PLAYING FAST AND LOOSE WITH FIJI’S RETIREMENT FUND

Editorial

FijiSUN

SUVA, Fiji (March 15) - Any audit of the investments of the Fiji National Provident Fund (FNPF) portfolio will find a preponderance of lending to the State. This is a result of the habit of successive governments of dipping into their citizens' life savings to fund their unwillingness or inability to live within their means. If the terms of reference allow the audit to go back far enough, it might even find that the members' hard earned cash was used to bail the Rabuka Government out of the NBF disaster.

[PIR editor’s note: The NBF – National Bank of Fiji – acquired in 1999 by an Australian company and renamed Colonial National Bank, ran up huge losses over bad debts and was bailed out by the Fiji National Provident Fund.]

But that, as has been famously said, is water under the bridge. The members' money is safe. The FNPF is not the NBF. Its investments are on the whole well managed and it carries adequate liquidity provisions - meaning that it is able to release cash at short notice, as thousands of hard-pressed members have discovered in the wake of December 5. However, if the audit were empowered to inquire into the adequacy of return on the members' funds the answers might be enlightening.

Gluttonous borrowing by a succession of governments has tended to cap the return to members who are asked to accept the State's terms even though better terms might be safely available elsewhere. The members, then, pay twice for the State's profligacy. They pay in terms of taxes to repay the borrowing of their own money and they pay again through capped returns on their investments. An audit can uncover such maladies - but it cannot cure them. Again depending on its terms of reference, an audit might also reveal the subtle but hugely significant change in the fund's attitude to risk during the past five years. The formation of its subsidiary, FNPF Investments Limited, has allowed the fund through its managers and directors, to adopt a more entrepreneurial approach to investment, which most overseas pension fund managers would find to be nothing short of hair raising.

Through the subsidiary, the fund's members now find themselves with controlling interests in hotel developments and the nation's major telecommunications provider. This is despite the fact that the fund possesses neither knowledge nor experience of running such companies. Of course an audit will also uncover more instances of questionable behavior such as that highlighted by this newspaper in recent days. But it would be a great pity if this eclipsed the need for a thorough overhaul of the fund's investment philosophy in general and the subsidiary in particular.

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