Economists have panned calls by politicians from across the political divide for the government to allow further withdrawals from the Employees Provident Fund (EPF), warning once more that such a move will only result in long-term problems for contributors in addition to widening the wealth gap.
The calls, initially made by former prime minister Najib Razak, recently gained traction among opposition leaders as well, with PKR chief Anwar Ibrahim and DAP secretary-general Lim Guan Eng also urging the government to allow withdrawals from the retirement fund.
But economist Ahmed Razman Abdul Latiff advised caution, saying that while EPF’s dividends had increased from the year before, this might not be enough to ease the needs of contributors.
“It is estimated that 5.8 million contributors under the age of 55 have savings of below RM10,000,” Razman, of Universiti Putra Malaysia, said.
“If withdrawals are allowed, in the end they will run out of savings.”
The i-Lestari, i-Sinar and i-Citra facilities introduced over the past two years were part of the various aid packages announced by Putrajaya to cushion the financial impact of Covid-19.
Najib had said in November last year that the maximum amount for withdrawal under i-Citra should be raised from RM5,000 to RM10,000.
He made similar calls several times more, saying in the Dewan Rakyat on March 2 that it would be his fourth time urging the government to allow further withdrawals under i-Citra.
“It doesn’t matter who wants to claim the credit,” he said. “As long as the request for this final withdrawal, which people are really looking forward to, can be granted by the government immediately.”
Opposition leader Anwar meanwhile made a U-turn from his previous stance, saying on March 9 that he had changed his mind after hearing the complaints of people struggling to get by.
“Having seen that the government does not appear to have a way to fix these failures, I now support the approval for withdrawals to be made as quickly as possible and without any hindrance or bureaucratic red tape,” he said in a statement.
Lim meanwhile said that withdrawals of at least RM5,000 should be allowed due to the rising cost of living without a corresponding increase in wages.
Economist Madeline Berma however said that the government should not allow contributors to continue dipping into their savings, warning of long-term problems ahead.
“EPF funds are meant as savings for the future, after retirement,” she told MalaysiaNow.
“Retirement funds are important to prevent contributors from falling into poverty once they are no longer working.”
Razman agreed, acknowledging that measures are needed to address immediate concerns and short-term gaps due to the economic crisis but cautioning that shortcomings in the country’s social protection system must also be tackled.
He also said that any help should come from the government itself.
“Politicians who call for EPF savings to be withdrawn are fishing in troubled waters,” he said, “proposing something that looks grandiose but does not place management responsibilities on the contributor.”
Adding that there are many mechanisms in place to help those in need, he said it was better for contributors to keep their money in the EPF and rely on other forms of help from the government.
The EPF itself said in December last year that the country’s social protection had been pushed to the limit after the series of withdrawals due to the Covid-19 crisis.
It said while it was understandable that withdrawals were allowed during the virus lockdowns, this should not be made a practice during natural calamities as it is bound by laws guiding how members’ contributions are managed.
It also revealed that the various withdrawal schemes had led to the outflow of RM101 billion involving 6.1 million members, leaving them with less than RM10,000 in their accounts. Of these, it said at the time, 3.6 million had less than RM1,000.
It also said that a majority of those who made the emergency withdrawals were Bumiputeras.
“As a result, 4.4 million or 54% of Bumiputera members now have less than RM10,000, and two million or 25% have less than RM1,000,” it said.
Economist Yeah Kim Leng said allowing further withdrawals would further deplete contributors’ savings for their retirement.
“It will add to the number of contributors with little or zero balance, making them vulnerable to old-age poverty,” he said.
He said a better approach to helping the people would be through targeted support such as job placements, business grants and loan subsidy programmes.
He also suggested more stringent screening before withdrawals are allowed, adding however that this would place administrative burdens on the EPF.
Madeline meanwhile urged the government to provide more assistance for flood victims.
“For the victims of natural disasters, I suggest that the government provide assistance such as home repairs or provisions for temporary housing,” she said.
Other forms of assistance include financial aid for damage to property, health assistance, and help with funeral arrangements and logistics.