KUALA LUMPUR, April 3 — The fourth withdrawal of the Employees Provident Fund (EPF) has received a mixed response, with some arguing that the continued use of EPF savings in hard times takes away the very purpose of the fund’s existence, while others argue that emergency use of it should be allowed.

Malaysia’s economy was severely impacted by the coronavirus, with the jobless rate rising to 5.3 per cent in May 2020 but the economic impact has subsided subsequently, with the country’s unemployment rate falling to 4.3 per cent in the fourth quarter of 2021 — the lowest level since the pandemic struck — as demand for labour increased throughout the recovery.

For Small and Medium Enterprises Association of Malaysia chairman Datuk William Ng, any additional liquidity in the market will undoubtedly help boost sales, particularly for the retail segment; however, it should be the final withdrawal as the economy is in recovery mode and the country’s unemployment figure is declining monthly.

"The broader issue is inflation cost, with the costs of labour, logistics and raw materials increasing between 20 per cent to 40 per cent in the past six months,” Ng said.

He stressed that the government’s primary focus should be on reducing red tape, particularly on rehiring foreign workers for low-value-added jobs shunned by locals, streamlining permit and licence approval processes, and generally reducing or relaxing regulatory burdens as businesses and SMEs recover from the pandemic.

"This in turn would alleviate firms’ cost and operational pressures and ensure that no extra expenditures are passed on to consumers,” he added. 

The right move?

Nungsari Ahmad Radhi, an economist, echoes the sentiment, questioning whether Putrajaya’s approval of the RM10,000 special withdrawal is an appropriate course of action, considering that the fund is intended to cover the post-retirement living expenses of its contributors.

"It is destroying the EPF as an institution, an institution that has performed admirably,” he said. "Additionally, given the fund’s size, this abuse will have an effect on the country’s overall financial markets, including the cost of government borrowing,” he told Bernama.

He expressed concern for the livelihood of Malaysians, stating that a generation of Malaysians will quit the job market with nothing in the next decade. "Over six million EPF account holders do not even have RM10,000 in their accounts and some two million have less than RM1,000 in their accounts. If anything, these are the people who really need help. How does this help them?” he said.

The EPF has announced that it aims to focus on helping members rebuild their savings for their retirement future as these withdrawals, namely i-Lestari, i-Sinar, and i-Citra, resulted in a total of RM101 billion being disbursed to over 7.4 million members, which is close to half of all EPF members. 

While they provided some financial relief to members during the pandemic and the various movement control orders, the withdrawals have inevitably led to 6.1 million members now having less than RM10,000 in their EPF accounts, of which 3.6 million have less than RM1,000, leaving them vulnerable and unprotected for their retirement. 

Nungsari has advocated for the government to use cash transfers to assist low-income households.

"All these withdrawals will just kill it, similarly the Retirement Fund (Incorporated), which is supposed to finance public sector pension. We need to have discipline in managing it,” he said. 

"In twenty years, there will be a large generation of retirees with little in the EPF and no job, who are not government pensioners,” he warned, citing Malaysian households’ marginal propensity to consume (MPC) as an example.

Bank Negara Malaysia’s (BNM) Working Paper Series WP2/2013 indicated that households with a monthly disposable income of less than RM1,000 consume an average of 81 sen from every RM1 in additional income and that the MPC is larger for lower income households than for higher income households.

BNM Governor Tan Sri Nor Shamsiah Mohd Yunus agrees that Malaysia should urgently reform its social protection system to ensure the people would not face serious financial hardship in the future.

"The pandemic has been a reminder to us again that we must urgently reform our social protection system. "It will not be easy, nor can this happen overnight, but it needs to start now,” she told a virtual press conference in conjunction with the publication of BNM’s annual report on Friday.

Nor Shamsiah said this when asked to comment on the government’s nod for the special EPF withdrawal of RM10,000 recently, adding that with the economy showing signs of recovery, the people should slowly start to rebuild their financial buffers.

BNM Deputy Governor Jessica Chew said while the central bank recognised the withdrawals would help many who are struggling to get back on their feet from the pandemic and the recent floods, the numbers from the EPF "are really worrying.” — Bernama