Global forces, institutional pressures: The Malaysian Employees Provident Fund in need of reform

Abstract

This thesis examines one area of welfare in one rapidly industrialising country - Malaysia - in order to explore the nature and impact of key economic, social and institutional pressures on a key component of the Malaysian welfare system: the Employees Provident Fund (EPF). The fundamental question is can the Malaysian EPF meet its core objective which is to ensure that all of its members have financial security in their old age? The thesis identifies four key challenges: first, can the current pensions system meet its stated aims despite external global economic pressures which can impinge on the way states configure their welfare systems; second, how will population ageing impact upon current pensions policy and third, do class and ethnic changes matter? The fourth challenge is the EPF itself which - in common with core institutions in other welfare systems is itself 'institutionalised' - though having been in existence for over 50 years, needs to change in order to fulfil its primary objective of ensuring financial security for its members in old age. Continued reliance on individual provision alone will increase inequality based on gender, age, class and ethnicity. The demographic shift to an ageing population combined with widening income inequality ― itself a product of Malaysia's engagement with the global economy ― will result in too few people will having amassed the required level of savings to fund a lengthening old age. The thesis concludes that neither expansion of the EPF'S remit nor inaction are viable options. A new social insurance based scheme which guarantees a minimum level of income for all, regardless of class or ethnicity should be introduced. Such a scheme, though expensive, would be both effective and equitable, and would be consistent with the EPF's own stated objectives.