The government's bid to increase the full EPF withdrawal age to 60 years has rekindled memories of the Mahathir era.
I am worried about our Employees Provident Fund (EPF) monies. The recent statement by Deputy Finance Minister Donald Lim who said that the age for full withdrawal from the EPF by contributors will be raised to 60 is bothering me and many others as well.
It means that the government needs more money and as always EPF is its kitty.
As at June 2010, the total savings deposited by millions of employees and their employers stood at RM407 billion.
The EPF has become the main source of domestic borrowings by the federal government.
But over the years the role of the EPF as the primary lender to the government has been grossly abused.
Here’s a reminder of the abuses by Umno’s political masters since 1981.
Former Prime Minister Dr Mahathir Mohamad used EPF funds to finance the nation’s mega public projects.
Mahathir believed that Malaysia could achieve developed status and be at par with the Western economies through his mega economics doctrine.
Under the Mahathir’s “mega economic” models, projects and supplies worth billions were awarded directly to cronies and henchmen.
These projects were priced above the standard costs and the extra monies then went into the pockets of Umno (in the peninsula) and PBB (in Sarawak) stalwarts and coalition loyalists.
EPF buffer for Mahathir
This was Mahathir’s fatal mistake. For more than a decade, these funds were used to top up the annual deficit expenditures in the national budgets.
Upon investigations it was found that the deficit expenditures incurred were substantial due to the mark-up costs of public projects awarded to Umno and PBB cronies without the open tender system.
Hence a big chunk – to the tune of billions of ringgit annually – was borrowed from EPF for extra payments to Umno and PBB crony companies.
After the 1997-98 economic crisis that hit the nation badly, it was the EPF funds that were used to bail out crony companies.
Almost all of the crony companies suffered mammoth financial losses due to the fall in the ringgit value vis-à-vis the major world currencies and the loss in the value of the stocks from the KLSE crash.
What was worse , EPF funds were also used to prop up the shares of companies in which the powers-that-be had vested interests but this too burned out because the mega players involved were foreign “investors” (I call them gamblers).
Unlike in commercial banks the occurrence of bad loans did not result in “credit control” or freeze.
Because for the EPF the cash inflows from the employees and employers’ contributions and cash outflows from their withdrawals and loans taken by the government are a continuous non-stop process.
In other words, whatever and however much funds are used up, it will be continuously replenished by the new inflows from contributors.
Hence, EPF funds can be siphoned out or “stolen” without anyone noticing because the continued replenishing by the members’ monthly contributions creates the illusion that there is nothing wrong with the workers’ money deposited with the EPF.
It is also why to date no one really knows the total outflows and how are the funds utilised, especially those related to government borrowings for public investments/expenditures and for bailout purposes.
Also the Umno government has never until now disclosed how much EPF incurred in losses trying to prop up share prices in the equity market.
Hence the annual dividends paid by the EPF to the employees’ savings accounts may not be profits/revenue generated from the investments by the government at all.
The dividends paid are believed to come from the continuous workers and employers’ monthly contributions.
In which case, why are we even allowing them to continue “lending” the government our money?
Awang Abdillah is a political analyst, writer and FMT columnist