Where the money’s going ...

The Star
BY LISA GOH lisagoh@thestar.com.my
20/3/2012

With a little more cash headed their way soon, here are some of the big (and small) plans that civil servants have got in mind.

Assistant finance administrator Norini Rapa was one happy woman when the Prime Minister announced a pay rise for some 1.4 million civil servants earlier this month.

Norini, 31, and her husband, who are parents of two young boys aged four and one, have been eyeing a particular double-storey terrace house in Salak Tinggi for a while, and with her salary going up by 13%, the property is now within their reach.

The first thought she had following the announcement was “I can now afford buy that house”.

“We've been planning to buy the house in Salak Tinggi because it's quite near to Putrajaya where we work. We really like it,” she says in an interview.

Unexpected windfall: Civil servants will be receiving salary increases of between 7% and 13% under an improved Malaysian Remuneration System.

Previously, her basic salary was only around RM1,420 a month, which entitled her to a government housing loan of about RM168,000.

“The house we want to buy costs RM191,000. That would mean that I would still have to fork out the difference in cash. But now that my new salary will be around RM1,600 a month, I qualify for a housing loan that will cover the cost of the house almost entirely. We can now afford to buy it.

“It's always good to have your own home. Especially with two young boys, it's good to have a little more space,” says Norini, who is currently renting an apartment.

On March 8, Datuk Seri Najib Tun Razak announced that civil servants would receive salary increases of between 7% and 13% under an improved Malaysian Remuneration System (SSM).

This follows the scrapping of the controversial Public Service New Remuneration Scheme (SBPA), which had come under criticism from government employees.

Shahrul: Wants to buy a family car with his new salary.

Najib said employees in the management and professional group from grades 1 to 54, who form the bulk of the 1.4 million civil servants, would get an adjustment of 13%. Employees on the Superscale (JUSA Jawatan Utama Sektor Awam) and Special Grades A, B and C would have their salaries adjusted by 9%.

Salaries of Staff Grade II and III officers would be adjusted by 8%, while salaries of Staff Grade I officers and the Chief Secretary to the Government would be adjusted by 7%.

He later said that more than RM6bil had been allocated for the pay rise, but the exact amount was not yet finalised.

Congress of Unions of Employees in the Public and Civil Services (Cuepacs) president Datuk Omar Osman describes the overall salary increase as fair.

Currently, he says, the lowest income earners in the public service such as drivers, general clerks, and technicians are earning a basic salary of between RM600 and RM700 a month, which he says is still below the urban poverty line.

On the other end of the spectrum, senior staff like the directors-general, secretaries-general and judges earn a basic salary of around RM10,000.

He notes that the pay rise is based on what the Government can afford to give at this point in time.

“It's an acceptable figure,” he says.

Norini: Planning to buy a new house after the pay rise.

With the unexpected windfall, Norini is not the only one with big plans.

Mohd Hadi Khalid, 31, who is an administrative and diplomatic officer with the Rural and Regional Development Ministry, also has plans to buy a house in Ipoh, where his wife is based.

“My salary is around RM2,000. With the 13% increment, we will be able to afford a better place. We haven't decided where exactly to buy in Ipoh; we're still looking around for opportunities.

“With the government loan, it'll be quite comfortable for us to pay about RM800 a month for the house, as our total household income is about RM5,000,” he explains.

 

However, he says all that will have to wait until the new salary comes in.

“The circular has not been released yet, so it's still wait and see,” he says.

It is learned that the new salary is expected to be disbursed in April, and will be backdated to Jan 1.

According to Real Estate and Housing Developers Association (Rehda) president Datuk Seri Michael Yam, the salary hike is definitely good news for the property sector.

“It's still early days to say exactly how much the property sector will benefit, but it is a positive outlook.

“With an average increment of about 10%, what government servants can afford also goes up. Civil servants will now be able to buy properties of a slightly higher value,” he says.

Banks, he explains, usually take a “one-third approach” when it comes to deciding how much one can afford for a loan repayment.

Mohd Hadi: Considering buying a better house.

“For example, if you have a salary of RM3,000, a third of that would be RM1,000 that's how much your advisable loan repayment is. But with a 10% increment, you can now afford a loan repayment of RM1,100.

“So instead of buying a RM200,000 house, one might now be able to afford a RM215,000 house,” he adds.

However, he does not foresee a rush in the property sector.

“People don't just decide overnight that they can afford to buy a house, so I don't foresee a rush. But it is definitely an impetus for big-item purchases,” he says, adding that 2007 and 2008 were good years for developers. Coincidentally, the last pay rise announced for civil servants was in 2007.

Houses are not the only big purchases government servants have in mind.

Despatch rider Shahrul Musa, 28, will be buying a car. A Perodua Alza, to be precise.

“My current salary is RM870. With the increment, it'll touch RM1,000 so it'll be easier to afford the car now. My wife is also a civil servant, so she's getting an increment too.

“We have a three-year-old son, so we do need a family car,” he says.

Others, like English teacher Elaine Kwa, 32, plan to take a lighter approach with the salary hike.

“We won't be going into any big investments at the moment. For me, most of the extra money will be going into savings, but it also means I can splurge a little more on my child. Educational toys don't come cheap,” says the mother of a three-month-old baby girl.

She draws a current monthly salary of about RM2,600.

Kwa, who also enjoys eating out, says that with a higher salary, she would be able to treat herself to nicer meals more often.

“The 13% increment is definitely welcome. These days when most families need two income earners, a few hundred ringgit definitely helps to lessen the burden of household expenditure,” she quips.

Another teacher, E. Koshila, 27, plans to start taking yoga lessons with the extra cash.

“My salary is about RM1,900. With a bit more, I am thinking of improving my lifestyle. I plan to take up yoga classes, or join a gym,” she says.

All these plans for spending money is only to be expected, says Rating Agency Malaysia Berhad's (RAM) group chief economist Dr Yeah Kim Leng.

Of the RM6bil which will fill the consumers' pockets, he expects 60% to 80% will be spent.

“This will vary from household to household, but it will have a boost on domestic spending, especially big-ticket items like property and cars.

“In terms of timing, the salary increment has come at a very propitious time, considering the uncertain external factors,” he says.

Federation of Malaysian Consumer Associations (Fomca) president Datuk Marimuthu Nadason, however, has concerns that the pay rise will trigger off a chain reaction, with traders cashing in on the windfall.

“There will definitely be an increase in the price of processed foods, such as nasi lemak and char kuey teow,” Marimuthu cautions.

“My advice to the traders is not to take advantage of the situation.”

So when will the spending start?

“The moment the money comes in, we'll be buying the house,” says Norini, with a huge smile.

“It's expected to be completed by the end of the year. After that, we can move into our own home.”