KL's public sector growth: Unwieldy and unjustifiable

The Straits Times, February 6, 2007


MALAYSIA'S quick cure for the problem of unemployed graduates is threatening to weigh down and weaken the country's governance itself.

In providing jobs to a huge number of graduates, whether or not they are qualified for the tasks, the government has caused a massive expansion in the public sector. This short-term solution may prove to be worse than the problem itself. It further shows that deeper mismatches between the needs of the national economy and the education provided to the young are not being seriously addressed.

Since 2000, the federal government has created about 210,000 new posts. The rate has accelerated especially since Datuk Seri Abdullah Badawi became Prime Minister, a surprising fact given that he had vowed, on succeeding Tun Dr Mahathir Mohamad in October 2003, to improve public service delivery.

The pledge was understood to mean he would aim for a slimmer and more effective bureaucracy. Expectations that this would happen have been waning among Malaysians over the past three years, and few now believe the administration has the ability to reform the public sector.

Not that the problem has been forgotten. Recently, the Prime Minister lamented that red tape and bureaucratic delays were driving foreign investments away. The Chief Secretary to the Government (de facto civil service boss), Tan Sri Mohamed Sidek Hassan, harshly told officials to 'shape up or ship out'.

A World Bank report cited by Datuk Seri Abdullah shows the time needed for approval to build a factory in Malaysia (281 days) is more than twice that in Thailand (127 days) and Vietnam (133 days).

The crisis in the public sector is profound, and still growing.

Since the 1970s, oiled by the discovery of petrol and gas, and informed by the need to create jobs for bumiputeras to fulfil the objectives of the New Economic Policy, the bureaucracy has changed from a well-paid, well- disciplined and well-regarded structure, into a mass organisation increasingly marred by allegations of graft and inefficiency.

One of the aims of Tun Dr Mahathir's privatisation policy introduced in the 1980s was to successively reduce the number of public servants to just over 500,000. With the population growing rapidly, this target, if achieved, would have brought the ratio between the public and private sectors to a healthier level.

Unfortunately, the public sector continued to expand. In 1990, the federal government had 773,997 employees; by 2000, there were 894,788 on the payroll - a rise of 15.6 per cent.
According to the Federal Positions List 2007, the federal government now employs 1.1 million civil servants.

These figures include those in the administration, military, police and teachers, but not employees of state governments, the local authorities, statutory bodies, privatised utilities, non-financial public enterprises and government-linked corporations.

Ascertaining staff numbers in institutions outside the federal government is a difficult task in Malaysia, but it is generally agreed that the 11 million-strong workforce consists of 20 to 25 per cent working in the public sector in one way or the other.

This relatively high figure is given credence by the fact that total government spending makes up 25.9 per cent of Malaysia's GDP, the highest among East Asian economies.

The fact that the public sector performs badly is a daily experience for many. That the bureaucracy is bloated is also common knowledge. After the economic crisis of a decade ago, the government soaked up the politically sensitive constituency of unemployed Malay graduates by providing them with public-sector jobs.

At present, no one knows exactly how many graduates are unemployed since the government itself lacks data on this. Figures provided by the Ministry of Human Resources, for example, differ vastly from those available at the Economic Planning Unit.

There is little dispute that the massive intake of public servants is a conscious decision, made to absorb the excess supply of graduates. Indeed, a Cabinet committee chaired by Deputy Prime Minister Najib Tun Razak to look into the problem decided at its very first meeting, in July last year, to instruct the Public Service Department to expedite the process of recruitment.

The problem of unemployed graduates grows from both the supply and demand sides. On the one hand, universities have mushroomed in the past two decades, the result of a purely political decision. The government realised that access to tertiary education for young Malays was a potent vote-gainer. At the same time, the building of new tertiary institutions would mean contracts for the construction lobby.

On the other hand, the demand for graduates remains low mainly because the economy continues to rely heavily on labour- intensive sectors, filled largely by foreign workers.

By resorting to the quick fix of absorbing unemployed graduates, who are arguably among the least competitive in the job market, and by not addressing the structural issues in the economy, the government is exacerbating the inefficiency evident in the already low-paid, low-morale public sector.

The mechanism put into place through this tactic makes pay rises less justifiable and output improvement less likely.

The writer is a visiting research fellow at the Institute of Southeast Asian Studies. This is a personal comment.


FROM BAD TO WORSE
By resorting to the quick fix of absorbing unemployed graduates...and by not addressing the structural issues in the economy, the government is exacerbating the inefficiency evident in the already low-paid, low-morale public sector.












By Liew Chin Tong, For The Straits Times