PETALING JAYA: The government has been told that Employees Provident Fund (EPF) contributors are not “white knights” to rescue the domestic economy because they will unwittingly be turned into sacrificial lambs.
The economy should be stimulated through investments in areas that have been neglected, such as agriculture, healthcare, elderly care, and not through using EPF savings in wasteful consumption, the Consumers Association of Penang (CAP) said today.
“It was reported in the media that i-Sinar withdrawals from EPF accounts have a ‘positive immediate impact on the real economy as it supported domestic consumptions’,” its president Mohideen Abdul Kader said in a statement.
“We wish to state our stand that since i-Sinar has been allowed to be withdrawn by the government, the reasons must be specific... for the sustenance of the EPF contributor’s livelihood during pay cut or being jobless, for business start-ups, and to service loans to avoid accumulating compound interest.”
It was reported that 5.94 million applicants for the i-Sinar scheme had been approved as of March 14, involving a total of RM52.48 billion.
This figure is alarming because there are an estimated 6.4 million active EPF contributors, meaning that 93%t of these contributors have withdrawn their savings, Mohideen said.
“However, as we expected, many Malaysians lacking financial literacy and discipline treated the money from i-Sinar as a windfall.
“With the money they bought cars, splurged on shopping (particularly for the coming Raya and Ramadhan), invested in stocks, gold and cryptocurrencies. These people may not have any more savings to fall back on should there be another outbreak, let alone when they retire,” he said.
He pointed out that i-Sinar applicants ignored the fact that cars instantly depreciate in price upon purchase while stocks are very risky as the market can be volatile and uncertain.
“Bank Negara Malaysia (BNM) specifically stated that the Bitcoin is not recognised as legal tender and warned the public of the risks associated with the use of such cryptocurrency,” he said.
“Gold is considered a very low yield investment because its price does not increase very fast under normal circumstances. The price of gold jewellery includes labour charges depending on the design of the item but when it is re-sold to the goldsmith or taken to a pawnshop, the item will only be assessed basing on the pure gold content.
“Hence, when a gold jewellery is sold or pawned, the person is certainly going to make a loss at least from the labour charges which constitutes a large portion of the purchase price unless gold price went up significantly.”
Mohideen pointed out that splurging on shopping using i-Sinar withdrawal is a financial suicide because consumer items have limited lifespan or shelf life and with very little or no resale value. According to a report quoting the Malaysia Retail Association, there was an 80% increase in business at shopping malls compared to pre-pandemic levels.
These people who spend their retirement funds sourced from i-Sinar may not have any savings to fall back on if there is ever another outbreak, let alone when they retire. Moreover, Malaysia is still far from bringing down new Covid-19 infections to one digit, Mohideen said.
“In reality the Covid-19 pandemic is far from over as India, Pakistan, Bangladesh, Indonesia and the Philippines are experiencing a new wave of infections after a significant drop in the number of cases for the past few months. Europe is experiencing the Third Wave recently.
“Malaysia is expected to have almost 500,000 people vaccinated by mid-April. However, this would constitute a mere 2% of the estimated 25 million people (80% of the total population) who would be vaccinated. It is not known when we are going to achieve the desired ‘herd immunity’ as the World Health Organisation (WHO) has expressed concern that developing herd immunity could be difficult for developing countries in the Asia-Pacific region.”