Govt to review expenditure practices to avoid burdening its finances
08 Oct 2022 11:23am
Ministry of Finance - BERNAMA
Subsidy programmes, pension reform, Public Private Partnership (PPP) spending and financial commitments as well as grants to statutory bodies are among the expenditure practices to be assessed.
It is part of the government’s commitment to maintaining a sustainable fiscal position for the country’s growth and development while ensuring the well-being of the rakyat is safeguarded at all times.
"The government will continue to strive and improve public spending efficiency and effectiveness, reducing leakages, eliminating duplication of programmes and projects, as well as promoting and adopting best practices in public expenditure management and transparency in financial reporting,” the Ministry of Finance (MoF) said in a feature article entitled, "The rise of public expenditure: The need for review and optimisation” in the 2023 Fiscal Outlook and Federal Government Revenue Estimates released yesterday.
For the past decade, pension expenses have increased more than two-fold from RM13.6 billion in 2011 to RM29.1 billion in 2021.
This trend is expected to continue, said the MoF, adding that the expenses incurred will be unsustainable as Malaysia has become an ageing nation based on the United Nations’ definition.
As a result of the increasing life expectancy of Malaysians, the pension liabilities involving pension pay-out and derivatives will have to be committed for a longer period thus requiring higher allocation in the future.
Various reforms have been made to the pension scheme to address the increasing pension liabilities.
In line with increasing life expectancy, the mandatory retirement age has been revised several times from 55 in 1951 to 60 in 2012.
Furthermore, in managing pension liabilities, the Pension Trust Fund was established under the Pensions Trust Fund Act 1991 [Act 454] with an initial endowment of RM500 million and is expected to grow via investments as specified in the Act.
In enhancing the governance and optimising the returns of the Pension Trust Fund, Act 454 was later replaced by the Retirement Fund Act 2007 [Act 662] which led to the establishment of the Retirement Fund (Incorporated) (KWAP).
"Moving forward, KWAP is expected to further strengthen its ability to grow the fund size as well as elevate service levels for pensioners,” said the report.
PPP is aimed to ease the government’s burden in providing high immediate capital for development projects.
It also allows for improvement in public facilities and services as PPP encourages public and private sector innovation through the sharing of expertise and experience in implementing PPP projects.
Since the introduction of PPP during the Ninth Malaysia Plan, 116 projects have been implemented such as highways, government buildings as well as educational and medical facilities.
However, the PPP concession commitment and lease payments for some of the projects have burdened the government’s finances, said the report.
The Auditor-General’s Reports and International Journal of Public Sector Performance Management revealed several issues concerning statutory bodies such as wastage of resources as well as duplication and poor management of projects.
The 12th Malaysia Plan has outlined the requirement to review policies and processes in managing statutory bodies to minimise the government’s risk exposure and enhance the transparency of the statutory bodies.
"In addition, statutory bodies are encouraged to improve transparency in reporting by international best practices and standards to reduce leakages and optimise public spending,” MoF noted.
There are more than 130 statutory bodies at the federal level as at July 2022.
Examples of statutory bodies are the Federal Land Development Authority, Majlis Amanah Rakyat, public higher education institutions such as University Malaya, regional development authorities such as East Coast Economic Region Development Council and port authorities such as Port Klang Authority. - BERNAMA
