Impact of Malaysia Budget 2011 to Malaysia Economy Outlook

On 15 Oct 2010, Putrajaya had announced on the her finalized 2011 budget plan. Among all the announcements, the one that will have the major ripple effect to Malaysia economy outlook is on the EPF (Employee Pension Fund) a.k.a KWSP role on local and abroad investment project. Budget plans that related to the involvement of EPF are:

1. EPF will undertake 10 billion Sungai Buloh development project
2. EPF will be allow to invest up to 20% of investment of overseas up from its original 6%. This is the very first time government has allow GLICs to be more aggressively involved in private capital market
3. EPF will join venture with UEM offer for PLUS Expressways at RM23 billion Cash

It mark that Malaysia Government has taking further step into intervene her free competitive market. The idea perhaps is adopted from John Maynard Keynes, Keynesian, whereby government intervention is needed in jump start a stagnant market to create jobs and spendings which what a market made of. However, the involvement of EPF will not do any good in jump start the market because EPF is a designated fund for retiree. It is a debt to be pay back to the people during retirement. The retirees who born on 1955-1959 which consist of more than 1 million in population will start to retire 2011. These retiree will start to withdraw their money from the pension fund. Assuming each retiree will withdraw RM50k; if my maths is right, 1 million retirees multiple by RM50k is equal to 50 billion Malaysia Ringgit. The hypothetical amount do not count immigrant which today made up quite a potion to Malaysia community. Since EPF will be putting up so much cash to its proposed project, how the fund be able to come up with the money to the retiree? The repercussion will either be simply printing more money (inflation), cut off or sell off investment in private market which will cause the stock market slump, or by increase taxes. Either one of it is very very bad for the economy.