KUALA LUMPUR: Economists have brushed off claims that the Employees Provident Fund (EPF) has low cash reserves, thus compelling it to sell some of its assets to facilitate withdrawals for the i-Sinar programme.
Putra Business School Associate Professor Dr Ahmed Razman Abdul Latiff said the announcement about the Account 1 withdrawal under i-Sinar would have taken into account its reserves' position and investment strategy for next year.
The EPF, he said, might have made the decision to dispose of its assets to calibrate its investments to allow withdrawal of cash from Account 1 by its two million members, not because it was facing financial difficulties.
He said just like Khazanah Nasional Bhd, Permodalan Nasional Bhd and other government investment companies, EPF's investment strategy can be broadly categorised into two areas — strategic investments that will give long-term returns to the fund, and commercial investments that will cater to the immediate needs of the investment, such as annual dividend and annual operating expenditure.
"In this case, the introduction of i-Sinar will require some calibration between these two types of investment strategies to allow the withdrawals without significantly affecting its assets' position.
"What EPF will probably do is sell off its least revenue-producing investments for the next few months to ensure it has enough cash reserves to meet the projected withdrawal by its members, as well as fulfilling its annual dividend commitment," he said.
The government recently announced that under the 2021 Budget, eligible EPF members can access 10 per cent of their savings in Account 1, subject to a consistent minimum balance of RM100, under the i-Sinar facility.
Those who have RM90,000 and below in their Account 1 can access any amount up to RM9,000.
The amount advanced will be staggered over six months with an increased first advance of up to RM4,000.
Those with savings of and above RM90,000 in Account 1 have access to up to 10 per cent of the account, with a maximum advance amount of RM60,000.
The amount advanced will be staggered over six months, with an increased first advance of up to RM10,000.
Union Network International-Malaysia Labour Centre recently objected to the sale of EPF assets, with its president Datuk Mohamed Shafie BP Mammal claiming that the sale indirectly showed that EPF does not have the reserves and cash flow, as it was forced to take such drastic measures.
Meanwhile, corporate and economic analyst Pankaj Kumar rubbished the notion that EPF has insufficient funds, noting that it has always registered net contributions.
However, he acknowledged that the contributions would be lower next year due to the reduced employee rate.
He projected that EPF would see a RM5 billion reduction in terms of contribution due to loss of jobs or pay cuts.
"Despite the withdrawal schemes, my projections show that EPF will see a net contribution of RM4.2 billion this year and RM5.3 billion next year.
"In addition, EPF holds seven per cent of money market exposure funds, hence there is no reason to sell down on equities or bonds as it is more than RM60 billion."