CH 02

2 Administrative Systems and
Instruments
Learning Outcomes
Understand the Malaysian government structure

Explain the government machinery
Explain how public policies are developed and
implemented
Understand the Malaysian legal framework
related to public revenue and procurement
Public Sector Accounting Governance and Accountability in the Malaysian All Rights Reserved
Context 2–3
Federal and State Level
Organizations
 The Federal level organisations are made up of

ministries, commissions, councils,
departments/units, federal statutory bodies and
public enterprises/government owned subsidiaries.
 The state-level organisations are made up of
district/land offices, local authorities/municipal
councils, state statutory bodies and state owned
subsidiaries.
 There are also federal departments at the state
level.
Context 2–4
Statutory Bodies and Non-
statutory Bodies
 Statutory bodies are formed under Legislative

Enactment. Examples are FELDA, Sports
Council (MSN) and Malaysian Institute of
Accountants.
 Non-statutory bodies are formed and governed
by the Companies Act 2016. Examples are
Amanah Raya Berhad.
Context 2–5
Local Government
Context 2–6
Malaysian Government
Machinery
 Malaysian Administration Modernisation

Planning Unit
 Public Service Department
 Economic Planning Unit
 Implementation Coordination Unit
Context 2–7
Malaysian Administration
Modernisation Planning Unit
The Malaysian public administration is led by Malaysian

Administration Modernisation and Planning Unit (MAMPU).
Its roles are to:
Introduce and promote new government machinery and
evaluate their performance
Plan and lead information and communication
technologies development in public service delivery
Become a public sector consultant in improving
organization performance
Context 2–8
Malaysian Administration
(cont.)
 Facilitate modernization and transformation of the
government machinery for improved public service
delivery
 Conduct research in public sector planning and
administration
 Promote the improvements in public service delivery.
Context 2–9
Public Service Department
 The PSD is responsible for hiring, development,

promotion and remuneration of all government
employees.
 It is the supporting function behind the staffing
requirements of the entire public administration
including hiring, training, payroll and retirement
services.
Context 2–10
Economic Planning Unit
 Formulates policies and strategies for both long-term

and medium-term plans in socioeconomic development
 Appraise, evaluate and recommend development
programmes and projects
 Undertakes economic research and offers advice to the
government on economic issues
 Undertakes planning for regional and corridor
development and acts as the Secretariat to the National
Economic Council (NEC).
Context 2–11
Implementation Coordination
Unit
 Performs periodic collection and analysis of financial
and physical data concerning development projects are
being implemented in the country
 Identify the problems encountered in implementation
and the reasons for any gaps between planned and
actual performance
 Provides advice, consultation and technical support for
the planning, implementation, monitoring and project
management to all government agencies.
 Prepare reports on outcome evaluation of development
programmes.
Context 2–12
Malaysian Financial
Machinery
 Ministry of Finance
 Bank Negara Malaysia
 Khazanah Nasional
 Royal Malaysian Customs and Excise
Department
 Inland Revenue Board Malaysia
Context 2–13
Ministry of Finance
 Treasury for the Government of Malaysia

 Oversees the collection of government
revenues and expenditures
 Oversees and regulates other financial
structures such as the banking and insurance
sector, the investment sector and government
asset holdings.
Context 2–14
Bank Negara Malaysia
 Responsible for monetary supply and regulation

 Monetary supply is controlled through the
management of money printing, bank reserve
requirements, interest rates and sale and
purchase of government securities
 Monitors foreign currency reserve
 Monitors the Banking and Insurance sector
 BNM is headed by a Governor whose signature
is on every Malaysian ringgit note.
Context 2–15
Khazanah Nasional
 Holds and manages the commercial assets of

the government, and undertakes strategic
investments
 Invests in both domestic and foreign companies
 Follows a corporate structure with a Board of
Directors and a management team
 Audited by an independent external auditor as
well as the Auditor General’s Office.
Context 2–16
Royal Malaysian Customs and
Excise Department
 The main revenue collector for the government,
predominantly of indirect taxes
 Provides trade facilitation through enforcement of and
compliance with applicable law (trade agreements)
 Manages all policies and procedures matters related to
industries, import, export and border control
 Protects the national borders and revenue by combating
all forms of smuggling and fraud
 Headed by a Director General of Customs who is
appointed by the Prime Minister. The Director General
reports to the Minister of Finance.
Context 2–17
Inland Revenue Board
Malaysia
 Responsible for the overall administration of

direct taxes – income taxes, stamp duties etc.
 Assists the government in the distribution of
Bantuan Sara Hidup Rakyat
 Headed by a Chief Executive Officer and
reports to a board headed by the Secretary
General of Treasury.
Context 2–18
Public Policy Formulation and
Implementation
 The Cabinet is the executive body of the government in

power.
 Meet on a weekly basis and deliberate on matters of
national interests and formulate policies within the
framework of existing legislation.
 The Cabinet members are given ministerial portfolios
 Each ministry will then be the ones who must create
and carry out the implementation plans for the policies.
Context 2–19
Policy Instruments
 Mandates provide rules governing the actions of

individuals and agencies.
 Inducements or incentives, where the government can
transfer money or reduce the cost to individuals or
agencies in return for the production of goods and
services.
 Capacity building, where money is allocated for
purposes of investment in material, intellectual, or
human resources.
Context 2–20
Policy Instruments (cont.)
 System change entails the transfer of authority among

individuals/ agencies to implement the government’s
policies.
 Hortatory policy is where a government sends a signal
that particular goals and actions are considered a high
priority
Context 2–21
Public Policy process
Context 2–22
Laws and Regulations Governing
Government Revenues
 Income Tax Act 1967

 Petroleum (Income Tax) Act 1967 (Revised 1995)
 Real Property Gains Tax Act 1976
 Stamp Duty Act 1949
 Customs Act 1967 and Excise Act 1976
 Goods and Services Tax Act 2014 (repealed 2018)
 Service Tax Act 1975 and later 2018
 Sales Tax Act 1972 and later 2018
Context 2–23
Laws and Regulations Governing
Government Procurement and
Expenditure
 Financial Procedure Act 1957

 Treasury Instructions
 Treasury Circular Letters
 Government Contracts Act 1949
 Federal Central Contract Circulars
Context 2–24
Laws and Regulations
Governing Borrowings
 Loan (Local) Act 1957 and Loan (Local) Act 1959

 Treasury Bills (Local) Act 1946
 External Loans Act 1963
 Government Funding Act 1983
 Loans (International Bank) Act 1958
 Extended Credit Act 1966
 Development Funds Act 1966
 Loans (Asia Development Bank) Act 1968
Context 2–25
Laws and Regulations
Governing Borrowings (cont.)
 Loans (Islamic Development Bank) Act 1977

 Loans (International Fund for Agricultural
Development) Act 1992.
Context 2–26
Malaysia Incorporated
 The Malaysian government adopted a privatization

policy towards the end of the 1980s
 Major public services such as telecommunication,
energy and transportation were incorporated and shares
sold to the private sector, with the government still
retaining substantial shares through Khazanah Nasional
and a ‘golden share’
 These companies have financial systems separate from
the government administrative system.
Context 2–27
Modes of Procurement
Within the public sector, the types of purchases

are categorized into:
1 Direct
2 Quotation
3 Tender.
Context 2–28
Direct Purchase
 Direct purchase allows procurement of supplies and

services up to the value of RM50,000 directly through
the issue of a Government Order to any known supplier
of goods or services consistently supplying goods at
acceptable quality and reasonable price.
 The requirement of registration is exempted.
 Procurement of works up to the value of RM20,000 may
be done through the issue of a Works Indent to a
contractor who is registered with the Contractors
Services Centre (PKK) and Construction Industry
Development Board (CIDB) Malaysia.
Context 2–29
Quotation
 Advertises the tender in the local newspapers

calling for quotation
 Purchaser receives a written proposal from a
vendor specifying the goods and services
supplied as well as the payment and delivery
terms and conditions
 Purchaser to compare offers and determine the
best deal depending on their purchase criteria
 Vendor required to register.
Context 2–30
Tender
 Tenders are meant for large and

complex projects
 Procurement of works, supplies and
services above the value of
RM500,000 must be done through
tender processes
 Contractors must be registered
 Joint ventures are allowed.
Context 2–31
Learning Outcomes
Understand the Malaysian government structure

Explain the government machinery
Explain how public policies are developed and
implemented
Understand the Malaysian legal framework
related to public revenue and procurement.
Context 2–32
Summary
Levels of • Federal
Government • State
• Malaysian Administration
Administrative • Public Service Department
Machinery • Economic Planning Unit
• Implementation Coordination Unit
• Policy
Policy instruments
• Policy process
• Ministry of Finance
Financial • Bank Negara Malaysia
Machinery • Khazanah Nasional
• Revenue collection agencies
• Revenue Collection
Laws and • Procurement and Expenditure
Regulations • Borrowing
Context 2–33

CH 02

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CH 02

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2 Administrative Systems and

Understand the Malaysian government structure

 The Federal level organisations are made up of

 Statutory bodies are formed under Legislative

 Malaysian Administration Modernisation

The Malaysian public administration is led by Malaysian

 The PSD is responsible for hiring, development,

 Formulates policies and strategies for both long-term

 Treasury for the Government of Malaysia

 Responsible for monetary supply and regulation

 Holds and manages the commercial assets of

 Responsible for the overall administration of

 The Cabinet is the executive body of the government in

 Mandates provide rules governing the actions of

 System change entails the transfer of authority among

 Income Tax Act 1967

 Financial Procedure Act 1957

 Loan (Local) Act 1957 and Loan (Local) Act 1959

 Loans (Islamic Development Bank) Act 1977

 The Malaysian government adopted a privatization

Within the public sector, the types of purchases

 Direct purchase allows procurement of supplies and

 Advertises the tender in the local newspapers

 Tenders are meant for large and

Understand the Malaysian government structure

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