Malaysia, which is on the cusp of becoming an ageing society, has to reform its social protection system to take into account the needs of the unemployed, according to Nurhisham Hussein, chief strategy officer of the Employees Provident Fund, the country’s largest pension fund.
He says the current system is employment-based and leaves out a significant chunk of the population, including housewives and those working in the informal sector, who don’t draw regular pay cheques.
He called for a "a new social contract" that would provide benefits such as healthcare and pension coverage to all Malaysians, but would require everyone to agree on the terms and the financing.
"We need a new social contract, people need to agree if these are the kind of benefits that they want, and they have to agree that this is how we need to finance it," Mr. Nurhisham told a virtual audience at a World Bank forum on June 26 that was streamed live on Facebook.
According to a World Bank report released the same day, Malaysia will become an ageing society – defined as one where 7% of the population is at least 65 years old – this year. By 2044, it’s expected to become an aged society where more than 14% are at least 65.
The report says the ageing process in Malaysia will occur at a similar speed as other Asia Pacific countries, including China, Japan, Singapore and Thailand, and at a much faster pace than in Australia and some European countries.
The Malaysian government has, since 2018, allowed those working in the gig economy such as e-hailing drivers and delivery riders to make voluntary contributions to the EPF and introduced a 50 million ringgit (US$11.67 million) matching grant to encourage them to do so.
But Mr. Nurhisham says reception has been mixed with some gig workers complaining they don’t have the money to contribute.
"There's a lot of reforms that need to be done for this social protection system. If you just look at reforming the social protection system, the legislative calendar will probably be filled up for the next five to ten years," he says.
The EPF, which manages retirement savings of private sector employees, had 924.75 billion ringgit of assets under management as of end-2019 and over 7.4 million members. Contributions are mandatory, and shared between employers and employees.