No bonus for civil servants to avoid sovereign debt crisis

There is nothing wrong with civil servants earn higher average salaries than private-sector and receiving bonus. But can you imagine how big RM3.1 billion is and its effect on the National Debt?

Ironically, Malaysia GDP is expected to grow more than 3% annually but government debt continues to grow at 12% annually.

The government’s Performance Management and Delivery Unit’s calculations show that by the year 2019, the country’s projected debt will be 103% of GDP and the fiscal deficit will reach RM449 billion or 38% of GDP.

At that point in time, the country will go into sovereign debt crisis in which government revenue will not be enough to service its debt and to operate the hospitals, schools and other government services.

Undeniably, government paying a month's bonus to the 1.2 million civil servants can be seen as unwise. Thus, under no conceivable circumstances should the government ever concede in practice.

Prime Minister Najib Razak said the government could not pay a month's bonus to the 1.2 million civil servants in Budget 2011 because it incurred an expenditure of RM3.1 billion is thus justified.

He said, the special financial assistance of RM500 for each civil servant was appropriate.

Najib said many quarters had lobbied to him to announce a month's bonus to the civil servants. But I would like to share with you ... that a month's bonus incurs an expenditure of RM3.1 million for the government. Personally, I would want to give a bonus but as a responsible finance minister, I cannot expend more than the national revenue.

"It is for this reason that I gave RM500 as a special financial assistance to civil servants," he said.

Najib announced a special financial assistance of RM500 for all civil servants from Grade 54 and below as well as contract officers and retirees. The payment will be made in December this year. The aid could help civil servants cope with schooling expenses for their children at the end of the year.

He said that though no bonus was given, the government had proposed other incentives for civil servants, such as maternity leave of up to 90 days. These also benefited women teachers, who made up almost 70 percent of the 400,000 teachers in the country.

Malaysia's economy will improve in the third quarter

Bank Negara Malaysia Governor Tan Sri Dr Zeti Akhtar Aziz said, the Malaysian economic conditions are expected to improve in the second half of this year supported by fiscal stimulus measures and enhancing access to financing.

Malaysia is expected to see a significant improvement in the third quarter this year and a higher degree of positive growth in the fourth quarter that would continue into next year.

She said, first quarter gross domestic product this year contracted by 6.2 % from a growth of 0.1% in the fourth quarter last year but the prognosis for improved economic conditions look brighter in the second half of the year.

Tan Sri Dr Zeti Akhtar Aziz attributed the contraction to the significant deterioration in external demand following the deepening recession in advanced economies.

"Export demand continues to be weak and the environment is still challenging. Despite early signs of improvement, Q2 will be similar to Q1," she said.

The economy was expected to continue to contract in the second quarter, she said.

"However, economic conditions are expected to improve in the second half of this year supported by fiscal stimulus measures and enhancing access to financing," said Dr Zeti.

Husni: 2009 GDP growth to dip below -1% but recover in 3/4

The country’s economy is expected to contract below -1.0 % this year amid the current economic climate, however it would recover in the third quarter of this year, as the impact of the recent RM67 billion economic stimulus package begins to take effect.

Second Finance Minister Datuk Ahmad Husni Mohamad Hanadzlah said.

“I cannot tell you (the growth figure) but it will definitely be below -1.0 per cent,” he said when asked to comment on the projection by economists that the gross domestic product (GDP) will contract between -4.5 per cent and -5.0 per cent this year.

Bank Negara Malaysia’s GDP forecast for the year is between -1.0 per cent and one per cent. Bank Negara will make an announcement on the first quarter GDP tomorrow.

“Wait for Bank Negara’s announcement tomorrow. Prime Minister Datuk Seri Najib Tun Razak will make another announcement the next day on the new forecast growth for 2009 and we will then know the position of the country’s economy,” he said,

Husni said that the government is currently working on the development of new economic model for the country.

“The economic model is in the planning stage,” he said, adding that the government would study which areas should be further liberalized. He said that the key thrust of the new model is the quality of investment and the people.

“Eventually, we will be opening up because we are part of the global system but the process of the liberalization takes time,” he added.