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

Mr Yeo Guat Kwang (Cheng San): (In Mandarin): Mr Speaker, Sir, first of all, on behalf of the trade unions, I would like to thank the Government for agreeing to credit the unused portions of the annual $350 cap on outpatient subsidy for civil servants who are on the Medisave and Subsidised Outpatient Treatment (MSO) scheme into the Medisave account of the officers. This is a shot in the arm for the unionists' effort to make our medical benefit more portable, and it is a great encouragement to our unionists and gives them more confidence in making representations to the Government on behalf of the workers to review their welfare and benefits.

I support the DPM's proposal for revision of salaries for civil servants. As we enter the 21st century, the nature and model of a global economy are undergoing great changes. This is a vast world with blurred boundaries. Compared to the time when we detached ourselves from the British rule some 40 years ago, the Singapore of today has seen a 70-fold increase in our GDP. We have already attained great achievements in social and economic fields. Recently, the Housing and Development Board handed out the 800,000th key to the owner of a brand new HDB flat. 90% of Singaporeans own their own flats. Even among the bottom 10% of our people, some 65% own their 3-room or bigger HDB flats.

Sir, we have read in various literature and newspapers that different people in different regions, irrespective of their races and nationalities, have some common aspirations. They do not want to be dependent on others. They wish to have their own homes. They also hope that their children have education and everybody craves for the country to be prosperous and the people live in peace and harmony. They hope that their children will grow up healthily, live in a safe country and have jobs that provide them with a stable income.

Let us take a look at all these hopes and aspirations. We all feel that, as Singaporeans, we should be very proud and happy because many of those things that remain as dreams for the people in many parts of the world have become a reality in Singapore. Most, if not all, of the Singaporeans' dreams have become realities. We must continue to put in our efforts to ensure that our people, especially the younger generation, will continue to enjoy this kind of very good social environment.

A friend of mine once told me that there are three types of government in the world. The first type of government consists of those who sit back and depend on their national resources to finance the government's spending and eventually squander away all the national wealth. The second type is a government consisting of people who work very hard to create wealth - for themselves. The third type is a government comprising able people who work hard to create wealth for the country and help the people to enhance their assets and share the fruits of success brought about by the government.

We cannot find anywhere on the map of the world any other country like the little red dot of Singapore. Yet, our system and our hardworking people have made us outstanding and different. It is only here in Singapore that we have this kind of transparency to discuss the question of how to implement meritocracy for good government to continue to help the country prosper and develop. What we want in this kind of system of transparency is reward based on merit. Because we do not want to be like many other countries in the world which have fallen into the pit of quicksand of money politics. Neither do we want to be a country using the "little above board and plenty under the table" kind of reward system. As a matter of fact, this kind of transparent salary system for our Ministers and civil servants who have sacrificed a lot, is one which can be described as a "win-win" system for both the Ministers and the masses.

As it is often quoted by the Opposition Member, "After all, the wool still comes from the sheep's back." (meaning in the long run, whatever you are given, you pay for it). However, we must stress that if you want to have the wool, you must also ensure that the sheep can grow with good health. Then only will we have the wool to shear. Let me give you another illustration. If a farmer can rear the chickens well, then he will have eggs to harvest, and the better your chicken, the better eggs you will get. If a farmer has developed a special skill to make his chicken produce golden eggs, then the golden eggs should be his rewards. On the contrary, if the farmer cannot rear his chickens well, then he gets only sick or even dead chickens. He can forget about having eggs to eat.

There is a Chinese saying that people need food to sustain their lives, while the nation is built upon its people. Our leaders and civil servants have to work very hard to earn their rewards. In Singapore, to become political leaders by itself is a sacrifice. Like doctors and teachers, the political leaders too make their own sacrifices. We should remunerate them well so that they would dedicate themselves to serving the nation and the people, without having to worry about providing for their families and their children. We often say that for lovers in love, they can survive on water and fresh air only. But how long can they survive? If we want our horses to run well, we must feed them well. How can you deny the horses of their feeds, yet expect them to gallop well? We should not inhibit the able and talented people to earn the rewards which they truly deserve. If they are good, pay them handsomely to commensurate with what they are worth.

In an open society like Singapore, we should permit "adding flowers to brocade". As a unionist, I feel that while practising "adding flowers to brocade", we should not forget also to "send hot charcoal to the needy during snowy weather". The Government must try and do its best to upgrade the low-income and low-skilled workers so that they too would have the opportunity to upgrade themselves and have a share in the fruits of our economic success. They should be given the necessary assistance in time of need. More importantly, we must ensure that children of every Singaporean, irrespective of their family background, should be given the equal starting point, to receive good education, so that children from the lower-income group will also have the opportunity to get out of the poverty trap.

There is a widening income gap among the top earners and bottom earners. There is this V-shape going up all the time. But this is not the problem. The key is whether the Government-employer-employee tripartitism can continuously work together to level up the "V", that is, to continuously push up the bottom line of our incomes.

This morning, we conducted a dialogue session with our trade union leaders. All the leaders raised their hands in support of this salary revision. So long as the Government can implement the principles, that is, to ensure that the less fortunate are properly looked after, in other words, we must have a good government so that we can attract investments and create more jobs for the people in Singapore, then we will have a good and stable working environment. The trade unions will support this salary revision.

The trade unionists also agree with building the bonus system into the scheme. The AUPE representative hoped that the PSD will further enhance its transparency in the evaluation of public sector employees, especially those who have become trade union leaders. If possible, they will ensure that these trade unionists will not suffer under the scheme. I hope the Government, in revising the salaries of the public sector, will also expedite the work redesign and re-engineering in the public sector so as to further enhance the efficiency of the public service. I hope that the Government will benchmark the bonuses and other incentive awards with our GDP and other development indicators. They must also take into account the social indicators and standard of living of the lower-income group. What we want is a public service that cares, one that does not sacrifice the "human touch" for efficiency.

The Senior Minister (Mr Lee Kuan Yew): Mr Speaker, Sir, there are no new arguments for the salary increases. They are obvious. They have been debated thoroughly but it is a popular issue which hits a popular imagination and it is not the norm in other countries to pay the market rate for the job. We have decided to do this and we know - I know and the prime minister knows - that wherever we go, we are greatly envied because they would like to do likewise. They just do not have the political strength.

The events of the last five years, since the debate on ministerial salaries working out this formula, have only shown that the formula is a practical method. Otherwise in a fast-changing globalised economy - we would be repeatedly debating the need for salary revisions. Instead, we are now fine-tuning the formula from the average of the top four earners to the top eight earners, in six professions.

I have grappled with this problem for over 30 years from 1959 to 1990. I had argued this question of ministerial salaries when I was in the opposition in 1955/56, 45 years ago. I then urged the chief minister of the day, David Marshall, to be realistic. His monthly salary then was a princely sum of $3,500 when as a leading lawyer he was making $10,000 to $20,000 a month. I recommended a realistic pay, appropriate to his earnings. But he did not have the political strength to do it and he left it at $3,500. So it remained until I developed sufficient political standing to be able to tackle the question and raise ministerial salaries in the 1970s when the economy had taken off.

Allow me to recount briefly how we managed in the last 40 years since 1959 so that you will understand where did we start, how have we arrived at where we are. As I have said, the first Cabinet was unusual because it consisted of men who had been drawn together by the forces of history. We were young men in our 30s and 40s, who had been through the sufferings of the war and the Japanese Occupation. And we were tempered by that experience. We wanted independence, and were strongly driven to change the economy and our society. My colleagues were outstanding men, a core group that stayed together from the 1950s to the 1980s, when they retired. They provided Singapore with 30 years of stability, solid growth and finally a transformed society.

But during that period, every few years I came to this House to revise their salaries to catch up with the fast growth economy and the ever higher salaries in the private sector. As we raced ahead and became part of the global economy, the salaries of our top people have been pulled up by those of their counterparts in the advanced countries and vice versa for those in the lower ranges. This trend is not likely to be reversed, unless we go into decline, in which case, the highly-trained and highly-skilled will leave, accelerating our fall. Of course, there is no extrapolation to its logical conclusion, as sometimes it would stabilise and plateau, because you cannot have a society which keeps on diverging. You can see from the protests in the developed countries - in America, now in France - that they also are protesting against a globalised economy because their lower end and their middle end earners are hurt by the export of industries, services and jobs; and they are really working against the interest of the developing world that needs these industries and jobs. So I advised the Prime Minister, and finally persuaded him to take this formula of an automatic adjustment to Parliament. The earnings of our top earners will continue to go up with the growth of our economy and so must ministerial salaries. This is a very strong trend.

Let me give the growth in the last 10 years: average of the top 24 in six professions in 1989 (which is for 1990 income tax) was $1 million. Five years later, in 1994 it became $1.4 million, an increase of over a third. In 1999, it was $2.5 million, an increase of three-quarters, just in the last 10 years. So had we not had this formula, the prime minister would be faced with the awful dilemma of taking the 1994 salary and saying, "Can we revise it by 76%?" There are lawyers and doctors in this House - Shanmugam, Davinder Singh, Dr Michael Lim. They are in the private sector and they can confirm by how much the earnings of top lawyers and top doctors in the private sector have gone up in the last five years.

In tandem with ministerial salaries, and the ministers form the benchmark, are the salaries of those in the higher echelons in the public service, and they are absolutely crucial officers of the State. Without good men occupying these positions, we would be unable to maintain our present standards - the Chief Justice, judges, attorney-general, auditor-general, accountant-general, permanent secretaries, CEOs of statutory boards.

When we took over in 1959, we inherited a civil service recruited by the British with very few locals whom they picked from the best of a small pool of local talent. And it has been one unending process of improvisation and adjustment ever since. For years, we could not get good lawyers to be judges, because the disproportionate earnings in the private sector which they have to give up to become a judge make it unrealistic. Only after 1990, when we had made radical salary revisions, and implemented them, has there been a full panoply of High Court judges. And it is an unending struggle now between the private sector, which includes multi-national legal corporations in Singapore, and the attorney-general's office and the legal service to compete for top talent.

Let me now explain how we have done it in this chamber. To self-renew, MPs and ministers, besides the civil servants, we had to recruit at every election able younger people. For ministers, I persuaded, and my colleagues too, able academics with PhDs and professionals to run as MPs, then appointed them as ministers. Many did not make it. The attrition rate was high. These scholars had good minds and the ability to marshal facts and figures, and to present them. But they did not have that quality necessary for a minister - "judgement" - making a decision, the right decision, on the basis of complex and incomplete data. You cannot wait until you have got all the facts in and then decide. It is a moving situation. You have to decide where the trend is, what should we do. So I cast around with my colleagues and tried out successful men, never mind whether they got PhDs or not, but whether they had succeeded in the real world, men who have been successful in their professions and business and in their own fields. The results were better.

Some of my ministers were very good at judging people. Hon Sui Sen, who was one of our best civil servants, permanent secretary, head of Economic Development Board, and later on I persuaded him to become an MP and then finance minister.

He recommended several, among them people whom he had worked with - Goh Chok Tong, S Dhanabalan, Tony Tan. They were three heavyweight ministers. We did not know that when we started. We recruited them in the 1970s, but we knew them only in the 1980s. Each year, we also selected 20 to 30 (later we increased it to 100 to 120) of our best students for scholarships to study in the best universities and bonded them to serve the government for eight years. Parents were poorer then, and scholarships were few. So we had the pick of the crop. And it is from that generation of the 1960s and 70s that we have today the present leaders of the civil service and the statutory boards, and quite a number of ministers, scholars and SAF scholars.

But since the middle-80s, especially in the 90s, our economic conditions changed and social attitudes altered. Now scholarships are numerous and commonplace. I read the Straits Times supplement on scholarships. Hundreds of them every year, because they had seen how we had succeeded - the private sector, the banks, even foreign multi-nationals in Singapore. So the Straits Times devotes a whole supplement to the scholarships on offer, describing, tabulating and comparing them in detail. Statutory boards, GLCs, all the big banks, major companies, like NatSteel, MNCs like Exxon Mobil, KPMG and American Insurance (AIA), they all give scholarships. They are all chasing a limited pool of scarce talent. Moreover, many parents now earn enough to send their children abroad to the best universities and do the subjects of their choice and have their children sign no bond, except to the father and mother, who would agree to whatever they want to do. This has changed the whole system of early recruitment and nurturing and career development of the best for higher appointments. For the last few years, the government and statutory boards no longer have the pick of the crop. That means 10, 15 years down the road, we may not have the same quality at the top echelon.

Hon Sui Sen recognised these changed circumstances and the altered values of our young. So he persuaded me in the 1970s to abandon this handcuffing of government officers by their pensions. We were losing, he said, too many good top men who are quite prepared to give up their pensions because they were attracted to lucrative careers in the private sector. So if we did not pay them pension, we could up their salary and compete.

I was uneasy because we were departing from an age-old system. The British ran an empire for 200 years based on lifetime employment in the government service. But Hon Sui Sen himself had spent his whole life in government service and, at the end, he told me, "Look at my pension!" It was a pittance because inflation plus growth meant a pension was worth little. And he was convinced, and finally convinced me, that younger officers no longer considered their pensions a strong pull factor when deciding whether to stay or to leave. They wanted to be paid their worth immediately and so wanted to go on CPF.

After much hesitation and reflection, I accepted the change and agreed to abandon pensions in favour of CPF. This led to the next series of other changes where salaries have to be regularly adjusted to match their counterparts in the private sector, or we would end up with the second and third best. It is a continuous series of exercises. In the old system, the British recruited straight from the universities; whether you are a law graduate, doctor, accountant, surveyor, architect, they all have similar salary scales. We inherited that. We carried that on. But it was unrelated to reality. Nobody can predict which profession would be the high flying profession when it comes to maturity. Today it's the law. Tomorrow, it could be something else. At one time, the architects in the building boom had the best returns. So we now have decided, as a result of abolishing pensions, that we have to go with the rate for the market in that profession.

We have new multi-faceted problems, because the global environment has changed and the best, our best whom we send abroad, are being recruited by top MNCs, also chasing talent and prepared to pay off their bonds. What is $200,000-$300,000 when you can get a good mind already proven? You can watch his school record, you can watch his college record, you can see his capabilities in argument, in presentation, and you have a ready-made winner. Whether he is a big winner or a small winner, it does not matter. But you know this is first league.

Let me now take you to how we are now placed. The present team in the government was selected and had worked with the old guards long before 1990. The selection started in the 1960s was not very successful because, as I said, we did not know how to spot who would make a good minister. So we chose people who sympathised with our views, and had good minds. But they lacked the quality of making the right decisions. We started to succeed only in the 1970s, after 10 years of error. And in 1972, I persuaded Ong Teng Cheong, then an architect, to give up his lucrative practice to join us. He took several years to wind up his practice first. He had commitments. Then 1976, Goh Chok Tong, S. Dhanabalan, and 1979, Tony Tan, and so it went on. There were many others. But, as I said, the attrition rate was still considerable. And at one time, we were so short of ministers to hold big ministries, that I persuaded two senior civil servants, top men, proven administrative ability, to contest elections and become ministers - Howe Yoon Chong, who was head of civil service, to become minister for defence, and Teh Cheang Wan, head of HDB, to become minister for national development. So it was an unending quest for the right man to put in the job.

It takes many years for a person to be tried and tested as a minister, and to develop that judgement and trust. Every cabinet has its core members of the team, goal shooters and goalkeepers. Not all 11 players can have the same star quality. And it is the prerogative of the prime minister to pick his men and, having picked his men, it is his responsibility to get them jell into a team and, as a team, to deliver. I have grappled with this problem. And were it possible, I would have liked to pay the ministers the way football clubs pay their players. When you have a star player and you change clubs, hundreds of millions of pounds change hands. Could I do it? I would cause so much public discomfiture for the other ministers who are not goal scorers, that team would soon be unable to function as a team. So a certain balance must be kept, solidarity of the team and recognition by the captain that he is a scorer and he is a first-class goalkeeper. Somehow, you have got to get them to share not only the glory but also the remuneration.

My core members for 25 years, they are well known to the public - Goh Keng Swee, S. Rajaratnam, Hon Sui Sen, Lim Kim San. Prime Minister Goh's core team must be obvious to all those who have watched how his government has performed, who have scored the goals, or have prevented them from being shot into our goal. I leave you to judge. But the point is that all the present cabinet members, including Lim Hng Kiang and Teo Chee Hean, were selected before 1990, before I stepped down. And since then, only three had made it to ministers of state - Peter Chen, Lim Swee Say, David Lim. The last intake of MPs was the highest average we ever had. But there is a difference between a good player and a Pele. That is what we have to look for, a striker. If the present team does not get more good men to join them in the next election in 2002, there will be a hiatus down the road.

Good government did not happen by doing things naturally in Singapore. It was a thorough and meticulous process of selection and testing. Finally, I learned how the big MNCs did it in America, using psychologists and psychiatrists to recruit and to test before promotion. And we became better also at assessing character. The ability is simple to judge, but the character element is very difficult. But we have assembled together the best persons available and willing. And there is no alternative team, or group of people outside the government, who can replace this present team. I say this without wanting to discourage those who are outside. There are some probably star players outside, but you have got to form a team and work as a team. If this government should fall, standards of government would go down, because from the very start in 1959, Singapore has had a government which is led by ministers, not by civil servants. The permanent secretaries do not settle policy. They do not innovate. It is the ministers who strike out. It was Goh Keng Swee who started the Economic Development Board; Hon Sui Sen started NOL; SIA, DBS, so many things. They are creative men. It is the opposite of the Japanese system, where top civil servants shape policy. Therefore, if Singapore does not have high calibre ministers, our performance will degrade and our economic growth will stumble and social problems will increase.

That we have adequate salaries for ministers removes only one of the factors that stand in the way of recruiting talent. Since the last revision to this formula, the prime minister has tried to get many from the private sector to join - top bankers, top CEOs. He ended up only with one - Peter Chen from Shell. Why did the others decline? Some have moved on and become venture capitalists. Because they are bright enough and shrewd enough to see, "Look, I am 40-plus. If I join you, I will be asked to stay on and on and on, if I am successful. If I am not, I am out. By that time, I have lost my connections." Some declined because they sized up the ministers and decided they may not quite measure up. So it is a difficult task. It removes only one obstacle, but not an insignificant factor.

Politically, it is not possible for any minister, or any MP, or any person to say at the outset that he would not have taken on the task of being a minister if he knew he would not be adequately compensated. But what he would do is, do it for a short term and then excuse himself. I can say this because I have been at it for over 40 years and anyway I am approaching the end of my career. So I can tell you the blunt truth. That period of revolutionary change that threw up people with deep convictions and overpowering motivations is over. That is a fact. We are in an era of high growth with fortunes being made by the enterprising, whether in a dot.com company or in finance or fund management, or in the professions. And the whole social climate has changed.

I was looking through the latest Forbes magazine which I have got by courtesy of SIA because I am a frequent flyer. One whole copy lists out all the billionaires in the world with short descriptions of how they became what they are. I am quite sure they sell a few hundreds, if not a few thousand copies in Singapore. So all our top minds are reading and saying, "Surely he can do it, why not I try?" So we have a qualitative change in aspirations. And it affects the old guards too. Some of them meet me and say, "Look at my pension. This is what we are worth." So I looked at them and I said, "But that is the rules we made." They said, "Yes." So from time to time, I persuade the prime minister. I said, "Give the pensioners a bonus because we are doing well. But for them, we would not be doing well." But many of them, if I were to go back and ask them all again, and they knew the progress that Singapore would make, they would tell me, "You carry on. I will stay out." This is the real world. We are not talking of a hypothetical situation. These are real people who are going through a tremendous global revolution in values. You open up Fortune magazine, what is it all about? They also have their list of billionaires.

Perhaps, if I were a young man of 35 or even 45, I will pause and ask myself, "Why not? Is it so difficult? Somebody else can do this job." But the plain fact is that very few people can do this job. I was explaining to the party secretary of Shenzhen when it was getting started in the 1980s, I said, "You have to be satisfied to run a system that enables many millionaires to flourish, and you are not a millionaire. And if you can do that, then you can succeed. But if you see the millions being made and you want to join in those millions, you will fail. The whole system will collapse." That is the problem. Look around and ask yourself: why has it failed? Because your authority to sign or not to sign a licence decides whether you will make him a millionaire or a billionaire or not, so why not make yourself one incidentally? It is not very difficult.

In many countries, like America, people take on a job for a short period and then they go out to the private sector - where having served their country is a valuable addition to their bio-data, apart from the important connections that they will have. You look at one of the most successful American treasury secretaries since World War II, Robert Rubin - (Goldman Sachs, chairman) gave it up. For six years the market knew that they had a professional and a very able professional, and they had confidence in him. The boom in the Clinton years is partly due to him and to Alan Greenspan, chairman of the Fed. But he wanted to leave after the first term. He was persuaded to stay on. He stayed on another 11/2 years and now he is co-chairman of the Citigroup.

Let me point out how long it takes to get an MP to learn to be a minister and have the public recognise him as such, especially when he is not a natural crowd puller or a mobiliser. There are two kinds of ministers in Singapore - the doer and the mobiliser. The ideal is to be able to do both.

When Mah Bow Tan contested against Chiam See Tong in Potong Pasir, you would not believe it, in 1980, he lost. Because you stand in a crowd, watch two chaps performing, and say, "I think this chap looks reasonable. He is bright, energetic," and so they voted for him. But I happened to know Mah Bow Tan and I knew his career. He had worked closely with me when we tried to help the Singapore Monitor get started to compete against the Straits Times and halfway through he told me, "Look, we can't. It will lose because of the grip of the Straits Times on all sources of news. They've bought out all the agencies, all the cartoons, everything. You cannot beat them." I decided that this man has judgement. So we fielded him in 1984 and only after another 10 years, now 16 years, that people have a different impression of him. They know that he is competent and effective. Look at the ministries that he has handled. So the prime minister now gives him National Development.

Next, you take Teo Chee Hean. He stood in the by-election in Marine Parade in 1992 - tall, lean, lanky, a bit gawky - as against Dr Chee Soon Juan, voluble, exuberant. If it was not a GRC, one-to-one, he may well have lost. Because what was the basis for judging? A short note about his CV and you see the physical person and you judge him on what he says at a few rallies. But eight years later, from the things he has done, from the difficult problems he is setting out to solve, people recognise that this is a thinking man and a very serious man who gets things done and he is going to get the schools up to a different level, and the teachers too. They have seen the quality in the man, the depth of his commitment and that he can deliver.

You take Lim Boon Heng, a Colombo Plan scholar, did naval architecture in the University of Newcastle. He worked in NOL in 1971 but because Goh Chok Tong had worked with him, he knew that this man can do things. He persuaded him to stand for election as MP in 1980, then sent him to NTUC to work with the secretary-general, Ong Teng Cheong. The NTUC is not a glamour sector. No great addition to your bio-data that will get you into a higher job. Maybe you can become a human resource or a trade union contact man. But from a good government point of view, NTUC is absolutely crucial because your policies have got to be sensitive to the large mass of the semi-skilled and the unskilled and somehow you must be able to craft your solutions so that they also have a place under the sun. Quietly, he built up rapport with union leaders and workers and won their confidence by his sincerity. Eleven years later, in 1991, he became senior minister of state for trade and industry, to test his decision-making power as an administrator. Then in 1993, he went back to NTUC as secretary-general and minister without portfolio in the PMO. When a difficult measure like cutting the CPF by 10% was necessary two years ago, he played a major part in persuading workers and union leaders to agree to this rational but emotionally very difficult cut. The point I want to make simply is this. It takes many years of quiet work to build up relationships and establish trust. Those in the NTUC doing this job, they are a crucial part of good government.

As I have said, one flaw of the democratic system is that voters do not have a proper assessment of the real person behind a first-time candidate - his character, his steadfastness, his trustworthiness. They only know him after several years and it is true of ministers, of the Speaker and of every MP, including the opposition. Both Chiam See Tong and Low Thia Khiang have been re-elected because their electorate has seen them as consistent and steady and are prepared to continue to have them represent them. Hence, it is important that MPs are suitably remunerated. People need time to gauge and assess who has the qualities best suited for what jobs that can make Singapore grow and thrive. The danger for Singapore is one of sudden change, a new school term with new pupils, new prefects, new head prefect, and a new school principal. Many things can go awry. And I cannot over-emphasise the importance of continuity.

The virtuous cycle that we have established, which the prime minister spoke about earlier today, is a cycle of good government making for high growth and social progress, leading to the re-election of good government, leading to the ability to renew that good government by recruiting more good men to continue the work. That cycle could be broken. If it does, it will probably never be re-established. You just look at the travail of the LDP in Japan. After 40 years in office, in the last decade, they have suffered from decreasing voter support. One factor which will help prevent that happening in Singapore is to have elections without money politics - no money to win elections, even to fight elections, and to pay ministers, judges, permanent secretaries, CEOs of companies and all those in the Government two-thirds of the market rate for the job. The issue is a simple one, whether the public sector should adopt the market rate. Big corporations give their top CEO share options, worth multi-millions, to attract the best. When they fail, they are out. Proctor & Gamble had two bad quarters, and the CEO resigned, and they looked for another one.

This government has raised Singapore's per capita GDP from third world to first world levels. 1959, per capita, $1,300, when I first took office. 1990, 30 years later when I stepped down, $22,000, from $1,300. Ten years later, after Prime Minister Goh took over, it is now $37,000. Sit down, ask yourself, was that doing what comes naturally? What needs to be done to achieve that? A working system, good policies, anticipating problems before they hit you.

The question really is: can we afford not to increase the $28 million paid to office holders last year by a further $6 million, which the revisions cost? See it in proportion to what is at stake. Pay the judges what we used to pay them and ask whether Chief Justice Yong could have done what he has done in the last 10 years. I knew the problems with the Bar and with the courts. Work was piling up. The problem could not be solved. It could only be solved by a complete change of system. I looked for a man who was a lawyer, whom I have known since we were in university together, who had gone into private practice and become a top banker. I asked him to take on this job. He has a real grasp of the outside world. I gave him the support. I said, "Change it," and he has. And in 10 years, it is a totally different judiciary, a totally different system, because he has been able to persuade good men to take up these jobs. The sum total increase which we are talking about is $400 million a year, and they involve billions in the GDP every year.

Finally, do not believe that we have escaped the problems that have plagued our neighbours and the region - KKN for corruption, collusion and nepotism, which have caused so much damage. If we believe that we are immune from it, we are really risking our future. It is a world-wide disease and especially endemic in Asia, and we can be easily striken by it. Only constant vigilance has kept it down.

Our market-based pay and allowances will give no excuse for any slippage, and it is the duty of all of us - MPs of all parties and ministers - to be alert, to make sure that no KKN incidents take place without proper investigation and punishment, and to set the example by maintaining high standards in protecting the integrity of our institutions. And you need two things for Singapore's continued well-being - strong institutions and good men to run them. [Applause]. 4.50 pm

Mr Simon S C Tay (Nominated Member): Thank you, Sir, for allowing me to join in the debate.

I am not sure what I can contribute after all that has been said, especially after the last speaker. Let me start by saying that Nominated Members of Parliament such as myself do not enjoy the same allowances as the elected MPs, as reflected in Annex 3 circulated by DPM Lee. I say this not to begrudge them or to claim any moral high ground. I only say that so that all my friends would not try to claim lunch from me next week!

The DPM's statement covers three main issues - new approaches for civil service leadership, the civil service salaries as a whole and, third, and most controversially, the salary increases for senior civil servants and Government appointments. These are linked but quite different.

I will make just some short points on the first and second issues before moving to the third and more controversial. I would say that this is a very difficult debate to join, in terms of how it is structured. On one hand, clearly in this House, we have emphasised the market and logic. The emphasis has been on the need for good government, ie, this Government which is trusted and has done well. And it is this Government that is asking the public to believe in the steps that it is taking. What do we have, on the other hand?

As characterised in this House, we seem to have the politics of envy and emotion, and the danger of bad and corrupt government. My argument is that there is, on this other hand, something more than this, and that we may need to consider. The words "equity", "idealisim" and "moral leadership" have been far less prevalent in this debate in this House. I think all of us would say that maybe this is accepted, understood, as part of the background, but I think they bear re-emphasis. Of course, everyone will agree that a good living wage, and reward are necessary for political leadership. But very few people in this House have spoken of the reward of other less tangible things. When the Senior Minister was speaking on the founding generation, he made it very clear that they were special, and that events of history had brought them together. He also made it very clear that they were human enough to have some tinge of envy at the present salaries. But I would say to them also that because they were participants in that great history, they have and deserve our respect in a very deep way, and that is what I mean by the reward of less tangible things, of being able to say to their children that "I did this for you and your generation, and your children's generation."

Sir, what I am concerned about in bringing this issue up, particularly the rewards for the politicians, is of the unintended consequences of debating this case in a very public, rigorous way. We are in danger of over arguing the case, I believe, that if we do not agree to these salary revisions, then everything we do will fail. I think that is a dangerous argument. And, therefore, I was glad to hear earlier today Prime Minister Goh's assurance of the other five Cs, not the typical 5 Cs of society, of the market place, but these other 5 Cs - qualities such as character and compassion - that he spoke so well about.

I want to acknowledge therefore the good that our Government has done and the need for future good government. But I want to question what are the factors that made it good - only money or is there something more? In fact, this recognition of a good government is one of my starting points, because I think one of the questions that has not been asked so far is a very basic one. What is the mischief that we are seeking to avoid?

Let me begin with the pay increase for the majority of civil servants, which has been less controversial. But the pay increase is nevertheless substantial. In moving it, Deputy Prime Minister Lee has assured the House that the Government is trying to follow the market, but not lead it. I understand that some people in the private sector have some reservations. They think that the wage hikes will undermine some of the cost-cutting measures we took to enhance Singapore's competitiveness last year and, secondly, that they may potentially spark a bidding war for talent. In this context, I would ask the Deputy Prime Minister to address these concerns.

Sir, I would like to suggest a new mechanism. In future, when Government decides to go well beyond what the NWC recommends, as in this case, these further adjustments should also be the subject of some consultation with the private sector. In that sense, it is NWC plus. The NWC tripartite system is a model that has served for the basic wage increases, and I do not see why it should not be reasonably successful in negotiating even these further efforts to catch up with the market. Because the Government, put together, is Singapore's largest employer, and what it does, does matter to the private sector.

In saying this, I want to emphasise that I do believe that some turnover in the civil service is not a bad thing. There is no harm in having some percentage of people transfer from the public sector to the private sector and, in this way, learn how these two different entities work and perhaps link them better. There is a certain dynamism in this, to create better links and understanding between the sectors. In that sense, I am urging that the Government take a view of acceptable levels of turnover and monitor trends against this before acting. This is necessary for the bulk of the civil service, but it is especially true for the elite Administrative Service. And with that, let me turn to my second point of the measures concerning this elite.

What I am saying is that by looking at turnover, we will avoid the possibility of over reacting, because one or two elite civil servants leave. Allow me to cite some figures published in the Straits Times on Thursday, 29th June, in the article "Fall in Number of People who Quit Jobs". The report cites research by the Manpower Research and Statistics Department. It says that the rate of labour turnover has, in fact, declined in Singapore, following from 4.4% in 1990 to 2.1% in 1998, and then 2.2% last year. Of course, these last two were bad years, and people tend not to move in bad years. In that sense, I want to ask the Deputy Prime Minister, in moving these large financial measures to catch up, what is the turnover for the civil service as a whole, and key sections of the civil service. Why are we needing to take care of the turnover problem? Is there a problem?

The report I cite also mentions that professionals, managers and others at the higher end of the workforce tend, in fact, to have the lowest resignation rate - 1.6%. In putting these questions to the Government, I also want to emphasise that there is the question of whether there is some sort of pent-up departure, in the sense that people have not left as normal in the last two years. There has been under reporting - 2.1%-2.2% - and therefore there will be a surge quite naturally this year, and then we may again level off.

The second set of questions I have for the Deputy Prime Minister relates to what are the reasons that civil servants cite for leaving, assuming they have this kind of exit interview that asks such questions. I ask this because Deputy Prime Minister Lee's statement itself recognises that pay alone will not keep people in their jobs. The prospects of the new economy are not just financial, but the sense of pioneering, adventure and ownership. If so, then raising pay by itself may not be the right answer. Indeed, if we over argue this and over emphasise this, we may be misleading ourselves. There can be pay differences that do not lead to turnover or there can be high rates of turnover even if there is good pay. Other factors clearly come into play - factors that money itself cannot address. I believe there are some people who have good reasons to want to stay in the civil service to contribute, even if their pay, whilst reasonably good, is not the best in the market. I hope there are such people.

In this sense, I actually welcome DPM's other point of his statement about the public sector leadership in allowing more mobility, this flow of people, by requiring fixed tenure of appointments rather than making Permanent Secretaries too permanent. This change in permanence is a good one. But I will put it to Members that in a sense it actually encourages turnover, perhaps of a healthy type. Nevertheless, it is something we need to consider. I move to think about these issues because of some recent publicity regarding a particular civil servant, Dr Finian Tan. From what I read in the papers, Dr Finian Tan was one of the very few, if not the only private sector top performer, to respond to the pay increases and the call of Government to join in the civil service leadership. He did well serving as Deputy Secretary at the Ministry of Trade and Industry, going through the civil service training, but now has recently left. He has got better pay. But from what I read again, it is not merely the pay that drives his departure.

Without over focusing on this one individual, this case raises certain questions. Why is it, despite increasing our pay, the Government still faces difficulty in recruiting people to the top of the civil service and of retaining them thereafter? The same questions apply in that sense to the political leadership because we have not, despite these pay revisions, recruited very widely from the private sector. The new members of Cabinet have come much more from traditional sources of the civil service and statutory bodies and the ranks of the scholars.

Let me then turn to the last point and the most controversial. I think it is understood that Singaporeans want a Government of good quality. But quality is not all. Cost is also a question of sensitivity and some degree of subjectivity. The very fact that we are in this House debating how the formula should be re-worked recognises this. The very fact that for the two years of the crisis there was a freeze recognises the sensitivity. So, are the changes that are being suggested enough? In some ways, I am for the changes because they actually try to make it a fairer system, 48 people rather than 24, the median rather than the average. But is that enough of a change? Again, I have to ask the question: what is the mischief?

I think we are arguing today in a new context. Five years ago when we argued the principle of benchmarking salaries, we had the assumption that the whole economy was going to go up, that everyone would benefit from good Government and what Singapore will deliver for them. When we talked about this again in the crisis years, we all felt affected. Of course, looking back now, we know that those in the very top still prospered. But the general sentiment was that we were in it together as one nation, one society.

In the context today, as emphasised by many speakers, globalisation will actually increase the differences between the top, the bottom, the top and the middle, and even a handful of the very top, from the next few in the 1%. This new context brings out not just the market forces which everyone has emphasised, but the question the Prime Minister and the Senior Minister put to us: what do we do as a society? Can we keep diverging as a society? The Senior Minister who spoke before me said no. We can hope there must be some balancing point. He pointed to global forces which then speak out against this continuing divergence. In this context, we have to ask ourselves whether this new policy will help or hurt us. This is why the public and this House have been engaged in debate about the true level of the bottom 10% in Singapore, whether it is $133 per month or $530 per month, if we take out the jobless people. Are those still too low? We have, in this context, to ask ourselves whether this new formula is really going to continue to help bind the society together in a deeper way. I emphasise "deeper" because the forces of globalisation are likely to get stronger.

I think that many people are concerned that linking the private sector market is imperfect. We are told that Ministers are not priests. Fair enough. Another analogy is like doctors. We respect that doctors must earn a good living. In Singapore, they do. But if your doctor tells you that he is interested in your fees and not your health, you know you are in trouble. You want to change your doctor. In fact, the profession I am from, lawyers, is the reverse of this joke. Everyone thinks that lawyers are in for the money, which is why there are all these jokes about lawyers and sharks, paying each other mutual professional respect.

Sir, the political dimension should be recognised and handled, not just with appeals to logic but with due recognition for the values of society, of compassion, equity, if not, the sterile hand of equality. If other governments pay too low, or are corrupt, they provide us with very easy targets to say that what we are doing is exactly correct. It is true that others do not have the right approach. If we look at the US, I believe the salary of the President has not been adjusted for about 17 or so years. That is clearly wrong. But we do not need to jump so fast to the reverse. They need not be adjusted automatically every year based on a very small number of top performers when the world is globalising and differences are accelerating.

We need to have good Government. We need to have competent bureaucracy. A part of that is to have very strong links to the median of people and even the bottom of people. I would therefore urge the Government to consider at least one proposal. This is that the benchmark should no longer be with those at the very top, whether it is 24 or 48, but aimed to be with the median. In many statistics, one can analyse companies based on how much the CEO is paid as compared to the bottom worker. Sometimes it is a multiple of 20, 30, 40 or more. That, in some ways, will be more comfortable for me and some Singaporeans, that Ministers should receive a good salary, one that puts him above the temptations of corruption, one that allows him to worry about the affairs of state without worrying about their own pockets, but perhaps one that is pegged as a high multiple of the median. This is more comfortable because this would actually create the linkage between their performance in bringing everyone up and not allowing just the few top people to fly ahead of everyone else.

If the Government will not consider this for the base salary of the top political leadership, I urge them to consider it for the bonuses. As proposed, the bonuses are pegged to GDP and GDP, as we know, is too raw, too global, a figure. We need to target the bottom. We need to target the median. We need political leaders who constantly emphasise their links in both pocket, in compassion, and where they stand with these people at the bottom and middle of Singapore.

Mr R. Ravindran (Bukit Timah): Sir, Singaporeans take pride that we have a Government that is efficient, corrupt-free and, more importantly, one that is far-sighted. However, in any country where salaries of politicians are raised for discussion, it stirs emotion and public talk. Hence, it comes as no surprise that the topic of salary revision has become public topic today. I am glad that the Government, in a true, open and transparent manner, has chosen to table these salary revisions despite it being not the best of times to do so, especially when we are recovering from a recession. Sir, I commend the Government for tabling these salary revisions timely for public scrutiny and debate.

Sir, let me first comment on the salaries of the Ministers. Few can deny that our Prime Minister and the Ministers are a fine lot. They sacrifice much to take on political appointments. They sacrifice career certainty for political uncertainty. They sacrifice privacy for a regime of taxing Government and community work. Many also sacrifice private and family life for the country. Sir, they manage a Government whose foreign reserves are in the billions, an economy that is vulnerable and they are also responsible for the well-being of three million Singaporeans.

Sir, the critical issue is whether our Ministers focus on running the country or constantly worry how they will meet the present and future needs of their families. If we want the best, let us then pay the best and expect the best from them. That the ruling party sets very high standards for the recruitment of Ministers is there for public scrutiny. Our Ministers are questioned in Parliament, by the media and even in international forums. Their impressive knowledge, thought process and management skills are there for everyone to see and to scrutinise. Even critics are known to have conceded due credit to our Ministers.

The original benchmark formula adopted in 1994 was not the best as is recognised by the further refinement announced recently. But it has to be so as the compensation package in the employment market is one that is never static. Stock options were something new here in 1994. But now these are becoming basic in many new companies, particularly in the emerging new economy companies. Change is the only constant thing in the new economy, and I am glad that this Government is tackling the issue of compensating public employees head on.

Talking to some Singaporeans yesterday, I felt that many do not really understand the details announced. To many what mattered was that the increase was substantial. The usual criticisms were raised. I thought I would raise them here so that they can be discussed openly in this House.

Some of these have already been highlighted by the Prime Minister. Some felt that political office is an ethical and moral one and not one that is purely pecuniary based. They felt higher salaries will translate to cynicism and less respect for the Ministers.

Some stated that the benchmark formula used is not representative of the pay of employees but are that of entrepreneurs who make big bucks not due to hard work but due to connections, guanxi, high risks and sheer luck.

Some also felt that Ministers should set the right example by withholding salary increases in an economy that is still recovering. Their point simply was that the timing was inappropriate.

Another view was that the new pay packet was one drafted by civil servants for civil servants and one that was not subject to external evaluation.

Some even expressed the view that the new increases will trigger a wage spiral in the economy as it becomes a case of many chasing fewer job candidates in the market.

Sir, what became clear to me after yesterday's feedback was that there are two groups of people. One group is those whom I would call the "I know" group and the other the "I know not" group. Those whom I refer to as "I know" group are the people who are very familiar as to what is happening in the job market, particularly for the top talent in the economy and they know that it is very difficult to get good talent even when you pay high price. The other group which I call the "I know not" group is the group that has basically no knowledge as to what is happening in the top talent market and they do not know how much it takes to pay them and how difficult it is to recruit top talent. What has become clear, even when listening to the debate that took place today, is that even some MPs are not clear as to how tough it is to get good talent in the market. Some MPs have expressed the view, particularly the Members for Potong Pasir and Hougang, that our leaders' salaries, particularly the Ministers' salaries, be pegged to a reasonable level and they compare to the salary of about $50,000 or the salary of the US President.

Sir, Mr Chiam, in his address, stated that the US President's salary was increased from about US$200,000 to US$400,000 which works out to about S$630,000. But when the pay of the US President was raised in 1998, one of the reports indicated that the President himself was embarrassed. However, the reality was that they had to increase his salary because the US President's salary formed the benchmark for the whole US administration. Only when they increased the salary of the US President could they then increase the salary for the whole administration.

Similarly, when we benchmark the pay of the Ministers, we are not only talking about the pay for the Ministers, but we are also talking about the pay for the whole civil service. Although we are asking our Ministers to sacrifice and forgo salary increases, the reality is that below them there is a big group of civil servants who are all waiting for their pay increases and will constantly compare with what the private sector is paying and what is the attraction in the private sector. Although we are calling for Ministers to restrain pay increases in the course of the debate, the reality is that we can never keep the pay of the Ministers low and yet try to keep our civil servants by keeping their pay high. We have to ensure that the whole public sector, which includes the Ministers, is always paid at the level with what the private sector is able to afford and also attract the same talent.

Sir, nevertheless, it is essential that the Government continually explains the transparency of our Ministers' pay. Let me highlight many other things that the public is not aware. Not many are aware that our Ministers' pay packet is a whole package and there are no hidden benefits. There is no free housing, no free cars for private use, no servants' allowance, or paid holidays for them or their family, as it is like in many other countries. Even the US President's pay is not merely what he gets in terms of the US$400,000 but he enjoys many other perks, including a special jet for himself. So there are many other perks which if one packages it in, I am quite sure it well exceeds what our Prime Minister or many of our Ministers earn, and that is something that was missing, I thought, in the debate that took place in this House today.

Similarly, Sir, not many are also aware that not all Ministers are paid the same salary and bonuses but a range of salaries and bonuses according to appointments held, performance and other yardsticks, as also similarly indicated by the handout by the Prime Minister in respect of bonuses.

Not many also remember that Ministers, just like all big income earners, also pay a large income tax which basically creams off 26% of their income.

Not many also remember that Ministers are not permanent tenure holders but individuals whose tenure is decided by the people once in five years.

Not many also remember that they manage an economy that has a GDP of $154 billion as of 1999 and a foreign reserve of about $128 billion.

Not many also remember that we hold our Ministers responsible when anything goes wrong in the country. If I remember what happened in 1997, everyone, particularly the workers, was asking what were our leaders doing about the recession and their loss of jobs.

Similarly, Sir, not many also remember that we hold our Ministers responsible when anything else goes wrong in this country. Literally put, Singaporeans expect our Ministers to be "Superman".

My call is: let us then pay them what they are worth and what they deserve.

Despite these criticisms at home by Singaporeans, many Singaporeans I met overseas usually take pride in stating that Singapore has a corrupt free environment because our Ministers and public sector employees are well paid.

Sir, having added the above, there are two important issues that I would like the DPM to address, and these are:

(i) whether our well-paid Ministers will continue to share the aspirations and concerns of the ordinary Singaporeans, particularly the low-income groups and the disadvantaged in Singapore; and

(ii) whether the new salary structure is adequate to attract and retain the best in Singapore to become Ministers and political appointment holders.

Sir, let me now move on to the civil servants' pay revision. While I recognise the need for the Administrative Service to continue to recruit and retain the best talent, I think it is the best approach to ensure that the civil service remains the backbone of a good and clean government. I am convinced after my interaction with the Administrative Service officers over the years that they are both hardworking, have great minds and that they are also creative and, most of all, have the interest of the State in their minds. Some are at times mistaken that Administrative Officers have a cushy job. I thought I will highlight an instance so that we recognise the heavy burden and responsibility that some of our Administrative Officers carry. While serving on the Inter-Ministerial Committee for the Ageing last year, I gave a tough assignment with a tight schedule to an Administrative Officer supporting my sub-committee. He produced the required work in 24 hours. Sir, I saw his very red and tired eyes the next day and knew that he had worked overnight. I asked him whether this was common to him. And he informed me that he provides administrative support to four to five committees usually and this was on top of his regular job at the Ministry. I highlighted this to show that we pay them well but we also expect and extract a lot from them. I am sure that such officers will be in high demand in the private sector and employers will pay a premium to recruit men of such quality. The more such men are lost in the civil service, I think the bigger the loss for Singapore.

Sir, I would like to urge the Government to ensure that the career route to the Administrative Service continues to be fair for entry by all others at all levels. The Government must ensure that the Administrative Service is not a closed club of Mandarins who only get admitted through Government scholarships or academic excellence. The more it remains a closed club, it would invite resentment and criticism. It must continue to recruit the best talent based on academic performance and proven performance. It must also continue to remain open to proven talent at all levels both from other Government departments of the civil service and also from the private sector.

My bigger concern is whether our new class of Mandarins will lose touch with the average Singaporeans. With better pay and bonuses, many will climb the ranks of the well-off too quickly. I already sense that many Singaporeans are feeling that our policy making top civil servants are losing touch with the ordinary lives of Singaporeans. How do we ensure that they remember that many Singaporeans are working class people with real problems like balancing their bank accounts every month? How do we ensure that they keep in touch with the ordinary Singaporeans and not just the top income groups?

Lastly, Sir, let me move on to the civil service general salary revision. Sir, I support the rise in the salary of all civil servants as it will certainly go towards building a first class public service. What I would like to ask the DPM is whether exit interviews are conducted when civil servants resign from the civil service. I am sure many Singaporeans will be interested in knowing whether salary was the reason for the resignation of the 284 senior officers from the Senior Officer Service so far this year. The details, if they are available, will enable Singaporeans to better understand the dollar pull of the private sector. If the reason disclosed is family commitments, pursuing further studies or other reasons, then improving the financial package will not address the problem. I do hope that the Government will pay attention to the detailed reason for the resignations and take the necessary action.

Secondly, if the Government benchmarks the salary of the public sector to the private sector, the public also expects the tough practices of the private sector, such as in the area of human resource management to be introduced into the public sector. In the private sector, non-performers are given adequate notice and shown the door. Some have expressed concern whether the public sector will be able to fire non-performers. It will be no use if "non-performers" are transferred to other departments as such non-performers will only continue to "non-perform" in the other departments within the public sector. Is the public sector really able to bite the bullet and fire the non-performers at all levels of the public service?

Lastly, Sir, with better pay and bonuses, the public will expect even higher standards of public service. The public will become less tolerant of long queues at polyclinics, delays in replies and average service. I would ask the DPM how the civil service will respond to these expectations.

On that note, Sir, I support the public sector salary revisions tabled by the Government.

Mr Noris Ong Chin Guan: Mr Speaker, Sir, it is not by chance that the citizens of a small resource scarce country can live peacefully, comfortably and ably, equipping itself to face the challenges of the new economy.

It is not by chance that the Singapore economy made a V-shaped recovery from the recent stormy recession. It is not by chance that we can boast of Ministers of integrity and competence, and who can carry themselves well in international forums.

Sir, the preservation of a good, efficient and honest Singapore Government in the new economy is too crucial to be left to chance. We should put in place a mechanism to help nurture this. It is on this basis that I rise to speak in support of DPM's ministerial statement.

Sir, I would like to make the following observations:

Firstly, Sir, the Government's recognition of the impact of the new economy on the Government and the aspirations of young officers is most timely. What is the new economy? I do not think that anyone can readily claim full knowledge of the new economy, as the very nature of the new economy is that it is ever changing. But one thing is certain. The fast pace changes will generate opportunities, such as the sprouting of dot-com companies and life sciences. These opportunities will come by swiftly. Unless we position ourselves well and ahead of time, we run the risk of lagging behind in the competition. Given our natural resource constraints, Singapore cannot afford any slip in our competitiveness. What this means is that we need to have a government that keeps pace with new trends and developments, has the capacity and audacity to act promptly, has senior civil servants who are willing to read up on life sciences in order to grow the Singapore economy. In short, we need a vibrant civil service.

The typical image of a civil service is that of an ageing, inflexible bureaucracy, a fogy old man holding the reins. A typical image of the Singapore civil servant must be one with the attitude of agent Ethan Hunt in "Mission: Impossible 2", highly skilled, IT-savvy, high IQ, high EQ, excellent network of contacts and gutsy enough to make calculated risks. I believe that with the proposal set up in DPM's statement, we can take heart that we will have to place a continual leadership renewal process in the Government. I believe that the DPM's proposal will help to maintain the average age of senior civil servants.

By instituting a 10-year term, the Government will send the right signal that it is no longer an iron rice bowl. It will allow Administrative Officers who have completed a 10-year term to bow out gracefully, should they choose to do so. This in turn will generate more opportunities for other competent Administrative Officers to rise to the top.

My second observation concerns the review of the salary benchmarks. I believe it is a timely exercise and will even go as far as to suggest that it should be conducted every three to five years. So far, we have heard ample suggestions on how to compute the Ministers' benchmark. Which is the most acceptable one? In my opinion, we should not trip ourselves on the technicalities of the benchmark formulas. We should not be overly concerned regarding whether we cut it fine enough. Rather we should use the ranking as a sanity or reality check to ensure that the pegging is at the right level. For example, the Prime Minister is ranked 63rd after the salary revision. Given his duties and responsibilities as the Executive Chairman and CEO of Singapore Inc, he must be grossly underpaid in the marketplace. Our Minister at Staff Grade 1 is only ranked 367th, which again is grossly disproportionate as compared to a person of the same calibre in the marketplace. And using the ranking as a reality check, I believe that the proposed benchmark revision is reasonable.

I suggest that we should not view the remuneration of our Government and political leadership entirely in market terms. I suggest that we should not deceive ourselves and say that all Government leaders be only driven by their self sacrificial public service spirit. Let us be realistic about it. Let us try to marry the need to be driven by the market and public spiritedness.

The test of the worth of the Government and political leadership is in times of crisis. Can they stand the test? They have done so repeatedly, and again in the recent economic recession. The litmus test for the political leadership is in the elections, just like the private sector. If we feel that the management team has done a lousy job, the shareholders can convene to dispose them. We have an increasingly sophisticated electorate. I believe that they understand the need for good government. I believe that they understand that good things never come cheaply. Likewise, there is a cost to good leadership.

Sir, I support the DPM's ministerial statement.

Dr Jennifer Lee: Mr Speaker, the Senior Minister and the Prime Minister have just earlier shared with us and reminded us of the calibre of our Ministers and the achievements of the Government. Actually, I think there was no real need for that because there is no question that our Ministers are deserving and that the Government has done very good work. The question that is troubling me is how you reconcile the pragmatic approach that we will always take in reducing everything down to economic equations, on the one hand, with our call, on the other hand, to Singaporeans, and to younger Singaporeans especially, to be patriotic and to have a love for their country and to have a commitment to it.

These two days we have been debating and discussing the salary revisions that are just about to be made for our top civil servants and Ministers. Just about one month ago, the results of the 1999 Labour Force Survey were published and they were a reminder for us that things are not all well for all Singaporeans. Much of the discussion that has ensued in the weeks since have focused particularly on the bottom 12% of households with income of less than $1,000. Not that much attention was paid to the next category which was the households with income of $1,000 to below $3,000. This is another full additional 30% of our population. While we are certainly not destitute, they are not anywhere close within reach of what we all consider the good material things in life. And we all know and recognise that cost will continue to increase and that, with this increasing cost, this group will also struggle more and more to be able to afford these good things. These two groups together comprise a full 42% of Singaporeans.

I have no argument with the philosophy of paying a person his worth and of the importance of having the best people in leadership. But with this juxtaposition of earning capacities right now so starkly highlighted, I strongly and sincerely urge the Government, our top civil servants and Ministers that, as the Government continues in its work to formulate and implement policies and programmes, it takes pains to be seen to be sensitive to the aspirations of and gives adequate weightage to, not alienating, this full 40% of Singaporeans. 5.35 pm

The Deputy Prime Minister (BG Lee Hsien Loong): Mr Speaker, Sir, I thank all the MPs who have contributed to this debate. It has been a very good airing and arguing of the issues. Rather than replying to the MPs one by one, I will group the issues together into seven separate sections and deal with them block by block.

The first group of concerns raised has to do with the quality of the civil service. Pay them well, yes, but ensure that they perform. Prof. Chin Tet Yung argued that selection for Public Service Leadership positions must be rigorous. Dr Vasoo asked whether the civil service quality will be maintained. He asked whether we have attracted good people since the last revision. And Mr Inderjit Singh, Mr Ravindran and several others strenuously argued for measuring performance and penalising non-performers transparently. They did not ask to cane them. I fully agree. And Mr Zulkifli raised the question of free riders, which is the same thing. I fully agree with Members that selection must be rigorous and standards must be high and must be enforced. And we have not left this to chance since the last salary revision.

Over the last five years, since 1995, for the Administrative Service, we recruited 148 people, that means, nearly 30 a year. We lost 115 for a net gain of 33. So we now have 275 Administrative Officers. The people who left - left through resignations, left through retirement - part of this outflow happened by itself, or maybe even happened despite our best efforts to discourage good officers from leaving. But an important part of this outflow was the result of active management, as we redeployed our people who did not fit into the Administrative Service career track. So there has been a considerable amount of turnover every year in order to leaven the group and to raise the standard of the group.

If we measure the CEP, the potential of the officers who are in the Administrative Service, five years ago and now, there has been a significant improvement. Look at the officers aged 30 and above, when they have been in the service for some years and we are able to form a good assessment of their standard and where they can go, how many of them can make it into a Deputy Secretary position, or now what we will call a PSL position. Five years ago, less than half, about 46%. Today, after the turnover and after the recruitment, 63% have the potential to make it into PSL positions, nearly two thirds. These are regular assessments. We have committees, we have cross-checking, PSC interviews the officers and confirms them. So we are reasonably confident that the quality of the service has gone up.

And we have been discriminating in rewarding the performers as opposed to the non-performers in the service. We have the performance bonus. It has been a valuable tool for making a distinction. Some MPs said it is not transparent. Is this the way to pay people more automatically? It is not. You work for your performance bonus.

Earlier, the Prime Minister had provided the distribution for the Ministers, how many received how many months of performance bonus. For the Administrative Officers (AOs), we have divided them into four categories. "A" performers, very few; "B" performers, well above average; "C" performers, who get the base rate, are doing well, but average; and sub-performers, who get nothing. Last year, 234 people were eligible to receive performance bonuses. "A" graders, 3; "B" graders, 68. So to get an "A" or "B" grade, you must be at least in the top third. "C" graders, 155, most of the rest; but no performance bonus, 8. So there is a possibility of your being graded below average. And if you continue to deserve zero performance bonus, after a couple of years, something more drastic will happen to you. It is not the quota. We do not automatically rank everybody and say the bottom person will forcibly be taken out and shot. But we make a hard-headed assessment and we have instituted procedures to make sure that hard-headedness prevails and we do not after a while, out of the goodness of our heart, lower our standards and slacken in what we expect people to perform.

So we will continue to manage the Administrative Service, to continue to recruit new talent, and to continue to manage officers who do not fit into the Administrative Service career path, and retention criteria. And now that we have defined the Public Service Leadership positions, these retention criteria are going to be more stringent. Because the test is: do you have the potential to make it into a PSL post? And if so, you stay; if not, we have to move you.

But, notwithstanding the calls for blood and thunder, we have to handle this carefully and sensitively, because we are dealing with good officers and we do not want to demoralise the service. It is an unavoidable reality. Not everybody who joins the service will really turn out to be a satisfactory and ideal cut to be an AO. Some work out, hopefully most will; some do not. And we must take chances and try people out. Because if everybody who comes in works out, my conclusion is that we were too cautious at the entry point and we must have turned away many people who could have worked out, but whom we did not take a chance on. So there must be some expectation of people who came in and have to be moved out. But not everybody who has to move out is necessarily failing to make the effort. We decided to bring him in. We decided to judge that he might do it. It turned out that he could not. It is as much our responsibility as his.

So therefore, when people leave because of exigencies of service, or because we have changed our critieria, or because we have decided to take a chance on him and it did not work, then we have to look after him and move him in such a way that he maintains his honour and his standing. Publicly shaming him will be unnecessary and counter-productive. That is not the way you manage people. Of course, if somebody is recalcitrant or non-performing, then, by all means, tar and feather him publicly and make an example of him. But fortunately, while there are some bad performers or non-performers in the service, the people who deserve this extreme treatment are few.

Secondly, the question of risks and rewards of which much has been made. Starting with Mr Tay Beng Chuan, who said you cannot compare Ministers and AOs with entrepreneurs, like Bill Gates and Li Kashing, because they venture their own money, they make it, they make it big. If they do not, they are totally wiped out. Fair enough. But we are not doing that. We are comparing Ministers with the executives, professionals and managers, the people working for the entrepreneurs, like Bill Gates or Li Kashing, and they are paid well in the private sector. If you are a CEO of IBM, or Hewlett Packard, you are paid well. As Dr Tan Cheng Bock pointed out, very well in the US. In Singapore, not quite so well, but still, that is the group we are comparing with. That is the right level which we want to compare with.

As Dr Ong Chit Chung pointed out, there is a perception that the civil service is an iron rice bowl and the private sector is much riskier. I would concede that the private sector environment is more volatile than the civil service, although I would not say that it is more risky than political office. Because in political office, you have totally no tenure at all. You have no contract. If you lose the elections, you are out. If you lose the confidence of the people, you are finished. And you cannot just go on to a new job easily because, having publicly not worked out, that is something which you carry on your CV for the rest of your life. So the comparison is not so extreme. And if you look at the private sector, if you are working for an MNC, or a large law firm, or an accounting firm, the risk is not so large. It is not one little boat in a great ocean. You are working on an ocean liner. IBM may go up or down. If you are Louis Gerstner, you have to turn it around. But if you are a top executive in IBM, working with the company, then you can expect a certain stability which may well be greater than the stability of many governments in the world. So there is a point, but it should not be overstated.

Finally, the test is: with the pay which we have set, are people leaving the private sector to queue up to join the public service? Or are people queueing up to leave the public service and join the private sector? That is the test whether you have overpaid or underpaid. And by this criterion, there is no evidence that the civil service is overpaying people as a group.

The way forward out of this issue is to move away from absolute job security, and not to pay less because you have greater job security. We have no more iron rice bowls in the civil service. I do not know where Mr Seng Han Thong used to see golden rice bowls. But I have never spotted any of them. If he does, I would appreciate it if he will let me know. But what we have done now to move towards less absolute job security, less absolute rewards is, firstly, to increase the performance bonus component substantially. And secondly, with the Public Service Leadership framework where we talk about the 10-year period of appointment at the DS level and 10 years at the PS level, that is a fixed term, rather than a lifetime commitment. It is a major step to take and newspapers have highlighted it and Members have caught on, but it is a step which we have to take carefully because it is a fundamental change and we better consider carefully that we do not go too far. We move and assess and, if need be, we move further but it is not something which you can adjust lightly.

So there is a turnover. Even in the natural course of events, with the changes we are making, the turnover will be there and there is an acceptable rate. It will vary from service to service. But if the turnover is too low, it is also something to worry about. If you ask me now today, is there a problem, I will say, yes, because when you compare this year's turnover with last year's, it has gone up sharply, whether it is senior officers, whether it is the other services, it has gone up, compared to last year, and nothing else has changed except that the gap with the private sector has widened. Therefore, we believe that that is the main problem. Talking to the officers confirms this. We also have to make sure that other conditions are right, the challenge of the job, the working conditions, the way we treat our officers and plan their careers, these are things we have to look at too, but salary is something which you cannot ignore.

And when we did our comparison with the private sector, we are not comparing with the top. We are saying, "Let us look at the 75th percentile of the private sector for the various services in the civil service." How do we compare? We found that the gap was quite large. In fact, the gap is about 20% but we decided that we will not close it completely. We will make this adjustment, that is, 13%, which I announced yesterday, and let us assess more carefully. Where we need, we can make a greater adjustment; where we do not, we can just hold it there.

The third group of questions which MPs have raised is the possible deleterious side effects of this salary revision package. Mr Ang Mong Seng and Mr Chew Heng Ching asked whether the additional personnel cost is provided for in the budget. The answer is no. However, the budget surplus for this year which has been projected is sufficient to cover the additional cost, which is $400 million. Some Ministries may need to come back to Parliament and pass supplementary budgets in order to pay for this, but it will be done.

Will the higher civil service salaries push up the cost of utilities, public transport and so on? Dr Vasoo and Mr Chew Heng Ching asked this. Because we are paying it out of the budget, the increases should not affect the cost of PUB utilities, public transport and so on. They have to move for other reasons. Anyway, public transport is not Government-run. Those are private companies. But in the cases where services are provided on a cost recovery basis, for example, healthcare, and where wages are a major component of the cost, then it is unavoidable that somehow or other patients have to bear at least part of the wage cost, whether it is 20%, whether it is 15% for the C class or whether it is 100% for the A class. A large part of what you pay goes towards the doctors and nurses, the hospital staff, not the x-ray machines and the operating theatres. But we have no choice. If we want better services, we need to pay the doctors and the nurses properly and this costs money.

There was a letter in the Straits Times recently which said that the writer went to queue up at the polyclinic and he was made to wait a long time, and the doctor was harassed and packing up her bag while talking to him and so on. Why can't he have better services? But it costs money and one of the reasons the doctor appeared harassed is because we do not have enough doctors. We are not paying enough to the doctors in the polyclinics who are doing a heavy and difficult job, and we will have to raise the pay of the doctors in the polyclinic to improve the service, because the public does not tolerate poor service either and somehow or other, this expense has to be covered. I saw that Mr Lim Hng Kiang answered this question very carefully when he announced the doctor's salary revision a couple of days ago, but it is a reality. Personal services are expensive and, in fact, a major component of cost increases in the developed countries and it is going to affect us too.

Mr Tay Beng Chuan, Dr Vasoo and Mr Chew Heng Ching asked about excessive civil service salary increases causing wage inflation. I would make three points. First, we are following, not leading the private sector. I have said this again but it is an important point. I think we have to say it repeatedly. We are not leading, we are not pushing it up. But we cannot be left behind too many steps. One step, yes, three steps, you can say that is the Asian style, walk three paces behind. But if you continue three paces behind for too long, your system is going to run into trouble.

Secondly, I accept that making the Government a more competitive employer will mean making it more difficult for the private sector to recruit, especially to recruit from the public service. That cannot be helped. We cannot stand there and helplessly watch our lawyers leave, our nurses leave, our clerks leave, our senior officers leave and our Administrative Officers leave and say that this is good for the private sector. It may be good for the private sector in the short term, but if the Government falls down, that is very bad for the private sector. So we have to stay competitive. But we must also make sure that civil servants recruited by the Government are employed productively and justify their pay. When we take that person and put him in the Government, he is actually producing something and not just a drone, not just a parasite. Then he justifies his pay because otherwise, we are just going to have a large class of people sharpening pencils and pushing papers, and we will be wasting resources and causing wage inflation.

The third point is that this year, we have put the Government salary revision and the NWC award together. It is two in one. Traditionally, the NWC award has been a benchmark for private sector NWC adjustments. But this year, because the two of them have been put together into one package, which includes the AVC, the extra performance bonus and monthly salaries, the total Government package, 13%, cannot be taken as the norm for private sector settlements. We are catching up and this package is not only NWC. There is salary adjustment to catch up. The private sector companies which have justification in salary adjustment can argue their own case, but I do not think it will be fair to use the civil service as a benchmark.

Finally, Mr Simon Tay asked whether we could consult the private sector when the Government makes pay revisions. I am afraid the answer has to be no. The private sector does not consult us when they make pay revisions. We have no wage control or wage freeze and the Government cannot consult the private sector when we make our pay revision. It is not possible. We have to decide what is right and we have to judge. We have the responsibility and we have to answer for it.

A fourth group of questions concerns the basic principle of paying the market rate for the job. Mr Tay Beng Chuan was the first to raise this, talking about the spirit of personal sacrifice which is required because of tripartism, because without sacrifice, leaders will not deserve respect, trust and confidence. And others too, including Mr Zulkifli and Mr Chiam, talked about moral authority. It is a basic point. There has to be, and there is some personal sacrifice involved in public service, otherwise, it would not be called public service. But the sacrifice cannot be so large as to put off able men. A business leader earns a full wage but he is respected for his business acumen, for his organisational skills, for his professionalism and the results he produces. Why should a political leader not be judged in the same way by his acumen, organisational skill, professionalism and the results he produces? If he is paid nothing and produces no results, he deserves no respect. If he is paid properly and he delivers results, I think he is fully entitled to respect. He is doing an honourable job. There is nothing improper or dishonourable about it. He should not enrich himself through public service but why does he have to make a large financial sacrifice just to prove his credentials? As Dr Ker Sin Tze has asked: can we find people who will do this in peaceful times?

What Mr Tay Beng Chuan described and the other MPs also talked about is indeed the model in many countries. I say "model" in the sense that that is how it works, not that that is the ideal for us to follow. Actually, in some of these countries, it is the other way round. Politicians are not respected and the public refuses to support paying them properly and, therefore, they are unable to raise their wages. That is why the British Members of Parliament had to stand up and say, "We are very embarrassed to talk about this because the public will not countenance raising politicians' wages." And so too in other countries.

I was just in Australia recently and the MPs said to me, "Your politicians are paid well." I said, "Yes, we have decided to make it a clean wage." They said, "If we did it here, we would be sacked. We would be out." They did not say, "Here, we all volunteer to sacrifice." But it just could not be done in their environment. I was talking to an American central banker and he asked about our wages - how big the gap was. He said that it was a real problem for him because the politicians' wages are not moved up, so his peoples' wages cannot go up. There is some sense of public service, so he still has some good officers. What is the problem? Because they have to send their children to college. So what he does is once a person comes in, if he thinks the chap is good, he moves him right to the top of his scale immediately. And he says, "You please save this money up, so when you reach the top of your career and you are still at that salary point, at least you would have been able to accumulate savings over the last five or ten years and would be able to send your children to college. You would not have to come and tell me that you have to resign to send your children to college." So it is a real problem. As for Bill Clinton, of whom much was made, the US Congress has decided that they are going to double the salaries, starting with the next President. They could not do it for themselves. It is politically untenable. But it is a problem and they are going to double it. When we say we follow the American example, I think we should understand what the American example entails.

We have chosen a different formula. It has worked for us, and I think we better keep it. I would not shy away from this transparency by moderating the salary increase using supplementary incentives and rewards, as Mr Tay Beng Chuan pointed out. We go for a clean wage. What we declare is what the Ministers get. It is more transparent. It is more sensible. It is better to pay $968,000 and be honest and open about it than to pay a small nominal wage and top it up with perks. Perks cause money too - to provide maids, cars, houses, free holidays and education for children is very expensive. Besides, we will be generating a privileged class of people who then will start arguing what car you are entitled to, which holiday are you allowed to go, can you travel first-class or business class on holiday and so on. So as Dr Tan Cheng Bock pointed out, we show all components.

Mr Low Thia Khiang said that we are not transparent enough. What else is there which we have not declared, which is not in the Table I handed out yesterday? There is nothing, that is it. It is broken down in many different pieces because there are different purposes, bonuses, allowances and so on, but all the pieces are declared and however many pieces there are, it adds up to that total sum of money. And if you want to know what the pieces are, the Straits Times has done its homework. Instead of asking your Legislative Assistants, you can look up the Straits Times today and it provides a neat little tabulation of what the Superscale G salary consists of, what the Staff Grade I salary consists of. There is nothing else.

Going on from the principle, MPs also argued about the detailed basis of the benchmark. Mr Iswaran asked: does it include foreigners? Does it include bankers who are entrepreneurs? The answer is no. The benchmark only includes Singaporeans and also Malaysians who are Permanent Residents in Singapore, because that is really one labour market. Foreigners are out and bankers who are entrepreneurs are also explicitly excluded. This has always been the case, it is nothing new. Members may have forgotten or may not have been present at the last debate, I think it is worth clarifying.

Another major point made is that the list of top earners changes every year, and therefore Ministers earn much more than any person outside. Mr Shanmugam raised this. Mr Ang Mong Seng said that it is like two aeroplanes, one of which is in the air all the time. Mr Chiam See Tong raised this, and Dr Tan Cheng Bock suggested that maybe out of the 48, we have 24 people fixed, and 24 people change from year to year. I am not sure how you fix them, because sometimes they grow old, they retire and sometimes they change jobs. But I understand the sentiment of it.

There are several answers to this. The first answer is that Ministers and civil servants also have no permanence. We are not here forever. We are here while we are doing the job. When we are no longer the Minister, we are out. Our aeroplane has landed. How much should they be paid while they are doing the job - an amount comparable to what top executives with similar responsibilities earn in the private sector.

It is possible to have an alternative approach, as Mr Zulkifli has suggested. Get a pay consultant, make pay comparisons, survey the industry, identify other firms against which you are comparing yourself, benchmarking yourself or against which you are competing, and then ascertain how much executives in these firms are paid. It is a way private sector companies do it, and it is a practical approach. We studied it quite extensively in this review before finally deciding, no, we better go back to the old approach of highest paid.

There are two reasons. First, because the process cannot be totally transparent or automatic. There is judgment. You have to decide whom to include, whom to exclude, and you will have to review the list of companies from year to year. It is not a fixed list. Then you have to look at the companies and say, "Is it a foreigner or not?" And too much judgment goes in for it to be an automatic formula.

The second reason is that if we do it that way by using a private survey, the data would be less reliable than the IRAS' data. IRAS sees your total pay, or at least they have a fairly good sense of what your total pay is. And if they have any doubt that that is your total pay, they will look into the matter and satisfy themselves as to what the truth is. Pay consultants - Towers Perrin, A T Kearney or whoever it is - do not have quite the same binocular and telescopic vision in these matters. They have an impression. It is not quite as accurate. I think, overall, for purposes of automatically computing a benchmark, it is better just to use the top earners as a proxy for the leaders in each profession.

There is some bias, because the top earners change from year to year, and there is a certain amount of randomness. Maybe by chance, that person's business was good and he was ranked high that year. But then so too with the top companies, because companies go up, go down, and I will have to continue to compare against the top companies. We have tried to minimise the bias. First, by increasing the samples from 24 to 48; secondly, by using the median instead of the mean. And also the two-thirds factor which we apply to the benchmark tends to go on the opposite direction to bring down your numbers. So that also compensates.

Finally, our answer is $968,000, ranked 367th amongst private sector earners, based on this year's revision or if we went for the full benchmark, $1.21 million, ranked 206th. And I think that is an eminently reasonable outcome.

There were many other suggestions made by other MPs. Mr Iswaran said why not just use the 200th ranking private sector earner. Dr Tan Cheng Bock said why not cap the size of the stock option gains, maybe at $1 million. We can do many of these things. Numerically, I think, one way or the other, it would come out at about the same place. But we are looking for sound rationale to make the comparison, because the benchmark is not only a numerical formula, it is also a statement of where you peg your Ministers, in terms of responsibility and job scope. What is the group against which we should rank our Ministers and compare their outcomes? And we say we should rank against the top professionals and executives in the private sector with general management responsibilities. That was the definition in the White Paper and I think that is the right definition. In other words, I want to compare our people - the Ministers and the Staff Grade I Permanent Secretaries - with people in the private sector holding that level of jobs with that standing in their professions. So I am really talking about the top 24 people - four professions times six. But to give my number more stability, to make some adjustment, in case the top man happens not to have top pay that year, so, all right, we have decided we will go to 48 people instead of 24. And it is still representative, but stabler.

This is different from saying I will aim for number 200 or 367, because I am not aiming just for the number. I am aiming for that category and, as I will show later, number 367 includes many people in front of it. As Mr Noris Ong says, very sensibly, finally, you are looking for a reality check. Do not get caught up on the technical details of how the benchmark is calculated. Just have a reality check; is the outcome reasonable, rank 200th for the full benchmark, rank 367th for the present adjustment? I think, on that basis, we pass the reality check.

I would not go for a link to the median per capita income and multiply by X, as Mr Simon Tay suggested. We have a component in the package which is linked to GDP. I think it is the most comprehensive single indicator of the overall performance of the economy, rather than any sub-group. And we really want growth, because growth is the first target. With growth, you can have distribution. If you start with distribution and then hope to have growth, you are getting it the wrong way around. So I would stick to GDP and I would stick to the basic principle that we are comparing against the top people in the private sector, and that is what I want to measure against.

Whatever the formula, the next question is: is the quantum reasonable? This question was asked in different ways, firstly, by Mr Seng Han Thong and Mr Chay Wai Chuen who wanted to know what professions are the 366 or 367 people who earn more than the benchmark. The Clerk will now distribute the Tables (Cols. 631-634) . We have tabulated them and you can see who these people are or at least what professions they are in. Table 1 - Professions of Top 366 Earners (Cols. 631 - 634)

These are the 366 people who earned more than the benchmark, namely, $968,000 in 1998 and assessed in 1999. You can see that they belong to a wide range of professions - accountants, bankers, manufacturers. The legal services are right at the top, large numbers. These are the ones that we are comparing against. The one group we are comparing against, not figured here, are the engineers who earn less. But then there are many other professions who also are represented in the top 366 people - real estate, medical services, ie, doctors, computer services, hospitality services, market research, luxury goods, advertising. I think if you ask whether the Minister ought to be better than some of the people on this list, I would say yes. And if he is not better than somebody on this list, then he should not be a Minister. So I think that the figure is a reasonable figure.

Now, look at the second page of Tables 2 and 3 (Cols. 635-636), to have a look at what the individual six professions in the benchmark actually earn. Table 2 shows the range of the eight people in each profession. The bankers earn $2.2-$4.5 million. Lawyers earn $1.5-$2.8 million. That is completely typical. Accountants earn $2-$2.3 million, and so on. Engineers earn less - $0.5-$0.8 million, but that is really because a lot of engineers have become CEOs of companies and are not captured as professional engineers on this chart. Tables 2 and 3 - Earning ranges of top 8 earners in 6 professions (Cols 635-636)

If you discount for stock option gains because you think they are volatile and discount by 50%, the numbers actually come out about the same. The only people who are affected are those working in multi-nationals who come down, both the lowest and highest. And the local manufacturers who come down for the lowest earner. The highest did not change. So it really does not make much difference. I think you can see that a lot of people are in these income brackets. These are not fictitious figures.

We excluded doctors from the benchmark but, as you can see from the list on the first page, there are a lot of doctors who are in this earning category - 11 people are in medical services. And if you ask about the top eight doctors, because Mr Simon Tay mentioned doctors and I think Dr Michael Lim too, they earn between $1.12 million and $2.48 million. It is a little bit less than lawyers. So doctors have to care for their patients, not just care for their fees, but doctors do not earn negligible fees, which is why we have had to make significant adjustments to doctors' salaries in the public sector.

The question of stock options which Dr Tan Cheng Bock focused on, I have shown from the Table that they actually did not make much difference in the past. In the future, I think they will make a difference to the multi-nationals, to the local manufacturers. They were not figured for lawyers, accountants and engineers because there you are talking about principal earned income from their partnerships. So they do not get stock options from their partnerships, unless one day we allow our law firms to become lawfirm.com. When that day comes, we will have another debate in the House.

With the way we are calculating the benchmark now, namely, depending on the median, because we have these professions - lawyers, engineers and accountants, at least, and probably also the bankers for now - without stock options, even if the people who have stock options have inflated options, it is not going to make a disproportionate move to your median, because they will be the few at the top, unless all 24 people have huge stock options and therefore it affects your median. If that happens, we will look at it again. I do not think that is imminent. So the conclusion from this is that the adjustment is well justified.

There was one group which I must confess which we accidentally omitted to mention although we did not omit to consider them, and this was pointed out by Mr Simon Tay and by a few other Members privately, and this has to do with the Nominated MP's allowance. This will be adjusted in step with the MP's allowance, and so too the NCMP's allowance, proportionately. We are completely fair and equal in these matters.

Finally, may I pay some attention to the speakers whom I have agreed with, as opposed to speakers where we have some difference of views. Prof. Chin Tet Yung, Mr Iswaran and Mr Ong Ah Heng urged us to restore the CPF as soon as possible. I fully agree. We have accepted the NWC's recommendation to bring forward the next step to January 2001, and we have said that we will announce in October how big this next step will be. We have to keep faith with the workers. When we told them that things were bad and to cut, they cut and agreed. Now that things are good and they want to restore it, we also want to restore it, and it has to be restored as soon as possible. 2% has already come and I look forward to another adjustment on 1st January.

But I think underlying this question is a different question, which was what Mr Sin Boon Ann explicitly articulated, and that was why we move Ministers' salaries now before the full CPF restoration. Let me turn the question around and ask: now that the economy is recovering, is the private sector continuing to freeze its salaries? No, before CPF full restoration, it is moving up. In fact, it is one reason why we are bringing forward the CPF restoration.

If the private sector is not freezing salaries, should we hold back all of the civil service salary revisions until the CPF is fully restored? I think the answer has to be no, because if we did hold back, we are being unfair to the civil servants and we are going to lose more good officers, and the best ones are the ones who are going to go first. Then we would have the real problem which the MPs worry about of people who are free-riding and under-performing.

So should we move for the whole public sector but leave out the Ministers? I think that would be wrong too. Because it would show that we lack faith in our own argument that the Ministers' pay should follow the benchmark and the benchmark should follow the private sector up and down. We have argued and debated this. We have decided that the benchmark is the way to go because we want to move with the private sector, not automatically up alone, but both up and down. In an exceptional situation when we are faced with a crisis, we froze the benchmark in 1998 and 1999. The crisis is past and the economy is recovering. It is on the way up. I think the right thing to do is to move for the Ministers' salaries to catch up, but 80% of the full benchmark, and we phase out the adjustment over three years. I think that is eminently fair.

Mr Chay Wai Chuen and Mr Thomas Thomas asked the Government to re-commit itself to promoting social mobility and flexibility. I fully agree with them. I also particularly agree with Mr Thomas Thomas that in the US, although income disparities are large, social mobility is significant. The US social attitude towards the successful ones who make it big are positive, because everybody hopes also to do the same and to rise, and thinks that he has a chance to get there. It is the major reason why in the US they have social stability and the income gap is not a political problem.

Income distributions are stretching out but this does not mean that hope is extinguished. So long as we keep our society open and we help all citizens to start out in life with education, good health care, with a home, and we give talent from all backgrounds every opportunity to succeed, I think that is to our benefit that we have these high peaks. They will bring others along and lift up the average for the whole society. If we push the peaks down we are not going to raise the rest of the society. We are going to push everybody down.

We have to continue to look after low income groups and create more jobs for all. As Mr Ravindran and Dr Jennifer Lee said, and Mr Yeo Guat Kwang put it in Chinese, not only Jin shang tian hua but also Xue zhong song tan not just add a rosette on to your brocade but also send coals in the snow to a needy person. I fully agree. The strategy should be what Mr Chay Wai Chuen explained, which is to uplift the lower income households and not focus on the income gap per se. What is important is the level of the lower income group. That Dr Jennifer Lee is able to say the $1,000 to $3,000 household income group is something to worry about is a great tribute to Singapore. Because in any other Asian country, if one is earning from $1,000 to $3,000 household income, owning a house with a television set, washing machine, telephone and probably handphone and a CD player, one would be very comfortably off. In China, they would consider that an enormous achievement, and in many other countries in Asia too. But in Singapore, because we have succeeded in uplifting our people en masse, even the lower income groups are $1,000 to $3,000 and have considerable assets to their name. I am not saying we should rest on our laurels. We should continue to work and uplift this group further. But that this group is already in a considerably privileged position compared to any similar stratum in any other Asian society, that is not in doubt.

Finally, the crucial point, which Mr Lim Boon Heng made eloquently yesterday, that we must attract talent to come to Singapore. We must retain talent, get Singaporeans back to Singapore and we must have good government. Because without good government, we can have very hardworking and talented people, but we are going to have a lot of hardship and suffering. This is crucial. The future of all Singaporeans depends on this and our revisions will help to achieve this.

MPs have understood this. Therefore, they have supported this policy. I would like to thank all the MPs for their contributions. I think what we need to do now is to work together with them to raise the standards of public service and Government, to get people who are idealistic, committed, patriotic and capable to come forward and serve Singapore and to bring about a better future that we all aspire to. [Applause.]

Mr Low Thia Khiang (Hougang): Sir, may I seek clarification with the DPM? I refer to Handout 2 that DPM distributed in Parliament yesterday. Is the salary figure in that Table inclusive of AVC, bonuses, etc? Is it a gross figure or a basic figure?

BG Lee Hsien Loong: It is a gross figure. It includes everything. It includes the monthly pay, AVC, Special Allowance, which the Ministers have been getting one month, Public Service Leadership Allowance, which we are introducing, car allowance, which has always been there and is tax free. So we actually imputed on top of the car allowance the amount of tax which would have been paid if it were taxable and added that into the bundle as well the performance bonus and the GDP bonus. It is all listed out in the Straits Times. Go and check it up there.

Mr Speaker: Before I take the vote, can I just remind hon. Members that we still have a number of items on the Order Paper to clear. So please do not forget to come back on Monday.