Hike in employers’ EPF contribution ‘will be counter-productive’

The Malaysian government should reject calls for the employers’ Employees Provident Fund (EPF) contribution to be increased to 20%, saying such a move will be counter-productive, according to the Small and Medium Enterprises Association of Malaysia (Samenta).

“We urge the Cabinet to reject this opportunistic demand by that fringe workers group, and instead focus on creating higher value jobs for Malaysians and helping Malaysian businesses and workers to be more productive,” said Samenta chairman William Ng.

The Union Network International-Malaysia Labour Centre’s (UNI-MLC) recently issued a 12-point plan to improve the conditions for workers, including raising employers’ EPF contribution.

Ng said the economic recovery post-pandemic remains fragile and SMEs continue to lag behind larger firms in terms of growth.

“The latest available data for 2021, for example, showed that SMEs only grew by 1% versus 4.4% for larger firms. This uneven recovery is further compounded by rising costs, which hit our SMEs as severely as they do consumers in general,” he said.

He said that when the government pleaded to SMEs to keep employees employed during the pandemic, most SMEs rose to the challenge.

As a result, Ng said the number of jobs dropped by only 2.5% between early 2020 to mid-2021, despite the nation’s gross domestic product (GDP) shrinking by 5.6%.

He added that many SMEs had to dip into their reserves to keep workers employed. “To many SMEs, that’s the price we pay to help Malaysia recover. But this call by that fringe workers’ group is one that we cannot accept and must urge the government to flatly reject,” said Ng.

He said SMEs’ margins are at their lowest point in recent history “and there is simply no more money to give”.

“We must instead increase the income of Malaysians by creating more high value industries and jobs, encourage Malaysians to save more, and protect our SMEs at all costs, so that Malaysian jobs and livelihoods are protected,” said Ng.

Prime Minister Anwar Ibrahim said recently that the call for employers to contribute 20% towards the EPF would be brought to the Cabinet for discussion.

Employers are currently required to contribute 13% for those earning RM5,000 (£890) and below, and 12% for those earning above RM5,000.


GDP sees year-on-year growth

Malaysia’s gross domestic product (GDP) growth for the first quarter of 2023 (1Q23) is expected to hit 5.6%, up on the 5% growth seen during the same quarter in 2022, according to Bank Islam Malaysia Bhd (BIMB).

The growth in 1Q23 was bolstered by strong domestic demand coupled with moderating inflation, the bank said in a research note.

BIMB chief economist Firdaos Rosli said private consumption would continue to drive growth going forward, supported by a steady improvement in the labour market where a lower unemployment rate of 3.5% was registered in February.

“Higher tourism receipts and the long end of the 2022 academic year holidays helped. As such, we believe that private consumption growth in the said quarter will likely come in the high single digits,” he said.

The bank noted that following 4.5 million tourist arrivals recorded in the fourth quarter of 2022, tourism arrivals and receipts could grow higher in 1Q23, coupled with China’s economic reopening, which is helping to boost growth in the services sector.

However, a Bank Negara Malaysia’s (BNM) forecast said economic growth was expected to average just 4% this year, with a Reuters poll showing growth was projected to rise to 4.6% in 2024.

“China’s rebound hasn’t been import-intensive enough to support goods-producing firms, while goods’ demand from advanced economies has been weak,” said Shivaan Tandon, emerging Asia economist at Capital Economics.

“Looking ahead, we think the economy is set to register below-trend growth this year. Exports are likely to remain under pressure if, as we expect, advanced economies undergo recessions in the second half. Domestic demand is also likely to struggle.”