The Malaysian Insight

THE government is being irresponsible in using funds meant for the people’s future every time the country is hit by a crisis, economist Dr Muhammed Abdul Khalid said of the Perikatan Nasional administration’s latest move to tap into the national resources trust fund (KWAN) to purchase Covid-19 vaccines.

Just like its controversial decision to have people withdraw their retirement savings from the Employees’ Provident Fund (EPF) last year to tide themselves over during the pandemic, dipping into KWAN is also akin to making people use their own money in a crisis, the former Khazanah Research director said.

“When the country has a problem, why do people have to use their own money?

“For example, when unemployment was high, when many lost their jobs and businesses went bankrupt, the government urged people to withdraw their EPF savings. It is now estimated that the total withdrawal is around RM90 billion.

“This is not good for the people because the EPF is their retirement savings,” he told the Malaysian Insight, adding that the government has to provide aid to the people, not the other way around.

Putrajaya on April 21 passed an emergency ordinance to amend the National Trust Fund Act 1988 enabling it to tap into the state natural resources fund to pay for vaccine purchases. 

KWAN is governed by the Act and managed by Bank Negara Malaysia, to conserve the nation’s wealth from petroleum and other natural resources for future generations.

According to the 2019 Auditor-General’s Report, there was RM16.03 billion in the fund as at December 31, 2019.

According to Muhammed, the fund is now at RM17 billion, and at a rate of return of 5%, it would be RM73 billion in 30 years.

The government’s move has drawn widespread criticism, more so as RM2.05 billion for vaccine purchases were already allocated under Budget 2021 last year. The sum is to cover vaccines for just over 80% of the population, in order to achieve herd immunity.

Since the emergency ordinance on KWAN last week, the government has yet to clarify how much more is needed to fund vaccine purchases over and above the existing allocation, nor has it responded to criticism of the new law.

Muhammed said KWAN was a fund meant to cover future generations if the country faced a shortfall in revenue from natural resources.

“Isn’t the money for the purchase of vaccines already approved by Parliament in Budget 2021? Why the need to break the coffers of future generations?

“KWAN holds funds for the future. This is a legacy for our grandchildren. The fund is a trust fund, approved by Parliament in 1988 for future generations when oil and gas revenues are declining.

“We cannot use the money from this trust fund at will. Even during the economic downturn in 1998 and 2008, this fund was never utilised. 

“If used now, it is detrimental because this is future investment money. This should not happen,” he said.

If more funds for vaccines are needed, Muhammed said the government should have held a parliamentary session to obtain lawmakers’ approval for additional expenditure, instead of using public funds or trust funds.

“No prime minister from the time of Dr Mahathir Mohamad, Abdullah Ahmad Badawi, Najib Razak, and Dr Mahathir again (under Pakatan Harapan) ever touched this money.

“Because they all know, this is the money for the future. It is not possible when there is a problem to tell the people to use their own money. This is not right. This is irresponsible,” Muhammed added.

Referring to the government’s move last year to allow people to withdraw their EPF savings, Muhammed said it was inappropriate to continue expecting the public to use their savings.  

With the EPF withdrawals, retirees will lose billions in investment proceeds and those with less savings are facing poverty when they retire, he said.

“An example is if RM90 billion is invested for 30 years and gets a return of 5% per year, for 30 years the money is RM390 billion, the return after 30 years is about RM300 billion.

“In other words, if you spend RM9,000 now at the age of 30, an individual will lose RM30,000 by the time he retires, and this is equal to 30 times the Bantuan Prihatin aid.”

Muhammed said in the current situation, it is better for the government to borrow than to continue using savings meant for the public.

“It is cheap now for the government to provide assistance by borrowing as interest rates are low.

“The government could even cut down the size of its cabinet and use ministers’ salaries to help the poor,” Muhammed added. – April 25, 2021.