publication June 30, 2019

Malaysia Economic Monitor June 2019: Re-energizing the Public Service

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Malaysia’s economy has continued to grow, but now at a more modest pace - mirroring the slowdown in global economic growth.

  • In the first quarter of the year, the economy saw a growth of 4.5%, sustained by consumption in the private and public sectors. However, overall economic activity has been weighed down by weaker-than-expected investment.
  • Private consumption growth has remained strong, supported by continued growth in real incomes, stable employment, wage growth and lower consumer price inflation.
  • On the supply side, growth has moderated in most economic sectors except in agriculture.
  • Export growth has slowed due to decreased external demand for manufactured exports.

Looking ahead, Malaysia’s GDP growth rate is forecast to moderate to 4.6 percent in 2019, from 4.7% in 2018.

  • Investment is expected to remain subdued over the near term, with both the public and private sectors continuing to adopt a cautious stance.
  • External sector weakness is likely to persist in the near term as decreasing global demand imposes constraints on export growth.
  • In the short term, the focus of government policies should be on rebuilding fiscal buffers, supporting private investment, and ensuring adequate social protection for low-income households.
  • As the country continues on its development path, it will need to implement reforms to boost human capital and to accelerate productivity growth.

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.

  • Malaysia is now faced with rising expectations and increased demands from citizens for better quality public service delivery as its middle class continues to grow.
  • While Malaysia’s public sector wage bill tracks below regional averages, it has also risen as a share of public expenditure in recent years due to an increase in number of public servants, posts, conversion of contract staff to employees, and increases in salaries and allowances.
  • Malaysia’s public service is perceived to have an over-centralized system, characterized by a lengthy recruitment process and other suboptimal practices.
  • Digitalization and automation pose further challenges for the management of the public service, with significant changes to the nature of jobs.

The country should look to re-energizing its public services to bring development to the next level. These include:

  • Intensifying efforts to ensure equal treatment in public sector employment and improve public perception of the public administration’s impartiality.
  • Conducting merit-based recruitment, decentralization, and the use of competency frameworks to induct the best talent.
  • Facilitating an open environment in the public service. To achieve this, it is necessary to build an institutional and legal framework that encourages pro-active sharing of information and data in a user-friendly and impactful manner.
  • Embracing new technologies and skills to digitalize and automate for improved public service delivery.