Malaysia’s Government Contingent Liabilities

A fast one (seems like all I have time for these days are fast ones), on contingent liabilities (excerpt):

Analysts say Govt’s contingent liabilities likely to rise

...In recent years, the Government has relied on what is called contingent liabilities, or off-the-books debt, to fund major development projects. Big-ticket items such as the rail lines cost billions of ringgit, and with Government debt close to its self-imposed ceiling of 55% of gross domestic product, the use of special-purpose vehicles (SPVs) that take the debt burden off the Government’s books has been almost the preferred way of funding such mega projects.

Cumulatively, contingent liabilities amount to RM178bil worth of guaranteed debt by the Government. With government debt at RM630.5bil at the end of last year, the off-the-books debt that is guaranteed by the Government is worth 28% of the public sector’s total debt.

...Structuring debt in such a way is by design, according to economist Datuk Dr R. Thillainathan, who is the former president of the Malaysian Economic Association....

Apples, Oranges and A Whole Fruit Orchard

On Bloomberg last week (excerpt):

Bloated Malaysia Civil Service Presents Headache for Najib

...Malaysia’s civil service employs 1.6 million people, or about 11 percent of the labor force. The jobs provide stability and security, including for ethnic Malays who are the majority of the population. Now the bloated bureaucracy presents a challenge to Prime Minister Najib Razak.

Najib, whose ruling coalition Barisan Nasional has been in power for nearly 60 years with the help of the Malay vote, has pledged to gradually narrow a budget deficit the country has been running since the Asian financial crisis. The commodity-driven $296-billion economy is expected to grow at the slowest pace in seven years in 2016, with lower oil prices eating into revenue.

But trimming the public workforce to improve the government’s coffers is difficult. While Najib has survived a year of political turmoil over funding scandals, he needs the support of Malays to win the next election due by 2018. His party, the United Malays National Organisation, has for decades propagated policies that provide favorable access to education, jobs and housing for Malays and indigenous people, known collectively as Bumiputeras....

I’ve written about this before – the statistics on civil servic headcounts across the world are fraught with measurement errors. Malaysia’s civil service looks “bloated” because we include many categories of workers under the civil service (such as the armed forces, state and local government workers) which other countries do not. In Japan for instance, the “official” civil service is only a quarter of all government workers.

Not exactly apples to apples.

The “Bloated” Malaysian Civil Service

I’ve been meaning to write a post on this subject for a couple of years now, but somehow never got around to it. Now DS Idris Jala has beaten me to the punch (excerpt):

Transforming public service delivery

It’s not bloated and we are looking at ways to improve.

Before I start talking about how we can and are doing things differently in the civil service, let me clear up this common misconception that the civil service is bloated.

Many comparisons have been made with other countries by simply taking the number of people who are termed public servants and comparing them as a proportion of the population. However, the problem is that no account is taken of who are considered to be civil servants.

GLCs And The Public-Private Nexus

I got a call from a reporter the other day asking about this, so I’m going to set my thoughts down on paper (figuratively speaking, of course).

There’s this idea that government and government linked companies (GLCs) dominate Malaysia’s corporate landscape – Maybank, CIMB, Sime Darby, Tenaga, Telekom, and the like. These companies are either virtual monopolies, or dominate their respective industries, possibly crowding out competition and investment.

Public Waste And Public Choice

These are cover your eyes awful:

1. RM2 billion in dubious security services
2. RM3,800 wall clocks
3. RM600,000 in unused footwear
4. RM550,000 in unverifiable claims
5. Lost cars!
6. RM8 million in double subsidies
7. RM16 million in uncollected performance bonds

Not much can paper over the amount of waste that goes on in government. The only one that I can understand is item 2, which was part of a lowest bid contract awarded by open tender. That’s fairly typical of tenders conducted even in the private sector – contractors hide their profit margins any way they can. But the rest look more like cases of inefficiency, incompetence and outright corruption.

Political Manifestos And Government Waste

Here’s a thought:

Let’s imagine, just for the sake of argument, that you’re a voter in an election campaign – just hypothetically speaking of course.

One party issues a manifesto. It has a lot of bright ideas which you like, but there are some parts which aren’t very appealing to you, and you don’t know how much of the manifesto proposals are going to be implemented. You’d rather not vote for a party that puts forward policies which you don’t agree with.

Then the next party also issues its manifesto, which also has many ideas you like and are in fact similar to the first party’s. Unfortunately, there are a few proposals which you don’t like very much either, but these are quite different from the first. Nor are you sure that all these promises will be fulfilled.

Estimating Government Waste

Oh boy, I know a lot of people are going to have a field day with this one (abstract):

Quality of Government and Living Standards: Adjusting for the Efficiency of Public Spending
Grigoli, Francesco ; Ley, Eduardo

Summary: It is generally acknowledged that the government’s output is difficult to define and its value is hard to measure. The practical solution, adopted by national accounts systems, is to equate output to input costs. However, several studies estimate significant inefficiencies in government activities (i.e., same output could be achieved with less inputs), implying that inputs are not a good approximation for outputs. If taken seriously, the next logical step is to purge from GDP the fraction of government inputs that is wasted. As differences in the quality of the public sector have a direct impact on citizens’ effective consumption of public and private goods and services, we must take them into account when computing a measure of living standards. We illustrate such a correction computing corrected per capita GDPs on the basis of two studies that estimate efficiency scores for several dimensions of government activities. We show that the correction could be significant, and rankings of living standards could be re-ordered as a result.