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

Resumption of Debate on the Deputy Prime Minister's Statement [29th June 2000].

Question again proposed.

Dr Tan Cheng Bock (Ayer Rajah): Mr Speaker, Sir, I rise to support this pay rise.

The prevailing local conditions of CPF cuts, widening wage gap between the top income earners and the lower income earners, higher transport and utilities costs make the upward pay revision debate of all political appointees and top civil servants very embarrassing. Yet, globalisation and fast changing technology require us to move quickly to meet the new challenges. Thus, the urgent need to retain talented people in the civil service and the political arena to take our country into the very competitive world markets. We are in Government to provide the ambience for the private sector to create wealth and jobs for Singaporeans. We must pay them well.

Yesterday, many in the House were revisiting many old arguments on why politicians must put service before self, and I agree. But the discussion should be centred, in my opinion, on whether the changes made to the two benchmark formulae will be able to meet the changing wage pattern in the years to come. We will debate on these equally important issues at a later date, or we may lose sight of the topic under review. I know it is difficult to de-link, but we must try. So with this as the background, we have to ask whether we are comfortable with the revision in the remuneration package and can we avoid the situation we are facing now.

I think today's debate is not why top civil servants and political appointees should be paid well. This issue was argued in this House during the last debate on the subject. We agreed and we discussed how best we could pay them. And it was in that debate that the current two benchmarks, 15P32 and 2/3 average 24, were thoroughly discussed and agreed upon, some grudgingly. I remember SM said that once we agreed on the formula, we need not come back to this House again to discuss this politically emotive issue. But we could not achieve this because of two changes taking place in the world. One is the new economy companies, including dot.coms and life sciences. Their remunerations do not follow the norm. Second, stock option is becoming an accepted way of rewarding the top executives. This portion of reward far exceeds their basic salary. How we address these two will be a challenge for us.

15P32 apparently is working well. But I am not so sure how long it needs another review, seeing the big numbers coming from the United States corporate remunerations. For example, let me give you some idea. Last year, US CEOs, on average, earned an incredible 475 times more than what the workers did. If you compare this to 84 times in the year 1990, it is a very big jump. We may not see such figures in Singapore yet. But we tend to follow the US trend. Today, the average Singapore CEO earns 44 times more than the average worker.

DPM has proposed three changes. The first one is to put more numbers in the basket of top earners, that is, increase to eight, instead of the present four top earners in the six categories - banking, accountancy, law, engineering, local manufacturing and multinational companies. The second change is to rank these 48 top earners in these categories and take the median. And third, stock options, a portion of the 48th top earners be divided by two, that is, accept only 50%. The two points of increasing the pool of top earners to 48 and taking the median as a reference base definitely improves the formula. But, again as before, it fails to address the point that these 48 top earners change every year. This has been brought up a couple of times by other Members of Parliament.

The question some are asking is, as long as the pay of the 48 top earners in the private sector keeps changing, Ministers' pay will always receive an upward revision of their pay, as experienced in the recession years. To many, this is a win-win situation. Is there a reason for not changing? Perhaps, DPM would want to consider keeping half of the 48, that is, 24 top earners permanent and rotate the rest. This could be a compromised move to reflect the truer comparison as the same cohort of 24 is used for every year. The ideal of course is to use the same cohort of 48 each year. It is only a suggestion.

With the new economy, the salaries of top CEOs will continue to go up as the salaries are based on the individual's worth and not on good or bad years. If we take the cue from the US again, in 1994, the US CEOs made US$2.8 million. Last year, the average CEO of large corporations earned US$12.4 million. As Singapore is 12 to 18 months behind the US, we can expect next year's salary of our CEOs to follow suit and a corresponding increase of our top civil servants and political appointees.

A large portion of pay package could come from stock options. Thus, halving the amount of the stock option portion, as suggested in the new formula, may be very high in the coming years. I therefore suggest that we consider putting a cap on this. One suggestion is to use the present stock option portion of this revised formula as a benchmark to work out a figure on this. In yesterday's DPM's speech, he said, and I quote:

"Executives may exercise in a single year stock options which they have accumulated over several years, especially in a bull market. To accept the full amount of stock option gains without any discount is unfair and will skew the benchmark upwards." Therefore, my suggestion for a cap is reasonable.

Finally, Singaporeans are not aware that the Minister's salary is a total package. Many Singaporeans do not realise this. There are no perks, like car, driver, house, maid, medical benefits, etc, and that the bonuses form part of the pay package.

Mr Speaker, Sir, I have made a few suggestions which I hope DPM will consider. I support this revision in salaries.

Mr Zulkifli bin Baharudin: Mr Speaker, I rise to support this statement and wish to compliment DPM for the transparent manner in which this issue was proposed. Inevitably, the transparent manner of discussing this matter will generate discussion and debate. Even in private sector, discussions on salaries and remuneration are usually sensitive and touchy. In a small country, like Singapore, where everybody knows everybody, you cannot avoid this issue being personalised. This, I think, will remain for some time an unavoidable outcome to this issue.

Sir, since this was announced yesterday, I asked a number of people whether it is too much to pay the Prime Minister about $1.9 million or $34 million annually for elected Members of this House. Most really do not know how much is enough. But they agree that the Prime Minister, for example, should be paid a very high salary for the job he is doing. In fact, some are puzzled that, despite the increase, the Prime Minister is still ranked 63rd among top salary earners. Many have no qualms to have our Prime Minister being the highest paid among top professionals. This shows that Singaporeans now understand that we need to pay the best to attract the brightest to do what is seen as the most important job in this country.

However, Sir, there are problems, especially with benchmarking civil service salaries with the private sector and this can be problematic. It is quite clear that most top jobs in the private sector carry a high level and element of uncertainty in a hire-and-fire environment. For the Minister, some said that at least he gets a five-year contract before his next election, a luxury private sector executives do not enjoy.

While the salary review has been very comprehensive and, in my view, quite revolutionary, as it has even made Permanent Secretaries non-permanent, it will be difficult to avoid or eradicate completely, like DPM said, the "hentak kaki" mentality, in a large organisation like the civil service. We need to consider a number of things. While we have a transparent system of paying top wages to attract talents into the civil service, we seem to have less than a transparent system in dealing with non-performers. With a large organisation like the civil service, we can possibly have a free rider situation. We therefore need to be more comprehensive in the scrutiny and management of those who are not performing well.

I do not see this as a problem of political office holders as they are more visible but the same cannot be said of civil servants who are generally and sometimes seen to be insulated from blame and problems. Second, there is also the time lag problem which has made it necessary to have salary or wage increase even at a time when private sector salaries are just coming out of a recession. Perhaps, one suggestion is to appoint a group of search firms tasked to recommend salaries consistent with formulas that have been established. This is a practice adopted by many in major MNCs and can similarly be done to determine civil service salaries. Such firms can be more responsive and therefore close the time lag problem.

There is another benefit to this, that is, you have a third party telling you what is the going market rate for these professionals which would make it easier to handle this issue, because some feel that even if salaries are pegged at much higher levels today, the overwhelming majority that the PAP has in this House will make this a foregone conclusion.

Another problem you have is that when you provide a range of salaries for certain categories of the same grade in the civil service, the number of people you can compare within that same grade is far too small to provide any meaningful competition as in the case of private sector where there are a lot more competition and similar types of jobs in other companies. Therefore, I think the appointment of search firms may be relevant in this case.

I am, however, concerned about one possible unintended consequence of this whole exercise and, that is, whether it will affect the moral authority of civil servants and political office bearers to govern because moral authority is extremely important. I travel in the region almost every week and have discovered the deep and wide respect that this Government enjoys, not only in Singapore but also outside the region and, partially, this has got to do with the fact that previous office holders have demonstrated a level of self-sacrifice when it comes to their own wages and remuneration. I am also aware that we have existing procedures and policies of existing office holders who exercise restraint in making investments or getting themselves involved in other kinds of jobs. I think this is something that we need to make clear and something which we need to guard against to make sure that while we pay top wages to our office holders, they are not seen to also compromise on the other investments.

Again, in this particular instance, I think political office bearers are visible, they can be seen, people know what they do, where they go, where they live, what car they drive. But the same cannot be said for civil servants. That is where we need to be more careful and have provisions to avoid such conflicts instituted and not be the subject of abuse.

On the whole, Sir, I would like to again reiterate my support for the statement.

The Senior Parliamentary Secretary to the Minister for Trade and Industry (Mr Tang Guan Seng): (In Mandarin): It is often said that touching on the subject of money would hurt inter-personal relationship. Even in a company, some people would be unhappy if one of their colleagues gets a pay raise of only $50 or $100. We are now talking about the pay increases of our Ministers. Thus, we have to take more pains in explaining this matter to the people.

Many governments do not publicly discuss pay increases for ministers, especially in countries where the ruling party is weak. The ruling party is worried that it might be voted out. Other governments do not discuss this because the country cannot afford higher pay for its ministers. The result is a less than clean government.

Singapore is unique. Firstly, we discuss the issue of ministers' pay openly. The Government takes a long-term approach to this issue because we want to maintain a first class government with first class efficiency.

Secondly, our system is highly transparent.

Some people ask why we are so transparent about the high salaries of our Ministers. There are many other easier ways to compensate them and to supplement their salaries, for example, giving them housing allowances, providing them with a chauffeur or a maid. The Government can also increase their salaries quietly through promotion. If we do that, things would have been much easier. However, it is not the style of the Government to do that. We want to lay everything on the table and allow even the formula for calculating Ministers' salaries to be brought up for public scrutiny. This is a very honest way of dealing with the matter.

When we discuss this issue, my view is that the emphasis should be on how to establish a system to determine ministers' salaries rather than focusing on the individual minister's salary. I think this would make our discussions more objective and rational.

Ministers and top civil servants are charged with the very heavy responsibility of improving the standard of living for Singaporeans. We have to establish a system so that the Government and the civil service can attract the best talents.

The achievements of our Government are for all to see. There is no need for us to blow our own trumpet.

Recently, I had a conversation with an Ambassador of a foreign country. She told me that in the past three years, there were two things in Singapore that left a very deep impression on her. First, during the financial crisis, the Government had time and again devised strategies to tackle the recession, and eventually led Singapore out of the recession - the first country in this region to do so. Secondly, while we were dealing with the recession, we also made preparations to face the challenges of the new economy, that is, to plan for the future.

Recently, I spoke to a couple of Hong Kong entrepreneurs and they told me the property market in Hong Kong had fallen drastically. This had caused a lot of unhappiness among the people and many of them had taken to the streets to demonstrate against the government. These Hong Kong entrepreneurs asked me how Singapore managed to prevent such a predicament. I told them that in Singapore, the political leadership had anticipated the problem of `over-heating' of the property market and introduced some timely measures to cool down the situation in the property market. This is the difference between Singapore and Hong Kong.

As a matter of fact, PERC, an independent think tank based in Hong Kong, in its report in May, rated the Singapore Government as number one in terms of political leadership and economic policies.

Sir, we should not look at the revision of Ministers' salaries in an isolated manner. We have to take into consideration the various factors in the public and the private sectors. We are now in the midst of transforming into a new economy. There are many attractions for talented young people to go into the private sector. This bodes ill for the public sector in the long term. On the other hand, if the salaries in the public sector are much more attractive than in the private sector, it is also not an ideal situation because the private sector might be weakened as a result. Between these two sectors, we have to maintain a balance so that there will be a free flow of talents. They should be able to move from the public sector to the private sector and vice versa. We want to have first-class talents in the public sector so as to help formulate and implement policies as these policies will affect the private sector and all the people of Singapore.

As for the relationship between the political leaders and the civil servants, let me share this story with members. Recently, I attended an international conference where I met a delegate from an economy whose government was just newly elected. I asked him about his government's new economic policies. He told me that the new government had only two priorities - one was environmental protection and the other was to please the workers. As for how to promote economic development, the new government had no ideas at all. He said that civil servants were facing big problems. This shows that if the political leaders are weak, the government will not be able to function satisfactorily even if you have good civil servants. The ideal situation is where the political leaders are more far-sighted and more capable than the civil servants.

Secondly, I would like to talk about the relationship between the political leadership and the private sector. Yesterday, some MPs opined that the risks in the private sector are higher. Of course, there are risks in the private sector. Ministers also face high risks, though different types of risks. As for the responsibility that they hold, I think no one will have any doubt that theirs are very much heavier. They have to care for 3 million Singaporeans, their employment, their education and their future.

In times of peace and prosperity, we will not appreciate the important roles played by the Ministers. Only in a crisis will we realise the importance of having a good Government.

The political leadership, the civil service and the private sector should maintain a balanced relationship so that there can be mobility among talents in these three sectors. We have a very limited pool of talents. If we can work out a salary formula, which can facilitate the flow of talents among these three sectors, it will be to the advantage of our country.

The existing formula will be replaced by a new formula. The new formula is to take the 48 top earners in the six selected professions and to use the median point of the income as a benchmark. The ministers' salaries will be pegged at two-thirds of the benchmark. Compared to the existing formula, this is an improvement. This shows that the Government is prepared to review the agreed formula to suit new circumstances. There is one common characteristic in these two formulae - the discounting factor. Now, we are using two-thirds. Should it be lower or higher? A decision has to be made. Deputy Prime Minister has surfaced this new formula for us to discuss.

I feel that there should be flexibility in the formula, so that even in changed circumstances, it can be adjusted and be accepted by most people.

Of course, this is not the best time to raise the issue of pay increases for Ministers and civil servants. This is because the cut in employers' CPF contributions has not been fully restored yet and there have been increases in utility charges, taxi fares, etc of late. So a lot of effort has to be made to convince the people to accept this.

Sir, in this connection, I hope that the Government will pay special attention to the following matters. Firstly is wage cost. Will the pay increases result in a chain reaction that triggers off an escalation in the private sector's salaries? If wage cost is increased, will our competitiveness be eroded? Secondly, will this result in a chain of price increases and push up inflation? Thirdly, I hope that the Government will continue with the asset enhancement programmes so that all Singaporeans will be able to enjoy the fruits of our economic success.

Mr Low Thia Khiang (Hougang): (In Mandarin): Mr Speaker, Sir, the principle of pegging Ministers' and top civil servants' pay to that of the top earners in the private sector was debated in this House in 1994.

My stand on the matter remains unchanged. I do not agree with the principle in the White Paper. In my opinion, those who decide to take up politics and those who decide to earn more money for themselves are two distinctly different categories of people. If you want to peg the pay of political appointees like Ministers, Ministers of State, etc., to the top earners in the private sector, and say that without doing so, you would not be able to attract suitable talents into politics is virtually degrading the politicians' noble spirit of serving the nation and serving the people.

It is said that times have changed. We should be more realistic and look at this issue from the point of view of market economy. But we all know that governing a country with the national resources as its backing and doing business with one's private capital are two different things altogether.

The private sector faces market competition, even competition in the international market. Among the top earners in the private sector, some are owners of enterprises and some are salaried employees. But do not forget that even world-class banks can collapse and close down! The PAP Government does not own Singapore, neither are the Ministers' salaried employees. They rule the country on a mandate given to them by the people after a general election. Once they are in power, they can put to use the assets of the State. They enjoy great power to decide everything. They can also formulate and implement all sorts of policies to ensure that they can be returned safely at the next general election. In Singapore, competition in the election market is very limited. As such, although both can be described as markets, there is a vast difference between them.

Since the electors in Singapore have elected the PAP to form the Government to rule the country, the PAP Government can decide how much their Ministers are worth. Is it asking for the sky? It is left to the people to judge.

Actually, the Government does not have to go through all the trouble, using all kinds of computation methods to peg the Ministers' salaries to the top earners in the private sector, just to justify the amounts they are asking for. There is no need to use the income of the top 24 or top 48 earners in the country as a benchmark to calculate the Ministers' salaries. They might as well put it in a simple and straightforward manner and say the Ministers need to be paid how many hundreds of thousands of dollars a month, otherwise the Ministers would not have enough money to use!

In the case of the civil servants' salaries, I believe there is just a very small number of senior civil servants who are going to receive substantial pay rise in this exercise. Thanks to the Ministers, they are given these pay increases to avoid having a big gap between their salaries and those of the Ministers, lest it may be difficult for the Cabinet to account for it.

The Government says that it is transparent and the Ministers' salary system is also transparent. But the information provided by the Deputy Prime Minister in Parliament yesterday was not transparent enough. May I ask whether the Ministers' salaries as reflected in Handout 2 are only the basic salaries under the Ministers' salary system? I would like to request the Deputy Prime Minister to disclose the full information on the gross salaries of the political office-holders and the civil servants of the various grades, including the various variable components, bonuses and other allowances payable to them.

Mr Speaker, Sir, we must not forget that the people of Singapore are paying a high price to engage this batch of talents to become Ministers. We sincerely hope that the return received by the people will not be mere peanuts.

Mr Chiam See Tong (Potong Pasir): Sir, I am much obliged to you for allowing me to join in the debate.

Yesterday, we debated on the disparity of incomes of Singaporeans. The lowest 10% of our workers were reported to be earning as low as $133 a month. The Minister said that the Straits Times had made a mistake in its report. Assuming that there were mistakes in that report and we correct it by doubling the reported wage of $133 to $266 a month, then rounding it off to $300 a month. Even at $300 a month, that is a very low income. A man can barely survive on $300 a month these days.

Sir, I am certain that Ministers must be aware that there are Singaporeans who are barely scraping the bottom of the barrel to make a living. Does it not prick their conscience then when they themselves ask for high salaries at over a million dollars a year? If we take the average worker's wages at $2,000 a month or $24,000 a year, and the Minister's salary at $1.4 million a year, then the Minister is earning something like 60 times more than an average worker in Singapore. It means that for a Minister to work for one year, the average worker in Singapore has to slog for his lifetime for 60 years. This, to me, somehow does not look right.

Ministers are supposed to be servants of the people. They are to take care of the people and to give public service to lead the people, particularly by example. How can our Ministers have the moral authority when they take their posts purely on the profit motive by asking such high salaries? At the moment, our Ministers are paid the highest salaries in the world, more than Presidents, Prime Ministers and Ministers of other bigger and richer countries than Singapore.

In America, President Clinton is paid about S$630,000 a year, half of what our Ministers get and one-third of that of our Prime Minister. I believe the work of the President of the United States is definitely more difficult and more onerous than that of any of the Ministers and Prime Minister in Singapore. Yet, they can live quite comfortably on a much lower salary than our Ministers and Prime Minister. It is not that America is poorer than Singapore. It is not that it is unable to pay its President well. If they wanted to, the Americans can afford to pay their President three or even four times more than the Prime Minister in Singapore. They certainly can afford to do so, since it is the richest country in the world. In fact, a few of the American companies earn more money a year than the whole of Singapore. Yet, the Americans choose not to pay the President and their Ministers high salaries.

The question is: why do Americans choose not to pay their President and the Ministers high salaries, as Singapore is doing? The reason is that the Americans feel that those who aspire to take up public office must have an element of sacrifice. It must be seen that those who take up public office are there to serve the public, and not to make a profit out of that office. The President and his Ministers will then have the moral authority to lead. They are basically there to serve the people and not to make money out of their office.

I think the Americans are right on that point. We must not scoff at American values. That country has not only survived over 200 years, over two world wars, but has become the most powerful and the richest nation in the world. There must be something that we can learn from the Americans in regard to the way they reward their President and their Ministers. I hope Singapore and its Ministers shall take note of that.

I am not envious of the high salaries paid to the Ministers. My concern is more for the future of Singapore. What sort of values should we set for young Singaporeans? On the one hand, leaders of Singapore urge the people to be more communitarian and not to be so self-centred, individualistic and care only for oneself. But, on the other hand, where the Ministers' salaries are concerned, they do not believe in the communitarian way. The Ministers want their salaries to be pegged to the private sector's high earners. The private sector's motivation is on profit. Private sector earnings and level of salaries are entirely based on profit and earnings. Whereas on the part of Ministers, their motivation is not profit orientated but on nation building. The Ministers then should not be asking for salaries based on high earners in the private sector, but should be based on other principles. I think the fairest way is to ask how much a Minister needs to have a comfortable life.

In the debate on the White Paper on Ministers' salaries in 1994, I told the House that I estimated that about $50,000 a month should give a Minister a comfortable living - a bungalow house, servants, two motorcars and with a chauffeur, annual holidays and children's education. I note that NMP Walter Woon in the same debate also proposed a similar figure of about $50,000 a month or $600,000 a year. He said that could be a base on which the Ministers could work. I tend to agree with Dr Woon.

I think that as long as the Ministers are given a dignified comfortable standard of living that should be enough. That should be the criterion. We cannot factor in the profit element. The profit element is a private sector practice and should not be followed because the Ministers are not running a private company. They are running a country, a nation, hopefully, in our case. They are leaders of the people and they should lead by example. If our leaders show our people that they are there in public positions and claim for themselves huge profits, the wrong signals shall definitely be sent to all Singaporeans, including our young Singaporeans. They shall become cynical and the only thing that concerns them is money. In fact, if money is the only motivation why one does a certain job, that person shall not do that job well.

Look at the great achievers in the world. When asked why they take on that job or do that thing which they are good at, the answers are inevitably not the great amount of money they can earn, but the love of their job or the things they are doing. For example, when Michael Chang and Boris Becker, world famous tennis players from America and Germany respectively, were asked why they devote their lives to playing tennis, they said that they love the game and not the millions of dollars they can earn or have earned. Similarly, if Ministers really love their job and want to serve the people well, they should not be asking for high salaries. By asking for high salaries, they are giving wrong signals to Singaporeans that they do not love their job but for the huge profits that they can earn.

Speakers in this debate and the debate on the White Paper in 1994 had commented on the unfairness of pegging the Ministers' salaries to the six highest earners in a selected group of professions in the private sector. The reason mainly is that the private sector of the same group of persons may not be drawing the same salaries in the following year and also that they are taking bigger risks.

A more equitable method is to peg our Ministers' salaries to the world leaders of other countries. A good example is to take the President of the United States as a base for which we can work on. I do not think that our Ministers will complain on that. We should compare the salaries paid to those in the public service in Singapore to those in the public service of other renowned countries and not compare the public sector salary with those in the private sector. The public sector and the private sector cannot be compared because the two are motivated by completely different reasons. One is for public good and the other is purely for profit. The two cannot be reconciled. Therefore, public sector salaries cannot use the private sector salaries as a benchmark.

I had read a report in the Hansard where Members of Parliament in England were debating on the increase of Members' allowances. Almost each of the Members there who rose to speak began by saying how embarrassed they were on speaking of the increase of their own remuneration. It can be seen from that debate in England that the values of the English parliamentarians are different from those in Singapore. Over in England, the parliamentarians there were terribly embarrassed when they were speaking on the increase of their own pay. One notes that it is not so in Singapore. The Ministers in Singapore have affirmed confidently that they have a right to be paid the proposed high salaries and are not a bit embarrassed by it. This is an observation I note in the difference of attitudes and values between the Singapore Parliament and the English Parliament.

In conclusion, I would just like to state what I heard last night at my meet-the-people session. One grassroots member, on hearing the revision of the Ministers' salaries, said, "Wow, can buy a house every year." Another remarked, "Just like striking a lottery each year."

The Prime Minister (Mr Goh Chok Tong): Mr Speaker, Sir, Singapore is not the United States. The US has a population of 280 million people. We only have a population of three million. The US is a huge country. We are just a little red dot. So running Singapore, I believe, is much more hazardous and difficult than running the United States. In Singapore, people will require a good government much more than the Americans will require a good government. If the Government does not run Singapore well, the whole country can disappear.

In 1966, the Government sent me to study Development Economics in Williams College in the US. It was a special course for officials from developing countries. I was then a young officer working in the Economic Planning Unit.

My class of 20 came from 16 different countries in Asia, Africa, Latin America and southern Europe. We were taught theories of economic development, quantitative programming and other useful subjects. But what we were not taught was the importance of good government as a pre-condition for sustained economic development. This was assumed. But alas, it was an assumption that did not hold true for most of the countries represented in my class. What has happened to these countries since then is instructive. For example, three of the countries have broken up - Pakistan, Ethiopia and Yugoslavia. Nine countries have experienced civil wars, social upheavals or violent changes of government at some stage in the last 35 years - Philippines, India, Egypt, Uganda, Liberia, Mexico, Colombia, Bolivia and Honduras. That leaves only four countries out of the 16 represented in my class without severe political and social upheavals - Kenya, Tanzania, Malaysia and Singapore. Kenya and Tanzania are not exactly models of economic growth.

If I were to do a Ph.D, I would study the relationship between economic development and the quality of government. Empirically, there is clearly a close correlation between the economic performance of a country and the quality of its government. The more competent the government, the higher the economic growth of the country when measured over a long period of time.

There are, of course, other reasons why some countries do better than others, why their economies grow faster, why their people enjoy a higher standard of living, and why they have peace and stability. These include a country's natural resources, its location, and its people. All these are important factors no doubt, but I believe my Ph.D thesis will conclude that the most important factor behind a country's economic performance and the standard of living it can provide its people, is the quality of the political leaders.

There is much wisdom in an old saying that an army of sheep led by a lion is stronger than an army of lions led by a sheep. The former will function as an effective unit. The latter will end up with the lions fighting amongst themselves and the sheep being eaten. People are no different. They have to be led. A people led by a superior government can produce exceptional results. On the other hand, an able people led by a mediocre government will underperform. Worse, if they are led by a fanatical government which fears being challenged, clever people might even lose their heads.

Cambodia is a tragic example. Pol Pot and his Khmer Rouge killed off millions of their own people.

Uganda is another example. Under Idi Amin, it lost many of its talents. My friend from Williams College, a native Ugandan, had to flee the country. Ugandans of Indian origin who ran the economy were chased out. Today, 21 years after the end of Idi Amin's reign, Uganda is still suffering from his misrule.

India has millions of talented people. Silicon Valley is full of Indians. Indian Singaporeans have contributed significantly to our development. Yet India remains a poor country. It is weighed down by a bureaucratic leadership that prevents India from performing to its full potential.

I believe that India is capable of achieving much more. When I was in India in January this year, I put this question to several Indian leaders when we discussed the importance of talents. To what extent of its potential is India performing today?

Their estimate was 30 to 40 percent. Good Government

Different people will have different definitions of a good government. My own criteria for a good government are:

(1) It must be honest, fair and just.

(2) It must be capable of forging national consensus and social cohesion, and willing to take painful decisions for the overall good.

(3) It must be able to anticipate the future to head off problems and be nimble enough to adapt and seize opportunities when circumstances change. In times of crises, it must be resourceful enough to overcome them. And,

(4) It must be able to improve the standard of living of its people, maximize their potential and involve them in building a better society.

I have led this Government for 10 years now. How it has performed is for you to judge, by my criteria or by whatever criteria you choose. In particular, scrutinize our performance in the last five years from the time we argued in this House that Ministers and civil servants must be paid market-based wages. Has the performance of my Government justified its wage?

Compare the salaries of Ministers and senior civil servants with the benefits you receive from having a good government. Look at it from the viewpoint of results, that is, the value of output and not the cost of inputs alone. It is the results which are important. What you get out of it, not the cost of inputs alone. Has my Government given you "safe homes, stable jobs and fuel to dream of all the tomorrows?", as a member of the public put it. She wrote to express her appreciation for my "keeping the country well oiled and well run". "Safe homes, stable jobs and fuel to dream of all the tomorrows?"

You might not have systematically evaluated the performance of the Singapore Government, but many international consultancies have.

I would like to refer to some of these professional third-party evaluations, not to blow our trumpets, but to underline the value of a good government.

First, Singapore's economic competitiveness. This year, for the seventh year running, the International Institute for Management Development in its annual World Competitiveness Yearbook ranked Singapore the world's second most competitive economy after the US. Another think-tank, the World Economic Forum, thinks we have done better. In its 1999 Global Competitiveness Report, it ranked Singapore as the world's most competitive economy for the fourth year in a row.

Both analyses regard the effectiveness of government policies as a key factor contributing to the overall competitiveness of a country. In the World Competitiveness Yearbook, Singapore came out first on the extent to which government policies are conducive to competitiveness.

In the Global Competitiveness Yearbook, Singapore was also ranked first in many areas of government, including economic policies and public sector competence.

The Straits Times and Zaobao recently carried a survey by the Political and Economic Risk Consultancy (PERC) on the quality of various Asian governments. The report by PERC showed Singapore to have the best quality of political leadership among the major economies of Asia. Singapore's economic policies were also deemed to be the most effective. The PERC report said, "A nation's per capita GDP is a good example of the effectiveness of a particular government's economic policies." It goes on to say that if it were to go back fifty years and pick those countries of Asia which would be dominant economies today, Singapore would have been considered an economic backwater compared to places such as Manila. But Marcos rode the Philippine economy into the ground, whereas Senior Minister guided Singapore to our achievements today in an "amazingly short period of time."

Another PERC-produced report in March, Asian Intelligence, also reported that its respondents had "consistently rated Singapore as having one of the best bureaucracies in the region" and that "Singapore is widely regarded as a place where things get done, and get done efficiently."

But it is not only in the area of economic policy that international analysts have rated the Singapore Government highly. In "The Economic Freedom of the World: 2000 Annual Report", published by the CATO Institute in Washington DC and Canada's Fraser Institute, Singapore scored full marks for its legal structure and property rights. In PERC's Comparative Country Risk Report 2000, Singapore's judicial system maintained its top position in Asia. PERC commented, "Singapore's legal system has an excellent reputation among businessmen for being fair and effective, if a bit harsh at times." More recently, Lord Woolf, one of Britain's most senior judges, was so impressed by the smooth functioning of the Singapore judiciary that he wished the courts in his country would follow some of the processes here.

In the area of health, the World Health Organisation earlier this month assessed Singapore to have the world's sixth best performing health care system among 191 member states surveyed.

Our education system has also come in for praise from foreign experts. US Education Secretary Richard Riley, when he was in Singapore recently for the APEC Education Ministerial Meeting, commented that there was a lot the US could learn from Singapore's education system. In the third and latest International Mathematics and Science Study some years ago, Singapore's 13-year olds came in first among 41 countries in their ability in science and mathematics. This is clear testimony of the effectiveness of our education system. Some US schools are even using our mathematics textbooks.

These are but a sampling of the international assessments of the performance of Singapore and the Singapore Government.

Singaporeans by now take all these assessments and high rankings for granted. But pause for a moment and ask yourself how we have managed to achieve first world standards in so short a time and with so little resources. Could it have been done without leaders of integrity, ability and dedication to the people they serve?

Test of Government

The true strength of a government is revealed when it is put through the most severe crisis. This Government has been put through one in the recent Asian financial crisis. The financial storm devastated the economies of South Korea, Thailand, Indonesia and Malaysia, but left Singapore relatively unscathed.

Just consider the damage to these economies in 1998.

South Korea's economy shrank by 6.7%.

Thailand's economy shrank by 10.2%, Malaysia's by 7.4%, and Indonesia's by a massive 13%.

In contrast, Singapore avoided a contraction in 1998. Our economy still grew, if only by 0.4%.

Suppose we had not managed our economy well. It could easily have shrunk by 5%. This would have taken off $9.5 billion (at current prices) from our GDP. Divide this by a population of 3 million and you will get a loss of $3,166 per person. This is an indication of the price each Singaporean pays if we had not managed our economy well.

In contrast, what was the total annual salary for all political office-holders in 1998? About $28 million.

What is the total salary increase we are proposing for political office-holders? About $6 million. With the salary revision, the annual salaries of all political office-holders, that is my Government, will rise from $28 million currently to $34 million. Is this a lot of money when compared with the $9.5 billion damage to the economy that could have been inflicted by the Asian financial crisis? Is $34 million a lot of money when they amount to only 0.024% of our GDP of $144 billion (at current prices)?

Let me put it simply: the damage we had prevented to the economy from the Asian financial crisis is more than enough to pay the Ministers and the other political office-holders for the rest of their political lives and in fact over many lifetimes!

The Asian financial crisis has distinguished us from the other regional economies. Recently, an American asked the US Ambassador to Singapore, Mr Steven Green, on the Internet: "Why was Singapore affected less than the region during the economic crisis?"

His reply: "In one word, it is management. Singaporeans are very fortunate to have a government that is very well-managed, very far-sighted and willing to embrace change."

Foreign governments and investors have noted our strengths in the crisis. Our ability to withstand the crisis has increased confidence in Singapore. This is obvious from my many meetings with foreign investors and leaders both in Singapore and abroad. We are going to see more foreign investments come in. This means more jobs and better jobs.

Let us put the salaries of Ministers in their proper perspective. A million dollars for a Minister seems a lot when compared to the salary of a worker. But $34 million for all the Ministers and political office-holders, that is the cost of government, is a tiny drop when compared to the increase in GDP that a good government can produce. For every 1% growth, the GDP increases by $1.4 billion.

Good People for Good Government

So how do we produce a good government? Get the best to serve the country.

A good government does not come naturally. It must be systematically created through the active recruitment of good and able people. You cannot just leave it to the electoral process to throw up a good government. If the present ruling party is not able to persuade some of the best people to enter politics, you will have only weak men and women to choose from to form a government.

After every election, we immediately look for new candidates for the next election (we do not wait until the election is about to come) - from the civil service, SAF, Police, statutory boards, GLCs, the professions and the private sector. In other words, all over Singapore. Since the last GE, we have already invited nearly 250 Singaporeans in their late 20s to mid-40s for tea sessions. By the time of the next GE, we would have met 400 to 500 potential candidates. Out of them, we hope to find 15 to 20 with these 5 "Cs" qualities. These are the 5 "Cs" which a potential candidate must have (not your usual 5 "Cs" but my 5 "Cs"):

(1) Capability: Does he have a record of good performance? Does he have the potential to become an office-holder? Does he have good judgment? Does he have leadership qualities?

(2) Character: Does he have character flaws? Is he able to get on with people and motivate them?

(3) Compassion: Has he done things for others beyond his own family? Does he care for others?

(4) Conviction: What does he believe in? What does he want to achieve in life? What motivates him? Why does he want to be an MP or a Minister?

(5) Commitment: Is he loyal to his friends? Will he stay the course? Will he fight when the chips are down?

If we assess that a person is interested only in politics as a career move, he will not be chosen as a candidate. If he is attracted only by the pay, he will not be selected as a Minister. But that does not mean we should not pay a Minister what he is worth. We are targeting the top people to be Ministers. They are high-income earners or will be in their non-political careers. We will have to pay them a competitive, market-based salary so that pay will not be an obstacle discouraging them from entering politics.

Professor Joseph Nye, Dean of the Kennedy School of Government at Harvard University, made the same point in a talk in Singapore last year. He said:

"Singapore is very wise. You need to attract good people into government, and paying high salaries reduces the incentive for corruption."

On his point on corruption, Singapore's policy of paying our public officials market-based wages has helped us create a corruption-free environment. Transparency International, an NGO dedicated to fighting corruption worldwide, has consistently ranked Singapore within the top ten least corrupt countries in the world, since its index was first published in 1995. Among Asian countries, we are rated the least corrupt.

Professor Nye added that the high salaries also helped "lateral entries" from the private sector into government. He said that this was important in a modern economy with a complex, fast-paced financial sector, as government decision-makers would need the inputs of private sector practitioners.

Professor Nye was right about lateral transfers. When we identify a suitable young man (or woman) with the potential to be a Minister, we have to persuade him to give up his bright prospects in the private sector for an uncertain future in politics. Benchmarking Ministers' salaries to what the best in the private sector earns, makes it easier for us to get some of the best people to become Ministers.

Some may argue that you do not have to pay so much to get people to join the public sector or become Ministers, and that there will always be people who want to become Ministers or civil servants. Quite right, if you think in terms of quantity, not quality.

The Economist in an article in its issue of 8th May 1999 on "The Politics of Envy" asked: "Why do governments systematically underpay their top people?" And answered that it is the tendency to think in terms of quantity, not quality.

Andrew Oswald, an economist at Warwick University, was quoted in the same article:

"Governments can set low pay and still get workers. It is the quality that will adjust. I doubt whether western democracies have fully grasped this. Governments still tend to count the warm bodies applying for occupations."

But not this Government. It goes for quality, not merely warm bodies, and certainly not seat-warmers. That is why we have performance bonuses for political office-holders, one of the few countries in the world to do so. Ministers are paid in accordance with their performance. I shall now ask the Clerk of Parliament to hand out a table (Cols. 629-630) showing the distribution of performance bonus received by political office-holders. [Copies of table distributed to hon. Members.] This is to answer the point raised by Mr Inderjit Singh that the performance of office-holders should be properly evaluated (Table 1). From the Table, you will see that only three Ministers received performance bonus of more than four months, and the most number of Ministers was in the 3-4 months category. We have been stringent with our evaluation. The office-holders were given similar tables at the time they received their performance bonus. So they knew how they have been evaluated. Table - Performance Bonus Distribution for Political Office-holders (Cols. 629-630)

We also insist on self-renewal. MPs and Ministers, even though they are performing well, will at the right time, have to make way for younger people.

In future, Permanent Secretaries too, even if they are good, will have to make way for younger people. Otherwise, younger people with high potential will not stay long enough to become Permanent Secretaries. Timing of Salary Revision

Some MPs have told me that while they support the salary revision for the public sector, they are concerned about the timing because the CPF cut has not yet been fully restored.

There are two reasons why we are proceeding with the salary revision now.

First, in November 1994, when we debated the White Paper on Competitive Salaries for Competent and Honest Government, we said that the salary benchmarks would be reviewed in five years' time.

Second, the gap between private sector and public sector pay has become a gulf since the start of the Asian financial crisis. This is because the Government froze the salaries of Ministers and top civil servants during the crisis. This was despite the fact that the salaries were due for upward revision. For example, the private sector benchmark for Ministers' salaries at Staff Grade 1 had increased by 13% in 1998 and 29% in 1999. Not to adjust the Ministers' and civil servants' pay now when we have emerged from the crisis and resumed strong growth, and especially when it is fully justified by the private sector benchmarks, is to fall into a state of paralysis experienced by governments elsewhere when they faced the issue of public sector pay revision. Because they were unable to keep the salaries competitive vis-a-vis the private sector, inevitably, their countries saw a decline in the quality of people wanting to be MPs, Ministers, judges and civil servants.

We are not, however, insensitive to workers' feelings and public sentiments. Because the CPF cut has not been fully restored, we are not restoring immediately the pay of Ministers and top civil servants to the private sector benchmark for Staff Grade I, but phasing it in over three years. These office-holders will receive only 80% of the benchmark in the first year. The basic monthly salary for Ministers will therefore increase by only 0.3% this year. With bonuses, the annual increase for Ministers will be a modest 12%.

Today's Realities

In debating the salary revisions, let me remind you of some realities we cannot run away from.

First, we are seeing a global convergence in the pay of top executives. Globalisation and technological advances in transportation and communication have led to increasing mobility of this group of people. They are able to move easily around the world in search of the best employment opportunities. If they do not get internationally competitive remuneration in their country, they can easily uproot for other more favourable opportunities in another country. Companies are therefore increasingly pressured to pay internationally competitive salaries for top executives, regardless in which country they operate.

Second, our job of retaining talents is made more difficult because Singaporeans, with their proficiency in English and high competence, are mobile and in great international demand. American universities and MNCs regularly cream off our scholars and bright students who study in the US.

Third, we must make a rapid transition to a knowledge-based economy. We have done the easier parts like building infrastructure, putting in place a business-friendly environment, and training our workers for skilled jobs. The next phase is much more difficult. We have to create new products and services ourselves and not merely add value to other people's products. With globalization and the IT revolution, competition has heightened. It is a new ball game altogether.

Overall, what all this means is that the wages of top private sector talents in Singapore will face significant upward pressure in the years to come. Companies in Singapore will have to pay their top local executives internationally competitive salaries to retain them. Certainly, they have to pay internationally competitive salaries for foreign talents. But let me add here that expatriates are excluded from the calculation of the salary benchmarks.

The Government has no choice but to match these upward trends in private sector pay in order to attract its fair share of talents. But the Government does not intend to be a price-setter. It will not lead the pace of pay revision in Singapore. It will only be a price-taker. We will only respond to the trends in the private sector, with a lag of one year, to ensure that public sector pay remains competitive.

Another reality we cannot escape from is the widening income gap between the top and bottom earners. In every society, there will be a bottom 10% and a top 10% of wage earners. The Government cannot artificially reduce the income gap between these two segments of the population by forcing upwards the salaries of the bottom 10%, or forcing downwards the salaries of the top 10%. This is a market economy, not a command economy. What the Government will do, however, is to ensure that all Singaporeans have an equal opportunity to make it to the top 10%. At the same time, we will help the relatively poor to ensure that they also benefit from the general increase in prosperity. The Government has already put in place a system of subsidies for education, housing and health. It has also implemented several assets-enhancement programmes. We will continue to help the lower-income Singaporeans increase their assets, as well as improve their earning capacity through training and skills upgrading. We will give them hope through investments in their children's education and future.

Conclusion

As Prime Minister, I have travelled widely and seen many governments at work. Our Ministers can stand their own against most of their counterparts elsewhere. We have a Cabinet Singapore can be proud of.

My most urgent job now is to make sure that there will be a successor team which can manage Singapore's complex economy in an increasingly competitive global environment, and which also understands the concerns of the man-in-the-street. I can build up this team only if we are able to persuade good men and women into politics.

The difficulty here is that a political career is not the natural or first choice of most able Singaporeans. Other major advanced countries too, like the US, face the same problem.

We have to overcome this problem. Singapore has left behind the revolutionary stage where leaders emerged to lead a historic movement with little thought of pay. We are in a steady state of development where fortunes can be made in the buzz of the private sector. There is much excitement in the new world of dotcoms, financial services, life sciences and R&D. Most able Singaporeans prefer to seek fulfilment in these challenges rather than in politics. If we fail to get a group of these bright, able and honest Singaporeans to form the political core of Singapore, then over time, the standard of government will go down, and Singapore will crumble.

Singapore is vulnerable. It does not have any natural resources except our people. Our people have been fortunate to be led by a good and competent Government since 1959. It will be very shortsighted and costly for Singaporeans if we grudge good Ministers their due, and settle for lesser men in Government in the future.

I have gone through the proposed revisions to public sector salaries and salary benchmarks thoroughly. I am satisfied that they are fair. I do not think they are generous, given the Ministers' huge responsibilities and impact on our people's lives. I want the right people to do these jobs. And so should you.

That Ministers' pay is a source of envy for some people is not necessarily bad. We are more likely to recruit good Ministers this way. I would be extremely worried if it were the reverse. If Ministers envy the pay of their counterparts in the private sector, that is the first step towards corruption.

Several MPs have advised me that we must deal with the emotional reaction of Singaporeans over the salary revision. They themselves support the market-based salaries but are concerned that the man-in-the-street will not understand why Ministers have to be paid high salaries. I understand these emotions. But I have faith in the judgment and rationality of Singaporeans. I have no doubt that some Singaporeans will react emotionally and will not accept our arguments. But I believe most Singaporeans will listen to the logic and make a rational decision. They have always done so. A rational and practical approach to problems has always been Singapore's hallmark. Otherwise, Singapore will not be where it is today.

To conclude, let me go back to my Williams College days. I have often wondered what has happened to my classmates.

What has happened to my Ethiopian friend, who already had six children at Williams College? He was a high official in the government of the late deposed Emperor Haile Selassie.

As for my Yugoslav friend from Croatia, I wonder whether his children had to fight fellow Yugoslavs to become Croatians?

What about the Pakistani official from East Pakistan who became a Bangladeshi? His government house overlooking the port of Chittagong was shelled during the war.

Fortunately, there were other classmates who have done well, retiring in high government positions. But their countries have not lived up to their dreams when they were young men at Williams College, eager to learn and eager to put into practice what they had learnt.

The real lesson for me from Williams College was: without a good government, all the good theories of economic development count for nothing. Countries with weak or bad governments will go downhill, suffer internal strife and may even break up. They will not be able to deliver a high standard of living for their people. And when a country goes down, it is not the able people who will suffer most. It is the man-in-the-street. They are the people who cannot migrate easily. They are the ones who need a good government most.

So ask yourself, "Where will Singapore be 30 years from now? What type of government will produce you a safe, stable and prosperous Singapore?"

Let me help you answer the questions by giving you some simple arithmetic.

First, the wage cost of all the political office-holders will be $34 million after this pay revision. There are three million Singaporeans. What is the cost of Government per capita? $11 per year or about five plates of "char kway teow" per Singaporean.

Second, in 1995, the Government made a contribution of $200 into the CPF account of all Singaporeans aged 21 and above and an additional pro-rated contribution of up to $300 to those who had contributed $750 themselves to their CPF account. The total amount paid out was about $800 million. What was the pay-out per Singaporean? $270, if we divide it by a population of three million.

We can do more such CPF top-ups in future, provided we have good growth. $11 per capita per year for a Government that can produce good economic growth and give you $270, even if it is once in five years, is surely good value for money.

Summing up, it is wrong to focus on the individual pay of Ministers in isolation. He is only a member of a team. You should focus on the cost of my Government and the benefits and consequences of having that Government. What is the cost of my Government to each Singaporean? Five plates of "char kway teow"! What was the price each of us would have paid if our economy had shrunk by 5% during the financial crisis? $3,166! And this price is only an example of the huge price you have to pay for a weak or bad government.

We have put in place a virtuous cycle of good Government, economic growth and benefits for the people. For your own benefit, it is wise for you to strengthen, not break this cycle. [Applause]

Mr Low Thia Khiang: Sir, may I seek a clarification from the Prime Minister?

Mr Speaker: All right.

Mr Low Thia Khiang: Would the Prime Minister also conclude in his proposed thesis that the higher the Ministers are paid, the higher the return in benefit for the people?

Mr Goh Chok Tong: Sir, when you do a doctoral thesis, you do not do such a simple correlation that the higher the pay, the more the benefits for the people. You have to look at what the Government can deliver and if you need to have high pay to attract good people into government, then of course, there is a link between that and the per capita GDP. Where you have high pay, and you pay people who do not measure up, then of course your performance cannot increase. So the link is not between the high pay. The link is between good people whom you have to attract with the right pay. In our context, it has to be related to the market, and you see the results later on. What I am saying is, judge this Government in totality for what it has performed. Do not look at individual Ministers' pay alone. Look at the wage cost of Government as a whole, the benefits to you, and the price of a bad government.

Mr Sin Boon Ann (Tampines): Sir, I rise to support the Deputy Prime Minister's statement.

Sir, I will not touch on the salary adjustments of the civil servants as I think that is less controversial than the issue of the Ministers' salary which is tied to the public sector salary adjustment.

We have had extensive debates before, inside and outside this House, on the issue of the amount that political appointment holders and, in particular, a Minister, should be getting as his salary. Mr Chiam had earlier alluded to the fact that to the average Singaporeans who may not be paid as much, especially to the fair number of Singaporeans who earn less than $24,000 a year, the idea of a Minister getting more than a million dollars is beyond comprehension.

At first brush, there seems to be a sense of inequity to this. Somehow, many Singaporeans feel that it is not right that there should be such a divide between the masses and a small number of political elite who, as the people's representatives, should reward themselves so handsomely with such salaries.

Sir, against this thinking, there is a sense that the people have made deep sacrifices, as was acknowledged by the Prime Minister earlier, when the Government decided to cut their CPF contribution following the recent financial crisis. Their CPF contribution has not been fully restored to date and there are constant calls for the Government to restore their CPF contribution to the level before the financial crisis. Therefore, for some, it seems odd that while they are making the sacrifices by taking pay cuts, the political appointment holders and civil servants should be increasing their salaries at this time. Many Singaporeans may feel that the Government should continue to set the example, as Mr Chiam had said earlier, by keeping the salary freeze until such time when CPF contribution has been fully restored to the people and the economy shows robust growth again.

The Ministerial Statement unfortunately also comes at a time and hot on the heels of the recent spate of announcements of cost increases. These include, for instance, the $2 charge on POSB accounts for those who maintain low deposits, and the recent announcement of revision to water rates, increase in transportation charges, and other private sector led charges.

At this moment, we know that the recovery of the Singapore economy is rather selective and not across the board. The construction industry is still in the doldrums and many Singaporeans are still unemployed. At my MPS alone, I get many requests from my constituents for help in looking for jobs. They are the ones who have been retrenched and are not so employable on account of age.

Against the backdrop of the present scenario, many Singaporeans may be asking: how can the Government increase the salary of civil servants and political appointment holders?

I do not deny, Sir, that the issue of Ministers' salary has always been a very emotive one. For reasons that I shall elaborate later, I support the move by the Government to increase the public sector salary. Let me examine some of the arguments raised against the salary revision.

First, as was alluded to by Mr Chiam, the inequity argument, ie, the growing gap in income distribution between the top and bottom income earners and the fact that CPF contribution has not been fully restored. Sir, the argument of social inequity is based on the idea of equal misery for all. The argument simply put is this: as long as there is inequality of income distribution and as long as CPF contribution has not been fully restored, political appointment holders, least of all, should be allowed to have salary revision.

Can this argument be tenable? Against this argument, we have to ask ourselves the kind of society we want to build for Singapore. I do not think for a moment that a country founded on a political philosophy of equal misery for all is going to bring about more wealth for the people in the long term. Let us recognise a basic principle here. We are a market economy where talents and resources are allocated on the basis of pricing. You want the best talent, you must be prepared to pay for the best talent; and by talent, I mean not only people with the ability to run the country well but also the honesty and integrity to run it.

To the detractors, I have a question. Would you rather pay the political appointment holders a fraction of the salary and have either people without the ability to take charge of our Government and make a mess of Singapore or have people whose only interest in coming to public office is to cream off the system and line their pockets in the process? Let us be honest about it. Talent is in short supply in Singapore. We want to attract the best talents to serve this country. For them, they will have to come out of the comfort zones of their established careers and family for the country. It is indeed a sacrifice for many who have established themselves in their career. They have to make a judgement call by resigning their jobs and serving the country as political appointment holders. We all know that there is no assurance that they will succeed in the long run as political appointment holders, having made the sacrifice. It is therefore quite clear that some sacrifices would be necessary.

However, to ask them to make near complete sacrifice or even total sacrifice in the service of the country is a very naive thing to do, Mr Chiam. These people have their mortgages to pay, their children to look after and a certain lifestyle to keep. His calculation of $50,000 is a relative thing. To the very poor in the poorest country in the world, your lifestyle would be obscenely rich. I think it is quite inappropriate to just pluck a figure out of thin air and to say that it is appropriate by your standard and your judgement. Let the person who is deemed by the power that be, who is capable of running this country, decide whether or not it is a sacrifice that is worth making and paying at the point in time.

The answer to the call to political office to serve the country is not a call to priesthood. They are not expected to live the life of an ascetic. Even in Israel, where the country has for years had prime ministers who lived rather ascetic lives, has had to face down two major scandals recently, when their President and former Prime Minister came under investigation on allegations of corruption. If a salary adjustment is in order, and having lived with a wage freeze for the last three years, why should we begrudge this adjustment?

We are not a basket case where our people live from hand to mouth. We can afford the salary increase and we want to continue to have people at the top who will be able to give all of us, and not just some Singaporeans, a better life in the new economy. We had a discussion earlier about the issue of growing income disparity between the poor and the rich in Singapore. The question that we have to ask ourselves is whether we want to pay the right people at the top to continue to create wealth for Singapore and to close the income gap in the process. If the answer is yes, should we not be willing to pay the price? The Prime Minister has given us a very lucid illustration earlier and I think the example is very telling.

Secondly, some Singaporeans, I suspect, may well support the pay increase but would say that it is inappropriate to implement this at this stage with the recent spate of price increases. Sir, with all due respect, I do not think that the two issues are necessarily related. What this argument is tantamount to saying is that because there are price increases, political appointees must not have salary adjustments. Why should the political appointment holders be any different? Are the promoters of this argument saying that wages for all employees should be frozen? Quite clearly, Sir, the argument is non-sequitur.

Finally, I have heard the argument making its rounds that the political appointment holder who is paid the equivalent of private sector salary may not be able to hold his own in the private sector once he leaves the comfort zone of the public service. This applies to political appointment holders who have never worked in the private sector before. Again, I find this argument rather difficult to follow. Sir, I believe that we have used the salaries of the private sector as a benchmark to allow us to (1) attract and keep those from the private sector with the necessary ability to serve the country; and, more importantly, (2) to recognise the ability and contribution of political appointment holders who have led the country well.

It is the cynicism of some Singaporeans on the ability of our political leaders who never really went through the baptism of fire in the private sector that I want to touch on briefly for now. The argument is simply this. We pay Ministers top private sector salaries. Can they really perform to the level of expectation required of the remuneration that they enjoy if they went to the private sector? In other words, would they have earned as much if they actually took on private sector jobs?

Sir, I believe that to take this line of argument is to confuse the issue. Let me explain. I am a solicitor and I earn an income. I should not be expected to earn the same salary as a doctor if I tried to do the work of a doctor. This is because I am not qualified and, more importantly, may not be suited for the job. The two are not the same. I am paid my salary which may be comparable to a doctor's salary because of what I do as a lawyer. Nobody begrudges the fact that I earn as much as a doctor. By the same token, we use the private sector salary as a benchmark. That does not mean that we should expect all political appointment holders to have the same talent to be a top doctor, lawyer or a banker. What the benchmark does in addition is to provide a basis for valuing the ability of those in the public service. Why should they be valued any less simply because they are in the public sector? Clearly, this approach to pay our public office appointment holders well has been proven right, as was mentioned earlier, because the last round of financial crisis has spared this country of the misery that we have seen in the region. Is this not proof of the quality of the leaders that we have? In other words, the benchmark is arguably our way of remunerating them for the quality of skills that they have brought about in running this country.

At the end of the day, Sir, we have to ask ourselves: are we prepared to pay the price for top leadership? Is it worth it? I would say that at least for us, the system is transparent and it is worth every cent of it. We know how much we are paying our public servants; or do we want a system where political appointment holders are paid little, and the true cost of leadership is not known until perhaps the leaders fall and corruption investigations begin? Sir, to my mind, the answer is obvious.

Mr Speaker: Order. I suspend the Sitting and will take the Chair again at 3.40 pm.

Sitting accordingly suspended at 3.17 pm until 3.40 pm. Sitting resumed at 3.40 pm