Fiji’s pension fund ship sinks lower with the coup burdens
12:35 May 26, 2011
Analysis – By Professor Wadan Narsey
The Fiji National Provident Fund management organised a symposium on the “future of the FNPF” last week.
Chaired and apparently dominated by an outside consultant, there was a public discussion of recommendations advocating changes to the FNPF structure, operations and pension rates at the symposium.
Similar recommendations had previously been made by other consultants from International Monetary Fund, World Bank, and International Labour Organisation, but none had the urgency that this last set has.
The FNPF plans meetings/symposiums at other centres in Fiji to convince stakeholders that the FNPF is not financially sustainable at the current pension rate of 15 percent (single) and must be reduced by a massive 40 percent to 9 percent (single).
The symposiums will also be encouraged to conclude that the contribution rate by employees should be increased from the current 16 percent of wages and salary to perhaps 20 percent, as other model countries in the world such as Singapore practice.
But these symposiums are all a big farce, a pretence at “public consultation”, much like the Charter Charade organised by regime leader Voreqe Bainimarama, John Samy and Petero Mataca.
The Bainimarama regime, which has appointed the new management and board, will make all the decisions.
The FNPF management and board, under orders from the Bainimarama regime, will continue to hide all the reports that would reveal that the regime is itself directly and indirectly responsible for a large part of the mess that the FNPF is currently in and the urgency of needed reforms.
The regime will continue to milk the FNPF cow, which, with increased contributions and reduced payouts, will give them even more of our savings to use ad misuse, however they wish.
Imagine if the major borrowers from Westpac or ANZ got a symposium together to tell all depositors that they must accept reduced rates of interest on their deposits because the banks would not be sustainable otherwise.
That is exactly what is happening now. The biggest borrower from FNPF is organising the charade and will not allow the release of a single consultant’s report to the owners of FNPF.
The regime will not contemplate any weakening of its control of the board or any election of representatives by the FNPF stakeholders.
The contributors to FNPF, and the pensioners of FNPF, will have no choice in the matter.
With media censorship, these massive changes to the pension fund cannot be freely and publicly discussed.
But people can speak their mind at these Bainimarama/Khaiyum symposium charades that are going on.
And make demands that is their lawful right as owners of the FNPF. Even if they fall on deaf ears.
Why the reduction in pension rate?
For several years now, there have been studies done by IMF, World Bank, ILO and so on that argued that the FNPF could not sustain the 15 percent single pension rate over the long term.
And given the long term declining performance of the FNPF investments, the 15 percent pension rate may have been a little on the high side. But we don’t know why.
For every FNPF management team and board for the last 15 years (including the appointees by Rabuka, Chaudhry, Qarase and Bainimarama) has arrogantly refused to make these studies public.
The public will not know whether the data and the analysis are accurate, and whether the recommendations are justified.
But they should know two reasons why the pension rates are being recommended to go down as low as 9 percent: first, the economic stagnation over the last four years directly caused by the Bainimarama coup of 2006; and second, FNPF’s disastrous investments and board decisions during the last four years of Bainimarama’s rule.
Bainimarama and his military officers, and all the coup collaborators, are partly to blame for the planned reduction in pension rates.
When Bainimarama and his Fiji Military Forces (our former security guards) treasonously took over the country in 2006, they also took over the FNPF.
Management, board changed
Without any reference to the owners of the FNPF, they changed the senior management and the board. They appointed new board members to all the FNPF subsidiaries like ATH and its subsidiary companies.
Some of these new board members made decisions which led to financial disasters such as the lost money through unwise loans and expenditure decisions at Natadola (more than $300 million?), Momi ($80 million?), GPH ($30 million?), FSC ($100 million?) and potentially other disasters such as at Tappoo City ($30 million?) and bad loans forced upon entities such as the Fiji Development Bank.
How much is the Bainimarama regime to blame? We don’t know because they won’t release the reports on these financial disasters.
But we know for sure, the Bainimarama military regime has helped to destroy the sugar industry by turning down $300 million of European Union aid available in 2006 for the sugar industry reform and restructuring, and badly managing an $100 million Indian loan for FSC mill refit, which resulted in even lower milling efficiency.
We know that the Bainimarama regime has for five years freely run massive budget deficits because of huge over-expenditure on the military itself, all funded by increasing the public debt, largely financed with enforced loans from FNPF at low rates of interest (around 5 percent at the margin).
We also know that a few months ago, Bainimarama and Khaiyum, with the irresponsible complicity of ANZ, showed their financial skills by proudly borrowing $500 million in foreign bonds at 9 percent while turning down an IMF loan at 2 percent (Yang, the IMF rep in Fiji stated there were very few conditions).
We know that with investments drying up because of Bainimarama’s arbitrary military decrees, there has been minimal economic growth, minimal job creation, minimal new contributors to the FNPF.
Lack of economic growth
The lack of economic growth has also meant that there are few bankable projects in the private sector for FNPF to lend to.
Instead, the FNPF has been forced by the Reserve Bank to bring back its income earning foreign investments, with the lost income going through the RBF into the control of the military government.
On the other side, the outgoings from the FNPF have been increasing not only because of pension or lump sums to be paid to those retiring, but also because of withdrawals by members for education and health reasons, due to increased hardship.
For many years the FNPF annual report used to state that their target earnings rate was 2 percentage points above the rate of inflation.
That statement is not made any more in the FNPF annual reports, because they have failed to achieve their target (what a pathetic management tactic: when you fail to achieve your KPIs, get rid of your KPIs!).
Indeed, for this year, the rate of inflation may be as high as 7% while the FNPF average return is less than 6%. Our FNPF savings are going backwards.
As we have been warning since 2006, the FNPF is in deep trouble.
No transparency, no accountability
The FNPF annual reports, signed by the FNPF board and senior management all claim to be transparent and accountable to the FNPF members.
What a pack of lies.
For more than three years now, I have asked FNPF management to make available the reports by WB, IMF, ILO and other recent consultants, or the recent reports on the financial mismanagement of the investments at Natadola and Momi.
They have all bluntly refused- they are simply afraid to lose their jobs.
The Bainimarama/Khaiyum regime will not tolerate any transparency or accountability of the FNPF to the public, whatever are the lies they propagate in their People’s Charter.
Just as they refuse to make public the annual Auditor-General’s reports on the military government’s expenditure and revenues over the last five years; or to allow an audit of the regimental funds; or to explain why they are paying themselves more than half a million in salaries each through a private accounting firm.
Coup costs usually out of sight
When an economy suffers because of a military coup, it is difficult to identify and quantify the costs, especially when the economy recovers pretty quickly, as in 1987 and 2000.
But the economy has not recovered after the 2006 coup. Our 2011 GDP, even if we to manage the projected 2.8 percent growth this year, will just about recover to our GDP in 2006.
We have therefore lost four years of economic growth, costing us anywhere between $1 billion to $2 billion, not even including the huge losses in property values.
The banks know that many businesses, big and small, are struggling; FIRCA is struggling to increase revenues, despite the increase in VAT; many government ministries like education and health are struggling to maintain their budgets; and there is little money available to fix up roads, water and sewerage.
Some may point to the increased numbers of beggars in the streets, despite official efforts to keep them out of sight; or the increased numbers of suicides and attempted suicides, or increased incidence of mental health problems.
But these costs are very difficult to quantify and relate to the 2006 coup.
Costs to FNPF now clear
Now FNPF contributors and pensioners (including coup supporters) will see very clearly how the military coup by Bainimarama and his supporters, are harming us.
Single pension rates will be reduced from 15 percent to 9 percent; double pension rates will be reduced from 12 percent to 7 percent.
This reduction in pensions will harm all civil servants, including all the treasonous military officers and soldiers who have conveniently forgotten their oaths of office, and blindly supported Bainimarama and his coup while enjoying their ill-gotten gains.
Existing pensioners (including coup supporters) will also know that their current pension rates will be reduced and capped: they can weep and wail all they like that FNPF signed and sealed a legal agreement with them, when they retired.
But evil people who can treasonously remove a lawfully elected government can also change the conditions of any legal contract: all they need is another military decree signed by the illegal military President, who many times has sworn sacred oaths on the Bible, to protect the people of Fiji.
We should know by now, that our basic human rights, such as the protection by law, freedom of speech and assembly, all mean nothing to Bainimarama, Khaiyum, Nailitikau, the military officers and illegal ministers in an illegal military government.
We should know by now that our basic human rights also mean nothing to the dozens of prominent businessmen, clergy, professionals, social leaders, and all the coup supporters and collaborators who have helped to legitimate and keep the Bainimarama regime in power since 2006.
We should known by now that the softening by our traditional donors and Australian “think tanks” towards the Bainimarama Regime is driven by their worries about China displacing them in the Pacific, not so much our own welfare.
We are all on our own. We can watch our FNPF be gutted.
Do we owners of FNPF, who have never protested against this evil regime, we who have continued to socialise and tolerate all the coup collaborators and supporters, deserve what we get?
Adam Smith’s selfishness not good for Fiji
In economics, there has been a very strong idea, originating from Adam Smith more than 200 years ago, that if every individual acted selfishly in his own self interest, the free market economy will perform efficiently to the ultimate benefit of everyone in the economy.
This principle is totally wrong in Fiji’s politics and society today.
It is abundantly clear that many of our people understand the evil consequences of this Bainimarama coup for Fiji and its people.
It is clear that they say nothing and do nothing because they think it is in their self-interest not to do so, in case they are personally victimised by the Bainimarama regime.
But if we all behave selfishly and refuse to oppose the treasonous Bainimarama coup; if all our military and police officers accept and obey their treasonous, illegal and immoral superiors; if we all live in our business, professional, religious, social, and sports boxes and refuse to confront and ostracise the coup supporters and collaborators among us; then the resulting Fiji is going to be a nightmare for our citizens, especially the poorest among us.
Adam Smith’s advocacy of individual selfishness is proving to be disastrous for our FNPF, and for Fiji.
What are the options?
Who knows? Perhaps even at this late stage in our demise as a free people, we might want to go to the FNPF symposium charade being organised by the Bainimarama/Khaiyum regime and:
1. Demand the public release of all the reports by IMF, WB, ILO and recent independent consultants;
2. Demand the release of all the reports on the investigation into the investments at Natadola, Momi etc
3. Demand that the majority of the FNPF board members must be democratically elected by the current FNPF contributors and with pensioners having separate elected representation.
4. Demand that the chairman of the board must be from these elected members and definitely not some foreigner as currently.
5. Demand that any decision on changes to the FNPF must be made by the elected board and not the current board and management.
6. Demand that FNPF must be allowed to invest as much of its funds abroad as is prudently advisable and that RBF must recompense FNPF for all the lost earnings because of foreign investments brought back.
7. Demand that the FNPF management swear oaths of allegiance to the real owners of the fund – the contributors and the pensioners – and not to a treasonous military government;
Also as part of our struggle to regain our basic human rights:
8. Publish the full list of coup collaborators and supporters in Fiji and abroad, so that all FNPF contributors and pensioners can see who are collectively responsible, with Bainimarama and Khaiyum, for the massive blows to our pension fund;
9. Start teaching our children to not take part in the daily charade by treasonous people illegally pretending to be prime ministers, ministers, Attorney-General, President, and first ladies etc.
10. Call on Australia and NZ to take sanctions against all their citizens who have supported the treasonous military coup in Fiji and the continuing plunder of the taxpayers of Fiji, and the gutting of our FNPF.
11. Appeal to those current and former military officers who have retained any vestige of allegiance to their military oaths, honor, ethics, and patriotism to call on Bainimarama and his ministers to resign from government and give it back to civilian rule – immediately, not in 2014.
If we continue to remain docile and quiet under oppression, we deserve everything we get, while condemning our children to a bleak future.
The reduction of FNPF pensions is just the beginning.
The Bainimarama/Khaiyum regime will have more nasty surprises for us, if and when they ever start reducing the public debt.
Dr Wadan Narsey is a professor of economics at the University of the South Pacific and a former National Federation Party parliamentarian.
May 30, 2011
FNPF continues with their charade
Once again, the very recent attempts by the monopoly superannuation entity, Fiji National Provident Fund, to trump up attempts to "consult" did not miss the eyes of our real-politik economic expert, Prof Wadan Narsey.
True to Narsey's predictions made earlier this month, all the hype is aimed at attempting to soften the blow to all superannuation paying citizens, that our returns by way of reduced pension rates are going to happen.
Here's the real deal according to Narsey (bless his soul).