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End FNPF subsidy to Fiji governments: linking the many battles 2011 (blogs)

18/03/2012
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There are many battles going on over the FNPF pensions.

From The Fiji Times of July 15, it seems that the FNPF Board and management are pushing ahead with their plans to reduce the pension rates of existing high income pensioners (Battle 1)  and future pensioners (Battle 2).

Totally ignoring the sanctity of the legal contracts FNPF itself offered the retirees, they continue to focus on alleged unsustainable cross-subsidization of pensioners by current contributors.

They refuse to call on Government statutory guarantees to finance any future shortfalls in revenue (way into the future).

They also conveniently ignore that FNPF has been giving large subsidies (amounting to hundreds of millions over the last forty years) to successive Fiji governments through easily available loans, at interest rates much lower than that charged by commercial banks.

 

These huge subsidies by FNPF to successive Fiji governments provide the legal battle by some pensioners against FNPF and the Military Regime with a powerful moral justification for Fiji Government to fulfill its fiduciary responsibilities to current pensioners, whatever is their pension rate.

Equally important for Battle 2 (maintaining the future rates of pensions) these interest rate subsidies to Government must now be ended by the FNPF Board and management.

For that to occur, both pensioners and current contributors need to fightBattle3, which is to have an FNPF Board completely accountable to its members.

Finally, for real long term sustainability of FNPF pensions, all need to fight Battle 4, which is to have an elected and accountable government which respects the sanctity of all contracts, and constitutional law and order  which will restore investor confidence and economic growth, and ultimate FNPF sustainability.

   But the last battle requires a “Road to Damascus” enlightenment for many coup supporters, including some current FNPF litigants, to understand that all these battles are linked, and cannot be fought inside little boxes, while ignoring the other legitimate battles going on outside.

FNPF battles are all linked

   There are several FNPF battles going on:

Battle 1: the legal battle by Burness/Shameem Law and others to stop the cuts to current pensioners (which might succeed to a limited extent);

Battle 2: to stop the reduction of future pension rates for current FNPF contributors;

Battle 3: to get the Military Regime to agree that the FNPF Board must be largely elected and controlled by the FNPF member.

FNPF members (pensioners and contributors) should note that everyFijigovernment has a natural incentive to prevent pensioners and contributors controlling the FNPF Board, because FNPF is a “cash cow” for them.

Every government has wanted to borrow for their budgets (for capital or recurrent expenditure, or to pay for their scams), whenever they wanted to, whatever funds were  available at FNPF, and at interest rates significantly lower than that charged by the commercial banks, locally and abroad.  No commercial bank can ever match this cash cow.

Every government has therefore maintained total control over the FNPF Board (the main borrower controlling the bank), which could not be allowed to be accountable to the FNPF members.

Fiji governments have also used the Reserve Bank ofFijito force FNPF to bring back its interest earning overseas investments, which FNPF is then forced to lend to the Fiji Government at low interest rates, or leave the funds idle, earning no interest.

Massive FNPF subsidy to Fiji governments

   The difference between the average weighted interest rates charged by FNPF to government, and the average weighted commercial bank lending rates has usually been more than 1 percentage point, and often more than 2 percentage points.

Ask the FNPF Board and Management for this information (but don’t hold your breath waiting for an answer).

With more than 2 billions lent to Government, the subsidy from FNPF to Government annually  amounts to more than $20 millions for every 1 percent difference in the interest rates between FNPF and the commercial banks.

Roughly, over the last forty years, this subsidy from FNPF to Government may have amounted to as much as $800 millions in today’s currency (give or take a few millions).

Government therefore not only has a legal obligation under the FNPF Act to cover any shortfalls for payment to existing pensioners, but it also has a moral obligation because it has enjoyed these massive subsidies in the past, and continues to enjoy now!.

Common battles 1 and 2:

   If the FNPF Board were to end the ongoing subsidy to the Fiji Government and charge the same interest rates as charged by the commercial banks, this will immediately improve the revenues for FNPF, and enable the FNPF to

(a) maintain the payments to current pensioners and

(b) enable the FNPF to continue to pay the current 15% (or somewhere near it) to future pensioners, not the paltry 9% they are offering by military decree.

It is the fiduciary and ethical duty of the FNPF Board and management to increase the interest rates charged for loans to Government, towards the commercial banks rates.

   Will the FNPF Board and Management do so?  Not a hope (as the correspondence between the Chairman of the FNPF Board and the CEO of Credit Corp clearly shows.

Indeed, the FNPF Board and management continue their brazen and shameless refusal to disclose all the relevant reports to the FNPF Members, despite their clear fiduciary duty of “full disclosure” where FNPF members interests are adversely affected by any Board decision.

The fact that these FNPF Board members won’t resign either, speaks volumes for their lack of ethics and moral fibre.

The personal interests of the management and board members (and for some, the interests of their companies or employers) depend on obeying the Military Regime.

Will the legal case succeed?

   The legal case by some pensioners may be given favorable hearing by the judiciary for two interesting reasons.

First, there are many prominent persons in the Military Regime’s hierarchy (it is a long list) who personally stand to lose a lot, if the existing pension rates are reduced.

Second, allowing the pensioners’ case to succeed, will be good propaganda for the Military Regime, to show the world it respects “law and the judiciary”.

But the planned pension rate reduction for future pensioners is still likely to go ahead, simply because this Military Regime desperately needs the cheap cash to keep financing their irresponsible deficits.

The current FNPF Board and management may go ahead with the illegal reduction of  the current high pensions.

This is a denial of natural justice, FNPF contributors might protest.

But this Military Regime has denied its citizens natural justice on a whole raft of cases, from the day it did the military coup in 2006.  So what’s new?

Common Battle 3

The interests of both current pensioners and current contributors could be better served if they could control the FNPF Board.

I doubt if that will happen under this current Military Regime.

Common Battle 4

   It is abundantly clear that FNPF’s financial problems would have been much smaller, had theFiji economy been growing solidly, with solid growth of employment and new contributors to the FNPF, and solid growth of incomes and dollar values of all contributions.

This requires the restoration of investor confidence that has been shattered by the military coup of 2006 (and of 1987 and 2000).

How ironic that the many lawyers and leading pensioners appealing to the “rule of law” now to protect their pensions and calling on the nation for good corporate governance, themselves supported the 2006 coup which broke the fundamental laws of the land.

One former High Court judge who is currently calling for good corporate governance, totally ignores the biggest corporate malpractice in front of her: the FNPF Board and management shamelessly ignoring the wishes of the owners of the FNPF while obeying the illegal Military Regime she helped establish.

One lawyer who is currently fighting the case challenging the legality of the FNPF’s planned slashing of pension rates, was the Human Rights Commissioner who passionately justified the 2006 military coup, despite all its illegalities, denial of basic human rights and natural justice.

There are also many prominentFijicitizens, currently challenging the legality of FNPF’s actions, who supported the Bainimarama coup and the NCBBF’s Charter Charade, despite its first article which claimed the supremacy of the 1997 Constitution.

All these legal cases against FNPF would not have been necessary if all these “good” people had not instigated and justified the military coup in the first place.

FNPF’s other links

   All those fighting to protect their interests in the FNPF need to understand the past national events which have undermined the FNPF through excessive Government borrowings:

(a) the need to cover the National Bank of Fiji disaster (catalyzed by the 19897 coup) and theSVTgovernment’s creation of the disastrous ATH monopolies, with an excessive price paid by FNPF.

(b) the numerous vote buying scams by successive governments  resulting in wasteful government expenditure;

(c) the massive budget blow-outs by the military following the 2000 and 2006 coups;

(d) the large investment losses caused by FNPF board decisions, all kept secret by the Military Regime, the media censorship and the Public Emergency Decree.

(e) the utter waste of large loans by Military Regime appointees, such as at the FSC.

(f) the senseless borrowing of $500 millions internationally at 9% interest when IMF was willing to lend at 2%.

There are others misallocation we still do not know about because of Military Regime’s refusal to release the Auditor General’s Report.

These are all linked to the FNPF malaise.

If those who are currently litigating against the FNPF, only fight their own narrow battles, there is little hope for the hundreds of thousands of poor Fiji people, for whom no lawyers are going to bat (for fee, or for free if that might help save tarnished reputations).

Is FNPF the Road to Damascus?

   It is natural for all of us to feel bitter and get into the “blame game” over FNPF, but that is not going to help FNPF, or Fund members, and the future generations.

Note that the FNPF problem probably the first clear national issue which brings together all the ethnic groups, all the religious groups, all the divisions, the political parties, all the genders, the young and the old, and even the members of the police and military forces.

But our people need to understand that all their battles over FNPF are linked also to national ideals of good governance and accountability.

There cannot be legal justice for just one group, and not for others.

Now that virtually every significant political and social group in Fiji have bent or broken the supreme laws of the land (in 1987, 2000 and 2006), we are long overdue for a grand “Truth and Reconciliation” process.

But our leaders need to have the humility and courage to admit error, and genuinely ask for forgiveness from each other.

FNPF may provide these erring individuals the opportunity to have their “road toDamascus” enlightenment.

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