‘No escape from cutting civil service size’

Ramon Navaratnam says high growth rates are irrelevant in the long run if the bureaucracy remains bloated.

PETALING JAYA: Higher economic growth rates will not be relevant in the long run if Putrajaya does nothing about the bloated civil service, according to economist Ramon Navaratnam.

Speaking to FMT, he said the civil service, at its current size, would put a strain on the government’s expenditure in time to come.

The former civil servant was responding to a report in the South China Morning Post (SCMP) that said Putrajaya faced the dilemma of having to trim down the civil service while keeping the country’s 1.6 million civil servants happy so that they will vote for Barisan Nasional in the coming general election.

Navaratnam, who served in the Treasury for nearly 30 years, said the RM14 billion spent on civil service wages and the RM19 billion spent on pensions in 2016 were massive by any standard.

“How do we sustain this in the future?” he said. “It will affect our growth and result in higher inflation rates.”

He said the only alternative was to keep to the status quo and reduce development expenditures, but “this isn’t fair to the country and the people because we’ll be supporting civil servants at the expense of the lower income group outside the civil service.”

He downplayed the International Monetary Fund’s recent upgrade of Malaysia’s projected growth rate for 2017 to 4.8% from 4.5%, saying it was relevant only for the short term and for as long as the country’s economic fundamentals remain strong.

He said Malaysia neither needed nor could afford such a large civil service. Making matters worse, he added, were leakage, wastage and corruption.

He said he hoped Budget 2018 would be a “transformative budget” that would address structural issues and “elephants in the room”.

“We must be more vigilant at all times as we face a slippery road ahead from a political and socio-economic perspective,” he added.

Ali Salman.

Ali Salman, director of research at the Institute for Democracy and Economic Affairs, also spoke to FMT on the need to reduce the size of the civil service. He said the government must choose the “right areas” of the service to trim down.

“Let’s get facts straight,” he said. “Out of 1.6 million civil servants, around 500,000 are teachers and another 300,000 work in healthcare, whereas 350,000 work in the army, police and border protection.

“That leaves the civil service with administration functions at around 450,000, and therefore the comparison with the gross number of civil servants is misleading.”

He said “unnecessary departments” in the Prime Minister’s Department needed to be closed down.

He also said the government should divest from government-linked companies.

Last February, Second Finance Minister Johari Abdul Ghani said the government’s burden in paying civil servants had increased from RM22 billion in 2003 to RM74 billion in 2016.

In 2003, pensions for civil servants amounted to RM5.9 billion. This soared to RM19 billion in 2016.

Johari said the amounts would continue to increase in the years to come and the government’s income would gradually decline.

The SCMP report also claimed that government coffers were fast diminishing, citing the missed payment of US$650 million to the International Petroleum Investment Co (IPIC) by state investment fund 1MDB on July 31.

It said Prime Minister Najib Razak could borrow from local banks to tide him over, but warned that it would have the effect of crowding out other genuine borrowers, causing the interest rate to spike.

This would start a vicious cycle in the economy and cause living costs to rise, it added. -FMT