Concerns over sustainability of wage bill

KUALA LUMPUR: The World Bank has expressed concerns over the sustainability of the Malaysian public sector’s wage bill in the long run.

The body’s lead public sector specialist Rajni Bajpai said the current debate on the Malaysian civil service needed to move on from its size to the sustainability of the wage bill.

“More important than the question of size is the quality of the civil service. We feel that we should not be bogged down by numbers. but have to look into the sustainability of the wage bill.

“The wage bill, as a share of the expenditure, has really been rising in recent years and we need to see if the government can really sustain the wage bill in the long run,” she said.

The civil service currently numbers some 1.7 million people. It was reported that salaries and pensions for civil servants previously accounted for 44% of the government’s operating expenditure, making it the fastest growing expenditure item.

Under the definition for civil service in Malaysia, the numbers also include health personnel and educators.

Rajni said as economies moved from middle income into high income, civil servants would have more specialised skills and needed to be paid more.

“But at the same time, these economies also collect more revenue. If you collect more revenue, you’re able to finance the civil service,” she said.

However, the collection of revenue, pointed out Rajni, has been a big problem in Malaysia.

“It has not moved in the way it should move and if you’re not collecting revenue that you should be collecting and the wage bill is rising, the situation is not sustainable,” she said.

The report however noted that the government wage bill as a percentage of GDP has tracked below the comparative average, at 5.6% of GDP in 2018.

Asked if the report considered the size of Malaysia’s public sector as too big, Rajni said this was because Malaysia had defined it to also include health and teaching personnel.

To a question if Malaysia should re-define its civil service differently, she said this would not make a difference as they would still be on the government payroll.

“The real solution is to have the right people with the right skills, productive and (for the government) to have revenue to hire the right people with specialised skills.

“The debate needs to move on from numbers to the sustainability of the wage bill and the quality of civil servants,” she said.

Rajni said it was really important to build up a strong institution in the country, particularly for Malaysia which was looking to moving from a middle income to a high income country, adding that research showed that “a strong institution” underpinned such a transition.