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Saturday, June 09, 2007

Finally the Government Does Something about Escalating Costs.

The recent salary increase given to all civil servants including pensioners will require an additional RM8billion every year to the costs of administration of Malaysia.

Comparison with other countries shows that our civil servants to population ratio is high compared to other countries in the Asia-Pacific region and even with the vast amounts spent on IT systems, the trend is towards an increase rather than a decrease of civil servants.

According to the article below, the cost of pensions alone has increased from RM2billion 15 years ago to the expected RM6billion estimated for 2008.

At the rate of increase, the bill could reach RM20billion by 2020.
The government has sensibly adopted a new pension scheme whereby new civil servants have to contribute to the fund and CUEPACS is not too happy.

Of course CUEPACS is not responsible for paying pensions in the future and they have to appear busy promoting their members’ benefits.

The government has to look after the welfare of all Malaysians and simply cannot carry such a heavy pension burden.

The government should also study why the costs of pensions have escalated way beyond all sustainability and such research could cover the following:

1.Study the number of pensioners who take second wives that are much younger thereby lengthening the period to pay derivative pensions to a younger widow with young children.

2.Give the civil servant the choice of converting the pension benefits into a lump sum payment. This can be calculated at any stage of the career after say 10 years service. For example the lump sum can be half the last drawn salary X years of service and this will allow some people to leave to set up a business.

3.Determine posts that have become redundant and to redeploy surplus staff to other areas.

4.Provide skills training to those who want to leave for the private sector and also counselling to those who have been terminated.

We should support the Government’s move to reduce the pension costs in the longer term. As for CUEPACS it would be good if they can give the public some valuable insights into how it can really work towards improving the delivery system of the government.

If you have not taken the poll to express your view on our civil servant numbers please read up the Green column on this website and take the poll today.

Graph: Just to illustrate how costs increase with time on a non-linear basis

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