Over 30 trade unions oppose proposed tripartite management of EPF

• Write to President Dissanayake expressing their opposition and the basis; seek urgent meeting

Over 30 trade unions and civil society organisations have written to President Anura Kumara Dissanayake expressing collective opposition to the proposed tripartite management of the Employees Provident Fund.

They have sought an urgent meeting with the President to discuss the matter as well as several reforms proposed.

The trade unions and other organisations who have jointly written to the President are All Ceylon Commercial and Industrial Workers’ Union, All Ceylon Telecommunications Employees’ Union, Ceylon Mercantile Union, Ceylon Teachers’ Union, Climate Action Now, Commercial and Industrial Workers’ Union, Communist Workers Union, Free Trade Union Centre, Human and Natural Resources Development Foundation, Institute for People’s Engagement and Networking, Law and Society Trust, Liberty Circle, Movement for Defence of Democratic Rights, Movement for Land and Agricultural Reform, Nimir Movement, Red Fields Movement, RED Union, Savisthri National Women’s Movement, Shramabimani Centre, Sri Lanka Insurance Corporation (SLIC) Employees’ Union, SLIC General Employees’ Union, SLIC Technical Officers’ Union, SLIC Branch Administration Association, SLIC General Services Union, Sri Lanka National Teachers’ Union, Sri Lanka Telecommunication Employees’ Union, Sri Lanka Working Journalists’ Association, Stand Up Movement Lanka, United General Services Employees’ Union, Voice of the Plantation People, Women’s Collective, and Yukthi Collective.

Following is the full text of their letter to President Dissanayake.

 This letter is submitted by the alliance of 32 trade unions and mass organisations representing the members of the Employees’ Provident Fund (EPF), with the objective of registering our strong protest against the detrimental decision taken by your Government. We strongly object to the Government’s plan to transfer the EPF to a tripartite board—jointly promoted by the Employers’ Federation of Ceylon (EFC), International Monetary Fund (IMF) and the International Labour Organisation (ILO)—and to increase the investments of those funds within private equity and debt markets.

 While the EFC and the Government jointly project this plan as a ‘modern governance framework’, it poses a serious threat to the EPF’s financial stability, fiduciary conduct, and returns to workers’ life savings, with severe consequences for broader macroeconomic stability. Rather than replacing the corruption existing in the public sector, this tripartite framework paves the way for a corporate takeover of the EPF. Through this, the fund is exposed to unlawful business practices such as insider trading using internal information of EPF investments, conflicts of interest and corporate bailouts of unstable private companies.

 Sri Lanka’s corporate sector has a tremendously negative track record, which you alluded to during your victorious election campaign in 2024. This was recently unravelled by the multi-billion-dollar illicit capital flight through trade misinvoicing, which your administration is now actively working to curb in the imports sector. The recent banking sector fraud exceeds Rs. 13 billion; widespread corporate tax evasion destabilised the fiscal position (Sri Lanka Auditor General’s Department Annual Reports) and consequently inflated the tax burden on the general public. The EFC has found it convenient to remain silent about these crimes, possibly assuming that their silence would preserve their social standing. Considering this inherent corruption within Sri Lanka’s corporate sector and its disregard to the living standards of the general public, there is no realistic basis to integrate corporate interests to actively manage the EPF. The corporate sector of Sri Lanka has not developed sufficiently on technical and ethical grounds to safely entrust the largest retirement savings pool in the country. The EPF is a captive fund that has no mechanism for the owners to divest if the management is corrupt. This further increases the possibility of corporate fraud when the management of the fund is jointly held with the corporate sector.    

 Furthermore, during the recent public discussion with trade unions, Finance and Planning Deputy Minister Dr. Anil Jayantha Fernando pointed out that the domestic debt restructuring (DDR) would inflict a loss of Rs. 600 billion to the EPF. Our independent calculations—formally submitted as an affidavit to the Supreme Court approved by the Federation of University Teachers’ Associations in 2024—reveal that nominal loss alone is Rs. 634.4 billion. When factoring in foreclosed reinvestment returns, the true loss skyrockets to Rs. 1,711 billion, wiping out 48% of the fund’s projected gross income for the 2023 – 2028 period. Under the pretext of safeguarding the banking system, this colossal robbery preserved high yields on Government bonds held by commercial banks and high-net-worth individuals, subsequently reaping them astronomical profits. Now, the exact same plunder is rearing its head again disguised as a tripartite committee.      

 The main arguments supporting our resistance and viable alternatives for optimising EPF management directly under the Central Bank of Sri Lanka (CBSL), are outlined below.

Objections to the Government’s tripartite proposal:

 1.The “International best practice and conflict of interest fallacies”

 The Government holds that tripartite management of pension funds is the "international best practice" and that there is a “conflict of interest” in CBSL managing the EPF. They are key pillars justifying the Government's tripartite proposal.

 These two positions are shockingly misleading given that four of the five largest pension funds in the world, in Norway, Japan, the US, and Singapore, are managed directly by state bodies or central banks. Therefore, ‘international best practice’ in pension fund management is the exact opposite of what the Government and the IMF are proposing. We hence reject these baseless positions.

 2.Corporate captivity and bailouts

 It is clear that the EFC is desperately pushing for this proposal at a time of global uncertainty, to cushion the effects of the crisis and maximise gains. Under corporate influence within the proposed tripartite board, the private conglomerates can use the multi-trillion-rupee EPF to continue their unstable commercial operations without having to risk their own capital or savings to do so. This will severely erode the financial stability of the EPF and its returns. 

3.Risk of front running

 Because the EPF is a colossal fund, its investment decisions can alter asset prices. This creates immense monetary value for the information generated by its investment decisions. Corporate representatives on the proposed tripartite board will be perfectly positioned to use this information to trade ahead of the EPF (front-running), buying assets cheaply and dumping them onto the EPF at inflated prices for guaranteed corporate gain, resulting in a reduction of returns to the EPF.

4.Unavoidable loopholes

 Presence of a separate group of investment analysts, trade union representatives and Government officials within the proposed tripartite structure cannot prevent pre-market corporate access to EPF’s investment decisions. Investment proposals made by the analysts had to be first approved by the proposed tripartite committee, making it impossible to prevent corporate access to insider information on EPF investments.

The corruption under CBSL management and proposed solutions

 The main problem that leads to corruption of the EPF under CBSL custody, revealed by the 2015 forensic audit, does not emanate from state management per se, but a legal loophole that protects regulators from their own misconduct. Under the CBSL Act No. 16 of 2023 (previously under the Monetary Law Act No. 58 of 1949), CBSL maintains a separate, exclusive Staff Provident Fund (SPF) for its own employees. Because their own retirement savings are therefore safe from the corruption suffered by the public EPF, CBSL officials are not compelled to act in its best interest. They have no personal reward in risk opposing political or corporate corruption of the EPF, that’s currently ongoing. The public bears 100% of the risk while the CBSL management bears 0%. This leads to a Principal-Agent Problem in managing the public EPF, and not a ‘conflict of interest’ as framed by the Government following the IMF. Introducing corporate representatives to the EPF management only transfers the Principal-Agent Problem from the CBSL to the corporate sector. 

Our proposed alternatives

 Rather than surrendering the fund to corporate interests, we propose structural legal reforms that align the incentives of regulators and the public while enforcing absolute transparency.

1. Amend the CBSL Act No. 16 of 2023 to dissolve the CBSL exclusive Staff Provident Fund and merge the funds into the public EPF. Offer alternative benefits to the public EPF that could closely mirror the benefits enjoyed by the CBSL staff fund, in a way that simultaneously ensures the stability of the public EPF. This will minimise reduction of benefits formerly enjoyed by the CBSL employees through their exclusive staff fund, and also ensure their support and compliance to the new amendment we collectively propose.

 When CBSL officers share the same asset ledger as factory, office and estate workers, the regulators become true stakeholders of the fund. The CBSL staff will have a personal interest and gain in taking the risk of actively resisting both external and internal attempts to abuse the public EPF. They will therefore resist political interference, corrupt investments and internal misconduct not as a public service, but to protect their own retirement savings.

 2. Mandate line-by-line public disclosure of all EPF investments, asset allocations, and trade executions. Investment transparency ensures strict compliance with international best practices, and allows working people to monitor their savings.

 We request an urgent meeting with your excellency to discuss these reforms and objections further.