“The social protection system is in urgent need of reform”

The BNM warned that the pandemic has served as a reminder of the urgent need to reform our social protection system. — Photo Bernama

KUALA LUMPUR: The fourth withdrawal from the Employees Provident Fund (EPF) has received a mixed response, with some saying the continued use of EPF savings in difficult times takes away the very purpose of the fund’s existence, while d others argue that emergency use of this should be allowed.

Malaysia’s economy has been badly hit by the coronavirus, with the unemployment rate reaching 5.3% in May 2020, but the economic impact has eased thereafter, with the country’s unemployment rate falling to 4.3% in the fourth quarter of 2021 – the lowest level since the pandemic hit – as labor demand rose throughout the recovery.

For the chairman of the Association of Small and Medium Enterprises Malaysia, Datuk William Ng, any additional liquidity in the market will undoubtedly help boost sales, especially for the retail segment; however, this should be the final pullback as the economy is in recovery mode and the country’s unemployment figure is falling every month.

“The larger issue is the cost of inflation, with labor, logistics and raw material costs having increased by 20% to 40% over the past six months,” Ng said.

He stressed that the government should mainly focus on reducing bureaucracy, especially on rehiring foreign workers for low value-added jobs avoided by locals, streamlining permit and license approval processes and , generally speaking, the reduction or easing of regulatory burdens as businesses and SMEs recover from the pandemic.

“This would reduce costs and operational pressures for businesses and ensure that no additional expense is passed on to consumers,” he added.

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

“It destroys ETH as an institution, an institution that has worked admirably,” he said.

“Furthermore, given the size of the fund, this abuse will have an effect on all of the country’s financial markets, including the cost of government borrowing,” he told Bernama.

He expressed concern about the livelihoods of Malaysians, saying a generation of Malaysians will leave the workforce 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 announced that it aims to help members replenish their savings for their future retirement, as these withdrawals, i.e. i-Lestari, i-Sinar and i-Citra, resulted in the payment of a total of 101 billion RM to over 7.4 million. members, i.e. nearly half of EPF members.

Although they provided some financial relief to members during the pandemic and the various movement control orders, the withdrawals inevitably led to 6.1 million members now having less than RM10,000 in their EPF accounts, including 3 .6 million have less than RM1,000, leaving them vulnerable and unprotected for their retirement.

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

“All these withdrawals will only kill him and the Retirement Fund (Incorporated), which is supposed to fund public sector pensions. We have to be disciplined in managing it,” he said.

“In 20 years, there will be a large generation of retirees with few EPFs and no jobs who are not government retirees,” he warned, citing as an example the marginal propensity to consume (MPC) of Malaysian households.

The BNM WP2/2013 working paper series indicates that households with monthly disposable income below RM1,000 consume on average 81 sen of every RM1 in additional income and that the MPC is higher for low income households than for high-income households.

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

“The pandemic has reminded us again that we urgently need to reform our social protection system.

“It won’t be easy, and it can’t happen overnight, but it has to start now,” she told a virtual press conference on the occasion of the release of the annual report. from BNM on Friday.

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

BNM Deputy Governor Jessica Chew said that while the central bank recognized the withdrawals would help many struggling to recover from the pandemic and recent flooding, the EPF figures “are really worrying.” — Bernama






Joel C. Hicks