Financial markets around the world mostly gained momentum last month on the development of COVID-19 vaccines. This lifted the return rates of Taiwan’s labor funds to positive territory, after they slumped earlier in the year, when global financial markets were affected by the COVID-19 pandemic and the US dollar was weak against other major currencies.
The six labor funds — which are used to pay pensions and other workers’ benefits, with NT$4.45 trillion (US$155.92 billion) of assets under management — turned a profit of NT$240 billion last month and the cumulative profit from January to last month totaled NT$190 billion, Bureau of Labor Funds officials said on Friday.
As this month’s economic indicators at home and abroad have been better than last month’s, the officials said that the Labor Pension Fund, Labor Retirement Fund, Labor Insurance Fund, Employment Insurance Fund, Occupational Incidents Protection Fund and Wage Arrears Payment Fund are expected to continue generating profits this month and their return rates were likely to stay in positive territory for the whole of this year.
The funds have diversified investment portfolios of financial products at home and abroad. For years, the bureau has managed the funds through proprietary investment and discretionary trading.
Discretionary trading is alloted to a number of securities investment trust companies through an open bidding process, and since the fees for discretionary trading are often as high as several billion New Taiwan dollars per year, it tends to attract many companies eager for a slice of the business.
However, scandals related to discretionary trading have occurred more than once, including four times in the past eight years.
Securities professionals who managed discretionary accounts were found to have been involved in illegal activities for their own profit, causing the funds to incur losses of millions to billions of NT dollars, even though they were commissioned to boost the return ratio of investments.
In the latest case, judicial authorities on Nov. 27 detained Yu Nai-wen (游迺文), head of the bureau’s domestic investment division, for alleged stock manipulation and bribery. It is the first time that a high-ranking labor official had been detained on suspicion of involvement in corruption.
The ensuing scandal led the prosecutors to question or detain several people at PJ Asset Management Co, Uni-President Investment Trust Corp, Fuh Hwa Investment Trust Co and Capital Investment Trust Corp.
The Ministry of Labor has confirmed that Yu had been considered “high risk” in an internal report in 2016 over his behavior and that it was inclined to remove him from his post in 2017.
The ministry’s statement raises several questions: Why was Yu not removed three years ago? Was there pressure from political circles or senior officials for a coverup? Are his alleged misdeeds an individual case or were structural factors in play?
Moreover, people would like to know how the bureau can prevent similar incidents, what safeguards it has against such misconduct and whether there will be a general inquiry into how securities investment trust firms handle the six funds.
The ministry has repeatedly warned the public that the Labor Insurance Fund might go bankrupt soon and said that labor insurance reform is imperative, yet, its proposed solutions have been nothing more than demanding that workers pay higher premiums, accept lower pensions and postpone retirement.
The labor fund scandals have eroded the public’s trust in the ministry, and Yu’s case warrants a thorough review of the bureau’s internal control and risk monitoring mechanisms. The government must get to the bottom of this scandal.
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