EOBI made politically motivated investments

ISLAMABAD: The Employees Old-Age Benefits Institution made politically-motivated investments worth Rs 4.6 billion in the Bank of Punjab during 2007-08. This was disclosed by the secretary Labour and Manpower at a meeting of the Public Accounts Committee on Monday. The PAC has now ordered an inquiry into the matter.

The office of the Auditor General of Pakistan disclosed that in 2007-08, the EOBI invested Rs 4.6 billion in the Bank of Punjab, an amount greater than even the total paid-up capital of the bank. The Director General Commercial Audit said that the EOBI bought BoP shares worth Rs 4.3 billion and deposited Rs 1.3 billion with the bank.

The BoP investment was part of the EOBI’s core strategy although the bank did not declare any dividends between 2003 and 2009, he added.

To this, the secretary for the Ministry of Labour and Manpower Tariq Puri conceded that there must have been political reasons for such investment.

“Rules were violated while investing in the Bank of Punjab,” said PAC chairman Chaudhry Nisar Ali Khan. “There was no rationale for having invested billions of rupees in BoP at a time its scandals had already come to the fore.”

“There was malafide in EOBI investments at that time and having been part of that government, I share this responsibility,” said PAC member Hamid Yar Hiraj of the PML-Q. He said the last government had allowed the EOBI to invest in the stock market, a decision which was inherently flawed.

Correspondingly, the DG Commercial Audit further revealed that during 2007-08, the EOBI suffered losses of Rs 4.82 billion on account of portfolio investments conducted in violation of company’s rules.

According to the rules, said the DG, the EOBI was supposed to invest only in those companies that earned one-fifth of the share value for the preceding two years at least. But two of the companies EOBI chose to invest in earned less than 20 per cent of their share value, which ended up creating a loss of Rs 4.8 billion.

The DG revealed that the 4.6 per cent shares of MACPAC Company were purchased at Rs 16 per share and its value now is just Rs 3 per share.

However, Puri insisted that the losses were notional only and EOBI had done nothing wrong. “The prescribed criteria were followed while investing in the BoP and other companies,” said Puri. “The losses counted by the DG Commercial Audit are unrealised and notional as our stockholding is still intact.” Due to the relatively improved economic environment, these notional losses have come down to 34 per cent in 2009-10 from over 56 per cent in 2008-09, argued Puri. In the meantime, he said, the EOBI has received dividends from these investments to the tune of Rs 4 billion.

The Public Accounts Committee has constituted an interdepartmental committee to examine the areas of investment and submit a report to the PAC within a week.

Published in the Express Tribune, June 1st, 2010.