THE RM40 billion in Employees Provident Fund (EPF) special withdrawals is welcome news for businesses looking to boost earnings, especially with Hari Raya festivities around the corner, those in the goods and retail businesses said.

More than five million applications for withdrawals totalling RM40 billion were made to the retirement fund last month after the special withdrawal facility of up to RM10,000 per person was opened on April 1.

This is the fourth special withdrawal allowed by the government to help the people cope with financial challenges caused by the Covid-19 epidemic and slowing economy.

The extra funds will help businesses recover, trade groups said, and is timely, along with the reopening of international borders and loosened movement restrictions.

“People can now return to their hometowns and there are no more restrictions on celebrations. Families can go out to the malls on weekends and spend, and all this helps to boost sales,” said Tomei Group managing director Ng Yih Pyng.

He said the gold jewellery business is active once again after two years of intermittent lockdowns and poor sales.

Many stores in the Tomei Group reported an increase in business since the retirement fund began crediting withdrawals to applicants from April 18, Ng said.

Gold and jewellery retailers have already seen a rebound in sales since December, which continued until Chinese New Year earlier this year.

Ng called this “revenge buying” as people returned to shopping after two years of Covid-19 movement restrictions.

There was a dip in sales after Chinese New Year to March, however, when the number of Omicron infections was high as well as concerns about inflation.

As such, the latest round of EPF withdrawals will help boost economic activity and the businesses are expecting the funds to stimulate more consumption, Ng said.

“From April 20, Tomei stores have been making more sales to people wanting to buy jewellery ahead of Hari Raya. We don’t think this is the peak yet as some applicants have yet to receive the funds from their withdrawal,” he told The Malaysian Insight.

Ng said it is not only Malays who buy jewellery and gold ahead of Hari Raya. Whenever there is a festival, sales tend to rise and buyers are from every ethnic group.

Mydin Mohamed Holdings Berhad group managing director Ameer Ali Mydin said business at his outlets have almost recovered to pre-Covid Hari Raya levels in 2019.

“The special EPF withdrawal is certainly one of the factors. Also the bonuses for civil servants,” he said.

Ameer, however, said while people are eager to spend again, the prices of some items have also gone up, which may result in people buying less.

Clothing costs more, and raw ingredients for cookies such as margarine are in short supply, he said.

What is selling well, he said, are Hari Raya gift baskets as well as items like school supplies, which charity groups are preparing to give as donations to the poor and orphanages.

Federation of Malaysian Fashion, Textiles and Apparel chairman Tan Thian Poh agreed that the prices of ready-to-wear clothing are higher and explained that this is due to supply issues involving China, where clothing is manufactured, and where Shanghai is under lockdown.

“Many suppliers are unable to deliver on time due to rising raw material prices and the lockdown in Shanghai. The supply chain also has problems with transport,” he said.

Some 20-30% of clothing and apparel are locally sourced and the rest are imported, he said.

But local manufacturers are also facing worker shortages, causing production to drop by about half.

Tan predicts a further price increase for clothes after current stock left from the epidemic is cleared.

“Textile and garment prices are expected to surge by 30-40% due to factors such as global raw material shortages, higher transport costs and a weak ringgit,” he said.

While businesses may welcome the EPF withdrawals, a small and medium enterprise group head said he would still advise EPF contributors against withdrawing funds that are meant for their retirement, unless they face a real emergency.

Associated Chinese Chambers of Commerce and Industry of Malaysia SMEs committee chairman Koong Lin Loong said people are using their withdrawn funds to buy festive items, which do not qualify as emergency spending.

“I suggest that people with working income not withdraw their EPF funds as much as possible. Once withdrawn, it is difficult to make up for it,” he said.

“Unless their income increases a lot in the future, it will affect the savings and interest.” – April 27, 2022.