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The unprecedented economic impact due to the Covid-19 pandemic has affected each and everyone. However, the extent of the adverse effects that the lockdown measures have had on each and every segment of the working class is different.
When the financial impact differs for different working classes, why should general financial assistance be extended to each and every one?
That’s the crux of the matter when it comes to allowing unconditional withdrawals from the Employee Provident Fund (EPF) and extending a blanket moratorium on repayment of bank loans to anyone and everyone.
Former Prime Minister Datuk Seri Najib Tun Razak has successfully presented an argument for the EPF to allow taxpayers affected by the pandemic to withdraw from Account 1, which was previously held sacred and cannot be touched until the 55th birthday. .
He does not want conditions for taxpayers who wish to withdraw from Account 1. Which means that even those who are not affected can access the cash.
Najib has also called on the government to coerce banks to extend the blanket moratorium on all loans until the motion control order (MCO) ends. One of their reasons is that the banks have been profitable and can afford to give something back to society.
Bank Negara and the banks are resisting the pressure. But Najib’s “cash is king” policies have drawn the affection of most of the lower earners to the point where mismanagement of 1Malaysia Development Bhd, a fund under his supervision that racked up debts of RM30bil.
Employees of the civil service, government agencies, government-linked companies, large and medium-sized corporations, and some industries, such as glove and packaging manufacturers, are not as affected as others.
Public officials have not had their salaries cut. Outside the civil service, pay reductions range from 10% to 20% for high-income earners earning RM10,000 and more per month. Bonuses and bonuses are cut.
The work-from-home arrangement should help management staff save some expenses. They save on transportation costs, they don’t need to spend a lot on coffee, lunches and hours after work in the pub or restaurants with colleagues.
The segments of people that have been most affected by the pandemic are those in the lower income bracket who receive less than RM5,000.
It’s especially worse for entertainment and event management companies, bars, restaurants, cruise and tour operators, and airlines.
The service sector, which employs large numbers of Malaysians, has seen business collapse due to the OLS.
Another affected sector is the informal economy, which is estimated at one third of the economic system. People in the informal economy do not pay taxes and, to a large extent, do not contribute to the EPF.
They have home and auto loans that were taken based on their income from the small businesses they manage.
Overall, businesses have shrunk by one third for the informal economy. As for service sector employees, many have been out of work or with less work available since March this year.
There are groups of employed people who really need help. To this end, what Najib professes is not wrong. Who cares about retirement needs when there’s no money to put food on the table? They want money now.
But financial aid should go to this group. It cannot be open to all, as there would be abuses that would come back to haunt the government much later.
When the EPF introduced the i-Lestari in April this year, many of those who did not need the RM 500 monthly withdrawals from Account 2 stuck to the scheme. According to the latest published figures, 4.7 million taxpayers withdrew a total amount of RM 11.6 billion under the scheme.
Were the 4.7 million members affected? It was certainly not the case. But many took advantage because there are no restrictions and they were able to access the cash easily.
For example, employees of a logistics company whose revenue was not affected in any way benefited from the i-Lestari program. When asked, their answer was because it was readily available and they can access the extra cash today and not wait until they turn 50.
One employee used the additional contribution of RM 500 to get married and another used the money to trade in his car.
Indeed, the money that was intended to be mandatory savings for your retirement was used for other purposes. It was not used to make ends meet during the pandemic.
The amount that members can withdraw under the i-Sinar scheme is much higher than that of the i-Lestari. There is no doubt that the money would be useful to those really affected by the pandemic.
But like the i-Lestari, there would be many who would not be affected and nevertheless would take the opportunity to withdraw part of their mandatory savings. That is human nature, especially for the poor.
There is no question that the money really belongs to the taxpayers. Their employers contributed some of the money to be saved as savings when they retired.
For those who are out of work or only have a few days of work in a month, they certainly need the money today. The i-Sinar scheme would be helpful.
But how many taxpayers are actually affected by the pandemic?
The EPF estimates that there should be around two million beneficiaries of the i-Sinar scheme, as it comes with restrictions.
If blanket approval is granted, the number can exceed 4 million, depending on the number of people accessing additional cash through the i-Lestari program.
Similarly, if a blanket moratorium is implemented on the repayment of bank loans, even the wealthy and those unaffected by the pandemic would not pay their dues. It is not because they cannot pay the loans.
It is simply because the moratorium allows them not to pay their fees.
The implications of a default on bank loans can be serious. It affects the cash flow of banks and, in turn, the amount of loans that financial institutions could offer to companies.
Any financial scheme that comes without restrictions will lead to abuse. It has always happened, especially in the case of EPF, since the days when the government allowed withdrawals to buy computers.
It’s just human nature and it’s waiting for it to happen if you let it.
M. Shanmugam is the former Specialist Editor of The Star. The opinions expressed here are those of the author.
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