CIVIL SERVICE SALARY REVISIONS

CIVIL SERVICE SALARY REVISIONS: Debate resumed.

6.12 pm

Mdm Ho Geok Choo (West Coast): Sir, this debate is highly emotive. I wish we would look at the bigger picture and not allow emotions to cloud the realities of the war for talent that is raging in this global market today. My speech will consider the following: competition for talents, reasons for attrition and issues beyond salary, refining the process of benchmarking with independent panel and market salary benchmarking of job size, the importance of flexible wage policy, reinforcing the Uniquely Singapore Brand.

Competition for talents

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Competition for talents

Sir, the issue at hand is what will happen if we lose talents from the civil service. The conventional wisdom is salaries must go up to match what the private sector is paying for the best. But is the risk of losing talent real or perceived? Are there other reasons why talented people leave the civil service? This begs the next question: is money the only way to “block” the drain on talent?

While turnover statistics from the civil service might point to the mid-level officers leaving the service, the turnover rates for the creme de la creme in the Administrative Service, eg, the Deputy Secretary, the Permanent Secretary and for that matter, equivalent grades in the political leadership and Judiciary is practically nil.

Does that mean that we need not worry about this group of hotshots whom some critics may say have already benefited from generous scholarships?

But from a HR perspective, caught in a competition for talents, there is a need to proactively revise the compensation package to ensure that something is being done to retain the best in the midst of the competition for talents. It is about due diligence and not taking what you have for granted. To do it after the fact would be like closing the stable door after the stallion has bolted.

HR departments would want to inculcate a pay philosophy which nurtures a high performance culture. This ultimate measure is what CEOs owe to business enterprises in the commercial world. For the Government, it is accountable to the people and businesses for the success of the nation - the whole complete proposition of stability, safety, security and economic prosperity.

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It is logical to ensure that we have the best brains and minds in the civil service and at the helm of political leadership in running Singapore Inc., the biggest and most complex enterprise in a sea of vulnerability: complex in its character, for we are a nation of multi-racial and multi-religious people; vulnerable, because we are surrounded by neighbours with highly different priorities, survival requirements and resources, and who constantly blow hot and cold at us.

To govern such a nation effectively with precise outcomes year after year has been the hallmark of our civil service and political leadership. In the stock market, Singapore Inc. is definitely a superior blue chip that pays good dividends year after year to its shareholders. So, we have to make sure that those who make good returns are well evaluated and remunerated for their effort.

Sir, the civil service is Singapore’s biggest employer. It must compete with the private sector to attract and retain the best talents. During the recession years, the civil service was a good port in a storm. Many unemployed lawyers and engineers signed up for teaching, and many are returning to the private sector during good times. This may explain the rise in resignations, from 4.8% in 2005 to 5.7% last year. But I would argue that such attrition is a natural outcome of good economic times. Even private sector employers are lamenting the rise in job-hopping.

Sir, many ask: how does the attrition rate in the Administrative Service compare with the attrition rate of the brightest in the six professions used for the salary benchmark? Are they also losing their best? If so, would we end up spiralling the wages of those whom we benchmark against? In other words, we could inevitably start a game of musical chairs in this competition for talents, as the ones

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overtaken will now benchmark against the newly-installed top earners, and the game goes on. Hence, the need to caution using salary benchmarking as the only solution to attrition issues.

Many of the former Administrative Service officers who have left for the private sector deny that it was higher pay that pulled them away. Most cited other reasons, such as yearning for more exciting challenges. Some professionals whose scholar-children in the Administrative Service are under very intense pressure to perform, as they have not reached Head of Department yet, say this is the problem - not that of the level of Superscale or Minister's pay, but it is the intense working conditions of those yet to prove themselves that is “pushing” the younger Administrative Officers to join the private sector. So, is it a case of treating all problems like a nail just because the hammer is the only available tool?

The sterling performance and the integrity of our civil service and public administrators have been acknowledged worldwide. To maintain this level of performance, we must endeavour to attract and retain the right talents. This requires good human capital management. Some say that throwing money at a problem is a lot more complex than dollars and sense, especially as measuring quality of “public service” in purely financial terms is becoming very crude and money cannot substitute for leadership that is low on “people” skills. We have to go beyond the salary issue. Instead, we must inculcate tolerance, trust, fairness and integrity among people managers.

Sir, let me now turn to the issue of Ministers’ salaries. Many Singaporeans would argue that Ministers cannot be compared to civil servants, even top civil servants. They are not recruited from a job advertisement. Ministers are elected

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by the will of the people in the General Elections, and then appointed from among their peers of MPs. These differences should help us better understand what drives a Minister in his job. And they should guide us in evaluating how a Minister should be remunerated. So what drives a Minister in his job? Is it merely the pay, or is it also his own value system and his commitment to serve the people?

Ministers operate, or should operate, with a spirit of service to the people who elected them. There is nothing in the private sector to match this privilege and the responsibility that comes with it. If governing Singapore is a task far larger than governing a corporation and requires skills of a different sort, it only goes to show that it comes with almost a priceless tag. Some would argue that Ministers may not necessarily perform as well in the private sector. My rejoinder to this is, it similarly applies to the private honchos. Therefore, given the extra EQ and sacrifice required of the political leadership, all the more compelling it is to peg their worth to that of the top private sector CEOs.

Sir, this debate boils down to a question of value and worth. How much do we value our civil servants and Ministers, and how much are they worth? Almost every one, from the man-on-the-street to the Opposition MP in this Chamber, has a view on how much is too much but no one seems to be able to say how much is just right. Is it realistic to peg the revised salaries to private-sector levels? Think about it. The size of a $230 billion economy as well as millions of lives are dependent on this group of civil servants and political leaders, and, if they fail, it is as good as a nation of 45 years under the PAP being wiped off completely. So can we ever overpay them for that humongous task ahead?

Will a Minister resign because his pay does not match market rates? Perhaps

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we should ask Dr Tony Tan and Mr S Dhanabalan, both successful top bankers, why they devoted their best years to serving the people. Dr Tony Tan even responded to a “recall” to become Deputy Prime Minister when the need arose. Did both of them do it just for the money? Were they adequately compensated for their sacrifices, ie, did they enjoy the same financial perks as Ministers as they did when they were bankers?

Sir, the crux of it all is: can we really tag a price to our political leadership? I think not. It is, as I said, priceless. We know that the call of duty to the public office is beyond dollars and cents. It takes more than capabilities and competence. It involves sacrifice and service. And if that were so, what is $2.2 million compared to $5 million that we pay the CEO of SingTel?

Sir, I support the principle of paying for the worth of the job and performance of the incumbent. The directions taken by the Government today is correct, but I would advocate further refinements in the process.

In large public-listed companies, the review of salaries is not done internally but by a remuneration committee staffed by independent directors. It may be prudent for the approach pioneered in 1994 to be reviewed and validated by an independent expert panel appointed specifically for this. There may be a need, therefore, for this formula to be validated by a properly constituted panel, as has been suggested by many academics and professionals, perhaps comprising remuneration experts, MPs and private sector CEOs.

The use of market salary benchmarks for transparency is definitely welcome. Is the latest $2.2 million salary benchmark too high? Based on our estimate, the size of a Minister’s job is significantly larger

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than the CEO’s job at some of the largest listed Singapore companies. If we were to extrapolate a market salary based on the published CEO salary data of these companies, this benchmark is not too high.

But, technically, the salary benchmark in its current form is difficult to defend because they relate to individual earnings and not to “market basic salary rates”. Also, the fact that the benchmark has been developed internally can be construed as self-serving. Given that the 48 individuals in the six professions may not be the same individuals year after year, are we comparing apples with apples, given that the cohort of civil servants and political office-holders may remain the same for a good five years? Should we also use a five-year moving average for a more realistic measure of earnings over a period of time, rather than to peg it against the incomes of the previous year? Whatever the formula, it will always be a judgement call. So who makes this judgement is crucial.

Perhaps, the salary benchmark could be revised to consider the existing remuneration packages of the 10 or so largest listed companies and a judgment based on how many times larger the Minister’s job size is, compared to that of these 10 CEOs. The judgment should be made by an appointed expert panel.

Sir, there have also been rumblings that the heat on high wages is happening in pockets of the economy and not widespread yet. But once the cue is on, where the civil service and Government take the lead, then it can be expected that pressure will be put on, especially on the non-financial sectors. SMEs are going to be hard hit in their bid for talents. It will start an inflationary wage spiral. Business costs will go up and some businesses may become uncompetitive because of high wage costs.

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Sir, this is the time for us to reinforce the importance of flexible wage policy. The scheme towards a variable component with a high portion linked to performance of the individual and the economy is the right thing to do. Therefore, employers who can afford and need to align with market rate would do well to use the variable component that realistically compensates for real-time performance and keep the fixed component low. For others, this is a good time to do the catch-up and put it right, especially if employee salaries have been lagging behind. Where the company could ill afford hefty increases, employees must not abandon ship for another 50 bucks.

The test to building trust and fairness could not have come at a more appropriate time for both employers and employees. The economy is doing well as a whole, and if any adjustments are to be made, it must be done when things are looking rosy and bright, although it may not be so for every one. There is never a right timing.

Sir, our Ministers and civil servants have done a sterling job in making Singapore the developed nation that it is today, carrying a uniquely Singapore Brand. The Government and Ministers do not deserve the “disdain or cynicism” that is generated every time their pay or its determination is mentioned. I do not agree that political office is demeaned by paying competitive private-sector salaries, so long as the benchmarking is above board and appropriately reviewed. It takes a rare breed to make it to the top anywhere and, for that, we need to pay a premium. It is a globalised world that offers many attractive options, and we all know that the rules of the game have changed for every one. It is no longer relevant to follow the paths of the Tony Blairs and George Bushs.

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Sir, no one can deny that the Singapore Brand has given a boost to many, and especially the private-sector businesses that have thrived on this brand. Singapore's approach is breaking new ground but, eventually, I am pretty sure that many countries will have to follow suit, just like in our road pricing approach. Therefore, another precedent created by Singapore Inc.

We do not need to apologise for instituting a pay philosophy that advocates for salary to commensurate with the worth of the job and performance of the incumbents. All we need to do is to fine-tune the formulation process for the salary benchmarking.

On this note, Sir, I support the motion.

6.27 pm

Mr Chiam See Tong (Potong Pasir): Mr Deputy Speaker, Sir, thank you for allowing me to join in this debate.

A Minister in Singapore gets an annual salary of $1.2 million, our Prime Minister gets $1.9 million, and our Minister Mentor gets $2.7 million, as reported in the press. Compared to our office-bearers, the President of the United States gets an annual salary of only nearly $1 million. The Prime Minister of Canada gets paid about S$400,000; the Australian Prime Minister receives an annual salary of about S$300,000; the Prime Minister of the UK gets about S$500,000 and the Chief Executive of the Hong Kong SAR government gets about S$600,000. The salaries of these heads of government that I cited are amongst the highest paid in the world and the salaries of our Ministers easily surpass them. It can be said that our Ministers receive the highest salaries in the world. This can be entered into the Guinness Book of Records as a world record. This is another first that Singapore can boast of, ie, Singapore is a small country described only as a dot on

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the world. The United States of America has a land area of about 15,000 times that of Singapore and over 60 times more people than us, but our Prime Minister earns more than President Bush.

Yet, our Prime Minister and other Ministers are still dissatisfied - they want more. The question is: if the heads of governments of other bigger and more industralised countries can live on salaries less than a million dollars, why can our Ministers not do the same?

It does not mean when a country is able to pay its Ministers more, they can automatically ask for more. Why was Mr Durai of NKF ostracised for receiving more, although NKF can well afford to pay him more? The reason is that NKF is a charity and its funds all come from donations of Singaporeans who themselves are not rich. Poor people are also supporters of NKF and the money they donated should mostly be used for the benefit of the patients and not to line the pockets of its employees. A charity must be run for the benefit or the purpose of the charity. Although the Government is not a charity, it has many similarities with charities, especially in the way it runs with honesty and integrity. A government should be run entirely for the benefit of the citizens of Singapore. When Ministers are paid exorbitant salaries, then Singaporeans perceive that the Government is not doing everything it can for the people of Singapore but it is more interested in lining the pockets of its Ministers.

Only recently, Members of Parliament have been trying unsuccessfully to get the Minister to increase the Public Assistance from $250 to $300 per month. How will the people react if they found out that the Government is asking for a pay hike of Ministers' salaries when the Ministers are paid of about $100,000 a month? The people in the bottom 5% are still paid only about $1,000 a month. What are the Ministers going to say to these people

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when there is such a great disparity of incomes between them and the lowly-paid workers? As far as I am concerned, they have all lost their moral authority, vis-a-vis the low-income workers. The gap of their incomes is too great, in fact, 100 times.

The poor worker has to work 100 months to earn the amount of salary a Minister earns in a month. The duty of political leaders is different from that of a leader in a commercial world. In the commercial world, the CEO or the manager has to only think of the bottomline, but the political leader must, at all times, maintain integrity and moral authority to inspire and to rally the people. Once the moral authority is lost, the whole credibility is also lost.

A Minister receiving a salary amount of $1.2 million will certainly undermine his moral authority. As John F Kennedy said, "Ask not what your country can do for you, but what you can do for your country." The question is how to determine the salaries of Ministers. The Government chooses to fix the benchmark of Ministers' salaries by pegging them to the highest earners in the private sector. I think this is unfair to the taxpayers who are footing the bill because the high performance managers and the CEOs are given all kinds of extras, incentives and perks, such as bonuses, stock options and also bonus shares. In other words, their salaries are highly inflated. How can our Ministers take that as a benchmark?

A fairer way is to peg Ministers' salaries to the Ministers of other First-World countries. I think Hong Kong is a good country to follow. Hong Kong is an Asian country about the size of Singapore. They are paying the head of government of about $600,000 a year or about $50,000 a month. I think this is a fair salary.

At the last debate in this House on the revision of Ministers' salaries, I suggested

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at that time that we pay our Ministers $50,000 a month. This time round, I would suggest that Ministers be paid higher, about $70,000 a month or $840,000 a year. If we pay our Ministers overall less by $20 million, that amount can be saved and we can easily use that to up the PA allowance - $300 per month - to benefit another 66,000 cases. The last time, I believe it was Dr Lily Neo and others who were asking for more PA allowance. There you are, if you can save on the Minister's salaries, we can have another 66,000 people benefiting from the money we save by giving less to the Ministers.

What are the jobs of the Ministers? Are they paid to grow the economy or, simply, just to take care of the Ministries or to lead the nation? The Minister Mentor, last Wednesday, in Sydney, said that Singapore should not save on the $20 million or Singapore's $210 billion economy will be jeopardised. Now, he is assuming that Ministers are responsible for growing the economy. But there is one glaring example of the Shin Corp fiasco which showed that the Ministers' judgement and decision, if they are involved, do not justify the huge amounts of salaries they receive. Maybe the Ministers can explain why the Ministers have not made a decisive decision in the Shin Corp deal, which I think it is not very wise and gets Singapore into a bit of a fix.

6.35 pm

The Minister of State for Trade and Industry (Mr Lee Yi Shyan): Mr Deputy Speaker, Sir, I would like to start with Mandarin.

( In Mandarin ): [For vernacular speech, please refer to Appendix A.] Singapore's achievement over the past 40 years is

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*Cols. 199-202.

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indeed a case study of successful economic and social development in contemporary history. This tidy country has very limited resources, next to nothing, but yet, it is able to compete and survive in a not too favourable political environment.

Our founding fathers were firm and resolute. With extraordinary courage and wisdom, they were able to persuade the people to develop this unimpressive island into a brilliant and famous metropolitan city. Countries, near and far, big and small, are full of admiration for our strict political style, and the humane and social harmony and development we have achieved.

The reason for Singapore's success is because we have a very good people-oriented political ideology. From the formulation to the execution of the policies, we have a very good civil service system and mechanism to ensure their success. Within the system, we have enough talents and experts to realise our various dreams and visions. We have been able to achieve the actual effects of “To talk about what we think about; and to carry out what we talk about.”

Many other countries can fulfil only two of the three conditions, hampering the development of the country and the quality of life of their people cannot be improved. In some of these countries, the people in power neglect the problems of the people’s lives, caring only for their own personal benefit. Some governments may have the vision but not a team of clean and honest civil servants to formulate policies and see to their execution. Yet, there are some other countries with a host of talented people but lack a sound system and mechanism, with the civil servants fighting among themselves rather than coordinating and operating as a team, resulting in super high personal IQ but low organisational IQ.

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So the successful operation of a government depends very much on the three fundamental factors of “political ideology; system and mechanism; talents and experts”. All the three factors must be present for the absence of any one of the three may result in their getting nowhere. Hitherto, I have been speaking on the major issue because if the country is not wealthy, the people will not be strong.

During the Warring States in ancient China, in a petition to the Emperor of Zhao, the sage Xunzi wrote, “An enlightened emperor must prudently maintain harmony by reducing expenditure while broadening sources of income, and carefully use his discretion in the State’s spending. Then the State will have surpluses and there will be no worry of insufficiency.” This is the basic concept of a wealthy nation, strong people. There must be economic development first before there will be wealth to be shared with the people. On the contrary, if the economy is weak, all the people can share is its poverty.

Our present economic system is completely linked to the global economy. As a result, our experts and talents do not belong to our country and our people alone. Those who are talented can find greener pastures all over the world. While the water flows to the lower planes, people will strive to move to higher grounds. The United States rose to become a superpower because it attracted and absorbed talents from all over the world and the Jews from Europe. China is also promoting the concept of prospering the nation by technology and education to attract its overseas students to return to serve the nation.

Whether or not we can continue to be prosperous will depend on whether we can strike a balance among the three major premises of “political ideology, mechanism and talents”. From my own

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observations, we will be facing strong challenges in the “talents” aspect. When faced with market pressure, other countries and foreign companies will unhesitatingly and mercilessly poach the talents from Singapore. The Middle East countries are offering double or triple annual salaries of more than a million dollars to recruit middle management staff in their 30s to work there.

So, if we do not raise the salaries of our civil servants now, we are resigning ourselves to death, awaiting our doom. Some time down the road, we will find that we have not enough good people to drive our system and mechanism. This will be a national crisis and a sign of weakening.

Of course, not every Tom, Dick and Harry will earn an annual salary of $1 million to $2 million, but we are beginning to see more of such cases. To the man-in-the-street, a million or two may be a huge sum of money, but I would like our Singaporeans to be understanding and rational people. We have to be magnanimous. Only if we have a good government and a good civil service can our economy develop and prosper, creating wealth to be shared with the people.

In fact, since 2001, the Government has shared some $11 billion with the less fortunate people in Singapore by way of assistance packages. The destitute elderly, the patients who need medical care, the unemployed and the school children have benefited from these packages.

Of course, with an ageing population and economic growth, such assistance packages may be increased rationally. In any event, I believe that we should be able to strike a good balance between creating a loving and harmonious society and encouraging our people to be self-reliant.

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Attracting the able with high salaries, maintaining the people with integrity with high pay may not be a common practice in the world. However, so long as it is practised properly, benefiting the people, even when we may be creating a precedent, we should not hesitate to make the move.

I hope that with the future of our nation in view, we would all support the best people to join the Government and the civil service.

( In English ): Our debate today is about fair pay for Ministers and civil servants. Their job is to lead the country, translate vision into reality. If they do their job well, our economy will grow, our society will remain cohesive and the lives of Singaporeans will improve.

Before we can come to any conclusions, I think we need to address three questions:

(a) What is the job about, ie, what is at stake; (b) What kind of people do we need to do the job well; and

(c) What is a fair pay for these people.

What is the job about, what is at stake?

The job of any modern government is a complex one. It not only has to address current issues, but it has to plan for the future. It has to affirm the successful, it has to encourage and assist the weak. It has to protect its citizens, but also to challenge them to be responsible. It should not be populist, but should seek to strengthen consensus and unity amongst its constituents so as to achieve a common vision.

While these job descriptions may seem common for many governments, the job

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of governing Singapore is made much more difficult because of our smallness and vulnerabilities. Despite all odds, we have accomplished much. Singapore is worth much more now than 40 years ago and the stakes are high.

How much is Singapore’s worth? Based on our GDP of S$210 billion growing at 4% to 6% annually, every five-year term of good government will produce new combined value add in excess of S$1 trillion. What about our foreign reserves managed by GIC, savings in the banks and investments in the SGX? They run into hundreds of billions. We all know that commercial buildings are worth a certain price. Likewise, our factory buildings, MRT system, roads, airport and seaport all have monetary values that can be realised if they are listed and sold to international investors. Yet, we have not put a price tag to these assets.

Imagine if we go one step further and impute values to the intangibles of the operating environment in Singapore: safety, reliability, stability, efficiency and "integratedness". These are valuable attributes money cannot buy and yet, these values have become synonymous with Singapore’s infrastructure.

Singapore’s value is also expressed through other countries’ curiosity at our achievements.

Just a few months back, a middle-eastern country actually wanted to buy over the entire JTC. In Saudi Arabia, one marketing brochure for a new 150 sq km City reads “Singapore in the Middle East”. Many of the oil-rich middle-eastern countries are now diversifying their economies by building new cities and infrastructure. Many of them wish they could build an “instant Singapore” into their systems. I think if we had offered, they would have bought up not just JTC, but PSA, CAAS, IDA, MOE and many other institutions.

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Sir, as far as I know, not a week passes by without a foreign delegation in town studying our systems, with the aim of adapting it back in their countries. They come from China to the Middle East, Russia to India, and not to mention many officials under training from ASEAN countries. They are interested in our urban planning, environmental protection, medical 3M, e-Government, workers upgrading programmes, CPF and soon, the Workfare Bonus programme.

This week, the second Jiangsu province delegation, comprising 18 party secretaries and 11 Mayors, are visiting Singapore. What makes the delegation unusual is that either the Number 1 or Number 2 persons of the major cities in Jiangsu are here at the same time. They are very serious about studying our urban planning and public administration system.

When the first Jiangsu delegation visited us in November last year, one of the Mayors commented to me, "In terms of individual buildings, I believe we have more outstanding architecture than you have. But when you assemble all your buildings side-by-side, your city looks so neat and beautiful. They are in harmony. So what is your secret?"

Our former chief national planner, now a senior director of RSP Architects, Mr Liu Thai Ker has been doing many architectural and city master-planning work all over the world. He reminded me that “Singapore is the world’s only brand new, well functioning global metropolis built up in the last 40 years”. That is why we are a subject of case studies and analysis, from countries near and afar.

What kind of people do we need to do the job?

Does it make sense now that we know we are dealing with trillions of assets in Singapore and we want to start

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to relax the system and have lesser people to run the country?

Consider an executive search firm’s view below. I quote:

"Singapore's bureaucrats are seen as "positive-minded achievers who know how to work ethically within the system with a view to actually get things done and delivered to the population quality products and services” - be it in healthcare, public amenities such as transport and housing, utilities like water and power, environmental issues and, most important, education."

“The current "global initiatives" of Singapore to expand its presence beyond its shores and into the large emerging markets of India, China, etc, are being watched closely. Singapore's experiences in setting up SEZs in Bangalore and in China are practically textbook cases for many countries which are looking to expand their GNPs by co-investing worldwide. The successes of Singapore’s Civil Service Professionals in these areas make them extremely valuable to countries seeking to repeat these achievements. So the next wave of Executive headhunting from Singapore to many other countries in emerging markets could involve senior civil servants - at salary levels far in excess of the ones currently prevailing at home. This process could start happening within the next two to three years as more and more countries are on a platform to take off and need high quality governance to ensure sustainable world class infrastructure is in place."

Sir, I am worried that there might be an exodus of talents from the civil service. If we are not able to appreciate our own talents, others will express the appreciation on our behalf.

Of course, I am not trying to over-simplify any career decisions at the senior level to just a single dimensional consideration of “dollars and cents”. In

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fact, I believe it is most common for any executive offered an opportunity to consider four key factors: (a) mission and meaning of the job; (b) challenge and growth opportunities; (c) environment for self and family; and (d) monetary compensation.

In the talent wars out there, firms are competing by raising the bar in every of the four components above. If all that we can offer in public sector leadership are the first three components, and have a very weak fourth component, it is most unlikely that we can compete effectively against other career opportunities, much less convince anyone to take up public sector leadership positions.

For multinationals, they can recruit worldwide for their CEO and the senior management team members. In Singapore, for positions of Ministers and Permanent Secretaries, we can only choose from the limited pool of top local talents. We cannot possibly appoint foreigners or PRs to the Cabinet, lest we will end up having many foreign Ministers! This is a severe constraint on our building the best team from a population base of 4 million.

The Straits Times reported on 6th April 2007 that Mr Wee Cho Yaw was the best paid banker at $9.25 million last year. DBS’ Jackson Tai and OCBC’s David O Conner were reported to receive around $7.5 million and $5 million respectively. In the real estate sector, Capitaland’s Mr Liew Mun Leong was paid $5.14 million, City Development’s Kwek Leng Beng received $4.25 million and Keppel Land’s Lim Chee Onn $5.5 million. Earlier on, it was also reported that SingTel’s new CEO, Ms Chua Sock Koon, would be paid $5 million if she meets her performance targets.

I think our companies paying their CEOs regionally-competitive salaries is a

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good sign. As our companies grow in sophistication, assets and their international reach, their management teams will also become valuable to other international companies. I am sure their boards, in deciding the level of compensation, have taken into consideration the job scope, complexity and the market value of these leadership positions.

Some people argue that running a business is different from running a country. Running businesses require functional and execution skills; you also need market knowledge and business acumen. Hence, you need to pay top dollars for this unique blend of rare qualities.

For political leaders, do they also not need to possess strong functional skills and the political acumen to take into account a wide range of variables in decision-making? See how the Thai stock market plunged by 15% and US$25 billion was wiped out overnight on the announcement of currency control measures.

What about anticipative work, such as averting terrorist attacks, keeping our sea lanes open, keeping drinking water flowing, ensuring sand and granite supply coming? Do they need organisational skills and execution skills? Do they need plans and preparation? Do they need imagination and risk-taking?

I believe good political leaders not only need to be rational and analytical - the head factor, they must also have the character, empathy and the temperament - the heart factor. They must have exceptional abilities to connect with people.

It is fair to assume that the top 500 professionals in Singapore have the basic “head” factor. Then, as we begin the filtering process, using the “heart”

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criterion and relevant skill sets, removing PRs and non-Singaporeans along the way, we will quickly come to a much shorter list of qualified potentials. If we talk to them, telling them the kind of drastic pay cut they need to expect, and the heavy burden and nature of the political office, I think they will consider the four components of a career choice, speak to their family members and, finally, politely decline the opportunity to serve. We will have very few people coming forward. With the war for talents intensifying, the situation will be worse in the future. Should we then lower our standard of selection, by going down to the next 500 or next 1,000? The further down we go, the less capable people we are recruiting into the team, the less assured will be our future.

Some people argue that business leaders are faced with greater risks. But would not leaders of nations face the same risks and more? We just need to remember the Asian financial crisis, 911, SARS, terrorism, possible pandemic flu, the rise in oil prices, and, of course, in recent months, the shortage of sand.

A business can leave a hostile operating environment, retrench workers and pack up and move to greener pastures. However, our Government cannot relocate Singapore. We have to accept the situation as it is, retrain displaced workers, restructure on a national scale, sustain livelihoods and maintain confidence. Bankrupt businesses can fold up under Chapter 11 and get reborn with new capital and owner. If Singapore folds up, we would not even have a place to call 'home' anymore.

Some people argue that corporate leaders face fluctuating incomes every year. They argue that Ministerial pay should be tied to their work performance. Yes, but we should also recognise that good business leaders deliver strong performance over a period of time.

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Likewise, we should look at a Cabinet’s performance in leading the country in its five-year term or longer.

However, I also want to caution against an over-zealous performance-based implementation that will encourage short-term behaviour. We know that not everything that is quantifiable is important, but not every important thing is quantifiable. Many decisions taken for a country must be long term in nature - master-planning of the city, the population model, policies on a social safety net, defence policy, etc. Even when to build our new MRT lines has very long-term implications.

If we over-incentivise short-term behaviour, as you see how many other governments do, we could end up implementing populist policies, squandering our reserves away and neglecting capacity building and investments for the future. In the corporate world, we have heard of CEOs creating short-term results or turnaround by stripping assets, scrapping staff training and trimming R&D budget just to maximise profits. A company can be propped up for a few years but will die of poor nutrition thereafter. This approach should not be the outcome of our performance-based compensation system for Ministers.

I met with the Chairman of a large industrial park developer in a neighbouring country about two years ago. I was very curious at his business model. So I asked him, "Industrial park development in most countries is a money-losing proposition. Government typically has to put in a lot of infrastructure around the industrial park for it to work. Roads, water, power plants, sewerage system, telecommunications and all these are very expensive investments. In Singapore, we set up JTC just to do that. How is it that you can develop greenfield industrial parks and still make money?"

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The founder-Chairman replied, "Oh ... in my country, the government is not so organised and have people like yours. We, the private sector, must organise ourselves to build our own industrial parks. Besides charging land rental, I also provide utilities, telecommunications, canteens, workers’ uniforms, housing... anything that my tenants need I would provide. We create a revenue model from our tenants and we become profitable."

So impressed, I asked further, “But you have created a new industrial park from ground up. What about your capital city? It is a large metropolis. But traffic congestion is choking it. Is there any plan where you or your government has to tear some of the old buildings down, widen up the roads, build more subway lines and perhaps also bury overhead cables underground?” Without much hesitation, this entrepreneur said, “No, if the government attempts to do that, there will be riots. They will be overthrown the next day. We are too democratic, too many voices and there are too many interest groups. Don’t forget, our government is weak. Your PAP government is half a communist! When you say you do, you will do!"

Sir, whatever others may call us, we deliver benefits to our people.

The latest Merrill Lynch report has this to say about Singapore: “At the risk of being abstract, we would say that Singapore is amongst the best countries in the world. ... There is no prescribed way to analyse a state’s Grand Strategy. But you can start with its perspective. How it sees its goals, its strengths and fears. ... These are key issues for a country … countries with governments that have strategic vision and the ability to implement, also have strongly-performing stock markets. Those that don’t, have not.”

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Sir, persuading the ablest men and women to lead this country must be an urgent priority for the present generation of leaders. The Prime Minister needs every tool he can have to make it easier, not harder for talented people with the right character to come in. We should give our strong support to the proposal to pay Ministers and senior civil servants, and statutory appointment holders market-based salaries.

Sir, paying S$56 million for a Cabinet to run a GDP of S$210 billion is cheap. You cannot get that anywhere in the world.

Conversely, paying a team $46 million (or even $4.6 million for that matter) can be too expensive, if the result is a floundering economy, high unemployment, empty government coffers and a divided people. All these can happen faster than you think, with an incompetent government.

Sir, the choice is clear.

7.03 pm

Mr Siew Kum Hong (Nominated Member): Mr Deputy Speaker Sir, thank you for allowing me to participate in this debate. I know that the hour is late, and I beg the indulgence of the House while I make my speech.

I will start by stating my support for the principle of paying Ministers and top civil servants fairly. But I would draw a distinction between Ministers and Administrative Officers. I will first discuss Administrative Officers, or AOs.

Administrative Officers

Sir, the Administrative Service is a career. It is a job for AOs, albeit one in public service and hence expected to have a greater sense of purpose and an accompanying element of self-sacrifice.

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Seen from that perspective, we cannot fault AOs if they view the public service and the private sector as alternative career paths, between which they have to weigh the relative merits. It is a choice between two competing jobs, each with their own attractions, and we must be realistic and accept that remuneration plays a big part in the decision-making process.

I therefore agree with the benchmarking of the Administrative Service salaries with the private sector salaries, with two caveats.

Firstly, the benchmarks should be adjusted for the fact that AOs are entitled to pensions if they serve long enough. Pensions have gone the way of the dinosaur in the private sector. It is therefore inconsistent to benchmark Administrative Service pay to private sector salaries on the one hand, and to retain a pension scheme on the other. We should either do away with pensions completely, or adjust pensionable officers’ salaries to take into account their potential pensions.

Secondly, and more importantly, the officers in question must really be that talented and must actually contribute that much.

Sir, I spoke to a lot of people over the past few weeks about this issue. And curiously enough, I have found that those who argue against high salaries for AOs are frequently serving or former civil servants. They question whether the AOs are all that talented. They believe that AOs are almost never asked to leave, that they receive private sector salaries while retaining an iron rice-bowl, with the prospect of a pension to boot, and that they would not command such salaries if they enter the private sector.

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So either those in the civil service know something the rest of us do not, or there is a serious perception gap. Perhaps, what is needed is to increase awareness about the contributions of AOs and to have greater transparency in how they are held accountable for their performance.

Paying Ministers fairly

Sir, I think that the considerations are very different when it comes to Ministers. I agree that people should not have to make “unreasonable financial sacrifices” to enter or to stay in public service. But that simply begs the question of what is unreasonable. What level of salaries would be fair? What sacrifices would be considered unreasonable?

Sir, I agree that Ministerial salaries need to be high enough, and that worthy candidates will not be deterred from public service by financial considerations. In fact, I do not think that the current MR4 benchmark of $1.2 million per year is too high in today’s world. I know that many Singaporeans will disagree with me. But we have to be realistic. In a globalised economy where there is massive demand chasing a limited pool of top talent, $1.2 million per year is very possibly at the lower-end of the scale for the very best of top talent.

And I agree that Ministers should be entitled to a comfortable lifestyle. I think that we would be demanding an unreasonable financial sacrifice, if we were to ask potential Ministers to downgrade their standards of living upon entering public service.

Top talent will expect a nice house, a nice car, or maybe a few nice cars, including for the wife and children, overseas universities for their children, good medical care for their family and parents, luxurious holidays, adequate insurance and sufficient investments for a decent retirement.

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But, Sir, how much does it really take to provide for all that? $1.2 million per year seems enough to me. Still, I am willing to accept that it may not be enough – I make nothing near those levels, and I would hardly know what expectations such top earners would have. So I am prepared to agree that the number may need to be higher, and may even need to be $1.6 million, $1.8 million, or $2.2 million.

What it means to be a Minister

But the present benchmarking system is flawed in its mechanics. Many have pointed out these flaws, and I will not repeat them. The only suggestion I would make is to introduce a cap which can be revised from time to time if the Government feels that it is not sufficient for a fair standard of living for Ministers. There should also be an adjustment when a Minister or top civil servant becomes entitled to a pension but the present benchmark is not being changed, and there is no cap. There is no linkage between the benchmark and what it can buy. There is only a linkage with the top earners, whom I think we can all agree will earn more and more as globalisation gains pace.

Beyond what is needed to sustain a fair standard of living, what does more and more salary go towards? The salary becomes the opportunity cost of public service, losing out on the millions waiting in the private sector. It becomes the envy of one’s peers, those raking in the big bucks at the top of the corporate ladder. It becomes valuing our Ministers by their salaries, and not their contributions, both tangible and intangible.

All that sends the wrong message about our political leaders. It equates political leadership with management. We often hear the phrase “running a country”.

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I think our Ministers do more than just run Singapore. They lead Singapore.

Government is more than just management. Competency and ability at leading and managing an organisation, at problem-solving and policy-making, are in and of themselves not enough to make a great leader. They might be necessary, but they are never sufficient. It might make for an excellent civil servant, but it is not enough for a political leader.

Sir, Ministers cannot be just good managers or able technocrats. They must be more than that. They must be leaders of men and women, leaders of Singapore and Singaporeans. A Minister must inspire respect and confidence. A Minister can be appointed to the office, but he or she will command respect and confidence only because of the measure of the person that he or she is.

But what is the message sent to society when we focus so much on salaries and money, when we equate government so closely with CEOs, COOs and CFOs, lawyers and accountants and engineers? The message is that our Ministers are really just managing the country, and not so much leading the people.

Sir, I do not think that that is right or healthy. We rely on the civil service, including the Administrative Service, to manage the country. We look to our Ministers to lead us.

I think it is safe to say that every one of us in this House are honoured and privileged to be here. It was a great honour for me to be appointed as a Nominated Member, and I am sure it was the same for my fellow Nominated Members. I imagine that it was an even greater honour for all of the elected Members who won the trust of their constituents, and for Ms Sylvia Lim who

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won over enough voters to qualify as an NCMP.

But the honour and the privilege is greatest for the political office-holders. We Singaporeans have reposed our trust in our Ministers, to lead us into this ever more uncertain future that we call a post-9/11 globalised world. That is, I think, the greatest honour that any Singaporean can have, to be so entrusted by his or her fellow Singaporeans.

This honour and privilege cannot be measured in monetary terms. It is unquantifiable. And I would argue that it means far more than any amount that a company can ever pay to an executive. I would even go so far as to say that any person who disagrees, who cares so much about what he or she is paid, someone to whom this honour and privilege is not enough, is not a suitable leader and is not fit for political office.

Being a Minister involves a lot of sacrifices. Most of them, such as demands on one’s time and the loss of privacy, are non-financial. And I am sure that many, if not most, who have been asked to serve but who declined, did so because of these non-financial sacrifices. So for these people, increasing Ministerial salaries would not make a difference.

As for the others, for whom the decision against public service turned on the financial consideration, I would argue that we should not have them in government anyway. They are not suitable for political leadership at all. Their priorities are skewed against public service. And yet, increasing Ministerial salaries would pave the way for precisely this group of people to take up public office.

Perspectives

Sir, Singaporeans have been asked to put some perspective around the current

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$45.5 million for the political appointees, being 0.13% of Government expenditure and 0.022% of our GDP. I think there are some other perspectives that can be put around these numbers.

At the revised MR4 benchmark of $1.6 million per year, a Minister who serves a full five-year term would have made $8 million. Serve two terms, and that becomes $16 million plus a pension. Even if the Minister spends a million dollars a year, there would still be $6 million left over for a retirement in style.

Meanwhile, Workfare will cost the Government $400 million a year. But it is intended to benefit the bottom 15% of the workforce. In 2005, we had 2.36 million workers. The bottom 15% means 354,000 workers. Workfare will cost over seven times of the aggregate revised salaries of political appointees, but it benefits 10,000 times the number of political appointees we have.

Or let us take Public Assistance. MCYS recently announced a revision to the amounts that Public Assistance recipients will get. Some Members felt that the amounts are not enough, especially for one-member households. Dr Lily Neo has calculated that a minimum of $400 per month is needed by such households, yet the revised rate for them is $290 per month.

With 3,000 households on Public Assistance, an across-the-board increase of $110 per month would mean an additional expenditure of $3.96 million a year – 7% of the amounts that we will pay political appointees every year after the revisions. Yet, we decline to do so, fearing an erosion of Singaporeans’ work ethic, never mind that one must be unable to work to qualify for Public Assistance.

Sir, there are a lot of different perspectives that can be put around Ministerial salaries. My fear is that the

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singular perspective being applied, of what our Ministers could potentially be earning in the private sector, ignores other perspectives that are equally valid and equally important.

We place so much emphasis on using public funds wisely, on sending the right message to society, on not inadvertently creating new problems when we address existing ones. These same considerations must apply when we consider Ministerial salaries. It is not just a question of the number, whether we can afford it or its size relative to the stakes involved. There are other considerations involved, and other potential repercussions.

And my greatest worry is that an open-ended linkage between Ministerial salaries and top earners, which is how the benchmarks work in their current form, could in the long run undermine the moral authority that a government needs to lead the people.

Moral authority

As our leaders, Ministers wield a great deal of authority. They have legal authority due to their positions. They also have moral authority, by virtue of being our elected leaders to whom we have entrusted the reins of the Government.

Sir, our leaders must maintain that moral authority, so that Singaporeans will instinctively trust that whatever is done by the Government is done for the good of the country. Government is more, much more than just management. There is an intangible, moral dimension to government and political leadership that civil servants are not equipped to deal with, that have to be addressed by duly-elected Ministers.

Our leaders need to have this moral authority to lead the nation, so that

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whenever we have to ask Singaporeans to make sacrifices for the good of the nation, whether it be workers bearing the brunt of CPF cuts or NSmen putting their lives on the line to defend Singapore, they will respond without question, willingly and courageously, because they trust and believe in our leaders.

I dare say that our NSmen will risk their lives if ordered to do so by the Prime Minister or the Defence Minister, but not if it is the Permanent Secretary. It is this moral authority that makes all the difference between a Minister and a civil servant, a leader and a manager.

Sir, the track record of the ruling Party has been almost impeccable. With the benefit of 20/20 hindsight, many an unpopular policy has proved to be the right choice. So, by and large, Singaporeans remain trusting of the PAP, and that shows at each and every General Election since independence. The present Government is no different. It won last year’s election by a landslide, and it has the requisite degree of moral authority.

But we need to ensure that future governments will continue to have that same level of moral authority. The benchmarking system puts that at risk. When we focus on salaries to the exclusion of the moral imperative and considerations of public duty and service, we endanger the moral authority of the Government to lead. Because then, cynicism creeps in, and it taints, weakens and may ultimately destroy the bond between the Government and the people.

This is exacerbated by the surrounding context of a widening income gap. During the Budget debates, the House heard so much about the income gap, about how it is inevitable, and about what we are doing to address it. The MR4 benchmark is such that Ministerial salaries are tied to the very narrow tip at the top of the pyramid, but are decoupled from the stagnant

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broad base at the bottom. The benchmark itself becomes part of the problem.

Also, a large part of Ministers’ bonuses are tied to Singapore’s economic growth. This growth represents the sum total of the efforts of all Singapore citizens, permanent residents and foreign talents. But thanks to globalisation, many Singaporeans are not reaping the fruits of their labours and are instead struggling to stay afloat. Ministers benefit from this economic growth through the GDP bonuses, even as many Singaporeans do not. There seems to be a certain degree of inequity here.

Sir, we are told that it is an admirable sentiment to want our Ministers to be people with that sense of self-sacrifice, who are prepared to make a financial sacrifice - a reasonable one - to serve the country, but the real world is different and that this view is unrealistic.

But to me, this way of thinking is not unrealistic. Instead, it is actually an important sieve that filters out the types of people that we should not have in Government, people whose desire to serve would be outweighed by a few million dollars, even if their standard of living is not compromised.

I believe that our Ministers did not make the decision to enter public service lightly, and they have made great sacrifices in doing so. And because of that, Singaporeans respect and salute them, and give them the moral authority to lead. We have to ensure that future governments are able to enjoy the same degree of moral authority.

Sir, I think that we are all idealists in this House. We all believe in this great social enterprise that we call Singapore. We have to, otherwise we would not have sacrificed our time to be here, we would not have heeded the call of duty and served.

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We must believe that we are not the only ones with this idealism and sense of purpose. We must believe that there are many other Singaporeans who feel strongly enough about our nation, that they would be willing to make the necessary sacrifices to serve the country.

If we have reached the stage where money is necessary to draw able Singaporeans into public office, then I think we might as well pack up now, because we would have failed, because Singaporeans obviously do not see Singapore as a nation worth fighting and sacrificing for.

Sir, I do not believe that to be the case. To believe otherwise is to admit failure in our nation-building efforts. I am not prepared to do so. And I hope that the Government is not prepared to do so either, and will show that in future revisions.