One critical component of recurrent expenditures is the resources needed to maintain infrastructure and run services. In this regard, infrastructure maintenance should receive high priority because the returns to adequately maintaining existing infrastructure will almost certainly exceed the returns to building new infrastructure. The other critical components of recurrent expenditures are wages and salaries, which have accounted for 20% to 30% of recurrent expenditures during 2007–
2013 and from 10% to 12% of total government expenditure (Table 3). It is estimated that general government employment (including employment in the military) totals about 2 million people, or about 3.8% of the population. The average wage or salary of a government employee is about 100,000 kyat per month and the wage compression ratio (measured by dividing the ninth decile to the first decile of public administration wages) is around 5. The government has increased wages substantially over the past couple of years and, with significant additional hiring planned, the wage bill is expected to increase further. The wage bill as a proportion of expenditures and revenues is still low by regional standards and public sector salaries are only beginning to approach levels in neighboring low-income countries. But international experience (Box 1) would strongly suggest that further major adjustments to wages and salaries should be undertaken as part of a medium-term reform program aimed at enhancing the overall effectiveness and efficiency of public sector employment and remuneration. It is noteworthy that while the ratio of government wages to GDP per capita in Myanmar is still relatively low compared with other low-income countries (1.3 compared with 1.9), total government employment3 as a percent of the total population is high relative to other low-income countries (3.8% compared with 1.1%), in part at least because of the large size of the military.
Table 3: Cross-Country Comparison of Ratios of Government Wages to Government
Expenditures, Government Revenues, and Gross Domestic Product
Wages/Expenditures Wages/GDP
Myanmar 10.69 1.16
Thailand 40.99 6.85
Singapore 30.21 4.64
GDP = gross domestic product.
Note: Ratios are averages over the period 2007–2014.
Source: World Bank, World Development Indicators (accessed December 2014).
C. Balancing Public and Private Expenditures
In determining the appropriate level of expenditures, particularly with respect to the social sectors and infrastructure, it will be important that the government takes account of the potential for private expenditures to complement or supplement public expenditures. There are two dimensions to this issue that need to be considered, the first is the balance between public and private provision of public services, and the second are the opportunities for public–private partnerships in service provision.
3 Total government employment includes military employees.
Box 1: Public Sector Employment and Wages, International Perspective
Employment. Government and total public sector employment as a percentage of the population tend to rise with a country’s level of income. According to the ILO statistics, general government employment (i.e., including both central and local governments and employment in the armed forces) ranges from 1.1% of the population in low-income countries to
5.3% in middle-income countries, and 7.9% in high-income countries; and total public sector employment (i.e., including state-owned enterprises) ranges from 4% of the population in low- income countries to 6.8% in middle-income countries, and 9.2% in high-income countries. General government employment in countries in East Asia is about 4% of the population, and in South Asia, about 3%. But these averages do mask significant differences across countries within different income and regional groupings depending, among other things, on the overall role expected of the public sector.
Remuneration. Average public administration wages are generally higher than per capita GDP, with the ratio ranging from
1.9 in low-income countries to 1.4 in middle-income countries, and 1.2 in high-income countries. Average public administration wages are also consistently above wages in the manufacturing sector across all income and regional groupings (the ratio ranges from 1.3 to 1.8) and consistently below average wages in the financial sector (the ratio ranges from 0.5 to 0.9). It should also be noted that average public administration wages may mask large variations in the overall structure of wages within public administration. Indeed even across ASEAN countries, the wage compression ratio (measured by dividing the ninth deciles to the first deciles of earnings) varies greatly, for example, from 2 in Indonesia to 6 in Cambodia, 9 in the Philippines, and 14 in Thailand.
Reform. International experience with respect to enhancing the effectiveness and efficiency of public sector employment and remuneration systems suggests the following: first, while there are some short-term options to address periods of severe fiscal pressure, rationalizing government employment and wages is more properly viewed as an issue of medium and longer term reform; second, a review of employment may need to go hand-in-hand with broader expenditure reviews that examine the role of government, the cost effectiveness of different policy options, potential for outsourcing of noncore functions, areas of duplication and overlap etc., and third, increases in wage levels should ideally be linked with broader reforms of the pay and incentives system, including the potential for linking pay increases with performance, rationalization of allowances and other benefits, increasing internal mobility, training and other career development opportunities, and enhancing accountability.
ASEAN = Association of Southeast Asian Nations, GDP = gross domestic product, ILO = International Labour Organization. Sources: Clements et al. 2010; World Bank 2011; and World Bank, World Development Indicators (accessed July 2014).
With respect to the balance between public and private expenditures, international experience and even experience within ASEAN varies greatly. In the health sector, for example (Table 4), health expenditures as a percentage of GDP vary significantly from a low of 2% in Myanmar to 7% in Viet Nam. In addition, the share of total health expenditures accounted for by the public sector varies even more widely, from 13% in Myanmar to 76% in Thailand. It is clear that Myanmar needs to work hard to significantly increase total expenditures relative to GDP and the share of those expenditures accounted for by the public sector. But the appropriate ratio of private expenditures on health relative to GDP is a more open question and will need careful consideration as part of the development of the government’s overall sector strategy.
There is much discussion in Myanmar about public–private partnerships (PPP); and as part of the reform of SEEs, some enterprises have already been transformed into PPPs. International experience, however, suggests that the government should proceed cautiously in this area and give careful consideration to the sectors where such partnerships may be most effective, the nature of the partnerships that would be most advantageous, and the regulatory framework that needs to be in place to maximize the probability of success (Box 2). International experience also strongly suggests that even with a strong emphasis on PPPs, the bulk of both infrastructure and social sector investment will remain a government responsibility.
Table 4: Health Expenditures in Selected ASEAN Countries, 2011
Cambodia Indonesia Lao PDR Malaysia Myanmar Philippines Thailand Viet Nam
Total health
exps (% of
GDP)
5.7
2.7
2.8
3.6
2.0
4.1
4.1
6.8
Public exps on health (% of total health exps)
22.4
34.1
49.3
45.7
13.0
33.3
75.5
40.4
ASEAN = Association of Southeast Asian Nations, exps = expenditures, GDP = gross domestic product, Lao PDR = Lao People’s Democratic
Republic.
Source: World Bank, World Development Indicators (accessed July 2014).