PUBLIC EXPENDITURE MANAGEMENT

PUBLIC EXPENDITURE MANAGEMENT: HOW MALAYSIA REFORMS AMONG THE CRISIS

ABSTRACT
Since 1989, Malaysia has implement the Public Expenditure Management reforms through the using of the Modified Budgeting System (MBS). Public Expenditure Management (PEM) is an approach to public sector budgets are oriented towards achieving the desired social results. PEM introduced based on the three purposes aggregate fiscal discipline, allocative efficiency and operational efficiency. PEM focuses on outcomes and understands expenditures as a means to produce outputs which are needed to achieve desired outcomes

Despite these reform efforts, almost era later, a lot leaves to be desired on the outcomes such as budget outturns have been higher than approved allocations and the domestic debt stocks and cost have been on the increase. The country\’s economy remains strong despite global economic uncertainty the risk to small and open economy in Malaysia. Foundation a strong economy has allowed the country to some surprises economy before. Going forward, economic fundamentals will continue to be strengthened to ensure resilient in the face of risk and uncertainty outside. This consolidation will be achieved by strengthening demand state, diversify the economy, increase domestic savings, strengthen the fiscal position, maintain low inflation and strengthen the financial system.

This paper sets out to present a general analysis of the Malaysia public expenditure management among the economy crisis happen and how Malaysia applied the transformation programmed to make sure the budgeting as GDP percentage planning to reduce by year 2020.

Keywords: Public Expenditure Management, Modified Budgeting System, fiscal, budget

1.0 INTRODUCTION

Public expenditure management (PEM) is viewed as being at the heart of economic policy making in many countries mainly due to renewed consideration of the need for having a responsible, responsive and effective government that works better and costs less and the growing fiscal deficits (Premchand, 2000 p72). Public expenditure management relates to allocation and use financial resources responsively, efficiently and effectively (Campos, 2001; Schicks, 1998). The Bretton Woods Institutions have been in the forefront initiating PEM reforms to address the excessive fiscal deficit problems (see Schicks, 1998; World Bank, 1998 and Proter and Diamond, 1999).
PEM operates through financial plan decisions, but differs in two important ways from conventional budgeting. Conventional budgeting on the other hand focuses closely on expenditures on inputs. PEM covers a wide range of institutional and management arrangements, not just those traditionally associated through budgeting. PEM emphasizes substantive outcomes which is relate to (a) total revenue and expenditure, (b) the allocation of resources between sectors and programs, and (c) the efficiency with which government institutions operate (Allen Shick, 1997). Nevertheless, public expenditure management, while presenting new approaches, be different at these two points by not denying traditional budgeting exactly. Firstly, it includes political rules into traditional routine rules. Then, it gives importance to institutional and organizational arrangements as an alternative of traditional partnerships. The prerequisite of a good financial performance can be covered through a good institutional arrangement during budgeting (Shah, 2007, p.48).
The Malaysian public expenditure management system performs on par with international best practice as exemplified in a few OECD countries. This is due to extraordinary efforts by central agencies to improve the system over the past 10 years through fiscal discipline, allocation of public resources to strategic priorities, effective and efficient use of public resources, and accountability for the use of public resources (World Bank, 2000). Malaysia is one of the several developing countries, facing huge fiscal deficits, which have followed World Bank recommendation to implement PEM reforms in order to address the negative consequences of excessive deficit and issues of accountability, transparency and efficiency.
Following the basic elements of Public Expenditure Management that was justify by the World Bank in 2000 to promote the achievement of outcomes budgeting system:
i. Aggregate fiscal discipline,
ii. Allocative efficiency,
iii. Operational efficiency.
These three objectives are complementary and interdependent. Devoid of fiscal discipline, it is impossible to accomplish effective prioritisation and implementation of policy priorities plus programmes. Improving the internal management systems to accomplish efficiency without a firm constraint is not credible. But mere fiscal discipline in the presence of arbitrary source of allocation and inefficient operations is inherently unsustainable.
Malaysia also faces future challenges in achieving medium term outcomes that will determine whether it can sustain past achievements and move to a fully developed country as envisaged in the government\’s Vision 2020. The main objective of this study is to analyse and assess whether the objectives of PEM reforms have been achieved in Malaysia.

2.0 AGGREGATE FISCAL DISIPLINE

Aggregate fiscal discipline refers to the alignment of public spending with total revenues (domestic revenue plus a sustainable level of foreign debt); with simple words, it means keeping government spending within sustainable limits. Spend wisely and according to the draft budget should be strengthened to ensure the management of public expenditure to achieve the outcome. In layman\’s terms, it means not spending more than what you can afford. Aggregate fiscal discipline requires that spending (and other budget) totals be set independently of and before decisions are made on the various parts of budget. If they are not, the spending totals will inexorably rise to accommodate demand. The totals must be reasonably firm—hard constraints rather than soft targets—and must be enforced throughout the year while spending is underway, not just during the period when the budget is being prepared. Moreover, the aggregates must be sustainable over the medium term or longer through policies and instruments that enable the government to maintain discipline year after year (Allen Shick, 1997).
To ensure aggregate fiscal discipline achieved by the target, the budget must be constantly reviewed throughout the year either three times or four times a year. This is to ensure that the budget is spent according to ability and not according to the will. The role of the need to ensure commitment in government spending does not violate discipline in the management of public expenditure. Aggregate fiscal discipline closely interlinked with the spending (in real terms or as a share in GDP) and revenue of a company or government. Spending incurred must be in line with earned revenue. This is to ensure that there is no problem spending excessive and inconsistent with the increase in revenue.
To achieve the best impact on fiscal discipline, one method is to limit the amount of expenses as a proportion of GDP by setting an absolute right to a share of total spending. In addition, the determination of the maximum value of allowable expenses increased in the coming year should be implemented. If the total expenditure cannot be controlled, the government will try to ensure aggregate fiscal value achieved through tax increases or sell assets to solve the problem of state spending. If all the parties fail to ensure the success of fiscal discipline, the government will incur a loss, aggregate their demand far exceeds what is available. Deficit spending will become unsustainable, which translates to a stable macroeconomic environment – high inflation, high interest rates, and a growing current account deficit. This will slow down economic growth and efforts to reduce poverty.

2.1 ALLOCATIVE EFFICIENCY

Assuming that aggregate fiscal discipline successfully applied in the management of expenditure, the second challenge to be faced is that the government should ensure that expenditure must be made in a way and the right place. Provision has been granted in accordance with spending being applied, then every department must be spent in accordance with the provisions given in a program that is effective and the impact or benefit to the government. No government managed to control the amount of budget spending but each part is controlled by the management in the government. Constraints in order to control this spending will affect all divisions to achieve the best management. Responsibility of all parties to ensure that this was achieved on an annual basis.
However, most of the problems in a particular program or project development, efforts to obtain approvals from agencies that provide provisions, an agency will submit a budget request for a lower cost to ensure the program gets the budget. However with not knowing any better, the government which provided the budget will approve it because it is relatively low. After allocations in the budget, then the agency will apply for additional funds in the future and others. Challenges such as these will lead to an allocation program will spend in excess of what is provided by an agency.
During the past 30 years, democratic governments have sought to counter budgetary incrementalism in a variety of ways. One has been to link the budget to formal priority-setting procedures such as program budgeting or planning-programming- budgeting systems (PPBS); another has been to direct spending units to prepare zero-based budgets (Allen Shick, 1997). Despite various reforms made, issue expenses not in accordance with the requirements of the right has always happened and failed to follow the required public expenditure management. PEM ensure that these problems can be solved by making the division of responsibilities to all parties, including the ministers involved. The government still must adjudicate competing sectors demand; that is, it must decide how much should be allocated to every primary or portfolio in the budget sector.

2.2 OPERATIONAL EFFICIENCY

Operational efficiency is closely related to the success of the government to operate and give satisfaction to the people. Due to bureaucratic delays and a lot of levels, operational inefficiencies of a government is a problem for management expenses. In the private sector, these problems are also endemic. But CEOs and managers in the private sector have an interest in the profits, making competition, and market high. The bottom line is something that managers can monitor. So by structuring the company so that the source of profits (and losses) are easily viewed, management can more easily identify who is to blame or reward. The staff, especially those in the departments, can’t be manipulate by the market.
With a very limited operating costs, managers should ensure that cash costs involved are managed in the right way according to resources. Running costs are progressively reduced by a percentage equal to all or a portion of expected efficiency gains. Among the goals is to implement austerity budget through operating costs involved, such as staff costs, supplies, equipment and so on. The government will carry out this control is to specify the amount that can be spent in each category of inputs purchased trustee expenses. Various established system of internal controls that managers give up its in spending the funds allocated. But in many countries, the budget continues to focus on the amount spent on various inputs. Managers are the most important role to ensure the operation of regulated and limited by budget.
However, if the parties of the government or a private company saw operating costs expenditure has almost become a deficit or be used for other purposes, the employer will cut the budget down. PEM supports operational efficiency by shifting the focus of spending control from input to output and by centralized management operational resources. These critical characteristics greatly influence public management implemented by democratic countries. Reforms focused operation on the manager must give the discretion to carry out their operations as they are appropriate and necessary responsible for decision-making, including control the output result. In order to achieve operational efficiency, the government must guard against a reduction in operating costs that are hidden in service or quality to be obtained. This is one of the reasons why they emphasize output and measures, quality of service, and review the performance of an action.
Program implementation and service delivery point to the effectiveness and efficiency of operations and to maximize the use of available resources. Effectiveness in a service closely related to resource allocation and allocative efficiency. It is also very dependent on the approved budget.

3.0 NEW ECONOMIC REALITY IN MALAYSIA

Malaysia achieved unprecedented economic growth and the dramatic poverty reduction in the two decades before 1997 same as other countries in East Asia. During this period, the government\’s role changed from being a major contributor to economic activity facilitator’s private sector-led growth. As a result, the pressure on public spending has been reduced and when regional financial crisis hit in 1997, the budget was in surplus-unusual for most countries and public debt has fallen to about 30 percent of GDP (World Bank, 2000).
In addition, although the growth was largely behind the reduction of poverty, based on the existing safety net a comprehensive system such as public health, free basic education, and the transfer and income generation for the poor and vulnerable, proved resilient to the crisis. What is important security network components are linked wages to productivity which allows flexibility in labour market and low unemployment preserved only 3.9 per cent in 1998 and 3.4 per cent in 1999. Send return of foreign workers, who are largely employed in the sectors worst affected as construction, also blocking the increase in unemployment and poverty. Moreover, after the crisis impairment of reducing the impact on the rural poor (which is the majority of the pre-crisis poor) because it increases farm income (World Bank, 2000).
Malaysia has strengthened public expenditure management system and largely comparable with international best practices. However, the strategy of the government to allow private sector participation in the provision and financing of public services, particularly infrastructure, have placed new demands on the contingent and off-budget public expenditure management. Although this strategy has led to infrastructure capacity-positive results doubled between 1985 and 1995, the government provides financial support to projects that expand the private sector and encourages competitiveness to maximize efficiency. This has also increased direct and contingent liabilities of the government.
From a surplus of 1.9 percent in 1997, the federal budget was expected to show a deficit of about 2.1 percent of GDP in 1998 and 3.6 percent in 1999 (Table 3.0), excluding off-budgetary expenditures to recapitalize the financial sector and meet the government\’s liabilities in privatized infrastructure projects. The deficit would result from a decrease in revenue (about 14 percent between 1997 and 1998) and an increase in development spending (of about 15 percent between 1997 and 1998). Revenues would drop primarily because of the recession, but the fiscal stimulus would also contribute by reducing the corporate profits tax rate and other measures. Despite stepped up development expenditures during 1998, the deficit of the federal government was smaller than planned-only 2.1 percent of GDP-reflecting higher-than-expected tax revenues and delays in project implementation.
From the table, the economic data show that in year 2013 a deficit of about 3.8 percent of GDP, then for the year 2014 a deficit is about 3.4 percent and 3.2 percent of GDP for 2015. It Show that the Malaysia government is moving to ensure that the public expenditure management objectives achieved by Vision 2020.
The deficit will continue until the economy emerges from the recession and return to growth of 4-5 percent. This may take a few years. The debt to GDP ratio may reach 50-60 percent by the year 2000 (including financial restructuring and contingent liabilities on privatized infrastructure projects), from 32 percent at end 1997. The rising debt will impose trade-offs on policymakers between the size of the stimulus and the size of the primary deficit, and between domestic and foreign debt financing (World Bank, 2000). The World Bank has estimated Malaysia\’s national debt will increase by the year 2000. For the 2013, the debt to GDP was reached to percent 54.7, then for 2014 it was reduced to 52.8 percent and in 2015 the debt of GDP was increased to 54.5 percent. Debt was produced from domestic and foreign debt. Meanwhile the spending and expenditure was deficit and increased to achieve percent 38.3 for 2016. Public Expenditure Management element for aggregate fiscal discipline can be improved and strengthened for the next year to 2020.

Table 3.0: Federal Government Spending and Revenue (Varies Year)
RM billion 1996 1997\’ 1998 1999\’ 2013 2014 2015
Revenue 58.3 65.7 56.7 58.7 213.3 220.6 222.4
Direct taxes 25.9 30.4 30.0 27.2 120.5 126.7 116.7
Indirect taxes 21.4 23.2 15.3 18.1 35.4 37.5 53.2
Other 11.0 12.1 11.4 13.3 57.4 56.4 52.3
Expenditure 58.5 60.4 62.7 69.3 253.6 256.1 260.7
Current 43.9 44.7 44.6 46.7 211.4 219.6 213.3
Development 14.6 15.7 18.1 22.6 42.2 39.5 47.4
Surplus/Deficit -0.2 5.3 -6.0 -10.6 -40.3 -35.5 -38.3
as % of GDP -0.1 % 1.9 % -2.1 -3.6 % -3.8 % -3.4 % -3.2 %
Total Debt as a % of GDP 35.9% 32.6% 36.2% 37.3% 54.7 % 52.8 % 54.5 %
Domestic Debt as a % of GDP 31.7% 27.9% 31.0% 31.3% 53 % 51.3 % 37.4 %
Foreign Debt as a % of GDP 4.2% 4.7% 5.2% 6.1% 1.7 % 1.5 % 17.1 %
Sources: Economic Report Ministry of Finance 2016

Malaysia\’s public expenditure management system is equivalent to international best practices as reflected in a number of OECD countries. This is because the government has been trying to improve the system in the past 10 years through fiscal discipline, allocation of public resources with strategic priorities, effective and efficient use of public resources, and accountability for the use of public resources. Modified Budgeting System (MBS), which was introduced in 1989 and has been implemented to provide greater management flexibility and accountability to the public management system. Malaysia can further improve public management through better integrate off-budget liabilities in the planning, performance, and the budget process; and improve management performance and strengthen the relationship between the Cabinet policy and budgeting processes.

3.1 MALAYSIA MODIFIED BUDGETING SYSTEM (MBS)

The traditional Program and Performance Budgeting System in Malaysia (PPBS) was replace by the Modified Budgeting System (MBS) in 1989 to introduce managerial flexible and accountability to the public management system (World Bank, 2000). Modified Budgeting System (MBS), which focuses on output and impact, performance measurement, and evaluation. MBS implementation across the federal agencies has spread in the last five years. It was launched in 1990 in three agencies -Health, Public Works and Welfare Ministries, to introduce and cultivate familiarity with the new system among select Ministry. The number of agency MBS practice gradually increased and by 1995, MBS operates through all ministries and federal departments.
Then MBS was implemented in Statutory Bodies and to remedy weaknesses in the Programme and Performance Budgeting System (PBBS). MBS comprises expenditure targets, program agreement and exception reporting, a cycle of program evaluations and a generalised approach to expenditure control. MBS is widely known as the ‘let managers manage’ policy because it delegates greater budget autonomy to operating managers. An implementation MBS requires fundamental reviews of programs and activities at least once every five years. Main objectives of MBS (John Anthony Xavier, 1996) is:-
i. Promote a rational allocation of resources to government program by imposing fiscal limits upon agencies and forging a link between inputs and outputs
ii. Improve discipline and rationality into the budget process by explicitly quantifying a binding expenditure limit for each agency, shifting from the line item budgeting to performance-based budgeting and producing output oriented structures
iii. Improve program management by adopting better management practices including encouraging greater delegation of authority from Treasury to agencies and then on to the line managers
iv. Reorient the focus of accountability on issues of programs efficiency and effectiveness by measuring performance against predetermined targets, evaluating programs and activities according to their impact and relevance and matching accountability and authority by holding managers accountable for performance

Main features of MBS (John Anthony Xavier, 1996) is:-
i. An Expenditure Target is provided to each Ministry/Department at the start off the budget process to which existing policy budget submissions must comply
ii. A Program Agreement is signed between the Treasury and the line ministry which determines the level of performance that can be achieved for a budget year with the allocation approved. At the end of the fiscal year, an Exception Report is prepared by the lines of ministries regarding the performance of activities which do not reach the levels specified in the program agreement.
iii. Program Evaluation takes place for each activity at least once every five years.
iv. A Generalized Approach to Expenditure Control is adopted which enables the Treasury to tighten the controls of overall expenditure and delegates the control over details to line ministries

3.2 PUBLIC EXPENDITURE IN MALAYSIA

Public Expenditure Management in Malaysia has listed four main functions to ensure the best system within budget. Among them is the provision of fiscal discipline, allocating public resources with strategic priorities, ensure efficiency and effectiveness of public resources, and ensure public accountability for the use of public resources.
First, based on the overall budget for the previous year has shown a surplus, the government expects the government will have balanced budget rules for operating expenses. Treasury will be able to control aggregate spending effectively through the targeted budget. However, fiscal planning is more focused on cash flow compared to the central government of government assets and liabilities.
Second, public resources must be allocated according to strategic priorities. Look East Policy, Vision 2020 and the National Development Plan and other documents created should be used as a guide to the development strategy. To ensure the ministry of national strategies, public expenditure management system must be based on the procedures and incentives. Chronic supplementary budgets necessitated by the Cabinet\’s introduction of policies during the fiscal year signal a missing link between Cabinet\’s decision-making and the budget process.
Thirdly, the two initiatives were developed to improve the performance of the public sector under the MBS program agreement between the Treasury and the ministry during the budget process for the identification and preparation of performance expected by the ministry Exception Report for fiscal year-end performance report to the Treasury. Next Public Service Development Circular introduced to the aspects of effectiveness and efficiency of government agencies. However, this initiative is not fully implemented in the framework of the government.
The fourth function that is mentioned in the management of public spending is strong public accounting and financial reporting system which is owned by Malaysia. Among them is the Accounting Department of State, Department of the National Audit Committee, which examined the Auditor General\’s reports of the State Audit. It is intended to examine the national accounts in addition to strengthening the performance report to the Treasury.
However, the most important challenges for the future management of public expenditure in Malaysia is the integration of off-budget liabilities in the planning, performance and budget process. Relations between the Cabinet policy and budget process should be strengthened to improve the performance of public expenditure management in Malaysia.
To ensure that Malaysia develops, non-departmental agency engagement strategy has been given the opportunity to stick to engage in development, public enterprises to support the activities of government, semi-government and private sectors. Funds such as direct grants, loans and loan guarantees re-introduced and monitored in accordance with the provisions provided.
The budget is very influenced by the institution, which consists of both the formal and informal rules. Transparency and accountability are an important mechanism to ensure a successful outcome PEM. All costs are implied or restrictions involving politicians and bureaucrats who break the rules should be clear financial and otherwise. Any politician or party boss should have a transparent accountability and responsibility for the implementation of activities carried out. Accountability to Parliament is important and one of the basic conditions to the management of budget.
The ability to make predictions are important in operating performance. It is intended for public officials to plan the provision of services. Skills to forecast government spending in various sectors as important signals to the private sector to decide production, marketing and investment. However, the forecast is a challenge that is at risk and should take into account the economic and fiscal context.
The situation of modern society nowadays, people cause to expect honesty from the parties responsible for implementing the government\’s budget activities. Corruption is the misuse of office for personal gain, either directly or indirectly to cause inefficiency in PEM. PEM is intended to reduce the opportunities for corruption and punishment on corruption and also strengthen public expenditure management itself. Weak system of tax administration, debt management, customs administration, privatization and others are prone to corruption and fraud. Fiscal transparency and accountability and effective audit will help curb corruption in the state administration.

4.0 MALAYSIA TRANSFORMATION PROGRAM

For 2000 onwards, Malaysia has implemented a transformation program which could help the country face the challenges of the future. Strengthening the national economy will be achieved by strengthening domestic demand, diversify the economy, increase domestic savings, strengthening the fiscal position, maintain low inflation and strengthen the financial system. Stable economic growth will also provide a conducive environment for business and investment long term.
In 2011-2015, the national economy has maintained steady growth despite the world economic stage to perform mixed. Gross Domestic Product (GDP) is estimated to grow at 5.3% per year with a Gross National Income (GNI) per capita at current prices is expected to increase by 5.8% from RM27,819 (US $ 8.636) in 2010 to RM36,937 (US $ 10.196) in 2015. in the period 2009-2014, the average monthly income of households has increased faster at 8.8% per annum.
For 2016-2020, the Government will continue to strengthen the resilience of the economy to address the economic challenges in the future. The economy is expected to grow at 5% to 6% per annum based on sustained domestic demand and increase the contribution of the external sector. In addition, the strengthening of the structure to strengthen the basis for economic growth, including increased innovation and productivity, will continue to drive growth.
From the National Transformation Programme (NTP) Annual Report 2015, Malaysia government was indicate to aligned to the goals of Malaysia’s New Economic Model
(NEM) to enable the country to attain high income economy status by 2020 through sustainable and inclusive measures. Under the NTP,
The Government Transformation Programme (GTP) is designed to provide all Malaysians access to improved public services irrespective of race, religion and region helping us to achieve the ideals of 1Malaysia while the Economic Transformation Programme (ETP) is a focused, inclusive and sustainable initiative that will transform Malaysia into a high-income nation by 2020. Each year since the National Transformation Programme (NTP) was launched in 2010, the Government has released two Annual Reports – the Government Transformation Programme (GTP) and the Economic Transformation Programme (ETP). Registering a gross domestic product (GDP) growth of 5 percent for 2015, private sector continued to be a key driver through consumption and investment. This is very much in line with the aspirations of the ETP, to create an environment that encourages the private sector to take up a key role in driving the economy forward. ETP through six Strategic Reform Initiative, introduced the Public Finance Reform dn also reduce the government\’s role in business. This shows that the government has taken reform measures as implemented earlier.
From NTP there are two measures implemented by Malaysia to reduce the burden of increasing debt and reduce the deficit gap that occurred since 1998. Among them is a comprehensive rationalization of subsidies through the creation of a safety network aimed at streamlining government spending, as well as the implementation of the Goods and Services Tax (GST) of 6 per cent on 1 April 2015. Malaysia adopted a policy of checks and balances (check and balance) as the national debt cannot exceed the ceiling of 55 percent of GDP, as stipulated under the Government Funding Act 1983 and the Loan (Local) (Amendment) Order 2005. During the past five years, Malaysia has managed to achieve the fiscal deficit target from year to year (Figure 4.1) while ensuring the country\’s debt level should not exceed 55 per cent (54.5 per cent of GDP is achieved in 2015.

Figure 4.1: On track to Fiscal Balance by 2020

From the NTP Annual 2015 report it was show since 2013, Malaysia has remained in the fiscal “Safe Zone”. The “Safe Zone” indicates the fiscal health of economies, requiring that public debt be below 75 percent of GDP while deficit is kept at four percent of GDP or below (Figure 4.2). In 2015, fiscal deficit continued to be reduced according to target, at 3.2 percent of GDP compared to 5.4 percent in 2010.

Figure 4.2: Malaysia In The ‘Safe Zone’

To achieve the target of reducing the fiscal deficit from 6.5 percent of GDP in 2009 and to maintain the maximum level of debt of the Federal Government on the level of 55 per cent of the Gross Domestic Product (GDP) annually, Malaysia has embarked on a series of reforms of public finance, disciplined and structured to ensure that government finances is controlled.
Under the Strategic Reform Initiative in 2015, we have witnessed the successful implementation of Goods and Services Tax (GST), the implementation of Accrual Accounting System, the increase in direct tax compliance and administration and increase tax compliance and administration indirectly. Implementation of accrual accounting is better showing than cash accounting. This could help the country\’s public expenditure management and improve the level of accountability and transparency in the management of public sector resources and facilitate the costing of resources, something that is important to improve the results-based budgeting in promoting the sustainability of fiscal policy.
5.0 CONCLUSION

In conclusion, public expenditure management will involve the aggregate fiscal discipline, allocative efficiency and operational efficiency. However, for better management of public spending in Malaysia, the main function of PEM is seen to four functions, namely fiscal discipline, allocating public resources with strategic priorities, ensure efficiency and effectiveness of public resources, and ensure public accountability for the use of public resources. Malaysia adopted the Modified Budgeting System in 1989 to ensure that this system can help the management of national expenditure. The economic crisis that occurred in 1997 and 2009 has led to Malaysia\’s economic situation and the debt burden borne by countries is increasing.
Through the program, the NTP which was introduced in 2010, the Malaysian government has introduced various measures to transform many aspects of public service delivery and be a catalyst for the economy to achieve sustainability and inclusiveness in socio-economic development for Malaysians from all walks of life, NTP is a venture for the construction of state very big shouldered by all stakeholders from the public and private sectors.
The implementation of GST, accrual accounting system and increase tax revenues and non-tax-assisted management of public finances. However, more reforms or improving the management of public expenditure needs to be seen and studied as the country is still experiencing a deficit in each year. Even though the report shows that the country is still at a strong level, the measures taken have shown burden on the people due to operational inefficiencies that have been implemented by the departments that provide services to the people. The government still needs to prove the extent to which the implementation of public expenditure management is handled properly and ensure that the system has been implemented efficiently and effectively. More important in PEM and the successful in PEM is the transparency, accountability, predictability and participation in public expenditure management.
The involvement of all the parties involved in the administration must convince the people and transparency in the implementation of government activities. The system will be implemented through the PEM further strengthen the management and so help combat corruption on government activities. People are expecting spending and government revenue at this time to provide a yield that is able to overcome the country\’s economic crisis deepened and burdensome. Concept study is still low and require in-depth study and to see the whole scope involved to ensure the country\’s public expenditure management more transparent.

6.0 REFERENCES
Caiden, N.(Ed.), (1996), Public Budgeting and Financial Administration in Developing Countries, London, England: Jai Press.
Caiden, N. (1995), “Comparing Budget Systems,” Public Budgeting and Finance, 15(4): 23-38.
Jadranka Djurović-Todorović, Marina Djordjević (2009), The Important of Public Expenditure Management in Modern Budget Systems, Serbia
John Anthony Xavier (1996), Budget Reform-the Malaysian Experience.
Lyman Rose (2012), 4 Step to prioritize expenditures, Retrieved November 28, 2016, from www.imf.org/external/pubsft/expend/guide3.htm
Ministry of Finance Malaysia (2012), Retrieved November 28, 2016 from www.treasury.gov.my/…/2016/…/FGR1970_2016…
Ministry of Finance Malaysia (2012), Retrieved November 28, 2016 from www.treasury.gov.my/…/2016/…/FGRP1970_2016…
National Transformation Programme Annual Report 2015 (2016), Performance Management and Delivery Unit, Prime Minister Department.
Premchard, A (2000) Control of Public Money: The Fiscal Machinery in Developing Countries, Oxford University Press New Delhi
Shick, Allen (1999), A Contemporary Approach to Public Expenditure Management, World Bank Institute, Governance, Regulation and Finance Division (Second Printing April 1999)
Shah, Anwar and Jürgen Von Hagen (2007), Budgeting and Budgetary Institutions, Herndon, VA, USA:World Bank.
The Governance Unit Strategy and Policy Department Asian Development Bank Issue, (2001) The Governance Brief, ADB
The World Bank (2000), Malaysia Public Expenditure: Managing The Crisis; Challenging The Future, Poverty Reduction and Economic Management Sector Unit East Asia and Pacific Region.

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