CIVIL SERVICE SALARY REVISIONS

CIVIL SERVICE SALARY REVISIONS: Order read for resumption of debate on Question [9th April 2007],

"That the Civil Service Salary Revisions be considered by Parliament.". - [Minister for Defence].

Question again proposed.

2.00 pm

Mdm Halimah Yacob (Jurong): Mr Speaker, Sir, anyone listening to yesterday's debate will get the impression that this whole salary revision is only for the Administrative Service officers and the political office holders. I would like to stress that there are 64,000 civil servants, and they too make important contributions to the work of the public service, and this pay revision would also cover them. This will be the main focus of my speech today to give the perspective of the public sector employees on this pay revision.

Sir, the public service pay was last revised in 2000, after the service suffered an exodus of staff to the private sector. Hence, I agree with Minister Teo that it is timely and relevant to do this revision now before we see a repeat of that exodus. It is important for the public service to pay its officers competitive salaries in order to attract and retain its fair share of talent. Being the largest employer in Singapore, its policies on wages and human resource have a significant impact on the private sector. Witness the complaints from the private sector whenever they perceive in the past that the public sector was paying better bonuses, which they felt pressurised to match in order to retain their employees. Hence, the public service has also been mindful not to be seen as the leader when it comes to the payment of salary and bonuses to its employees. But this cautious approach has also resulted in the public service losing people. If the public service does not have its fair share of good people, service to the public will be affected. It would also not be able to live up to the rigorous demands of policy making in an extremely competitive and challenging environment. Having dealt with the public service in the course of my union work, I can vouch for the fact that the public service of today is a far cry from the service of the past, in terms of the quality of the staff and the standards of performance.

There are now many dreaded acronyms among civil servants, such as PRP, which is Performance Review Process, where someone who receives an E rating is given a certain period to buck up, failing which he will be terminated. Then there is the SGS - the Special Gratuity Scheme - where someone who has stagnated in his performance and is blocking the career path of others is politely asked whether he could do something better in the private sector instead of continuing in his job. And if he so agrees, he could leave through the SGS. Then there is, of course, the equally dreaded best sourcing, where jobs could be outsourced to the private sector once market testing shows that it is viable to do so. The civil servants know that if they do not perform, not only will they be deprived of performance bonuses but they may also be asked to leave the service. So the public service today is no longer an iron rice bowl, where people are kept in service no matter what happens.

Sir, in fact, one of the complaints about the public service today among new recruits is that it lacks job security. The public service today employs people on contracts, even for jobs which are not short term. This is something that the public service, in my view, may want to review as it unnecessarily creates uncertainty particularly among new recruits - the group that has the highest turnover. If the reason is to test people before confirming them, then the good old probation system can still perform that function. So, even if the starting pay is adjusted, its concerns over job security are not addressed, then I think the public service will continue to see a higher turnover among new recruits.

Sir, let me now focus on some aspects of the salary revision and its impact on civil servants. Our public sector unionists have raised some issues and concerns. They felt that thus far, the focus has been only on the pay of the top civil servants. They are worried in case the salary revision will benefit only the very few at the top and the graduates, based on Minister Teo's express concern that the graduate scheme is seeing a higher level of turnover. The very top civil servants form only a very small percentage of the 64,000 civil servants that are spread across 15 Ministries and who help to make the system work.

Our public sector unionists understand the need to reward and retain our top talents, but I believe that the rest of the civil servants too deserve to be treated fairly and should be given a decent pay increase. As one public sector unionist reminded me in a meeting that we had last Thursday, we must look at the public service as a total human being where every part of the body performs a function. It is not only the brain that matters. Even if a person has a wonderful brain, without the hands, legs, eyes, nose and ears, that person cannot function effectively. So we need to pay the top civil servants well but we must not forget the rest of the public service, without whom our public service will be crippled and cannot function well. The best policies will be ruined if poorly-paid demotivated, disgruntled counter staff at the Ministry is rude to the public, or if a similarly poorly-paid demotivated and disgruntled lower division staff fails to implement policies effectively. I think their concern is not unwarranted.

Many civil servants today who joined service years ago have reached the maximum on their scale and have not been receiving wage increases. Prior to the year 2000, they could expect to look forward to NWC wage increases. But since 2000, NWC wage increases were paid only in the form of the Annual Variable Component (AVC) which was split into two parts and paid in July and December. In the meantime, the cost of living has gone up.

Sir, this has been particularly difficult for the public service staff in the lower divisions, such as Divisions 3 and 4 and the daily-rated employees. The Amalgamated Union of Daily Rated Workers has asked me to remind the Government not to forget about the DREs - the lowest-paid workers in the public service. On average, a DRE who has worked for more than 20 years earns only about $1,000 a month inclusive of allowances, which are paid only if they fulfill some traditions such as punctuality. Almost all the DREs today work two jobs to make ends meet. This is the group that, despite economic growth, is still stuck with low wages, as they face the same challenge of stretching incomes caused by globalisation that afflicts all our low-wage workers.

Many have gone for training but there is a limit to how much the cleansing jobs that they perform can be revamped. I would like to urge the Government to pay special attention to the lower divisions and our daily-rated workers in the salary revision so that they are not left out.

Sir, I have listened carefully to the Minister's statement. I am glad to note that the salary adjustment, which will be paid primarily in the form of bonuses tied to performance and market demand, will benefit everyone in the public service. Since Minister Teo made the announcement on 2nd March this year that there will be a salary revision, expectations have been raised. Civil servants are expecting adjustments to their basic pay. Hence, it is important that the basic principle of how the adjustment will be made is clearly explained to both the civil servants as well as the public. The public service has a flexible wage system, and the adjustment this year is primarily in the variable component, and not a fixed component of the civil servants' salary structure, except maybe for only a few schemes of service which will get their basic pay adjusted.

Another key consideration is that, unlike the salary revision exercise in 2000, the exercise this time is different in that the adjustment will not be the same across the board. Rather, the salary adjustment will depend on market demand and performance of staff. This means that the variable component that is pegged to performance has increased, and this makes it all the more important for the public service to have an effective performance management system.

In essence, Sir, we can agree that if the public service is to improve its standards, it needs to reward people based on performance and not on their mere presence at work or based solely on seniority. Nevertheless, for a performance-based system to work, it is important to have in place an objective, fair and transparent performance appraisal system that generates confidence among public service staff. For this to happen, the targets must be clear, discussed with the staff and achievable.

There must also be a system in place where managers are properly trained to appraise their staff and give regular feedback on their performance. Our concern is that the effectiveness of the performance management system in the public sector today varies across Ministries and statutory boards, and has to be improved. According to one unionist, statutory boards do not share their corporate KPIs with the unions and staff until only very recently.

But there are also examples of good performance management systems practised in the public sector. The PUB Employees' Union has confidence in its appraisal system, as the management engage an external consultant, discuss extensively with the union and the staff, train the supervisors and even a few years after the implementation of the appraisal system, the consultant continues to do annual evaluations to ensure that the system is complied with and functions well. It is important that the positive experience of the PUB Employees' Union is multiplied across the public service.

There was an interesting column in the 2nd April 2007 Financial Times entitled "Why the annual appraisal fails to make the grade", where the columnist describes the appraisal process as a process usually entered into in a spirit of embarrassment, false optimism and weary duty. I hope that this is not how the public service management system is perceived. If more and more public service pay is to be pegged to performance, I would like to urge the Public Service Division to do a lot more work in this area to improve the performance management system across Ministries and statutory boards.

Sir, let me now touch on market adjustment. One principle that we are seeing being more clearly established now is that an officer's wage increase will now be tied more closely to market demand. It is important, in my view, to ensure that those schemes of service without relevant market equivalents are also adequately compensated. The Minister had explained that the Public Service Division would look at the qualifications of the officer in such cases to determine how much wage adjustments to pay to those without market equivalents. In my view, this is not enough. The Government should also look at the job size of the officers and the complexity of the jobs, taking into account the knowledge and experience that they have in performing certain jobs in the civil service. The nature of the work in the civil service is different from that of the private sector. There are jobs, such as officers doing ICA work, where it is not possible to find the market equivalent, but these are jobs critical to Singapore's security. Hence, we need to be fair to them as well and ensure that they receive fair pay adjustments.

Sir, as market comparisons are now increasingly being used as a benchmark for salary revisions in the public service, it is imperative that the jobs in the public service do not remain static but are constantly reviewed and redesigned so that officers in all the schemes of service could continue to enhance the value of their work and will stand an equal chance of earning better bonuses and wage increases. This is important because it is not fair to the staff if they have been asked to do the same job for the past 20 years, and then one day when market comparisons are done, they are told that the market value of their jobs is lower than others and therefore they deserve less bonuses and wage increases. So, I would like to urge the Public Service Division to do a thorough review of the jobs in the public service to assess whether there are jobs which now have to be redesigned so that the staff on those schemes could do higher-level jobs and enhance their market value. Some examples are the Corporate Support Service and the Operations Support Service, which could be upgraded to the higher-level jobs. This is something which we had raised a few years ago and I would like to urge the PSD to give this greater urgency and priority.

One of the comments about the public service is that other than the Administrative Service, promotions for the other schemes of service are far too slow compared to the private sector. Recently, the Ministry of Education made a very smart move by conducting a promotion exercise, which is essentially a catch-up exercise. Under the enhanced career structure for teachers, the MOE promoted a bumper crop of 10,850 officers. Some benefited from faster promotions while others benefited from the new additional career grade of GEOs 1A3/2A3, that was created. These are additional promotional grades as the next higher grade is too far for many to cross. I think, Sir, that this is a good move to motivate and retain staff, and I strongly urge the rest of the public service to study and implement this as well.

Sir, I have highlighted some issues pertaining to the current service pay revision and have also made some suggestions for improvements. Having worked closely with the public service, primarily as adviser to the public sector unions, I must emphasise that, overall, in its human resource management policies, our civil service can pride itself as being a fair and progressive employer, whether in the area of staff welfare or staff development. Just to quote you some examples. On work-life balance, our civil service is one of the earliest to adopt family-friendly policies, such as extended maternity leave for young mothers and paid sick leave for mothers to tend to sick children, long before the Employment Act was amended to provide the two days' paid sick leave to parents in the private sector. Our civil service also has schemes allowing women officers to work part time or flexi time and was the first to adopt the policy on equal pay for work of equal value, way back in the 1960s, even before Singapore officially ratified International Labour Organisation Convention 100 on this in the year 2002. I hope, of course, Sir, that we will see more female Permanent Secretaries, but the current record of four from a base of zero is not too bad. In fact, because of its reputation, I sometimes receive request from young school leavers looking for jobs in my constituency who specifically request for work in the Government service or who are disappointed when they could not secure a civil service job and want to appeal for a second chance. So, far from the impression that many have, the civil service is still an attractive, exciting and challenging place to work.

Sir, in the course of my work, I also had the opportunity of meeting very enlightened senior civil servants, such as Mr Lim Siong Guan who not only understood very well what is important for our economy and growth and how to ensure that our civil service remains efficient and effective. He also understood very well the concerns of the average Singaporean and the need to take care of the civil servants even as the civil service charged ahead to prepare for new challenges. It was also during Mr Lim Siong Guan's time that we had our first public sector union-management gathering in 1997, which is a practice that we have continued up to today. The public sector union-management gathering provides a platform for the NTUC and the public sector unions to regularly discuss and engage the PSD and the public sector management from the Ministries and statutory boards on HR policies and issues in the public sector, and has laid a strong foundation for the development of good LMR in the public sector.

Sir, in conclusion, if, as mentioned by Minister Teo, the public sector could, through competitive wages, help to retain able men and women in the public service and duplicate many more Permanent Secretaries of Mr Lim Siong Guan's calibre and character - I know that Mr Lim has retired - then this is something that is good for our future.

2.22 pm

Mr Hri Kumar Nair: Mr Speaker, Sir, different points of views have been given, I will not try and cover the same ground. Let me start by talking about what I know best - my own profession, the law.

Our court system is based on the British model. Many years ago, lawyers in England called barristers were regarded like public servants. They were expected to use their skills and training for the benefit of all whose cause was just and innocent, without fear or favour and without reference to power or wealth. Consistent with their calling, their fees were regarded as honorarium which they cannot sue to recover. In other words, you have no recourse if your client decides not to pay you. Barristers were also not permitted to pick and choose their cases for their clients. A barrister was expected to represent all to the best of his ability, whether or not he found them loathsome or whether or not they were princes or paupers. Their overriding duty was to serve the public. And legend has it that after a barrister finished his work in court, his client will deposit his fee in a little pocket in the barrister's robe or gown. And this pocket was located at the back of the robe so that even the very act of payment could not be seen by the barrister, because such matters of money were beneath him. So, if you look carefully at the back of a lawyer's robe today, you will see a tiny pouch. That pouch is all but sewn up, so you cannot put any money in it anymore. It has no function but merely a vestige of time past. That story may not be entirely accurate, I should say. But it is dutifully told by one generation of lawyers to the next to emphasise the nobility of the profession.

The legal profession today is still an honourable one. Lawyers have a higher duty to the court. They must act in the interest of justice. They are held to a higher standard and respect of their character and conduct compared to any other profession. They are expected to serve the public good. But no one, and absolutely no one, expects lawyers today in England, Singapore or anywhere around the world to work with the same financial constraints of days gone by. Why? Because those rules are outdated and unrealistic. Today, having a clean and competent legal system is an important part in any country's economy. And to achieve high standards, you need bright people willing to take up the law as a career. We all know that financial rewards play a part in someone making a selection of his career. And I do not think I will be wrong to say that today in law school in Singapore, the United Kingdom, United States or anywhere around the developed world, very bright students are attracted to the law largely on account of financial opportunities which the legal profession offers, and there is absolutely nothing wrong with that.

Is the legal profession worse for this? Clearly not! In fact, by paying well, you are actually raising standards and also levelling the playing field. Otherwise, you will be left in a situation where only the rich can afford to be judges and lawyers, which was the situation in England many years ago. You also need good legal minds, both in the private as well as the public sectors. The system will not work if you have bright judges and government prosecutors but less qualified lawyers in the private sector, and vice versa. So, the financial rewards in both these sectors must be compatible, otherwise there will be an imbalance of talent and an exodus from one to another whenever that imbalance is not addressed. This had in fact happened in the past in Singapore.

So, performing a public service is not inconsistent with receiving good pay. The position of lawyers has evolved. Why should it stand still for Ministers and civil servants? Yes, it is the duty of Ministers and the civil service to serve the public. Yesterday, Mr Siew Kum Hong spoke passionately about how Ministers should be cut from a different cloth and how they should be driven by the privilege of leading this country. I agree with him. A person in that job should not have to be motivated by anything other than the privilege and honour of leading Singapore. He should be someone who thinks that destiny demands of him to service. If he does not have that drive or mindset, how will he be able to make the tough decisions which he will inevitably have to make? But why does this mean that Ministers should be paid less than what they are worth or what their job demands. And why should their moral authority be questioned or eroded in the minds of right-thinking people simply because we seek to give them a fair wage? Just because someone should not do this job for money does not mean that you should not pay him fairly.

What are the common arguments we hear? First, there is a fear that the wrong type of person may be motivated to take office. I think that is overstated. One does not get the job simply by applying for it. You first have to establish a good reputation. You then have to satisfy the Prime Minister's standards, no doubt highly stringent. You then have to be scrutinised by the electorate and prove yourself in the office of a junior Minister before you are asked to step up. It is clearly not in the PM's interest to appoint someone who is not competent and dedicated to Singapore. In fact, despite the salary increases in 1994 and thereafter, the Prime Minister has said on a number of occasions that it is still difficult to persuade good people to step forward. Why? Because asking someone who is probably already successful and comfortable in his career to completely overhaul his life, and more than that the lives of his family, is very difficult. What value do we place on that?

Do Singaporeans really believe that keeping salaries low will discourage greedy and dishonest people from trying to get into office? The many examples around the world tell us differently. The wrong people will always try to take control because they know that if they succeed, they can rewrite the rules to benefit themselves and they will not bother about having a debate in Parliament or elsewhere about it. But there is a more fundamental point, I submit. There is nothing wrong with factoring salary in your career choice. We all do that. Why is it regarded as an imperfection when our Ministers do it or when the formula allows our Ministers to do it? If people demand their politicians take an oath of sainthood with their oath of office, then they are just asking to be deceived.

The other common argument is that other countries do not pay their leaders as much and the figures often cited sums which are officially declared. The additional perks and advantages received during and after office are usually left out. We have heard some examples yesterday. But, more importantly, again, so what if we pay the highest? Singaporeans should decide for ourselves what value we place on having an honest, dedicated, competent leadership. We should not be dictated by considerations and circumstances of other countries which have absolutely no relevance to us at all. What other leaders earn should not be how we value leadership in Singapore.

Then we have a third argument of Mr Chiam yesterday comparing the Government to a charity. I am flabbergasted by this. It is completely different. A charity's deliverables are limited. It has no obligation to grow its business. It does not have to look after its donors or give them returns. The comparison is completely misplaced.

So the basic question is: what is a fair wage? At first blush, it seems a difficult question. But once we agree on the principle, it is fairly simple to resolve.

Sir, I fully accept the principle that we should let the market determine the value of our Ministers and senior civil servants. Benchmarking Ministerial salaries to the private sector is a sensible basis. Like many who have spoken before me, I believe the formula requires some fine-tuning so that it fairly represents the market and takes into account other important factors. Why fine-tune it now? It was simply because the formula was devised in 1994 when salary structures were somewhat different. It is clear that there has today been a significant widening of the salary ranges and these have occurred even at the very top. Take the law as an example. According to the Sunday Times of 1st April this year, in 1998, the difference between the top earner and the eight highest earner in law was $1.2 million. Today, I believe that figure to be much larger and may even exceed $5 million. In other words, there is a vast difference in remuneration even among those who are successful. The amounts earned by those at the very top are therefore no longer representative of what most successful lawyers take home. If the intention of the formula is to be in line with market, then these super earners are not a reflection of what the market pays a successful professional.

Second, the earnings of the top 48, particularly those in the profession, are not really salaries. Although I do not know who they are, I believe they are probably senior partners or sole proprietors of their own firms. They are not just lawyers or accountants but entrepreneurs running a business of providing legal or accounting services. They are very different from salaried persons. Their earnings represent a return on their enterprise and risk. If the business fails to generate a profit, they earn nothing and they may even lose money. So in a real way, their entire earnings are effectively performance based. It is therefore inappropriate to take their figures and translate them into a regular monthly salary. In the circumstances, if the intention is to continue using the top eight individuals of each profession, then we should compare like for like. A substantial portion of our Ministers' and civil servants' pay should be made performance related. I note that the measures announced yesterday seek to place a greater emphasis on performance but, if you want a proper comparison, a larger portion should be performance based.

In addition, the key performance indicators should be spelt out clearly so that the public is left in no doubt of the standards that are expected. We are more than willing to pay our public servants a fair wage and, in return, it is reasonable for us to know what we will get in return. There is nothing that will reassure Singaporeans more than a clear set of concrete deliverables from our public servants and if they do achieve their targets, no one can reasonably begrudge them what they earn.

Sir, my final point is about symbolism. At the end of the day, whatever formula one chooses, the Government must serve and be accountable to all segments of the society. The formula should properly reflect that. Mr Low Thia Khiang had, some time ago, suggested that Ministers' salaries should be a multiple of salaries of the bottom 20%. Politically very convenient to argue but really practically makes little sense. Mr Low obviously agrees because he did not repeat the suggestion at this debate yesterday.

In the same vein, this formula should not just take into account the top 48. We cannot ignore the perception that if the formula is tied just to the top, Ministers and civil servants will always enjoy the upside regardless of how the rest of Singaporeans are doing. Indeed, it is well conceivable that the top 24 could continue to earn well and do better even in an economic downturn and increased unemployment. In that event, the Government may be compelled to impose salary cuts and pay below the benchmark as it had done in the past. But what is the point of having a formula if you are only going to follow it some of the time? More importantly, if the formula results in figures which the Government is not comfortable paying, then perhaps there is something wrong with the formula. I believe the formula should contain elements which will tie salaries to the general well-being of Singapore, for example, the GDP, the unemployment rate, the cost of living. We can work out the details. I know these matters may be taken into account when deciding performance bonuses, but I think it is important that we spell this out expressly to demonstrate that they will have a direct bearing on salaries as well. It may be a question of presentation and explanation, but in matters such as these, which are emotional, I think presentation and explanation are just as important.

The Parliamentary Secretary to the Minister for Community Development, Youth and Sports (Mr Teo Ser Luck): Mr Speaker, Sir, I declare my interest as an office holder in the Ministry of Community Development, Youth and Sports.

First, I would like to respond to Mr Low Thia Khiang's points that were raised yesterday in Mandarin.

( In Mandarin ):[For vernacular speech, please refer to Appendix A.] Sir, Mr Low mentioned yesterday during the debate about the living standards and civil servants' salaries of various countries such as Denmark, Switzerland and Finland, and he has compared them with Singapore. Let me use Denmark as an example to make a simple comparison. The taxes in Denmark are about 43% to 63%, whereas the top income earners in Singapore pay 20%. The GST in Denmark is 25%, but in Singapore our GST is 5% which will be increased to 7%. Their unemployment rate is about 3% to 5% and the figure for Singapore is less than 3%. This is a country that emphasises strongly on social welfare. So, they levy very high taxes on their people. If the unemployment rate is high, it will lead to job insecurity, and thus many people will need social welfare to help them. In the long run, it is not sustainable and it is a burden on the people. Can we accept this? After a generation of hard work, our society has been elevated from a Third World society to a first class society. To achieve this, it requires tremendous effort and wisdom.

Therefore, if we use these countries as comparison, because of the difference in background, it is like comparing two different companies that are selling different products. Likewise, it is difficult to compare the salaries for the political leaders in Singapore with those in European countries. So, such comparison is unfair and inappropriate.

*Cols. 363-364.

( In English ): Sir, the issue of pay has always been an emotive one. And most of my parliamentary colleagues have already brought up many points, and I will re-emphasise some of them. I face these difficult issues as well when I was in the private sector, that is, how much do we pay a person, how much is the talent worth, what is the job's worth. While we may argue exactly how much we should pay a person, one thing that is clear in the private sector is that we pay top dollar for talent as well. The logic is simple. It will cost the company much more to replace the top talent than to pay more to retain him. Not only would we lose the experience of this talent, we incur cost on time and training for the new replacement. Any company that values its talent will make the sound business decision to pay market value. In the same way that the private sector pays well to keep its talent, I agree that the Government should pay top dollar to attract and retain our fair share of top talent in our civil service. The stakes are high. There are many companies but only one government, and the Government is dealing with the whole country of four million population in Singapore. So the business of Government must not fail. We need the best to run the country.

Since 1994, this benchmark has been implemented. I suppose the Government understands that today, the public sector has to compete with the private sector for talent and the public sector job is just another option in the job market. Let me quote Mr Philip Yeo who said recently that the value system for his generation was strong and that would mean times had changed, and so had the value system. I am not questioning the moral obligation of the younger generation, because there are certainly more options now and more distractions. So, to many, the social responsibilities of a job in the Government may not be as attractive enough now to outweigh the generous private sector offers, and this is the current situation that we have to accept. It is not easy to find someone with a three-in-one - the ability, the mind, the heart - all rolled into one. It is even more challenging to expect them to come in at a discount. So it is not an everyday sale like in a shopping centre. We have to continue to try to find these good people with a unique compassion. But then we must also be ready to pay.

Having said that, I think the debate should be on how we peg the civil service pay to that of the private sector. How should the public sector pay public servants competitive salaries? I agree that not all top civil servants will make it to the top tier of the private sector and vice versa . But the top talents are leaving for the private sector, so it is reasonable to peg to the level that the private sector pays. Many of my parliamentary colleagues have already spoken about the benchmark and formula, and I would say that the formula has caused many on the ground quite confused. But I would just like to put it simply that we should just pay what is needed to retain and check the talents.

Therefore, the real issue here is if we pay a market value, would the public sector talents be able to function at the same pace, undertake the same risks and generate the same output as the private sector talents? A company is essentially a profit and cost centre or, what we call, a P&L centre, comprising revenue and cost, headed by a Chief Executive or General Manager. The revenue centre is the frontline staff who bring in the business, the sales department for the company, while the cost centre is the back-end staff - operations, logistics, accounting - that provide support for the revenue centre. The frontline revenue generating staff usually have a lower fixed base, higher variable pay component pegged to the amount of business it generates for the company when it meets the targets. The back-end staff, on the other hand, usually have a higher base pay, lower variable component and, taken together, the frontline staff usually get paid more than the back-end staff when the targets are met and the company prospers. However, there are also underperforming ones and they get even lesser and they also face termination in double quick time.

So, at times, when I was in the private sector, I did get cold sweat because you woke up in the morning and you worried whether your numbers met the targets or not, or whether your competitors were doing something that was different that would pose a threat to your business. So which market pay should the civil servants be pegged to - revenue, cost or P&L centre? Or should the civil servants in different Government agencies and departments have different benchmarks like in the private sector, considering that the Government would also have its own P&L centre? Should economic promotion agencies, such as the EDB, that attract foreign investments into Singapore be paid higher variable components like the sales department in a private sector? The formula to derive the benchmark is currently complicated enough for most people. So I do not really see the need to over-engineer it any further. But let us review the broad guidelines and see if it is necessary to place more variables and less fixed component and link it to performance indicators in the areas of responsibilities. And these have to be more specific than GDP. It can be too broad as KPIs need to have direct impact on the actions of the different functions that will positively affect the GDP.

At the same time, as we peg the civil service pay to the private sector, we should instil the same discipline of the private sector in the civil service. The private sector takes actions swiftly on performers and non-peformers. While top performers are rewarded handsomely, the non-performers are quickly dealt with. In market jargons, we call that "heads will roll or you get the chop". This is important to send a clear message of what is needed to be done with a sense of urgency. Similarly, we should review our system of assessment to identify performers and non-performers so that the system of reward and incentive will be more closely aligned to that of the private sector. If we can link performance to economic output, as many Members have mentioned, ability to be cost-efficient, reducing Government's spending but maintaining the same level of activities or with the same level of impact, innovation, creativity, efficiency and effectiveness of systems and policies implemented, I believe that the Government should start placing more emphasis on quantifying targets and measuring an officer's performance more closely according to clear and measurable objectives because you cannot manage or control something that you cannot measure.

While I agree that the pay of the Administrative Officers has fallen behind and ought to be adjusted, we must be mindful that by increasing the pay of the Administrative Officers, we would likely create a larger income gap between the 230 Administrative Officers and the other 60,000 plus non-Administrative Officers in the civil service. As in any wage disparity, those who are paid lesser might feel dissatisfied, especially if we perceive that they are working just as hard, if not harder than those who are paid more. While we can justify the top dollar we are paying to our top talents, we must ensure that the wage disparity within the civil service does not create an unhealthy tension in the system or demoralise the large segment of the civil service. We need thinkers but we also need doers. Plans are nothing. Planning is everything. You can have the best policy paper written, but there will still be no impact if the implementation is not effective. And this requires different skills sets and they are both as critical.

As we seek to build an elite system, we must ensure that we do not end up with an elitist system. The civil service must continue to function as an effective organisation throughout all levels, across all different schemes of services and each and every civil servant must be given the opportunities to shine, to progress according to his capabilities and potential and to be recognised for his contributions.

Since we started pegging Ministers' and top civil servants' pay to the private sector in 1994, we should examine if this has indeed been

effective in attracting the type of talents that we want. As we know, even with the salary formula, many of the current office-holders left their successful careers and joined the Government at a discount, with no certainty of success. But many other top talents did not make that sacrifice.

Sir, are we going to continue to revise upwards the benchmarks every year? I see no need for such revisions, if we use pay as the sole basis of attracting talents. While I support the current proposed increase, my view is that pay should not be the main component to attract and retain talent. We ought to develop a whole package that would make civil service a choice career for our best people. And part of the package in the private sector is to provide a fair leadership, keep the employees constantly motivated and optimally challenged. Similarly, for the civil servants, we must provide a total package to make civil service a choice career where civil servants are given opportunities to stretch themselves, learn new capabilities and develop to their fullest. I met this young officer sometime ago. He told me he had many ideas and papers written but they are all in a drawer. I told him that that was great and asked him, "Why do you not present it to the Minister?" He said, "No. They are not for presentation or to share the ideas now because they are contingency plans, just in case the Minister changes his mind again or his directions."

Sir, going forward, with greater competition from the private sector for young talents, we need to ensure that the civil service remains inspiring, allowing our young officers room for creativity, challenging them to take risks, make them feel ownership in whatever they do and, at the same time, we must be able to create a sense of idealism in our young officers with a larger purpose of helping to shape the future of our country, something that cannot be fulfilled in the private sector. One observation which may be useful for consideration in this whole package is a cosmetic observation. We call our top civil servants Administrative Officers. They do policy planning that impacts the lives of many people. But an administrative officer in the private sector with the same designation has a very different role. They handle administrative functions in making sure that office equipment is maintained, the telephones are working, the letters are routed to the right people, and this is just to maintain the office in support of the frontline staff. It is an important job no doubt, but tactical in nature. So should we consider a change in the name for some of the officers to better reflect the strategic impact of that role in the public sector?

Sir, I would like to summarise my views on three key points.

First, we must understand the need to pay more and to keep and attract talents in the civil service. It is done in the private sector and should be done in the civil service in order for us to attract and retain the brightest people.

Second, in pegging the civil service pay to that of the private sector, we need to ensure that we develop a system with the same discipline of the private sector to reward performers and to deal with non-performers.

Third, we should look beyond pay to create a compelling package that will make the civil service a choice career, particularly to our young officers. To this end, we need not be too fixated about the salary formula, as there would always be subjectivity with regard to how the formula ought to be determined. Money must not and should not guide the minds and hearts of our office-holders. Let the minds and hearts not be driven by money but by passion. We must be compassionate, feel the pains and sorrows of the needy, and have the political will to make a difference for them. We must create opportunities to help our fellow Singaporeans to succeed. And, as leaders, we must be with our people through thick and thin, be the first to take the heat and the last to claim the credit.

To end, I would like to quote, in Mandarin, the words of one blogger and Minister Mentor Lee Kuan Yew. I will just combine the quotes together:

( In Mandarin ): "I hope our leaders will think of the worries of the nation first before they think of the happiness. They should put the interests of the people above the interests of self."

( In English ): Sir, with that, I support the motion.

2.50 pm

Dr Lim Wee Kiak (Sembawang): Mr Speaker, Sir, I believe I would not be far wrong to say this topic is certainly one of the most hotly debated issues now in the public, other than the recent debate on the GST hike. However, one good outcome this debate has brought about for Singapore and also fellow Singaporeans is the opportunity to showcase the commitment of this Government to transparency and good corporate governance. Ours is a Government that is not afraid to take issues onto the catwalk for everyone to give their views and opinions. We have read recently in the newspapers of how one country, after a coup, rewarded its top brass arbitrarily with a 30% rise in their pay without making any reference to the people.

Coming back to the debate proper on the remuneration for our Ministers and the top echelons in the civil service, I call this a "Three Cheers!" announcement. The three cheers are:

(1) The graduated approach to the salary adjustment;

(2) The increase in the variable component of salary and linking it to GDP growth;

(3) Setting aside up to 25% of annual remuneration as individual performance bonus.

I fully support the motion that top civil servants and Government leaders should be paid a reasonable package. I feel that there is really no parallel to compare the responsibilities of our leaders in civil service and politics to those of the top CEOs in the corporate world. Given a choice, who should fill the ministerial cabinet posts? The people who helm these posts will have to lead, plan and execute policies that will have such far-reaching ramifications on the entire population of Singapore. I guess my choice is clear. It should be the most capable men and women that we can find on this island. Their remunerations should commensurate with their portfolios and responsibilities, and the real question is: how much should that be?

Sir, the formula that has been put forth, based on the top eight earners of six professions, will always be open to questions. And, yes, there are many questions. One argument being bandied about is: why six? Why not average of 12 professions? Why these professions and not others? Why top 8 earners? Why not top 100 earners? Situation varies. Invariably, emotions set in, and the whole argument to pay or not to pay becomes clouded. Let us put emotions aside and focus on why we are here today to discuss on this topic again. What is our objective? Our aim is to look at the work of our Ministers as well as top civil servants and present a framework in which we can provide the necessary remuneration. The remuneration must be such that we can continue to attract the best talents to serve in the civil service.

This House had spent many hours debating this issue in 1994 and 2000. The benchmarks were debated and accepted. I do not think we need to debate on the benchmarks again, as long as the benchmarks remain relevant today as they were in 1994 or 2000. I think our Government should just stick to and honour the benchmarks for remuneration. If the Government wants to or is willing to review this benchmark again, may I suggest that we commission an independent committee comprising well respected individuals independent of our civil service and Government in our country to study and put forth their recommendations. This was suggested by other hon. Members of this House, Mr Alvin Yeo and Mdm Ho Geok Choo, yesterday as well. It is really awkward for the Government to review and propose its own remuneration. If the Government overpays the civil servants and the Ministers, it is not fair to the people. If the Government underpays the civil servants and the Ministers, it is not fair to the Government.

The first cheer, I would applaud the announcement that the increase in Ministers' remuneration be rolled out on a graduated scale. Our current team of Ministers, whether they are doctors, lawyers or engineers by profession, is not about to resign just because they are not getting any pay rise. They are individuals who have committed to serve the people. They are individuals who made personal sacrifices to serve the country. Underpinning this need to pay top salaries to attract top brains is our concern how can we continue to attract top brains to go into Government service in future. If we do not take action to adjust the remunerations to the agreed benchmarks, we risk sending the wrong signal to the younger talents who are potential Ministers-to-be. We risk losing them to the private sector now and we risk being unable to attract enough good talents into politics in the future. So, adjust the salary we must, but we need not do it in one step. I believe the graduated increase approach will be more palatable to the people at large, and they will then know that we are doing this exercise more for the future than for the present.

While some argued that there must be a spirit of altruism for those who venture into the path of civil service, we have to be realistic. Let me draw an analogy in sports. Every sports man or woman would have a great passion for their sport, be it tennis, F1 race or golf. But even then, organisers have to raise huge sums of prize money, if they are to compete and make sure that they are able to attract the best personalities to take up the sports. Look at Wimbledon tennis, where the organisers have to raise the prize money to more than a million pounds. If they had kept the prize money to just 30,000 pounds, do you think that you will get that same level of competitiveness and energy in the sports? The tennis greats, such as Roger Federer and Pete Sampras, would probably be better off taking up golf and jostle for a chance to be the next Tiger Woods. The one million pounds invested in prize money have generated many more hundred million pounds in the tennis industry and commerce in the end.

The second cheer, I applaud the announcement of a larger portion of the remuneration adjustment to be paid as a variable component rather than a fixed salary. About half of this variable bonus will be based on the growth in our Gross Domestic Product (GDP) which is the primary barometer of our economic health. However, we all know that a rise in GDP may not benefit all sectors of society equally and some may even lag behind. I would suggest that the Government consider using indicators that will directly impact on the livelihood of all Singaporeans, such as the Consumer Price Index (CPI) or even the inflation rate. Keeping the CPI low will keep our cost of living affordable, and keeping our inflation rate low will protect our people's savings.

My third cheer is the announcement linking 25% of remuneration to individual performance. It should not be an across-the-board standardised pay package for all who hold a ministerial post. Each Minister should be assessed, based on his contribution and its impact on improving the people's quality of life. This variable component should be subject to fluctuations, just like the variable component of the wages for all other workers in Singapore.

Perhaps, I should end by sharing this with the House. Jamaica has a population of 2.7 million. A news report on what the Ministers were getting in 2002 disclosed that the Prime Minister's salary, in Jamaican dollars, rose from $2.4 million to $4.7 million; the Finance Minister from $1.95 million to $3.8 million; Cabinet ministers from $1.8 million to $3.5 million; House Speaker from $1.6 million to $3.3 million. The pay issue was the subject of the Oliver Clarke Committee on Parliamentary Salaries, an independent committee that looked into the pay of Ministers and parliamentarians.

Let me just read you some extracts of what the Jamaica Observer said on this issue in its editorial:

"We expect that there will be renewed debate over how MPs and members of the executive should be paid now that the Special Parliamentary Group (SPG) that was established to review the Clarke Report has tabled its report, and the matter is coming up again for debate in the House.

Like the members of the committee that was headed by Mr Oliver Clarke, this newspaper does not believe that Jamaican parliamentarians are overpaid or adequately compensated. Many who sit in the legislature or accept posts in the Cabinet or the executive could do far better in their professions or the private sector.

So we accept Prime Minister Patterson's proposition that parliamentarians should receive 'some reasonable compensation in line with what obtains in other areas of professional life'.

But even as we support better salaries for those in the legislature - as one means of discouraging corruption - we want to be sure that taxpayers, going forward, receive an adequate return on their investments. The process, as proposed by the Clarke Committee, must ensure transparency and accountability and, and as far as possible, the linking of pay to outcomes."

Mr Speaker, Sir, does that not sound very similar to what we are discussing today?

In conclusion, I support the Ministerial Statement on civil service salary revisions and give this Statement three cheers. I hope the Government will consider the suggestions of:

(1) Setting up an independent civil service salary review committee for future salary revisions; and

(2) In addition to GDP, include the CPI, inflation rate and other global indices for the assessment of variable bonus for MPs, senior civil servants and Ministers.

2.59 pm

Dr Loo Choon Yong (Nominated Member): Sir, every organisation, public or private, needs to attract and retain talent. Otherwise, it cannot sustain itself and definitely cannot grow.

Sir, the Government is no different. It must continually attract some of the brightest and best to public service as political office-holders, Administrative Officers or officers in other branches of Government. There are also sensitive jobs in defence, intelligence, home security, foreign service, etc, that require people with good brains, firm hands and stout hearts. And because experience and judgement are of paramount importance, these officers need to be retained for many years. A high turnover in these positions will erode the quality of the decision and outcome.

I run a private healthcare organisation that delivers healthcare and, if we are unable to attract and retain some of the brightest and best medical talents, we will never be able to deliver high quality healthcare our local and regional patients expect. Our competition is regional and international. Highly skilled physicians and surgeons do not come cheap. On top of that, we require them to be compassionate to all our patients and also to work together as a team. We also appeal to their sense of service and professionalism and, fortunately, part of the reward of a doctor is seeing his patients get better and walk out of hospital. Otherwise, pay has to go up higher and patients will have to bear bigger healthcare bills.

I am therefore very sympathetic to challenges faced by the Prime Minister in attracting and retaining talents in the public sector.

How to pay Ministers and civil servants adequately and fairly? Sir, this is one subject that never fails to excite the House, the press, the coffeeshop and, recently, cyberspace and its netizens.

I also discovered that besides primary school education, every Singaporean is also an expert on Ministerial pay.

Sir, I take comfort in what the Prime Minister said recently at the Administrative Service Dinner. I quote, "We pay competitive wages, attract and retain people of calibre and hold them to high standards of integrity and performance." However, he added, "Financial rewards cannot be the main motivation of public officers." I agree with that.

I, like all Singaporeans, will worry for Singapore the day people enter politics, or join public service in order to make a fortune, or worse, to enrich themselves.

Indeed, in addition to their monetary compensation, there are other intangible but equally real rewards. Often, the satisfaction one gets from work of passion, sense of nation-building and the knowledge that one is improving the lives of fellow Singaporeans, far exceeds monetary rewards. Besides such personal satisfaction, Singaporeans look up to our Ministers and treat them with great respect. Most Singaporeans know that they are competent, honest and hardworking. We see them at the grassroots functions, community clubs, Parliament and in their Ministries. Newspaper reports have some of the Ministers appearing to have aged prematurely, mentioning Raymond and Vivian, I think, Swee Say too.

It is easy to agree that Ministers' pay should not be pegged at a level to compensate them fully, as though they have remained in the private sector and progressed in the private sector. I think that may be deemed speculative.

However, as taxpayers, we want to pay our Ministers and political office-holders adequately so that they will be able to provide a good home for their families, good education for their children, financial security for old age, and perhaps a little luxury every now and then. So we are not talking about a Spartan or priestly lifestyle. We certainly do not want our Ministers to be impoverished when they accept political office. This is especially so, now that we are no longer in our initial years of nation-building.

Moral authority

Sir, much has been said about moral authority and Ministers' salaries. I understand the sentiments but I fail to fathom the logic. I fully agree that there has to be a public service element of sacrifice in the total scheme of Ministers' compensation.

In my mind, a Minister's moral authority is not proportional to the quantum of his forgone pay. His moral authority to govern has a lot more to do with this own moral fibre, integrity, intellectual honesty, his competence and his compassion.

I am comforted by the fact that the Government has shown restraint and consideration by increasing salaries in phases, over the next two years. They have also decided to take only 2/3 of the benchmark. And more importantly, they have come to this House, openly and clearly explaining their position. And even if one disagrees with the way the benchmark is computed, one must respect them for their approach - open, fair, robust, no hypocrisy. Eventually, it is for the electorate to judge whether $2.2 million per annum for a Minister is fair and acceptable.

How important is monetary compensation in public service? A survey by HR experts Heidrick & Struggles across the Asian Pacific region on "Effectiveness of various HR policies with respect to employee retention" states that of seven areas, two stand out, ie, the two most important things people look at - leadership development, which is training, coaching and mentoring, and long-term career planning, which is succession plans and career path.

The survey found that companies that are exceptional in these two areas will be better able to retain their talent. These experts concluded, and I quote, "So while compensation must remain competitive, it is not the primary driver of employee satisfaction." The first trigger for an employee to leave a company is usually related to career development and opportunities, or perceived lack thereof. Other factors are "a favourable culture climate", "increased responsibilities", "community involvement", "promoting a favourable image" and, lastly, "monetary reward system".

Sir, it is clear to me that the public sector actually possesses those very attributes that experts say should enable them to retain their officers. The civil service today is different from those in the sixties. Whilst the situation is no longer revolutionary, the job is still no less challenging. Besides, much is done in the area of leadership development and long-term career planning and we even have a Mentor in the Cabinet.

So, could it be that the Government is under-selling itself, that the situation is made to seem worse? Or could it be that the quoted 5% is actually quite acceptable and that the Government should not try and aim at a zero-loss situation? So some attritions may be unavoidable. We should accept that.

It should also be remembered that not all separations are due to inadequate compensation. I recommend a book, "The 7 Hidden Reasons Employees Leave" by an expert, Leigh Branham. It is good reading. It tells you why people do not want to tell you the real reasons why they leave.

I am relieved that a large part of the increase is pegged to performance of the individual as well as that of Singapore's GDP growth, and not just straight increase in the fixed salary component. Making Ministers' and senior civil servants' pay bear a greater relationship to their performance is indeed a good move. This is actually the situation in the private sector.

However, relying on GDP growth alone is, in my mind, a simple, convenient but inadequate measure. I propose the Government also take in at least one other indicator - that of the total costs of running the government as a percentage of total revenue.

Private sector CEOs have to ensure that profits are not consumed by increasing costs and expenses. Board of Directors looks to growth not only of the top line but as well as growth of the bottom line when they are evaluating the management performance. GDP growth unfortunately only measures the revenue or the top line. We impose that discipline on charities that, when they raise funds, they must not spend more than 30%. So similarly, we reward Ministers and senior civil servants better only if they can run the Government with increasing productivity and efficiency. Hard data on cost ratios will be more useful and compelling than general declarations of improving service and efficiency. That way, we can further lighten the tax burden for Singaporeans and corporations. More investments will result and more jobs should be created. I believe it is a more refined way to align the interest of Ministers and senior civil servants to that of the society at large.

The other portion of compensation is to be based on a Minister's personal performance. It will surely be up to the Prime Minister to assess the Ministers' performance. We do know that PM has his own KPIs for his Ministers and I expect them to be both exacting and demanding.

Benchmarking

Sir, the current two-thirds M48 is a useful tool. It is better than the previous two-thirds average 24 adopted in the 1994 White Paper. However, choosing the top eight persons from each of the six professional groups is narrow and skewed. The top eight are actually extreme outliers. They actually constitute the top 0.04% of accountants, the top 0.12% of engineers and the top 0.24% of lawyers.

Most compensation experts would recommend companies determining CEO salary ranges to be in the range of 75th percentile of comparable scope of responsibility and size of jobs, ie, pay according to the top 25% of comparable group if they wish to be competitive. However, we also note that where highly specialised skills are needed, there is often no choice for the company but to pay whatever compensation that will attract the candidate.

Would it be possible to revise the benchmark two-thirds M48 to make it more broad-based and more reliable? May I therefore suggest to the Government to use the median salary of the top 5% of each of the six chosen professional groups instead of just the top eight persons?

Secondly, the Government can remove the discount totally or keep it to 4/5 of whatever number instead, as benchmarking to the median salary of the top 5% may depress the benchmark salary. Whatever the quantum of discount decided by the Government, we will see that that is the portion which is the public service element of the pay that collectively Ministers and civil servants want to give to the society.

Taken together, these two modifications will provide a more reliable benchmark not based on outliers but will be more consistent as we go forward. Such a benchmark should be more acceptable to the public too.

Capping the increase

Sir, in order to reassure taxpayers that in the future, there will still be moderation even as the Government reviews Ministerial pay, may I suggest that after this round of increase, there be a cap of cumulative increase of not more than 50% for any intervening five-year period? This, I believe, will help assuage the angst and sense of inequity felt in some quarters.

Sir, because the income gap between the top earners and the rest of society will continue to widen, it is even more important that we must ensure abundant opportunities for young Singaporeans to reach the top. We must ensure that all Singaporeans, regardless of race, language, religion, or socio-economic background have equal opportunities to reach the top. Then they too can enjoy the high pay that top earners command and their family can have a better life.

Pension

Sir, I applaud the Minister for remembering the pioneer batch of MPs and civil servants. These are people who have contributed much to Singapore. By this act, we are teaching our young that this is not a "disposable" society, like Kleenex tissue, use and throw. It is right to promote the culture of " yin shui si yuan " - remembering where the water comes from. Indeed, I propose that over and above this one-time payment, we should perhaps consider increasing their pension, as many of them are in their old age and a $380 pension may be insufficient if there is no family support.

Whilst I advocate a higher payout to the pioneer batch of nation builders, I propose that, going forward, the Government should do away with the pension scheme for political officer-holders and Administrative officers. The pension scheme is an antiquated retention tool. Most civil servants have been converted to the CPF scheme long ago. By the way, the private sector does not use pension anymore.

Sir, with the above suggestions and comments, I support the motion.

3.14 pm

Ms Denise Phua Lay Peng (Jalan Besar): Sir, pay is a very personal issue. In all my years in human resource and leadership work, I have never met anyone who told me that their pay is enough, whether they belong to the lowest or the highest income strata.

When asked once, "How much money is enough money?", John D Rockefeller, one of the wealthiest men in US history replied, "Just a little bit more!"

That is why management philosopher, Charles Handy, wrote about the 'Doctrine of Enough' in his book, " The Hungry Spirit". He recommended that each of us needs to find our own personal level of what is "enough", so that we can be liberated to pursue our dreams and our purpose without being chained to our appetite.

Sir, I wish to make three key points today. (1) I believe that the spirit of serving and giving is still alive in Singapore. (2) We need to be careful not to leave behind political and civil service officers that combine excessive levels of power and money. (3) If Government wishes to benchmark public servants with the private sector, then there are some principles around compensation practices which should be adopted, to simulate more closely private-sector norms.

First, why I believe that the desire to serve is still alive in Singapore. This week is a very special week for me. Two fellow volunteers - Linda Kho, Managing Director of a training consulting firm, and Mrs Ng Sock Kian, a Vice President in a bank - decided to take the plunge, turning their backs on the private sector to work full-time with me in the non-profit special needs community. They join another ex-Goldman Sachs HR regional director, Goh Boon Keng. All three ladies took pay cuts from half to two-thirds of their pay to serve in a cause they believe in. I share their names, not to put a badge of honour on them, but to illustrate this following point.

Minister Mentor is right in many things about Singapore. But his opinion that the real world of Singapore does not surface leaders who are willing to make sacrifices, to do something that they believe in, I say, is a tad too pessimistic. In fact, I know of a number of people who have tasted corporate success and are willing to rise above their power suits and perks to move on to serve in the non-profit sector. Not all of them have left and some of them are still looking for an inspiring vision and team to lend their talents to. I myself have served with many volunteers who gave of their time and money unconditionally.

The spirit to serve without asking for much in return is still alive in Singapore. In fact, many of us still admire the courageous political heroes who took on Singapore's British colonial masters then, to create a family and nation of our own.

Next, Sir, I would like to touch on power and money - the potently addictive motivators behind many human behaviours, and to caution this House that we need to be careful not to leave behind political and civil service officers that combine excessive levels of power and money.

I know the general argument is this. If we do not pay leaders high enough, we will never be able to attract the right people. I ask the House to consider this contrarian view. I say that if we do not balance and we concentrate too much power and money in top public officers, it might not attract the right people. On the contrary, we might attract the wrong people.

Sir, public office holders and top civil servants wield the most power in our country. This power to swing national policies and even the power of king-making does not carry a price tag that is easily written, and is a very significant component of that position.

Besides power, money is the other top motivator behind many people. Put together, power and money can be potently addictive. As responsible leaders, we must be careful not to leave behind a system or structure that combines power and monetary rewards to such high levels that incumbents are so handcuffed by this lethal combination that they find it hard to let go. And worse, it creates an office that potential candidates are so attracted to that they may go for broke just to get there, whether they are suitable or not. This potentially can do more harm than good to Singapore - something that will not augur well for our country.

My next point is on public versus private sector. I would submit that working in the public sector is not exactly the same as working in the private sector, and I do not mean state-owned enterprises. Ex-Permanent Secretary Ngiam Tong Dow was yesterday quoted in the House on how he did not have to lose sleep over the bottom line when he was serving in the civil service.

One of my fellow volunteers in the Enabling Master Plan for Disabled and a Managing Director of a foreign bank told me that his job can disappear tomorrow if he does not perform or if there is a corporate reorganisation somewhere in headquarters.

When I was working in a local conglomerate and involved in company turn-around projects, I witnessed first-hand the high drop-out rates of top executives-turned-entrepreneurs who could not stomach the tough work of producing consistent enough profit levels that qualify them for public listing.

Many Singaporeans know the painful journeys that successful technopreneurs like Sim Wong Hoo of Creative Technologies, Olivia Lum of Hyflux and Wong Ngit Liong of Venture Manufacturing went through before they finally got their millions. Hence, it is the general perception of many Singaporeans that the degree of job security in the Singapore public service is relatively high and working there is not exactly working in Wall Street.

Sir, not all highly-paid CEOs of legal firms or banks are top candidate choices to be Ministers or top civil servants. By the same token, not all top political and civil service leaders may excel in the private sector. So I do agree that those precious few who are able to thrive in both public and private sectors are Singapore's crown jewels and they are worth millions of dollars. Even so, I think once that special leader crosses over to serve in a public office, it is futile for him to keep looking over his shoulders to yearn for what he could have made. Alan Greenspan, economist and former US Federal Reserve Chairman, who spent almost 20 years serving four Presidents, was reported to have accepted an annual pay of only US$180,000. When he finally retired in 2006, he still had a fruitful career due to his influence and expertise. He donated free service to the UK Treasury and is now also a highly sought-after speaker with a price tag of US$100,000 per talk. Alan Greenspan is a good illustration of a respected and skilled leader who is highly capable of working in the private sector but chose to serve his country below his market value.

Finally, Sir, if Government wishes to pay and benchmark public servants against private sector pay instead of against other governments, then it should simulate the work environment as close as that in the private sector. In addition, start adopting some principles around compensation practices that resemble more closely the private sector.

In this regard, I propose five compensation practices for consideration.

Practice 1. Set up an independent senior salaries review body comprising independent representatives from various key sectors in Singapore. The principle of not writing one's own pay cheque is very key in addressing public disquiet on this issue. The United Kingdom Senior Salaries Review Body, which proposes political and civil service pay, for instance, comprises senior executives from the private sector, HR and finance consultancy, academia and so forth.

Public perception of this body's independence is just as critical as the body's real independence. In the corporate sector, there is already an uproar over how some CEOs influence their boards to write themselves excessive pay cheques, even to the extent of being paid hefty sums upon exit due to poor performance. A 2005 study on "CEO Skill and Excessive Pay" by Professors from Stanford, Wharton School and the New York University concluded that particularly in big stable firms, a high salary does not necessarily mean that a CEO is more competent.

Practice 2. Establish a line of sight that shows clearly the link between pay and performance of political and civil service leaders. Make key performance indicators (KPIs) transparent so that the people of Singapore know how the leaders have contributed to the Prime Minister's vision of an inclusive and vibrant Singapore in which no one is left behind. Do not simply use one global helicopter KPI like the size of Singapore's GDP as the basis for performance-based component like bonus. How does the Health Minister, for instance, see his Ministry's good performance linked directly to the GDP?

Compensation best practice dictates that there be a clear line of sight between one's pay packet and his direct performance. In the case of public servants, I believe that performance-based pay can tie in to at least three tiers: (1) country's performance, not just economic; (2) each Ministry's performance; and (3) each individual's performance.

Surely, performance indicators like the customer's or the citizen's feedback to major public services, the number of jobs created for local Singaporeans, percentage of Singaporeans in the lowest-income bracket, the number of Singaporeans who choose to migrate, etc, are all KPIs that can be incorporated in a balanced score card of our top leaders.

Practice 3. Adopt a more commonly acceptable salary benchmarking formula. In the private sector, it is rare to see the use of the current salary benchmarking formula which targets only a very small number of top wage earners in the sector that they compete in. Actually, one key questionable underlying assumption of the current formula is that 100% of all the political office-holders, every Permanent Secretary and every Administrative Officer will surely end up as top wage earners in Singapore.

Most firms I know set their target competitive rates at either the 50th or the 75th percentile of target employee categories in selected companies and industries, but never at such a small number of top wage earners.

Practice 4. Adopt a broader band pay range for each position that we are talking about, to cater to appropriate salary levels for incumbents ranging from those with entry-level skills to those critical skills experts or long-term outstanding performers. Hence, hypothetically using $1.2 million as a mid point for a Minister's pay and a minimum-to-maximum spread of 60%, the minimum pay for entry-level Minister can be $840,000, or 30% below mid point; a mature performer gets $1.2 million and a consistent top performer gets close to $1.6 million, or 30% above mid point. So, adopt a broader band pay range for each position.

Practice 5. Cultivate more lasting and non-monetary motivators to usher in and retain good people to join the public sector. Simply throwing money at the problem does not solve it. There is no quick-fix solution to talent attraction and retention, and there are numerous best practices in this field. Many employers, though, find it harder to walk the talk.

In March 2007, a Harvard Business Review article entitled "What it means to work here", the authors lament at their HR equivalent of keeping up with the Joneses. The authors said that in their quest to find and retain top talent, organisations often try to match competitors' salary offers and training opportunities. They forget that people will become long-term deeply engaged employees only if their work experience is what they expect it to be, and they are intrigued and excited by a vision that they find inspiring; a leader they want to follow and work roles that match their passion and their talent.

Sir, may I even suggest that for the sake of Singapore, we should release the 32-year-olds who, after serving their bonds, may want to respond to a different drum beat in their lives or simply want to expose themselves to a different work environment whilst they are still young. If they stay on, because they are handcuffed by a super pay scale or their pension, it is a lose-lose situation for them and the Government.

In conclusion, Sir, the issue of pay is a sensitive one. Someone earning $1,000 can never fathom another who is earning $10,000. A person earning $10,000 will never understand how another who is earning $100,000 a month still feels is not sufficient. For someone like Minister Mentor who will be remembered by all of us as the father of Singapore, how does one even find a price tag big enough for his contribution?

What is enough? We may never agree. But let me end with the writing of Charles Handy who said, "The philosophy of "enough" cannot be imposed on a society. It is a matter of norms, not law. But norms are set by the elite, whose examples set the fashion. What the top people do today, the middle level imitates tomorrow, and the bottom aspires to, some day."

The people who follow us are watching us. Our young people are also watching us. So it is the people sector, where many are professionals who volunteer their service and money unconditionally all these years.

Sir, I urge our leaders to give some more thought on what is reasonable enough for top leaders' salaries, whilst considering the five compensation practices I quoted. At the same time, I urge that together, Members of this House will make it a priority to ensure that everyone in Singapore has a real chance of also being able to reach their personal level of "enough".

3.30 pm

The Minister, Prime Minister's Office (Mr Lim Swee Say): Mr Speaker, Sir, I agree with various Members of the House who spoke before me that salary increase for Ministers is a sensitive and an emotional issue. Over the last few weeks, I had dialogues with a number of union leaders. Many of them asked me: "Why is $1.2 million still not enough? Is this debate about $10.5 million worth of salary increase for the Ministers or is it more to this? And, if so, what is the real issue?" I explained to them that this is about attracting the right people and the best team to lead the nation and to serve the people. And I told them that this is important because having enough jobs is the best welfare for our workers and having a clean and capable government is the best protection for our people.

Sir, way back in 1991 to 1993, I spent two years based in New York City working for the EDB. Once I called on the Chairman of a Fortune-500 company - one of the top companies in the world - and he told me that he was very impressed by Singapore Incorporated. He said there was one thing we have in common between Singapore and his company, that is, both of us compete very aggressively in this global economy. In his case, the company has to compete for business revenue. In the case of Singapore Inc., we have to compete for investment and total business spending. In his case, as a Chairman, he has to sustain profitable growth. In our case, we have to sustain economic and job growth. He said that it was not easy for companies to compete successfully, and he fully realised and recognised that it was even more difficult for a country to do so. And he said that he was very impressed because Singapore competed as a Singapore Incorporated.

Some Members may feel that the public sector does not work hard enough. I beg to differ. I spent 21 years as a civil servant. And for those of you who think that our civil servants do not work hard enough, just try to say it to our PUB whose staff worked many years to produce NEWater to solve our water problem and to supply NEWater to wafer fab. Just talk to MND and URA - how hard they have to work to find the land needed for our wafer fabrication parks in Ang Mo Kio, Woodlands, Tampines and Pasir Ris. Just talk to our JTC - how at one time, they had to work round-the-clock because the piece of land allocated to a wafer fab park turned out to be an illegal dumping ground, and there was no record that it was an illegal dumping ground. So when they dug the ground, they discovered loads of rubbish underground. In fact, they had to work day and night because we had to meet the deadline that we promised to investors. Just try talking to the EDB - whose staff have been travelling around the world to secure investments, to create jobs for Singapore, and the list goes on.

Sir, Singapore Inc. has indeed done very well. As a result, we are today one of the countries with the highest employment rate and the lowest unemployment rate. This is something we all can be proud of. However, let us recognise that this job is never done, because the journey of economic development is one with no end. We have to press on for the benefit of our workers and our people. Yesterday, our pioneering leaders created labour-intensive jobs; today, we are creating skill, technology, and capital-intensive jobs; tomorrow, the next thing we have to go on is to create more innovation and knowledge-intensive jobs for the future generation of Singaporeans. In other words, the process of creating better job, better pay, better life is a journey with no end. This is the reason why yesterday we built Jurong Industrial Estate; today, we build wafer fabrication parks; we build chemical island at Jurong, we build Biopolis at OneNorth, and so on. And the task tomorrow will get even bigger and more challenging. Why? When we say that competition in the future will be stronger and bigger, many people think that this is just a slogan. Sir, let me assure you that this is all real.

Two weeks ago, Intel, a company that EDB has been promoting since the 1970s, decided to build their wafer fab plant in Dalian of China. This wafer fab plant is going to produce 12-inch wafer fab. It involves about US$2.5 billion worth of investment and it is going to create more than 1,500 jobs. By the year 2010, when this plant is up and running, my guess is that by then, China will surpass Singapore not just in terms of wafer fab production capacity but maybe in terms of technological capabilities as well. In other words, competition will get stronger and better all the time.

Sir, there is nothing we can do to stop the competition from getting better and bigger. But I explained to our workers and union leaders that there is one thing we can do, ie, to do whatever necessary to make sure that we have the right people and the best team to lead Singapore. Because that is our best bet of transforming Singapore Incorporated of today into a Singapore Unlimited of tomorrow in the world of unlimited competition.

Sir, there is another reason why we have to work together to make sure that we have the right people and the best team to lead Singapore. When the Chairman of that MNC complimented Singapore for Singapore Inc., I told him one thing. I said: "Thank you very much for your compliment. But there is one big difference between your company and Singapore Incorporated as a country. Both of us, you as a company and we as a country, have to restructure as fast as we can to stay ahead of competition. But there is one big difference. In your case, you can retrench your workers. In our case, we cannot retrench our citizens."

In other words, we not only have to create new jobs for the young, for the better educated, we also have to take care of workers of all ages. Today, if you look at Singapore, what do we have? We have programmes for the low-wage workers, for the mature workers and for the PMETs. For the low-wage workers - we talk about JRP (Job Re-creation), SRP (Skills Re-development). For the mature workers - we talk about re-employment. For the PMETs, Dr Ng Eng Hen announced a few weeks ago in this House the Professionals Conversion Programme, and I was told the response has been tremendous. The various agencies, NTUC and WDA are working together in running a series of seminars and workshops for these PMETs. And for our blue-collar workers, we are now stepping up re-deployment. You may not be aware, Sir. Based on the data collected by the unions, we notice recently that the workers affected by retrenchment today are getting younger and younger. In the manufacturing sector, my colleague, Ms Cham Hui Fong, told me that two years ago, 41% of the retrenched workers were less than 40 years old. It went up to 48%. And last year, it was 51%. In other words, we have to find ways to help many of these workers to keep up the pace of change in terms of re-deployment as the pace of restructuring gets faster and faster, affecting more and more workers, including the younger workers.

So, not only do we have to compete as a Singapore Unlimited in future. Equally important, if not more importantly, we must also take care of each other as one Singapore United. For these two reasons - Singapore United and Singapore Unlimited - I believe it is important that we work together to make sure that we find the right people to form the best team to lead Singapore into the future.

What kind of leaders do we need? I think it is the three "Hs". The first "H" is people with a thinking head, otherwise they will not be able to lead us in competing as Singapore Unlimited. The second "H" are leaders with a caring heart, if not they cannot lead us as Singapore United. And, thirdly, most of all, these potential leaders with thinking head and a caring heart must also have a pair of clean "hands"; in other words, no corruption. Every dollar we collect from businesses must go to the Government and every dollar we spend must be for the benefit of the people. I read in the newspapers today and I heard Mr Chiam spoke in the House yesterday. He said that the Singapore Government has set a new Guinness World of Records of Ministers with the highest salary in the world. I would like to ask Mr Chiam: is he referring to "clean" wage or "dirty" wage? Because there is a big difference between "clean" wage and "dirty" wage. A wife of a visiting Minister came to Singapore. My wife accompanied her for shopping at Raffles Hotel. Apparently, she went in and she just told the shopkeeper - I want this, this, and that, and the shopkeeper put everything together and the bill came up to tens of thousands of dollars. And that lady, the wife of the Minister, did not pay a single cent because she had friends who were with her who took out from their handbags not credit cards but a stack of papers and paid everything in cash. In other words, many of these Ministers, so to speak, have mobile ATM - automated teller machines.

Likewise, civil servants too. I was in Siem Reap over the weekends with Buona Vista grassroots leaders. I asked the tour leader, "When you fall sick, where do you go?" He said, "I go to a public hospital." I asked, "How is the public hospital?" He said, "It’s not bad. The price is not too expensive but the UTM can be very expensive." I asked, "What do you mean by UTM?" He said, "Under-table money." And I asked him why did he need to pay under-table money, and he said, "Because if you want to get good care, or you want your parents to get good care, you have to pay UTM so that the nurses and doctors will take good care of you."

Sir, I want to emphasise this point about clean wage and dirty wage because these have tremendous impact on the life of the workers. One government - I will not mention which one, but not the Singapore Government - lamented to the NTUC that they wished that their unions can be as constructive as NTUC. So my NTUC colleagues, union leaders, told them, "Look, your government hopes you can be as constructive as the NTUC." And their union leaders told our union leaders, "You please tell our government that the day when our government behaves like the Singapore Government, that is the day when we will behave like the NTUC of Singapore."

Sir, win-win-win tripartism is crucial to enhance and protect the well-being of Singaporeans and Singaporean workers, and this can only be possible if we have a clean and capable government in charge of Singapore. These are the two strong reasons, I feel, that we must do whatever necessary to ensure that we have the right people and the best team in place - to realise our vision of Singapore United and Singapore Unlimited.

Sir, the next question is: how are we going to compete for these right people to form the best team? Mr Market rewards successful corporate leaders. Why? Because these corporate leaders are able to generate profit for the stakeholders and at the same time give better bonuses to the workers. So, successful corporate leaders are rewarded by Mr Market. As a people, we cannot wait for Mr Market to reward our national leaders, our political leaders. The question is, as a people, do we value the contributions and commitment of our national leaders? Our national leaders are different from corporate leaders. Corporate leaders are very good in making money, very good in growing business and growing corporations. But our national leaders are very good in changing the life of the people for the better. The question is: how do we attach a value to this? Since Mr Market is not going to attach a value to that, we, as a people, have to decide.

Look at Singapore, if ever we are going to have a record in the Guinness Book of Records, I do not think that the entry proposed by Mr Chiam is the right one - that Singapore has got itself a world record in terms of Ministers' salary. My proposal would be that we have set the record in the Guinness Book for being a country that is able to transform the entire nation from a third world country to a first world country in one generation. And I do not think there are too many countries in the world that are able to achieve it. Looking ahead, our challenge is to keep staying in this First-World.

As I see it, Mr Speaker, Sir, the real and urgent issue facing the House today is how fast we can move to keep attracting the right people to form the best team. Let me make a confession here. The Prime Minister has heard it before and I want to speak very frankly. I used to hold a lot of reservations about this benchmarking of Ministers' pay, and the Prime Minister knows my view. But, lately, I changed my mind. And this is the reason why today I am standing here speaking with conviction. What makes me change my mind? My union leaders asked me, "SG Lim Swee Say, SG Lim Boon Heng served us for 25 years,

13 years as our Secretary-General. He did not resign, and he was not unhappy being paid $1.2 million. So if the Government decided not to increase your pay, are you going to be unhappy? Are you going to resign as Secretary-General of NTUC?" I told them a story. I said, one day, I walked down the street, I saw this lady from behind, wearing a T-shirt and written on the back was "The answer is No". I thought this was interesting. What was the question in front? So I overtook her and looked in front, and written in front was "The answer is still No".

Sir, I told my union leaders, "Doesn't matter what happens to the pay increase, Lim Swee Say will always be happy serving the workers and labour movement. Lim Swee Say will never resign." So they said, "If that's the case, there is no issue. There is no need to increase the pay then." I told them that the issue is not whether this old Lim Swee Say will be unhappy or will resign. I said you should ask yourself this question, "Today, this old Lim Swee Say is 52 years. By the year 2011 general election, the old Lim Swee Say will be 57 years. By the next general election in 2016, if the old Lim Swee Say is still around, he will be 62 years old." I told them, "If you think through this carefully, Lim Swee Say, 52 years old, is not the oldest in the Cabinet and yet, according to my own assessment, I think for the good of the country, I should just stand for one more general election." By 2016, when I am 62 years and if I still have to stand for election to serve as the Secretary-General of NTUC and as a Minister in the Prime Minister's Office, I think it must tell something that our efforts in attracting the best people to form the best team must have run into some difficulties. It is therefore in our interests to focus our minds on this.

Mr Speaker, Sir, in my view, the most important and urgent issue today facing us in this debate on the Minister's pay is really one of how do we attract young Singaporeans to come forward to serve, and the process must start now. The process must not wait. I was asked, two weeks ago, "Mr Lim, is it a good time to increase wages?" I told them there is no such thing as good time or bad time. I said we must do it all the time. And I think some people misunderstood me. They think that Lim Swee Say said "Do all the time" means keep increasing Ministers' pay everyday! That is not what I meant. When I said we must do it all the time, I mean we must attract the best talent possible all the time because the process of forming a new and best team must be a non-stop one. We have to quicken our pace to keep reaching out to those Singaporeans with a globalised brain and a pro-Singapore heart.

Where do these people come from - young Singaporeans who have globalised brain and pro-Singapore heart? One important source would be the civil service. I look at my fellow Cabinet colleagues, quite a number of us came from the civil service - Chee Hean, George Yeo, Hng Kiang, Tharman, Boon Wan, and so on. It is important that we keep the wage system in the civil service competitive because not only do we need a good civil service but equally, if not more important, we must make sure that the civil service will continue to be a source of future national leaders. And yet, at the same time, some of these best brains of the future must come through the private sector because diversity is strength. If we want to compete as Singapore unlimited, that private sector background is critical and crucial. The challenge of course is that these globalised brains and pro-Singapore hearts in the private sector are also the ones who are very good in making money. And that is the reason why we have to find ways to attract them by reducing the wage gap.

When I was in Siem Reap, the tour leader said something very interesting. I do not know how it came about but it just came up. He said, "You know, when there is water, there will be fishes. When there are fishes, there will be food. When there is food, there will be people. When there are people, there will be civilisation." It is a very profound statement. When I heard that, I told myself that I must share this with Members in this House. Because what we are talking about basically is this. How do we attract some of the best brains in Singapore, the best potential leaders in Singapore, to basically help us to produce "water"? Why? Because we must have water so that there will be fishes, so that there will be food, so that there will be people and there will be civilisation. So water is the basic building block. There is nothing glamorous about producing water. That is the reason why I think some management theory talked about the "rain-maker". The "rain-makers" are the people whom people look up to because they make rain and when they make rain, there is water and the whole tribe benefits from the rain. In other words, we have to look for more of these "rain-makers" so that they will make rain and create water for Singapore Unlimited and Singapore United to survive and grow.

One of my grassroots leaders then asked me, "Mr Lim, if the issue is really about attracting new blood, new Lim Swee Say to come into politics, into Cabinet, why not let the old Lim Swee Say stay on with $1.2 million and let the new Lim Swee Say have the $2.2 million?" I looked at him and said, "For the old Lim Swee Say to take $1.2 million is not the problem." But let me ask you this question, "If I old Lim Swee Say declare I stay on $1.2 million, when the new Lim Swee Say comes into politics, the media will ask him, "New Lim Swee Say, are you on $1.2 million or are you on $2.2 million?" The new Lim Swee Say said, "Oh, I am on $2.2 million." Then the next question will be, "Why are you less committed than the old Lim Swee Say? Old Lim Swee Say is happy with $1.2 million. Why do you need $2.2 million?"

Sir, on a serious note, what we have to ask ourselves is: are we serious about doing whatever necessary to attract some of the right people, the best brains, to form the best team? If so, let us not try to dance around this tough decision. It is a difficult decision, but it has to be done. Let us do it.

Sir, the whole process of attracting the right people to form the best team is difficult and challenging and I hope that we do not underestimate it. I read somewhere that once MM Lee was asked for his assessment of his Cabinet. His reply was that this is the best team he could put together. And somebody interpreted what he said to mean that he did not say that this is the best team in absolute terms. He just said that this is the best team he could put together. In other words, let us recognise that, at the end of the day, attracting the best talents is not so simple - just because you want to attract them, they will come in. We can only attract those whom we are able to attract, and these are obviously those with the passion to serve.

Sir, I feel that we have to do a lot more because the new Lim Swee Say of the future must be a lot better than the old Lim Swee Say of today. Otherwise, our vision of Singapore Unlimited and Singapore United would not be realised. There is one big difference between the way we nurture leaders in the corporate world versus the political arena. It is something I would like to share, having gone through it for the last few years. In the private sector, the union leaders used to say that when you have a good CEO, be happy but do not be too happy, because you will not be happy forever. When they come across a bad CEO, they said, be sad but do not be too sad, because you will not be sad forever. Because that is the nature of the private sector world - CEOs come and go. If you are good, the market will poach you. If you are bad, the market will fire you. So they keep moving. But in the case of the political leadership, it cannot be done that way. Some of us may have this impression that we can just go out and get people to come in and try them out for five years. If it works, it works. If it does not work, next term we drop them, find a new Minister and a new Cabinet. It does not work that way. Policy formulation has got tremendous implications. Here, we are talking about the lives of Singaporeans, we are talking about the jobs of the workers. It is something that is not to be taken lightly.

Sir, I would say, let us be realistic, let us be serious about how we can really go out there to attract the best brains. I heard a lot of talk about whether we can adopt a more idealistic approach like going for people who are prepared to sacrifice everything to come in to serve. Yes, I think there are people with good brains, there are people with a good heart. But we do not have enough good people with both good brains and good hearts. Because if there are enough people with good brains and good hearts in this world, then how do we explain there are so many bad governments in this world? On this basis, I am very sure that having a good government with Ministers with good brains and good hearts cannot happen by chance. It must be through a conscious effort. Therefore, at the end of the day, when we talk about moral authority, my sense is very simple. If a Minister were to tell the people that he is drawing low salary but pockets big money, I think he has no moral authority to lead. If a Minister has promised to change the life of the people for the better, but at the end of the day, the only better life is his own life, he has no moral authority to lead. If a Minister is a "NATO" (no action, talk only), every time a problem happens, he blames everybody except himself, then he has got no moral authority. But if a Minister, through some transparent formula, is prepared to accept a clean wage and does his very best to create opportunities for the people and to change the life of the people for the better, then I think there is no reason why he cannot command our respect.

Sir, let me continue in Mandarin please.

( In Mandarin ): [For vernacular speech, please refer to Appendix A.] My father and I were 17 years old when we went overseas for the first time. But there was one difference, ie, when my father went overseas when he was 17 years old, he left his native place and he came from China to Singapore to seek a livelihood. After which, he settled down in Singapore. For me, the situation was different. When I was 17 years old, the first time I went out of Singapore was to Johor for mountain climbing, because I was on a trip together with my National Junior college classmates. Back then, I was very confident of getting a scholarship. I was looking forward to going overseas for study and was full of confidence and hope for my future. During my father's time, he was living in a totally different environment.

This year, coincidentally, my son is also turning 17 years old. Next month, he will be 17. But he is different from me and my father. He does not need to wait to be 17 years old before he could go overseas. In fact, when he was two years old, he already went overseas with me to New York. And now, today, my son goes to a good school for education, and he has a good computer for his good fun. If he studies hard, I do believe that he will have a good job and a good career. In other words, my father, my son and I have different fates because under Singapore's political leadership we have been able to progress from a Third-World country into a First-World country within a generation. Even so, I am still worried over the future of Singapore. Why so? Even though I know that my 17-year-old son has a bright future, one thing I cannot be sure of is that when he gets married with kids, when his children turn 17 - 30 years from now if I am lucky - are we certain to say that Singapore can still have a prosperous economy? This I am not sure.

I feel that if we want to safeguard our own future, we have to take the necessary actions to continuously attract the younger generations, the best talents, with an enthusiastic heart, who will put the country and people before oneself, as well as serve the country with one's heart and might. If we can do that, I would be confident that our future generation, our children or grandchildren, will have a safe and stable country, as well as a prosperous economy to live in and pursue their dreams.

• Cols. 365-366.

( In English ): Sir, when I was based in New York City, every night at 10 o'clock, one station would broadcast the 10 o'clock news. At the beginning of the news, some voice would come on and say, "It is now 10 o'clock. Do you know where your children are?" This is because in the early 1990s, the New Yorkers were very concerned about the safety of their children. So, every night, at 10 o'clock, before the news came on, it said, "It is now 10 o'clock. Do you know where your children are?"

Sir, here, in Singapore, we need not worry too much about the safety of our children. But still, there is one thing we ought to be concerned about, that is, who will take charge of our country, who will take care of our workers and our people, 20 or 30 years from now? As we discuss and debate this issue of salary revisions for Ministers, I hope everyone of us will ask ourselves this question: "It is now 2007. Do you know who our future Prime Minister and future Ministers are?" Sir, my answer is, "no, not yet". What about you?

Mr Speaker: **** Order. I propose to take the break now. I suspend the Sitting and will take the Chair again at 4 .15 pm.

Sitting accordingly suspended

at 3.55 pm until 4.15 pm

Sitting resumed at 4.15 pm

[Mr Speaker in the Chair]:

CIVIL SERVICE SALARY REVISIONS: Debate resumed.

Ms Cham Hui Fong (Nominated Member): Mr Speaker, Sir, I am not that surprised that Ministers' pay adjustment would be such an emotive issue. But I think I am quite puzzled and I am saying, why should it be? We have recently read about the CEO of ST Engineering being paid probably about $2.8 million a year. Are the employees of ST Engineering very unhappy? So I called up some of them. I asked them whether they are upset that their boss, the CEO, is actually paid that much. And they told me, "Of course not." I then added, "If he is paid a fraction lesser, maybe the rest of you could get a bit more." But they told us, "No. As a boss who runs a company with a turnover of millions of dollars, we want to hold him responsible, that he must know that earning this much of money, he has this obligation to fulfil to his people, that he should be there to provide good jobs, and good-paying jobs, for his employees in ST Engineering."

So why are they not quarrelling and debating on how much their CEO should be paid? Some would say that, well, because they have no authority to do so. If they are not happy, at the most they quit. But, more importantly, what we have realised is that the workers are able to see what the management has done that has a lot of positive impact on their pay packets.

To many people we spoke to, there is probably no price tag to leadership. How do you price leaders? One million dollars? Two million dollars? There is actually no price tag, although a lot of people on the street just cannot understand. One million dollars is not enough? One hundred percent pay jump? They find that this is probably a bit too much for them to accept. But, in my view, there are probably flaws in any benchmark. We can use any kind of benchmark, there will still be flaws.

Lawyers and doctors or corporate leaders cannot be compared to the political leaders that we have today. The Government needs a more acute strategic understanding of the world that we are operating in. We are also competing in an environment today where all the familiar signposts are already no longer the same, and we need people to be able to look at the changes rapidly. Our public officers that are led by the Ministers or the leaders must be able to see the changes. We need thinkers, planners and, of course, doers and implementers, to ensure that Singapore continues to prosper and thrive. Therefore, we cannot afford a Government that fails. We have spoken to our people. For example, SIA can fail, but Singapore cannot fail as an air hub. DBS Bank probably can fail, but Singapore again cannot fail as a financial hub, because the stakes are probably too much.

Hence, there is this very high expectation on the deliverables of our Government. And because of this high expectation, I think what we are expecting from them is tremendous, compared to any corporations that we can think of. Then, again, we ask ourselves: what is the purpose of having this four-day debate on this? Do we have a good Government that our people can trust? Can we sleep in peace when, say, we are attacked by SARS or when terrorism is actually threatening everywhere around the globe? The answer today must be, "Yes". Why then is there this big hoo-ha again over these extra millions of dollars that we are paying when, if you look at the Budget, we are already giving so many tens of millions of dollars back to the people, whether it is on account of GST, PESA, or many others? Why are we spending so much time to quibble over these few million dollars that we are paying to the architects of our first-class society?

Sir, I think the flaw of the system today is that the voters do not have a proper assessment of the real person behind the scene, ie, the architect, the people who work behind the scene, or even those Ministers that are fronting the scene, and people who work behind the policies. More importantly, people are not able to have a good assessment of the kind of rationale and objective of why and how policies are being shaped and how these will impact the people's lives. What we hope to see is, when this debate is over, which we are quite sure that the chances are that it will be supported by all, that the Government, led by this team of Ministers, together with the support of the public officers, will continue to work and ensure that whatever policies that we are implementing - the way we present the policies and talk to the people, whether it will impact the lower-income workers, the PMETs, the older workers - these people on the ground can better appreciate what the Government has done over the years and enable them to better link, eg, the standard of living that we have today, the better life that we have, the better life that we expect our next generation will have, to leadership by this Government, that we will continue to be led by a good, competent Government.

Sir, we have more discerning Singaporeans today. They are better able to judge. But we will have to continue to give this human touch to illustrate what the Government has done over the years and will continue to do. This is to also ensure that whatever we are doing, we do not just show them hard facts and figures but that there is some emotional attachment from the ground to the Government, the people and the policies that we are going to implement. Of course, a company with first-class management but third-class workers is not going to succeed. Similarly, if we look at Singapore as one that will prosper and thrive with sound policies, it cannot be just done with good policies and a first-class infrastructure but also because we also have Singaporeans who must be committed and excited by the new ideas and vision that our Government has.

Sir, we will not begrudge this extra pay for a competent Government. But we must be assured that this cannot be a zero-sum game. Stakeholders like us, if we invest this money in the Ministers and the public service, would expect higher and better returns. Linking the pay to economic performance is sound. But we have to take care of the process. Three years ago, we worked with one company to introduce performance-based pay and to also introduce KPIs. This is a multinational with a turnover of millions of dollars. The rank-and-file workers used to get a fixed three-month bonus. After we introduced KPI, we changed the structure. Instead of a fixed three months, they would get a range of two months to as high as six months. The workers were certainly happy. But when the management showed us that it would in turn get a range of zero to nine months, there was a lot of unhappiness. Why? They felt that workers like us who suffer, work day and night and have to work overtime to produce the results, only get a maximum of six months, whereas the management, who sit in the air-conditioned office, get as high as nine months. So they find that this is totally ridiculous and out of sync. They could not agree.

So we went deeper into it and realised that there were a lot of processes that were not put in place. The workers on the ground do not quite understand what the management has been doing. Despite the fact that management can bring in good business and investment, it was not communicated and translated to the people so that they could understand and comprehend. What we have done is that, through a lot of sessions with the management, we realised that there must be a lot of information sharing. And information sharing must be something that is relevant, that people could relate to and understand. So whenever the management brings in new investment, the way they communicate to the people is no longer "There is a new investment that is going to bring us millions of dollars. You have to work probably for another 200 hours to make it happen." Instead, they explained to them that "This new investment is going to help in our margins and revenues and benefit you in the end, because your bonuses will go up; overall, the prospects have improved."

Whenever someone generates some new ideas that save money, it is no longer just a new idea. To them, this new idea has already transformed itself into something that they can see will benefit themselves, their pockets. So this is how they have done it over the years. For the last two years, I think all of them have been enjoying seven, eight or nine months' bonus. They are happy. They no longer point their fingers at their management and ask, "Why are they drawing more money and we less?" Because they have gone through a process where whatever the management were to communicate to the people, the people could relate to, understand and appreciate how this little contribution that each individual makes can actually impact on the overall KPIs and therefore affect themselves and benefit the entire company.

This is just one illustration. I would like to say that linking pay to performance is certainly a sound idea because many people could accept it better, that you can have this better pay package, but it is linked to something which is good for the economy and for everybody. So when we hear from the Ministers and the civil servants, when they communicate policies to the people, it may be useful if these policies, even the different GDP growth that we have been using, could be translated into something that could resonate with the people and that they could relate to. For example, what would be the number of better-paying jobs with this growth of GDP? What would be the real changes and value-add that people could appreciate? And what are the better opportunities that each and every individual can anticipate? I think it will be easier for Singaporeans to therefore relate to how this GDP growth can link to the pay package of the Ministers and how it will actually affect them positively.

We need Government leaders who are not planners but those with a good sense to listen to the people. It will demonstrate that they not only look after the people but also with the right EQ, passion and empathy, that they really understand the ground. You can have a first-class fantastic policy but, if you do not understand the ground, you can never implement it effectively.

The last Budget saw many goodies given out to Singaporeans. Public assistance, we know, is a very sensitive issue. It is important because it benefits the lower-wage workers. But there are actually many other various funds that were introduced, eg, Opportunity funds, ComCare funds, Workfare Improvement Scheme.

And these are all much bigger in scale and benefit many more Singaporeans. So we should not just probably look at one and lose sight of what the other funds and opportunities that we have actually created for the larger Singaporeans.

Let me suggest that instead of every five years, when there is a General Election and we start to scramble and look at what the Government has done for our people, the various Ministries could come up with some social report card. This is something that the labour movement has done for various cooperatives because we have to explain to the people what are the challenges, what we have done and how we actually dealt with those issues, and how it actually benefited the workers in the end. If the various Ministries could have some social report card to indicate to us what they have done over the years, such as how many Singaporeans and workers have benefited in one way or another through the various schemes, it will certainly help to present a clearer picture of what the Government has set out to do and has actually done and carried out to deliver the promises that they have given to the people. This will be some sort of KPIs where they impact the individuals and can be better understood by Singaporeans in general.

When new policies are being presented, we would urge that it be a bit more Singaporean-centric - take a look at exactly what Singaporeans will want to see; how will it affect them? So, when you present it to the people, there is probably a better linkage, instead of just giving them hard figures and economics that people do not quite understand. These are certain issues that we thought will be useful for the Singaporeans in general, to better understand the purpose of doing all these.

If I may say it again, pay adjustment to the civil service - well, they have done a good job - we will support that the Government pay them. But this should not be a zero-sum game. Again, our people would want us to say that they would not want to dispute or say whether the timing is right or wrong because there is not right or wrong timing. If we think that this is the right Government that we have trusted and we will continue to place our trust in, then we have to trust the team that is led by PM to ensure that the pie will continue to grow amidst all the challenges that continue to daunt us. We also have to think about our next generation that will continue to benefit under the good leadership where opportunities will be abundant for our children and where we can grow old and not have to worry about our livelihood.

4.33 pm

Mr Michael Palmer (Pasir Ris-Punggol): Mr Speaker, Sir, thank you for giving me this opportunity to say a few words in this debate.

Let me begin by making my position clear. I am not against paying for results. In the private sector, you pay for performance. If a person performs to expectation, he is remunerated accordingly. If a person performs above expectation, then he is rewarded for that exceptional performance. He can be rewarded with both an increase in basic salary as well as a good bonus. Depending on the type of industry he is in, this remuneration could also come in other forms, such as stock options.

However, in the private sector, the basic premise when it comes to remuneration and reward is this: you pay for what you get, and you should get what you pay for. The employee knows that he gets paid for results and he is accountable for his performance.

I would like to deal with these points in my speech:

(a) Accountability for performance;

(b) Revenue centres and cost centres; and

(c) Timing.

Let me begin with accountability. We know that in the present system, civil service and Ministerial salaries are benchmarked against the salaries of the top earners in certain sectors of the private sector. In certain top grades, a discount is given off the benchmark. While not everyone understands the intricacies of the formula used, Singaporeans generally know that our civil service salaries are benchmarked against what some perceive to be lofty private sector salaries.

The thing is, if private sector salaries are to be used as the yardstick for measurement, then it is reasonable to expect the same sort of accountability for performance in the civil service that the private sector companies demand. One cannot just take the rewards without also taking on the obligation of accountability for performance for those rewards. I am therefore glad to hear that some part of the increases will be paid by way of performance bonuses, especially in respect of the higher grades of the Administrative Service. However, like my colleagues, Mr Alvin Yeo and Mr Inderjit Singh, before me, I think that a larger part of the total remuneration package should be performance-based throughout the civil service.

Whether it is true or not, public perception is that working in the civil service provides a person with an iron rice bowl. But that is not the case in the private sector. In the private sector, if your performance is poor and consistently poor over a year, or even two quarters in some sectors, you could be out of a job. It is not a case of not receiving your bonus or not progressing. You may not have a job at all if you do not perform. As Mr Hri Kumar has said, the remuneration of many of the top professionals is almost solely based on performance.

Do the civil servants face the same guillotine? Are they similarly accountable? The public perception is that they are not. If we want to peg our civil service salaries to the top salaries in the private sector, then they must be accountable for their performance. In a recent article that appeared in the Straits Times , the Public Service Division said that Ministers do not have guaranteed tenures because they face elections every five years. That is a fair point. But we are increasing the salaries of not just the Ministers and other political appointment holders today. We are increasing the salaries of the whole of the civil service. They do not face elections every five years. How are they accountable if they do not perform? The public does not see that accountability for performance.

If we want the remuneration of the civil service to be pegged to that of the private sector, I believe the right thing to do is to set targets and key performance indicators, or KPIs, for our civil servants. These may not always be revenue-driven, as in the private sector. For instance, we obviously cannot have revenue-driven KPIs for the departments in MCYS that administer welfare schemes. But we can set other targets and performance indicators. It may not be easy to devise, but it can be done.

In order for the civil service remuneration packages to be more closely linked to individual performance, civil servants must have targets and performance indicators set in accordance with their individual roles. They should be specific, measurable, achievable, realistic and timely. Yes, the percentage increase in our GDP for a particular year can be a factor where it is taken into account, but it should not be the only factor. With a system of KPIs in place, civil servants will have goals to strive for and if they meet or exceed those goals, they will be rewarded accordingly. And if they do not perform and fail to meet their targets consistently, then they must also face the consequences.

The next issue which we should also consider in the equation is the fact that in the private sector, every company and business has its revenue-generating centres and its cost centres. Mr Teo Ser Luck has touched on this in his speech. To put it simply, it is widely acknowledged that workers in the revenue-generating centres of a business will earn more than those in the cost centres, that, at the same time, their remuneration is also far more performance-based. Again, if the civil service is to be run along the lines of "Singapore Inc.", as Mr Lim Swee Say has referred to, then should we not also look to see which departments in each Ministry are the so-called revenue centres and which are the cost centres?

As I mentioned earlier, the performance of certain departments in various Ministries cannot be revenue-driven. Some adaptation is necessary. In the case of these departments, the concept of revenue will naturally need to be replaced with something else that describes their ultimate goals and targets. But the purpose of the segregation is not to create divide within the service. One of the main purposes of such a distinction is to ensure that resources are allocated correctly so that performance and results are rewarded.

Finally, I would like to say a bit about the timing of these revisions. I do not think that these revisions are being introduced at the right time. And I do not think that we have been sensitive to the feelings of many people in choosing to make these revisions at this time.

Towards the end of last year, the Prime Minister announced that it was likely that GST would be increased from 5% to 7%. There were two main reasons for the increase. The first was because we would need more revenue to invest in research, development and infrastructure to take Singapore forward and make it a top tier First-World country. The second reason was because there was a widening income gap and we need to redistribute the wealth from the top earners to the lower wage earners who have experienced little or no increase in their salaries over the last few years. In fact, while top level income earners have experienced up to 4% annual increases in their salaries, even some middle income earners have experienced little increase.

With the fear of the income gap widening, we supported the increase in GST and introduced measures like Workfare and the GST offset package in the Budget to help close the gap. But in this House today, even before those income gap-closing measures have been implemented, we debate an increase in Ministerial and civil service salaries which can only widen the gap between civil servants and the lower wage earners.

And, ultimately, the question that many people have asked me is - did we increase GST to pay for this increase in salaries? While that is clearly not the case, it is most unfortunate that a support package so carefully crafted in good faith to help our lower income families should now be seen in such light.

I suspect there is probably never a good time to introduce the issue of increasing Ministerial and civil service salaries, and there will always be people who feel that the salaries are already too high. Nevertheless, do we really need to pick a time when the public is least receptive to such increases? Allow me to read just two excerpts from the feedback which I have received. I quote:

"To have pay adjustments now and then is fair. But to do it now, in view of GST hike, is extremely politically insensitive. There's a difference between being above board/honest and being blunt."

"..... timing of the pay hike is extremely insensitive amidst talk of narrowing the income gap and the impending GST increase. If a pay hike is absolutely necessary, a better timing would have been when the welfare policies have exercised their effectiveness and the people better adjusted to rising prices."

Mr Speaker, Sir, I believe that we must invest in our future and must ensure that we retain the best in our Government and civil service. But we must also ensure that these people give us their best performance so as to justify the salaries that they are receiving. To ensure that this is the case, they must be accountable for their performance. I also hope that the Government will take into account the sensitivities of Singaporeans when introducing these changes to Ministerial and civil service salaries. After all, many are still in the slow process of recovery from the last economic downturn and have yet to see the benefits of the measures introduced in the recent Budget.

4.42 pm

Assoc. Prof. Kalyani K Mehta: Sir, I wish to speak from the social perspective in this debate on the salary increases for the civil service, ranging from the President all the way down to the elected MPs, not forgetting the retired MPs, office-holders and civil service pensioners.

Let me start by remarking that if an alien from another planet were making some observations, he would say, "Santa Claus has come to Singapore." Sir, to set this scenario, I wish to quote Kishore Mahbubani, Dean of Lee Kuan Yew's School of Public Policy, NUS, in his book, "Can Asians Think?" He says,

"Singapore is not a perfect society nor is it a paradise. Affluence has created bad habits, excessive consumption and waste generation. According to the UNEP, Singaporeans generated 1.1 kg of domestic waste per person per day compared to Germany's 0.9 kg. Littering lingers as a bad habit. Singapore is also not spared from the social problems of modern cities - drug abuse, juvenile delinquency, vandalism and teenage crime. Even though the deterrents are severe, the struggle for survival and social improvement will be an eternal one for Singapore."

There is no doubt in the minds of Singaporeans of the uncertain times we live in and the excessive competition for talent and economic progress at all levels - individual, organisational and national. Credit must be given not only to our extremely competent leaders, but also the people of Singapore, including those who stay at home and care for frail elders and disabled. Singapore's success is due to the hard work of the average person too because his or her loyalty to the nation is Singapore's real strength. It is not just the working population that I am referring to; each and every individual, no matter how big or small the contribution he or she makes,

for example, a volunteer at a voluntary welfare agency or housewife who puts hot food on the table for her husband and children, or the retiree who helps nurture the grandchildren while the parents are at work.

It is perhaps the same kind of approach that was the background of President Nathan's speech delivered at the Second Session of the Tenth Parliament and reported in the Straits Times on 13th January 2005. He spelt out seven priorities: (1) secure Singapore's place in the world; (2) build a safe and secure environment; (3) build the economy; (4) invest in people, young and old; (5) augment population and talent, including foreign talent; (6) engage the youth; and (7) make it a place for everyone, an inclusive society.

Sir, in response to the President's Address, Mr Wong Kan Seng made the following statement: "At the heart of every successful society is a core of dedicated and committed people who stay and move ahead together. This is especially vital for a small city state like Singapore."

In last year's National Day Rally Speech, our Prime Minister said, "We are a nation and a big family. The Government will do its best to look after all Singaporeans and ensure that everyone can share in the nation's fruit of success." He then went on to talk about the income disparity in Singapore, largely due to globalisation.

The point I want to make is the social compact of the top leaders and the populace. This message has been discussed many times - that the leaders need us and the people need the leaders. The people's trust and confidence is a must for any government to rule a country. We have seen in Thailand recently what can happen when that trust is broken.

Sir, today's debate is focused on an economic issue, but let us not forget that it will have social and moral implications. I will expand a little.

Yesterday, some of my fellow MPs talked about the fact that there are many Singaporeans who are still struggling to make ends meet, as they are financially strapped. Many people are wondering how much of their limited income will be channelled into the 2% GST hike. Others are wondering if the rents will rise due to the property boom that has been experienced lately.

The people who will receive increased salaries as a result of the decision taken by the Government will be the target of envy by all those who struggle to support their families with a limited wage. Management of envy is a very difficult task. If the envy rises year after year, the social compact could collapse. Mind you, the top leaders have excelled in their performance over the last six years, and they do deserve competitive salaries. We want civil servants who are high in IQ and EQ. On top of that, they have to be morally upright, courteous and concerned about Singaporeans. That is indeed a tall order. In my opinion, all of them have these attributes. However, the million dollar question is: how much is enough?

Sir, I have two points to make for consideration in this debate. The first point is that the formula that was passed by Parliament in 1994 needs to be revisited and revised because, at that time, performance-based appraisal and rewards were not practised. Today, we have basic salaries for employees and bonuses awarded on the performance of the employee during the previous year. Following this logic, the benchmark salaries of the top civil servants, ie, the MR4 grades, should be pegged to the basic salaries of the top 48 earners, ie, from each of the six chosen fields. Since they are also eligible for pensions after their retirement, it is a reasonable proposition. For the high performance civil servants, bonuses could be added to the basic salaries. I am glad to note that in his speech yesterday, Minister Teo Chee Hean mentioned that a sizable proportion of the raise will be in the form of performance bonus. For the MR9 category, we could peg at the basic salaries of the relevant categories also.

Having a GDP bonus is a good idea. But I think overall performance should be the guiding yardstick for all civil servants. These have been enumerated by fellow Member, Mr Teo Ser Luck, eg, originality, creativity, passion, etc.

As we look into the future, potential top leaders have to have the right motivations. If we choose those with good brain only, they may inadvertently be working for the pay package and not the goal of public service. Good quality of people in the civil service should be the ultimate aspiration for the Minister.

I move on to my second point. Let us look at this issue of salary raise for civil servants in Singapore in perspective. About one month ago in this very Chamber, we discussed the amount that public assistance recipients receive. Many MPs voiced the inadequacy of the amount given, even with the proposed increase. The media has featured real life illustrations of such very poor persons. I have interviewed, in the nature of my work, samsui women or local construction workers, as we know them - old elderly who once worked as coolies or menial labourers in the Singapore port. Public assistance recipients have contributed in the past towards Singapore's economic success that we are enjoying today, and this should not be forgotten. When we juxtapose the amount of dollars that was discussed in that debate and the amount of dollars that we are discussing now, the huge difference is hard to miss. My point is that if we are to be generous towards civil servants who belong to the upper class, then let us be a little generous towards the very poor, as represented by the public assistance recipients - so they can sleep on full stomachs.

For the recipients living alone, perhaps the MCYS can reconsider the amount and raise it in the coming review.

In conclusion, there is no doubt that the top civil servants have performed extremely well, and they deserve a raise. The question ultimately is how much is enough. The Singapore public may be concerned that if the private sector salaries and bonuses spiral upwards in future, there will be unimaginable salaries drawn by the public sector. Is this the way to go? Surely not. To give the public an assurance, then the idea of a cap, suggested earlier by NMP Loo Choon Yong, should be seriously considered.

Sir, with the above suggestions and comments, I support the motion.