Evolution of the Bangladeshi provident fund and its investment : towards an independent trustee

Abstract

This thesis seeks to address the legal deficiencies in the Bangladeshi Provident Fund identified by the World Bank and the Asian Development Bank in their reports, both published in 1997. This particular fund is currently the only pension fund available in Bangladesh. It is available only to public sector employees and a limited number of people working in the private sector. Under the Trusts Act,1882,the Provident Fund is administered by the government and certain other employers themselves as trustees, but this has created a conflict of interest between the employers and employees. The World Bank, the Asian Development Bank and the International Organisation of Pension Supervisors have all noted glaring deficiencies firstly in the legislative, regulatory and government administration framework of the Provident Fund under the outdated Trusts Act of 1882,and secondly, in ‘nascent’ institutions such as insurance companies, which have the potential to offer general pension plans. These problems have hindered Bangladesh in establishing and administering a more universally accessible fund founded upon the ‘three pillars’ of the modern pension fund scheme recommended by the World Bank in 1994. This thesis argues that fundamental improvements in trust law and the regulatory framework are needed in order to improve the foundations of the Provident Fund itself, and to make available to all Bangladeshi workers a universal pension fund system - the ‘three pillars’ pension system. The thesis employs a comparative analysis, drawing on Australia’s experience as an established ‘three-pillar’ pension and superannuation fund system, and India’s recent legislative steps towards a three-pillar system. In addressing the problems identified by the above-mentioned international bodies, it is argued here that the crucial step in improving and extending the existing Provident Fund and in establishing a more universally accessible pension fund to create an independent corporate trustee of the pension fund. The trustee of this fund should be independent of the government and employers’ administration and control. Because of the independence of this trustee, it will be necessary to provide also an independent regulatory framework for the pension fund’s corporate and prudential supervision. These are the essential elements of the ‘three-pillar’ pension system. Resolving these issues should provide the means for creating an independently regulated pension fund that provides a significant new addition to the social welfare net in Bangladesh. It will also provide a valuable foundation for capital formation in both the domestic and international markets.

Date of Award	2012
Original language	English
Supervisor	Geoff Nicoll (Supervisor) & Jenny FU (Supervisor)