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

Debate resumed.

The Minister without Portfolio (Mr Lim Boon Heng): Sir, first, let me give a short response to Dr Ong Chit Chung on the point about private sector jobs being more risky than those in the civil service. I am not sure whether he intended to echo what Mr Inderjit Singh had earlier said about the job of political office holders - whether that was the real point. But I think he will agree with me, observing governments in different parts of the world, that there is no riskier job than that of a political office. I think the risk may be different but the job is no less risky.

Dr Ong Chit Chung rose ---

Mr Speaker: Order. Would you like to make way for Dr Ong?

Mr Lim Boon Heng: Yes.

Dr Ong Chit Chung: Sir, I was not referring particularly to the political office holders but to the civil service as a whole.

Mr Lim Boon Heng: Sir, I take the point. But now in the PSL scheme, those appointed to the top jobs would be appointed for 10 years and, after that, they would have to leave. Now it is not quite the same as the private sector but there is a limit as to how long the person will serve in that job and that does not mean that if the person really fumbles in the job, he will not be removed. I do not think that is the intention of the Government.

Earlier this afternoon, Members debated a full hour on the widening income gap. The numbers that were released by DPM BG Lee puts this in sharp focus. Members will observe how much the income gap has widened in top talent and the workers in the factory. This trend, however, is not a Singapore phenomenon. I have been associated with the trade unions for 20 years. It is my job to see how others pay workers elsewhere and what incomes were like between management and workers. I know that this trend has its origins in the United States. In the 1980s, US companies restructured and re-engineered to regain the competitiveness they had lost to other MNCs, particularly the Japanese. One of the key changes they made was to provide new and attractive incentive schemes to top executives, the most significant of which are stock options. The stock option message is clear. If you make the company grow, your share in it grows as well.

By the 1990s, US companies had regained their vitality. New ideas emerged, using new technology. As the revitalised US companies sweep the competition, MNCs elsewhere followed these successful United States models. In Europe, the United Kingdom led the way and these methods are now spreading in Western Europe. Indeed, there is an on-going debate raging in some continental European countries steeped in socialist thinking. They ask: are the wages of top earners obscene? European MNCs are not waiting for the conclusion of this debate - they have to survive, and therefore, they are fighting for their share of top talent who will make a difference to their future.

What is the result? Under the administration of Tony Blair's New Labour, the income gap in the United Kingdom is now wider than it ever was during the Thatcher years!

French Socialist Finance Minister, Laurent Fabius could not persuade one top talent he wanted to join and work for him. Why? He was locked up by his company with stock options!

And the Japanese have taken notice. They too, are beginning to embrace American methods. They have started to employ non-Japanese to lead their troubled companies and I am sure that they must pay top wages to get those foreigners to work for Japanese companies.

Some people ask: can we stop the income gap from widening? In other words, let the Americans and the Europeans and even the Japanese go their way and let us go our way. This is unrealistic. We cannot buck the trend. Ours is rated as the most globalised economy by one research company, AT Kearney reported in The Economist. Therefore, what happens elsewhere will come to pass here as well. Our top talent will compete for jobs at top first world wages. Go to New York, Silicon Valley, London, Hong Kong or Tokyo - you will find some of our best talents there. They are paid what top talents in the world are paid. Many of them earn several millions a year and they do so quietly.

Do we want more of our top talent leaving to join first world companies? Are we satisfied that they do well in the first world countries, creating jobs there? Or do we want them here, developing companies, creating jobs for Singaporeans? I think we want the latter.

Fortunately, we still have most of our top talent here. But try to narrow the income gap here by imposing a limit on top end wages instead of letting market forces work - we will merely see the migration of our top talent. The cost would be a sluggish economy, higher unemployment and lower wages across the board, not just low wages at the top, but lower wages also at the bottom. Far from helping the lower income, we will be consigning them to third world standards of living.

If we are concerned about the welfare of the less-skilled lower income families here, which, evidently many Members are, judging from the debate earlier this afternoon, then we must not only retain our talent but also attract more talent here. Only a thriving economy will create good jobs for all, including the less skilled.

We must have some of the best talent in Government and in the civil service. Some will say that the wealth of the country is not due just to the efforts of Government or the civil service but due to the hard-work of the people of Singapore. True, I agree but our hardworking people need leaders to show them the right way. If we do not have top talent to analyse the problems we face and devise the right policies and plans, all their hard work will be in vain.

I made my first of several trips to Vietnam in 1992. I was deeply impressed by how motivated and hardworking the Vietnamese people are. They had abandoned the centrally-planned economy, where everyone was paid almost the same low wages, for the market economy, following what other communist countries had done.

I made my most recent trip two weeks ago. One Vietnamese asked what I think of Vietnam. Well, there has been progress. Some Vietnamese are better off. They drive cars or motorcycles. Their traffic jams in the evenings are not due just to bicycles but also to many motorcycles. But they could have done a lot better, if their leaders have been bolder in accepting market-oriented policies. They could have attracted more investments creating jobs in Vietnam. Instead, today they are planning to export 300,000 workers overseas, the solution which Mr Zulkifli might have suggested for our lower income and low-skilled workers. But I do not think that is the way to go, because to send our low-skilled workers overseas means paying them wages of third world countries. They get a better pay working here in Singapore. Vietnamese workers, I think, toil harder than Singaporean workers but they do not enjoy the quality of life our workers have.

What is the difference? It is in the quality of leadership - in Government and in the civil service. Without capable leaders showing the right way, our workers can work hard but see no improvement in their lives. I do not mean to criticise the Vietnamese government. The transition from a centrally-planned economy to a market economy is not an easy one. But the point is: hard work by the people alone is not enough; the policies must be right.

We do not want Singaporeans to toil hard for little return. We want them to have good jobs here. We want them to be better skilled, more productive and earning higher wages.

While our economic recovery is firm, let us not underestimate the problems that we face. The transition that we have to make into the knowledge economy is not an easy one. At the same time, many of the jobs we now have are under threat.

We have done well in a number of areas. But this success does not guarantee the future. We have to draw a lesson from the Fortune Top 100 list. In 20 years, the names at the top are quite different! So even in the sectors where we are rated among the best, we can be left behind.

Take, for example, the port of Singapore. It has been our lifeline since the founding of modern Singapore. In recent years, we have seen how new ports close by can pose a real challenge to PSA.

Take Changi Airport. It has developed into the leading hub in the region, even though, geographically, Bangkok is better sited. But this position may not last forever. Two days ago, I flew back from London. The Singapore Airlines flight was almost full. However, most of the passengers did not stop over in Singapore. The majority changed to connecting flights to Australia. Good business for SIA and Changi Airport, but not our hotels or shops. The same day (27th June) at noon, I read in the New Paper that with the new Boeing 747-400 and flight paths over China, Qantas can fly London-Sydney refuelling at Bangkok, cutting one hour from the journey.

That is only the harbinger of things to come. In a few short years, a new generation of aircraft can fly London-Sydney non-stop. So will most of those who commute between Europe and Australia over fly Singapore?

Will Changi face the same fate as Honolulu? Honolulu used to be a stop-over for trans-Pacific flights, but aircraft now fly non-stop across the Pacific. Will Changi face the same fate as airports in the Middle East, once a necessary stop between Asia and Europe? What implications have this development for Singapore Airlines? What new strategies must it adopt to remain one of the leading airlines in the world, maintaining 25,000 jobs it creates, mostly for Singaporeans, and we are not talking about jobs for the lower 10% of Singaporeans. We are talking about good jobs.

Take another example: the telecommunications sector. Technology has changed so fast in this sector, and the ground rules have likewise changed. Today SingTel has a tough challenge to remain a national champion generating thousands of good jobs for Singaporeans. In order to strengthen our chances of remaining our telecommunications hub in the region, we have opened up the sector, adding greater pressure on SingTel. Better to open up, create jobs for Singaporeans, even if they work for foreign companies, than to continue to protect SingTel and risk losing everything.

These are but three examples. They show that we are not just competing with countries in the region, we are competing globally. Therefore, we need to get the best talent in Government, in the civil service and in our leading companies.

If US companies, European companies and, most likely, also the Japanese companies all pay top wages for top talent, we will see top end wages here rise as well, if we are to retain and attract our share of talent to tackle the new challenges before us.

The income gap may widen, but it will widen because wages will rise much more slowly at the lower end. But it does not mean that there is no improvement in the lives of those at the bottom.

Will the income gap stop widening? At this stage of our development, it will widen further, but it will slow down. Even in the United States, the gap will not widen indefinitely. It must also plateau off, even swing back and narrow somewhat. Indeed, the dip in the Dow Jones index and Nasdaq recently has, in many instances, reduced the variable payments top executives get. One day it may be a more prolonged dip. If that happens, it will happen here as well. When that will be, it is difficult to predict.

Our task is to get people in Government and in the civil service to devise policies that will ensure that the low income share in the progress of the country, even with their relatively lower incomes. It means successfully attracting investments to create good jobs for all our workers. It means keeping HDB flats affordable, ensuring that good healthcare is available to everyone, that children from all families get the best education they deserve. For now, we have to follow the world-wide trend and pay top talent the high wages they can earn elsewhere. But more of the annual wage for them should be variable, as in the private sector. I am pleased that the new wage structure that DPM BG Lee announced matches more closely private sector practice.

Apart from ensuring that our workers continue to have good jobs, and their families continue to enjoy a decent life, we must maintain equal opportunities for all, irrespective of family income. This has been so throughout our short history. The children of poor families have been able to go all the way to university, and then into jobs. It is still so today.

When I left for London recently, one SATS employee, a Muslim woman, assisted my mother-in-law with a wheelchair, pushing her to the boarding gate. I had a casual conversation with her, and found that she was going on leave next month - on holiday to Canada. It pleased me that an ordinary worker of SATS can afford to take a holiday so far away. But what pleased me much more was her telling me that she would be visiting her son who is there studying to become a doctor. So our system today allows children from humble families to rise to the top! We must make sure that this remains so. And even if we may have to live with a higher income disparity than we have been comfortable with, we know that in the next generation, the children from low-income families also have a chance to get to the top, and draw top wages.

So our policies must not only ensure everyone has a good job, a comfortable home and access to healthcare, we must also ensure that our education system remains a social leveller that gives every child equal opportunities to go as far as his abilities allow him or her.

Sir, I have taken this line in this debate because I know there is a lot of concern for the plight of the low-income. There is concern about this sense of unhappiness seeing others earn top wages, and that maybe the solution could be to narrow the income gap. But to me, after 20 years working with the trade unions, I know that the best way to help the low-income is to ensure that they have a job, that they can earn a living and hold their heads high. And that way is to make sure that we have top talent in Government, in the civil service and also in our companies.

Dr Vasoo: Mr Speaker, Sir, thank you for allowing me to join in the debate.

Sir, salary revision both in the private sector and the public sector attracts tremendous attention. What is important for us is to ask ourselves whether salary revision is essential. I think it is essential in order that one has to provide some rewards and incentives to attract the best, and one cannot escape this, whether in the low-income group, the middle income or the top bracket, the revision is essentially necessary. At the same time, we should ask ourselves how can we attract good, honest people, people with integrity and ability, into the various sectors. I think that is the basic question that we have to ask ourselves, that if we do not pay respectable rewards and incentives to people, could we attract them, sustain them, or would we in the long run be worse off? These are basic questions that we have to ask ourselves and the answer is obvious. If we need to have a versatile organisation, versatile enterprise, versatile Government, then we must try and attract the best into the public sector and also into the private sector. The private sector always attracts the best all the time because they reward the best through various measures and incentives.

Sir, the world is changing. We are not competing amongst ourselves. We are competing with people outside and in the international arena. The world has become complex. Knowledge has changed. There are now borderless industries, ideas, travel and these are very complex issues that we need to tackle. And would Singapore and Singaporeans be able to face these challenges of a complex nature and how do we prepare people and encourage and recruit people in the public sector? I think that is a very important question that we all have to ask ourselves. The question is to try and see how we can provide them respectable incentives and rewards in order that we can get them to give their best.

Sir, for the working class and the average workers and the families in the heartland, we have to ask ourselves whether we would be better off if we have dishonest and incompetent people managing the Government. I am sure we would not be better off. We will be worse off. So the question is: how do we, as Singaporeans, make sure that we attract the best possible people into the public sector?

I am sure Members will agree with me that an effective civil service and a sound political leadership together with a hardworking population are key factors to promote economic and social progress of any nation. We have seen this happening in the United Kingdom. They attract reasonably talented people into the civil service. We have seen this happening in Ireland. Ireland was at one time not really making progress but it has reformed and changed. It is making very good progress today. The United States, Canada and new emerging places have undergone reforms. Even, as Members know, Poland, which was a very planned economy, today has changed. The leadership has changed. They have been able to attract talented people into the Government of Poland. Mexico is changing. South Korea, in fact, is also undergoing reform and changes, despite the problems of the chaebo.

Sir, the problems have been created by all these chaebos. They are trying to clean it up. As Members know, it requires good people to think through what can be done. Good government is a valuable asset to people as lives can become better. Therefore, it is very important for us in Singapore to attract people of quality and, I say, most importantly, people with integrity, into the civil service and politics. In order to do so, we need to reward them adequately and also provide them incentives.

This is a good insurance for Singaporeans because we continuously need honest and capable people in Government not only to look after our assets but to build our assets further. We have accumulated more than $80 billion but we will have to look after it to build it further so that we will remain viable and versatile.

Sir, imagine what poor government can do to the lives of Singaporeans when dishonest and less able people are attracted into the civil service and politics. Can we make progress? Not too distant time, we know of the Lim Yew Hock Government. See what has happened? We had a corrupt civil service. We had inefficient and not competent people managing it. Many Singaporeans suffered. Their lives were no better until we had a change of Government in 1959. So it is not too distant. We should remember that this is not too far in history and I hope people do not have short memories that such a problem can happen. In many places, such a problem has come about. Our public resources and funds can be squandered by people who are dishonest and incompetent. We will all end up as losers as each of us has to carry at the end of the day the public debt created by incompetents who have found their way into government. This is happening in many places and I am sure Singaporeans can read about it and the problems are quite real. We have seen this happening right now in Latin America, in the Balkans, in Africa, in Asia and nearer in our region. People are suffering as a result of rampant government corruption. As a result, the better off will leave because of instability.

I studied in Hong Kong and I had lots of friends who studied together with me in my post-graduate studies. Prior to 1997, many of my good friends have migrated because of the fear and concern of political instability in the future. There are a lot of talented people who have gone to Canada, the United States and Australia. I have gone back to revisit them but I could not find some of them. This is real. I shared, studied and lived with them in the hostel. Today, many of them are in many other places other than Hong Kong because of political instability. As a result, Hong Kong has lost many of its talents to many of the developed countries.

Sir, in the end, I say that if we do not have good people in Government and the civil service, we will be no better and we cannot guarantee that this cannot happen to Singapore provided that we ensure that we have good people who can be attracted into politics and Government. If we are not careful, we will suffer the same fate. So it is better that we give our able people in Government and the private sector respectable rewards and incentives.

Sir, while we reward the capable in Government, we should also take care of the well being of the working class, ie, the heartlanders. The cost of living is expected to increase and it is important that basic services such as education, health, housing, transport and PUB charges continue to be affordable. I would like to ask the DPM whether such costs will remain reasonable and affordable. How would the Government continue to look after the interests of the working class? What plans does it have because we are moving towards rewarding good Government servants, good Administrative Officers? Therefore, can we ensure that we have in the civil service people who are of quality so that we are able to make further progress?

Sir, the salary revision and the increases have implications on consumer cost and create some inflation. I would like to ask the DPM whether one would expect an inflationary trend which can affect our economy to some extent. With all these changes, would it have any spiralling effect on the cost of living of the ordinary people?

Since the last salary revision, have we been able to attract good people into the civil service? Are the attrition rates manageable? What is more important is: are we getting people with good public service attitude into the civil service since the changes instituted at the last revision? Is the civil service showing dividend in having made further progress by attracting good people into Government?

In the final analysis, we have to ask ourselves whether a better civil service is a good insurance for the working class Singaporeans. It is very important for Singaporeans to examine this. I must say that it is very important, looking at the Hong Kong context and many other countries nearer our region, that when we cannot attract honest and good people into Government, ultimately even the poor has to pay the price. Many of the poor, the working class, are paying the price for having incompetent people in Government and we should not let this happen in Singapore.

Sir, I support the salary revision proposed by the Government.

Mr Seng Han Thong (Ang Mo Kio): (In Mandarin): Mr Speaker, Sir, in the past, civil servants gave people the typical impression that they were eating from an "iron rice bowl" that could not be broken, and the senior Administrative Officers were holding "golden rice bowls". Today, when we debate on the revision of the salaries of civil servants, is this an implication that more "iron rice bowls" would be turning into "golden rice bowls"?

If we look at the major reforms to the civil service in recent years, with all the privatisation and corporatisation, we will find that the various personnel incentive policies given to the civil service are gradually approaching those in the private sector. This is inevitable. The main reason is, in this era of globalisation and new economy, not only the various countries are competing for talents, the public sector and the private sector are also competing for talents and brainpower. The Government must ensure that the civil servants, who are charged with the extremely heavy responsibility of formulating and implementing public policies, are of the best calibre. They must be better than those personnel in the private sector. In order to attain this fundamental condition, these top civil servants must be rewarded according to their performance and even be remunerated substantially. Just now, DPM Lee mentioned that the PSL job cannot be permanent. They can only hold the office for 10 years. This is a breakthrough. It is a compromise between the "iron rice bowl" system and the high remuneration policy. Perhaps we should change the title of "Permanent Secretary", lest it gives people the impression that the office of permanent secretary is so permanent that they continue to hold the office forever.

The people of Singapore want to have a good Government, one that is of high integrity, one that is honest. As such, in 1994 when Parliament debated the salaries for the Ministers, our emphasis was on "Competitive Salaries for Competent and Honest Government". I feel that even in this new economy of today, this principle remains unchanged. Today, as we re-debate this issue, DPM Lee introduced a more practical and relevant formula. As the Ministers' salaries are equated to the 206th and 367th ranking among the top earners in the private sector, I would be grateful if DPM Lee could enlighten us as to what professions these corresponding personnel in the private sector come from. If the top management staff from more professions and more corporations are drawing this level of salaries, then our people will have a better understanding and will be more willing to accept it. Our Ministers would have no difficulty handling the types of jobs, and there is no reason why they should not be remunerated as well as the chief executive officers in the private sector.

On this principle, we should also want to "cherish our talents, value our talents and cultivate our talents". We want not only a honest and far-sighted Government, but also capable and efficient civil servants. These are the wishes of the people of Singapore. We are fortunate to have both a good Government and a very efficient civil service. This is indeed most commendable.

As we know, in a certain country, although the central government has absolute power, the local government officials do not observe the rules as they are too far away from the controlling authority. The officials collude with the rich businessmen and the people are the ones who suffer. The many excellent policies of the government cannot be effectively implemented.

In another country, there is a perfect civil service system. The civil service is stronger and more powerful than the government. The government is at the mercy of the civil servants, and is entangled by money politics. Likewise, the people suffer.

On the other hand, although we have a team of highly efficient civil servants, there are times when too much emphasis is placed on efficiency at the expense of humanity. They have sacrificed the "human touch". As such, while I support paying good civil servants handsomely, I also urge the Government to strongly promote the plan to send civil servants to the community to feel the pulse of the ground. They must touch the ground, so that they can understand the feelings of the people. In implementing its policies, the People's Action Party Government should make the people feel that the action is for the good of the people. Touch their hearts. This is what we call the "heartware". Under the system of the new economy, the income gap between the top earners and the low-income group tends to become wider and wider. This is inevitable. We must let the people understand that for all the policies of the Government, interest of the people is always the prime consideration.

In this aspect, I wish to commend the performance of the CPF Board. According to a report of Lianhe Zaobao on 5th April, some 7,000 senior citizens, influenced by a certain rumour, rushed to the CPF Board to collect $250 because they were under the impression that they might not get the money if they were to go there late. The staff from CPF Board manifested their care and concern for these old folks. They not only saw to it that these old people get the money immediately, but also deployed extra helpers to move some chairs over for these old people to sit on and treated them very well. They have certainly put to full play the well-intentioned policy of the Government in a most vivid manner. Otherwise, even a good policy can turn out to be one detested by the people.

The Service Improvement Unit appointed by Prime Minister Goh Chok Tong has been actively monitoring the service standard of the various Government departments, and proposed many people-friendly services. Being a member of the monitoring unit, I am personally aware of many efforts put in by the civil service in this aspect always with the interest of the people at heart.

While supporting the revision of salaries for civil servants, I would also urge the Government not to forget the workers who may be drop-outs in our new economic system. We know that skill upgrading is the best security for our workers. However, many older workers have difficulty upgrading their skills. I hope that our Government would review the various policies, so as to be more focused on how to help these workers who cannot keep pace with the rapid changes in our economic system, in order that these older workers could also have a stake in our prosperity.

The people of Singapore generally understand and accept the principle of "competitive salaries for competent and honest Government". The workers of Singapore also understand that without a good Government and highly efficient civil servants, we will not be able to attract foreign investments and create job opportunities for our people.

Last month, I went with a group of trade unionists to a neighbouring country to attend a conference. While waiting in the holding room to board the aeroplane, I saw a group of labourers from that country who came to Singapore illegally to work, and had to be repatriated after being found out by the authority. Our workers understand that if we do not have a good Government and good civil servants, they may face the same predicament. However, many workers, particularly those in the middle and lower income group, are perplexed as to why many charges are being adjusted upwards before their wages are adjusted and their CPF contributions are not fully restored. With the revision of salaries of civil servants, will it bring about another round of high-salary war when the private sector boosts up its offers in order to lure the best talents to its fold? I hope that the Government will monitor closely the development in this aspect, as well as the feelings of the people.

Mr Hawazi Daipi (Sembawang): (In Malay): Mr Speaker, Sir, we have heard the Deputy Prime Minister speak on why civil servants are to get more pay, and Ministers too. But after all the adjustments have been made, the salaries of civil servants and Ministers will still lag behind top private sector incomes.

Some people still ask why there is a need to peg the salaries of senior civil servants and Ministers to the private sector. But if we want good quality staff and people in the Government, we have to pay the market salary or almost near market rates. Senior civil servants play an important role in the running of the country. Ministers have even heavier responsibilities. The decisions taken by Ministers have far-reaching implications, politically, economically and socially. With a good political leadership, Singapore has achieved tremendous progress over the years.

Just look at the GDP for the last few years or when we have attained self-government. At the current prices, the GDP in 1959 was $2 billion. In 1969, it went up to $5 billion; $20.5 billion in 1979; $58 billion in 1989; and $144 billion in 1999. This means that from 1959 to 1999 the GDP has grown 71 times, or in percentage terms, 7,100 per cent! This is not a small increase. It is not a surprise that some people think the success of Singapore is a miracle.

How has this been achieved? We have often heard of the media hype about Singapore's economic miracle. The truth is that our economy has grown because Singaporeans as a people have worked together. The Government is the one that has brought about this economic growth. The Government has brought in the confidence. The data of the GDP that I have tabled before you are the achievement that has been brought about by the Government which has led us even during turbulent times. It is not only the economic aspect. We also have political stability because we have a Government that is sensitive to matters in a multi-racial, multi-lingual society.

We enjoy industrial harmony because our unions work together, and not in conflict with employers. Unions and employers are both accepted by the Government as social partners. There are not many countries that have this collaborative system in which we have achieved. Many countries are trying to develop this partnership, which shows that the benefits of such collaboration which we have been enjoying are recognised. This cannot be achieved if our Government does not have an open mind or has not encouraged such cooperation or collaboration. Therefore, this underlines the importance of good leadership. As a result, we have been able to maintain social cohesion. Over the years, we have been able to put the social safety net that has provided the minimum standard of protection for society. Public housing, education and health care are heavily subsidised. So is transportation. Other than that, we have also the asset enhancement scheme.

Without a good government, we may not have good governance. Without a good government, it is impossible for Singapore to achieve this level of social and economic development. Without a good government and civil service, we cannot maintain this quality of life.

As a trade unionist and also a former journalist, I have visited many countries, rich, poor; big and small. Generally what I have noticed is that good governance is led by good government and it has helped in the economic growth and social development of the country. The reverse is true. Here we have seen how the political and economic structure may be demolished when a government closes one eye on corrupt practices or the leaders of government themselves are corrupt. It does not happen in Singapore and we should not allow such things to happen in Singapore.

Therefore, in order to maintain good leadership in the Government, our community must be prepared to pay a premium to attract good talent and high-calibre people to be in Government or in the civil service.

I am not surprised at reading the report of the Political and Economic Risk Consultancy (PERC) based in Hong Kong recently. According to PERC, the Singapore Government emerged tops among Asian governments for its effectiveness in economic policies. Singapore is also top in the banking and legal systems. Expatriates feel happy to work in Singapore. It clearly shows that the Singapore Government has brought about a good life for Singaporeans.

Should we be reluctant in giving this reward to the leaders of Government and senior civil servants? I do not believe so. If we compare what has been enjoyed by the community with the salary scales that have been suggested by the Deputy Prime Minister, it is not too much. Would higher salaries for senior civil servants or political office holders create a wider income gap in Singapore? I think not. Therefore, I support the Deputy Prime Minister's statement to upgrade the quality of leadership in the civil service. However, this does not mean that we are not concerned about the income disparity which is a debatable issue recently. Although we cannot stop this widening income gap in a developing economy, especially so in a KBE, we should avoid social tension as a result of this income gap. We must always assist the lower income group to upgrade themselves, to have good skills and a higher and stable income.

Generally, I think people would not question the salaries of Ministers or senior civil servants. But the people want to know if the Government would continue to care for their welfare. Every citizen is important to us all, whether he is the poor or rich; the educated or less-educated; or has skill or without skills. We should help the children of every family to achieve the highest education according to their ability. We are fortunate that the meritocractic system that is in place always allows the children of the poor families to move upward through education. So no one needs to feel that they are caught in a poverty trap. In Singapore, there are many schemes implemented by the Government to assist the unfortunate. When we have budget surpluses, the Government tops up the CPF. The grassroots bodies and charities also help the poor. Trade unions also render their assistance. On the union front, each year, the labour movement gives away $1 million to assist the children from poor families in educational scholarships and bursaries.

I hope the Government will continue to assist voluntary organisations and the trade unions so that they could continue to assist the lower income groups and also to ensure that inflation is maintained at a low level. The Government should help these bodies to assist them face inflation and the challenges of a knowledge-based economy by upgrading their skills so that they will be able to maintain and have a stable job. We are able to do all this and also to avoid adverse social consequences if we have a good government and a good civil service.

The proposal of the Deputy Prime Minister in this area is good and I support it. My hope is, as mentioned by Mr Lim Boon Heng earlier, that people should not be envious of this situation by just looking at the figures that have been proposed for the senior civil servants and the political leaders. We should consider their responsibilities, duties and contributions and what they have to do to lead the people of Singapore.

Mr Speaker, I support the Deputy Prime Minister's proposal.

Mr Chay Wai Chuen (Tanjong Pagar): Thank you, Mr Speaker, Sir, for letting me join in this debate.

[Mr Deputy Speaker in the Chair]

4.31 pm

Mr Chay Wai Chuen (Tanjong Pagar): Sir, this mechanism in place about five years ago to pay civil servants and political appointees is now due for some review and, as mentioned just now by the Deputy Prime Minister, giving us some refinements and adjustments, which are to be welcomed. First, in particular, I am very happy that there is a widening of this group of the top end of the income earners to be included in this pegging and also to take the median as the average, instead of just a simple average. I would like to ask, together with the view expressed by the previous speaker, Mr Seng, that in the light of this new pegging of the rate, at 2/3 of M48 plus the 50% discount and 12% increase, at the 367th position of the high income scale, what is the equivalent range of income earners in this position? What kind of people, what profession, what category of employment do they belong to? It would be good if the DPM can give us some information on this range of income earners so that we can compare and see how our Ministers and civil servants are paid in relation to these income earners.

Sir, in this new salary adjustment for civil servants, two particular groups of people would be looking at it from different views. One is the higher income earners - the professionals, managers, owners of shares, investors and enterprises - who are looking at it from one view. And then the other view is really the ordinary man in the street. It is to be expected that these two views are quite different. To the internationally mobile, the managerial, professional type with professional qualifications and managerial competency working in large business organisations, the figures are not so intriguing. It would of course be correlated to the level of performance and reward. And in the high level of professional earnings and international MNCs' top executive earnings, these figures are not out of the realm, quite in the ordinary.

As to the point raised by one previous Member of Parliament, Mr Inderjit Singh, about this hazard part of the salary reward, perhaps the DPM could clarify at another occasion whether this hazard part is really taken care of in the performance-related part of the salary scale. I believe, if I am not mistaken, that this performance is almost at about 40% of the salary. So there is really quite a risk part of the salary reward in this performance-related factor.

If a shareholder or stakeholder in a company were to employ a staff or manager to run the corporation, it would be quite rational for him to hire the best team who can deliver. And modern governments and public services really require knowledge, skills and competency to match those in the private sector. That is how the world is becoming more and more global and governments and business organisations are relating to each other more and more. Can you imagine public servants in the Ministry of Communications and Information Technology or the Info-communications Development Authority who are not able to match the private sector business executives, the group that they deal with every day? The public servants would be led around in circle by these private sector business executives, doing no good to the public interest. And leaders of the Government of Singapore must also deal with many of the issues impacting on our stability, economic growth, investments, employment, training, retraining, rising standards of living and homes for the people. These issues that the Government of Singapore has tackled are proven. The records speak for themselves.

Another good example was, what many Members of Parliament have just now brought forward, how we came out of this Asian financial crisis with relatively little damage. If you were to look at the performance of governments all across the world and see how a country came out of this very severe financial crisis with very little damage, and in fact much strengthened, then I can see that there is a great justification to reward our civil servants.

Having this mechanism in place is not really to just reward present executives or public servants in the Government, it is really to attract top flight people in future to join the Government as well as of course to retain them. And in Singapore, politics is not about the politics of envy, but of governance to ensure growth, employment for 50,000 entrants to the labour market each year and rising expectations from an increasingly more knowledgable working population. So the demands are not really so simple and easy. Competition is a fact of life in this globalised economy and we are part and parcel of this. We are in the centre of it. There is no choice. MNCs compete and pay for human resource, not manpower. They bring these human resource talents from everywhere to anywhere, where they can maximise their returns on their business. And in this globalised economy, everyone is in competition in the market. It is world wide and everywhere, and we cannot run away from it.

Competition for foreign investment is also world wide. Countries engage in this to generate growth and employment opportunities for these countries. Investors and shareholders want the best return. Talents also want the best reward. So paying talent his worth ensures worthwhile value performance. However, this competition for investible resource is only half the picture. The other half of the story is what we have been talking about for some months in Singapore, ie, to encourage entrepreneurship and growth in our economy, income and jobs for the local economy. But we must realise this. The same yardsticks apply - remuneration, stock options for the local economy. And what we can see in this is that the new global economy paradigm really values mobility. Capital moves instantaneously to any place which gives its maximal return, even if briefly. People move from where they have been born to where their talent of worth is given expression across national boundaries. And we cannot prevent that from happening in Singapore. People come here to work because employers find it worthwhile to employ them. Singaporeans venture overseas because they are valued and are engaged with the special skills and competitiveness and are paid their worth for this. We cannot have one set of evaluation criteria for people in the private sector and another set for the Government public sector. We are kidding ourselves if we do, particularly so in Singapore. I have just read a report yesterday. The Singapore Government is again voted the least corrupt in this index.

Is running the Government the same as running a corporation? My view is that modern government has changed so much because of technology, and public demands are almost as fickle as consumer demands. And the Government of Singapore is quite unique in this respect. It owns and has many GLCs. I believe the contribution or size of our GLCs in the total economy is of very substantial figures which operate in the private sector. When the Government servants are seconded for a term or two in the private sector in the GLCs for exposure, as they do now, under this new scheme to train and expose our public servants, can one imagine a senior civil servant who, by his years of achievements from school to adult work, has to accept and work with a lower salary than a private sector senior executive? It is unrealistic, especially if he has to undertake more important assignments for the company or the shareholder who is the Government of Singapore. How much more unrealistic to expect the bosses of these senior civil servants, the Ministers and the office holders to be paid less than these executives? So there must be a scale of value and a scope of responsibilities to jobs, we must not be afraid to attach to men holding these offices to safeguard our livelihood, our homes, our lives and our national well-being.

Ours is an upward mobile society. Just now, the Secretary-General of the NTUC mentioned this point about how he was so impressed by the lady who is working in SATS going to Canada to see her son who is studying to be a doctor. There are many examples of such cases in Singapore where parents and children really move up very fast because of their achievements. And I can give another example. In Queenstown where I am representing - Queenstown is an area with very old three-room flats - I have come across an ordinary police staff with two children, one graduated at Harvard, another one graduated at Oxford, both on Government scholarships. It is quite unheard of anywhere in the world. But our society allows such people to come out and move up across the social structure by means of their achievement and capability. I hope the Singapore Government will make a re-commitment to the mobility and flexibility in our society for people to achieve and maximise their potential.

We should not short-change our people who are in the public service by restricting their rewards and the way in which they can generate the income and wealth for their own families, expecting everything will fall in place by themselves. Things may well fall apart.

I would like to address the issue of income gap which many people have been talking about. The issue of salary review and adjustments for civil servants and Ministers and office holders really should not be mixed up with the discussion on income gap. And I perfectly share the view expressed by Mr Lim Boon Heng that the income gap will not be getting closer when there is economic growth. In fact, this is a very common phenomenon. Economic development economists have been studying this. Whenever there is sustained economic growth, income gap widens. The only countries in the world where income gap is narrowing are the poor countries getting poorer. The gap is completely closed when everybody earns the same income. Proponents of this phenomenon remind me of some defunct ideology that has been proven not to work. The proper concern is really to level up the low income households, not to worry about the income inequality gap, or to close it. And this levelling up of income households can be done by an appropriate wage increase in competition in the market and by widening our social safety net infrastructure which the Government of Singapore has been adequately providing. But the Government, I encourage, should take more efforts to examine these areas where there can be more safeguards, more opportunities to allow for access for our workers to good public health, public housing and education.

Workers should ask whether their income and employment opportunities have improved over the past few years, whether their companies have done better as a result of appropriate remedial policies of the Government in the wake of this Asian financial crisis and the re-emergence of competition from the neighbouring countries especially with a new, much lower exchange rate regime in these countries. They are really giving Singapore the real competition, unless we move ourselves up into higher technology end. And Government should respond by ensuring that there is room in society for everyone to be upward mobile by education, training, re-training, skills acquisition, giving them equal opportunities and access to all levels of society by dint of their success and achievements.

I would ask the Government for re-commitment for maximising the potential of everyone throughout his work life, to have the necessary skills, preparations and opportunities to stay employable, to have affordable access to health, education and housing. And I ask my fellow Singapore workers to be concerned about this rather than to be concerned about closing the income gap.

I urge the Government to re-dedicate ourselves to this precept of Singapore 21 where every Singaporean matters to enable everyone to maximise and achieve his potential. That, to me, is a very tall order and I say let us hire the best people for the job.

Mr K. Shanmugam (Sembawang): Sir, I have always spoken in support of pay rises for Ministers and civil servants strongly, and I do so again.

Many will welcome or at least not question the rises for civil servants. However, the focus will be on Ministers' salary rises. This is a hot topic and has always been so. On this topic, there is really only one question: do we accept that Ministers' salary should be referenced to top earners in the private sector? The answer is really a no-brainer. This is not a new point. It was established in 1994 when salaries were linked to top incomes outside. But despite this, questions will again be asked when Ministers' salaries are increased. It is these three common questions.

The first two are questions of principle and the third is the question of detail. The first question of principle is a suggestion by some that, in absolute terms, Ministers are already earning top salaries and that, therefore, their salaries should not be increased further. This suggestion overlooks a basic point. That is the point about relativity. Regardless of actual numbers, can we have too large a gap between public and private sector incomes? If there is a large gap, then do we honestly expect to get the best for the top public sector? In these matters, one has to be honest and not hypocritical. We want the most talented in Cabinet. Why not pay them what they would get outside? $34 million is cheap to pay for a corrupt-free, top quality Government. Look around in both developed countries and developing countries and see what happens when people stinge on Government salaries. You do not want your Ministers who take favours from private sector people to take free holidays or stay in their hotels, as has happened in developed countries. That cheapens the Government.

Let us pose the question another way. If we approach the question de novo and without political consideration, would we only rank that a Minister's job as being as important as that of the 200 top earners outside? Should we not have people in the top 50, in fact, the top 20, and if we have such people in the Cabinet, is it then fair to pay them what the 200 earners outside earn? Yet, with all these revisions, that is what the proposal aims at, and even that, it will only be achieved in the year 2003. Any private organisation that does that will simply lose their talent and will end up as a secondary organisation.

Therefore, for the first question, the focus should not be on absolute numbers. It should be on relative linkage. Singaporeans have to realise that as a result of the growing economy, incomes have indeed risen and yes, there is a large income gap. It is a fact. At the top, our people in the private sector command world-class income. We cannot realistically pay our Ministers any less. What we have to hope for is that over time, the right policies and education will help a much larger proportion of the population to reap the full benefits of becoming a world-class economy.

I will now deal with the second question that is often asked. Even among those who accept the principle that there should be a linkage between public and private sector salaries, the question that is often asked is whether we do, in fact, have Ministers who command these incomes outside. It is a sensitive question but it misses the central point which we are discussing now. The point of principle is whether we accept that the Ministers' salaries, without reference to individuals, should be at least equal to what the 200 earners outside earn, having regard to the importance of the job and the pressures of the job. If we agree with that principle, then the salaries should be adjusted to that scale. It does not matter whether specific individuals, who are Ministers, would be able to command those salaries outside. That is a systemic issue. We should agree on principles and not let arguments over individual personalities dictate the principles.

On detail, the question that is often asked is, in the private sector, the list of individuals who are top earners may change from year to year. By linking ministerial salaries only to incomes, the question is whether the ministerial salaries are protected from the vagaries of the marketplace which may affect top private sector earners, and whether over time, the Ministers would, in fact, earn much more than any specific individual outside.

Again, that question overlooks a central principle whether there should be a linkage between a Minister's job and his specific rank outside. It does not matter who the individuals are, whether in the public or private sector. The salary of a Minister should be linked to a range in the private sector because that is what the Minister's job is worth. Then the Government should ensure that its Ministers are of the calibre to command such incomes, whether they are in Government or out of Government. It is like saying what salary will you pay a CEO of a major bank. There will be a base which will be high, regardless of the individual, but specific individuals may get differing bonuses.

Sir, after all these revisions, frankly, the ministerial salaries, are still not competitive. The world outside has changed and salaries are increasing outside and they are only part of the picture. The investment opportunities that are available to private sector professionals are simply not available to Ministers. With the changing environment, the best outside can make a vast fortune in the new economy which will make these ministerial salaries appear loose change. Do we or do we not believe that at least some of our Ministers can make that kind of money if they went outside?

The Minister's job is a thankless job if he looks at it as a job. The pressures, the public scrutiny, the imponderables are such that you have to really approach it as a calling rather than as a job. And this country, as most of the countries now, is competing at an increasingly complex environment and without natural resources and with only our people to go by, good stewardship is now at a premium and it is all the more important that we get the best.

Sir, let me end by saying this. I have said it before but I strongly believe it and will repeat it. When someone suitable is identified and is asked to become a Minister, you only want him to ask himself the following three questions:

(i) Am I intellectually good enough?

(ii) Can I do the job?

(iii) Do I want to do the job?

You do not want him to ask a fourth question: can I afford it? If that question is asked, we have failed. Sir, I support the changes.

Mr Ang Mong Seng (Bukit Gombak): (In Mandarin): Mr Speaker, my Parliamentary colleagues have brought up some very important points in support of the Ministerial Statement made by Deputy Prime Minister Lee Hsien Loong.

I would like to add a few points. Firstly, on CPF. In 1997/1998, when we were facing the Asian financial crisis, our workers cooperated with the Government. They accepted the Government's proposal to cut their CPF benefits by 10% in the employer's CPF contribution. Today, we are proposing to increase the salaries of our Ministers and civil servants on the premise that the economy has recovered. On this point, I would like to ask whether the Government has a specific time-table for this 10% cut in the employer's CPF contribution to be fully restored. The economy has recovered and this is the time we should seriously consider restoring the cut in CPF to our workers.

Secondly, today, we announce the rise in the pay for our civil servants. Tomorrow, this will be reported in the newspapers. The response from the market is usually very fast. Even before these announcements were made, transport charges, PUB charges, taxi fares have already gone up. Tomorrow, with the report of pay rise in the newspapers, the various retail outlets and the hawkers will spontaneously jack up their prices. As such, I am worried that the salary increase for civil servants in Divisions III and IV may not be able to match the price hike outside. Although their salaries have gone up, their standard of living may actually take a downturn instead. I feel that for the civil servants in the lower-income group, the increase in their salaries should not be computed in terms of percentage points. For those with a salary of $10,000, a 10% increase would have been $1,000. But for those earning $1,000, 10% is only $100. They pay the same 70 cents for the same cup of coffee. We should give them the increase in real terms so that they enjoy a real raise in their income. Although we may not be able to close the gap between the high earners and the low earners, we should at least try to give the low earners a better deal.

Thirdly, the principle for pegging the Ministers' salaries to the top earners in the private sector. In 1994, it was pegged to the top 24 earners and today it is pegged to the top 48 earners. This is an improvement. But for those in the private sector, those who are the top earners such as the CEO and the senior managers, they do not have security in their work. This year, they may have a high pay but next year, they may not get the same pay. So when we are pegged to the top 48 earners, they are actually a different lot of people from year to year. So next year, we may be looking at another group of people in the top earning bracket. Some members of the public feel that this is not a very fair method.

Let me give you an example. There are two aeroplanes taking off at the same time. One aeroplane 'P' representing the public sector and the other aeroplane 'M' representing the Ministers. The two aeroplanes take off at the same time. After some time, aeroplane 'P' has to land to refuel, but aeroplane 'M' can have a refuel in mid-air and it does not need to land for refuelling. So in the long run, aeroplane 'M' would have gone faster and further away than aeroplane `P". I feel that we should peg to the same group of people on a long-term basis, rather than changing every year. In this way, it would be fairer.

Our income varies according to our economic progress. If the economy has gone up, then everyone will enjoy higher income, and if the economy is not doing well, the income will go down. It applies to everyone.

Fourthly, in this year's Budget, no mention was made of this proposed increase in pay for our Ministers and civil servants. Since this pay rise will take effect from July this year, which is within the current fiscal year, will the increase to the civil servants' salaries affect the service that will be provided to the members of the public, eg, in the Ministry of Health, the Ministry of the Environment or the Ministry of National Development? Will the service quality be affected because they have to spend more money to pay for the higher salaries of the civil servants?

Fifthly, I am worried about those who are unemployed. In 1997-1998, because of the financial crisis, quite a lot of people were retrenched. Many people could not find alternative jobs, particularly those who do not have good skills or those who are more elderly. They have tried very hard to apply for new jobs, but the success rate is very low, mainly because they are older. They may be in their 40s or 50s or they do not possess computer or special skills, and they are unable to secure new jobs.

Two years have since passed. Even if they have some savings, they would most probably have been used up by now. Now they face this problem of not having enough money to support themselves and their families. While we are proposing pay rise to our civil servants, we should also take the plight of these people into consideration, and show some kind of special concern for them.

We have talked a lot about training and retraining. But these training and retraining programmes do not benefit them physically unless they can have a job with income to support themselves and their families. First of all, the Government should have an overall plan to look after these people who are presently unemployed and to give them some free training and job opportunities so that these workers who are now unemployed would be able to find jobs.

Sir, I support what Minister Lim Boon Heng has said. We must make sure that everybody is employed. The first thing is to have a job. Salary comes second. We should not compare ourselves with others. If you compare yourself with others, you will only be frustrated. So long as you can find a job to support your family, high pay or low pay does not matter so much. In fact, whether the pay is high or low is a very subjective point. One important thing is that we must make sure that everyone has a job, so that his family can have food to eat.

Mr Thomas Thomas: Mr Speaker, Sir, the wage increase which was announced today is a good thing, in the sense that it is in line with the National Wages Council's recommendation which actually gives recognition to the sacrifices of workers during the recession. The other thing is that it keeps faith - there is reward for sacrifices.

At the same time, I also accept the economic reality that you have to pay high salaries to attract and retain - and the word used - talent. But instead of using the word "talent", I would prefer "people with the appropriate skills and abilities" that can meet the needs for the work they do. To pay people their worth is definitely acceptable. But in trying to solve one set of problems, we must also be aware that sometimes we create other problems, and there are also concerns. We also have to be aware of what the concerns and problems are, and try to resolve them.

In my own mind, sitting there and listening, I can think of three basic concerns which many people have. The first one is: who pays for the increases? There are going to be increases and it has to be paid. The normal thing to ask is: will it result in increases in fees and in Government charges? And a lot of costs of living are going up. Will it be more expensive for ordinary citizens of this country?

The other thing is: how do we measure talent? Who are the talents - the right people with the right skills? We bring in people with ability. We talk about market. We talk about efficiency. And they are very high in IQ. They write good papers and have good ideas. But there is also another important element, which is the feel for the people. The emotional quotient of our top civil servants is also important.

The third thing is that, even at Question Time the discussion and the debate were that it seems to be that the demand for the skills of a few people at the top are going up. Therefore, their earnings are spiralling upwards, and they are going up and up. There are people at the lower level whose jobs are getting casualised, jobs are being outsourced and there is a spiral downwards, and the net result is that the gap is getting bigger and bigger. We heard that in economic terms, this widening gap is inevitable. But is this socially and morally acceptable? Will it result in a change of values? Are we only measuring efficiency in terms of dollars, and in terms of money? I reflect on this and I think one of the answers to some of these questions can be found in history.

I would like to ask whether history can teach us some things, and a few things strike me. One is, in France, during the time of Louis XVI, they had great income disparity. When the Queen was told that the ordinary people did not have bread, she said, "Give them cake!" The net result was the French Revolution.

England, at the same time, was also in a similar situation, but they did not have a revolution. There were a lot of poor people. Income gaps were very wide and leaders were out of touch. I read somewhere that one of the reasons why there was no revolution in England was attributed to just one man who went from town to town, village to village, on horseback. His name was John Wesley. He basically gave a lot of ordinary people hope - hope beyond their difficult circumstances. He did not just preach and talk about the world to come, but he also converted many of his ideals into practical help, in the sense that he built schools; he housed people who were in difficulty; he helped the poor; he gave practical assistance, built orphanages and he helped. At the end of the day, the ordinary working people in England were motivated to work hard, to save more, to earn more and also from their earnings, to give back more, and the social standard of living changed. And that was a bit of a social revolution.

Another thing that comes to mind is that at the beginning of the 20th century and at the end of the 19th century, 1% of the US population owned 45% of the national wealth. They had all the ingredients for a great revolution or uprising, but it did not take place. Europe had lesser differentials but they had revolutions - the Russian revolution and the Great War. Why did it not happen in the US but happened in Europe?

I sit back and I think that one of the reasons is that in the United States, everybody had opportunities through education. Europe was very class divided. And one of the lessons that I learned and one of the key things is that we also need social consciousness. We cannot have a good society whereby people who are eligible and who are entitled to get their worth is paid less than their worth. I think people must get their worth. But the people who get the high pay, who earn well, must also realise that they have to give back something to society. And there are also people who have lesser abilities, lesser talent than them, and they have to be supported. It is not just the creation of wealth but it is also having the right social conditions and stability. I think we must be aware of this. When it is very secure, when things are very smooth, when we do not have these problems, many of us will not think about it. But in moving forward from these events, the difficulties of the ordinary workers who do find a lot of pressures of cost of living, some of them find it very difficult to understand why some people should earn so much more than they could spend. But, at the same time, if these people do explain and we understand that it is for the overall good, it helps.

The other thing we learn is that everybody should have opportunities to move up, and the best way is through education. In the US and in many other places, the answer was education, and there must be social mobility. Because when you move up the ladder of success, sometimes the ladder is slippery, you slip. But when you fall there must be sufficient safety nets. And along the way in working life, the chance to move and upgrade is very important in our society. Can we have that?

As regards social safety nets, I would suggest that we also relook at our social safety nets. We have got basic safety nets of health, education, housing. These are important. But what is poverty, what is poor, also changes the relative values.

I remember when I was young, a lot of homes did not have a refrigerator. The telephone was not in every home. Television was not in every home. But, today, these are considered very basic. The UN says that the poverty line is US$1 a day. But in our society, because our norms are different, the poverty line is also different, and it is also relative. If somebody has it, we also want to keep up with the Joneses. Therefore, we also need to relook at our social safety nets as well as realise that because there is a lot of casualisation of labour at the bottom end, people feel very insecure. We should increase protection for this group of workers, because they do not have the bargaining power or the skills to earn top wages and they need help. And on help, I accept that the best form of social security for anybody is social security with dignity, and that is to have jobs and have the pride of being self-reliant.

Sir, I think it is important that we help our people to be self-reliant and have the ability to move up. Therefore, the key for the majority of us would be opportunities and that the role of Government beyond economic growth is also social growth, social cohesion, and cost of living. And if we do all that, then I think we will have people in our society who are strong. They get stronger, and we know that we cannot strengthen the weak by weakening the strong. The strong gets stronger but it is without weakening the weak. If we have the right values, then I accept that we should not have the politics of envy but rather the politics of saying that "if this is something that everybody can achieve, I too have the opportunity to get it. My children can also have the opportunity to have it" and therefore everybody wins.

Sir, on that note, I have no difficulty in accepting that anybody, whether it is Ministers, civil servants, the private sector and ordinary workers, who deserves should get his fair worth.

5.15 pm

Mrs Lim Hwee Hua (Marine Parade): Sir, I rise to endorse the need for sustaining a suitably and adequately motivated public sector and for retaining talent as well as to make specific comments on the changes as outlined by the Deputy Prime Minister.

Much has been said by many of my colleagues on the importance of good and honest Government to our economic and social well being. So I shall not belabour the point about the adverse consequences of having less than upright and incompetent Government. Equally so, attention has been centred on the fast changing global economy and therefore on the need for a dynamic, responsive and upright public sector to enable us to cope and position ourselves.

In this context, the public sector must continue to work closely with the private sector, embracing economic challenges together as one single team rather than two camps, the administrator, or even worse, the bureaucracy versus the actual doers. Hence, the civil service needs to be more nimble-footed, more responsive and to be exercising foresight as a matter of habit.

I should add here that we do not begin at zero base. We do have a civil service that we can justifiably be proud of. However, the macro competitive landscape is imposing more and more demands on us. This has great implications for all levels and grades within the civil service as it is now incumbent on every public officer to take ownership of and responsibility for his Ministry's or Department's mission.

The Government, as employer, must therefore in turn ensure that there is sufficient non-quantitative motivation, guidance and counselling to enable each public sector employee to give of his or her best. For the ones who still tend to "maintain the status quo" or hide behind a faceless bureaucracy, they need to be guided on to individual and team excellence. Essentially, this is a change in culture and mindset.

Towards this end, the move to highlight and reward performance is inevitable and much needed. The emphasis on nurturing and preserving credible and competent leadership cannot be overstated.

Sir, it is this very spirit of motivating public sector employees to perform at their potential that should arrest our attention. The absolute numbers and the size of increases are, of course, important and news worthy. But what is more important is that essentially there is a need to maintain relativities and to approximate private sector practices, for example, that more will move into the variable and less into the fixed. The sure thing in the form of an iron rice bowl, fixed increments and salaries is fast becoming scarce in the real world.

Sir, let me now go on to make comments on the specific changes to benchmarking and the emphasis on performance.

Firstly, benchmarking. Two questions are frequently associated with the construction of the benchmark: How representative it is and the extent of risk that is embodied. As my colleague, Mr Chay, has also pointed out, by enlarging the pool from 24 to 48 professionals and taking the median instead of the average, the modified benchmark has become more representative and reduces the risk of outliers providing an upward bias to the numbers. However, many will still ask why 48, not 96, or some other larger number. In this regard, I think it will be good for the Government to explain how the pool size is arrived at.

Sir, we note too that the Government recognises that stock options can substantially inflate overall compensation and has therefore discounted this in the benchmark. Once again, is halving accurate and will future refinements be made to approximate actual proportions in the private sector?

Secondly, the extent of risk assumption which is also associated with the emphasis on performance. Sir, many will ask how closely does the revamped compensation scheme for top leaders resemble that of the private sector. In other words, how much risk does a top public sector leader assume in his job and career? With more going into the variable and less into the fixed, the link to performance and overall economic well being is closer. This is a move to be applauded and it should not stop here.

Next, as to what would constitute a good performance measure, for example, using GDP growth as a proxy, there will always be the challenge of developing a measure that has a more direct correlation to work across the different Ministries. Otherwise, the lack of differentiation at the individual level may be a source of unhappiness. For companies, whether it is sales or profitability targets, there is usually little ambiguity as they can easily be translated into individual targets as well.

Finally, Sir, allow me to say that I recognise it is a difficult balance to strike between the need to arrest the attrition of talent from the public sector and harmonising the changes with the overall wage climate in Singapore. Whilst it is clearly necessary to check and debate on the justification for benchmarking, we have to be mindful that the checking exercise does not become an emotional tussle and derail us in our long term quest to be knowledge intensive. As my colleague, Dr Vasoo, has alluded to, we would always have to ask ourselves what the consequences of alternative actions or the status quo would be.

In the larger scheme of things, where employment would increasingly be less predictable and less structured, the individual Singaporean's worth will increasingly hinge on value creation for a fast changing economy at his level. Essentially, it boils down to having the appropriate attitude and response regardless of where one works, whether it is in the public or private sector.

Mr Chew Heng Ching (East Coast): Sir, I rise to support the spirit and principles behind the proposals raised by DPM Lee today.

Raising compensation levels of Ministers and senior public servants has always been an emotive issue for any country. Nevertheless, there is a need to reinforce and understand the fundamental reasons why it is required at this particular juncture.

Singapore is not just an isolated nation in the rising sea of global trends facing all economies in the world. The effects of globalisation are being felt at the far corners of the world. There is now a world benchmark for talent, and not just a domestic one. Mobility of people and the growth of opportunities in the international arena have spawned a whole new level of the ball game in attracting and retaining talent.

By many accounts, our Government and civil service have been very successful, transparent and progressive in transforming our country and citizens to the top tier in GNP per capita, in education matters, health and many other services. They have indeed delivered for the nation. A hallmark of our success has been the clear incentives in rewarding dedication, efficiency and results, with market benchmarks. This has ensured that some of our very best and brightest continue to serve our country for the benefit of all.

Indeed, the Government and its bureaucracy have been ranked tops by many international benchmarks, not least the recent Economist survey on e-Governments for which it is stated that we have the largest potential in enabling the successful transition of the economy and the nation into the new e-millennium.

We all recognise the lure of the dot.coms and its ability to reward richly. Similarly with the rising prosperity of the world and enlarged opportunities for our limited talent pool, the opportunity costs to those who can deliver for the nation have risen. We can never compare and compensate like for like with the market as there is the noble duty of public service attached to the jobs in Government. However, we can certainly give due recognition and reward in as fair and effective a manner as possible.

The recent PERC report as appeared in the Straits Times today ranked Singapore tops for its leadership. Our Ministers certainly deserve the recognition. They also deserve the adjustments proposed in this exercise. In particular, I applaud the measures to phase the adjustments for Ministers' salary over a 3-year period as well as the annual review to better reflect the fluctuations in the market. This is indeed a testament to the robust integrity of the way in which we scrutinise and refine our system continuously in the public interest.

Sir, despite the logical and rational reasons that had been debated at length in the past and to-date that the Government faces in attracting and retaining talent, we still have to address some of the emotive and pertinent concerns of our citizens.

I would therefore like to raise a few concerns and seek clarifications with DPM. Sir, Singaporeans are feeling the effects of the recent increase in fees and rates, in transportation, utilities and other basic charges in the economy. There is a fear that there could be further increase in fees, rates and other charges as a natural consequence of raising public sector wages. DPM has stated earlier today that the proposed increases in salary of public servants arising from this exercise will amount to some $400 million. I would like to ask him if this amount has been provided for in the current budget. If not, where would the expenditure be funded? If yes, could we have the assurance from him that this exercise would not lead to any consequential increases in rates and fees of Government charges.

The timing of the exercise is also a source of concern for a large minority of our population who have yet to feel any tangible effects of the economic recovery. These include families whose members have suffered retrenchments or SMEs and small businesses that are still finding the environment difficult to successfully operate in.

I would like to ask if the Government has done any studies into the potential impact on employment and wages, ie, its impact on our economic recovery arising from this exercise. If the consequence of benchmarking public sector wages leads to pressure on the private sector employers to follow suit to attract and retain their own talent by raising wages, this may stifle the nascent and segmented economic recovery that we have benefited so far. Will DPM comment on this concern?

On a related note, rising wages increase the opportunity cost to relocate and discourage Singaporeans to take on more entrepreneurial roles by creating more "comfortable" employees in both the public and private sectors. This seems to go against the spirit of entrepreneurialship and enterprise that we have been trying to cultivate so aggressively in the last one year.

Greater risk averseness and higher opportunity costs in the public and private sectors will reduce labour mobility. There may be less incentive as a result to exploit opportunities as fast as we should be. Would DPM therefore be able to comment on any expected effects this exercise may have on slowing the initiative for greater enterprise in our economic model, which is essential to our survival in the new millennium?

Sir, I support the proposal but would like DPM to address some of the concerns I have raised arising from this exercise.

Mr S. Iswaran (West Coast): Sir, this is not an easy matter to debate. Salaries of Ministers and civil servants are a matter of intense public scrutiny. Public funds are involved. Many perceive Members of this House as being judge, jury and beneficiary and ultimately it is an extremely emotive issue.

I am therefore glad that the Government has chosen to adopt an open and transparent approach to this debate. One would imagine for a matter which is fraught with such problems, the instinct would be to shirk away from debate. But this Government has not done that and it has placed all the facts on the table for Singaporeans to look at openly and consider. It is typical of this Government's style and I welcome it.

Sir, the need for top talent in the public sector is, in my mind, very obvious. The public and private sectors are twin engines of growth. Public sector capacity is critical for the growth of our nation. It is difficult to think of any country where the public sector has been weak or slovenly in its response to challenges and which has yet managed to maintain and sustain consistent growth and economic and developmental success. There are a few where there is this asymmetry and in those cases the benefits have been in very narrow pockets and not sustainable. The public sector is a key determinant of the enabling conditions for economic growth and broad-based development. These include not just physical infrastructure but the laws and policies, education system, law and order, etc.

Sir, the bottomline is we cannot fly as high or as fast with only one engine firing. If we accept the need for top talent in the public sector, we must be ready and willing to pay competitively. Only then can we hire the best, demand the best, and make no apologies for it. Charity and sacrifice is best left to the individual to decide for himself or herself.

Sir, I think back to the time when I joined the Administrative Service in 1987. Over a period of six to seven years, three-quarters of my cohort resigned and left for the private sector. This was before the civil service pay adjustments were introduced in 1994. These are good friends and they are no less loyal to Singapore than anybody in this Chamber or any other Singaporean. But they left because of the economic realities. They too had needs. They had families. They had children. They had mortgages to pay and they had expectations and aspirations commensurate with their talent. It was quite unrealistic to expect them to take a substantial reduction in pay when they could see what they could command out there. So they left. And they felt that they could continue to contribute to Singapore in other ways, and many of them still do. But the bottomline again is that the civil service and the public sector was the poorer for their departure.

The question then is how much is enough. Sir, this is subjective. We have a formula. Is it too high? Is it too low? Or is it right? We could perhaps look at it from some angles. The first question to ask is really: have they delivered? And I think it is generally acknowledged not just by Singaporeans or Members of this House, but globally, that we have a public sector that is amongst the best in the world. The PERC survey that many Members have cited is just one in a series of examples. In the World Competitiveness Reports, we have consistently been rated high and one of the critical factors has been governance.

It is not just the quality of the leadership but also the fact that it has been able to stay ahead of the curve and not just keep up. More recent examples of that will be the manner in which the economic challenges of the recent crisis were managed, the drive into a knowledge-based economy and the initiatives in e-government. Not many countries have set the pace. And we have to see what has all this cost us. If I recall correctly, with all these pay adjustments, the DPM has said the total cost will increase to $34 million. This is less than 0.01% of our GDP. If you call it an investment, I think it is reaping good returns. If you want to call it insurance, it is a very low premium to pay.

Sir, I think the need for such competitive pay is equally obvious if we contemplate the alternatives. We should not measure the cost of public leadership in terms of just the salaries that the leaders earn but of the total cost they could cost the nation, in terms of poor decisions or in terms of other unsavoury tendencies.

Sir, I would like to focus on some aspects of this review for further comment. The benchmark that has been used to compute civil servants and Ministers' pay has been the object of much confusion and even mythology. Does it include foreigners? Does it include stock options? Is there a discount? How big a discount is it? And does it include the wages or the earnings of banker entrepreneurs? It has also been the object of criticism that the base that has been chosen has been too narrow and that Ministers and the top civil servants are therefore not subjecting themselves to adequate risk in their earnings. In that regard, I welcome the broadening of the base from 24 to 48 for the higher benchmark and the 50% discount from stock options. It is also laudable that most of these increases are going to be channelled to the variable component and to increase it to as much as 40% of the total wage. I think these are important steps to address some of the questions in the minds of the public. But I do have some specific questions on this benchmark and its application.

One question really is the net effect of the entire benchmark and the discounting has been to peg the Ministers' pay at 200, if you take the full amount of $1.21 million, or 360, I think, if it was taken at a discounted level of $900,000. So the question that begs to be asked is: could an alternative formulation be considered, or maybe it has been discarded, which is to consider a broader pool at the top of, let us say, the top 400, and then taking the median of 200? The reason I say this, Sir, is in any statistical analysis, a small sample tends to have greater volatility and variability. To use that as a base to compute a benchmark and then to apply a discount is probably going to raise more questions. And perhaps if the net effect of all of these is to peg the Ministers' pay at 200, then why not do that and, say, take 400, and take the median. I think this is something I would just like to hear some clarification on, whether this has been considered and why it has been discarded, if so.

The other issue is the question of transparency. The sceptics will say that this large variable component of 40% is merely a device to camouflage the true extent of the pay rise accruing to the top civil servants and Ministers, and I think this needs to be addressed head on. One way to do that is to be transparent about the range and performance bonuses given to Ministers. I do not mean by this that individual Ministers' names be put and the bonuses be stated next to them. But I think it would be a very strong effective signal if the public is told that the range and performance bonuses earned by the Ministers is X to Y. That would tell them, first, that the variability is genuine and it will be effected at the top levels, and secondly, that the Ministers are subjecting themselves to the very discipline that they expect of top civil servants as well, in terms of pay variability.

Sir, the final comment I have is on the issue of timing and sensitivity. This pay rise comes, and there is no denying this, at an awkward time, because CPF cuts have not been fully restored and there have been recent increases in transportation costs and other charges. One could argue that there is never a good time for such pay rises. But the quantum is significant and for many, they would find it difficult to fathom. I think it is very laudable that in this exercise there has been a concerted effort to space out the increase and minimise the upfront increase. It demonstrates that a lot of thought has gone into being sensitive to average Singaporeans and their perception. But I wonder whether an additional step in terms of accelerating the CPF cut restoration could be considered. I think that would demonstrate to Singaporeans that the leaders are in it with them and that when things get better, it gets better for all.

Dr Ker Sin Tze (Aljunied): (In Mandarin): Mr Deputy Speaker, Sir, Deputy Prime Minister BG Lee Hsien Loong has made a Ministerial Statement on the increase of salaries for the Ministers and public servants, and he has used the mechanism deployed in the previous exercise with some improvements, such as increasing the pool of top earners from 24 to 48 and using the median point, instead of the average. These are good improvements.

Perhaps some people may question whether this is an appropriate time to propose such a substantial increment to the salaries of the Ministers and civil servants given the present economic situation. Since 1999, our economy has come out from the rock bottom situation. Our exports have grown strongly, particularly in the exports of electronic parts. Last year, our economic growth was 5.4% and the income of the professionals had increased substantially. Since the civil servants' salaries were pegged to the private sector, I think it is only fair that we look into increasing the salaries of the Ministers and public servants according to the current market trend. But now we are moving into a new economy whereby the economic structure has transformed in such a way that many traditional industries are unable to pick up, and some workers are unable to cope with the demand of the new economy. Many SMEs are not doing well, and many workers have lost their jobs. These are the people who suffer losses in income and they find it difficult to accept the substantial increase in the salaries for the Ministers at this point of time. As for those who are lucky enough to stay employed, the cut in their employers' CPF contribution has yet to be fully restored and they cannot help feeling unhappy about this increment of salaries to the Ministers and public servants.

The pegging of salaries between the public and private sectors is something which we have debated and accepted many years ago. It is a very creative measure. Singapore is the only country in the world with such a formulation. The Government has pegged the public sector's pay to the 6 top earning professions in the private sector. The public sector has been responsible for policies that govern the nation and to lead us in our economic development. In the meantime, our Ministers' pay is pegged at only two-thirds of the top earners in the private sector. This is very reasonable. With the economic recovery, the earnings in the private sector have gone up. So it is only fair and reasonable that we make adjustment to the public sector's salaries at this point of time.

However, the gap between the public sector and the private sector could even be widened because at this time, everyone is fighting for talent. In order to retain the top talents in the public sector, we have to increase their salaries. But in the private sector, they would also take the public sector's salary as a benchmark as well. They would also increase the salaries for their own staff in order to retain their talents. This would bring about a chain reaction and, in the long run, the wage cost in Singapore would go up and this would affect our competitiveness. The only solution is that we have to improve our productivity to offset the adverse effects brought about by higher wage costs.

The economic recovery is not across-the-board. There are some sectors in our economy, particularly in the SMEs, which have not fully recovered, and the higher wage cost would be an added burden to them. However, if we do not increase the salaries of our talented professionals, what would have happened? Under the development of information technology, we are becoming globalised and our talents would easily be attracted by other countries, so long as they offer better terms of employment and better pay. Many of our top talents would be attracted by the overseas employers, and go over there. So we have to pay them good salaries in order to retain them. This is a reality which we cannot run away from.

At the same time, the salary in the public sector must also be competitive so that we can retain the top talents in our public service. Therefore, an appropriate adjustment is necessary and cannot be avoided. If we do not adjust their salaries, many talents and top brains will be lost to the private sector. If we do not have first-class talents who can make decisions correctly and resolve all the difficulties to lead the Government, particularly in a time of crisis, it will certainly lead to disaster. For example, in 1985 and 1986, when we faced such a grave economic crisis, if it were not because of the Government's prompt action, we would not be able to get out of the crisis so quickly and emerged stronger than before. So I think a high quality government is very essential. Only with a good government, could we have good economic growth and a good standard of living for our people. Of course, some people may argue that our first and second generations of political leaders had sacrificed themselves to serve the people without insisting on good pay. It is because of their sacrifices that we are able to enjoy what we have today. Then why is it that we must now pay relatively high salaries to attract and retain talents in the Government? I think the answer is that we are now living in a different era. Our society is peaceful and stable. Our economy is growing rapidly and talents are easily attracted to other sectors because of their market value. Nowadays, when the young people choose their courses of study, they always think in terms of how much they can earn in the future. This is inevitably the criterion for their choice of studies.

In future, whether or not they are prepared to be civil servants or political leaders, one of the major considerations will be how much they can get in terms of salaries. If we compare the salaries of our Ministers to the top earners in the private sector, they are still one-third less. This is a sacrifice that they have to make. So, in future, will the top talents be prepared to make this sacrifice to be in the public service? It is still a doubtful point. If we do not have good salaries for the Ministers, it would be very difficult to attract top talents to form the Government, and it would be a great loss to our nation.

The proposal raised by DPM Lee is not just for the salary increase for the present batch of political leaders - the Prime Minister, Deputy Prime Ministers and the Cabinet Ministers - it is, more importantly, a preparation for the future. To the present lot of Ministers and public servants, they have a stable and adequate pay. A pay rise of 10% or 20% is not that critical to them. In economic terms, the "marginal utility" of money is getting lesser and lesser.

Sir, the important point is that we want to set up a mechanism to ensure that we have generation after generation of high quality people in the Government to promote the progress and development of the economy of Singapore.

I support the Deputy Prime Minister's statement.