A Budget Of, By, and For Civil Servants

A Budget Of, By, And For Civil Servants

The recently unveiled Federal Budget is a windfall for government employees. It is a budget of, by and for civil servants.

With this budget, the government continues to expand, with the number of civil servants ballooning close to a million. Its domination of the economy and marketplace continues unabated. This budget betrays the government’s incessant rhetoric of reinventing itself. It is business as usual, with more of the same. The government has learned nothing from past mistakes and experiences, in particular the 1997 economic contagion.

The only deference to that crisis was the government’s much-hyped reduction of the deficit, from over 5 percent of the GDP only a few years ago to a projected under 4 this year.

Anytime a government, especially a democratic one, can cut its budget deficit, that is indeed laudatory. America is having problems addressing its gaping deficits because of political realities. Democratic governments risk being voted out should they cut favorite programs or raise taxes. Deficits are nothing more than the government bribing its voters.

Nature of Deficit More Important

Reducing deficits and having balanced budgets may please the fiscally conservative, but this may not necessarily be wise. The nature of the deficits is more crucial.

If the deficits are for funding schools and health facilities, that is money well spent. It represents wise investment in the most precious asset of a nation, its human capital. Healthy and well-educated citizens will pay dividends way in excess of the investments, quite apart from the humanitarian merits of such endeavors. Similarly, those deficits are acceptable if used for funding infrastructures and other productive investments.

On the other hand, if those deficits arose from building grandiose skyscrapers, ornate palaces, and fancy headquarters for civil servants, then we have a major problem. Unfortunately, this is the usual state of affairs in Third World nations. Many also divert their scant public resources to risky commercial ventures.

Many Third World countries that have absolutely no expertise or trained personnel in aviation brashly start their own national airlines. These leaders just cannot get away from such prestige items.

Malaysia is not immune to such temptations. Its national airline, like other Government-linked companies, continues to drain the Treasury. This budget repeats the pattern of spawning new GLCs, including a colossal one with the initial price tag of RM2B to dabble in real estate. Others would engage in equally risky businesses like biotechnology and agro-business. Obviously we have not learned anything from the expensive lessons of Perwaja and Bank Bumiputra.

Generous funding for social investments alone is not enough. If through corruption and political patronage those precious funds were not spent prudently, then its investment value would plummet very quickly. By whatever measure (relative to the economy, overall budget or population) Malaysia expends huge sums on education, yet it has little to show for it. Experts, employers and parents all agree that the products of our schools and universities are wanting.

Through corruption, political patronage and sheer incompetence, considerable leakage occurs with public expenditure s in Malaysia. Yet this budget addresses none of these pressing issues. There is no increased funding for the Anti-Corruption Agency, for example.

Bloated Public Sector

I have no problem with rewarding workers for a job well done. This budget generously rewards civil servants with extra bonuses, increased pensions, better housing, and liberal allowances. There are also new agencies, meaning more civil servants, like the Health Tourism unit and agricultural attaches. We currently have education attaches abroad. It may be coincidental, but the enrollment of foreign students has declined! I would not count on those civil servants to increase health tourism or agricultural exports.

Paying, housing, and pampering civil servants consume a massive chunk of the budget. This will only increase with time; there is no restraint. I am against these allowances and special housings as they isolate civil servants from outside realities. Presently, civil servants know nothing about gyrations of interest rates, housing costs, and living expenses because they are insulated by their subsidized allowances.

Special housing for civil servants and the police are particularly pernicious, as that will physically isolate them from the community. Pay them the market rate and let them find housing like the rest of us. That will inject a dose of reality on them. Besides, having a policeman or someone from the Anti Corruption Agency as your neighbor will have a salutary effect on the community.

The huge size of government presents other problems quite apart from costs. When the government is a massive employer, it deprives the private sector of talent. One reason the Soviet system collapsed is that the party and government sucked up talent, with little left for private sector and society.

It is not so much the size of government that matters rather what it does with the resources and personnel. Scandinavian countries all have big governments and large public sectors, but their citizens are competitive and economies robust. That is because those governments use their resources for productive public services like healthcare, education, childcare, and generous social safety nets. No wonder their citizens are contented with few emigrating, despite their long winters and short summers.

India has an equally large public sector, but its public servants are busy checking and issuing permits, and otherwise making a pest of themselves to producers and entrepreneurs. As a result, unlike the Scandinavians, Indians flock out of their country given a chance.

The public sector in Malaysia is more like India than Scandinavia. We have our share of “Permit Rajs.” A large chunk of the religious establishment (it too, like others, is getting increased allocation with this budget) is devoted to such non-productive pursuits as ensuring Muslims do not hold hands in public.

This being Malaysia, there is the ugly racial element. Governments are always less efficient and less responsive than private enterprises. Unlike businesses, governments are spared the rigorous discipline of the marketplace.

As the public sector in Malaysia is almost exclusively in Malay hands, its inefficiencies and sluggishness are viewed not as inherent deficiencies of governments but as another defect of Malays. Unfortunately, this important facet of public perception is lost on our mostly Malay civil servants.

When an American civil servant like the former FEMA Director Michael Brown fumbled, it was seen as another typical incompetent political appointee, and nothing more. When the Director-General of Customs in Malaysia had a binge of gala retirement parties, that was viewed as a deficiency of the Malay character.

Of course, that is unfair. Given that reality, I would expect Malay civil servants to perform better in order to eradicate this unjust stereotyping. Unfortunately, many them are oblivious of this and bent on living up to this ugly characterization.

This budget also reinforces another Malay stereotype, of being utterly dependent on big government. The rhetoric of “glokal Malays” and “New Malays” notwithstanding, this budget represents business as usual.