Are civil servants the biggest winners in Malaysia’s 2018 budget?

Many say Malaysian Prime Minister Najib Razak’s 2018 budget brought cheer to Malaysian civil servants who form an important voting bloc in an election year. Tricia Yeoh discusses how much of an impact these benefits will have.

KUALA LUMPUR: The Malaysian government tabled a generous pre-election budget for 2018, as was expected.

The final budget before the highly anticipated upcoming 14th General Election, it dished out especially lucrative goodies for civil servants and pensioners, two groups it cannot afford to upset.

In this budget, civil servants were clearly given priority, in part a response to their own proposals that the government alleviate their economic burden.

Among the new initiatives that this budget announced were a one-off payment of RM1,500 (US$354), a second time-based promotion for support staff who received their last promotion 13 years ago, and the provision of full retirement benefits to those who retire early for health reasons.

Maternity benefits were also extended, with maternity leave increased to 360 days and shorter working hours for civil servants at least five months pregnant.

In-house Masters and PhD programmes will also be introduced to encourage lifelong learning.

Although past year budgets have always included special gifts for civil servants, the 2018 budget is particularly generous with its unprecedented array of benefits. This is even so when compared to the last pre-election budget of 2013, which provided for a one-month bonus but with no other significant initiatives.

Pensioners were a second group rewarded by the budget. They will receive a one-off payment of RM750, and see an increase of the lowest pension rate to RM1,000 a month which will benefit more than 50,000 pensioners who have been in the civil service for at least 25 years.

The pattern is obvious when one analyses the breakdown of budget allocations. Over the last decade, the operating expenditure has drastically increased compared to the development expenditure.

In the 2010 budget, the projected operating expenditure formed 73 per cent of total expenditure. Compare this to the 2018 budget, where it now forms almost 84 per cent of total expenditure.

This means the ratio between the projected operating and development expenditure respectively in this budget is 5 to 1, where for every RM1 spent for development purposes, RM5 is being used to fund operational costs, including manpower costs and the salaries of civil servants, pensions, subsidies and social assistance to the public.

Yet, emoluments – civil servants’ salaries – form a significant 33.8 per cent of the allocated sum for the total operating expenditure of RM234.3 billion, a proportion that has been growing in recent years. Emoluments have risen from RM42 billion in Budget 2010 to RM78.1 billion in Budget 2018.

Unfortunately, these benefits do not necessarily translate into an attractive package that brings the best and brightest of Malaysian talent into the civil service.

In fact, the concern is quite the opposite; the benefits may instead incentivise those who prefer a comfortable job to stay on over those who prefer a merit-based system that rewards talent and effort.

BLOATED CIVIL SERVICE

Analysts have also cautioned that the size of the civil service – there are some 1.6 million civil servants in Malaysia – is bloated and the increasing amount of funds required to service this number is not fiscally sustainable in the long run.

After all, an ideal budget would dedicate a substantial amount to development expenditure, where money could be used for longer term investments, in funding healthcare and education programmes for instance.

Nevertheless, the Malaysian government has always been careful in stressing it would not reduce the number of civil servants. While the benefits this time are particularly extensive, ensuring the welfare of civil servants has always been something the Barisan Nasional government has claimed credit for.

The main reason is likely this: Civil servants represent 12 per cent of registered voters, possibly the single largest voting bloc in the Malaysian electorate that would be most immediately loyal to the Barisan Nasional given the various perks they have received over the years.

It also happens to be that the vast majority of civil servants is Malay, a key target voter demography for the UMNO-led Barisan Nasional coalition. The opposition is fully aware of the situation, and both opposition-led states of Selangor and Penang also announced generous cash bonuses to state civil servants in their respective 2018 state budgets.

This growing dependency on government handouts is unfortunately not without reason.

The Congress of Union of Employees in the Public and Civil Services Malaysia (CUEPACS) reported in 2016 that between 700,000 to 800,000 civil servants fall in the bottom 40 per cent of Malaysian households, who receive a monthly income of RM3,900 and below.

In May this year, CUEPACS warned that up to 100,000 civil servants are in danger of being declared bankrupt, adding that many are resorting to taking loans from loan sharks. This is likely a combination of relatively low pay compared to salaries in the private sector, poor financial planning and the rising costs of living.

With these numbers in mind, it is no wonder that civil servants would require significant financial assistance.

Yet it also reflects a more alarming scenario of the socio-economic conditions under which Malaysian civil servants live, as well as the larger economy with costs of living that have risen so rapidly even the fully-employed are unable to survive.

TEMPORARY RELIEF

While Malaysian civil servants celebrate their winnings in this budget announcement, it will not be long before the accumulative economic burdens weigh on them again.

A one-off payment of RM1,500 will hardly last an average Malaysian household of five people very long. Maternity benefits may be welcome relief – and in fact these are forward-thinking measures that help women cope better in the workplace – but they will not adequately line families’ pockets with the extra income they require.

The government has its sights set on the election next year, and for good reason.

It will be one of the most hotly contested elections in recent history, given that former Prime Minister Mahathir Mohamed now leads the opposition coalition, the man many senior civil servants and pensioners would have served in the past and therefore have some allegiance to.

The Malaysian government has once again attempted to entice civil servants and pensioners with budget goodies, which have been well received. But the true impact of the government’s generosity will only be known at the ballot box.