Labor minister of Kazakhstan to propose investment scheme for assets of pension funds

/IRBIS, Jan.13, 00/ - REUTERS informs the Minister of labor and social security Nikolai Radostovets proposed investment scheme of the assets of pension funds into real sector of through bank deposits. He presented the scheme to parliament deputies. He also said new project of the law "On accumulative pension system" would be developed by the Ministry till the end of the second quarter of this year. "Pension money invested in the banks of the second tier should be used. It should not be an anonymous deposit, that is, pension assets deposited in the banks should not dissolve within all credit funds. Money of pension funds should be used to finance certain investment programs", he said. The country has 15 private accumulative pension funds and one state fund after transforming its pension system from united to accumulative system. Radostovets says investment projects should be selected at public contest. An agreement is to be signed between the pension fund and the banks, which offered the best investment projects. This agreement should provide for the control over implementation of the project and beneficial use of resources. "With this approach the bank takes all risks and in case of failure deposit amount will be returned to the pension fund. It will protect the program from doubtful proposals" said Radostovets. Even relatively small programs should be financed by using tranches, he added. He believes this financing mechanism is one way of big scale financing of the economy by institutional investors - pension funds, and insurance companies. "Even if a small production was successfully put into operation due to pension funds, it will be a good example of pension reforms' success, and appropriate answer to opponents, whose criticism is based on excessive financing of the state debt". The law permits pension funds to invest deposits of their clients in SS, corporate securities entered in "A" listing at Kazakhstan stock exchange and in bank deposits, whose list is approved by the National Bank and in securities of international financial institutions. The number of financial instruments the pension funds can invest in is limited by the absence of "blue chips" shares in the market. Therefore, about 90% of assets of the pension funds is invested in short-term and mid-term state securities. He suggests to simplify the listing procedure at Kazakhstan stock exchange for the companies, which "implement programs of improving Kazakhstan's economy", expand the market for municipal securities to develop local infrastructure, construction and develop mortgage bills, as a collateral for real estate. He believes these mechanisms will be entered into the new law "On accumulative pension system". Earlier this week, REUTERS was informed by the prime-minister Kasymjomart Tokaev that the Cabinet of Ministers was studying ways of using the funds of pension funds at low risks, which amounted to about $400 mln in two years.