Zaid: Growing Pensions Will Ruin Malaysia

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Former federal minister Zaid Ibrahim has warned of the risk of economic ruin if the government is prevented from dealing effectively with the issue of civil service pensions and emoluments.

“There is no choice but to deal with the problem,” he told FMT in a comment on a government announcement that it was proposing to appoint civil servants on contract from next year instead of under the permanent and pensionable scheme.

He said Putrajaya would have to convince the public that the government did not have the money to continue paying out pensions and that any replacement scheme it would decide on had been thoroughly considered.

“For this, we need a team of credible independent persons to study the financial situation and make recommendations,” he added.

He also said the issue could become a political hot potato for the government and he urged leaders of all political parties to support Putrajaya’s search for a solution.

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“If we continue to shy away from dealing with chronic problems,” he said, “the damage will be irreparable.”

John Anthony Xavier, a former public servant who is now a fellow at University Kebangsaan Malaysia’s Graduate School of Business, warned in a newspaper column last year that pension payments would hit RM100 billion a year by 2030.

Economist Ramon Navaratnam says the government should move to a contractual system.

Recently, former civil service union leader AH Ponniah called for the appointment of a royal commission to study the government’s plan for an alternative to the pension scheme.

He acknowledged that the government’s current financial position gave it no choice but to axe the scheme, but he said it should defer its plan until a thorough study had been done.

But Ramon Navaratnam, an economist and a former secretary-general of the transport ministry, said the government shouldn’t wait for a royal commission’s study to make a decision.

“Financial constraints are not the only consideration,” he said. “We have to realign with modern management and business practices.

“We should just stop with pensions and move to a contractual system, with the contracts offering competitive salaries on top of the normal government benefits.”

He said the switch would allow the government to trim the size of the civil service, which currently employs 1.7 million people. – FMT