Hands Off the Fund

Any attempt by the government to tap the billions held by Social Security Investment Fund would have dire political consequences.

After weeks of confusion and controversy, Prime Minister Hani al-Mulki publicly affirmed in April that his government does not seek to interfere in the independent workings of the Social Security Investment Fund. Rather, he said, the government can merely propose investment opportunities which fund officials are free to either pursue or reject.

Al-Mulki was forced to make this clarification after mounting speculation his cash-strapped administration was quietly studying ways of somehow getting direct access to JD9 billion from the fund.

The fund is overseen by the Social Security Commission, one of the few remaining national institutions we can rely on. It distributes pensions to thousands of retirees, in addition to compensations in cases of death, injury, unemployment and other work related risks. It also provides a social safety net for individuals and families. Since it was founded in 2003, its assets have been growing steadily. Last year they grew by 11 percent, which means that as stakeholders, Jordanians should be satisfied.

What triggered the controversy was the fact that the government had asked the Office for the Interpretations of Laws (OIL) to clarify the regulations pertaining to the authority of the SSC.

In the first instance, the OIL concluded that the Investment Fund’s council has the authority to make investment decisions provided that such decisions are approved by the SSC’s board of directors. But it seems that the government was not happy with that conclusion that it asked OIL to look into the matter once more.

In March, OIL convened again and this time concluded that the Investment Funds’ council has the full authority to adopt investment related decisions without going back to the SSC’s board of directors since that board approves the Investment Funds annual plans and budget.

This clear contradiction in conclusions raised suspicions that the government was working to influence the Investment Fund’s investment plans. The controversy coincided with rumors that the government might be working to amend the SSC’s law. The last time that law was amended was in 2014. Also adding fuel to fire was the decision to retire the SSC’s director after she reportedly disagreed with the current head of the Investment Fund.

The second conclusion of OIL was welcomed by the government, according to analysts. Seven of the 9-member board of the Investment Fund Council are appointed by the government, while 10 of the 15-member SSC board represent unions and trade and industry chambers where the government has no influence.

Critics of any government meddling in the SSC funds say successive governments have a terrible economic track record and that no government can be trusted with the life savings of Jordanians. They point out to the failure of the government’s privatization strategy where resulting earnings, estimated in billions of dinars, have been mismanaged. They also point to the fact that public debt has spiked over the past 10 years due to bad economic policies by successive governments. Over the years, the government has borrowed over JD4.5 billion from the SSC against bonds and the fund’s investment in government related projects have lost over JD500 million.

The government’s mindset is difficult to read. It wants to pursue a path of self-reliance but it can only do so much through raising taxes. There are serious doubts over its economic policy and whether al-Mulki can fulfill his promise that Jordanians will see light at the end of the tunnel by mid next year.

Even worse, many economic analysts believe the recent price hikes have backfired, with government revenues witnessing sharp declines as many commercial, agricultural and industrial sectors have slowed down considerably as a result. They mock the Prime Minister’s advice to Jordanians to cut down on consumption; pointing that this contradicts the most basic free market fundamental.

And with the economy effectively in recession and the government’s ability to borrow subject to the IMF, which oversees our economic adjustment plan, the SSC’s funds have become a juicy target. The Prime Minister says the government will only suggest investment opportunities to the Investment Council, which will have the final say. But appointed members can be influenced or even coerced and, hence, the danger.