Nation’s bloated civil service, a challenge in slowing economy

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KUALA LUMPUR: The cost of maintaining a bloated civil service is draining Malaysia’s resources at a time when government revenues are falling.

With the Malaysian economy expected to grow at its slowest pace in seven years, trimming the civil service is a good option.

However, trimming the public workforce to improve the government’s coffers is difficult, according to a Bloomberg report.

This is largely because the majority of civil servants are Malays and the ruling government has in place pro-Malay policies. Also, Prime Minister Najib Razak’s own party, Umno, propagates policies favourable to the Malays.

Civil servants are also an important vote bank for the Barisan Nasional.

Najib, whose ruling coalition BN has been in power for nearly 60 years with the help of the Malay vote, had pledged to gradually narrow a budget deficit the country had been running since the Asian financial crisis, said the report.

The commodity-driven USD296-billion economy is expected to grow at the slowest pace in seven years in 2016, with lower oil prices eating into revenue.

Malaysia’s civil service employs 1.6 million people, or about 11 percent of the labour force.

Now, said the report, the bloated bureaucracy presented a challenge to Najib. Malaysia’s civil service relative to population was more than double the average in the Asia-Pacific region by some measures, it said.

While Najib has survived a year of political turmoil over the 1MDB scandal, he needs the support of Malays to win the next election due by 2018, according to the report.

“The civil service forms an important support base for the government and can usually be counted upon to show up and vote for the ruling party during elections,” said Chia Shuhui, an Asia analyst at BMI Research in Singapore.

“The government is not going to cut benefits to their support base, and therefore it is unlikely to make significant changes in terms of its expenditure on the civil service,” Bloomberg quoted him as saying.

Chia, however, added that the government had been taking steps to streamline the civil service and improve the efficiency of the public sector.

“The civil service in Malaysia is intricately jived in with the ethnic policies” of the government, Jayant Menon, an economist at the Asian Development Bank, was quoted as saying “This is a form of ensuring not just employment, but relatively attractive employment.”

Given that nothing much could be done to the civil service because of political and ethnic sensitivities, Menon suggested that the government focus on cutting its business exposure through a government-linked corporation divestment programme to increase revenue.

Salaries, pensions and gratuities accounted for about a third of the budget every year, the biggest expenditure item, Bloomberg said.

However, it noted that Malaysian officials had previously defended the size of the civil service.