PM's speech on ministerial pay rise(2)

　　I KNOW some MPs want us to do public lynchings (of public servants when they don't perform well). This person, for the following shortcomings, hung, drawn and quartered. Ministers, even better. But if I did that, would I have civil servants and ministers? Do you do that in your companies?

　　Just because you don't see us exercising discipline visibly and ostentatiously doesn't mean we are not managing the system tightly and properly. It's always with finesse and politeness.

　　Money corrupts, says Prof Thio. Power corrupts. Yes. But in this system, have we had wrong people coming to government, corrupting the system? Where? Instead, we've got a government that's clean, efficient, capable.

　　When you get the Asian crisis, when you get Sars, Team Singapore rises to the challenge. When faced with competitive challenges from China and India, the team comes up with new policies to keep it competitive. The Biopolis, the IRs, create new jobs, replace old jobs lost. Workfare, ComCare. Could we have done all these, would we have had the instruments and the team and the capability to do this had we not moved boldly in 1994 and again in 2000?

　　It's as well we moved in 2000. If we had hesitated to 11th Sept 2001, then we would be 30 per cent behind where we are now and I think we would have lost many people. We would be in deep trouble today.

　　Without proper pay, integrity of the system will be at risk. High pay does not guarantee a clean system. Enron is an example some MPs mentioned. I concede that. But nevertheless, proper pay enables us to keep the system clean.

　　Many countries are fighting corruption, even First World countries. In the UK, sleaze plagues Tory and Labour governments. Sleaze means ministers giving advantages, receiving benefits. In the US, Republicans lost the mid- term elections. Iraq was an issue but so was sleaze: Their congressmen and senators were found doing bad things with money and their voters punished them. But that doesn't clean up the system.

　　In Asia, China is fighting a wave of corruption, not just ordinary corruption but top-level. Government officials, party leaders. The party secretary of Shanghai, Chen Liangyu, Politburo member, removed. Mayors, vice- mayors. Some of them were executed but while you can execute one corrupt person, can you execute the practice of corruption?

　　I met a prominent South-east Asian businessman recently. I said, you know, corruption is a problem. He says, yes. Money politics. The government says they will eradicate it but it cannot be eradicated, it's permanent. Why? Many reasons but a major one is that the public-sector salaries are way below the market.

　　So we've got to keep our system clean at all costs. At all costs means that if anyone does wrong, however high up it goes, it will be investigated. If there's any allegation, however high up that allegation goes, it will also be investigated. We've done it with ministers. I have been investigated because of HPL. Younger ones may not remember but it's 10 years ago. We had a long debate in this House. So has the Minister Mentor. Nobody is above the law.

　　What will happen if people are not properly paid? Well, they will start with small things. Eventually it will get worse. And then we will be just like the others. I can tell you some stories about that, but I will save that for another time.

　　Our culture is well established. Everybody knows the rules: If we touch something that's wrong, you will be found out and anyway you should feel bad about it yourself. Because we have this system, we can deal with big issues, big things, properly.

　　You take the IRs. Billions of dollars were at stake in the tenders. What is remarkable about them? Not that they came, but how we handled them.

　　For big projects, because so much money is at stake and it's so easy to corrupt people, we usually do a tender on price. You seal your bid and put it into a box. Witnesses open the box. It's quite objective: The best price wins.

　　I wanted to do it this way for the IRs because it's such a big project and there's a big subjective element in assessing the project. In a beauty parade, there will be arguments. Did you choose the best one, were you really fair, and so on.

　　I stayed very firm to the line that I wanted this to be tendered. We designed a tender scheme to make it work. But unfortunately it could not work. So I visited Las Vegas. I went to, I think, four of the casinos and talked to their CEOs. They all raised this with me. They said: This won't work, you won't get the best project. So I asked: What should we do? The reply: Fix the price, compete on quality. I said: How do I assess the quality? It's subjective. The reply: You have to do that, otherwise you will not get a good project.

　　Some very clever people said: We know what you're trying to do; you want to design a tender to make us do the right thing. Says a chief executive: 'I'm a mathematician too. I know how these tenders work, so if you set these rules, I will play your game. But I think you are setting the wrong rules and you are making us play the wrong game.'

　　Not Miss Universe

　　AFTER I came back, we changed policy and decided on a beauty parade. It's not Miss Universe. You have to have a whole system assessing the project objectively on many criteria. Some of these you can measure, some you have to judge, some of it is subjective feel.

　　At the end of the process, you must have the integrity of the system and the quality of the judgment so that Singaporeans know you've done the right thing, participants agree you've done the right thing, and nobody suspects or alleges any hanky panky. At the end of it, through proper procedures, due diligence and an evaluation committee, the two best projects were picked. Who else in the world can do that?

　　Merrill Lynch wrote us up. I quote: 'Singapore's process was transparent, supported by the community, and attracted the world's largest and best IR companies...the government's decision was accepted and respected by all, and people believe the two winners were the best bidders.'

　　Think about that. What kind of civil service, what kind of ministers do you need to make that happen? Jayakumar was on the committee, Lim Hng Kiang, Raymond Lim, I think, Vivian, Mah Bow Tan, supported by Perm Secs, supported by the Singapore Tourism Board, by Sentosa.

　　We had system discipline: no leaks, no bribes, no monkey business. Therefore, we got the best project for Singapore. How much would it have cost to just adjust half a point here, half a mark there and you come up with a different outcome?

　　So competitive salaries is one of the basic requirements to protect the integrity of our institutions.

　　Moral authority

　　MANY MPs have raised the question of moral authority. They've made the argument that public service requires selflessness and sacrifice; that ministers especially must have moral authority to lead, not just to manage. Therefore, you cannot expect wages comparable to the private sector.

　　I agree with these propositions in principle. You must be selfless, you must have some sacrifice, you must have the moral authority to lead, to get people to follow you. And therefore it cannot be exactly the same as in the private sector.

　　I would differ slightly from Shanmugam. Shanmugam says: 'Why should there be any sacrifice?' I say, let there be sacrifice, so there can be no doubt a person is not in this to make money.

　　But let's ask where does the moral authority come from. I think it comes from leaders who care for the people, leaders who improve the lives of the people, who are motivated to serve others and not enrich themselves. It comes from leaders demonstrating that they are more often right than they are wrong.

　　They need a bit of financial sacrifice. Some. But this is not an auction. You sacrifice X, I sacrifice two Xs. You match me. The one who makes the biggest self-sacrifice gets the job. Look at the countries with low-paid ministers. Do they have higher standing with their people because of that?

　　I know Ms Denise Phua, Mr Lim Biow Chuan and others disagree with this, and I know many of those who have spoken up for the opposite view hold their views out of deep conviction. For example, Lim Biow Chuan - according to Dr Lee Boon Yang, who's known him for many, many years - has held this view ever since Dr Lee has known him. He supports the PAP on everything but on this. He thinks we shouldn't do it. Well, I respect those views, but I cannot agree with them.

　　In particular, I would disagree with Ms Denise Phua when she talks about the nexus of power and money. I'm not worried about somebody wanting to become PM for the sake of $4 million. I am worried about somebody wanting to become PM and hoping to collect $400 million under the table.

　　We don't expect ministers to earn as much as top earners in the private sector. But it must be not too far out. That's the principle on which our 2/3M48 benchmark is based: First, estimate what a successful corporate executive or professional can earn. Then, apply a discount. Then, work out a formula that's fair and stick to it. Whether things go up or down, follow that formula. When the private sector moves, we also adjust.

　　Some people want to benchmark ministers' pay against that in their previous professions. For example, they say, engineers are paid $600,000, and there are so many engineers in the Cabinet, so that's what you should be paid. Ms Lee Bee Wah was quite alarmed. She pointed out that a number of engineers have moved on to become chief executives and other things. I'm saying this again, by special request of the Ministry of Education and MTI, because they are worried that students may stop studying engineering and go and do law. Lee Bee Wah did us a favour explaining that engineers have done very well and lots of bright students ought to go and study engineering.

　　Or veterinary science. There was one letter in The Straits Times which says Dr Lee Boon Yang is a vet, so you should pay him a vet's salary. But Lee Boon Yang is not just a vet. He was a vet. He was spotted by Mr Goh Chok Tong, who invited him for tea and assessed that he wasn't 'just' a vet.

　　I fielded him, he became Parl Sec, then Senior Parl Sec, then MOS, then minister. He proved himself at each step. He was steady, had judgment, could size people up and get good people to work for him and get things done. Such a person can do many things, whatever his original training.

　　Quite a lot of very talented people became vets in the 1960s and 1970s. Colombo Plan scholarships were offered for veterinary science. At that time, pig farms were a significant part of our economy, and we needed vets to look after them.

　　Vets doing well

　　IF YOU look at the vets who have done well in the public sector, it's not just Lee Boon Yang. Cheng Tong Fatt, who became Perm Sec (National Development), then ambassador to China; Chin Siat Yoon, currently ambassador to China; Ngiam Tong Tau, the brother of Ngiam Tong Dow, CEO of the Agro Veterinary Authority for many years. Three very able people, all awarded the Meritorious Service Medal. If you can find me more vets like them, please tell me. I will invite them to tea.

　　Denise Phua suggested a range around the benchmark, rather than a single point, plus or minus maybe 20 per cent or so. We don't have that exactly, but effectively we do. For example, we often appoint Acting Ministers. The substantive grade is Senior Minister of State, so he's not receiving the MR4 benchmark, but one below that, the SR5 Perm Sec salary. If he's confirmed, he goes to MR4. There's also room for ministers to be promoted to MR3 and MR2.

　　But whatever the fine print, the benchmark is basically sound. Teo Chee Hean has explained why the $2.2 million figure which the benchmark has produced this year is reasonable. I left the technical verification to the PSD and the minister in charge, but I applied a reality check.

　　First reality check: $2.2 million ranks 206th among private-sector earners. Are there 206 jobs in the private sector which are more important than being a minister and being a senior perm sec? I think now there are only four perm secs in the MR4 grade and above, and the ministers. Two hundred and six jobs in the private sector bigger than those? Fifty maybe, 100 possibly, 200? I don't believe so.

　　My second reality check: What are the CEOs of companies earning? The Business Times published a table on Monday listing the companies in the Straits Times Index. There are 55 companies. I don't think they have data for all of them, but they have data for most. They published a list of the CEOs and how much they were earning. I've taken that and made a table. I've also added a column for market capitalisation, just for a sense of size.

　　The top earner was at Venture Corp. Mr Wong Ngit Liong earned $16.75 million-plus. He was followed by Wee Cho Yaw at $9 million, all the way down to an executive at People's Food, who earned a quarter-million dollars.

　　The middle among the 55 companies - the 27th and 28th - would be Comfort DelGro and Genting International. Both $1.75 million-plus. For two companies with market caps of $4 billion to $5 billion. My ministers, $2.2 million. I think we passed the sanity check.

　　But look at the market cap. What are the biggest companies? The banks are at $30 billion-plus. SingTel is the biggest, at $50 billion. If Singapore Inc were a listed company, what would its market cap be? My GDP, which is the profit earned in a year by Singapore Inc, is $210 billion. The average price-earnings ratio on the SGX is now 20. If Singapore Inc went for an IPO, this would be a $4 trillion company. So I think we are well within the right ball park for what these ministers' jobs are worth.

　　But whatever the formula, whatever the detailed number, the reality which you cannot run away from is that the private sector is moving up, and so must we.

　　Independent pay commission

　　SEVERAL MPs suggested we delegate responsibility for setting pay to an independent pay commission. It's a conflict of interest, they say; we can't settle our own pay, let somebody else do it. But I don't believe this will settle the matter because whatever the commission recommends, finally the responsibility comes back to the political leadership. The buck stops here. If the commission recommends high, are you going to take it? If the commission recommends low, are you going to solve your problem? Who will answer for the outcome?

　　The Cabinet is accountable to Parliament, to all Singaporeans. Every five years, there are elections. Singaporeans have to judge. They have to decide whether we've done the right thing, whether we've delivered on our promises. They have to decide whether they have got value for money.

　　At every election, Mr Low Thia Khiang and Mr Chiam See Tong have made this an issue. In the very first election in 1984 that I contested, Mr Chiam See Tong made a very powerful speech at Fullerton Square, where he said: 'One month's salary for the minister, one year's work for the worker and you still don't have.' That ultimately is the test: Are we doing the right thing? The people have to decide whether we have kept the trust with the voters.

　　The opposition and some other MPs too disagree with this government's approach and have suggested various other ways of doing it.

　　Sylvia Lim says this is unrealistic; only 0.1 per cent of people are in that top category. Why not look at the median wage, which is US$2,000 or S$3,000. But will that approach do better at producing a successor leadership, a new PM and DPM, and Cabinet for Singapore?

　　Just as a thought-experiment, I would ask Mr Low Thia Khiang and Sylvia Lim to produce their line-up of ministers, their dream team. Name it. They don't have to be Workers' Party members. You can pick and choose any Singaporean, including PAP members. If you can't find a complete line-up for the Cabinet, at least tell us who you will appoint as minister for finance, and minister for law, from the best people out there in the private sector. Tell us, and tell Singaporeans, how much you intend to pay them. The median wage? A hundred times the 20th percentile? How much do you want to pay them? Is it realistic to have such a dream team if you don't pay them properly? Then Singapore can decide.

　　I'm not saying that we have the best possible team, or that this team is perfect. I readily concede that we need to reinforce it. I readily concede that the ability and the skills of the ministers vary. Each is different. Some are stronger than others, some have skills which complement another's. But every minister is worth his pay. Those who make the grade stay, others who don't, leave. By paying properly, we can improve. We can strengthen the team over time.

　　We make comparisons with other countries. I agree with that. I think we should compare ourselves with other countries. But unfortunately, the comparison was done wrongly by Mr Low and some others. Because if you compare with other countries, you will find that other countries also face problems of paying their political leaders properly. It's not true that low pay works better for them. The reality is, they can't muster the political consensus to pay more realistic salaries. The politicians are in low standing, so the public will not support it. In some countries, politicians rank below used-car salesmen in public trust.

　　America's judicial crisis

　　BENCHMARKING to the private sector is not something special to Singapore. Other countries have tried it too, although they have not been able to do it. The Americans tried it. The British tried it. It didn't work.

　　(On Tuesday) Shanmugam delivered an outstanding speech in the House. Not all the members were here. One part of the speech which the newspapers did not report was what he said about the American judiciary. According to US Chief Justice John Roberts, it's in 'a constitutional crisis'. Let me explain.

　　America established a market- based framework in 1989 to adjust government salaries annually based on increases in private-sector wages. Benchmarking to the private sector, in other words. They made one adjustment, and were supposed to follow through every year. But Congress never followed through for fear of a public backlash.

　　Now the whole system is stuck because all the salaries are related: salaries of congressmen, the secretaries of the departments, their civil servants, their judges. If you don't move on the congressmen, everybody else is stuck.

　　The judges are particularly without recourse because nobody speaks for the judges. That's how they have ended up with a constitutional crisis.

　　Chief Justice Roberts' annual report last year was devoted to this one subject of judicial salary. I quote: 'The dramatic erosion of judicial compensation will inevitably result in a decline in the quality of persons willing to accept a lifetime appointment as a federal judge. Our judiciary will not properly serve its constitutional role if it is restricted to, firstly, persons so wealthy that they can afford to be indifferent to the level of judicial compensation, or secondly, people for whom the judicial salary represents a pay increase.

　　'Do not get me wrong - there are very good judges in both of these categories. But a judiciary drawn more and more from only those categories would not be the sort of judiciary on which we have historically depended to protect the rule of law in this country.'

　　So the Americans have a serious problem. So, too, the British. They also have a policy in which the top end of Senior Civil Service pay should be at least 80 per cent of the private-sector median for broadly comparable jobs, and the ministers are linked to the Senior Civil Service. Their formula is more generous than our formula. But they haven't been able to apply it.

　　The latest report by their independent Salaries Review Body says: 'Since 2002, we've made clear that the government was failing to fund the Senior Civil Service pay system in such a way as to meet its own targets. The government acknowledges that it is proving more difficult to recruit high- quality candidates from the private and wider public sectors.'

　　So you can be a 5,000-year-old country like China, a 1,000-year- old country like Britain, a 250- year-old country like America or a 42-year-old country like Singapore. Human nature takes a long time to change.

　　What do these countries do? They can't raise salaries, so they find other ways around the problem. Short terms in office, and then make up earnings through lectures and connections. Bill Clinton, you heard Ms Josephine Teo say (on Tuesday), makes US$40 million in lecture fees. It's not bad. And US$12 million in book advance - never mind the royalties per book. Somebody said to me: 'But that's all right, that is private sector, good for him. Good for him.'

　　If you are in a job and you are calculating, 'How do I look after myself the day after tomorrow, after my retirement', what does that do to your motivations, your commitment, your sense of responsibility in the public sector, in the job? But if you don't do that, how do you take care of your family? That's the system of the revolving door. Do we want that?

　　There is another approach. You can top up salaries with additional perks. Hong Kong until 1997 was a British colony. So every civil servant had a fully paid holiday for the family to the UK every year, because it's meant for the expatriate Englishmen. But even the Hong Kongers who were recruited into the service got a holiday in Britain. And even the Hong Kongers whose children are Hong Kong Chinese got an allowance for their children to be educated in public schools in the UK. It's part of the terms of service.

　　One Asean minister told me that, as a minister, once a year, she and her family are entitled to one holiday, fully paid, anywhere in the world.

　　Is that system better for us?

　　No hidden perks

　　WE'VE decided to be open, upfront, transparent. What you see is what you get, or in this case, what you see is what they get. No hidden perks. Only pension for office-holders, which is the same as what civil servants receive - and even that's been frozen since 1994. We are going to study how to include the pensions in the benchmark comparison as well as whatever superannuation benefits which the private sector has. This is not so easy because in the private sector you have golden parachutes, golden handcuffs, and all kinds of things which don't show up in the annual pay. I'm not sure if I count them in, whether I'm going to be behind or ahead. But I think we should find out what the status is so we can understand the real comparison and position.

　　Besides this, the salaries are not fixed. One-third of the ministers' package is now variable. After the revision, half is going to be variable. The variable depends on two things: the GDP - how well the economy is performing - and his individual performance.

　　Teo Chee Hean has explained why we have chosen GDP as the umbrella indicator. But because the different ministers have different responsibilities, I also have for each minister a performance bonus. The Prime Minister decides how much the minister will get, how he has performed in his portfolio. I don't want Teo Chee Hean to spend all his time worrying about the bottom 20 per cent (as he might under the Workers' Party formula). But I do want MCYS to worry about the bottom 20 per cent, MOM to worry about jobs, MTI to worry about generating growth, getting investments. All that goes into the performance bonus for each of the ministers.

　　There's a range because not all the ministers have the same responsibilities. And the load will vary from year to year because the challenges and the circumstances change. If there's Sars, if there's a security issue, if there's an economic recession or an education transformation, well, focus goes there. But there is a distribution. Some get more, some get less.

　　We have been stringent in our evaluation. Only two ministers got the highest bracket of eight to 10 months' bonus. More than a third were in the zero to five months' range and the rest were in the middle. And similar numbers for the ministers of state. The parliamentary secretaries are on a more stringent scheme.

　　I should explain that this is not over and above the package or the benchmark. This is part of the benchmark. So the benchmark salary is not guaranteed. It depends on growth, it depends on performance. We also depend on every person giving his best so that, as a team, we can deliver results for Singapore.

　　I think these are strong arguments for why we should do this. But despite these arguments, I know that a lot of people still find the salary policy difficult to accept. There are some reasons for this. The income gap is widening. The economy is doing well but some people and businesses are still facing difficulties. As one grassroots leader told Mr Lim Boon Heng: 'Ministers' pay is going up, but not our pay. Our business has not improved, but the prices of goods and services have also gone up.'

　　These are real problems on the ground which people feel and which colour their perceptions. So some people say they support the salary revision in principle but this is not a good time. I agree. Teo Chee Hean said: 'But we must do it in good times,' meaning early. But I would concede this is not a good time because we've just raised the GST. Not everything has been sorted out in the economy.

　　But, on the other hand, firstly, there's no good time. Secondly, and more importantly, there is urgency. I considered waiting one year. This might have made the package more easy to explain. It might have shown more sensitivity, given that we've just done hard policy with the GST. But this is a problem which is very urgent. It's urgent because it has been seven years since we last adjusted, and since then, the private sector has surged ahead.

　　The government held back after 9/11, it held back after Sars. In fact, it not only held back, it made pay cuts. First, 10 per cent. Then after Sars, another 10 per cent. We restored the pay cuts, but in the last two years, the gap has still widened and the private sector is now roaring ahead.

　　If we look ahead, the whole of Asia is booming. Many Singaporeans are going after opportunities all over Asia and if Singapore does as well as we expect it to, then the opportunities and rewards in the private sector are going to be tremendous. Not just the dollars but the excitement, the thrill, the adrenalin rush of going into new markets, starting new businesses, creating a new presence in first-tier Chinese cities, second-tier Chinese cities, the Middle East, India and Central Asia. If we wait till next year or the year after, the government will lose people. The service will say: 'This is a government which shies away from a politically prickly decision and meanwhile, we will lose ground further.' By the time we move, even a 33 per cent increase might not be enough.

　　We can't afford that. We have to move now. And we have to keep on adjusting as the private sector moves; this is a dynamic situation and we've got to stay abreast of it.

　　So that's why the ministerial statement says we are making one move, April 1, a second step, Jan 1, 2008, and a third step, Jan 1, 2009. If Asia continues to thrive, some of these adjustments are going to be large. But we have to do them. Not a fresh decision, but as a consistent policy, already debated and decided upon.

　　New generation

　　WE ARE preparing for the future against the backdrop of a new globalised Asia, completely transforming itself. And this policy is intended to work not for us but for a new generation of Singaporeans. The test is not whether my present ministers will leave - some MPs, including Ms Sylvia Lim, asked this - but whether we will have good ministers here to face good MPs in this Chamber in 10 or 20 years' time.

　　We must and we will tackle the problems which people feel and which make them sour on this issue - the income gap, middle-aged workers, health-care cost. These are important priorities for me and my team and we've started many programmes to deal with them: Workfare to help lower-income workers; ComCare to help the needy; improvements to Medi-

　　save, MediShield and Medifund to make health care more affordable; and upgrading of HDB flats to enhance the value of your property and improve your quality of life. This applies even to rental flats. It goes all the way throughout our society.

　　We will do more to help those who are in trouble - the poor, the needy, the unemployed. How can we do so most effectively? By building a good team, a good team which will grow the economy, which will conceive the ideas to tackle these and future problems. And by having good people who are in touch with your needs, who will do their best to make your life better and who care for Singapore.

　　This is going to be a controversial and emotive issue for a long time. But I'm convinced that we are doing the right thing. The cost of building the team to serve Singaporeans is tiny compared to what they can deliver and what is at stake.

　　What is the cost of having the wrong team in charge of Singapore? Where would we be now if we hadn't thought of Newater many years ago? How would our children be coping if we didn't have first-class schools in every HDB town and then 40 per cent of every cohort failed the PSLE, which used to be the case when I was in school? What price do we put on safe streets and law enforcers whom the public can trust?

　　Have we made the right decision? I am convinced so, but time will show and Singaporeans will decide. By the next election, we'll present our report card to Singaporeans. Then judge us on our performance, whether this government has delivered on its promises, whether you have better jobs, better lives.

　　Teo Chee Hean on Monday quoted a piece from a Harvard business school professor, Richard Vietor, who wrote a chapter on Singapore Inc. Some of his passages are worth quoting. I'll just read you this: 'Singapore has become a rich country. It has remained secure in South-east Asia amid countries far larger and somewhat less stable than itself. Singapore has done this through a combination of great leadership, effective developmental strategies and strong government institutions. It is difficult to think of another country with a similar set of government institutions that work so well.

　　'Yet Singapore's future remains uncertain. While it continues to grow quickly, the challenges of becoming a knowledge-based economy are immense. Singapore has done it in the past and does serve as an admirable model of what is possible. It remains to be seen if the country can continue in the future.'

　　It is a task for all of us to get the best team to lead Singapore and to prove that Singapore's success can continue well into the future.

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