KUALA LUMPUR (Jan 15): The Socio-Economic Research Centre (SERC) has urged the government to reconsider the proposed mandatory Employees Provident Fund (EPF) contribution for foreign workers, to ease financial burdens on businesses.

SERC executive director Lee Heng Guie said this measure, along with other policy changes, such as the increase in minimum wage and the multi-tiered foreign worker levy, would significantly raise operating costs for businesses.

“Based on our calculations, assuming all three measures are implemented simultaneously, employers would face an additional cost of RM454 per month for a new foreign employee, and RM267 per month for an existing foreign employee,” he told a media briefing on Malaysia’s 2025 economic outlook on Wednesday.

Lee said businesses, especially micro, small, and medium enterprises (MSMEs), are already struggling with rising costs post-pandemic, including the surge in raw material prices.

“This measure will undoubtedly add more pressure on businesses. They will not absorb all the costs and will pass them on to consumers, ultimately burdening the public,” he added.

The mandatory EPF contribution, which was announced by Prime Minister Datuk Seri Anwar Ibrahim in Budget 2025, is to be implemented in phases, though the exact timeline has not yet been disclosed.

Lee also questioned the necessity of the measure, arguing that foreign workers are already protected by insurance schemes and security bonds.

“The government says this is to reduce reliance on foreign workers, but many industries face labour shortage because locals are unwilling to take these jobs. The government needs to address this issue effectively,” he said.

For 2025, SERC projects an inflation rate of 2.5% to 3%, compared to the government’s forecast of 2% to 3.5%.

Lee attributed upward inflation pressures to increased business costs, pay hikes for civil servants, a higher minimum wage, and the planned rationalisation of petrol subsidies.

However, SERC expects Bank Negara Malaysia (BNM) to maintain its policy rate at 3% throughout the year, while closely monitoring inflation risks stemming from fuel subsidy cuts and wage increases.

SERC also forecast a gross domestic product (GDP) growth of 5% for 2025, within the government’s official forecast range of 4.5% to 5.5%.

“We expect the Malaysian economy expansion [to] remain on course, albeit challenging, underpinned by supportive expansionary fiscal and still accommodative interest rates,” Lee said.

Regarding the local currency, SERC predicts the ringgit will weaken to RM4.50-RM4.60 against the US dollar in the first half of 2025, before gradually strengthening to RM4.30-RM4.40 by year-end.