pension scheme has\nimpacted in increasing government spending. <\/p>\n\n\n\n

Superannuation\nsystems reflect the saving level in a country and the management of\nsuperannuation has been radically changed after the 1970s and household savings\ncannot cover the gap between investment and savings.  Therefore, the superannuation system in a\ncountry plays a monumental service role and strategic economic acumen ship for\nstability. However, economic policymakers were blind on this matter and were\nunable to make effective policies except for few fund audits.  In the year 2000, I wrote to the president of\nSri Lanka about EPF management as I saw that EPF has the potential to dishonest\nactivities and the president acknowledged my letter, but nothing happened, most\nprobably the administrator with the president was not understanding of the\nsubject and reluctant to talk about it.  \n<\/p>\n\n\n\n

The\nAsian Bond Market, which began to invest Asian savings in Asia based on a great\nideological desire of Mr. Thaksin Shinawatra showed the significance of\nsuperannuation management rather than investing Asian savings in the Western\nbonds.  Employees in Sri Lanka don’t\nunderstand how their savings subject to the risk and don\u2019t understand how to\nquantify the risk and threat of dishonest individuals.  The central bank bond scam absorbed dividends\nof innocents\u2019 employees to pockets of dishonest people and if the fund manager acted\nas an independent body separately from the central bank such the loss could\nhave avoided or minimized. Arjuna Mahendran was the head of bond issuer,\nCentral Bank and investor in bonds (EPF) and many complicated activities, which\nwere not understood by yahapalana politicians. It was a conflict of interest. Has\nforensic auditor pointed out these complicated issues, I don\u2019t know?  I pointed out to the president of Sri Lanka\nin the year 2000 referring to the issue of treasury bonds to enhance the\ncapitalization of government banks.<\/p>\n\n\n\n

The\nsuperannuation management is in a mess in Sri Lanka and subject to dishonest\ndeals and insolvent threats. Central Bank of Sri Lanka has been added pressure\nby the management of EPF and it can see that many people visit the central bank\nto solve problems related to EPF. When LTTE exploded the bomb in central bank\nbuilding many of these EPF customers died as those people were forced to visit\nthe bank as the EPF was in the central bank building.<\/p>\n\n\n\n

The\nprime role of Central bank has been ignored by its executives and the managing\nstyle of EPF by the central bank was easier to cheating activities of the\ndishonest governor. As the regulatory authority of the financial system, Central\nBank has neglected vital roles and under the management of superannuation, the\ncentral bank has become a market player, which is a conflicting role with\nobjectives and the role of the central bank. Central Bank also played a rural\ncredit business, which had been a market player’s role that was not appropriate\nto the regulatory authority, later this role changed by the establishment of a\ndevelopment bank.   <\/p>\n\n\n\n

The\noutcome of central bank operations reflects that the government should give\nfreedom to the central bank to operate as a regulatory authority to protect the\nfinancial system of Sri Lanka and to providing research information on the\nimpact of government policies.  Then the\nMonetary Board can take the right decisions on the interest rate and other\nmatters-based research finding trends of the economy. When a regulatory\nauthority becomes a market player, it is a clear conflict of interest and\npossible for dishonest activities. Former central bank governor, Mr. Ajith\nNivard Cabral recently stated that the forensic audit on the Central Bank bond\nscam could be not accept as the central bank audited own institute as an\nexternal verification auditor, which could be considered as an act of conflict\nof interest. Why Central Bank wanted to go outside for a forensic audit, what\nis doing its training department without training its staff about security\nactivities and bonds and any other roles of the bank.  Playing a market role by central bank is a\ndirect engagement in creating international disgrace to the financial system of\nSri Lanka and it is a crime against people of Sri Lanka, who are the owners of\nfinancial assets of the country.  <\/p>\n\n\n\n

When\nthe government considers establishing a separate corporate body to manage superannuation\nsavings it will have forward and backward linkages to economic development and\ngrowth. The super management in any country seems like a mega business and\ndeveloped countries have allowed multiple organizations as the industry\ninvolved in trillions of funds. It boosts the Colombo Stock Market opening for\nthe listing of national and international firms like Mumbai. Colombo stock\nMarket also needs good and effective regulation and Central bank can work on\nsuch regulation as the regulatory authority.<\/p>\n\n\n\n

An\nIndependent superannuation body will be a large organization like Bank of\nCeylon, which provides more than 10000 new job opportunities for educated\nyouths. Each super fund including individual super funds of banks and other\norganizations should come to the proposed corporate institution and EPF, ETF\nand other super funds will be operated as single organizations and a government\nown business. The combining of funds would not much cost to the government as\ncurrent fund managers are trustees not the owners, but it needs risk assessment\nof investment to assess the net worth. <\/p>\n\n\n\n

Trading\nbanks in Sri Lanka have a strong pressure from the corporate market to provide\ncredit facilities and the best policy action is to release this pressure to\ndevelop a corporate bond market under the supervision, the control and\nguarantee of the proposed superannuation management organization.  Good companies in various industry area of\nthe country can issue bonds with a guarantee of the superannuation management\ninstitute and allow to invest in bonds by local and foreign investors. This\naction releases the pressure of local trading banks in providing working\ncapital to companies and the central bank can play its regulatory role to\ncontrol the interest rate of the country. <\/p>\n\n\n\n

The\nproposed super management body would support to construction industry, building\na high rise building in Colombo for the head office and decentralizing fund\noperations in regional Sri Lanka combining with the current role of Labour\nDepartment, which perform a various role in relation to collecting premiums for\nthe fund and supervision of issues of premium contributions. It will be a mega\nbusiness in the country as a government own institution.<\/p>\n\n\n\n

The\nindependent superannuation management body could be maintained a diversified\ninvestment portfolio to manage risks and generate higher returns to give the\nbest retirement benefits to employees in Sri Lanka.  This organization can do multiple businesses\nsuch as insurance, education and training work and many other activities. It\nwould positively impact on controlling fiscal management and reduce the budget\ngap or promote make an excess budget helping to good value for Sri Lanka Rupee\nand most probably it will support to increase the foreign value of Sri Lanka\nRupee. <\/p>\n\n\n\n

Another\nvital aspect of reforming superannuation management is to attract business for\nsuper management in other south Asian countries to increase foreign assets of\nSri Lanka.  The proposed organization can\nmanage super funds in India, Pakistan, Bangladesh, Maldives Islands and others\nif it shows management stewardship.<\/p>\n","protected":false},"excerpt":{"rendered":"

BY EDWARD THEOPHILUS Historical information indicates that the superannuation system to Sri Lanka was brought by the British colonial rulers and originally, it was limited to a government pension program to its employees. The superannuation system was broadened by the establishment of the Employees Provident Fund (EPF) and the system further enhanced by the establishment […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"footnotes":""},"categories":[124],"tags":[],"class_list":["post-97365","post","type-post","status-publish","format-standard","hentry","category-edward-theophilus"],"_links":{"self":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/97365","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/comments?post=97365"}],"version-history":[{"count":0,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/97365\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/media?parent=97365"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/categories?post=97365"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/tags?post=97365"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}