Tuesday, March 17, 2015

The elephant in Malaysia’s civil service

10:18AM Mar 17, 2015
By Lim Teck Ghee

“In Malaysia there are 1.4 million civil servants in 28 schemes of service under the Jabatan Perkhidmatan Awam or the Public Services Department. They include the federal public service, the state public services, the joint public services, the education service, the judiciary, the legal service, the police and armed forces...”

Idris Jala, ‘Transforming public service delivery’, Jan 27, 2014.

COMMENT In his article, the CEO of Pemandu made the case that the 1.4 million strong civil service was not bloated although he conceded that it needed to improve service delivery.

Firstly, there is no denying that we have a civil service to population ratio that is the highest in the region.

The 2011 UN Economic and Social Survey of Asia and the Pacific (Unescap) had noted that Malaysia has the largest civil service in the region with a civil servant to population ratio of 4.68, compared to Indonesia's 1.79, South Korea's 1.85 and Thailand's 2.06. Since then, we have added another several hundred thousand civil servants to the national payroll.

There is also no doubt that the present size of the civil service makes for a major drain on the country's finances. Recently, ahead of the tabling of the 2015 Budget, Jayant Menon, Asian Development Bank's lead economist urged that "government expenditure needs to be trimmed back significantly, with reductions required in the massive but hidden subsidies to government-linked corporations, and in the bloated and inefficient bureaucracy."

His proposal: "[I]nstead of rewarding the Mandarins with a one-month bonus not for productivity improvements but purposes unclear, (the) government should focus on curtailing expenditure on the civil service, which currently accounts for a massive 30 percent of total expenditure."

My position is that fiscal prudence requires that the government should not give a bonus to civil servants - not in 2015 or in any other year, especially an election one. As it is, the civil service is a relatively privileged sector, where members enjoy perks such as free medical, housing and retirement benefits that are not found in the self-employed and some of the private sector.

The rapid - and unjustifiable - growth of the civil service means that the average non-civil servant taxpayer has to bear the burden of increased expenditure on the civil service. To have the average non-civil service Malaysian subsidise civil service annual bonuses is adding insult to injury since there is little or no evidence of productivity increase.

A case may be made for adjusting the salaries of the lowest rung of civil servants if there is an extraordinary increase in cost of living or rise in inflation. But this salary adjustment needs to be justified with empirical data on the impact of rising costs or it will be dismissed by the public as undeserved and a political ploy.

More justifiable is to reduce the salary differential between the highest and lowest rung civil servants which possibly ranks amongst the worst in the world.

Clueless Bank Negara

Besides BN appearing to be clueless on the optimal size of the civil service and unconcerned about its impact on the nation's financial health, the concern is also that Bank Negara is not providing government and policymakers with guidance on how to manage the over-sized elephant in Rumah Malaysia.

According to its mission statement, the central bank, "is committed to excellence in promoting monetary and financial system stability and fostering a sound and progressive financial system."

But it has been silent all these years on the burgeoning civil service and the impact on the country's financial well-being. This silence has continued in its latest annual report on the country's economic situation.

It is strange that Bank Negara has nothing to say about right sizing or trimming back the civil service numbers. But perhaps it is not so strange seeing that it has had nothing to say about the 1Malaysia Development Berhad (1MDB) and other earlier financial chicanery that were put on its radar but which it has refused to raise red flags about.

The table (right) shows how quickly the civil service bill has ballooned during the past eight years largely due to new recruitment so that our present civil service number exceeds 1.6 million. This is a path of growth that is unsustainable and could bankrupt the nation in the future.

The most serious outcome of the bloated civil service and expenditure on emolument and pensions and gratuities (this expenditure does not include the cost of supplies and services, including costly health services, necessary to ensure that our civil servants are in good shape) is the squeeze on developmental expenditure.

Estimates place the reduction in spending on rural development, education, health, communications and other socio-economic infrastructure and developmental essentials at up to one-third as a proportion of total federal expenditure in the last decade.

Thus the developmental budget has dropped from over 30 percent of the total budget allocation in the period before 2003 to 20 percent plus in the last 10 years.

A lean civil service

We need a lean civil service; we cannot afford a fat and flatulent one. We need one that enables services to be delivered efficiently and effectively for the sectors that the state has responsibility for - education, health, security and defence, public infrastructure, etc.

No one in the right mind is calling for a cut in the civil service that is applied across the board without taking into account priorities in education and health and the need to maintain and improve existing services. But there is a strong case for a cut in many sectors of the service - including our world record breaking over-sized cabinet.

It has become politically incorrect to call for a trimming down of the civil service. This is stupid and ridiculous. Although the civil servants are an important voting bloc, they should not be allowed to hold the country to ransom.

And even though Malays comprise a major part of the civil service, let's not forget that there are more Malays in the country who are not civil servants and whose burden it is equally to bear if civil service staffing is not rationalised.

The national interests make it imperative that we place the civil service under the microscope, do a forensic analysis and take a non-racial approach to its size and role in the country.

Any takers?

DR LIM TECK GHEE is former World Bank senior social scientist, whose report on bumiputera equity when he was director of Asli's Centre for Public Policy Studies sparked controversy in 2006. He is now CEO of the Centre for Policy Initiatives.
~ Malaysiakini

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