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Early budget goodie geared for elections? May 21, 2007

Posted by elizabethwong in Current Affairs, Economy, Malaysia, Politics.

There is little doubt that there are many in the civil service who have struggled to make ends meet in this climate of rising cost of living.

Although the salary increase is overdue, the quantum is beyond one’s expectations.

But in the private sector, there’s little to cheer. How many of us have seen a wage increase? Despite the government’s stated growth rate, said to be averaging at 5.6 per cent and the deficit, said to be standing at 3.5 per cent, isn’t reflected on the ground.

As for the market being ‘strong’ – why then are key public listed companies (PLCs) going private?

Another thought crossed my mind – would it hurt the Government to implement this after the Budget, and backdate it? Then we would have a bigger picture on the state of our finances.

Why then the haste to set it to July 1?

Other headlines today:

Police, Military To Enjoy Pay Hike Of Up To 42 Pct – Abdullah
PUTRAJAYA, May 21 (Bernama) — Police and military personnel will get a pay rise of between nine and 42 per cent following the government’s decision to increase the salary of civil servants, effective July 1, Datuk Seri Abdullah Ahmad Badawi said today.

Pension Set To Increase Too, Says Abdullah
PUTRAJAYA, May 21 (Bernama) — Government retirees are set to enjoy an increase in their pension following the pay hike for civil servants announced today, Datuk Seri Abdullah Ahmad Badawi said.

Civil Servants To Get Pay Increase Of Up To 35 Pct

PUTRAJAYA, May 21 (Bernama) — Prime Minister Datuk Seri Abdullah Ahmad Badawi today announced a pay increase of between 7.5 per cent and 35 per cent for the more than one million civil servants in the country, effective July 1.

They will also get a 100 per cent increase in the cost of living allowance (Cola).

In recognition of the heavy responsibility of police and military personnel and the challenges they face in the line of duty, Abdullah said they would get an additional 20 per cent on top of the increase.

Speaking at the Workers Day gathering for the public sector here, he said the basic salary of the Support Group II (Grades 1 to 16) would be increased by 35 per cent while those in the Support Group I (Grades 17 to 40) would get a 25 per cent increase.

For the Management and Professional Group (Grades 41 to 54), the increase is 15 per cent while those in the Premier Grade (Jusa) will get a 7.5 per cent pay hike.

Abdullah said the salary increase for the 1,002,040 civil servants would cost the government RM3.4 billion this year or an additional annual expenditure of RM6.8 billion.

The increase in the payment of Cola will involve an additional expenditure of RM600 million this year or RM1.2 billion annually.

Abdullah said the strong growth of the country’s Gross Domestic Product over the past five years, averaging 5.6 per cent annually, was the first factor considered by the government in determining the quantum of the pay hike.

This, he said, was spurred by the growth in private sector investment and the external trade volume which had surpassed the RM1 trillion mark.

“All these have allowed interest rates, inflation and unemployment to remain low. The Bursa Malaysia Composite Index also reflects the country’s tremendous economic growth, reaching its highest level recently,” he said.

The prime minister said the second factor was the need to attract and retain qualified, highly-motivated and performance-driven human capital in the civil service.

The government, he said, was also concerned about the rising cost of living due to the hike in global oil prices which had affected those in the lower income bracket.

The fourth factor, Abdullah said, was the government’s affordability which was aided by a marked increase in tax collection and a more prudent execution of expenditure.

“In fixing the quantum, the government is always mindful of its repercussions on the country’s financial position. Any salary increase will also involve pension calculations and certain allowances.

“The quantum has been decided carefully and prudently. The government was able to reduce the budget deficit from 5.3 per cent in to 3.5 per cent last year and we’ll continue with this prudent fiscal management,” he added.

Saying that the pay hike would lessen the burden of those in the lower income group, Abdullah said that at the same time, they should be mindful of the people’s higher expectations of the civil service.

“They’ll expect a high-quality civil service that commensurates with the salary increase. Take this opportunity to increase productivity and the quality of service to the people,” he added.

-The prime minister also urged government employees to be prudent consumers in light of the reported price increases lately.

“Do report errant traders to the authorities and spend your money elsewhere. Consumers who exercise their rights are smart consumers. Tell others if you come across these errant traders so that people won’t have to deal with them.

“The Domestic Trade and Consumer Affairs Ministry should also increase monitoring and efforts to educate the public on consumer rights,” he said.

Highlighting a matter close to his heart, Abdullah said the government wanted the country’s public sector to emerge as one that would achieve global distinction.

“The government is counting on its employees to add value to their work. They should strive to reduce red tape, be friendly, transparent, responsive, creative — putting the interests of customers above all else,” he added.

Abdullah said that civil servants should change their mindset to deliver services speedily, bearing in mind that they should play the role of facilitators and partners of the people and the private sector.


(Updated) What lower-ranking civil servants have been living on:-

PUTRAJAYA, May 21 (Bernama) — The lowest basic wage in the civil service following the salary increase announced today is almost above the poverty line, said Prime Minister Datuk Seri Abdullah Ahmad Badawi.

He said the new lowest basic salary would be RM649.15 per month compared to the poverty line of an average RM691 for the country for a family of five.

The poverty line or poverty threshold is the minimum level of income deemed necessary to achieve an adequate standard of living.

The lowest basic salary, that in the service scheme of a cook on Grade N1, will be RM649.15 per month following the 35 per cent increase in salary for that group of employees, to come into effect from July 1, compared to the current RM480.85.

Abdullah had announced a salary increase of 7.5 per cent, 15 per cent, 25 per cent and 35 per cent effective July 1, with the lowest rate of increase for top-level officers and the highest rate for low-ranking employees.

Abdullah said the gross lowest salary would be RM1,024.15 per month after addition of the civil service allowance and the housing allowance.

This gross salary does not include the cost-of-living allowance, which has been doubled to between RM100 and RM300 depending on the location of the workplace.

Prior to the salary increase, the gross lowest wage was RM805.85 per month.

The new gross lowest salary is evidently way above the poverty line, which is RM691 per month for the whole country, RM661 for the peninsula, RM888 for Sabah and RM765 for Sarawak.



1. sani - May 21, 2007

salary increase…menang sorak kampung tergadai…civil servants will give pak lah a big cheers…but businesses will be cheering more louder when all the prices goes up….

2. ahirudin attan aka rockybru - May 21, 2007

Hey, this is good news for the civil servants. A 35 per cent pay rise for the lower-income group will help bring them back to where they were before the government increased petrol prices (which sparked the increase in prices of other essential goods).

I do not wish to politicize the issue but I can’t help but point out that going by the PM’s “4 factors why the civil servants are getting the pay rise”, none of it suggests that the civil servants deserve it.

Read the Bernama story again. Why are the civil servants getting a pay rise? Because of:
1/ Malaysia has had strong economic growths in the last five years
2/ The govt needs to attract and retain the good civil servants
3/ The govt wants to reduce the burden of the civil servants affected by the rising cost of living due to the increase in global oil prices
4/ The government can afford it, because the government collects more taxes and has been prudent in its spending

It’s good for the civil servants but it doesn’t say that civil servant deserve it because they have done an excellent job. Certain departments in the government have improved by leaps and bounds while others have not done much to please the public. Meritocracy has nothing to do with pay increase in civil services and as long as that is the case Factor No 2 is out of the question. The other three factors are PR stuff for the present Administration.

The 20 per cent more for our cops and soldiers is a welcomed move. I was hoping that they would give the teachers more, too.

3. muhammadyunus - May 21, 2007

Dear Elizabeth and Rocky,

Rocky might be right – The four factors would just perhaps be PR. Or just a reason to fog the actual truth of why it is done in the first place. Personally, if the real reason is what i think it is, Pak Lah should just be man enough and go ahead telling the truth. Even if it ticks a particular group of people.

We all know that the socio-economic disparity of the Malays and Chinese are significantly huge – 7:4 [nearly double]. And astonishingly, the figure has not really changed much at all since right after independence. Hence, i feel that this is a very clever step from our Malay leaders in reducing the economic gap – increasing salary at the workplace [government offices] where the majority of people working in the sector are Malays or Bumis.

It is sad that people conveniently decipher action in their favor. It is sad that people do not honestly take the time to percieve meaning of the action or communication rather than responding with haste…Sad.

4. Daily Nibbler - May 21, 2007

I am not against increase in pay for civil servants but only when there is a marked increase in producitivity and efficiency. Otherwise, it will only add to increase in inflation.

Of course, the argument by the government servants is they need a marked increase in their pay in order to be motivated to increase productivity and efficiency. I don’t think so.

In any case, is there a body that measures (such as KPIs) their productivity in the first place?

5. elizabethwong - May 21, 2007

I don’t favour pegging ‘productivity’ to wages.
But the civil service, including the police, need to have an increase in their wages. It’s not about motivation, but subsistence, especially those living in the urban centres.
Referring to Rocky’s 4 points above, my concerns are – is the country doing that well in the past 5 years? If not, then we have to find the means to support this increase.
There’s no indication prudence has been exercised in Expenditure.
Taxation? I believe there is no plan to announce an unpopular scheme such as a tax increase; which brings to mind one of the PM”s earlier policy of a Goods and Services Tax (GST), though this has been postponed for implementation this year. I shan’t be surprised if this resurfaces after the General Elections.

6. mob1900 - May 22, 2007

When you’re starved for a few days, a normal dinner tastes exceptionaly good. This strategy was predicted years ago when price hikes begun while I do not think civil servants who works two jobs to make end’s meet will quit anytime soon to concerntrate on giving ‘quality’ services. Private sectors will be squeezed further since the promises of civil servant’s salary hikes has to be met. The numbers (35%) looks good but I suspect budget allocated for other areas will suffer from this salary hike increase. Somebody’s playing with the screws while balancing the dacing as usual.

P/s to Eli:
Good luck running for congress!

7. Daily Nibbler - May 22, 2007

Came across a bank teller wearing a tag “We deserve 30%” today. They too, through their union, are pressing for wage increase. Based on what? Subsistence, like the civil servants?

EW: Based on profit-sharing. Don’t you think these folks at the counters, loan offices etc. work hard enough to benefit from their labour, or is it just management that’s allowed enjoy the ‘fruits’?

8. sani - May 22, 2007

month of july…it’s 30days++ to go bang oiiiiiii….juz wait for 1/2 weeks to come…then they will know how much is 7.5%~35% translated into RM….i’m waiting for shafie afdal to wash his mouth with 1000 excuses….

9. Daily Nibbler - May 23, 2007

Agreed. That is one way of tagging wages to productivity. You would need to measure the profits and agree on a formula. Without productivity and ways to measure them, there may not even be profits to share out in the first place. It cannot be based on subsistence alone. The same for civil service.

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