Agenda Daily


Speculation is rife that the general election is just around the corner after the government dished out a hefty salary increase to the one million-odd civil servants in the country. Accentuating this is the stock market having reached its all-time high not too long ago. However, is this sufficient for the present administration to outdo its best ever mandate recorded three years ago?


The civil servants’ salary increase announced by prime Minister Datuk Seri Abdullah Ahmad Badawi on May 21 is bound to have many far-reaching implications on the economy and the well-being of the people.

With over one million civil servants and pensioners to cater to, the salary and pension bills are enormous – estimated at over RM24 billion for salaries and some RM7 billion for pension and gratuities annually. The increase will only add to the national burden.

On the other hand, such a large amount of expenditure is an important source of growth for the economy. Little wonder then that the stock market reacted positively to the news.

Abdullah said the pay rise was made possible by ‘the economic growth of 5.6%, the effect of fuel prices, positive trends of Bursa Malaysia and improved tax collection’.

At least that was how one mainstream English newspaper put it. I think what the Prime Minister said or was attempting to say was the raise was necessary, following the hefty fuel price increases at the beginning of 2006.

This was progressively followed by the government-mandated electricity tariff and highway toll increases, higher local government levies and taxes and increases in the price of other controlled items.

The latest is the 15-sen-a-kilogramme rise in the price of wheat flour.

As for ‘the positive trends of Bursa Malaysia’, I think what the Prime Minister really meant was that companies listed on the exchange were doing better financially and this had enabled the government to collect more corporate taxes.

With more than one million civil servants and 557,033 pensioners eligible for the increase, the cheers and praises for the Prime Minister are only to be expected.

But the salary revision tells of more than just the ability of the government to pay. More importantly, it is an acknowledgment that the inflationary situation isn’t as rosy as has been made out to be.

Otherwise, why should the government raise the cost of living allowance or COLA by as much as 100% and adjust the salary by a hefty 7.5% for senior management and 35% for the lower-ranking staff?

In addition, Police and Army personnel are being offered an extra 20% over and above the general increase.

It can’t be because their productivity has increased or is likely to increase. Instead, the Prime Minister himself has been a key critic of the civil service, accusing it of inefficiency and failing to provide smooth delivery of services to the people.

The pledge by the civil servants to be responsible and disciplined as a response to the wage increase and the assertion by the Inspector-General of Police, Tan Sri Musa Hassan, that policemen now have absolutely no reason to be tempted to accept bribes, have to be taken with a pinch of salt.

There have been such pledges before but inefficiency, corruption and abuse of power remain the bane of the civil service and the law enforcement agencies.

The ‘Cikgu Effect’

NOT unexpectedly, the Malaysian Trades Union Congress (MTUC), which represents private-sector employees, called for the salaries of lower-ranking workers to be revised accordingly.

The congress’ Sarawak secretary Andrew Lo said although top executives and senior managers in the private sector are better paid than government employees, the situation is not the same for those in the lower ranks.

But this is easier said than done. The private-sector employers, in particular, the smaller ones, do not have the financial muscle of the government to raise salaries at their whims and fancies.

Despite the record-breaking performance of Bursa Malaysia in recent months and the proclamation by some ministers that the good times are here again, many sectors of the economy are yet to enjoy such an effect.

On the contrary, with the slower-than-expected delivery of public-sector services and disbursement of payments to small contractors and suppliers, the trickle-down effects of the economic growth remain tentative.

As a result, cost-cutting measures, which include staff retrenchment, continue to be a key element in determining the profitability of many private-sector companies and corporations.

Without cost-cutting measures, many Bursa Malaysia-listed companies will continue to show lacklustre results. But cost cutting has negative effects on the demand for goods and services as purchasing power is reduced.

On the other hand, the civil service salary increase is bound to raise inflationary pressure. It is an established fact that the prices of goods and services go up each time a revision in the salary of civil servants is carried out.

While the civil servants and their families might enjoy reasonable benefits from the higher household income, those who are employed in the private sector or are self-employed will have to endure a decline in purchasing power, as prices of goods and services rise.

This is the ‘cikgu effect’ of civil servant salary increases. In 1973, when the Aziz Salary Commission gave a hefty pay increase to the country’s teachers, prices of goods and services went up almost instantly, and shopkeepers resorted to addressing every free-spending customer as cikgu or teacher.

Since then, every civil service salary revision has been followed by price increases and an orgy of sales promotions.

Election gimmick?

IS this an election gimmick?

The Prime Minister and his loyal Cabinet members were quick to dismiss such a notion.

Speaking to Malaysian journalists during his visit to Tokyo on May 22, Abdullah refuted claims that the pay increase was indicative of an early general election.

He said it was the nature of the Opposition to always look for ulterior motives whenever the government did something good for the people.

‘It is as if we only work to prepare for the election. We work for the development of the country because we want to make sure that the people will always be with us and continue to support us to achieve Vision 2020 and beyond,’ The Star reported.

I think I can agree with the Prime Minister on this one. The salary increase does not necessarily mean that the general election is coming soon.

Why should he be in a hurry to seek a new mandate? The current mandate is historically the best ever for a Malaysian Prime Minister and it’s only three years old. The last general election was in March 2004.

Abdullah does not have to call for a general election until some time in 2009, unless he thinks he has lost the trust of the voters and needs a fresh mandate to rule.

There may be disgruntlement with the way Abdullah and his government are running the country, but instead of seeking a fresh mandate, the Prime Minister could mend his ways to pacify the people. He still has sufficient time and a lot of money under the ninth five-year plan to make changes and show results.

It is reasonable to expect the Prime Minister to call for an early election if he knows that we don’t like the direction the economy is taking and the true nature of the stock market, and the property ‘bubble’.

And last but not least the likely outcomes of the various sensational court cases involving government-linked personalities, like the upcoming trial of Abdul Razak Abdullah Baginda, a former aide of the Deputy Prime Minister, and two policemen for the murder of the Mongolian woman Altantuya Shaaribuu. Or, he wants to make sweeping changes to the Barisan National (BN) parliamentary and state legislative assembly line-ups as preparation for his second term as Prime Minister.

Despite the ‘campaign’ by former Prime Minister Tun Dr Mahathir Mohamad to arouse public opinion about his leadership, Abdullah has made it clear that he is neither a stopgap nor a one-term Prime Minister.

But detractors, including the Parliamentary Opposition Leader Lim Kit Siang, have a point. The salary increase is only one of the several feel-good factors that the Prime Minister is whipping up.

For months now, his mainstream media supporters have been hyping the ‘good times are here again’ theme and highlighting the record-breaking price performance of Bursa Malaysia.

Another major ‘feel-good’ event is the 50th anniversary celebrations of independence, which will climax on Aug 31 and wind down toward the middle of September.

Pundits may want to take a bet on Abdullah calling for an early general election to take advantage of the Merdeka anniversary celebrations and the positive effect of the civil service salary increase, but the Prime Minister may want to give some thought to the possibility of the civil service salary increase not translating into votes for BN.

More importantly, he has to consider the sentiments of the rest of the people who are not enjoying income improvement but have to pay higher prices for goods and services due to demand-induced inflation and profiteering.

So, the future as it relates to the general election and the continuing popularity of the Prime Minister, is not as straightforward as a civil service salary increase, the stock market hype and the Merdeka anniversary.

The Prime Minister is far from finding his damai abadi – his ultimate and permanent contentment. The search could only be beginning, as his electoral mandate slowly but surely runs out.

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