Malaysian Prime Minister Anwar Ibrahim said civil servant pension fund Kumpulan Wang Persaraan (KWAP) doesn’t earn enough from investments to cover its pension obligations, so the government has to keep financing the shortfall.
Anwar, who is also the finance minister, said KWAP earned 12.9 billion ringgit (US$3.16 billion) from investments last year, while the government’s annual pension obligations is close to 45 billion ringgit.
He said the long-term sustainability of pension financing was identified as a major challenge more than two decades ago, including during his first stint as finance minister in the 1990s.
“Although the earnings are substantial and reach tens of billions of ringgit, they are still unable to cover the long-term cost of pension requirements,” Anwar told the Senate on July 20.
He said it will take political determination to resolve the issue, while balancing the interests of civil servants and the government’s financial capacity.
Last week, Anwar disclosed in parliament that KWAP invested 163.4 million ringgit in failed Indonesian startup eFishery and is looking to recover the money. The Indonesian firm is in the process of being liquidated after an internal audit uncovered what turned out to be one of the largest startup frauds in Southeast Asia.
Other investors in eFishery included Singapore state investment firm Temasek Holdings Pte Ltd, and Japan’s Softbank Group.
Anwar told the Senate that requiring companies to have lengthy track records before investing would prevent new businesses from securing the capital they need to grow.
He said investment professionals should learn from what happened with eFishery, strengthen their assessment processes, and avoid treating the reputations of international investors and auditors as a guarantee of success.
