Written by: Averroes
(1.0) Introduction
People are familiar with KWSP which is Kumpulan Wang Simpanan Pekerja. It serves to keep all the savings for employees. Though KWAN is different and not many know of its existence.
(1.1) Definition of Trust Fund
In short terms, a trust fund is a trust for funds which there is a legal agreement which one party is the settlor, who gives legal title to another party who is the trustee. The trustee administers that asset or legal title accordingly in behalf of another third party, known as the beneficiary.
Though, for this National Trust Fund or KWAN, the government can become the trustees, or even the settlor or beneficiaries. It could also extend to individuals, groups, individuals and other institutions.
(1.2) Types of Trust Funds
Trust Funds can be in the form of private and public. Private is the one that is formed through trust deed to preserve capital, while the income generated is given or distributed to certain persons or usages.
Public is one that is established for the use of the public, usually by the government by established laws. These laws would then contain legal terms, assigns rights and duties to varying people or parties. That law we shall refer to is the National Trust Act 1988 that established KWAN.
(2.0) The laws for Trust Fund
As mentioned, KWAN is a public trust fund, which was created in 1988 by the National Trust Act 1988 (1988 Act). It is a trust fund which is listed as a government trust fund under the Second Schedule of the Financial Procedure Act 1957.
Under the 1988 Act, section 3 states that the fund would be administered by a panel of trustees, namely the National Trust Fund Panel and that Bank Negara Malaysia would be the party to be accountable for day-to-day administration and management of the fund.
In the Dewan Rakyat Hansard on 15/10/1987, the purpose of KWAN was to ensure that the country's income was at a higher level when the nation slips into economic downfall. It would assist the country to expand its economy in the future and trying times.
In that Hansard, it was suggested that petronas should contribute RM10 million of income every year to KWAN.
It became a reality when the law under section 5(1) of the Act states that money would be from the Consolidated Fund as enshrined under the Federal Constitution, contributions made by Petronas, contributions by any state in Malaysia from exploitation of petroleum or other depleting resources, moneys from the investments of the fund, all grants, donations, gifts, contributions and bequests as well as contributions made by any person or authority whose business is related to depleting resources.
(3.0) The issue regarding KWAN
(3.1) Only parliament has power to amend the act
It is known that KWAN is a statutory body and the trust fund was created by Parliament, however, during the pandemic, the emergency powers and ordinances made changes to the legal terms of the public trust fund, without legislative means.
Rather for assisting in revitalizing the economy, the Emergency (National Trust Fund Act) (Amendment) Ordinance made changes that KWAN can now be used for the procurement of vaccines and any expenditure incurred in relation to the vaccines for an epidemic of any infectious disease as specified under the Prevention and Control of Infectious Diseases Act 1988.
This came into affect when the Federal Government Gazette was published by the Attorney General's Chambers. It amended section 6 of the Act, and was promulgated by the Yang di-Pertuan Agong, Al-Sultan Abdullah Ri'ayatuddin Al-Mustafa Billah Shah, on April 14 as under article 150(2B) of the Federal Constitution.
From here, it is arguable to challenge this drastic change, since only Parliament is entitled to modify the Act, unlike the section 54(7)Provident Fund Act 1991 (KWSP) which allows the minister to vary or modify the purposes of withdrawal made by employee, if the minister thinks it expedient after consulting the EPF board by order published in the gazette.
(3.2) Suspicions on how the money would be spent
Even if the government were to issue the ordinance, would they still use the money as stated in the ordinance?
The government suddenly tapped another RM5 billion from KWAN. Though, there are different reports of how many were collected under KWAN. According to Finance Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz, December 31 last year saw the assets of KWAN at RM19.5 billion.
In 2017, the amount was at RM16.9 billion. According to reports, other countries also made similar actions, but are more to borrowing instead of withdrawing trust funds. In Iran, it sought US$5 billion loans from the IMF (International Monetary Fund) while the US launched a US$700 billion quantitative easing programme to sustain its economy for the lethal virus.
From the RM19.5 billion, RM10.4 billion was from Petronas and RM9.1 billion was from return on investment (ROI) from investing the funds. Only RM5 billion will be taken from the RM9.1 billion to procure vaccines and not the contributions made by Petronas.
The withdrawal was to increase the immunization speed up to 80% of our country's population by February 2022. Though, the finance minister defended that it was still for economic purposes as well. Though, he stated that RM3 billion was not allocated in the Budget 2021 unfortunately.
He however did confirm that RM2 billion was made in March to also ramp up immunization speed. He claimed it was for long-sustainability and that the government was out of fiscal options. It was due to the 1MDB and SRC International fiasco of RM1 trillion. Our country's statutory debt was reaching 60% which currently is at 58%. Also, Petronas should not only be the revenue as other parties can contribute.
According to IDEAS CEO, Tricia Yeoh, the withdrawal would set a precedent which in the future, the government can simply withdraw the amount which had collected around RM17.4 billion for the past 33 years. The amount collected must be saved and spared, because it came from valuable natural resources. It is important the parliament should operate once more to handle this issue.
RM5 billion was already issued, with RM3 billion in the 2021 budget and another RM2 billion announced in March, which raises questions as to why more money is to be withdrawn from KWAN, when it is only to be withdrawn during economic crises.
Would that mean that the government is incompetent to find other ways to generate funds and made KWAN as the final resort? Would this mean that the government is inconsistent and weak in handling budgets for the nation, since they did not even allocate the RM3 billion in the 2021 budget.
This raises many questions and doubts over the ordinance and purported use of the RM5 billion to procure vaccines.
(4.0) References;
https://www.freemalaysiatoday.com/category/opinion/2021/04/25/only-parliament-can-change-terms-of-use-for-public-trust-fund/
https://www.resourcedata.org/dataset/rgi-national-trust-fund-act-1988-act-339-/resource/38941e25-733f-4dc9-a805-7201462d7b33
https://www.freemalaysiatoday.com/category/nation/2021/04/23/how-much-will-be-taken-from-national-trust-fund-govt-asked/
https://www.theedgemarkets.com/article/government-amends-national-trust-fund-act-finance-covid19-vaccines-and-related-expenses
https://www.nst.com.my/business/2021/04/685741/govt-tap-rm5bil-covid-19-vaccines-national-trust-fund
https://www.malaymail.com/news/malaysia/2021/04/21/government-amends-national-trust-fund-act-allowing-funds-to-be-used-to-buy/1968407
https://www.malaysiakini.com/news/572310
https://www.nst.com.my/business/2020/03/575701/kwan-white-knight-troubled-malaysias-economy
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