CIVIL SERVICE NWC AWARD, PUBLIC SECTOR SALARY REVISIONS, AND REVIEW OF SALARY BENCHMARKS

2.27 pm

Assoc. Prof. Chin Tet Yung (Sembawang): Mr Speaker, Sir, thank you for giving me this opportunity to speak.

I am sure the hon. Members in this House will join me in thanking the Deputy Prime Minister for his Statement, given in his usual candid and lucid manner. And I am sure Members in this House will also want to thank him for the generous allowance to Members of Parliament.

Sir, the issue of Ministerial and civil service salaries has surfaced several times in this House in the past. But for Members like myself who entered this House only in 1997, it will be the first time that we have an opportunity to give our views on the matter. The debate in 1994 on the White Paper entitled "Competitive Salaries for Honest and Competent Government" raised many of the issues that I am sure will be raised again in this House this time round.

Sir, the Statement today refines what was put in practice after Parliament endorsed the White Paper in 1994. The principles, as stated by the Deputy Prime Minister, remain much the same - clear, transparent principles of reward, competitive salaries to attract top talent into the public sector and, following from that, the benchmarking of salaries to comparable posts in the private sector. In the October 1994 debate, Prime Minister Goh reminded this House and Singaporeans that one of the crucial questions is, "What sort of people in the Government will best provide you stability, a healthy environment, good-paying jobs and bring you more prosperity?"

Sir, at the turn of the century, I believe that Singaporeans will accept the wisdom of the policy of attracting top talent into the public sector - from Ministers, Parliamentary Secretaries to Permanent Secretaries and other civil servants. What is readily apparent to many who would pause to think of recent events is that Singapore has weathered the economic storms of the past two to three years far better than many other countries in the region - countries that have an abundance of resources that we do not have. What we do have is a strong, reliable Government and a resilient people, who are prepared to take hardship and to ride out the storm together.

But the story could have been different. We could have been no better off or indeed be worse off than many of the worst hit countries. What could have happened, for instance, if instead of being Ministers, they have been employed in the private sector, taking care of their own companies rather than the general well-being of all Singaporeans? Would we be in this position today, when we can point once more to a healthy growth rate in our economy, when there is a gradual restoration of the cuts in salaries and CPF that we have endured over the past couple of years? To me, and I am sure to many right-thinking Singaporeans, the crucial policies taken by the Government to combat the economic crisis in 1997 made the difference between what happened to us and what happened in the region. I do not wish to be smug about this. Many Singaporeans still suffer from unemployment, loss of income and other hardships. But still recovery was not long in coming and all this because of the swift, decisive and, more importantly, correct decisions taken to stave off the ill-effects of the crisis.

Lest people think that we may be blowing our own trumpet, it is gratifying to know, as Members of this House must have read in today's Straits Times as well as the Straits Times on Monday, 26th June, that the Singapore Government had been rated top in Asia for economic effectiveness and leadership quality. Their management style is described as moderately interventionist, which is distinct from being intrusive or highly intrusive. This is the view culled from a survey on Asian leadership conducted by a Hong Kong think-tank, the Political and Economic Risk Consultancy (PERC). The survey is based on the views of expatriates working in the region conducted in the first quarter of this year. In other words, we have the views of those expatriates, most or all of whom, I presume, are working in the private sector, stating quite firmly and simply that the leadership in Singapore is "High Quality". No other leadership in the survey attracted the same rating. If there was, and such leaders are paid less, we can, I think, ask the DPM for an explanation.

Sir, I was struck not so much by the results of the PERC's survey which was expected, as also by another major piece concerning Singapore in the latest issue of the Economist, that very respectable English publication. It ran a feature on e-Government. The reporter said that "after e-commerce and e-business, the next Internet revolution will be e-Government".

What surprised me was that the only country that merited a detailed feature was Singapore. According to the Economist list of Net neighbourhoods, ie, people with Internet access at home, Singapore came second only to Norway. It is ahead of countries like the US, Germany, UK, Canada, Japan and Australia. At the same time, in the feature on Singapore's approach to e-Government, the report quoted an international survey of sites offering integrated service delivery through the Internet conducted last year by America's General Service Administration. It stated "that Singapore eCitizen Centre is the most developed example of integrated service delivery in the world."

Sir, these singular achievements, together with many relating to our infrastructural facilities like our airport and seaport, do not come about spontaneously. Neither do good Government spontaneously emerge from a population. If only that were true. But the histories of many countries bear testimony to the fact that the rise and fall of economies, of societies and even of civilisations rest on political and public leadership in times of war, of crisis and of revolution.

Sir, Singapore is facing challenges the like of which have not been experienced before. We face global competition for talent, we face competition with developed countries which have far better resources and much larger populations than we have. Are we as a people going to be so small-minded as to begrudge the political and public leadership their just rewards? Or are we going to be positive, and look beyond ourselves, have the interests of the nation at heart, and say, "Well done, carry on" and be properly rewarded?

Sir, I support the refinements made to the quantification of salaries for civil servants and political leaders. I particularly welcome the institution of performance bonus for all civil servants. But lest it be thought that it can be taken for granted that one would not cast a critical eye on the public service as a Member of this House, I should like to end by asking the DPM to assure us of three things:

First, that the selection process for the top leaders, whether as Ministers, office-bearers, Permanent Secretaries or other PSL appointments, be as rigorous, if not more, than what it has been before.

Second, that we should consider some form of independent mechanism or body to monitor and evaluate the quality of decision-making in the civil service. We do not in Singapore prefer to use the legal process for challenging civil service decisions. In other countries, such as the European countries and North America, there are significant developments in the area of administrative law where good practices such as candour, transparency and regard for the individuals are implemented. We should like to encourage such values in the civil service, and as many have said in this House during the Budget debate this year, we should expect now a higher standard of communication and transparency from the civil service than before.

Finally, may I ask the Government to make all possible haste to restore the cuts to CPF and other wages to alleviate the hardship that is still felt by many. Singaporeans would want to be assured that the Government would, as the PM has said, "provide stability, a healthy environment, good-paying jobs and more prosperity".

Sir, I thank you and support the measures on public sector salaries.

Dr Michael Lim Chun Leng (Cheng San): Sir, I thank you for allowing me to make some comments on the measures.

The last time when the salaries and benchmarkings were commented upon, it was in a different environment where the economy was doing well and many of the salaries have not gone up to the million dollar ranges. This time round the issues will probably be more emotive because there are many other issues at hand, for example, the economic recovery has been patchy and certain sectors have not fully recovered. There is still a significant minority of the households in Singapore who are low income families. Many of these will find these million dollar salaries, especially for the high office holders, very mind-boggling numbers which they cannot quite fathom and understand. Of course, there will be some people who believe that political leaders should always be altruistic. I am here not to defend anybody but to try to take a level headed approach to some of these issues and try to dissect the emotive issues from the logical and rational thinking.

The first question we want to ask ourselves is whether there are any grounds for salary adjustment. The economic crisis has seen either a freeze or a downward adjustment in remuneration for senior Government leaders and civil servants. A strong and far-sighted political leadership that we have and an efficient civil service have helped Singapore to steer ourselves through the crisis with minimal damage to the economy. Our political leaders have formulated policies that have allowed Singapore to have a speedy recovery. The upswing in the economy has been fast and, as Members have read in the recent PERC report, our Singapore Government has been rated No. 1 in this region.

With the recovery in the economy, there have been several pull factors which have made it more difficult to retain good leaders in the civil service and in other areas of the civil service as well. I think there will be this global pull for talents which DPM has mentioned, and we cannot escape the fact that this pull will increase when stock options become a part of life in the private sector. It will be increasingly more difficult to attract top quality leaders to join the political leadership. We need to make these adjustments to market changes to retain the talents and to attract new talents.

The second question that will bother many people is whether the degree of pay rise is justifiable. DPM has explained that the percentage of pay rise across-the- board has been tailored to meet different segments in the civil service according to the type of professions or departments that they are in. I support the move to moderate the increase in the base pay and instead move towards variable and performance linked bonus system. I think it is very heart warming that, for the Ministers especially, the base pay increase has only been 0.3%. That is a good message to send across and that a significant part of the adjustments will be through a performance related system. This is a move that should be lauded.

The next question that many people will ask is not just the percentage of increment but the absolute amounts in the salary increase. Is it justified? Yes, the sums are large and we must look at this in perspective. We must be able to compare apples with apples and pears with pears. Some Members must have read in the last few weeks that there was a report in the Straits Times that said that a drop in the share price of several electronic and manufacturing companies on the Stock Exchange had resulted in a paper loss of tens of millions of dollars for these individuals. I am also aware of companies where employees have stock options worth millions of dollars. If we take the perspective that our top Government leaders are the key drivers of Singapore Inc., then certainly they should deserve to get a remuneration comparable, if not better than those given to the top management of these companies.

I am especially pleased that even though the benchmarks and the formulas have been decided upon, the Government has been transparent enough to come forward to bring the issue to the forefront and debate this again and put this up for comments by other Members of Parliament. If we look at it logically and rationally, these moves are good moves but there are many emotional issues at hand and we cannot escape from these emotional concerns that will be expressed or have been expressed.

As I have said earlier, economic recovery is patchy and there are sectors of the economy that have yet to recover fully from the crisis.

Would it be a rational argument to say that the pay of Ministers and civil servants should only be adjusted after all sectors of the economy have been restored or recovered? I do not think so. In fact, we should ensure that we continue to attract good talent into Government and civil service so that we can drive the economy to greater heights and restructure the economy to meet the challenges ahead. This would be a solution in helping those sectors of the economy that have been weak.

Another emotive concern of many people is, I think there is not a small minority of Singapore households that have incomes at a low income range, and they will never be able to get even one year's remuneration of the top earners in their whole life time. Hence, some people will argue, "Yes, there will be too great an income divide between the top and the low income families." This is a very emotive issue that will find favour with many people. It will pull at our heart strings. Yes, there are low income families that will certainly continue to require assistance. If we look at it in a more rational way, we must ask ourselves whether the savings that can be obtained by not having a pay increase, what will it do to help them compared to having a good Government and a first class civil service that can attract high quality investments and help workers upgrade their skills. That is a better solution to helping the lower income families.

Another emotive issue that the absolute amounts that the Ministers and top civil servants will get in their remuneration package are so large compared to the average household that it will be very difficult for them to accept these numbers. These are million dollar numbers and some of them in their whole life time will never see these numbers. I do not disagree that these numbers may be mind-boggling or seem very excessive for the average families in Singapore. Again, we have to try to put aside our emotions. Five or 10 years down the road, there will always be low income families. But there will always be top corporate leaders in the private sector that will earn salaries beyond the imagination of the average Singapore families. Should we stop paying our top political leaders and our civil servants high salaries because there are low income families who will not understand the quantum of the pay? Or should we pay top political leaders and civil servants a remuneration that is close to the market so that we have good people who will lead the country and will be able to help these low income families improve their standard of living? I think the answer is obvious.

Finally, there are those who believe that, yes, politicians are here on a calling and to be altruistic and therefore they should sacrifice for the nation. This sort of statement will find favour with many people. But we must ask ourselves, how many of our top talents in the private sector will be willing to step out of their high paying private sector jobs with corporate benefits and go into the political arena. Do we sincerely believe that altruism alone can attract the best to come forward and to run our country? If we believe that, we must be mistaken. I think to many Singaporeans, the concerns and worries that were present during the Asian economic crisis appear to have been an issue of the past. In my day-to-day practice as a doctor, I continue to meet people from other countries, including Indonesia, and they are still significantly affected by the social and economic consequences of the crisis. Just this week alone, I met one who said that he had to relocate from his home in Indonesia because of the social unrest. He has got to move somewhere else out of Indonesia to live with his daughter. I have got another patient who came to me and said that he was very worried because his land had been occupied by other people, and he feared for the safety of his family.

These accounts by these patients remind me that I have to count my blessings. I do not take this for granted. I am happy that I have a home, I do not have to worry for my safety of my family, and I have a job and stable income. And all this has been made possible because we have a strong political climate and a strong economy. I do not take this for granted, but I am thankful that we have a good Government that has made all this possible for all Singaporeans to have a safe home and a prosperous nation.

I believe that we should invest in our future, and really our future depends on attracting and retaining top talent in the Government and in the civil service so that these talented people can continue to make Singapore the best home for every Singaporean.

Mr Inderjit Singh (Ang Mo Kio): Mr Speaker, Sir, it is very difficult to do a benchmark and define a formula that can reflect what a Minister or a top civil servant in Singapore should be paid. The general feedback from many Singaporeans is that we are paying our Ministers and civil servants too high a salary as compared to any other country in the world. But the question we should ask ourselves is whether we can really make a fair comparison by looking at the salary scales of Ministers and top civil servants in other countries. My contention is that we cannot and should not because there is no other country like Singapore around the world. The nature of things here is very different compared to those in any other countries. So Singapore leaders therefore decided to define a unique formula that suits our system and the system basically addresses issues like corruption prevention, attracting the best talent to join the Government and compensating for what the Ministers lose out by not participating in the private sector.

In my opinion, we should look at the salary formula on a stand-alone context of the Singapore environment and in the context of addressing the issues that I just mentioned. Just as the board of directors and the top management of each corporation or company will have to determine the best compensation package to attract and retain the best talent and to motivate them to do well for the company, in the same way the Government of the day in Singapore has determined the salary formula and compensation package that the Deputy Prime Minister has just announced. And it is best suited to achieve the objectives of recruiting and retaining talent and to keep the Government clean.

Sir, the man in the street, however, will see the quantum of salary increases for the Ministers, as so huge and unimaginable for them to achieve easily. I do feel for the man in the street and therefore it is the responsibility of the Government to ensure that every Singaporean has the opportunity to achieve their full potential and earn as much as they deserve to earn. Everybody should be ensured of a good quality of life in Singapore and it is the responsibility of the Government and the Ministers to ensure that this happens. If the Government fails to do so, and the Ministers fail to do so, then the people in charge do not deserve to be paid what they are being paid, just as in any country, where the CEO and the top management are held accountable for their poor performance and their compensation package is affected accordingly.

I also feel that it is not useful to compare the quantum of the Ministers' salary to that of the man in the street, because if we do, then obviously there is a tremendous skew and the gap will be really big. I feel that we should look at the Ministers' compensation package on a stand-alone basis based on the responsibility they have been charged with and this cannot be easily compared with anyone else in Singapore. We must look at the issue on an absolute basis. Any relative measurement will result in too much of an emotional debate, as my colleague Dr Michael Lim talked about earlier. In fact, it will be emotional because of our inability to compare accurately the roles and responsibilities of the jobs against which we are comparing.

Sir, having said that, it is also a common practice in the private sector for the top management to be paid a very high compensation package, as compared to the average worker in the company. So a relative measurement in such a situation is also not useful. The relative measure of a CEO's or Minister's salary should be really the competition and therefore a company or a government should continue to attract, keep and motivate them. To be able to continue to attract, motivate and keep them in the company, the compensation package should be more attractive compared to the alternative employment and package that the competition can provide. In this case, for the Ministers and top civil servants, the competition is the private sector. For our CEOs, it will be another company.

Sir, the formula chosen by the Government basically aims to use the private sector as a benchmark. I can accept this formula because the private sector does provide alternative employment opportunities for the Ministers and civil servants and therefore the competition is there for the same talent. However, I feel that the formula used in the past was not quite a good measure of what salary increments the top private sector earners really received. The biggest flaw in the formula was that every year, the top four earners in each professional group were most likely not the same people in the following year. In fact, these people were probably the outliers within their profession and taking an average of such outlier numbers results in something that does not truly reflect what the best earners in the private sector really receive. And it does not really reflect the essence of what the formula was supposed to do.

Secondly, the top earners in most cases made their money as a result of extraordinary performance and received extraordinary bonuses or stock options, as the Deputy Prime Minister rightly pointed out. With the changes in the formula that the Deputy Prime Minister announced, specifically in increasing the total number of people used as a benchmark and using the median instead of the average of 48, I believe we should, to a certain extent, address the issue of the outliers. It is also prudent to discount the variable component of the private sector salaries in computing the benchmark for Ministers and civil servants, and especially stock options tend to really skew the data out of place. The reason is that, as the Deputy Prime Minister mentioned, the point of exercise could be the result of stock option accrued over many years of employment. So, therefore, it was not fair in the past to use this to compute the average.

Similarly, by making smaller increments in the basic salary and by allowing huge performance bonuses, we are getting closer to the private sector's method of compensation where it is more equitable. The Deputy Prime Minister earlier announced that about 40% of the increment or benchmark salary actually goes to the variable component, and I think it is a good move, and this will only be paid if the performance of the Minister or the civil servant is good.

I would urge the Deputy Prime Minister to continue to fine-tune the formula so that we can better achieve the intended goal of a private sector system of compensation package. I especially support the fact that should a Minister or civil servant do extremely well and typically there will be just a handful of people each year, then we should not shy away from giving them huge bonuses, be it six months, 10 months or even 20 months of bonuses, and this is what is being practised in the private sector. This is not given to everyone in the company, just a handful of them who really did very well.

Finally, Sir, since we have chosen a private sector benchmark for the system of compensating our Ministers and civil servants, I feel that we should accordingly expose the Ministers and civil servants to the risk of employment, as faced by the top management in the private sector. So while the top managements in the private sector are paid very high salaries, they face tremendous risk in whether their careers should continue within the same company. In my opinion, we cannot just adopt the good part of the private sector practices and leave out the bad part. I therefore feel that while we have accepted a transparent system of compensating Ministers and civil servants, we should accordingly have a transparent system of how their performances are measured and how they are penalised for their poor performances. And penalising means not getting a bonus, and it may not be a sacking as you know, it takes time. It is only fair that Singaporeans know about this part of the formula and that we are sincerely practising a system where people do not get rewarded even if they do not do their jobs well. I know that this is a very difficult thing to do, especially for the Cabinet, but I would say that this comes as the hazards of the job, in return for such an attractive compensation package. If we can show this in practice that we are really compensating the good performers and not rewarding the poor performers, then I am sure that we will have no problems in getting Singaporeans to support the system that we are putting in place. The problem is that many of them are just looking at the good part of the story and not the other part of where poor performers do not get rewarded.

Sir, with that, I support the proposal that the Deputy Prime Minister has put up.

Mr Tay Beng Chuan: Mr Speaker, Sir, I agree with the Deputy Prime Minister that we must have competitive salaries for Ministers and civil servants to maintain a competent and honest government. Such competitive salaries could be slightly higher than the average salaries of the professionals in the private sector and can be adjusted regularly according to our economic performance, productivity growth, and inflation rate in line with the recommendations of NWC. The aim is to make sure that they can lead a comfortable life financially commensurate with their official position and status during their dedicated service in public office.

The business community generally understands and accepts this. But what we are concerned is that, according to the formula given by the Government, the salaries of the Ministers and top civil servants will be based on the average income of a few top earners who are the exceptionally successful bankers, accountants, engineers, lawyers, manufacturers or MNC chiefs. These top income earners, I believe, are not mere wage earners like the Ministers and top civil servants drawing a fixed salary with good job security, regardless of the ups and downs of our economic conditions and the balance of payments. They are, in fact, enterprising businessmen and risk-takers who have to pay a high price in terms of financial losses and legal obligations in the event of their business failures. The incomes these top earners earn from business success could be exceptionally high and some of them might in future earn as much as Bill Gates or Li Kashing. We therefore have to ask ourselves: Is it appropriate or realistic for the Ministers and top civil servants to expect an income comparable with such top earners in the private sector?

Ministers and top civil servants must strive to earn their respect, trust and confidence from the people, in order to have their continued support in policy implementation. In the true spirit of tripartism, the average businessmen and workers would expect the Ministers and top civil servants to set a good example by putting the community before self and making some personal sacrifices, in terms of time and money, in pursuit of national interests and issues. How could the Ministers and top civil servants continue to earn the respect, trust and confidence from the people if they are inclined to demand a high income comparable with those of Bill Gates or Li Kashing?

Mr Speaker, Sir, businessmen and employers in private sector are currently facing upward pressure of business cost arising from the economic recovery. Any large across-the-board increase in the civil service salary may create a spiral effect, leading to runaway increases in wages, prices and charges, in both public and private sectors. This would drive up our total business cost, forcing many companies to close down or relocate elsewhere in the face of fierce competition from the regional economies. This, together with the increasing cost of living, will cause even more hardship to the low income group. The business community would therefore like to urge the Government to be more moderate in the upward salary revisions for Ministers and civil servants and consider other supplementary incentives or rewards to keep the deserving staff in the civil service.

Mr Speaker: Order. I suspend the Sitting and will take the Chair again at 3.25 pm.

Sitting accordingly suspended at 3.03 pm until 3.25 pm. Sitting resumed at 3.25 pm