Malaysia’s public sector ‘performs relatively well’ but still lags behind high-income countries: World Bank

Rising expectations for better quality public service delivery and an “over-centralised” system are some of the challenges Malaysia faces in improving its public sector.

Although Malaysia’s economy is primed for continued growth in 2019, a report by the World Bank has shown that more could be done to improve its public service in order for it to remain resilient in a volatile environment.

Citing findings from its biannual Malaysia Economic Monitor report released on Monday (July 1), the World Bank said in a statement that despite the country’s good public service performance on the regional level, it still falls short when compared to the world’s other advanced economies and faces several challenges to be on par.

It noted that as Malaysia’s middle class continues to grow, rising expectations and increased demands from citizens for better quality public service delivery would need to be tackled.

“The public service plays a vital role in Malaysia’s transition to a high-income and developed economy. While the country’s public service performs relatively well, or is at par on some governance indicators compared to countries in the region, it lags behind high-income countries,” the World Bank said.

In particular, Malaysia’s public service lags behind other advanced and high-income economies in terms of openness and transparency, it said.

The World Bank said that for the public service to “fully realise its potential”, Malaysia will have to invest in human resources management and foster a more transparent environment.

This includes intensifying efforts to safeguard equal treatment in the sector’s employment processes and improving public perception of the public administration’s impartiality.

It also includes merit-based recruitment, decentralisation and the utilisation of competency frameworks to hire the best talent.

The World Bank added that open environments may be cultivated through institutional and legal frameworks that promote pro-active information and data sharing in a “user-friendly and impactful manner”.

To  “re-energise” public services, Malaysia would also need to embrace new technologies and skills to digitalise and automate for improved public service delivery.

And while the country’s public sector wage bill lies below regional averages, it has also risen as a share of public expenditure in recent years because of the increase in number of public servants, posts, conversion of contract staff to employees, as well as hikes in salaries and allowances, the World Bank said.

Furthermore, Malaysia’s public service is reportedly an “over-centralised” system, marred by tedious recruitment processes and “sub-optimal” practices, the World Bank said.

The institution also said that digitalisation and automation are expected to change the nature of job scopes and pose managerial challenges in the public service.

‘Diversify away’ from unstable oil-related revenues

The World Bank also recommended in its report for Malaysia to “diversify away” from unstable oil-related revenues and also to promote future public investment.

According to the organisation, Malaysia’s revenue from personal income taxes and consumption taxes was below the average levels seen in other upper middle-income economies and high-incomes nations.

While reforms to widen the tax base are required, measures to enhance the existing social protection system would be necessary to “boost resilience and protect the vulnerable”, the World Bank said.

For instance, current plans for a targeted fuel subsidy framework could potentially bring savings that can be used to grow core social welfare programmes, the World Bank said.

Malaysia’s economy is expected to grow at 4.6 per cent in 2019, down from 4.7 per cent last year, the report said.

“With an uncertain external environment and subdued business confidence, policy actions should aim to strengthen fiscal buffers, facilitate private investment and ensure adequate social protection for lower-income households,” the World Bank said.

It added that in the medium term, bold reforms and measures are needed to boost human capital and to increase the level of public sector revenues.

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