In Malaysia, the economic crisis due to Covid-19 has caused exceptional measures, with the authorization for citizens to dip into retirement savings funds (Employees' Provident Fund...

In Malaysia, the Covid-19 dangerously drains retirement savings

Deserted streets in the Malaysian capital, Kuala Lumpur, during confinement in June 2021. (Illustration).

REUTERS - LIM HUEY TENG

Text by: Gabrielle Maréchaux Follow

5 mins

In Malaysia, the economic crisis due to Covid-19 has caused exceptional measures, with the authorization for citizens to dip into retirement savings funds (Employees' Provident Fund or EPF) to cope with difficult end-of-months .

A dangerous or ineffective measure for many economists but which remains very popular in the country.

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From our correspondent in Kuala Lumpur,

According to the Malaysian Prime Minister himself, digging into his retirement fund to make ends meet is an action that is not without risk.

Also immediately after announcing that citizens could once again withdraw up to 2,000 euros from their savings for their old age, he added "

the government gives its authorization for an exceptional withdrawal, but I call on contributors to maintain their savings unless the situation is really urgent and I hope that contributors will think before making a withdrawal, for the good of the future
”.

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This is the fourth time that the Malaysian government has made such an announcement since the start of the health crisis, to which an economic crisis was quickly added.

However, the country is not the only one to have let employees in pain or its unemployed dip into their retirement savings:

Australia authorized in 2020 the withdrawal of 13,360 euros

Chile that of 30% in total of the retirement savings

in 2021, Peru 25%.

But no government seems to have gone as far in the timing and extent of authorized withdrawal as Malaysia.

No dissonant political voices

If this kind of measure had, at the start of the health crisis,

detractors in the political sphere and civil society

, this fourth authorization arrives, it, with almost no dissonant voice in these spheres.

Indeed, while

the leader of the opposition party, Anwar Ibrahim

, and consumer associations have been warning for the past two years about the ticking time bomb represented by these withdrawals, this week they approve the government's measure.

A reversal that does not surprise

James Chin, a Malaysian researcher

at the University of Tasmania: “

They realized that without this new withdrawal, Malaysians would starve, there is no social security in Malaysia, most of the middle class have no savings, so when their salary is no longer where is exhausted, they seem to have only their retirement savings left

But these retirement savings are already melting like snow in the sun since the pandemic.

In total, 22 billion euros have already been withdrawn and half of contributors currently have less than 2000 euros in their account, which means that they will have to work until their death, alert more and more economists.

Forty-eight hours before this announcement of authorized withdrawal, the Minister of Finance himself was concerned about it, also mentioning another emerging problem: "

In order to prepare for these new withdrawals, the EPF will have to sell more assets investment abroad in this volatile market, given the recent conflict between Russia and Ukraine

", he assured the Parliament on Monday 14 March.

For Professor Geoffrey Williams, an economist at the

Malaysia University of Science and Technology

, this umpteenth measure will also have almost no effect on the most precarious “

their savings are already exhausted,

he recalls.

2.6 million have less than 200 euros in their retirement fund and millions of Malaysians who need help at the moment have no pension at all.

"Start now a reform of social protection and health"

Ineffective for today's poor, these successive measures have, however, enough to impoverish the pension system in Malaysia in the long term, warns the economist, noting that future precarious seniors will probably not be able to be helped by a system of family or community solidarity that Malaysia often likes to claim: "

There's a kind of nostalgia for an Asian culture of community support from an extended family system that was perhaps more real in the past, but now Malaysia is a well-developed country with all the characteristics that go with that, including weakened family ties in terms of social support.
So we cannot rely on those to help 85% of Malaysians who will face poverty when they are old because the resources are simply not there, especially for low income families.
What we need is a universal basic pension system as part of a broader social protection and health reform that should start now.

As for the possibility of saving more or working longer in an attempt to restore some sort of balance in the retirement savings system, these appear to Professor Williams as two unconvincing options for those who have nothing left on their hands. their savings: "

If you are 40 years old and want to achieve a decent amount of retirement savings,

he observes,

you will have to save about half of your income, if you are at the level of the median salary, which seems impossible.
And if you work until the age of 65, that is to say five more years, still with the median salary, but this time a classic savings rate of 24%, you will only have 35 euros of more per month for your retirement, which is to say almost nothing.

In Malaysia, the Covid-19 dangerously drains retirement savings

In Malaysia, the Covid-19 dangerously drains retirement savings

No dissonant political voices

"Start now a reform of social protection and health"

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