AUGUST 19 — Regardless of how the government wants to spin it, you and I both know that the economy is not doing so well right now. We probably have the same amount of money in our pockets each month that we had last year despite the threat of inflation and the rising cost of living.
But this year, there are more expenses to pay for, more essentials which are increasing in price, more bills to deal with and more debts to settle.
Not too long ago, the government expressed concern that Malaysian households were heavily burdened with increasing credit debt as a result of spending and living beyond one’s means.
Perhaps the government needs to look at itself in the mirror and realise that it too is in a similar predicament. And perhaps has been for a long time.
It doesn’t take an economist to point this out. If the total expenditure exceeds the revenue collected, a budget deficit then exists. The only way for the government to pay for this deficit is to go into debt and borrow. The last time the budget was in surplus was back in the late 90s.
2015 ended with the national debt (Federal government debt) reaching RM 604 billion. This amount represents 54.9 per cent of the country’s gross domestic product (GDP). Or each Malaysian citizen owing RM19,497. And each year, RM22 billion in interest has to be paid or RM717 every second.
It is a staggering situation.
The legal limit is 55 per cent. That is the national limit as stated under the 1983 Government Funding Act and the 1959 Loan (Local) Act. Under these two Acts, the government cannot legally have debt beyond this ceiling.
It is almost certain that the government’s spending levels and falling oil revenue will (or already has, depending on who you are talking to) cause the debt to breach the debt ceiling this year. I am wondering whether our MPs or even government even care.
Money has to come from somewhere and even for a country, it is not unlimited.
If we are not ready to dig a deeper hole into debt, then what we need to do immediately is to reduce government spending. Every child is taught that there is no such thing as a free lunch. To have more of something, we have to have less of another.
In recent years, more and more initiatives have been introduced and have gradually become expensive entitlements such as BR1M. The government has not only increased the amounts received but has also expanded the coverage of these cash handouts.
How can a cash handout which an estimated 5.2 million households or 83 per cent of the entire population are considered eligible to receive, be considered as targeted assistance?
The 2016 budget amounts to RM267.2 billion. Despite revisions to the budget, some sections of government such as the Prime Minister’s Department remain relatively unrevised.
If the government is intent on continuing on with this level of spending, something needs to go. And no, the solution is not telling off Malaysians about them needing to change their lifestyles.
We need to scale back on some sacred cows. I specifically point to the ballooning cost of maintaining a large and bloated civil service.
It is truly an astounding fact that Malaysia’s civil servants make up around five per cent of Malaysia’s 30 million people or 11 per cent of the working population. That’s 1.4 million people in addition to around 600,000 pensioners. Twice the proportion for countries such as Indonesia, Thailand and the Philippines.
A decade ago, there were only 900,000 civil servants.
Compare this to the United Kingdom. The UK currently has 393,000 civil servants against their population of 64 million. The last time they had 1.2 million workers in the public sector was during the Second World War!
With duplicate and parallel departments maintained and not consolidated despite the economic crunch, the Malaysian civil service neither looks like it is reducing its size anytime soon nor increasing levels of efficiency.
However, with these numbers comes obligations (pensions, gratuities, and all manner of civil service perks and allowances) which are not one off costs and will burden the Government and the taxpayer for many years to come.
The 2016 budget indicates that the bill for the wages and pensions of government employees will be RM 70.5 billion or 25.5 percent of the entire federal budget. And no, this is not normal.
Ten years ago, it was RM36.9 billion. Rather than becoming more lean and efficient in times of global economic uncertainty, it continues to be happy hour for the public sector in Malaysia.
It is sobering to remember that only 1.8 million of the entire public and private sector workforce actually pays taxes. Despite the civil servants making up 11 percent of the labour force, a large proportion are not required to pay taxes due to the low paying nature of the jobs.
Absent of a bullish economy with giddying economic growth rates, it has become a zero sum situation. If the government insists on continuing with cash handouts and programmes which have limited impact, extremely short term gains and less memorable achievements, the size of the public service must be dramatically reduced to fund them.
Let us be clear.
The civil service should not and is not a jobs programme. It is not intended to be a place to soak up the unemployed and address the unemployment rate at the same time.
You cannot pay a large number of people a low paying wage (despite the introduction of a minimum wage level, a large proportion of the public sector is paid slightly higher than the poverty income level of RM800) and then pretend that unemployment is being addressed.
What is needed instead is an intelligent combination of pay increases, large RIF (reduction in force) or downsizing exercises of lower level, low and non-performing staff, as well as smart recruitment of staff.
We need to hire and retain the right people to do what is needed to be done based on merit, experience and capacity. Racially preferential policies have no benefit whatsoever and only result in being a burden to the service with a large number of low performing individuals.
We need out of the box thinking to deal with today’s reality as well as the courage to do what is necessary.
* This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail Online.
