Wednesday, May 05, 2010

Remember This! -Coup wolves circling FNPF

Professor Wadan Narsey

Friday, March 13, 2009

FIJI National Provident Fund contributors and pensioners should be concerned. Perhaps worried. Perhaps frightened. Because our FNPF life savings are under threat, opines economist PROFESSOR WADAN NARSEY.

Fijian Holdings Limited, a company now controlled by the military Government, tried to borrow more than a $100 million from FNPF, when private banks had refused. Thankfully, FNPF refused.

More ominously, the military Government wants to borrow hundreds of millions, basically to sustain their increased recurrent expenditure and military over-spending.

The private banks, local or overseas, will not oblige. Should FNPF oblige? Will FNPF oblige?

If FNPF continuously gives in to such lending pressures from Government, without economic growth, it will only encourage inflation to rise in the long term, thereby slashing the real value of everyone's savings and pensions.

And if ever pensioners totally lose confidence in FNPF, it may become insolvent, with future pension rates slashed, and even existing pensions reduced in dollar terms.

The key issue is that the FNPF board is now controlled by an unelected military Government's appointees.

We the FNPF contributors who own the savings do not have a single direct representative on the FNPF board who can be accountable to us. Why don't we?

We remain quiet at our peril.

Fiji's life savings

Annually, by law, some 16 per cent of our wages and salaries is deposited into the FNPF.

The FNPF is, therefore, the depository of the bulk of the life savings of most people who work in Fiji's formal sector, amounting to more than $2.5 billion.

The assets are supposed to be worth more than $3 billion. Bigger than the assets of all the commercial banks put together. From the outset, with successive governments controlling the board, the bulk of FNPF funds have been lent to Government, at interest rates much lower than those demanded by commercial banks.

Since 2000, to shore up Fiji's foreign exchange reserves, successive governments and the Reserve Bank of Fiji have forced FNPF to bring back its foreign investments, thereby losing FNPF revenue.

Worse still, with idle funds in Fiji, FNPF is also forced, in the absence of bankable private sector demand, to lend even more to Government, as currently. Some FNPF savings are invested in property. But significant amounts have now also been lent to investment projects such as at Natadola, Momi and GPH, the returns on all of which have been delayed, largely because of the 2006 coup. The FNPF rate of return has been going down for a decade. It will go down further if the FNPF board makes more mistakes.

The FHL wolf

For decades the borrowing wolves have been circling the easy money at the FNPF.

Recently, the FHL board and management, which have been taken over by the military Government, tried to borrow more than $100 million from FNPF, to finance the purchase of British Petroleum South Pacific at the massive price of $190 million.

An Indian company would first take out its own management fees from the revenue, with the remainder then being available for loan repayments, other costs and dividends.

Not surprisingly, the commercial banks won't touch this loan. And thank goodness that the FNPF board has also apparently refused.

But the FNPF board may not be able to withstand the military Government's pressure to lend hundreds of millions more, to finance Government's budget deficit and spending plans.

And that could be as damaging as the FHL loan.

Government deficits and killer inflation

There is nothing wrong per se with FNPF financing the Fiji government's budget deficit.

As long as the borrowed funds are spent on productive capital expenditure, which leads to increased economic growth, incomes and tax revenues for government.

But with an unelected military Government in place, we are unlikely to see the required economic growth, income and increased tax revenues, which could repay the loans.

All that is likely to happen is an increase in the money supply, increased imports, reduced foreign reserves, bigger public debt, and an upward pressure on inflation.

Since December 2006, Fiji has suffered total inflation of 10%, by which most people's real incomes have declined in real terms.

Worse, everyone's savings and pensions have lost 10% of their value since December 2006.

The bad news is that every bit of future inflation, very quietly and secretly working through higher prices in the market, will continue to steal away our savings and pensions.

And it will be a horror story, if inflation is accelerated by a devaluation.

If our economy does not grow enough with new jobs, FNPF will not see the required growth in employee contributions and neither will government see increased tax revenues.

If the economy deteriorates enough, Government may not be able to repay their FNPF loans on time.

The rate of return to FNPF shareholders will keep dropping. FNPF may have to further reduce the pension rate to future retirees.

And in the worst case scenario, if retiring people lose their confidence in the FNPF, and simply withdraw their savings in lump sums rather than take the pension, then FNPF may face a liquidity crisis and could even become insolvent, i.e. bankrupt.

Current pensioners may then not be paid on time or, horror of all horrors, may have their pensions illegally reduced.

Imagine the suffering. Let us hope it never comes to that.

But it may, if this military Government continues to hold on to power and continues its fiscal irresponsibility.

Question: who should be held responsible for any future destruction of our FNPF life savings?

FNPF and unelected governments

If mistakes are made by an FNPF board appointed by an elected government, the voters must ultimately take responsibility.

But if mistakes are made by an FNPF board appointed by an unelected military Government, then the military themselves (Bainimarama and the Military Council including most of the former military commanders) and the board members appointed by the military Government, must be personally held responsible.

Also responsible will be all those who volunteered, after the 2006 coup to help run the military Government and boards: the Fiji Labour Party and their stalwarts Chaudhry, Vayeshnoi, Tom Ricketts, Jokapeci Koroi and others.

Also responsible will be those who supported the NCBBF/ Charter/ Electoral Reform excuses for the 2006 coup: Archbishop Mataca, Kamlesh Arya, Jo Serulagilagi, Finau Tabakaucoro, Lorini Tevi, John Samy, Kevin Barr, David Arms, Francis Narayan, Robin Nair and others.

While some claimed to be serving the President's mandate, they disappeared without any reference to the President when they were booted out by Bainimarama.

FNPF board and us

FNPF decisions are now being made by an FNPF board controlled by the military Government.

We, the FNPF contributors and pensioners, have no representation whatsoever on the board.

If thieves came into our house and stole $1000 from the drawers, and took the family jewellery, we would be outraged and screaming for the police.

But people with guns have taken over the government and control of tax revenues and public expenditure, reduced our incomes by more than a billion dollars in the past two years, and now, are mounting attacks on our FNPF which could erode our life savings.

Why are the FNPF contributors, including FMF soldiers, police, civil servants, and blind coup supporters, all staying silent?

This article serves notice: if our Fiji National Provident Fund suffers because of forced irresponsible lending to government and other carpet-bagger companies, this military Government and the coup supporters must be held primarily responsible.

But also jointly responsible with be every FNPF contributor who chooses to stay silent in the face of this impending disaster.

We will not be able to wash our hands, like Pontius Pilate, if our FNPF cow ever ends up in the slaughterhouse. As a minimum we must demand direct representation on the FNPF board to protect our interests. And FNPF must also be allowed to invest overseas to maximise return to shareholders, and diversify its portfolio.

* The views expressed here are exclusively those of the author and are published by this newspaper on that sole understanding.

$327m written off: FNPF
Thursday, May 06, 2010

FNPF has written off three hundred and twenty seven million dollars ($327m) in members funds, with over three hundred million written off from the Natadola Bay Resorts development project.

Attorney General Aiyaz Sayed-Khaiyum made the announcement yesterday, saying the total value of members’ assets now stands at three point two billion dollars ($3.2b).

“For the period ended June 2009, $327m has been written off taking into account previous accounts that did not reflect the true position of member funds. This means that 9% of the total members’ funds have been written off, therefore after the write off, the total value of members assets of FNPF now stands at $3.2 billion.”

The largest portion of the write off is from the Natadola Bay Resorts Development, standing at three hundred and one million dollars ($301m).

Eighteen million dollars ($18m) was lost in Momi while other losses were incurred at the Malthouse Brewery, Savusavu Marina, Bayview Hospital, Grand Pacific Hotel and the Fiji Hardwood Corporation.

Sayed-Khaiyum says the government is working with the FNPF and customers can be assured of their funds being secure.

“Government notes that with the proper accounts now in place it means that FNPF will now be on a good footing to be able to secure and protect the funds of all its members. From government perspective you can be rest assured that we are working behind the scenes with FNPF to ensure that there is stability in the market and that all our members’ funds are protected in a stable market.”

Comments posted on
  • “Government notes that with the proper accounts now in place it means that FNPF will now be on a good footing to be able to secure and protect the funds of all its members. From government perspective you can be rest assured that we are working behind the scenes with FNPF to ensure that there is stability in the market and that all our members’ funds are protected in a stable market.”
  • A careless splurging of funds and also carelessly announced as if to imply that they (IIG) can invest or use the people's money anyway they like and if the venture does not live up to their expectations then we'll go on to the next project and write off the last one as bad debt.
  • They won't allow the owners to withdraw their money but they can go out and get abit of bling for themselves and spend carelessly. When the country gets back to normal, an independant commission has to be set up to find out how much money in taxpayers funds they gobbled up in their time in p[ower, I think that we will find a ridiculous amount that could surpass the amount equivalent to three government annual budgets.
  • Do not forget the amount spent on extravagant wives and partners and properties bought
  • The tourism project was doing fine until you clowns coup the government and investors flee with their money.
  • Fiji National Provident Fund Chief Executive Aisake Taito said however member’s funds are safe.
  • What the...??? $327 million???? People shouldn't be supprise if all this illegal regimes bad loans will also be written off as bad debts. Lie, lie more lies because FNPF is NOT SAFE. Not anymore!
  • This is closer to getting FNPF to bankruptcy I guess. As predicted and not suprisingly FNPF is a rubbish dump now. Well at least the regimes dumping ground. With rubbish minded people running it, it has now turned into chaos. How can people not know of whats happenning to their money. Another National Bank saga as time will tell. People should withdraw their money and invest it else
      • People need to know that this regime will do anything because they need to balance their 2009 annual report. So in the process they have no idea what to do but go for the kill, coup style, do or die. I wonder what interest rate members will get this year. People shouldn't be suprise if no interest will be paid. What a price to pay for allowing a dictator to live in our country let alone controlling the countrys only superannuation fund.

  • FNPF accounts

    THE Fiji National Provident Fund is expected to release its 2009 accounts this month. The report will be tabled in Cabinet before it is released to the public. The Fund released the 2008 accounts last month.

  •  - People should elect to stop deductions to FNPF and also withdraw all their money from the clutches of these hungry wolves who are desperate enough not to include moral in their line of thinking.
    • Not suprising its happening. Rich members are not running away overseas for no reason. These members are withdrawing their lump sum because the foul smell was long comming. The problem is that the poor members, as always, are the ones trapped and forced to pay for the regimes illegal activities because they cann't withdraw. Sad indeed.
    • This is a material amount and should never happen. To write off non current assets means either an exxageration of fair value on its purchase or a gigantic distortion in the annual accum depreciation of these assets by the fnpf accountants....$2m to $10 is acceptable...but $327m?.
- This kind of practise raises red flags on the solvency of an entity and requires an audience with its stakeholders before a general write off of such magnitude is even planned.
- In Audit, this is referred to as "smoothing" or a "massaging" of final accounts and usually means that fraudulent liability concealment is occurrring. Thus a need to reduce the Asset value to reflect the concealment and prop up the net worth of the entity unrealistically.
- I wonder what the realviews of its own external auditors are? or were they again cooerced into allowing such an unethical "off the books" adjustment!!!
The worst case scenario is -If the write offs were for current assets ..then the short term liquidity and actual safety of members funds is defunct !!!
- This means that $327m refers to funds drawn from the fund annually by a single entity, in other words the current government [the single most intrepid fnpf debtor from 2006] !!
- Which means bye bye and sa moce to those funds ----and that we are going to pay for our lost fnpf $327m ourselves through our payment of government taxes..
I feel so sad for Aisake because he is a real financially savvy n reliable person but like ANaitini noted earlier, he cant do much with his job on the line and mortgages to pay.

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