Factors Influencing the Efficiency of Malaysian Local Governments

Abstract

This paper investigates the factors influencing the efficiency of Malaysian local governments. Three measures of efficiency are considered, namely (i) technical efficiency (TE), (ii) pure technical efficiency (PTE) and (iii) scale efficiency (SE). Design/ Methodology/ Approach: This study uses secondary data from annual financial statements of local governments in Malaysia. Financial statements from 2008 to 2015 from 35 local governments were obtained. Panel regression based on the ordinary least square was used to examine the determinants of efficiency of the Malaysian local governments. Research findings: The results reveal that the population size and value of assets have positive and significant influence on the PTE, economic independence has positive and significant influence on the TE and SE, while the dependence on tax revenues is found negatively and significantly associated with all the three measures of efficiency (i.e. TE, PTE and SE). Originality/value: The paper provides empirical evidence on the determinants of efficiency of local governments in Malaysia. More importantly, the investigation on the factors was carried out for three measures of efficiency that are TE, PTE and SE. Practitioner/ Policy implication: The findings offer useful information to the relevant local governments in improving their efficiency. Research limitation: The present study has focused only on examining the efficiency of local government and has not been able to assess the effectiveness of these services

Cost-Benefit Analysis in The Local Authorities and Effective Decision-Making in Public Investment

“…It could also be seen that LAs in Malaysia gain revenues from three sources, namely taxes, non-tax revenue, and allocations from federal and state governments. Specifically, government grants and assistance reflect the higher revenues accumulated by the LAs (Martinez-Vasquez, Kebede & Weliwita, 2015), while a lesser contribution originates from the collection of property taxes and services charges (Atan et al, 2010;Mohd, Ayub, & Anuar, 2018;Ismail, Said & Amin, 2020). In today's environment where rapid urbanisation, climate changes, and global financial and economic crises have been dominated, most LAs in developing countries including Malaysia face more significant challenges, especially in managing the cities.…”

“…To achieve holistic planning and development of smart cities in Malaysia, MSCF serves as a guide and reference to Local Authorities (LAs) such as city managers, state governments, federal ministries and departments, academicians, industry players, and other interested stakeholders. As the third tier of the Malaysian government, LAs play significant roles in the city's development and maintenance (Atan, Abdul Rahman, Sawiran, Mohamed & Mail, 2010;Samsurijan, Ebekozien, Azazi, Shaed & Badaruddin, 2022) which include maintaining roads and providing safe transport, ensuring reliable waste management systems, and developing and maintaining leisure amenities and recreational facilities among others (Ab Majid, Mohamed, Haron, Omar & Jomitin, 2014;Said, Amin & Ismail, 2020).…”

“…The LAs have been pushed to reevaluate their current functions due to changes in the global environment, the creation and amendment of governmental policies, strategies, and initiatives, and the rising needs of the public for a wide range of services and facilities (Ab Majid et al, 2014;Said et al, 2020). Malaysia's vision of developing into a sustainable nation by the year 2030 has placed additional pressure on LAs to perform major transformations in their method of delivering services.…”