Kuala Lumpur, 6 September 2024: The Institute for Democracy and Economic Affairs (IDEAS) welcomes Prime Minister Dato’ Sri Anwar Ibrahim’s announcement on the government’s plan to rationalise Federal Statutory Bodies (FSBs), a critical step towards enhancing the efficiency and effectiveness of public service delivery and the use of government resources. 

Federal Statutory Bodies play a significant role in the provision of public services and spurring economic development. The 2022 Auditor General Report lists 132 Federal Statutory Bodies within its audit mandate. Some of these entities are regulatory bodies such as the Bank Negara Malaysia, the Inland Revenue Board, and port authorities. But there also are entities that are mandated to implement policies, including spurring economic development and providing public services, such as public universities, MARA, FELDA, and Tabung Haji.  Their role in the economy is substantial as many own government-linked companies, and in 2022, the total assets of the FSBs amounted to RM2.492 trillion. As government agencies, the FSBs receive annual allocations and sometimes are given debt facilities by the government. In some cases, some of their debts amount to 6.4% of total public sector debts and are also guaranteed by the government. In 2022, the allocation to FSBs was 5.1% of the annual budget, and the FSBs’ debt (almost all are guaranteed by the government) represents 5.1% of GDP.    

While many of these entities have their own purposes, there are entities which seem to have overlapping functions and mandates, such as those working to foster regional development.  There are at least eight entities that are given the mandate to promote regional economic development; four of them (KEDA, KESEDAR, KETENGAH, KEJORA) were established in the 1970s, one in the 1980s (PERDA), while the remaining three entities (ECERDC, NCIA, IRDA)  were established in the early 2000s. 

“Overlapping mandates could result in inefficiencies and wastage of resources, especially if they work on similar focus areas and do not coordinate their efforts and programs. Coordination issues also arise when these agencies are managed by different ministries. The rationalisation exercise offers an opportunity to streamline operations, reduce wastage, and improve government service delivery. A rationalisation exercise, which could reduce the number of FSBs, would provide the government with some fiscal space, albeit small.  It would also reduce the complexity of fiscal risk that the government has to manage”, said Sri Murniati Yusuf, Senior Director of Research at IDEAS.

IDEAS also urges the government to maintain transparency throughout this process by keeping the public informed of the progress, clear timeline, and outcomes of the rationalisation efforts. Stakeholder engagement and feedback will be crucial to ensuring that these reforms meet the needs of the people and contribute to the overall goal of a more efficient, responsive, and accountable government. Considering the work IDEAS has done on FSBs and state-owned enterprises (SOE) reform over the years, we are ready to participate in any consultations the government organises in the future.

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Ryan Panicker
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T: 03 – 2070 8881/8882 | E: ryannesh@ideas.org.my