CIVIL SERVICE SALARY REVISIONS

CIVIL SERVICE SALARY REVISIONS:

(Statement by the Minister for Defence): 2.53 pm

Mr Teo Chee Hean: Mr Speaker, Sir, modern Singapore is a testimony to the perseverance, ingenuity and hard work of our people. In a short span of 40 years, we have transformed our island state into a developed nation. Singaporeans enjoy peace, stability, economic progress, good housing, healthcare, education, and a clean and safe environment.

The mission of the Public Service is to work with the elected Government to ensure Singapore’s continued survival, security and success. Public officers work with the political leadership as stewards of Singapore’s present and future. The work of the Public Service is closely linked to the lives of Singaporeans. Through the work it does, the Public Service provides infrastructure, homes, education, and law and order. It creates a conducive environment for Singaporeans to create wealth, earn a living, raise a family and lead a fulfilling life. We have a diverse group of officers, with different aptitudes and capabilities.

Column: 54

There are policy developers, policemen, teachers, social workers, economists, statisticians, engineers, clerical and administrative staff. We need a whole host of officers with different backgrounds and talents in the Service - to think, plan, and do. Together, they make the Service tick.

Richard Vietor, a Harvard Business School professor who specialises in teaching and research on business and government policy, recently published a book titled “How Countries Compete.” He devoted one chapter to Singapore and described us as “the best example of government that works.” And, indeed, ours is a Government that works for Singapore and Singaporeans.

Eight or nine years ago, when I was the Minister for Education, I briefed the EDB's International Advisory Council on our then new initiatives in education. These were a group of top CEOs - experienced industrialists and businessmen from the US, Europe and Japan, several of whom had sat on or given advice to their governments' education review panels. After listening to my briefing, they said, "We've heard all that before in our own countries. What makes you believe you can succeed in doing that when we have difficulties putting through similar reforms in our own countries?" That question gave me pause. Then I replied that it is because Singaporeans place great importance on education. And in the Ministry, we have the people and a system in place that will see this through. We also have a teachers' union that understands what we are doing. Instead of resisting change, they are supporting it - for example, organising courses in IT so that teachers can keep up-to-date. I am glad that my confidence in our parents and students, teachers, our educational administrators and our institutions has been proven right. Today, they have brought our system forward to new heights.

Column: 55

As Minister-in-charge of Civil Service matters, I often hear from my counterparts from other countries that Singapore is a place where things happen. We do not just envision and talk, we act. Each time they re-visit us, what we talked about doing during their last visit would actually be already happening. This is possible because we have strong institutions, and a team of dedicated officers at all levels who will work through the details and carry out the plans - Biopolis, Marina Bay, upgrading of our housing estates, skills redevelopment, Workfare, preparing for an ageing society, making our waterways active, beautiful and clean.

Going forward, the opportunities and challenges confronting Singapore are increasingly complex. There are no 'ten-year series' or 'model answers'. The Public Service has to break new ground and draw upon the ideas and energies of the private and people sectors to address these challenges together - to develop our own solutions, challenge old paradigms, experiment with untested approaches and learn from our mistakes along the way.

Singaporeans have a Public Service they can all be proud of. The Political and Economic Risk Consultancy (PERC) 2007 Report, and the World Economic Forum’s 2006 Global Competitiveness Report ranked Singapore first in the quality and competence of its Public Service.

Here, I would like to take the opportunity to acknowledge and thank every public officer for his or her contribution to Singapore. It does not matter which service or agency you work in. Every officer can and should be proud of being part of the Singapore Public Service, a highly respected and well regarded organisation.

Column: 56

We do not have to just rely on comparisons by think-tanks. Every Singaporean who travels abroad will, in his heart, be grateful for the quiet efficiency, courtesy and impartiality of our public officers when they cross the immigration and customs counters at their various ports of entry and exit around the world.

But the Service can and must do better. Singaporeans are more informed, and vocal. The standards expected of the public service today are higher. And public officers can expect more to be asked of them. Demanding customers spur improvements. Public officers do not have all the answers. We have to do more to cultivate a serious listening ear, to better understand the needs of the public and to consider ideas and suggestions to improve the way we work and serve the public. There is a need to constantly improve.

Good People are Key

How do we do this? The key is to have good people in the Service, enough of them, with the right values and passion for Public Service - well-led, well-trained and well-motivated. We need good people and leaders to helm our various institutions and services - principals for our schools, commanders of our police divisions, managers of our various line departments and customer touch points. We also need the support of our rank and file officers who quietly do good work behind the scenes, or courteously at the counters, helping to implement and execute policies well.

To bring it all together, to provide vision and coherence, and set the tone and direction, we also need exceptional public service leadership. This means having strong and capable leaders who can anticipate challenges and change, take a long-term strategic view, tackle the complex issues, and yet at the same time come up with workable solutions that are

Column: 57

needed today. We need leaders who can energise, organise and galvanise the Public Service to move the agenda forward and ensure that implementation accords with intent.

Sense of Meaning and Mission

As a progressive employer, the Public Service’s human resource management practices must keep pace. We must commit to pay competitive wages for our officers and provide them with the development and training to improve and stretch themselves so that they can better contribute to their agencies. We must make the Public Service an organisation that provides our officers with a sense of meaning and mission, that ultimately it exists to serve the people of Singapore.

We see such examples everyday in the work of our public officers. Many go the extra mile to work for the good of Singaporeans, not just at the policy level, but also at the individual level, helping to deal with and solve the problems of individual Singaporeans. We recognise the most outstanding of such efforts every year with the PS21 Star Service Awards. I hope to see more of such examples. Officers who work in our Ministries and statutory boards must feel a sense of challenge and must believe that individually and collectively, they make a real difference in the lives of Singaporeans. We need to tap on their passion, energy and mobilise them to do their best, and achieve their best - for Singaporeans and for themselves.

Making sure we can get and keep good people

Attracting and retaining able people to build a team, especially those who have the potential to take up top leadership positions in the Public Service is however becoming more difficult. Final year students in our local universities are

Column: 58

invited to attend many tea sessions and career talks, and many are now offered jobs three to six months before graduation.

The competition for talent is not just within Singapore. Our people are being talent-hunted to work in Hong Kong, China or Vietnam and the Middle East. In February this year, a group of public officers attending one of the Civil Service College’s leadership training programmes, made a study trip to Dubai. At a networking dinner, they met a fellow Singaporean who had been headhunted to take up a very senior position in a Dubai company. He told our officials that his Chairman is very impressed with Singapore and the ability of Singaporeans. So, he promised his Chairman that every time he is back in Singapore, he will speak with two to three Singaporeans to interest them in working for his company. I do not know how often he comes home, but we should be worried.

Paying competitive salaries

For the Public Service to remain an attractive employer, our terms must keep pace with the private sector. That is why our policy is to pay public officers competitive salaries, salaries that are commensurate with private sector earnings. We do not seek to lead the market, but to keep pace with it.

Salaries in the private sector have been moving rapidly, especially in the last two years, in certain sectors. In February this year, the two healthcare clusters adjusted nurses’ salaries upwards by 3%-7%. On 31st January 2007, a Business Times report cited that some law firms had raised salaries amid the growing demand for legal work and a shortage of lawyers. Reports from HR consultancies point to more firms hiring executives, and offering attractive salary packages to attract them.

Column: 59

The financial and banking sector is growing rapidly and many potential job seekers are attracted to it. According to a 12th February Wall Street Journal report, there is a shortage of talent in the private banking sector. The earnings of some of the relationship managers in Singapore surpass the pay levels in Switzerland. Singaporeans are being attracted to these jobs, including one young ex-SAF officer who was featured in the report.

As I informed the House in March, the Civil Service is experiencing the effects of the tightening labour market. Our overall resignation rate has increased from 4.8% in 2005 to 5.7% in 2006. We are losing our lawyers, accountants and management executives. The resignation rate of the Management Executive Scheme (which employs graduate officers across the Ministries) was 10.6%, up from 7.4% in 2005. At some of our entry grades, the situation is quite serious, with resignation rates as high as 25%. Members of the House would also have read from the newspapers that for our Home Team, there has been a 40% increase in the resignation of junior officers in January and February this year, compared to the same period last year.

We need to act before the situation becomes more serious. The Government, as an employer, has to respond quickly and decisively to stay competitive and close the wage gaps. Otherwise, we will deplete the Service of the able people we need, and the service level to the public will be affected.

Civil Service salary adjustments

Approach

The last major salary revision for the Civil Service was in 2000, seven years ago. During the recession years, civil service salaries moved down with the

Column: 60

market, and were restored recently in 2005. In recent years, we have made adjustments to specific schemes that have fallen behind their benchmarks.

For this review, we have taken a comprehensive look at all the schemes, assessed the attrition rates and wage levels of each scheme relative to their respective market comparisons, and identified the underlying issues affecting the schemes. Let me explain the approach we have taken and the principles behind this round of revision.

First, we are not making a uniform across-the-board revision, where everyone receives a standard ‘x%’ increase. Adjustments are made according to the needs of individual schemes. Where the salaries are severely lagging the market and there are high attrition rates, we will make larger adjustments. Where the lag is smaller, we will, of course, make smaller adjustments. Some schemes have been reviewed recently, and are already being paid close to market salaries.

Second, we will bring our salary structures more in line with our philosophy of linking pay to performance. Many of the adjustments will not be in the monthly salaries but in the form of a performance-related payment. Only those civil servants who have performed beyond the satisfactory level will receive this performance-based payment, with those performing very well receiving a higher amount. These payments allow us to close wage gaps quickly this year. For subsequent years, these payments are likely to be incorporated into the performance bonus structure of the officers, if the market salary levels are sustained, so that those who are consistently good performers will continue to enjoy the higher salaries. For schemes which are lagging severely behind the market, we would have to adjust both monthly salaries and annual components in order to close the gap.

Column: 61

Third, we recognise that salaries alone are not the panacea to our problems. We need to look at the whole career proposition, such as sense of purpose, job scope, interesting assignments, exciting career prospects, and developmental opportunities. These issues have to be addressed so that a career in the Civil Service will remain attractive not just to young people fresh out of school, but also to serving officers.

That is why, in conjunction with the pay increases, we will continue with our reviews to address the fundamental issues for specific services. Let me give a recent example. The Education Service was reviewed in August last year. We raised the starting salaries and increased the retention bonuses for the teachers.

But the review went beyond pay. The Ministry of Education solicited feedback from teachers and made changes to allow teachers to have study scheme leave, to take longer periods of study leave, a special fund was set up for teachers to use for learning and developmental needs, and promotional grades were added for classroom teachers. This year, some 10,000 teachers have been promoted, many of them to the new promotional grades introduced in the restructured scheme of service.

I will now brief the House on the pay revisions for the different groups of civil servants. The revisions will apply to the Civil Service. Statutory Boards will review their salaries concurrently and make adjustments, where appropriate. A number of Statutory Boards (eg, EDB, MAS) have already adjusted their salaries earlier this year.

Starting salary revisions

As I mentioned earlier, at the entry level, the competition for fresh university graduates is getting more intense. The recent surveys by the Singapore Management University, and preliminary

Column: 62

indications for NUS and NTU show that pay offers for fresh graduates have been rising. For example, the average salary offer for a SMU graduate is about $2,800.

The Civil Service has adjusted starting salaries annually to keep in step with the market, both upwards and downwards. We dropped starting salaries by 10% during the recession years, and increased them when the economy recovered in recent years. With effect from June this year, we will raise starting salaries to keep pace with the market. For a graduate with a Good Honours degree who is appointed to the Management Executive Scheme, the starting salary will be raised by about 10%. Starting salaries of other graduate schemes will be adjusted according to their market benchmarks. We will also adjust the salaries of officers who have been appointed recently, to maintain relativities with the incoming batch of fresh graduates. We will continue to monitor our salaries at these entry grades and make adjustments as necessary to maintain competitiveness.

Schemes with In-Built Market Adjustment Components

Some Civil Service professional schemes, such as accountants, economists and statisticians, have an in-built “market adjustment component”. The market salaries of these professions tend to be volatile - with large bonuses in boom times, but falling sharply during a recession. The market adjustment component allows the annual salaries of these schemes to be adjusted rapidly, up or down, without affecting the monthly salaries.

We will raise the market adjustment components of these schemes according to their individual benchmarks. There is no further need to make other forms of adjustment for this group.

Column: 63

According to Mercer HR Consulting, private sector salaries are projected to increase by 4% in 2007. For the officers in the Civil Service, we will make a basic payment amounting to 3%-5% increase in the annual salaries. This payment will be performance-based and will be in the range of 0.5-0.75 months. Good performers will receive up to 0.5 month whilst better performers will receive up to 0.75 month.

This payment will apply to schemes which are currently at or close to their market benchmarks. It will ensure Civil Service salaries are competitive. On top of this payment, civil servants will continue to receive their annual increment and the mid-year annual variable payment. Like other Singaporeans, they will also enjoy the 1.5% increase in the employer CPF contribution from July this year.

This payment will apply to the Education Service, the Corporate Support Scheme and the Operations Support Scheme.

The Education Service completed its review last year, but there are still issues to be addressed. The Ministry of Education will be adjusting starting salaries, and making corresponding adjustments for teachers who were recently appointed. We must also identify high-calibre teachers who have the potential to make it as our future leaders in education and develop and reward them in a timely manner.

Corporate Support Officers and Operations Support Officers will also receive this basic tier. The payments will be made next month, in May. If the economy continues to do well and the higher market salaries are sustained, these payments will be incorporated into the annual performance bonuses of these schemes of service so that officers who

Column: 64

are performing well will continue to receive them.

We will also be looking into re-designing the jobs and upgrading the skills of our officers in the Corporate Support, Operations Support and similar schemes. Traditionally, these schemes have been designed with rather narrow job scopes. We will work together with the public sector unions to prepare our officers to take on a wider scope of work and responsibilities, and provide more opportunities for progression.

These schemes of service, which will receive the basic tier for officers who have shown more than satisfactory performance, account for approximately two thirds of the officers in the Civil Service.

Schemes which are lagging the market

There is a group of schemes which is lagging the market, for which we will make larger increases than the basic tier to close the gap. I will highlight the key services, namely the Management Executive Scheme, the Management Support Scheme, the Home Uniformed Services and the Foreign Service. Collectively, these schemes account for almost one-third of the officers in the Civil Service.

Graduate officers on the Management Executive Scheme work across all Ministries performing a wide range of jobs, including policy development and implementation, corporate services and operations work. Salaries for this group of officers have fallen behind the market. We need to make an upward adjustment of 16% this year in order to level up. As a first step, we will halve the gap through a 5%-8% adjustment. This will be in the form of a performance-based payment of 0.75-1.25 months of salary. Good performers will receive up to 0.75 month, which is equivalent to a 5% increase, and

Column: 65

the better performers will receive up to 1.25 months.

A more fundamental review of the Management Executive Scheme is also ongoing. The review will look into all aspects, including pay, career advancement and progression, job challenges as well as training and development of officers. We want to make the scheme more attractive, both to fresh graduates, as well as to mid-career entrants to the Civil Service. In particular, we will need to identify, develop, and reward more substantially, those among the Management Executive officers who are performing very well and have demonstrated the capability to take on greater responsibilities. The review will be completed in the second half of 2007. There will be a second round of adjustment later this year when the review is completed. The form of the adjustment will depend on the findings or recommendations of the review.

In the same vein, we are making changes to the Management Support Scheme and Technical Support Scheme, which employ officers with diploma qualifications. These schemes are also lagging behind their benchmarks, and we will make a performance-based payment of 0.5-1 month. Good performers will receive up to 0.5 month, and the better ones, up to 1 month. Similarly, a more fundamental review of the Management Support Scheme is ongoing, and we will make a further adjustment before the end of the year.

The Home Affairs Uniformed Services, comprising the Police, Prisons, Civil Defence and Narcotics services, are lagging their benchmarks by up to 26% in certain grades. As the gap is large, these services require major adjustments. These services are now dealing with more complex and challenging tasks given the threat of terrorism and the increased security measures required. We need to

Column: 66

pay our Home Team officers competitively, so that the uniformed services will be well-staffed and able to address any emergency. The first step of this adjustment will be carried out now, amounting to 10%-13%.

Senior officers in the Home Uniformed Services will receive a performance-based payment of 1-1.5 months, with the higher quantum going to better performers. Junior officers will also receive performance-based payments ranging between 0.75 and 1.5 months. In addition, to address the market pay gap, we will increase their monthly salaries by 4%-5%.

Beyond pay, the Ministry of Home Affairs will also be looking at other aspects to better attract and retain their officers. There will be more opportunities for junior officers to progress into the senior ranks. The Ministry is also streamlining its promotion and ranking process, and reviewing benefits and other terms, to make the Home Uniformed Services a more attractive career. After the review is completed, a second adjustment will be made later this year to close the remaining gap.

The Singapore Armed Forces will make similar salary adjustments to maintain competitiveness.

The Foreign Service is also lagging the market substantially. Our diplomats are a small but critical group of officers who promote and safeguard Singapore’s interests in the international arena.

Foreign Service officers will receive a market adjustment of 0.75 months. In addition, the performance bonus structure has been revised to identify and reward the top performers better. Annual increments have also been increased and tied to performance. Other adjustments include a revision of the monthly salaries at the entry grades and a revamp of the

Column: 67

retention bonus framework. On average, Foreign Service officers can expect an 8% salary increase.

Administrative Service and P/J/S appointment holders

Administrative Service

Let me now move on to the salary adjustments for the Administrative Service, and Political, Judicial and Statutory Appointment Holders.

The Administrative Service is at the core of the Public Service. Administrative Officers serve in many of the top Public Service leadership posts. We set very high standards for admission into the Administrative Service. Officers with high ability and potential from all schemes in the Public Sector, as well as private sector candidates are welcome, regardless of whether they had previously received scholarships or not. They are brought into the Administrative Service so long as they meet the stringent requirements and have a passion for and dedication and commitment to Public Service. Once brought in, they are developed, stretched in challenging responsibilities and tested for future top appointments in the Public Service.

A lot is demanded from our Administrative Officers. They are expected not only to do their primary jobs well, but to also actively lead, participate and contribute to inter-agency issues and service-wide initiatives. This is a key role of the Administrative Service - to ensure that the whole Public Service operates with collective vision and coherence. The officers are assessed rigorously every year and those who do not meet the mark are asked to leave the Administrative Service. They may then be transferred to another scheme in the Public Service. There are also officers who themselves ask to leave

Column: 68

the Administrative Service as they prefer a more specialised area of work. Those who make it to top positions as Deputy Secretaries and Permanent Secretaries have fixed term appointments, and are expected to step down at the end of the term to make way for younger officers. This provides for orderly succession and a pipeline of potential future Public Service leaders in order to maintain the drive and energy of the whole Public Service.

Administrative Service Salary Benchmarks

The salaries of the Administrative Service were last adjusted in 2000. It is one of the schemes that have fallen behind their benchmarks. The salaries of Administrative Officers are pegged to two market benchmarks. I will now ask for the slides to be projected. At the SR9 grade, which is the entry level into the Superscale grades, the benchmark is defined as the salary of the 15th person, aged 32 years, hence, 15P/32, from six professions,

namely, bankers, lawyers, engineers, accountants, employees of MNCs and local manufacturers. The next slide will illustrate how the benchmark is computed and derived. It, too, sorts the top earners aged 32 by income and then find the 15th person, the median. Administrative Officers at the SR9 grade are typically in director-level positions in their organisations.

The second benchmark is set at the higher end, the Staff Grade I, or what we call the MR4 grade. This is the grade at which senior Permanent Secretaries are paid. The benchmark is defined as two-thirds of the median salary among the top eight earners in the same six professions. This is also the entry-level grade for Ministers. We first find the top eight earners from the six professions. We sort the 48 persons by income, we find the median income earner, ie, between the 24th and 25th, and then we multiply the result by two-thirds, so there is a one-third discount of this median income.

Column: 69

Last month, we released information on how the two benchmarks and actual salaries have moved over the last seven years. This has been widely reported. I will briefly recap the trends and request Members to refer to the handouts* [ Copies of handouts distributed to hon. Members ]. The income tax data that we are using for the benchmarks are for Year of Assessment 2006, ie, for income earned in 2005. The benchmark salaries are, therefore, almost two years old.

In 2000, SR9 salaries were at 67% of the benchmark and we adjusted salaries then to close the gap fully, to increase salaries by 50%. This benchmark dipped in 2004 to 2005, but has since risen. It currently stands at $361,000, similar to what it was in 2000. The SR9 salaries were reduced during 2001-2003 due to the economic recession but the cuts have since been restored. Currently, the SR9 salaries are close to the benchmark.

At the MR4 grade, salaries were at 71% of the benchmark in 2000. We raised salaries to 80% of the benchmark then, with the intent of closing the gap over a three-year period. We made the first adjustment in the first half of 2001, raising salaries to $1.2 million, according to plan. Thereafter, Ministers and senior civil servants took a pay cut of 10% after the September 11 attacks in 2001 and another 10% cut after SARS in 2003. The two cuts were restored about two years later, in July 2004 and January 2005, respectively. So, that is the red line on the chart. Since then, there have not been any salary adjustments for the Administrative Service. Salaries at the MR4 level are at $1.2 million, the same level as in 2001.

In the meantime, the blue line, the benchmark for MR4 has moved. It rose from $1.4 million in YA2000 to $1.9 million in YA2001, reflecting income that was earned during 2000, which was a

*Cols. 175-180.

Column: 70

particularly good year for Singapore. Thereafter, the benchmark dipped during the recession years, but it never fell below the $1.4 million mark. In recent years, the benchmark has increased, in tandem with Singapore’s good economic growth. Currently, it is at $2.2 million, based on income earned in 2005. This also means that, at the MR4 level, salaries are now at 55% of the benchmark, compared to 71% in 2000.

The principle of benchmarking Ministers’ and senior civil servants’ pay has been established and widely debated in Parliament. Our philosophy is to pay competitive salaries to facilitate the recruitment and retention of the quality of talent we need for the Government and public sector. To do so, we have to benchmark against the comparable top jobs in the private sector. These are the realistic alternatives that a student considering a scholarship, or a person considering a career in the public sector could pursue. Indeed, for the public officers in their 20s and 30s, their peers in school and university would be pursuing just such careers and, in a rising job market, these are precisely the jobs that headhunters are targeting them for. For those considering whether to serve in political office, these are often the careers that they are currently pursuing with good prospects of rising further in the private sector. Some of those in their late 30s or 40s are at or near the top jobs in their companies or field of work.

Sir, there is no perfect method for doing this benchmarking. The methodology of establishing these two market benchmarks at SR9 and MR4 was set out in the White Paper on ‘Competitive Salaries for Competent and Honest Government’ in 1994. The White Paper was thoroughly debated in this House. In 2000, when the last salary adjustments were made, the benchmarking methodology was reviewed and there was a thorough debate in this

Column: 71

House again. The benchmark of 15P32 for SR9 was found to be sound, while the benchmark for MR4 was modified in 2000 to make it more robust by expanding the base to the current top eight income earners in each of the six professions, to discount stock option gains by 50%, and using the median rather than the mean. For this round, we have looked carefully at the benchmarks again, and have found that they remain sound. They follow economic and employment market conditions up and down. But after calculating the benchmark figure, we also do a check against private-sector income earners and we rank them against private-sector income earners. The ranking of the benchmark against the private sector income earners is stable and does not fluctuate widely.

I understand that many Members have views and suggestions on this issue and I look forward to hearing their views and ideas.

Salary revisions - adjustments for MR4

Salaries at the MR4 Grade are currently at 55% of the benchmark. Given the large gap, it is not realistic to close the gap fully in one go. Instead, we will close half the gap, ie, from 55% of the benchmark to 77% of the benchmark by the end of this year. This will be effected in two steps - one step now, and another step at the end of the year, to bring it to 77%. Next year, we aim to close half of the remaining gap, bringing salaries to 88% of the benchmark by the end of 2008.

But for now, in the first step, we will increase the annual salaries for MR4 grades and above, by an average of 25%. The percentage increase will range from 33% at MR4, decreasing to 14% at the higher grades. The annual salary at MR4 will be increased from $1.2 million to

Column: 72

$1.6 million. This will bring the MR4 salary to 73% of the benchmark, fairly close to the 77% of benchmark we want to be at, at the end of this year.

The revisions will be effected through adjustments to both monthly salaries and annual components. Monthly salaries for the MR4 grade and above will be increased by an average of 15%. Monthly salaries at the MR4 grade will be increased by 22.5% from $42,800 to $52,400. The percentage increase in monthly salaries tapers off progressively for the higher grades.

We will restructure the pay to remove components which are no longer relevant and to build up performance-linked components. We will make three main changes - removing of the Car Allowance, increasing the GDP Bonus and increasing the Performance Bonus.

First, the Car Allowance. This is a legacy payment from the time when the Civil Service stopped providing senior officers with an official car. The Car Allowance is currently 2.5 times the monthly salary of the officer. This is not the market practice. Typically, private sector companies pay car or transport allowance at a flat rate. As the Car Allowance is no longer relevant, we will remove it formally. In its place, we will increase the GDP Bonus which depends on the performance of the economy, and performance bonus which depends on the individual's performance. This will apply to all appointment holders, the Administrative Service, as well as senior officers in all Ministries and statutory boards. I should emphasise that the Car Allowance is already counted into the annual salary package of these officers. Hence, this change does not change the total annual salary package but restructures it to be more performance-based.

The President, Prime Minister and Speaker do not currently receive the Car

Column: 73

Allowance as they are provided with an official car. The restructured salaries, however, that replace the Car Allowance do so with higher GDP Bonus and Performance Bonus. The President, Prime Minister and Speaker will draw this new restructured salary. The total salaries of the President and the Prime Minister will increase by about 25%, close to the average percentage for the MR4 grade and above. They will continue to be accorded the use of an official car. This car benefit will be subject to tax.

Second, we will revise the GDP Bonus. This bonus payment depends on the real growth figure for the year. Currently, the norm payment is two months, if the economy grows by 5%. There will be no GDP bonus if the economy grows by 2% or less, but a maximum of four months will be given out if the economy grows by 8% or more. In between, the bonus varies linearly with the real GDP growth rate.

We will put a major part of the salary increase into the GDP Bonus, to make a larger proportion of the annual salary package dependent on growth of the economy. Ultimately, every senior civil servant and appointment holder plays a role in ensuring that Singapore continues to thrive and prosper. We will increase the bonus to a norm payment of three months, if the economy grows by 5%. The minimum payment will still remain at zero if the economy grows by 2% or less. The maximum will be increased to eight months, if the economy grows by 10% or more.

Third, in line with our philosophy of paying for performance, we will increase the Performance Bonus by two months for officers at this level, to typically seven months.

With the above revisions, close to half or 47% of the annual package of MR4 grades and above will be variable,

Column: 74

compared to about one-third or 34% today. 20% of their salaries will be predicated on the GDP bonus. Another quarter of their salary is performance-dependent. The Prime Minister decides on the level of performance bonus each Minister receives.

The President, Prime Minister, Judiciary and Statutory Appointment Holders currently receive a fixed Service Bonus of five months instead of Performance bonus. The Service Bonus will be increased to seven months which is in line with a two-month increase in Performance Bonus quantum that those in grades MR4 and above could qualify for. About 20% of their salaries will be predicated on the GDP bonus.

All the salary revisions are non-pensionable. There will be no increase in pension cost.

The new salary levels will bring the rankings of MR4 and above salaries amongst all income earners to a level comparable to their rankings in 2000.

The Prime Minister's salary currently ranks 164th among income earners. After the revision, the Prime Minister's salary, at $3.1 million, will rank 102nd among the private sector earners. In 2000, the Prime Minister's salary ranked 63rd. The MR4 salary currently ranks 769th among income earners. The revised MR4 package will rank 438th compared with 367th in 2000.

Adjustments for SR9

We have to make sure that salaries at the SR9 benchmark stay competitive to retain our top officers. For Administrative Officers who are bonded, their bonds will be ending when they are in their late 20s and early 30s. This is a critical juncture in their careers, when they will ponder alternative career options. These officers

Column: 75

are most mobile and likely to be drawn to all the attractions of the private sector, in particular the banking industry.

At the Superscale entry grade, or SR9 grade, our salaries are close to the benchmark level. But we should be mindful that the benchmark measures salaries received in 2005, almost two years ago. The market for talented young professionals is very competitive and we expect that market salaries have risen further in 2006 and 2007. As the SR9 salary is currently near its benchmark, we will not be making any adjustment to the monthly salaries at this grade or in the grades below. But we will make a performance-based payment of 0.5 to 0.75 month. This is in line with other civil servants whose schemes are at or close to their benchmarks.

This payment, together with the higher GDP bonus paid out this year, will raise annual SR9 salaries by 3%, from $372,000 to $384,000. About 36% of the revised salary package will be variable depending on how well the economy and the individual perform.

The salaries for grades between SR9 and Staff Grade I or MR4, will be adjusted by between 3% at SR9 and 33% at MR4.

We will watch private sector salaries at the SR9 benchmark carefully. Should we see the market moving, we will move promptly to make a further adjustment, later this year if necessary. I will now ask for the tables* on the Civil Service revisions and on the 2000, 2006 and revised 2007 salaries for PM, Minister (MR4), and SR9, including ranking information to be circulated. The tables will also include the salaries and rankings for the President, the Senior Minister, Minister Mentor and the DPMs. [ Copies of tables circulated to hon. Members. ]

Column: 76

Adjustments for MP Allowance

We will also adjust the allowance for Members of Parliament. The Members of Parliament Allowance is pegged to the Administrative Service SR9 grade. MPs currently receive a monthly allowance, as well as the Non-Pensionable Annual Allowance or the 13th month pay, and they also receive the Annual Variable Component which is paid in July and December each year.

In 1995, the annual package for Members of Parliament was $100,500, or 56% of the SR9 annual package. Over the years, the SR9 annual package has risen but with a large proportion of the increase paid as annual components - the GDP Bonus and performance bonus. As MPs do not receive these components, their annual package has decreased as a proportion of the SR9 annual package. The current MP annual allowance is 47% of the SR9 annual package.

We will bring the MPs’ allowance back to 56% of the SR9 annual salaries. The monthly MP allowance will be raised from the current $11,900 to $13,200. The GDP Bonus will also be extended to MPs, so as to link their annual package to the state of the economy. MPs will receive one month of GDP bonus if GDP grows at 5%, and up to two months of GDP bonus if the GDP growth reaches or exceeds 8%. But if GDP growth is 2% or less, there will be no GDP bonus paid. This is the same as the GDP bonus at the SR9 level. The combined changes will bring the 2007 Members of Parliament package back to 56% of the SR9 package, similar to the 1995 levels. We will make corresponding adjustments to the allowances for Non-constituency MPs and Nominated Members of Parliament.

We will also increase the allowances for a Member of Parliament to engage a Legislative Assistant from $1,000 to

Column: 77

$1,300 and for a Secretarial Assistant from $350 to $500.

Costing

All the adjustments will take effect from 1st April 2007. The total salary revisions for the Civil Service will increase the Government’s wage bill by about $214 million or 4.7%. The wage bill for political appointment holders will increase by $10.5 million (or 23%) to $56 million.

Ex-gratia payment

The pay revisions outlined above are to ensure that we continue to have a good public service for the future. We should, however, not forget those who have laboured hard to lay the strong foundation for us. One group comprises the former officeholders and Members of Parliament who were elected between 1959 and 1980 and retired before December 1992 and are now drawing a pension. They were among the first generation of leaders who toiled during the early years of independent Singapore and did not have a chance to enjoy the fruits of their labour. Another group is the civil service pensioners who worked with the Government during the turbulent times of the 1950s and 1960s and who retired before January 1982. These pensioners served at a time when civil service pay was lagging well behind the private sector. Some did not enjoy the benefits of employers' CPF contribution while others did not have their wage increase consolidated into their pensionable salaries. We would like to acknowledge these early pioneers and their dedicated service, even as the civil service adjusts its pay level for the current batch of officers.

In 1996 and 2000, we made ex-gratia payments to these two groups as a tangible recognition of their contributions during the early years of nation building. This year, we will make another gesture in

Column: 78

the form of an ex-gratia payment of the same quantum to these two groups. The payment is estimated to cost $2 million for 43 retired MPs and officeholders. About 2,400 civil service pensioners are expected to receive the payment, costing $7.6 million.

Conclusion

Mr Speaker, Sir, three weeks ago, I met Dr Henri Ghesquire. He had worked in the International Monetary Fund for over 27 years advising and observing many countries. He served in Singapore in 2004 and 2005 as Director of the IMF-Singapore Regional Training Institute. He wrote a book and in his recent book called "Singapore’s Success - Engineering Economic Growth", Dr Ghesquire analysed Singapore’s rapid development. In the concluding chapter, he wrote and I quote:

"Singapore succeeded because its leadership was assiduous, highly intelligent in a practical way, determined to achieve shared prosperity, and committed to act with integrity. Leading with vision and fortitude is possible. Its benefits can be invaluable. This is Singapore's ultimate lesson."

Sir, we know financial rewards cannot and should not be the main motivation of those in the Public Service. There are many intrinsic rewards that come from working in the public sector. However, that does not mean that we do not need to pay them market-competitive salaries. We do not want pay to be the reason for people to join us. But we also do not want pay to be the reason for them not to join us, or to leave after joining us.

Few countries have implemented our philosophy and practice of benchmarking and paying public officers salaries that are pegged to the market, but this system has worked for us. Competitive wages have helped us bring in and retain able men and women in Government and in the Public

Column: 79

Service in Singapore. This policy has served us well. We must maintain this competitive advantage - a clean, effective and efficient Public Service. We need a team of good people to develop the vision, ideas and plans, as well as to see through the execution.

In the end, what is our objective? Our objective is to have a public service that works, that works for the people of Singapore. This way, we will be better placed to realise our vision and dreams for Singapore.

Mr Speaker, Sir, pursuant to Standing Order No. 44, I beg to move,

That the Ministerial Statement on the Civil Service Salary Revisions be considered by Parliament.

Question proposed.

*Cols. 181-194.

3.55 pm

Mr Alvin Yeo (Hong Kah): Mr Speaker, Sir, my first reaction, and I suspect the same of many of my fellow MPs, when I heard that there was going to be a pay revision for Ministers and also MPs was: how to explain this to our residents, especially coming in a matter of months after the announcement to increase the GST? There was surely going to be a chorus of disapproval and complaints about this or that Minister not deserving his or her high pay. But amidst the heat and dust, we will do well to bear in mind two points. The first is that the Government is coming out in the open about what it proposes to do and that we get the opportunity to debate the merits, and the people get the opportunity to vent their feelings, with the Ministers and MPs having nowhere to hide. After all, the policy of benchmarking was adopted some 10 years ago in the 1990s. There

Column: 80

would have been nothing to stop this Government from just following the benchmark to its full extent without any public debate.

Indeed, as someone who was not in Parliament at that time - in fact, not until last year - I had simply assumed that that was being done. So, the present figures, where the Ministers' salaries at the entry level come up to 55% of the benchmark, came as something of a surprise to me. I consider that whatever our views about the pay revision, whether for or against it, we cannot complain that it is not being done in a transparent and open manner.

The second point to bear in mind, which is easy to overlook, is that this proposed revision covers the entire civil service of tens of thousands of employees, roughly half, I think, are made of teaching staff, and another 15-20% made up of Police and Civil Defence officers. It also covers our Judges and statutory appointment holders like the Auditor-General. Most of the public's attention has been focused on the Ministers' pay, and now perhaps also the MP's allowance, which is only natural and understandable, given that we are elected by the people. But the sweep of the revisions and the objectives behind them are much wider than that.

There are several measures in this package to make sure that our civil service remains strong, is adequately staffed and is staffed by the right sort of people, which are too important to overlook, and we should not overlook them.

So, what is it about the pay revision that sparks such outcry? Without a doubt, it is the $2.2 million benchmark or the sticker price on an entry-level Minister. The Minister's statement that pay will go up to less than the benchmark, and only in stages, will make

Column: 81

it easier for the public to swallow, but only slightly easier, I suspect.

So, should we be outraged that entry-level Ministers would, I think, earn something like $1.6 million with effect from this year, going up to close to $2 million next year, assuming that the benchmark remains the same? It is correct that that is a lot of money. It is correct that that is more than some Singaporeans will earn in a lifetime. However, we need to look at what the private sector, which is the other competitor to the public sector, what they would pay for people of similar skills and abilities.

In that regard, I note the Minister's statement that fresh Honours graduates joining the civil service will have their salaries pegged to be competitive with the private sector. I think he mentioned that an SMU graduate would earn, on average, $2,800 per month. By way of comparison, the top legal firms - and I note that lawyers form probably the largest single block of Members in this House - were paying newly-qualified lawyers that kind of salary - $2,800 - 10 years ago. Now, the major law firms pay new lawyers about 50% more - between $4,200 and $4,500 per month. On top of that, they can get good performance bonuses of up to six or seven months.

As regards the Ministers, well, we live in a world where the average income last year of the CEOs of our three local banks was over $7 million, where the Chief Executive of our largest property company was paid in excess of $5 million, where his counterpart in our largest conglomerate got over $5.5 million the year before. And where the CEO of our largest telecommunications company - both the outgoing CEO and the incoming CEO - got an annual package which, together with stock options, was worth $5 million or more. These figures have all been widely reported in the press,

Column: 82

including in the Business Times today in a story at page 7.

$5-$7 million a year is a huge number by any measure. But even if one says, "That's for the No. 1 person in the organisation, and we should be looking at the No. 3 or No. 4", if you halve those figures, you would still be in the $2.5-$3.5 million range, which approximates to the $3.3 million median derived from the 48 top earners. To then cut that median by a third or 33% is no small matter for the person who stands to earn that amount, but reflects the element of sacrifice that public service demands.

The market reality is this. Someone earning $2.5 to $3.5 million, or with the potential to earn that much or more, may not give that up for an annual package of $1.2 million, no matter how public-spirited. Something more than that would still represent a pay cut to such a person, now or in the future, but may be a sacrifice that he or she would be prepared to make.

In the run-up to last year's General Election, I read that the hon. Member for Hougang proposed that Ministers' pay should instead be based on the median salary for the lowest 20% of the workforce with a multiplier of 80 or 100 times. That sounds appealing at first blush. But does it represent market reality? I do not know of any major commercial organisation that derives its CEO's pay from a multiplier of its workers' salaries. I doubt very much if one asks compensation consultants whether they would recommend such a formula for a high-level hire. The harsh reality is that when looking for a CEO-calibre person, you set his pay based on what other CEOs are getting, not a multiplier of their workers' pay. That is the market economy at work. That is the world we live in.

This sounds elitist. But do we not want our leaders to be the elite in terms

Column: 83

of ability? At the end of the day, are we looking for the 10 or 20 people with the most ability to govern, or the 10 or 20 people who are most willing to take pay cuts to join the public service? Being typical Singaporeans, the answer is we want both. But unless one can find the ideal combination in a person and a number of such people, we do need to strike a balance. That is what, I think, the proposed revision sets out to do. And to learn that after the revision, there will be a hundred people in the private sector who would earn more than the Prime Minister, and that there would be about 400 people who would earn more than an entry-level Minister does not make the revision seem out of balance when one considers the importance of their role and the heavy responsibilities they bear.

This does not mean that the revision cannot be improved or refined. I would like to put forward three measures for the Minister to consider.

I am happy to note that there will be a substantial performance element to the Ministers' remuneration. I think the figure mentioned was 47%. I would suggest that the performance element should be at least half and maybe up to 60-70% of the total package. This is to bring it closer in line with private- sector pay packages, which is, after all, what we are benchmarking against. This would also help to refute the notion that the Minister's pay is somehow all locked in - he, basically, just has to avoid any major bungles to get the full amount.

The performance element has two main components - one, based on the performance of the individual Minister, and the other on the performance of the overall economy. The first is necessarily based on individual assessment. But the second, based on the GDP growth of the Singapore economy, can be objectively

Column: 84

worked out, and the Minister has clearly explained how that ranges from zero to a maximum of eight months, depending on the GDP growth figures. I would suggest that this GDP component, which is said would come up to something like 20%, should form either 25% of the total package or at least half of the performance element. This will expose our Ministers to the risk and rewards of the overall economy in the same way private CEOs' pay gyrates with the financial results of their companies, and would serve to bring down our leaders' pay in times of recession where it seems only right to do so when many workers would be struggling.

My second suggestion for the Minister to consider is rather to adjust the benchmark based on the figures from year to year, to derive it from a moving average over the preceding 3-5 years. This would help to smoothen out the swings, up and down, of executives' pay which tends to move in line with the economy. That is, after all, the aim of good government, to build sustained growth by adopting policies which may have a long lead time, rather than artificial pump-priming. A moving average basis seems consonant with the medium to long-term outlook that we want our leaders to adopt.

My third suggestion is to borrow a concept from private-sector corporate governance - that of the Remuneration Committee. Perhaps an independent body could be set up with members from leading non-political organisations and the public, possibly including some NMPs, to review the manner in which the benchmarks are derived. Such a move would increase public confidence that the benchmarking policy set by this House is being implemented in a fair and transparent way. And, hopefully, we move some of the niggling doubts in people's minds about certain issues, like whether the Ministers' pay includes free

Column: 85

COEs, waiver of maid levies or other suspected "perks".

In the final analysis, the issue comes down to the selection of talent - the calibre of our Ministers. To take the three most obvious examples - not the only examples, I hasten to add - of the Prime Minister, the Senior Minister and the Minister Mentor, I suspect that the majority of our population would not begrudge paying them several times over the benchmark. With the right leaders, no amount is too much. But with not-the-right leaders, any amount seems too much.

That is the heart of the issue. The proposed revision is not an end unto itself - some clever method to fatten the wallets of our Ministers. If that were so, some quieter way, without the need for this public debate or public statements, could be found to achieve that. Rather, it is a means to an end. And that end is the search to find the leaders of tomorrow while developing the leaders of today. The pay revision is but one element in this drive - albeit an important one. So we should look at it in its proper perspective, as one component of the renewal of our leadership. And one should assess that search for talent by the results it yields. So if this revision helps to bring our civil service to the highest standards of service, helps us to build a world-class judiciary, to find the leaders to take our country to the next level, it would have been worth it.

As the Minister remarked, there is no perfect formula, no magic bullet to derive the benchmark. But let us look at this issue in the wider context as part of the drive for the wide talent to lead our country. And let us judge it on the track record of the Government, both now and in the future, and the leaders that come to the fore.

On that basis, Mr Speaker, Sir, I support the revision.

Column: 86

Mr Speaker: Order. I propose to take the break now. I suspend the Sitting and will take the Chair again at 4.35 pm.

_Sitting accordingly suspended
at 4.13 pm until 4.35 pm _ .

Sitting resumed at 4.35 pm

[Mr Speaker in the Chair]:

CIVIL SERVICE SALARY REVISIONS: Debate resumed.

Mr Inderjit Singh (Ang Mo Kio): Sir, thank you for allowing me to speak on this issue. The whole issue of salary adjustments for the civil service and the Ministers has been emotionally debated by the public and I can understand why it has become emotional. I feel that had the Government done things differently which, in my view, would not have been a very difficult thing to do, the public discussion could actually have been on the merits of the proposed salary revision, which I do support.

The whole salary debate started with the debate on “Competitive Salaries for Competent and Honest Government” which the Minister spoke about just now, and it took place in this House sometime in 1994, and I still have all the cuttings [ indicating ]. It has drawn a lot of interest. I was the newly appointed second adviser and I took a lot of interest on this issue and I have kept them since then. Thirteen years later, however, the debate has not shifted very much, which means that the Government has failed to address the contentious issues. The central question here is whether our Ministers and top civil servants deserve so much in the way of salary but discussions have unfortunately been clouded with other issues. I think

Column: 87

people already accept that Ministers and civil servants deserve the high salaries but how the Government is justifying it is the main problem.

My comments today will focus on three areas:

(i) Whether our Ministers and civil servants should be paid the very high salaries;

(ii) The usage of the benchmark to calculate the Ministerial salary increase; and

(iii) The timing of the proposed increase in salary – in other words, whether it is something that needed to be done at this time.

Sir, let me say at the outset that I strongly support the Prime Minister’s initiative to increase the remuneration of Ministers, but I disagree with the benchmark that is used to decide this salary scale or, in fact, the use of any benchmark, and I also have some concerns about the timing of the proposed revision.

First, on the Ministerial salary – do our Ministers deserve so much of remuneration?

Rationale

Sir, the rationale for paying our Ministers and top civil servants so much has been explained by the Prime Minister, Minister Mentor and, also, by Senior Minister during his Prime Ministership, when the salary debate first took place in 1994. And today, the Minister for Defence also gave us the reasons. People generally have accepted the fact that our Ministers must be paid well. And I am in full agreement with the rationale although I cannot agree with the rather extreme

Column: 88

scenario raised by the Minister Mentor of a meltdown and Singapore landing in the dumps if we do not increase our Ministers’ salaries from $1.2 million to $2.2 million this time. Our history over the last 40 years shows that we have had many committed men and women who have made sacrifices for the country by coming to serve at all levels of government. Many of the Minister Mentor’s generation, including the Minister Mentor himself, made such a sacrifice. Even in this generation, as the Minister Mentor highlighted a few days ago, we had three doctors who left lucrative practices to join the Government, giving up well-paying compensation packages. Many of the Members of Parliament even today are sacrificing a lot to serve the country. Some lawyer MPs are giving up clients because of the time that they devote to their constituency work. Businessmen MPs could have spent more time on their business and made more money for their companies and for themselves, but they have made the choice to spend it serving the country. So, the Minister Mentor is not quite right in thinking that Singapore will sink if we do not make Ministers the highest paid in the land.

Sacrifice and whether we should demand it

But having said that, should we have a system or a situation where we demand sacrifice by all people who join the Government, whether the civil service, or as Ministers or as MPs? It sounds like a compelling argument but we have to be realistic and fair, especially in these times of intense competition for talent.

We have to realise that on a system-wide level, altruism alone will not give us the critical numbers that we require in leadership, which SM himself noted in the debate in 1994. So, are we willing to leave the future of the economy to chance that we will get good people who

Column: 89

will give up their competence without caring about their salary?

We should not take advantage of the situation and the good nature of the people we bring in to work as Ministers and pay them less than what they should command. It is the responsibility of the organisation - in this case, the Government - to reward them even if they do not demand it.

In enlightened organisations, good people do not worry about whether they will be well paid for the good job they do - they just go out and do the job and have faith that the organisation will ensure that they will be equitably rewarded. The Prime Minister should therefore take the responsibility to pay those who join the Government what they deserve even if they do not ask for it. We should want the best to know that if they are committed to give their best, they will not be worse off. So, in principle, I agree that we need to offer packages that, on balance, are comparable with the best in the private sector.

Sir, I have heard the argument that Ministers and civil servants do not work as hard as people in the private sector. This is a wrong perception. It is well known that most politicians spend weekends and nights doing constituency work and other political related work. But it does not end there. It is also a 24/7 preoccupation for many of our top leaders, our Prime Minister included. Many a time, I have emailed the Prime Minister at midnight, and sometimes at 1.00 am, and five minutes later I get a reply, and then I am pressured to send him another email, and it makes me wonder whether he ever sleeps. About a week ago, I was in the USA doing my business and it was about 10.30 in the morning, my time in San Francisco, and I emailed a message to Minister Tharman. It was about 1.30 am (Singapore time). I got a reply five minutes later.And I also

Column: 90

knew that Minister Tharman had to attend a breakfast meeting at 8.00 the same morning, a meeting which I was supposed to attend but could not because I was in the USA. I do not think that Ministers work less hard or have jobs that are any less challenging than anything one can find in the private sector. It is the same with MPs and many civil servants.

The model that we are heading to

Given that we then recognise that there is a need to pay top-dollar salaries for top talent, the question is where we are heading as far as the idea of public service is concerned. It is a fine balance to strike, but once we acknowledge the market reality, the logical conclusion is that we move away from the concept of pure public service to performance-linked pay. The more we move towards a purely monetary-based compensatory package, the more we take the moral shine off our leadership.

As we move more and more towards a system that is properly compensatory in monetary terms, the Prime Minister must also ensure greater correlation to performance and that each Minister or civil servant should be subject to stringent performance management. Hence, should there be less than the desired level of performance, strict action should be taken whether in adjusting the salaries or the total compensation or, in fact, removing non-performers and poor performers. No longer can we say that this person is just doing public service or is making great personal sacrifices for the nation and therefore we should be more tolerant towards less than top-notch performance levels of such people. So the whole system will naturally evolve towards one of Ministers doing a job and less of just doing service to the nation.

Still, the proof of the pudding is in the eating. The facts speak for themselves. No country compares with the stability

Column: 91

and security and the overall potential of Singapore. These are, in large part, the result of enlightened leadership. We cannot risk diminishing this. I therefore support the move to pay our leaders high enough salaries so that we have a team of people in place in Government who can continue to make the right policies for Singapore.

So having addressed the issue of whether our Ministers should be paid top-dollar, I now turn to the question of what is the appropriate way to decide on the amount that they get paid. This is where the problems start to arise.

The validity of the benchmarks - Do we need them and should we keep them?

As we know, the Ministerial package is pegged to a benchmark. This benchmark is the reason why the whole debate has become emotional. Many holes have been poked into this benchmark formula.

Some of the issues raised in 1994 about the benchmark remain the same till today, and I read many of them through this cutting [ indicating ] that I get. First, the arbitrariness of selecting the six professions and why other professions are left out and why only the top eight are being selected. Second, the big difference in risk between the public sector and private sector. Third, the upward bias, I heard, of taking the top earners - those at the top in one year may not be at the top the following year, whereas the Ministers would always be getting paid based on whoever was at the top, insulating them from the vagaries of the private sector. Fourth, the assumption is that the Ministers could have commanded the high pay had they been working in the private sector.

Why then after 13 years we still have not been able to convince Singaporeans

Column: 92

about the rationality of using the benchmark formula as it was designed? I do not intend to suggest a better formula. I know many Members in this House will do so. Mr Alvin Yeo also spoke about some of his suggestions on how it can be modified. Instead, I am going to suggest that we eliminate the use of the private sector benchmark to set salaries for the Government. Here are my reasons.

First, if we were to stick with a formula-based system, we would have to be making discounts for many things. The risks CEOs and the professionals face in the private sector are much different from the risks faced by Ministers and civil servants. So, if you really want to use a benchmark formula, a big discount would have to be given for the fact that CEOs are judged on an annual performance while Ministers face elections every five years. So are we then prepared to a discount of 1/5 of what the CEOs earn to account for the lower "risk"? What about a lawyer or a professional who is subject to law suits from clients if a job is poorly done? Their risk level is much higher than a Minister's or a civil servant's as they are immune to such law suits even if they do a bad job in their Ministries. Are we willing to throw in another discount for this? Or for the fact that Ministers have pensions while the top earners in the selected sample do not? So, let us add another discount factor because of the pension. And we can find many other holes with the benchmark formula and I am sure we will be hearing many of this in the next few days of the debate. So, therefore, why use a benchmark?

In fact, over the years, the benchmark formula was not adhered to as planned, which is a reason why the Prime Minister has highlighted the big gap but has opened up in the salaries as compared to the top in the private sector. In the past 13 years after the benchmark formula was implemented in 1994, the Government and the PM decided what

Column: 93

was thought to be fair compensation for the civil servants and Ministers and apparently never really used the benchmark. Salaries were still adjusted. So in some years, salaries went up and in other years, there were pay cuts, especially during the recession years. This alone shows that it is possible to do without a benchmark. And, also, in reference to the handout given for the SR9 grade, it clearly shows that in the last two years, we did not adhere to the benchmark because it was at 116% and 103% for the last two years. So we are not following the benchmark.

People on the ground have told me, "Let's not kid ourselves with a benchmark formula, because we can target any number as the final number that we want a formula to calculate, and then reason backwards to find a formula that will give us a final number." Sir, elements in the formula can be varied, such as which professions are chosen, or how many of the top earners should be considered as part of the sample. And therefore, frankly, I can use just any formula to justify the final number I want. So, for example, if I want the salary to be $1 million a year, I can design a formula to choose the variables to give me the answer. And similarly, if I want it to be $5 million a year, I can design that formula. So this is what many, among the professionals, perceive this whole benchmark mechanism to be - although I can understand it is one way of measuring Ministers' salaries against a benchmark, they are very cynical about this with the kind of explanation that I have just spoken about - in other words, they think that it is an eyewash. The public finds this approach patronising. The professional and the better educated Singaporeans just do not agree with the comparisons made as there are too many variables and the scope of work and risks are a world of difference. I agree with this and, I think moving forward, there is little point in trying to justify salary increase using a

Column: 94

benchmark formula. So, to use a benchmark formula which compares to the private sector is a futile exercise and we will always draw criticisms and we will never win the argument of justifying Government salaries that way. It only serves to cloud the real issue, ie, whether high pay is deserved.

A possible benchmark

If the Government really wants to use a benchmark which, in any event, I do not recommend, then perhaps it should be pegged to the compensation and benefits of Ministers and officials in other similar developed countries but adding in the additional perks and benefits which they get during and after their service. That may have some hope of being better accepted than the current benchmark comparing, as it would, apples with apples.

The 1994 decision to benchmark in context

Does this mean that the decision to move to a formula-based system in 1994 was wrong? Let us give the Government the benefit of doubt, perhaps it had no other way but to develop and use the famous "6 professions" benchmark. I think many countries have since also increased their salaries to justify why civil servants and Ministers should be paid as high by referring to Singapore.

Sir, 13 years later, we are already used to this new range of million-dollar salaries that Ministers are paid. I feel that there is no longer a need to use such an arbitrary benchmark formula for justifying further increases in Ministerial and civil servants' salaries.

Sir, we already have a good base from $1.2 million and, like any other company, all that is needed is regular internal reviews to make adjustments. If later the

Column: 95

Prime Minister cannot successfully hire certain people he wants and this becomes a systemic problem, he may need to review the overall compensation package to come up with one that can let him achieve his hiring and retention goals. Then he could do a check against the private sector chiefs who are earning to give him comfort that his Ministers and civil servants are not too far off from the top earners. Using the private sector salary benchmarks then would be merely one of the tools rather than the main means to calculate salaries in Government.

I therefore strongly urge that the Prime Minister drop the benchmark approach. You needed a system 13 years ago but now let the setting of salaries for the public sector take a life of its own. You will achieve the same outcome. The Prime Minister should decide what he needs to pay the Ministers, whether it is $2 million or $5 million, the people will then decide whether they endorse the decision every five years when they go to the polls. Dropping the benchmark formula will go a long way towards taking the emotions out of the salary debate. Some will still question the high salaries but at least they will not feel that the Government is using a "smoke and mirror" approach of using private sector benchmarks to justify the high salaries.

Among my grassroots leaders and residents, the general feedback is that they have already learned to accept the fact that Ministers need to be paid high salaries. So if the CEO of SingTel or Temasek Holdings can earn $5 million a year, should the Finance Minister who is overall in charge be earning less? The public understands this argument. And whether it is $1.2 million or $2.2 million, it is something, if the Prime Minister feels necessary, they will accept it. As an aside, many of them already cannot

Column: 96

imagine a $1.2 million salary and another million for them is in the same order of magnitude, but their biggest issue is with the timing of the salary adjustment.

I will therefore address the issue of timing.

Timing

Sir, we are in the midst of a long-term recovery from the poor economic years of the post-Asian economic crisis. We have just introduced Workfare for the less well off - surely an acknowledgement that times are tough for many people in Singapore.

Things are going to get tougher for the man-in-the-street this July when the GST increases to 7%. The Minister for Finance, when delivering his Budget speech this year, said that the GST increase this year was expected to raise "additional $750 million this year, and $1.4 billion per year going forward". This is money that is to come from the taxpayers' pocket. It will be painful but necessary to reposition our economy.

I can understand if this sum is needed to make the economy more competitive, for example, if the new revenue will allow us to cut corporate taxes so that more companies set up here, bringing jobs for Singaporeans. But how do we answer the man-in-the-street when he is told that about 1/4 to 1/3 of the expected revenue increase this year from GST is going to be the bill for the proposed Ministerial and civil service salary increases. I was told it is about $240 million. Many of those I spoke with now think that the key driver for a 2% GST increase was in fact to fund the salary revisions primarily for the civil service. This seriously undermines the Government's ability to make tough decisions and convince the public in future.

Coming as it is at a time of belt tightening for the public at large to cope

Column: 97

with the GST increase, the timing of the proposed increases we are debating could have been better.

As to the timing, although there have been some suggestions that the world would become catastrophic if the salary revisions were not done, I disagree. The danger we face is a slow attrition of talent in the Government. Has the Prime Minister really lost a Minister or a Permanent Secretary? Have any of the Prime Ministers in the past lost one purely because of pay? I think the issue is not as urgent as it is being made to seem.

We were in the House about a month ago debating and arguing why we should not be giving our public assistance recipients, some 3,000 of them, another $100 monthly assistance increase and we are talking about million-dollar salary increases. And the total expenditure on civil servants' and Ministers' salary increases is almost the same as the total Workfare Income Supplement Scheme. What signal are we sending to Singaporeans?

Sir, in conclusion, I broadly support the move to keep Ministerial and civil service salaries attractive but state that the benchmark has outlived its usefulness and the sooner we abandon it, the sooner the debate will be more focused on the real issues. Regardless of my support for the revision generally, I am just a little concerned at the timeliness of the measures, coming as they do hard on the heels of the painful measures that Singaporeans will have to learn to cope with after the GST is increased in July. While attractive salary in the top echelons of the Government sector is desirable, we could have achieved better results in this whole salary adjustment exercise had we been more sensitive to these emotive issues of using a benchmark and, also, the timing.

Column: 98

Sir, I support the salary increase but I do not agree with the benchmark formula.

Mr Gautam Banerjee (Nominated Member): Mr Speaker, Sir, any public discussion on salaries, particularly salaries for those public guy in the public service is likely to be an emotive issue. The open discussion we had on this sensitive subject has generated feelings of uneasiness and even some envy and resentment. A strong, responsible and sustainable leadership requires difficult and controversial issues to be discussed in an open and transparent fashion, not behind closed doors. Hence, it is to Government's credit that it has taken bold steps of openly bringing this important, if not sensitive, matter for public discussion and debate.

Mr Gautam Banerjee (Nominated Member): 4.56 pm

Sir, in any organisation, there will always be some who are unhappy with how much their leaders are paid. They see it as a zero sum game. They wrongly assume that the size of the pie is always fixed. They think that what is given to their leaders is entirely at their expense. But this is not the case in dynamic and growing organisations. If an organisation is able to attract and retain the best and brightest who would then bring about growth in the size of the pie, all stakeholders will benefit from it. Conversely, if an organisation is unable to attract and retain its best and brightest, it will end up being managed by less than competent people. All things being equal, chances are that this pie will shrink and the stakeholders will eventually lose out as the competition intensifies. Paying less may be a populous tactic to achieve short-term gain and will appeal to those who want to play to the gallery. But it is a wrong strategy to pursue in an organisation's objectives or to achieve

Column: 99

long-term sustainable growth and development. This is because good leaders and good governance will inevitably increase

the value of an organisation which, in turn, will bring about greater value to all its stakeholders. If we apply this reasoning to the motion, I believe there are three fundamental questions that we need to address. They are:

Firstly, do we have a good Government in Singapore?

Secondly, what is the price that we are willing to pay for good Government?

Thirdly, what might be the consequences of not willing to pay for good Government?

Let us commence with the first question, "Do we have a good Government in Singapore?" Before we can decide how much to pay someone, we must begin with an assessment of the value that the person brings to the position. Have our top civil servants and Ministers brought value to Singapore? Here, I would like to share my personal experience and those of my senior local, regional and global colleagues who have been in and out of Singapore for various meetings and conferences over the years. During their visits to Singapore, they have had the opportunity to meet our Prime Minister, some of our Ministers, ex-Ministers and top civil servants. My overseas colleagues have themselves established personal and working relationships with Government leaders and senior civil servants in their respective countries. So I asked them if they were impressed by the calibre of leaders that we have in Singapore, compared to their own leaders. Their answer is an overwhelming yes. My answer is also an overwhelming yes because, for more than

Column: 100

two decades, I have personally witnessed how effective, far-sighted and pragmatic government and governance have helped businesses flourish and bring about a significant improvement in living standards for most Singaporeans.

But we need not have to rely on anecdotal evidence, because there are many independent studies and surveys that benchmark Singapore very positively across a range of variables and indicators. For example, a recent study by the partnership for New York and my firm on 11 global cities has ranked Singapore as the global city which is most conducive for doing business. Considering our short history, the fact that Singapore is even shortlisted as a global city alongside such giants as New York, London, Paris and Tokyo is, in itself, no mean achievement. Singapore is also ranked fifth in the World Economic Forum's latest Global Competitiveness Index . Our per capita income puts us in the league of first-world countries. The only other post-colonial nations in this premier league are Kuwait, Qatar and the United Arab Emirates, all countries which are rich in natural resources. Compared to other countries that achieved independence in the 1960s, we are way ahead of our peers. Under the World Bank classification format, many of these countries are still languishing in the low-income group of less than US$875 per capita, whilst we have already made it to the high-income bracket with per capita which is at least 12 times higher. Singapore also tops the ranking of 13 Asian communities for being the least corrupt country in the region, according to a survey by Political and Economic Risk Consultancy (PERC).

To what do we attribute all these accomplishments? Of course, our people are very hardworking and industrious but, without a good Government and good public institutions, it would not have been possible to achieve this exemplary report card.

Column: 101

But there are still many more challenges that the Government faces in its efforts to bring greater value to Singaporeans from all walks of life. A number of our citizens are suffering from the adverse effects of globalisation, which inevitably creates winners and losers. Those that have been left behind by globalisation would need to be nurtured back into the economic and social mainstream and we will have to preserve social mobility by steadfastly holding on to our meritocratic traditions. Our ageing population will pose challenges for public policy and we need to do more to engage our younger generations and netizens.

But, on balance, our Ministers and top civil servants have brought much value to our Singaporeans. I believe that no reasonable person inside or outside of this House can dispute this claim. What is disputable though is whether the current situation is sustainable. There is a Chinese saying that wealth cannot be retained beyond the third generation. Thus far, our third generation leaders are trying to prove this saying wrong. Can Singapore's wealth be maintained by our next generation of leaders? That will depend on whether we still have the best and brightest in this House and in the civil service. Looking at the attrition rate in the civil service, I am not so sure.

Sir, the competition for talent is very real. We are losing talent in the civil service to the private sector, the private sector in Singapore is losing talent to other competing cities and countries. Perhaps, we are making up by having foreign talent come to Singapore to compensate this, but the civil service risks being the biggest loser in the competition for talent, especially in a buoyant economy. This does not augur well for the future of Singapore. How can we attract and retain the best and brightest in the Government? This leads me to the second fundamental question: what price

Column: 102

are we willing to pay for good Government?

For me, whether it is from the business sense or from the view of a private citizen, the answer is an obvious yes. We must pay our politicians and civil servants well. However, when I read the Forum page and what netizens have to say, the answer is not obvious to everyone.

Sir, there are some imaginative people who think that Singapore is now on auto-pilot and there is therefore no need to pay our leaders much. They feel that the challenges that our current leaders face are nothing compared to our nation's first generation of leaders. They reason that since our first generation leaders did so much and yet were paid much lesser, why should our present leaders be paid so much for doing much less? Let us ask ourselves: are the challenges that the current Government facing any less difficult? I certainly do not think so. To begin with, this is not a fair comparison. The challenges are of a different nature, as our nation is now at a different stage of development. Challenges of globalisation and keeping Singapore ahead of the competition are no less daunting than the pioneering industrialisation efforts. The challenges of binding a nation of cosmopolitans and heartlanders are no less difficult than the challenges of starting a new nation. The threat of terrorism is more pervasive and sinister, compared to the strikes and demonstrations of yesteryears. The views and expectations of the present population are of a different level of sophistication. All things considered, there is no way in which our present Government can operate in the auto-pilot mode.

Sir, there are others who feel that our Government leaders are paid too much, compared to the leaders in other countries, such as the United States of

Column: 103

America, Britain or China. They argue that Singapore is a small country. They ask, "Why should our PM be paid more than President Bush when the latter has a more demanding job?" This comparison is grossly unfair and misses the point altogether. The key issue here is that of opportunity cost. If our Ministers decide not to be Ministers, they would not be Ministers in another country. Chances are that they will be in the private sector. What if some of our Ministers opted out of politics? Chances are that they will be the head honchos of some of our listed companies and command higher remuneration packages. There are several such examples of ex-Ministers running successful public and private companies. Is the calibre of our Ministers less than our top CEOs? With all due respect, no. Can our Ministers do an equally good job, if not better, in leading any of our top listed companies? You only have to look at the track record of our former Ministers who are now at the helm of successful public and private sector companies.

Why are they not paid as well as the private sector? That is because of the notion that public service is a calling that involves personal sacrifice. Paying public servants too much, it seems, would otherwise send the wrong message that money is everything. Public servants are expected to look after the people's interests over and above their own personal interests. Public servants are expected to be noble people with an overarching mission to do good for all Singaporeans.

I agree with this view, but only to a certain extent. I agree that attracting and retaining talent in public service is not by way of high remuneration package alone. Our public servants must demonstrate that they are in it for the long haul and for the good of the people and not just for the money. But the important point this misses is the battle for talent that rages in

Column: 104

today's global and connected world. Our Administrative Officers and Ministers are paid well in absolute amounts, compared to most people. This is because they are the cream of the crop and there is a price that we need to pay for such talent. Whilst this absolute amount may seem large, it is actually much less than what they would have received if they had chosen a different career path. Talent today is highly sought after and extremely mobile. If they decide to walk off to another job tomorrow, the opportunities are abundant for them and they are almost guaranteed to be paid higher. They can opt for more privacy and not have their pay subject to public debates. This is a reality that does not sink in well with most people. But it is a stark reality that has far-reaching implications for the future of Singaporeans.

This brings me to the third fundamental question: what choice do we have if we are not willing to pay for good Government? Can we afford not to have good Government? I dread to contemplate a scenario whereby Singapore is no longer able to attract and retain the best and brightest in the civil service and the Government. Imagine having no long-term strategies, substandard policies and poor execution of public policy. Investor confidence would crumble and our economy will go down a few notches. The personal equity and worth of all Singaporeans would be at risk. Other countries can rely on their natural resources in case things go wrong. But, in Singapore, we do not have this luxury. We must continue to invest in our leaders and have good faith that they will deliver a bigger pie and secure a better future for all Singaporeans. Top civil servants and Ministers are not promised an iron rice bowl as there are already mechanisms in place to motivate them to do well and to deal with under-performance.

Sir, before I conclude, let me now make some observations on the present

Column: 105

benchmarking system, since both speakers before me had some comments on the system.

After so many years, should the benchmark still be based on the salaries of the six professions identified in 1994 and last reviewed in 2000? While benchmarking is important and brings credibility to the whole argument of having Ministerial and civil service salaries pegged to the market, I would suggest that fine-tuning is necessary to ensure that the professions selected are indeed the alternative professions that our top civil servants and Ministers would have joined. In the constantly evolving world of business and commerce, we are seeing new categories of employers attracting the best and brightest. One possible new category, for example, would be private equity. I would also create a category to include the top listed companies in Singapore by market capitalisation. This, in my opinion, is a more relevant grouping today than local manufacturers, which is presently included as a category for the benchmarking exercise. For our Ministers to decide on an alternative career in the private sector, it is not inconceivable that they would end up as CEOs for our listed companies.

I would also recommend that the review of the benchmarking process be done at more regular intervals because of the fast-paced world we live in, with business cycles becoming ever shorter. Refining and updating the way we benchmark Ministers' salaries to the private sector will help to clear the noise around leader quality and process which has caused unnecessary distraction from the real issue that our Ministers' and civil servants' remuneration has substantially fallen behind what they could possibly earn in the private sector.

Sir, I support the motion.

Column: 106

5.12 pm

Mr Low Thia Khiang: Mr Deputy Speaker, Sir, when this topic on market benchmarking of Ministerial and civil service salaries against the top private-sector earners was first debated in Parliament in 1994, I spoke against it. Thirteen years after Parliament agreed to the salary benchmarks, the debate continues over whether Ministers are being paid too much. The issues I spoke on at the debate remain relevant to date. This is blatant evidence that the public, like me, was not and is not convinced that the salary benchmark is fair and just. I see no point in wasting public resources debating this salary issue every few years, if the sole purpose of having this supposed debate is just to pacify the people that the Government has given it fair thought before approving the high salaries.

While the Government can claim to have secured the mandate of the people at the recent elections last year and therefore has the right to pay itself based on the terms of the Government deemed most suitable, I wish to remind the Government that I do not think Singaporeans have given the Government a blank cheque. Given the public disquiet and debate outside this House after the intended salary revision was announced, the Government should seriously consider setting up a panel for public consultation and coming up with a remuneration formula for the public service that can be adhered to, is practical and deemed reasonable by the public. Many people are not convinced of the rationale of benchmarking the current salaries of the Administrative Service, including the Ministers', against the top earners in the private sector. One concern is that it is volatile. This is inevitable when the variable components of private sector wages, such as bonuses and stock option gains, are taken into account in the

Column: 107

setting of annual wages. In addition, the benchmark not only considers the earnings of Singaporeans but also those of Malaysians and Permanent Residents. While most of the individuals in the benchmark change every year, the level of wages taken into consideration will most likely increase over the years. This is largely due to two factors.

Firstly, a larger income gap due to globalisation will result in more outliers earning very high incomes.

Secondly, the embrace of foreign talents in Singapore will result in a greater pool of high-wage earners that will qualify under the benchmark criteria, alongside potentially increased wage.

Even if the Government takes an average from the range within the benchmark, it may not be representative of the general trend of income earned by Singaporeans. In the worst scenario, such a benchmark may even encourage money-minded civil servants to focus on policies that ensure the existence of the pool of top earners that satisfies the benchmark criteria. Apart from the potential embarrassment from an escalating benchmark,

that is headed for alarming high levels, it is also highly ludicrous that senior civil servants are consistently one of the highest paid in the workforce. Remuneration in the private sector is volatile and employees are subject to stringent performance reviews. For instance, stock option gains are possible only when an individual makes the correct investment decisions. More often than not, such individuals have also helped to improve the value of the company. However, human beings do not always make the right decisions throughout their entire life.

By benchmarking civil servants' annual pay against individuals who have

Column: 108

performed well during that year, there is an implicit assumption that civil servants and Ministers never make incorrect decisions. But are they truly super human beings, forever error-free? In addition, is there any job in the private sector that can guarantee that an employee is always amongst the highest paid in that sector regardless of the performance of that employee? There is much less job security in the private sector and even top performers face continual and fierce competition. Civil servants have an advantage as they are shielded from competition by foreign talent. Ministers too are guaranteed at least five years of job security from one election to next. Moreover, for the ruling party, there is always the flexibility of changing election rules in their favour to significantly increase job security for their Ministers. After all, did SM Goh and MM Lee not previously admit that the GRCs enabled them to bring in Ministerial materials?

It is also ironic that we are consuming taxpayers' money and we are also discussing how much more of a fraction of a million to pay civil servants and Ministers, whilst we haggle over additional tens of dollars to hand out to our needy and disadvantaged citizens. According to the 2005 report by the Department of Economic and Social Affairs, United Nations, the Singapore Civil Service has some of the highest paid civil servants in the world. Our Government holds the view that this will ensure a clean, competent and effective civil service. However, the fact shows that other countries with lower paid civil servants are able to enjoy such qualities. Based on the corruption perception index and global competitiveness index, Singapore ranked below Finland and Denmark in 2005 and 2006. However, the governing of a country should not only take into account these two factors. A more important factor that directly affects the lives of every Singaporean living here is the quality of life. A survey

Column: 109

that evaluates 39 quality of living criteria, including political, social, economic and environmental factors, personal safety and health, education, transport and other public services, found in 2006 that Swiss cities had topped the annual survey again while Singapore, with its highly paid and thus highly competent and clean government, ranked best amongst Asian cities, but was 34th in the world.

Based on the above facts, it would be interesting to know how much the civil servants are paid in countries such as Denmark, Finland and Switzerland, just to name a few. According to a United Nations' report, the Switzerland Federal Office of Personnel revealed that the basic remuneration of civil servants ranged from 55,000 Swiss francs to 321,000 Swiss francs in 2006 which, based on an exchange rate of about 1.25, was about S$69,000 to S$402,000.

Good performers receive merit increments of up to 6% while worst performing staff may get a decrease in salary. Although bonuses can reach 12% of salary for outstanding performers, the residence and overtime allowances are paid, it still seems that the highest-paid Swiss civil servants receive a lower salary than what Singapore civil servants and Ministers receive. But, Sir, we have to note that they have neither a Prime Minister nor a President in Switzerland.

Sir, to cite another example, the 2006 United Nations' report listed that the lowest monthly civil service salary in Finland was 1,200 euros, while the average was 2,600 euros for all wage earners. Even if the purchasing power parity is taken into account, it is highly likely that our civil servants here have a much better deal. Based on such evidence, we believe that there is no need for enormously large salaries to attract and retain the right talent to run a country in an efficient and corrupt-free manner.

Column: 110

The Worker's Party is of the view that the Government should consider modifying the current benchmark in place of a more equitable and sustainable one. We suggest that the benchmark should take into account international practice, in particular, countries that could be taken into consideration would be those just cited, such as Switzerland, Denmark and Finland as well as those developed countries.

Sir, Denmark, like Singapore, employs a pay adjustment scheme to ensure that the pay of state employees in general and over a long period of time develops in parallel with the wages and salaries in the private sector. For the Danish, their pay adjustment scheme automatically adjusts the central government pay development to the private sector pay development, but subject to a certain time lag. Hong Kong tries to maintain their civil service pay level with the private sector, but they only maintain the broad comparability and not any explicit link. Unlike Singapore, they all do not have a sure-win formula that ensures civil servants always have the best deal by benchmarking specifically to the top few earners.

While we accept that basic salary may be benchmarked broadly with the private sector in line with international best practice, we believe that performance pay should also be introduced to establish a visible correlation between performance and pay. Currently, the civil service has no financial bottom line in ensuring good outcomes although part of the senior officers' salary is linked to GDP growth.

Sir, while it is necessary to link a percentage of salary to performance, it is also imperative to provide a performance regime whereby it is possible to discriminate performance for non-performers or under-performers, and to reward them accordingly. Sir, in this respect, I welcome the adjustments in civil service pay structure just announced

Column: 111

by the Minister. A performance-related pay system requires a comprehensive and objective system of measurement, in particular, performance appraisals have to be more vigorous and transparent to the public, something that the public can identify with. Variable bonus will only be given to civil servants and Ministers if the key performance indicators of the respective Ministries had been met. We recommend having different KPIs for different Ministries from time to time so that Ministers and civil servants can concentrate their effort in deriving the right policy for Singapore in their respective areas.

For instance, Sir, some possible KPIs that the Government can consider adopting at this point in time are: a 5% drop in Gini coefficient, reflecting efforts to reduce income disparity, for the Prime Minister; a 2% increase in the proportion of trips taken on public transport during the peak hours, reflecting efforts to make public transport a choice mode by the Ministry of Transport; a 5% increase in the total fertility rate, reflecting efforts to address the ageing population by Ministers and civil servants involved in the Committee on Ageing Population; and perhaps, a minimum long-term unemployment rate, reflecting efforts to address structural unemployment by the Ministry of Manpower.

By linking variable bonuses to clear and objective KPIs, the Government can concentrate on making the right policy for Singapore, rather than spending valuable resources and time tracking how much private sector's top-earners had made each year and how the Government should therefore be paid. Such objective short-term goals also track the success and ensure that long-term policies can be gradually attained. In addition, this system will ensure that public officers are both accountable and responsible for the

Column: 112

outcome of their formulated policies and keep the Government transparent to the public, in terms of its achievements, capabilities and accountability.

Sir, I would now like to move on to the issue of recruiting and retaining talent within the civil service. MM Lee has said that it is not possible to hire a foreign talent to run this country because political leaders must have the passion, the commitment and must share the dream of the people. Likewise, such qualities are essential in each and every one of our civil servants. Not everyone is cut out for a career in the civil service and the loss of able people who lack such qualities is not a loss to our country. In fact, I believe that civil servants with such qualities will never be induced by the attraction of a private career and a private life, no matter how great the financial rewards offered by the private sector. More importantly, Sir, it is common knowledge that the senior civil servants and Ministers in Singapore are hardly paid peanuts. Although statistics show that officers aged between 28 and 33 make up more than 80% of resignations in the past five years - and I suppose many of these are scholars - it is not unexpected that these officers will review their options when their scholarship bonds end. The alarmingly high percentage speaks of a bigger problem, perhaps, that scholarships funded out of taxpayers' money did not attract the right mix of people.

According to one such civil servant who has resigned from the service, he said that the Administrative Service was not the best fit for him. In fact, some who left said that they were drawn by the different challenges and new experiences, more so than by the money. The earlier the Government comes to terms with this, the better for the people of Singapore. If the original intention for the scholarship holders to serve as civil servants is not met and the Government continues to invest more resources in the same

Column: 113

process in the hope for a reverse trend, the Government could be wasting precious resources for the wrong reasons and expectations. In view of the above, I think more efforts should be made to explore other recruitment and screening methods to attract the talent for the right fit.

Sir, we agree that public servants should not be expected to make unreasonable financial sacrifice to be in the public sector. However, neither should they be seen being paid unreasonable wages for their contributions. According to the Department of Statistics, the bottom and top 10 decile of employed households registered an average monthly income of $300 and $6,990 respectively in 2006. Given such statistics, the argument that civil servants make unreasonable financial sacrifice is not convincing. Even in the private sector, no organisation can afford to keep paying increasingly high salaries just to retain and attract top performers since resources are inevitably limited. Moreover, in the case of public service, we need a different breed of people to come forward to serve. There is simply no point in offering high remuneration just to entice people to serve if what they are interested in is to make more and more money for themselves and their families in pursuit of material interest in life. Sir, do not forget that even if you do not pay peanuts, but pay with a bigger piece, say, a banana instead, you can still get a monkey.

In conclusion, Sir, the real issue is how to find the right leaders to run Singapore and to ensure that Singapore continues to succeed. Benchmarking the civil service and Ministers' salaries to the cream of the private sector's income-earners who may or may not be at the same top all the time is controversial and distracting. I would like to end this speech by quoting what Chua Mui Hoong said in the Straits Times: "How much they are paid is secondary. Pay them well, but

Column: 114

do not let pay drive the search for leaders."

5.26 pm

The Minister Mentor, Prime Minister's Office (Mr Lee Kuan Yew): A point of clarification, Sir. The Member has compared Singapore against Switzerland, Denmark and Finland. Can I ask him if he considers Singapore's population to resource ratio equal to Denmark, Switzerland and Finland?

Second, have they brought the standard of living of their people up, multi-fold times, from third-world to first-world in one generation? To maintain that quality of government both in the political leadership that sets the tone for the whole civil service and for the whole country, can you get a Swiss-type government, Finnish-type government or a Danish government to bring about the results that Singapore has brought about in their own countries, let alone bringing them and their systems into Singapore? Please explain.

Mr Low Thia Khiang: Sir, I have to admit that these are the reports that I got from the United Nations. They have put up these reports. I believe that, based on the reports of what they have assessed today, they are not lousier than Singapore, in terms of living standards or the performance of the government. They have different conditions from us, but I gather that when we move forward, we are also emulating the standard of living of Switzerland. Are we not?

Mr Lee Kuan Yew: The Member has not answered my question. Is he saying that we are comparing apples with apples? Is he saying that the system of government in Finland, Denmark and Switzerland can bring them from First World to a superpower? Can they do that? Does he realise that Singapore's GDP is only one-third of its external trade - that our external trade is three and a

Column: 115

half times that of our GDP, higher than Hong Kong, by three times. And that if this economy ever falters, it is the end of Singapore and its First World status.

Denmark, Switzerland and Finland are part of Europe. They can fail and they are still caught in a European situation. If we fail here, we fall back to a South East Asian situation. Just look around you.

Mr Low Thia Khiang: Sir, is the Minister Mentor saying that without paying such a high salary, we are bound to fail? Even if we pay top-earner salaries, I do not think the present Government can bring Singapore to superpower status.

Mr Lee Kuan Yew: I am putting a simple question and ask for his clarification. He has compared Singapore as if it were a Denmark, a Switzerland or a Finland. Their system, their governments, never produced the kind of transformation that we have had, and their system and their governments have a broader base, and can afford a mediocre government.

The Singapore base is less than 700 square kilometres. When we started, it was less than 600 square kilometres. Could the system in Denmark, Switzerland or Finland produce a transformation as in Singapore?

Mr Low Thia Khiang: Sir, on what basis does Minister Mentor think that if the system in Denmark and Switzerland is put in Singapore it will not be able to transform Singapore into what we are today? I want to know what is the basis. I have no claim that it will happen. But I would like to know, from the wisdom of Minister Mentor, why he thinks that it will not happen.

Mr Deputy Speaker: Mr Low, I do not think that you can see the clarification of Minister Mentor! Mr Lee.

Column: 116

Mr Lee Kuan Yew: I would like the Member to explain why he thinks Singapore is comparable to Denmark, Switzerland and Finland. Look at the size of the country, the location of the country, the resources of each country and the history of its people. Then look at Singapore, its size, its history and the nature of its population.

To make the transformation from what we were in 1959 or 1965, whichever the starting point, to what we are requires an extraordinary government with extraordinary government officers to support it, to bring to where it is.

If we go back to an ordinary system that exists around us, then we will go down to those levels. It is as simple as that. There is no guarantee that Singapore with less than 700 square kilometres can maintain this position.

Mr Deputy Speaker: Ms Irene Ng, do you have a clarification?

Ms Irene Ng Phek Hoong: Sir, a point of clarification for Mr Low. Mr Low seems to have a very rosy view of the system in Denmark, Finland and Switzerland. I wonder whether he is aware that in Finland, the unemployment rate is 17% compared to our unemployment rate. And at their recent election, the Prime Minister of Finland won the election only by a very narrow margin and is now forced to negotiate a four-party coalition, and might change his policies. Is this the type of Singapore that he wants - with a high unemployment rate?

Mr Low Thia Khiang: As far as I am aware, based on the report that I have looked at, which was published by the United Nations, these are the comparisons. Are they that bad? They are not Third World countries.

Column: 117

5.38 pm

Mrs Josephine Teo (Bishan-Toa Payoh): Mr Deputy Speaker, Sir, I would like to share my perspective as a human resource practitioner in the matter of the Ministers' salaries.

From HR's standpoint, usually, when we hire people, we determine the salary based on three factors. The first is the expected job size; second, the candidate's level of competence; and, third, some sort of a market comparison.

Let me, first, deal with the issue of job size and competence. I think that few jobs are as demanding and as complex as that of a Minister. There is not much argument on that. I think in terms of competence, few would also question that our Ministers are very well qualified, and all have proven track records in their chosen fields.

So, the key question is, in terms of market comparison, how much are others with similar job sizes paid? Our Ministers' salaries are being compared to those of political leaders elsewhere in the world, eg, that of the US President. I think it is reasonable to compare, but I do think that we have to recognise that for many political leaders in these other countries, the financial returns come after and not necessarily during the term of office - this is the point that Mr Inderjit Singh had mentioned.

One example for the House's information is that in the case of Bill Clinton, when he left office, he wrote a book entitled My Life , and the book advance alone was believed to be worth US$12 million. In an article in the International Herald Tribune , that was published on 2nd March this year, it was reported that, "In the six years since Bill Clinton left office, he has pocketed a staggering US$40 million in speaking fees. Two-thirds of his speaking money

*Cols. 195-198.

Column: 118

has come from foreign sources, according to the Washington Post , including a Saudi Arabian investment firm and a Chinese real estate development group run by a local Communist Party official."

The article adds that Clinton is hardly the only former President to leverage the prestige of the Presidency for big bucks. It is also pointed out that former Presidents received generous pensions and are granted hundreds of thousands of dollars in annual staff, office and travel allowances.

In the article, it was reported that for the fiscal year 2007, Clinton will receive approximately US$1.16 million from the US Treasury, and that includes his telephone stipend which will come to US$77,000.

I think the key point is that while we want to make comparisons, we cannot just compare what political leaders are paid on paper. And the real question is whether we would like to see what is happening in the US also happen in Singapore. If our answer to this question is a clear no, then we must ask what all HR practitioners do, ie, what is a fair salary to pay a Minister based on job size, competence and market comparison. And is there an alternative benchmark that we would like to consider?

Mr Low Thia Khiang had criticised the pegging of Ministers' salaries to that of top-income earners. And on previous occasions, he had suggested to peg Ministers' salaries to that of the bottom 20% income earners. This is a seemingly attractive idea, as pointed out by Mr Alvin Yeo, and quite unusual from the HR standpoint but not to be dismissed without due consideration. I would like to consider the situation if his proposal is really adopted, and I would now like to speak in Mandarin.

( In Mandarin ): [For vernacular speech, please refer to Appendix A.] Mr Low

Column: 119

Thia Khiang has suggested that the Ministers' salaries should be pegged to the lowest 20%. If we really adopted such a measure, what would be the consequences? The Ministers would definitely be concerned about the salary fluctuations of the lower income. Of course, that is a good thing. But the Ministers should be concerned with the income levels of all strata, and not just the lowest 20%. In order to solve the problem of the lower income, we need many approaches - re-training, skills upgrading, job re-design - and through these, raise their employability and productivity. All these cannot be achieved overnight.

But there is a short cut, which is to promote welfarism or Workfare, or provide free medical and education. But where does the money come from? The money can come from the reserves. Our current Ministers may not have to worry about this for a few years, because our reserves are quite abundant. But, the future Ministers will be in trouble.

The problem of the lower-income group would not really be solved. But, more importantly, for all Singaporeans, the safety net for our people, in this case, the reserves will be affected. The Ministers each has different responsibilities. Do we want to see the Minister for Defence, the Minister for Foreign Affairs, or the Minister for the Environment and Water Resources to also spend most of their time focusing on the income of the lower-income group and neglect their own responsibilities like national security issues? Are we only concerned with the salaries of the lower-income group but forgetting about the incomes of the sandwich class and professionals? So, Mr Low's suggestion has its drawbacks.

Column: 120

From the HR practitioner’s point of view, a better method is like what Minister Teo Chee Hean has said, which is to allow a larger portion of the Ministers' salaries to be pegged to the national performance of the GDP. So when the national well-being has gone up, then the Ministers' salaries will also increase. We should let the Prime Minister assess whether each Minister has been effective in his area of responsibility, and decide the kind of bonus each should get. This is in line with what the Minister has mentioned.

Ministers’ salaries reflect the importance of their job, and their impact on the national issues. Although the Ministers' salaries are high, our system is transparent. The advantage of this system is especially admired by the Chinese. Prof. Lu Yuanli of the Institute of Modern Chinese Studies in Shenzhen University has made an in-depth study of Singapore. He wanted to know and analyse why over a long period, Singapore, as a one-party Government, has remained clean and honest. He uses four phrases to describe us. Firstly, we have invoked the sense of morality to promote the virtue of clean government, thereby discouraging corruption. Secondly, we have instituted the payment of competitive salaries, thus removing the need for corruption. Thirdly, we have put in place clear rules to minimise opportunities for corruption. Fourthly, we have not hesitated to impose strict laws as a strong deterrence against corrupt actions.

Prof. Lu explained that payment of competitive salaries to those in public service allowed them to achieve a better standard of living, thus effectively removing the need for corruption. He highlighted two points that reflect the core of the system. First, we take an honest view of human nature, and that is to recognise that political leaders respond simultaneously to their social

Column: 121

responsibilities and also economic instincts. We also look at politics honestly. It is a calling requiring a sense of self-sacrifice, and at the same time a career choice impacting the economic well-being of family and dependants. In other words, when we demand that the leaders must have high moral standards, we must also provide good income, and establish strict rules and laws to ensure an honest and clean government.

( In English) : Therefore, as noted by Prof. Lu of Shenzhen University, paying Ministers well is one of the key measures needed to ensure a competent and honest government. In his opinion, it is better for us to pay well but to hold the Ministers accountable for their performance.

As I have mentioned, notwithstanding some of the pitfalls of Mr Low's proposal to peg Ministerial salaries to the lowest 20% income earners, I do believe that the intent behind his proposal is a good one, ie, to bring home the message that Government has the responsibility to ensure the progress and well-being of all levels of society, whether it is the lowest 20%, the middle 30%-70% and the highest 20%.

The labour movement, in particular, stresses this point, because workers at all levels matter to us. For the low-wage workers, we want to continue to have able people in Government work hard to support job redesign and skills upgrading, so that more low-wage workers can get better jobs and better pay. For older workers, we want to continue to have a caring Government that is planning ahead to raise the effective retirement age, so that more older workers can keep in good health and to stay in employment for as long as they wish.

For the PMETs, we want to continue to have a bold Government to create new jobs and to invest in retraining so that their new careers are better, if not as good as their old ones.

Column: 122

So, now do we, as Singaporeans, collectively hold the Government accountable for improving the lives of not just one segment of Singaporeans but all Singaporeans? It is with this in mind that I support the stronger linkage between the Ministers' salary and the GDP as it is one of the most representative indicators of the well-being of a broad base of Singaporeans. And it is definitely not something that will enable the Ministers to earn a "sure-win" salary because the economy can go up and can go down. So the Ministers' packages will also have to be adjusted because of that.

At the end of the day, in companies, if an employee does not live up to the expectations and to the salary that he is paid, he can be fired. Likewise, in Singapore, an incompetent and uncaring Government can be voted out. Every five years, all Singaporeans, regardless of income levels, have an equal vote in deciding whether or not the Government has done enough for them. The people will decide whether or not the Government acted as though it has a blank cheque, which Mr Low talked about, or whether the Government acted in a responsible manner with their long-term interest at heart, implementing policies that do indeed improve their livelihoods and well-being. If the Government takes care only of top-income earners, who are a small minority, and forgets about the low-wage workers, the older workers, or the PMETs, it cannot win enough votes to stay in power. And Singaporeans must judge the whole Government for its record in the next few years and decide if it is good enough. This is how Ministers will be held accountable for their efforts to improve the lives of all Singaporeans, and not just those at the top or at the bottom.

Mr Deputy Speaker, Sir, in conclusion, I think if we want people, including Ministers, to give of their best, we should not create the conditions to make them

Column: 123

feel disaffected, for example, by paying them far lower salaries than commensurate with the demands of the job. We can never fully measure the value of competent and honest government. What matters most is whether the Ministers deliver on their promises to Singaporeans and that, over time, all our lives are improved. All Singaporeans can and do judge the Government according to their own yardsticks, whether it is the unemployment rate or any other yardstick that they deem to be important, and they will express their assessment through their vote. Because of this, I support the revision and the stronger linkage of the Ministers' pay to the GDP.

Mr Deputy Speaker: Mr Low, is it a clarification?

Mr Low Thia Khiang: Mr Deputy Speaker, can I clarify what the Member has talked about? In Mandarin, Sir.

( In Mandarin ): Mrs Josephine Teo said that I had mentioned during the General Election that the Ministers' salaries should be pegged to the lowest 20% of the workers. But I did not mention it in my speech just now. Most importantly, it is now that the Ministers' salaries are pegged to the top 48th earners in the private sector. This has always been the concept. So, a very important point is that the Ministers occasionally may forget that there are some people who are in the very low-income group - they are the poor people. It is for this reason that I mentioned during the General Election that Ministers' salary should be linked or pegged to the lowest 20% income group. Maybe you multiply it by 100 times, is that considered high enough and, if it is not enough, then how much more do we need, maybe an astronomical figure?

Column: 124

The second point that I would like to clarify is that she said that we must have high salaries so that we can have a clean and honest government. But I would like to tell her, if a person is greedy, no matter how high the salary is, he will not be satisfied. So can high salary ensure a clean and honest government? This is still a controversial question.

Thirdly, I want to clarify that she said that the PAP can be ruling for a long period of time because the Ministers have high salaries, all the civil servants are highly paid, so they are all very clean. But I think the reasons for ruling over a long period of time should be more than this. It includes, for example, during the General Election, amend the General Elections rules ---

Mr Deputy Speaker: Mr Low, those are not points of clarifications.

Mr Low Thia Khiang: Thank you, Sir.

Mrs Josephine Teo: ( In Mandarin ): Sir, regarding what Mr Low said just now - the quote about high salary fostering a clean government - I had shared an observation by Prof. Lu Yuanli of Shenzhen University. It is not just my view, but a view of the Professor as well. So, whether Mr Low agrees or not, he is free to have his own view. Earlier on, Mr Low mentioned the point of linking the Ministers' salaries with the bottom 20%. In my previous speech, I did point out that if we really did that, then all the Ministers will only be concerned with the welfare of the lowest-income group. But what about the sandwich class, what about the professionals - is their welfare not important? Is the Ministers’ work not concerned with raising the living standards of the whole society, and not just of the lowest income? So, I believe that the people will understand that what we want are Ministers who are concerned about all Singaporeans, and not just a small segment of society.

Column: 125

5.58 pm

Mr Zainudin Nordin (Bishan-Toa Payoh): Mr Deputy Speaker, I do not think I can add anything to the thinking behind why we need to pay for talent. Minister Mentor Lee Kuan Yew has said it simply and said it best - the price of not having the top talented people in the Government and the civil service is the failure of Singapore. No one can deny this point. It is a given. But I would like to raise several points that the Government, this House and the civil service could consider and reflect on.

All of us here are for a purpose and while we are here in this Chamber as Members of Parliament, we have the responsibility to uphold the basic tenet of what makes this country work and why we should defend that principle. Though it is ironic that we should be discussing and debating on something that we may have direct benefit, it is for this very reason that the Members of Parliament are elected to do. In fact, this matter does not concern any individual civil servant or Minister. It concerns every Singaporean because it is about the future of our civil service and our leadership.

Let me start by offering one perspective for my fellow Singaporeans to consider.

Support for this salary review for civil servants will send a strong, enduring and permanent signal by the people, especially to the world out there watching us, that we are committed to have and will continue to have the right and best talent in Government and political office in order to continue having the right policies and executive actions to sustain our country as one of the best places to live and to do business. This, we do so that Singaporeans will never lack good-paying jobs, continuous employment, better facilities and infrastructures, like schools and homes, and steady economic growth

Column: 126

to assure a better future for our children and their children.

However, Sir, I do recognise that the timing for this salary review comes at a time when there are still quite a number of people out there without jobs or facing retrenchment or have unpaid utilities bills to settle or long-term medical expenses to meet or have difficulties to service housing loans or struggling to cope with their children's future needs or having difficulties to upgrade and improve their careers amidst a rapidly changing globalised world. My heart especially goes out to those who are struggling with low-paying, very often temporary, jobs and have aged parents to support too. We can emphathise with them. We can feel their frustration and pains and they do confide with us when they come to see us at the meet-the-people sessions. Many of these folks are normal folks who, like any other Singaporean, have hopes and aspirations for their family and children.

Mr Deputy Speaker, Sir, we must remember that while the economy today may be humming along, the victims of the last economic downturn have still not recovered. I am sure my experience is mirrored at the meet-the-people sessions of Members of this House too. There are still too many who are unable to find jobs. There are many who, despite Government's help schemes, cannot afford to fully support their children's education needs, and I do not mean simply paying school fees, because we all know that the cost of education today is much more than school fees. Many middle-aged workers, even skilled workers, have not found jobs of the same quality or pay to replace those that they have lost during the downturn. I now regularly encounter Singaporeans who find daily living a growing financial burden and often fear for the future well-being of their family and their children in this increasingly competitive world. Then, we have

Column: 127

decided to raise the GST. No doubt, any rational person calculating the offset package that the Government has generously given will know that the offset will pay for any GST hike for many years. Unfortunately, Sir, we all know too well that the issue we discuss today does not reside in the realm of rationale nor logic; it is an emotive matter.

As to be expected, there are uneasiness and strong feedback about the proposed review. To mitigate some of the concerns on the ground among them, residents who still have not recovered from the last economic downturn or, worse, have not been able to benefit from Singapore's economic growth in the last few years, we must take pains to show the contributions that each member of the Government and each senior civil servant make to the well-being of Singapore and Singaporeans.

Sir, there is a time and place for generalities, for broad big-picture statements, but what we need today is for the Government to clearly explain how each person who will receive this salary increase contributes to the well-being of all Singaporeans.

Mr Deputy Speaker, let this House hear and listen to what they would or might say in the Chamber and, I quote: "Yes, the best and talented should be paid a just and fair salary, just as we too want to be paid an adequate salary for our day's work." Yes, civil servants must have passion for public service as well as strong empathy for the less able, weak and sick in our society. Thus, is having a higher pay the best or only method to recruit and retain the right talents who have a passion for public service?

The Government needs to communicate in clear and uncertain language that we are indeed sensitive to the plight of

Column: 128

those having great difficulties in daily living and those who are unable to get jobs or better-paying jobs because of outdated skills or old age and the abundant employment opportunities out there that have been announced in the last few years. To put it simply, the right and best talents in Government and public office should be visibly known and measured by the extent to which they have improved the general level of the well-being of the people. Some may say public service is a noble calling, it is more than just a job. It is a calling. It is a privilege of service and leadership reserved only for those who are exceptionally caring for their fellow men and women. We need to continually under-promise and over-deliver and strive to surpass the reasonable expectations of the people who expect no less from the right and the best talents that this country can offer.

Mr Deputy Speaker, I believe that the great public interest generated by the salary review of civil servants serves as a timely reminder for those of us in public office that we are measured by the extent of our active compassion for our fellow citizens. Members of this House will be among those who may benefit from this salary increase. I believe that with this comes a set of very serious responsibilities. It is for us to prove that we have made and will continue to make Singapore a better place for our constituents and also for their children. Let us remember that we have a sworn responsibility to our constituents. We must recognise them as individuals and not mere numbers. We must recognise that they are afterall the people that we are elected to lead and to serve. They have put in our hands their future and the future of their children.

Thus, I urge every Member of this House to reflect on a few of these questions: How are we making a difference? How are we fulfilling this burden of responsibility? What are we

Column: 129

doing to make sure that every resident who has voted us as their representative of this House can rest assured that we will help improve their lives? When we can confidently answer with our own conscience clear, then we know that we are on the way to build a great Singapore where every Singaporean has a fair chance to achieve his aspirations and his future and the future of his family is secure in the hands of this Government. And as we govern and lead them into greener and better pastures of our promised vision, let us carry

this pleasant burden of developing this country together and make it into a great nation where ordinary people live in a grand manner, where great community flourishes and where all citizens call themselves Singaporeans proudly as one people, as they proclaim this their beloved country. If we can achieve this, then the debate whether or not civil servants and political leaders deserve their pay will be moot for they would already have proven their worth.

6.00 pm

Mr Lim Biow Chuan (Marine Parade): Mr Deputy Speaker, Sir, thank you for allowing me to speak on this topic. It has been hotly debated by many people since the announcement was made by the Prime Minister on 22nd March 2007. Sir, I accept the principle that if you do not pay Ministers and senior civil servants competitively, then you risk the situation where you have poor quality and incompetent government and even possibly corruption.

Recently, I read in the Straits Times that hundreds and thousands of low income civil servants in Malaysia are moonlighting to make ends meet. I certainly do not wish for a situation where any of our civil servants had to moonlight to work a second shift just to pay for their monthly expenses. For that reason, I understand the rationale for increasing

Column: 130

salaries of the various categories of civil servants. Last week, Minister Mentor Lee Kuan Yew gave an interview in Australia where he asked, "Why do we quarrel about whether we pay the Ministers and office-holders $46 million, which is 0.13% of Government expenditure, or whether we pay them $36 million or, better still, $26 million?" Minister Mentor said, "So you save $20 million and jeopardise an economy of $210 billion." Indeed, from the perspective, to pay the Ministers and office-holders $46 million seems a reasonable amount. But, Sir, the counter argument may then be, "Why not pay them $20 million more at $66 million?" The question many people grapple with is: what is a reasonable sum to pay for the Ministers, office-holders or senior civil servants?

Sir, whilst I feel that we should pay our civil servants competitively, I have my reservations about the huge amounts of money that we are paying for our top civil servants and office-bearers - $2.2 million for an officer of Grade MR4 and $363,000 for an officer at Grade SR9. And from the feedback that I have received, many people too feel that the salary which the Government is paying for these civil servants and office-bearers is too high. I express my concern as to the manner of pegging civil service salaries to the income of private sector individuals. Allow me to elaborate, Sir.

Firstly, in the private sector. Many of the top earners receive such high income because they either built up the companies themselves or they took huge risks with their personal fortunes. Had they failed in their endeavours, they would have received the blue bankruptcy papers that all businessmen dread. For every success story of any businessman that you read about, there are probably hundreds, if not thousands, who had failed and are now either bankrupt, or lost their family homes, or have suffered huge financial loss. Sir, my humble opinion

Column: 131

using the top earners in the six professions can at best be a guide as to what a top civil service officer should earn as he or she simply does not have to contend with the risk of losing her personal fortune. Former Permanent Secretary, Mr Ngiam Tong Dow, once said that, as a Permanent Secretary, he never had to worry whether he could pay his staff their wages. It was all provided for in the Budget. When he became the Chairman of DBS Bank, he worried about wages only 20% of his time. When he became the Chairman of HDB Corp, a new setup spun off from HDB, he spent 90% of his time worrying whether he had enough to pay his staff at the end of the month.

Sir, if you are a top earner as a lawyer, an accountant, engineer, banker or employee in an MNC or local manufacturing, the worries are just as bad, if not worse, than at HDB Corp. As a lawyer who runs a law firm, I worry all the time whether the clients would continue to use my services, whether the bills which the lawyer renders would become bad debts, whether the law firm staff would leave and take away business, whether the incompetent staff would mess up the accounts, whether the firm could deliver on legal work and whether the firm will be sued for negligence. There is also the worry that a dissatisfied client may make a complaint against a lawyer with the Law Society. All these, Sir, are on top of the concern whether I could pay my staff at the end of the month. And if these worries, like poor business, bad debts, negligence suits, etc, are not properly handled, the consequences are devastating for the business. For the other industries, they are likely to be the same for accountants, engineers and bankers. Possibly for bankers and some of the MNCs, you have to worry whether you can meet the sale targets for the year.

Column: 132

Sir, I struggle to understand what does the top Administrative Officer aged 32 at Grade SR9 have to worry about that would justify him receiving $363,000 a year, assuming he completes NS and graduates at 25 or 26 years of age, spends one to two years on a Master programme, at best he would have received five to six years of working experience at age 32 years old. What does a Grade SR9 Administrative Officer scholar with five to six years of experience do to earn that kind of salary of $363,000? From many people's perspective, they take no personal risks and are thus paid employees. If they mess up the policies, at best, they fail to be promoted, or they are asked to leave the Administrative Service. How does the Government justify paying such top dollars for someone with such experience even if there is only one such officer who achieves the grade in a year?

Sir, it is not my intention to run down the work that these Administrative Officer scholars do or to cast down on their ability. I know a few of these Administrative Officer scholars who work very hard and do their utmost best to deliver in their work. I just wish to put into perspective that having a benchmark does lead to a financial result that many people feel is unjustified.

Next, Sir, a top earner in an MNC, a lawyer, or an accountant, in the last three years may not be a top earner this year or the next. Fortunes in business vary according to industry cycles, and today's top earner may be in financial difficulties tomorrow. Based on the current peg to private sector salary, the senior civil servants will never ever have to face a downward cycle because it is pegged to the salaries of top earners, and there will always be top earners. Thus, this year, the top earners may be a property developer. If there is a glut in properties, he will not be the top earner next year and, next year, the top earner may be

Column: 133

someone in the IR business. The following year, the top earner may be someone in the computer business. But for the civil servant, his fortunes will never fall, as he is always pegged to the top earner.

Third, assuming that indeed, we have talented people that justify that kind of salary, my next concern is whether any increase in salaries will keep these talented people. Some of us may have read in the Straits Times about a former Administrative Officer, Mr Lee Chee Khoon, who already had four job offers when he quit the Administrative Service. In the year 2000, when the Prime Minister spoke about the review of salary benchmarks in Parliament, he spoke about the resignations of eight Administrative Officer scholars, of whom three left to join start-ups because they wanted to be part of the revolution. So the reality is that talented people want different challenges. Some officers may feel that if they do not make it to the top three of their cohort in the year, they would never make it to the top in the civil service. So they better leave as their talent is not recognised. Thus, up to a certain stage in one's life, increasing salaries alone may not be a motivating factor in persuading an Administrative Officer to stay. They may want to be their own boss. They may want to see the world from a different perspective, or they just may want a more balanced family life. In any event, Sir, I would submit that it is not a bad thing for talent to go to the private sector. This spread of talent in the civil service and the private sector may be better for Singapore as it keeps the economy vibrant with good exchange of ideas to make things work more efficiently.

Fourth, Sir, I am not convinced that if we lose talent to the private sector because of inadequate salaries, the officers and Ministers that we lose are not replaceable. Former Secretary of State of

Column: 134

America, Mr Colin Powell, recounted in his autobiography that when he was promoted to Brigadier General, the Army Chief of Staff told the 52 newly promoted BGs that competition was very keen at that level. General Rodgers said, "All of you could board an airplane and disappear over the Atlantic tomorrow, and the 52 Colonels that we replace you with would be just as good as you are." In other words, Sir, in the Singapore context, if half of our Permanent Secretaries were to quit tomorrow, whilst the transition would be very painful, I would expect the Deputy Secretaries to be able to step in and take over, and perform equally up to the mark.

Finally, Sir, I am concerned about the message that we are sending to Singaporeans by paying our top office-bearers such a large sum of money, and the message was unintended in that money is everything. As it is, the public perception is that Ministers and senior civil servants are already well-paid. For the Government to argue that they should be paid even more would create a bigger gulf between the Government and the man-in-the-street. It would cost more misunderstanding that the Government does not appreciate the hardship that the people are suffering under. And here, I say, misunderstanding because I know fully well that the Government does appreciate this hardship and is doing its utmost best to solve these issues. We assume, Sir, that Singaporeans cannot be motivated to serve as civil servants, office- bearers or Ministers, unless they are paid well. We assume that Singaporeans will not rise to the challenge to make personal sacrifices and to serve when called upon to do so.

Sir, I am aware that every Member of this House has made personal sacrifices and suffered financial loss to be serving as MPs. Some have taken pay cuts to serve as office-bearers. Some have lost business opportunities due to the huge

Column: 135

amount of time taken up by parliamentary duties. There is also the loss in privacy and loss of family time with loved ones. But we all came into politics with our eyes open and we have all decided that we would accept the sacrifices required of us. And I am certain that all of us would consider this service as MPs an honour to serve the people and the privilege to have the opportunity to lead, to influence policy and to make a difference in the life of fellow Singaporeans. Likewise, for senior members of the Government service, the Permanent Secretaries, the Directors and the Deputy Directors. They all have the privilege of drawing up policies that would have an impact on the lives of Singaporeans. They would be working with the best of the best in Singapore. As the newly appointed Second Permanent Secretary for MTI, Mr Ravi Menon, said, he stayed there a little longer because he found this work meaningful. Maybe I am idealistic, but I firmly believe that to be a leader, self-sacrifice is important.

Mr Deputy Speaker, Sir, Minister Mentor spoke about the huge personal sacrifices made by Dr Ng Eng Hen, Dr Vivian Balakrishnan and Dr Balaji, when they gave up their lucrative medical practices to become Ministers and Senior Minister of State. And having read of their personal sacrifices in the newspapers, my respect for each one of them has shot up several notches, just as all of us in this House have immense respect for Minister Mentor because he gave up the opportunity to be a top lawyer, earning millions of dollars, to take home the pittance that Ministers in those days received. And one day, Sir, I would like to be able to say that I had the privilege of working with these giants in politics who were prepared to make the requisite sacrifices to answer the call to duty. Can we find more such people? I am certain that if we put our minds to it, we would

Column: 136

be able to do so. And if any person who does not wish to join the rank of Ministers or Government officers simply because they cannot take the financial sacrifices, then let us just accept that. It may be better for both Singapore and the persons concerned that they remain in the private commercial world where they can contribute to Singapore in a different manner.

Sir, once again, I reiterate that I have no issue that civil servants and officers should be paid competitively. But I would urge the Government to rethink the policy of pegging the civil service salary to the top earners in the economy. Let us look for a formula that would compensate our top Ministers, other office-bearers and senior civil servants well and yet allow the people of Singapore to appreciate the sacrifices that these leaders are making.