KOTA KINABALU: The mandatory 2% Employees Provident Fund (EPF) contribution rate for foreign workers would burden the state, says Sabah Progressive Party (SAPP).
SAPP information chief, Chin Vui Kai, in opposing the proposal, warned that it will have far-reaching consequences for Sabah’s economy.
“Forcing foreign workers to contribute to the EPF would disrupt domestic economic activity. Instead of circulating in the consumer market, funds would be redirected towards the capital market, dampening market vitality,” he said in a statement on Thursday (Feb 6).
He said as most foreign workers have short employment cycles, mandatory EPF contributions would offer them little real benefit.
Instead, it would increase the financial burden on businesses, many of which in Sabah have already shut down due to economic difficulties, Chin said.
He said Sabah’s market remains reliant on suppliers from Peninsular Malaysia, both involve the costs of product supply and transportation.
“Any policies, such as increasing minimum wages, that drive up business costs in the peninsula will directly lead to higher goods prices in Sabah, worsening the cost-of-living crisis,” he said.
Chin said past increases in diesel prices, by removing the subsidy in the Peninsula, have already raised business costs, triggering inflation.
Now, with Tenaga Nasional Berhad’s (TNB) electricity tariff set to rise, the situation will only worsen, pushing Sabah’s market into a cycle of worsening inflation, he said.
He urged the Federal Government to reassess these policies and engage in thorough discussions with industry players to prevent a surge in inflation in Sabah.
Prime Minister Datuk Seri Anwar Ibrahim had announced the proposal to mandate all non-citizen workers to contribute to the EPF to ensure fair treatment for all workers regardless of nationality during the Budget 2025 presentations.
Following this, the Finance Ministry proposed standardising the EPF contribution rate for Malaysians and foreign nationals with new employment contracts, meaning employees would contribute 11% while employers contribute 12 % to - 13%.
The Finance Ministry also proposed a phased implementation of the contribution rate for foreign workers and employers with existing contracts, starting at two percent and gradually increasing over six years until it matches the EPF contribution rate applied to all workers in Malaysia.
