Downside To Increasing Civil Service Pay

 Downside To Increasing Civil Service Pay

M. Bakri Musa

 

The recent increase in civil servants’ pay, though long overdue, carries significant but less appreciated downside for Malays. Likewise, the much earlier decision to raise the mandatory retirement age to over 60. As the civil service is overwhelmingly Malay, both moves are seen as yet another manifestation of preferential treatment. I see it as otherwise if not downright counterproductive.

 

This salary raise increases the cost of running the government. As a nation’s finance is finite and a zero-sum exercise, more money for the public sector means a corresponding reduction for the private. However, it is the latter that contributes to economic growth and thus an expanding tax base. 

 

Controlling the cost of government lies less with emoluments, more with rationalizing its role and functions. Government has for example no business running a business. Leave that to the entrepreneurs. Eliminating the Ministry of Public Enterprises would cut government spending considerably while at the same time making it more effective and efficient. America won the most Olympic medals, yet she does not have a Sports Ministry.

 

 Likewise the government’s involvement in religion; faith is a private matter. Besides, Islam does not need defenders. It survived the Mongol invasion; it can do without JAKIM (the Malay acronym for the agency in charge of Islam). Ponder that more mosques are being built in America today and the faith fast expanding, yet she does not have any department of religion, much less that of Islam.

 

JAKIM and similar agencies at the state level and elsewhere are but massive and expensive public works programs for otherwise unemployable Malays. Expanding such agencies would only encourage more Malays to pursue the already glutted Islamic Studies.

 

Ponder the good it would do if those saved funds were instead diverted to providing internet access and equipping science laboratories in rural schools where the students are overwhelmingly Malays. Also, imagine if those JAKIM personnel were deployed to clean parks and roads. That would do society more good, and garner more pahala (good deeds) for the individuals.

 

As income tax rates are progressive, the cost of government is disproportionately borne by the rich, and rightly so. In Malaysia, that means non-Malays. Likewise with tax on goods and services. Meanwhile, increasing civil service pay and having government-linked enterprises both benefit mainly Malays.

 

            Those considerations aside, less appreciated is the negative impact on Malays. In the late 1950s, Tun Razak lowered the civil service optional retirement age to 40 so as to encourage Malay civil servants to leave and enter the private sector. That emboldened young Hanafiah, Raslan, and Mohamad to leave government service to start their accounting firm (HRM) that would later become a major global player. Italy did something similar after the war. In both instances, with the security of a pension, those young retired civil servants could take risks. 

Subsequently many Malay professionals trained under public scholarships would follow suit. 

 

            In the late 1980s when the government could not employ many newly graduated Malays on scholarships because of the economic downturn, that had an unexpected positive consequence. Those young Malays were then forced to enter the private sector.

 

            It is significant that the first Malaysian legal firm to have a major presence outside the country was Zaico, started by Zaid Ibrahim. He was later seduced by politics, an all-too-common weakness of young Malays, and sold his equity in the company. Today he rues that decision! Being an equity partner of a major law firm is far more rewarding (not just money-wise) than being a cabinet minister.

 

            In a recent posting, Zaid suggested that Malays be “forced” into business. Reducing the number of Malays in the civil service would achieve that end; conversely, increasing the pay would increase their inertia to remain in government. The experience of the late 1980s seemed to indicate that Zaid may be on to something. At that time because of economic constraints, the government was forced to break its promise to employ every Malay who had graduated on government scholarship. That resulted in an infusion of Malays into the private sector. That was good for Malays and Malaysia.

 

A slight twice. Many years ago a smart Malay graduate of an elite American university related to me how he had schemed to “bomb” his job interview with the Public Service Commission. He succeeded. Thus freed of his scholarship bonds, he returned to America to land a job with a leading technology company, and no scholarship penalty to pay back! 

 

            You need superior pay to attract talent. You can achieve that without increasing the total cost of government.  Canada’s population is comparable to Malaysia and she has a much larger territory to boot. Yet her Ministry of Finance (edifice as well as personnel) dwarfs that of Malaysia. While Malaysia was crippled by the 1997 Asian economic contagion, Canada withstood the 2008 economic storm that shook America. Yes, Canadian civil servants are very well paid and entry into it highly competitive. 

 

            Raising the mandatory retirement age also carries its own drawbacks, again not much appreciated. By the time they retire, those old civil servants are already set in their ways. Coupled with a generous pension, they have little incentive to venture out. More pernicious, their last year would be consumed lobbying for positions in the many government-linked companies. 

 

            America has for the most part done away with mandatory retirement age, deeming it “age discrimination.” It saddens me to see so many still productive Malaysians years my junior now retired, doing nothing. With Malaysia short of STEM teachers and professors for example, that is a crying shame and a colossal waste of precious talent. Malaysia, in particular the Malay community, cannot afford that.