Malaysian Civil Service Over-sized? An Analysis

There are currently 1.71 million Malaysians on the payroll of the government services in the country. The size of the Malaysian bureaucracy has been a major issue for over a decade now, with most analysts in agreement that it is over-sized. But, is it really so? If so, how far is it over-sized? How many employees need to be retrenched to achieve long term efficiency and sustainability?

Yet, there are counter arguments largely from the government itself that it is difficult to determine the truth of this assertion. They say that it cannot be compared directly with other countries because government service and government employees are categorised differently in different countries making it difficult to make direct comparison. Well, there must be a way to compare on the basis of apple for apple since data on global government services are easily available online. I have done just that in the last few days and managed to come out with comparative data with other countries.

There are two comparative data relevant for this purpose. First is the data on number of government employees per 100 persons in the country’s population and second, the operating expenditure incurred by the government in each country since this data is closely correlated to the size of the government service . This two set of data are global norms that indicate whether the government service is efficient, oversized or whether it is sustainable or otherwise.

Government Operating Expenditure

I have studied situations in a few countries selected on the basis of economic performance of the country, newly developing economy, newly industrialised economy as well as old industrialised economy, each with its own peculiar situation. United Kingdom, Australia, Japan, South Korea, Singapore and Thailand are selected for the above purpose, and the results are tabulated below:

The above table indicates that Malaysian Government’s spending on operating expenditure at 16.3% of the country’s GDP, superficially looks reasonable compared to the rest, except for UK which is overburdened by huge allocation for social security. However, Malaysia’a budget financing does not rest on a sound footing as it is over reliant on income from Petroleum, which in 2019 financed 30.9% of the nation’s Budget Expenditure. On this count alone it appears that our bureaucracy is over-sized by approximately 30%.

The chart showing the national Budget’s reliance on petroleum revenue is shown below:

Malaysia had been lucky in the past as the petroleum revenue had been able to come to the rescue to help financing the bloated government services. With the current rock bottom Petroleum price and expected large fall in other tax revenue, coupled with the need for stimulus packages during the current COVID-19 Pandemic, the government has no other recourse but to borrow much more money to finance huge deficit this year and in the next years budget. Such a large increase in debt will no doubt add to the existing burden, probably in the form of even bigger borrowing, higher taxes and big trim in development expenditure. Otherwise, the government budget financing capacity is becoming unsustainable. It is yet to be seen whether the government has the will to save expediture by down-sizing the Civil Service.

Number of Government Employees

The above table indicates the size of Malaysian Government bureaucracy compared with those tabulated countries, measured in the form of number of government employees per 100 persons of the country’s population. The government servants are defined for purposes of comparison as central government employees, regional government employees, employees of local authorities and statutory bodies where emoluments are paid out of duties and taxes.

In Malaysia, government employs 1.71 million persons, mostly Malays, on its payroll or 5.3 employees per 100 population of the country. While more established economies like UK and Australia employ more than 8 persons, other leading Asian Economies only employ not more than 2.77 persons per 100 of their population. On this count, Malaysian bureaucracy is over-sized by 2.33 time.

Further, near monopoly of the government service by Malays/Bumiputera means absence of inclusive approach to government service management, thus failing to promote multicultural working atmosphere which should be better and a more efficient option for the country.

Conclusion

The above comparisons indicate that the Malaysian bureaucracy is over-sized by a factor of between 1.31 times to 2.33 time of the average for the Asian countries. This is clearly a big wastage, the inevitable result of the deliberate long term policy of absorbing unemployed people into the government service. This policy is clearly a faulty one that, while acting as an immediate stop gap measure to reduce unemployment, is actually a drag to the economic efficiency of the country. The more realistic size of the Malaysian bureaucracy should be at between 735,000 to 1,300,000 instead 1,710,000 persons currently.

Needless to say this misallocation of human resources has been a drag factor in efforts to achieve the desired increase in labour productivity for the country. Further, development of the SME Sector, including Bumiputera businesses, are similarly affected, where talented Bumiputera are very much needed to push the country towards a developed nation status as envisioned earlier through the failed VISION 2020 – END

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DAH IKHWAN