Workers' EPF reduction compulsory
K Kabilan and Leong Kar YenPublished: Mar 29, 2001 9:10 AM | Updated: Jan 29, 2008 6:21 PM
The reduction of workers' contribution to the Employees Provident Fund (EPF) by two percent announced two days ago as part of a RM3 billion stimulus package to boost the economy is compulsory and will take effect beginning next month, Prime Minister Dr Mahathir Mohamad said today.
However, he added the government will review the reduction if the public is unhappy with it.
"If they don't like it, we can review, but the problem is while they don't want to use this extra money to spend, they ask the government for a pay rise. We can't afford any pay rise at this time," he told the press after officiating the MSC-Lucent Bell Labs Technology Forum in Kuala Lumpur this morning.
The Sun reported today that the EPF was mulling over the possibility of giving employees the option to maintain their current contribution of 11 percent instead of the new rate of nine percent.
The daily's report stated further that the laws governing EPF are being studied to ascertain if such an option is possible.
Best to spend
Mahathir said that contributions to the EPF were sitting idle and it would be better for the economy if some of the money is spent. "The EPF contains large sums of money, we have RM1.6 billion a month...it is better to spend a little, not too much.... just a little."
He added the extra expenditure arising out of the reduction in the EPF contributions would not affect the national savings.
"Our savings is 40 percent of the Gross Domestic Product and that is very high compared to other countries," he said.
Mahathir also revealed that if the stimulus package announced early this week was not effective in countering the effects of the economic downturn in the US ( the country's biggest export market) the government will consider additional measures.
On Tuesday, Mahathir unveiled a supplementary budget to shore up the Malaysian economy amid a US slowdown and announced a string of new measures to encourage domestic consumption, and plans to liberalise regulations on equity, property and asset investment by foreigners.
He also said as part of the package, beginning next month, employees' contribution to the EPF will be cut from 11 to nine percent. The government will also abolish the RM50 ringgit tax on credit cards imposed since 1997.
Mahathir said the stimulus package was a "pre-emptive measure" to sustain the country's growth momentum in anticipation of adverse effects due to the US slowdown on Malaysia's exports and economic prospects.
Falling index
When asked on the non-effect of the stimulus package in relation to the Kuala Lumpur Stock Exchange, Mahathir said he did not understand why the composite index kept falling despite the additional booster to the economy.
The index shed an additional 0.6 percent yesterday, following a dip on Tuesday, despite overnight strong gains on Wall Street which lifted major markets in the region.
"I don't understand the market at all. It would probably respond better to what is happening in New York than in Malaysia," he said.
"As far as I can see the country is doing very well. Most of the shares are undervalued so the market does not reflect the true economy. You cannot take the stock market as an index."
"You have to look at other indices that are used and the performance of the economy. You have to look at the supermarkets and the malls to see if people are buying or not," he added.
Alternative markets
Mahathir also disclosed that Malaysia was actively looking for alternative trade markets following the economic slowdown in both US and Japan, traditionally the largest markets for Malaysian products.
"At the same time we have taken measures to help our exports by giving credit to many countries so that they buy our palm oil .We are trying to boost our local consumption too. All these will contribute towards the growth of the economy," he said
He cited China as a possible alternative trade market as the country has a "big appetite" for palm oil.
"We will try selling palm oil to them, but the rest of the things we produce, they (China) can produce cheaper and better," he said.
However, he added the government will review the reduction if the public is unhappy with it.
"If they don't like it, we can review, but the problem is while they don't want to use this extra money to spend, they ask the government for a pay rise. We can't afford any pay rise at this time," he told the press after officiating the MSC-Lucent Bell Labs Technology Forum in Kuala Lumpur this morning.
The Sun reported today that the EPF was mulling over the possibility of giving employees the option to maintain their current contribution of 11 percent instead of the new rate of nine percent.
The daily's report stated further that the laws governing EPF are being studied to ascertain if such an option is possible.
Best to spend
Mahathir said that contributions to the EPF were sitting idle and it would be better for the economy if some of the money is spent. "The EPF contains large sums of money, we have RM1.6 billion a month...it is better to spend a little, not too much.... just a little."
He added the extra expenditure arising out of the reduction in the EPF contributions would not affect the national savings.
"Our savings is 40 percent of the Gross Domestic Product and that is very high compared to other countries," he said.
Mahathir also revealed that if the stimulus package announced early this week was not effective in countering the effects of the economic downturn in the US ( the country's biggest export market) the government will consider additional measures.
On Tuesday, Mahathir unveiled a supplementary budget to shore up the Malaysian economy amid a US slowdown and announced a string of new measures to encourage domestic consumption, and plans to liberalise regulations on equity, property and asset investment by foreigners.
He also said as part of the package, beginning next month, employees' contribution to the EPF will be cut from 11 to nine percent. The government will also abolish the RM50 ringgit tax on credit cards imposed since 1997.
Mahathir said the stimulus package was a "pre-emptive measure" to sustain the country's growth momentum in anticipation of adverse effects due to the US slowdown on Malaysia's exports and economic prospects.
Falling index
When asked on the non-effect of the stimulus package in relation to the Kuala Lumpur Stock Exchange, Mahathir said he did not understand why the composite index kept falling despite the additional booster to the economy.
The index shed an additional 0.6 percent yesterday, following a dip on Tuesday, despite overnight strong gains on Wall Street which lifted major markets in the region.
"I don't understand the market at all. It would probably respond better to what is happening in New York than in Malaysia," he said.
"As far as I can see the country is doing very well. Most of the shares are undervalued so the market does not reflect the true economy. You cannot take the stock market as an index."
"You have to look at other indices that are used and the performance of the economy. You have to look at the supermarkets and the malls to see if people are buying or not," he added.
Alternative markets
Mahathir also disclosed that Malaysia was actively looking for alternative trade markets following the economic slowdown in both US and Japan, traditionally the largest markets for Malaysian products.
"At the same time we have taken measures to help our exports by giving credit to many countries so that they buy our palm oil .We are trying to boost our local consumption too. All these will contribute towards the growth of the economy," he said
He cited China as a possible alternative trade market as the country has a "big appetite" for palm oil.
"We will try selling palm oil to them, but the rest of the things we produce, they (China) can produce cheaper and better," he said.
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