KARACHI, Aug 8: Carrying an investment fund of Rs116 billion, the Employees Old Age Benefit Institution (EOBI) operators are desperately exploring new avenues of investment to improve their income levels to an extent that should ensure monthly insurance payment of Rs1,300 to about 2,54,000 retired employees who are 60 years of age and above. Most of them belong to low income and disadvantaged sections of the society.
“The stock exchange carries a casino image where investors look for capital gains rather than companies’ profitability and is, therefore, unpredictable”, quipped a senior officer of the EOBI who said that National Saving Schemes are now a no go area for the institution and the only avenue is government securities that offer relatively low rate of return.
The EOBI was set up in 1976 under an act of Parliament by the PPP government of late Zulfikar Ali Bhutto as a social security net for the retired, old and poor workers that received a nominal amount as monthly pension. All business establishments with 10 and more employees under the law are liable to get registered with the EOBI and contribute five per cent of their employees wages to the Institution. Since 2002, this contribution of employers has been increased to six per cent and employees now too contribute one per cent.
Under section 9-A of the EOBI Act, the Government is committed to contribute every year the matching fund grant to the EOBI. This was, ironically stopped by late Zulfikar Ali Bhutto’s daughter Benazir government and since then the EOBI Fund thrived on National Saving Schemes, which offered a good return. The NSC schemes have since dried up and the EOBI operators are worried where to park their funds. Actuaries in the insurance market predict depletion of the EOBI funds in the foreseeable future if no remedial measures are taken.
Another change was brought about in the EOBI Act recently through Finance Bill 2006. In accordance with this change, the business establishments having 20 employees and more are now liable for registration with the EOBI, rendering hundreds of those in the business establishments with ten and more employees, vulnerable to deprivation after the age of 60 years. In fact, the business establishments manipulate their organisation structure in a way that even with 100 employees they show it as six and seven different organisations to circumvent the law.
“We managed to earn about Rs16 billion in 2005-06,” Akhtar Zamin informed Dawn on Tuesday to explain that this income was just enough to provide Rs1,300 monthly pension to about 2,54000 retired workers and also to meet the establishment cost of the institution. The income from investment increased by only Rs1 billion in 2005-06 and does not match the inflationary rate.
Bulk of the EOBI’s income came from investment in government securities where rate of return is fixed and too low. As much as more than 84 per cent of investment amounting to Rs94.20 billion was invested in government securities, which gave a return of less than Rs14 billion.
In the year 2003, the government allowed public sector institutions to invest in stock market. That was the time when rate of bank interest was low and stock brokers were wallowing in liquidity and making money in billions. The EOBI too joined the race and made handsome gains. But since at stake was the monthly pension of the old, retired and poor workers some caution was applied and the EOBI investment committee has put the condition of putting money only in those shares that showed 20 per cent return for two consecutive years. In the year 2005-06 EOBI invested about Rs14 billion and earned Rs1.89 billion income. Bulk of this income—-more than Rs1 billion--was from capital gains, while Rs851 million was earned from dividend income.
Real estate is one avenue where EOBI is targeting and has put Rs2.76 billion. Under the rules, the EOBI purchases land from the government only. It has put in place a subsidiary company to manage and run real estate business. The EOBI intends to make rich capital gains from real estate business.
The EOBI has now asked the government to bring privatised banks, other privatised entities, private banks and other business organisations within the registration net so that pension benefits can be extended to thousands of more employees. The private sector directors on the EOBI board have different ideas.
Nazim F Haji, who is one of the four employers’ directors on EOBI board says that many banks and private organisations offer a much better pension and provident scheme than EOBI. But officials of the EOBI argue that law provides registration of all institutions where pension scheme is being practiced. “Let there be a dual pension for the retired employees’’ is one argument.
Brigadier Akhtar Zamin wants to bring seasonal factories (ginning, rice husking etc) within the fold of EOBI. He has an ambitious scheme for lady workers, who work for a period of seven to eight years before their marriage in some school, factories and offices before taking up household as a full-time responsibility. He wants all such lady employees be paid a lump sum amount that commensurate with their period of work and emoluments to help them establish their home after marriage.
Officials in EOBI claim of having brought a large number of establishments, factories, schools and offices mostly in Defense Housing area within their registration network in last one year.
“We have now an ambition to do something for rural labour,” Mushtaq Ahmad Samoon a senior executive of the EOBI said who added that efforts were underway to draw up a precise definition of an agricultural worker and determine a minimum wage calculated from his work in a mechanised farm. “It is too difficult nay impossible to do it,” he said adding that some one has to make a start some day, let this begin now from EOBI.
The EOBI has now 58,210 establishments registered with it which have about 2.5 million employees who are now a part of the pension scheme. The contribution of business organisations increased to Rs3.37 billion in 2005-06 from Rs1.94 billion in 2001-02. Out of the total Rs116 billion fund accumulated since 1976, the EOBI invested bulk of it — more than 84 per cent — amounting to Rs94.20 billion in government securities.
