THE government is set to take up a $100 million project to introduce a private sector pension scheme and automate the insurance regulator. The three-year project — Bangladesh Insurance and Private Pension Market Development — will be financed by the World Bank and the government. The multilateral lender will provide $80 million and the government the rest $20 million and the project is likely to get the nod from the WB Board in March.
The Banking Division was given the task of introducing the private sector pension scheme. As of now, it has been decided that there will be two bodies — one in which the private sector jobholders will put in a certain amount and another that will invest the pooled funds for profitable ventures. From the profits the employees will be given benefits when they go into retirement. A policy will be formulated about the formation of the fund and regulations of the contributions. At the beginning, the fund will be managed by the Insurance Development and Regulatory Authority Bangladesh (IDRA) under the Finance Ministry. Besides, the private sector pension scheme, IDRA, Jiban Bima Corporation and Sadharan Bima Corporation will be automated under the $100-million project.
Before introducing the project, opinions of all stakeholders, especially the business community, should be taken. A private pension scheme looks fine on paper but it is not yet known whether this would exist for the long term. If it does the government must ensure that the project officials are competent people who are highly paid so that the millions of dollars of funds which they handle don’t go into a black hole like some of our banking debacles. This should be a topmost priority. Employees who get the job should be selected transparently and must be competent and efficient to minimize the risks of corruption or nepotism. This must be doubly ensured because the money belongs to the employees or the firms – it must not be idled away or wasted in redundant schemes.
Similarly, the regulation of the Insurance sector – without even strengthening the regulator (IDRA) should be a matter for concern. A regulator which does not have the capacity to monitor the insurance companies should be strengthened first and then given the charge later. But here we have the opposite – it is assumed that capacity building will go hand in hand with responsibility – but this can’t automatically be assumed. However, if properly implemented both will substantially benefit private sector workers and people who buy insurance – the later can easily complain if insurance companies fail to pay on time or not pay at all, while the former will at least get a pension which they could never hope of getting at all – as is the case in many private sector firms. It may be a good start.
