Raiding Social Security
The Social Security Corporation is a massive retirement fund in Jordan. The corporation was established in 1980, and currently covers the retirement and disability insurance needs for over half a million wage earners. The wage earner contributes 5.5% of his wage to the SSC, while the employer pays 11% of the total wages of their employees. The result is that the corporation controls assets of over 4 billion dinars.
The proper investment of this money is crucial for the long term viability of the corporation, which will eventually have to pay retirement and disability for the insured and death benefits to their family members. At the same time, this fund is viewed as being an important tool for economic development, and thus must invest the monies inside Jordan.
The question of who makes investment decisions is an important one. The board of directors of the SSC consists of seven government officials, four workers chosen by the labor unions and four representatives of employers chosen by the chambers of commerce and industry. The Social Security Investment Unit consists of seven members, consisting of three members of the board of directors and four members from the private sector who are nominated by the board of directors and ratified by the government.
So, the government has a strong influence on the investment decisions of the SSC. While the life expectancies of governments of Jordan are around one to two years, the SSC has obligations that should last decades from now. This means that what is expedient for the government may contradict the long term welfare of the SSC and the employees who are counting on it for their retirement.
While there are many examples of SSC investments being failures, these do not represent the total picture of their investments. It is not unusual for any venture to fail. However, how can we tell if an investment failed because it was not viable in the first place (but was approved due to political pressure) rather than due to other factors? These issues were raised last week by Salameh Dir’awi at al Arab Al Yawm. The issue was precipitated by a statement by the government that they will be borrowing 100 million dollars from the SSC to fund the building of new embassies and ambassadors residences around the world. This prompted Emad Hajjaj to publish this cartoon, showing the prime minister shoveling the money of the SSC while regular people (tax payers and SSC contributors) are begging for housing loans.
Anyway, Dir’awi strongly attacked the way the decision was made, saying that it only required a letter from the minister of finance to get the money. He also attacked changes in the makeup of the investment unit to increase the number of private sector representatives, with the implication that they are gambling with money that is not theirs. He pointed to a 950 million dinar loss in the stock exchange, which miraculously disappeared by adopting different accounting standards. He also questioned whether it is a priority for the government to spend on embassies and ambassador residences.
Fahed Fanek wrote an article defending government intervention in the SSC, although he said that interventions should be “rare, justified and transparent, with the government taking the responsibility for the outcome”. Previously, he wrote that the previous gains in the stock market over the last three years were much greater than the losses that were sustained with the market drop last year. Moreover, most investments are for long term dividends, and not for speculation.
Be that as it may, mechanisms to ensure the proper investment of SSC money should be in place in order to protect the stakeholders from political manipulation of SSC investments. It is, after all, OUR money.