KUALA LUMPUR, March 23 — Nearly half of contributors have insufficient savings to outlast the economic fallout wrought by the Covid-19 pandemic despite the government’s move to unlock RM40 billion from the Employees Provident Fund (EPF), an economist warned.

Christopher Choong, a deputy director of research at Khazanah Research Institute, estimated that the bottom 40 per cent of contributors will not have enough to last 12 months, as he called for broader measures to ensure a new stimulus package to help vulnerable workers.

“The bulk of the RM40 billion is from EPF withdrawals from Account 2,” he said in a text reply to Malay Mail

“But our initial calculations indicate that the bottom 40 per cent of active members in EPF may not have enough savings in Account 2 for them to benefit fully from the RM500 per month for the entire 12 months.” 

“We need more to protect a broader range of our workers, especially those who have lower EPF savings and those outside EPF, and extending the Employment Retention Programme (ERP) is one quick way to do this because the infrastructure is already there.”  

The measure is likely to be the chief feature of a new stimulus package that Prime Minister Tan Sri Muhyiddin Yassin is scheduled to unveil by month-end, as the government fights to stem the devastation caused by a fresh wave of Covid-19 infections, which has surpassed the 1,000th mark.

Starting April 1, contributors below the age of 55 will be allowed to withdraw a maximum of RM500 monthly from their Account 2 savings, which will cost the EPF up to RM40 billion. 

Muhyiddin said tapping into the EPF will help put some money into the pockets of workers affected by the pandemic, many of whom are already bearing its full brunt.

But response to the move has been one of scepticism so far. Opposition coalition, Pakatan Harapan, said unlocking EPF funds could have an adverse effect in the long term, and that it would be cheaper to disburse RM1,000 for each worker for the next two months.

Unions expressed the same wariness, calling the move shocking since it essentially forces workers to rely on their retirement funds instead, and technically not render them any assistance.

“At a time when we are asking the government to inject funds to help the millions of workers it is instead resorting to asking the workers to take money out of their own provident funds meant for old-age savings and spend it,” the Malaysian Trade Unions Congress said in a statement.

“This will result in the loss of annual and compounded dividends in the long term.”

Economists have said prior to yesterday’s stimulus announcement by the prime minister that there is an urgent need to direct as much resources into protecting vulnerable workers, particularly those in informal sectors.

This included calls for salaries to be subsidised to help small— and medium-sized businesses, the country’s largest payrollers, to stay afloat and prevent layoffs.

“Support needs to be directed to ensure that businesses can weather the situation we are in,” economists Muhammded Abdul Khalid, Nungsari Ahmad Radhi and Hamdan Abdul Majeed said in an open letter to Muhyiddin.

“This is especially true for SMEs — collectively the biggest employers in our nation. They employ close to ten million and have collectively borrowed over RM300 billion from banks. 

“Alleviating their concerns allows more breathing room for our SMEs as well as the people they employ.”

But Choong believes the measures announced by Muhyiddin to date have fallen short of the scale needed to retain employment. 

The SME Association of Malaysia estimated that between 5 and 10 per cent of its members will be forced to shut down with a million workers facing retrenchment, if no immediate measures are put in place.

“I understand that this is not the full package yet and that there will be additional announcements for the rest of the week, but we must act fast and do whatever it takes to prevent a systemic collapse in the real economy and the labour market,” he said.

“This is not even including self-employed workers yet, estimated to be around two million workers, and other labour reduction measures such as wage cuts that would be taken by firms.”

A massive layoff would overwhelm the newly-implemented Employment Insurance Scheme, whose fund size remains too small to cope with large-scale retrenchment, Choong warned.

Putrajaya has so far announced two stimulus packages worth RM26.5 billion.

Muhyiddin then unveiled a second round of stimulus worth RM650 million, which included a 2 per cent discount on electricity bills and a RM600 payment for each worker forced to go on unpaid leave under the Employment Retention Programme.

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