Hansard, 2000-06-29

Under the provisions of clause 2(d) of Article 46 of the Constitution of the Republic of Singapore, the following Members have been granted permission to be or to remain absent from sittings of Parliament (or any Committee of Parliament to which they have been appointed) for the periods stated: NameFromTo (2000)(2000) Dr Ho Tat Kin27 May29 May 14 Jun19 Jun Mr Kenneth Chen Koon Lap27 May31 May Mr Sin Boon Ann27 May9 Jun Mr Zulkifli Baharudin29 May31 May Mr Chew Heng Ching31 May2 Jun 12 Jun17 Jun NameFromTo (2000)(2000) Mr Tan Soo Khoon1 Jun4 Jun 13 Jun14 Jun Dr Lily Neo1 Jun4 Jun Mr Ong Kian Min1 Jun10 Jun 16 Jun21 Jun Dr S Vasoo1 Jun15 Jun Mr Tang Guan Seng2 Jun10 Jun 19 Jun25 Jun 3 Jul8 Jul Mr Simon S C Tay3 Jun9 Jun 14 Jun22 Jun Mrs Yu-Foo Yee Shoon3 Jun16 Jun Prof S Jayakumar3 Jun17 Jun BG George Yong-Boon Yeo4 Jun8 Jun 11 Jun22 Jun Mr Zainul Abidin Rasheed4 Jun10 Jun Mr Goh Chok Tong4 Jun17 Jun Dr Lee Boon Yang5 Jun10 Jun Mr Chiam See Tong5 Jun19 Jun Mr Ibrahim Bin Othman6 Jun19 Jun Dr Ker Sin Tze6 Jun20 Jun Dr Tony Tan Keng Yam7 Jun21 Jun 2 Jul3 Jul Mr Wong Kan Seng8 Jun9 Jun 24 Jun9 Jul Mr Ahmad Md Magad8 Jun11 Jun 17 Jun28 Jun 28 Aug9 Sep Mr R Sinnakaruppan8 Jun12 Jun 30 Jun30 Jun Dr Teo Ho Pin8 Jun12 Jun 19 Jun22 Jun Dr Michael Lim Chun Leng8 Jun16 Jun Mr Chan Soo Sen8 Jun17 Jun Mr Mohamed Maidin9 Jun16 Jun Mr Peh Chin Hua11 Jun18 Jun 26 Jun1 Jul 4 Jul20 Jul Mr David T E Lim12 Jun14 Jun 16 Jun20 Jun 23 Jun25 Jun 27 Jun29 Jun Mrs Lim Hwee Hua12 Jun15 Jun 11 Jul20 Jul Mr Lim Boon Heng12 Jun15 Jun 18 Jun27 Jun NameFromTo (2000)(2000) Mr Goh Chee Wee12 Jun17 Jun Mr Leong Horn Kee12 Jun28 Jun 28 Jun29 Jun 3 Jul3 Jul Assoc Prof Koo Tsai Kee14 Jun17 Jun 29 Jun2 Jul 6 Jul6 Jul Mr Yeo Guat Kwang15 Jun16 Jun 1 Jul6 Jul Mr Heng Chiang Meng16 Jun17 Jun 30 Jun2 Jul 15 Jul27 Jul Encik Sidek Saniff16 Jun19 Jun 1 Jul2 Aug Assoc Prof Ho Peng Kee19 Jun21 Jun Assoc Prof Toh See Kiat19 Jun22 Jun Encik Yatiman Yusof19 Jun23 Jun Mr Seng Han Thong20 Jun21 Jun 7 Jul9 Jul Mr Harun A Ghani20 Jun23 Jun Mr Othman Haron Eusofe21 Jun25 Jun Mr Ong Ah Heng22 Jun26 Jun Dr Wang Kai Yuen25 Jun1 Jul Mr Goh Choon Kang25 Jun1 Jul Mr Goh Chong Chia25 Jun4 Jul Mr Charles Chong27 Jun28 Jun Mr J B Jeyaretnam 29 Jun29 Jun Mr Chng Hee Kok29 Jun30 Jun Mr Gerard Ee 30 Jun30 Jun Mr Peter Chen30 Jun2 Jul Mr Mah Bow Tan30 Jun14 Jul Mr Tay Beng Chuan30 Jun15 Jul Dr Ow Chin Hock1 Jul2 Jul Mr Lim Swee Say2 Jul8 Jul Assoc Prof Chin Tet Yung 3 Jul3 Jul Mr Lew Syn Pau10 Jul14 Jul TAN SOO KHOON Speaker Parliament of Singapore

The following Bills were assented to by the President of the Republic of Singapore on the date stated: 5 June 2000 (i) Political Donations Bill; and (ii) Housing and Development (Amendment) Bill. TAN SOO KHOON Speaker Parliament of Singapore

The following Question Nos. 1 and 2 stood in the name of Mr Yeo Guat Kwang - 1. To ask the Minister for Trade and Industry how his Ministry interprets the 1999 Labour Force Survey which showed an increasing trend in income disparity; and what plans the Government has to help the unskilled, lower-income workers to improve their job prospect. 2. To ask the Minister for Trade and Industry how his Ministry interprets the 1999 Labour Force Survey which showed a rise in income inequality; and what social safety nets are available to help the lowest-income households avoid hardship.

asked the Minister for Trade and Industry whether any further constructive steps have been taken by the Government to render assistance to the bottom 10% of the population whose household income had plummeted.

asked the Minister for Trade and Industry whether his Ministry will quickly identify the bottom 10% of our population with an average monthly household income of only $133.00 and encourage them to take up the many better-paid unskilled jobs that our small and medium enterprises are desperately trying to fill up to meet the demand in the service, retail and manufacturing sectors.

asked the Minister for Trade and Industry whether single-parent families and other family structures not within our "traditional" definition form a disproportionate number of the households in the lowest-income group and, if so, whether the Government will review its policies to help these families bridge the income divide.

Question No. 1, Sir.

Mr Speaker, Sir, may I have your permission to take Question Nos. 1 to 5 together, please?

Yes.

The Government has always been committed to helping low income families improve their economic prospects and living standard. First, we ensure that their basic needs are met through affordable housing and healthcare. Second, we help equip them with the means to support themselves by providing heavily subsidised education and skills training. Third, we help create ample job opportunities by building a strong and competitive economy. This approach has worked well for us. Over the years, low income families in Singapore have seen their incomes and living standard rise steadily, in real terms. Among households in the bottom 20%, 95% own colour TV sets, 90% own telephones, and 77% own washing machines. These ownership rates are better than even the national average of all households in many developing countries. Our achievement in home ownership is also good. While many of the poor in other countries are homeless, the lowest 20% of households in Singapore are well-housed. 75% of them own their own homes. We have achieved this without creating dependence or weakening the family, and in a way which gives opportunity and hope for the children of low income families to do better. All segments of our society are thus able to benefit from our economic prosperity, and this is part of the reason for Singapore's political stability. Given the progress we have made, many people were surprised and disturbed by newspaper headlines claiming that the lowest 10% of our households lived on only $133 a month. In fact, the headlines were misleading and inaccurate. The Department of Statistics had reported that, in 1999, the average income from work of the bottom 10% of households was $133 per month. This was the statistical average. 75% of these households had members who did not work at all and therefore reported zero income. This pulled down the average income for this group of households to $133 per month. This statistical average of $133 per month in 1999 was sharply lower than the average of $258 per month in 1998. The main reason was that the proportion of households in the bottom 10% with no working persons went up from 62% in 1998 to 75% in 1999. Put it another way, the proportion of households with persons working fell sharply from more than one-third (38%) to one-quarter. This was partly because unemployment increased during the regional economic crisis, and also because the number of retiree households had grown. (The proportion of retiree households in the bottom 10% has risen from 27% in 1997 to 32% in 1998 and 35% in 1999*.) [*The increase in retiree households can be attributed to (a) the ageing population, and (b) older workers choosing to retire due to the poor job opportunities during the economic crisis.] Dr Jennifer Lee asked whether there is a disproportionate number of the households in the lowest-income group which are single-parent families. Single parent families constituted only 4.2% of households in the bottom 10% in 1999*. [*Definied as households with heads who are: (a) single, widowed, divorced/separated; and (b) with children below 16 years of age. The percentage of single parent households in the bottom 10%, although low, is higher than the national average of 1.8%.] This was in fact a slight reduction from the 4.5% in 1998. To cushion the impact of the crisis on the lower income families, the Government had provided rebates in HDB rental, utilities and service and conservancy charges as part of the cost cutting package. This assistance amounted to about $46 per month for households in HDB 1- and 2-room flats, and $36 per month for those in HDB 3-room flats. Mr Tay Beng Chuan has suggested that we help the bottom 10% take up the many better-paid unskilled jobs that our small and medium enterprises (SMEs) are trying to fill. The Ministry of Manpower (MOM) provides employment assistance, at no charge, to unemployed Singaporeans who have difficulties finding a job, including those in the bottom 10%. It actively sources for job vacancies, and organises job fairs and outplacement events in partnership with employers, unions, and the Community Development Councils. SMEs seeking workers are encouraged to register their job offers with MOM and participate in its recruitment events. As the economy recovers and the job market improves, more people in the bottom 10% would be able to find employment and the income growth of working households should resume. For the bottom 10% of households, their median CPF savings amounted to $20,000 in 1999. Among them, only 25% live in 1- or 2- room HDB flats. 39% live in HDB 3-room flats, 24% in 4-room or larger flats and 11% in private properties. Nearly all of these are owner-occupied. In other words, many in the bottom 10% have significant wealth, in the form of CPF savings and their homes. They are not an underclass. I have taken some time to put the Department of Statistics' figures in context, as it is important that we get a right picture of the bottom 10% income households before we discuss how best to help them. There are poor Singaporeans in our midst but the situation is not at all as bad as the headlines portrayed. To help the less well-off, the Government has put in place a range of assistance programmes. The Ministry of Community Development and Sports (MCDS) has various schemes that target the most disadvantaged in our society. The Public Assistance (PA) Scheme provides long term financial help. PA recipients also receive free medical services and assistance in-kind. The Interim Financial Assistance Scheme caters to those in need of shorter term help, while families in rental flats can seek relief from the Rental and Utilities Assistance Scheme (RUAS). There are also child care and student care fee assistance schemes for low-income families. The Community Development Councils (CDCs) further complement these schemes with other assistance tailored for their needy residents. For the children of low income families, the Ministry of Education (MOE) renders help for their education. MOE's Financial Assistance Scheme (FAS) provides needy pupils from families receiving social assistance from MCDS a 50% waiver of miscellaneous fees, full waiver of school fees and a textbook grant or an annual bursary. Schools can augment the assistance through the School Advisory Committee or School Management Committee Fund. Children from low-income families who perform well are also awarded Edusave Merit Bursaries. Many charitable foundations and grassroots organisations provide supplementary support. In the area of healthcare, the Ministry of Health (MOH) ensures that healthcare remains affordable and accessible to all, including the poor. Class C wards are subsidised 80%. Patients facing difficulty in paying their healthcare bills are assisted by the Medifund scheme. In addition, the Government also funds 90% of the capital expenditure and 50% of the recurrent expenditure of approved projects by social service agencies. This enables community organisations to provide a support system, such as counselling services or simple financial budgeting guidance, for families in need which go beyond just dollars and cents. Together with the National Council of Social Service, MCDS is also encouraging more corporations to sponsor assistance programmes for the less fortunate. This `many helping hands' approach enables us to create a strong basic social safety net for the poor. Looking ahead, the bigger concern to us is the widening income gap between the bottom and top earners. The average income ratio of the top 20% to the bottom 20% households has increased from 13.6 times in 1997 to 17.9 times in 1999. This was partly because the impact of the recent recession was much harder on the lower income households than on the higher income households. However, it is also likely to indicate a longer-term structural trend. With globalisation, there is now a global market for labour. At the top, scarce talents command high international wages while, at the bottom, the wages earned by those who are unskilled come under increasing downward pressure from the hundreds of millions in the Third World joining the global market who are prepared to work for a pittance. This is a worldwide trend which our system of foreign worker levies ameliorate only to a point. In the US, the ratio of average income of the top 20% to bottom 20% increased from 12.2 in 1988 to 13.7 in 1998. According to a recent report in the International Herald Tribune, the income gap in the US is now at its widest since data was collected in 1977*, [*Study by the Center on Budget and Policy Priorities was based on after-tax income figures from the Congressional Budget Office. Source: IHT, 6 September 1999.] with the ratio of top executives' to factory workers' pay increased 10-fold from 42 times in 1980, to 419 times in 1998*. [*By the Institute for Policy Studies and United for a Fair Economy. Source: IHT, 6 September 1999.] Even in Japan, which has long been regarded as one of the world's most egalitarian industrialized nations, the gap between the rich and poor is widening*. [*Source: IHT, 5 January 2000.] We can expect the same to happen in Singapore. What should be our response? First, we must make sure that the incomes of those at the bottom continue to rise. We can only achieve this if our economy continues to grow healthily. For the majority of low-income Singaporeans, especially older and less educated workers, skills upgrading is the key to enhancing employability and income. The Ministry of Manpower has therefore worked with employers and unions to launch the Skills Redevelopment Programme (SRP). Under the SRP, generous grants covering up to 100% of course fees and 85% of absentee payroll are provided for the training of less educated workers aged 40 years and above. The target is to upgrade the skills of some 100,000 workers through this programme by the year 2003. In addition, the Ministry of Manpower is working with other Government economic agencies and employers to professionalise jobs in domestic-based industries with low productivity such as cleaning, construction and retail. The aim is to upgrade these jobs to achieve higher skill content, and facilitate the training or retraining of workers in these industries. With improved productivity, these industries can then provide more viable job opportunities for local workers, including those displaced as a result of economic restructuring. To support the various manpower development initiatives, the Government has set aside $200 million for the Manpower Development Assistance Scheme to co-fund the projects with industries. Second, we must continue to ensure that lower income families have the means and opportunities to move up the economic and social ladder. That is to say, we must have as little friction as possible to social mobility and progression. Here, our education system plays a crucial role. We must give every child the best education possible and prepare him for the needs of the New Economy. This is why we have always given the highest emphasis to education. For every cohort, we are targeting 25% to have a university education, 40% to have a polytechnic education and another 25% to have an ITE education. We make sure that the children of poor families are not disadvantaged. MOE, MCDS and the CDCs help them financially so that no child is prevented from being educated to the limit of his potential because his parents are poor, sick or unemployed. As Prime Minister Goh Chok Tong has pointed out, our basic approach is to level up. The more economic growth we have, the more we will be able to level upwards. The key is a healthy Singapore economy that is globally competitive. Our social safety net sets a good minimum standard of living for the least well-off Singaporeans. This undergirds our sense of community solidarity. Beyond that, we must always give hope to those at the bottom that even if they themselves cannot do better, their children will be able to. At all times, our system must incentivise effort, family support and self-help.

May I ask the Minister whether there will be newer incentives, apart from those mentioned earlier, to facilitate low-paid and low-skilled workers to go for further training so that they can earn more wages?

These are on-going programmes. We have allocated funds for them. As and when new needs come up, we will look at how these new needs can be met, and if we have to allocate more funds for such undertakings, we will do so.

I would like to ask the Minister to review other aspects of this issue which affects the ability of lower income Singaporeans to improve their financial situation. May I ask that he looks into the various Government policies which, though well-conceived and implemented with good intent, have the unintended effect of disadvantaging the lower income groups' ability to improve themselves. For example, would the Minister review the policy of prohibiting the sale of cooked food prepared in homes? Would the Minister consider reinstating the past policy of allocating hawker stalls and school tuckshop stalls to deserving applicants instead of tendering them to the highest bidders? Sir, these are some of the traditional ways in which the poor could improve their financial situation but today they are no longer available because of Government policies. Would the Minister also review HDB's policy of not permitting second-time direct purchases from HDB if the second unit is of a lower category from the first even though both purchases could be within HDB's general policy of two direct purchases from HDB? Surely, the removal ---

Order. Mr Heng, are you making a speech?

No, Sir, I am asking questions. I am asking: whether the Minister could do this or do that. These are all questions.

I know that. But you are also punctuating your questions with sentences.

I agree. I will remove the sentences.

All right.

Sir, I would like to ask the Minister whether he could establish an Inter-Ministry Committee to review and amend, if needed, such policies, taking into consideration the effect on the poor and the diminishing number of opportunities for them to upgrade themselves. I would also like to ask the Minister that if he does so, whether feedback from the public would be solicited.

Sir, I thank Mr Heng for his helpful suggestions. Some of the issues are not new issues, like whether we should allow cooked food to be prepared in HDB households. There are, of course, conflicting objectives because there are externalities involved. The smoke may cause annoyance to neighbours and we should strike a proper balance between allowing for flexibility of resource allocation and not causing inconveniences or negative externalities to people around. But these are issues which Ministries should review from time to time so that we are not trapped in old positions, especially with the new challenges posed by changes in the world. His particular suggestions will be forwarded to the various Ministries for their consideration.

May I ask the Minister whether the widening of income gap in Singapore is definitely getting worse and whether this will jeopardize social cohesion, social stability and other related issues here?

The most common index used by countries to measure inequality of income is the gini coefficient and the higher it is, the greater the inequality. For many years, before the economic crisis, our gini coefficient has improved and then flattened out. During the crisis year of 1998, it went up. So we asked ourselves whether this was just the result of the economic crisis which hit those at the bottom disproportionately or whether it represented a trend break. We have been studying the gini coefficient in advanced countries in the US, the OECD and so on, and we have noted that in these countries, the gini coefficient has tended to worsen. So we ask ourselves: what is the likely tendency in the future? I think we have worsened because of globalisation. The top in our social ladder would command international wages, particularly in growth sectors where talents are scarce. Many of our hotshot dot.com types now command fabulous salaries or incomes because of the recent boom. Of course, the bubble has punctured the boom somewhat but, still, relative to many other sectors, they have done very well. Then there are those who are unskilled and, increasingly, they are competing with the unskilled in China, Vietnam, Indonesia and India. With the end of the Cold War, these countries are opening up and hundreds of millions of people are entering the workplace. In the past, when they lived in remote villages, they could not compete in the global market. Now, with better communication, transportation, Internet and e-commerce, more and more of them are entering the global market and this has a depressing effect on the wages which unskilled labour in Singapore can command. Of course, in the services sector, they tend to be protected. But even in the services sector, with the globalisation trends, more and more segments in the services sector are being opened up to global competitive pressure and it is in our own interest to open up the services sector to international competition because it lowers the cost of doing business in Singapore and helps make the tradable sector more competitive. Will the worsening of the gini coefficient continue forever? I think in the end, it will find its own equilibrium. When a new frontier is opened, there are the robber barons, there are those who have struck gold, and there are those who are left penurious, so the coefficient tends to widen. But after a while, stability will resume. Those who are at the bottom will catch up, those who are at the top will find that temporary scarcity is met by growing supply, and so the trend may reverse itself years down the road. But when that will take place, we do not know because the economic changes taking the world today are truly revolutionary.

The Minister mentioned the Government's target to upgrade 100,000 less-educated workers by 2003. I would like to know from the Minister what are the targets of this group of workers specifically and what concrete steps the Government has taken so far to achieve these targets. Also, is the Minister aware of the problems of these low-educated, low-paid workers, many of whom are trapped in low-paid professions? And will the Government consider providing a living allowance to these workers who are prepared to go for training? The other question is: in view of the widening income gap, will the Government review the benchmark for affordability in terms of HDB flats and healthcare services?

The Skills Redevelopment Programme covers a wide range of retraining courses. It is true that among the older workers, some find it hard even to get themselves retrained in these courses. But we have had some very good successes of workers going for retraining and finding good jobs in growth sectors of the economy. Take, for instance, our disk-drive industry which has shed thousands of workers in the last two years. Many of these workers had since been redeployed to other industry sectors. Many of them are still in the electronics sector where we enjoy rapid growth in the components, in the computer, and the communication segments. We do provide salary assistance through Government subsidy of absentee payroll. As to whether we should, from time to time, review what constitutes a minimum safety net in Singapore, I think we should, because this is what it means to be part of a community, that those at the bottom enjoy a minimum standard which is commensurate with the average living standard in our society as a whole so that the inequalities are not so gross as to cause social discord and disruption. If we look at the bottom 10% in Singapore and compare them to the bottom 10% in any other major city in the world, whether it is London, New York, Berlin, Tokyo or Hong Kong, I do not think we have done too badly. We should not measure a city by how its top 10% live. Because they can live very well; in Hong Kong, they drive Rolls Royces, in New York, it is a lifestyle which many of us can only imagine or fantasize about. But judge a city by how it looks after those at the bottom, its most downtrodden. And if we look around, I think we can be proud of what we have achieved in Singapore.

Sir, I do not think the Minister has answered my questions. There are basically two focus points. One, what is the specific target and how the Government intends to achieve the target of upgrading 100,000 workers by 2003 who are low-paid and less-educated. The second question I asked was whether the Government will review the benchmark for affordability in terms of healthcare and HDB flats.

Mr Speaker, Sir, I have answered both questions. If Mr Low wants more details, and he tables another Question, I will get the details and provide them to him. Under the Skills Redevelopment Programme, we have a whole range of courses for the retraining of workers to fit them into growth sectors in the economy. As to his second question whether we will re-assess what constitutes affordability levels, this is done on a continuing basis because it is always relative to the overall standards in our community.

Sir, I am still surprised to learn that in Singapore, people are still earning only $133 per month. I believe this is due to an educational problem. There are many workers in the workforce who are unable to read or write.

Mr Chiam, can you ask your question?

I am asking the Government whether it is willing to tackle the problem at its source, ie, to amend or change our education programme because it is too inflexible at the moment and those slow learners will always be left behind and probably will be unable to cope and may give up altogether. They end up by not being even able to read or write and how are we going to train these workers if they cannot even have the basic literacy and numeracy skills? So I am asking the Government whether it wants to tackle the problem at its source by changing the education system to make it more flexible to cater for the slow learners.

Sir, I thank Mr Chiam for his comments. He is right that the root problem is education. If we look at Singaporeans above the age of 40, less than one in two have more than six years of education. When the PAP Government came into power, we introduced mass education and the result has been a sharply increased educational profile of the population. Our educational profile of those above the age of 40 is basically a third-world educational profile and many of them will continue to be with us for a long time to come. We have got to find ways and means to help them, retrain them, upgrade their skills, and so on. Among those who are younger, aged 35 and below, our educational profile is first-class and many of the good things which Mr Chiam talked about are precisely the elements which are built into our educational system of providing for slow learners, or going faster for fast learners, and so on. If you go to our universities, polytechnics and even our ITEs today, the level of equipment, the facilities which are available to students are something unimaginable 10-20 years ago, and this attests to the emphasis this Government has put on education. The younger ones, we can solve. Those who are coming up, we make sure that from kindergarten onwards, they learn computers. They play games at first, Internet access, by primary five do web pages. They are off. But those who are already in the system who were educated during colonial days and the early years of independence, we should try our best to help them and in the past we had, and we still have, programmes like BEST and WISE, but there is only so much we can do because for many skills, if you do not acquire them when you are young when their minds are plastic and malleable, it is very difficult to acquire them when you are older. I have met workers who have gone through BEST and WISE and watched them struggle with square roots and so on. It is tough. They should try, and the skills should as far as possible be practice-oriented, but that historical legacy will remain with us for many more years to come and we have got to take that into account in all our programmes and policies.

Other than training and education for this group of people who find difficulty in training, would the Minister consider playing a more direct role in getting these Singaporeans obtain jobs in the region where such jobs are more easily available? You cannot train them, you cannot increase their level of education, can you perhaps help them to get jobs elsewhere outside Singapore?

Sir, I would not say that they cannot be trained or upgraded. They can be trained and upgraded, but what we can achieve will not be the same as what we can achieve with the young lads or lasses, and teenagers. As to whether we should send our unskilled workers to neighbouring countries to work, I do not think that is right. They enjoy a much higher standard of living in Singapore than what they can ever hope to enjoy, say, in other parts of South East Asia or even beyond. We try to protect the wage levels in Singapore through the workers' levy. Imagine if we had no work permit system in Singapore and no workers' levy, then millions will want to come to Singapore and wages at the bottom will be greatly depressed. This will cause not only social problems but it will also lead to a Singaporean underclass which would be a political problem. So we try to strike a balance between protecting those at the bottom and not allowing this protection to be such a weight on the overall competitiveness of our economy. It is a balance that we have to strike well. As to the Member's proposal to send our unskilled workers overseas, I think many of us would be against that.

Sir, if I understand the Minister correctly, the statistical $133 figure is caused by a high percentage of jobless people. Would the Minister be able to tell us if we minus off the jobless people, what is the true figure for the bottom? In that sense, has the actual figure itself gotten worse? Second, I would like to ask the Minister, if joblessness is the problem, are there ways to relook at policies to keep jobs in Singapore? By this, what I mean is that instead of searching only for higher value high technology investments in Singapore, should we look for reasonable wage companies and industries that will keep the bulk of jobs in Singapore?

Mr Speaker, Sir, on the first question, in 1999, 75% of the bottom 10% of households did not have a working member. Among the households that had at least one income earner, the average household income was $530 per month. Mr Tay also asked a broader question about our economic strategy, ie, whether we should not deliberately nurture an industry sector to cater to these people. Let us say that we create such a sector. Can we ever bring our costs low enough, say, in disk drives, to compete with Malaysia, the Philippines or China? I think that is an impossible game and a fool's game, because in these countries, there are many more willing to work at even lower wages. So this will result in our economy being constantly pulled down. Our strategy is to move upstream. When we have R&D centres, wafer fabs, pharmaceutical companies and petrochemical works in Singapore, there are people at the top who earn high salaries because their skills are very scarce in the world. But for each of these individuals that we have in our midst, they bring work and opportunities to many other people who service them, who maintain the plants, who do the landscaping, who provide the food, who provide the transportation and personal services. So it is far better for us to move upstream, which is higher value added and for which we have a competitive advantage and use these high points to raise the general level of the tent. This is a paradox in economics that, sometimes to have greater growth, we must accept a widening of inequality, because without that higher point for the tent, it is more difficult to raise the whole skirt. From the viewpoint of our economic strategy, we are targeting high value added industries for which we have a clear competitive advantage and rely upon these centres of growth to bring employment and advantage to ordinary Singaporeans. Madam Claire Chiang See Ngoh (Nominated Member): Sir, will the Minister consider setting up a crisis credit facility to help the 10% through these difficult times and allow them to pay back on very low interest terms?

Sir, there are many ways that we can use to redistribute income to those who are less well off. The most important thing is to have welfare without welfarism and to achieve redistribution without it somehow disincentivising effort or self-help. If there are projects which are low risk to justify the low interest rates, I think the market will attend to them. As far as the Government is concerned, we provide direct assistance through affordable HDB mortgages, through subsidies on service and conservancy charges, through MediFund, through subsidy of C class wards and polyclinics, through education facilities which are completely affordable all the way up to ITE and junior college. There are many ways to cause a redistribution. We should choose the ways which encourage effort, which increases the productive capacity and capability of those at the bottom. And we should be careful not to devise ways which lead to dependency and to moral hazard.

Sir, there are some groups of people who have great difficulty in accessing the skills retraining programmes, eg, working parents who are struggling to earn a living and, at the same time, look for childcare arrangements. Are there any programmes or service assistance that would be available for this grouping so that they could in fact take advantage of skills retraining?

Sir, there are many programmes which are available. If Dr Jennifer Lee knows of specific cases, they can be referred to either MOE, MCDS or to a CDC. All these agencies are aware of the whole array of schemes which are available and which would best meet the needs of particular families. The fact is that if you look around, yes, there are poor people around us but are their children not going to school? Are they not being treated for illnesses because of a lack of financial resources? And the reason why the outcome is not there is because these schemes are available and they are available in different places. If there are individuals who do not know how to access them, these cases can be referred to their MPs, CDCs or to the Ministries involved.

Sir, I wish to supplement what my fellow NMPs said. As a matter of fact, I wish to state that there are sufficient unskilled workers available in Singapore. There are many sectors of industries like servicing, manufacturing, etc, which are in urgent need of unskilled workers. We have this 10% ---

Mr Tay, can you ask your question?

Sir, will the Government conduct a special recruitment programme in conjunction with the employers' group to persuade this 10% low-income group to work for these unskilled industries? However, if these people are unwilling to do unskilled work, then would the Government reconsider the rigid rules which apply to foreign labour, so that our SMEs will be able to meet their immediate demands and take care of their requirements?

Sir, I thank Mr Tay for raising this point. It is an important point because the feedback from industries is that the labour market is tightening very rapidly with the end of the economic recession. We have, on the one hand, a group of unemployed who cannot seem to find employment and, on the other hand, a great demand for workers including unskilled workers. Part of the reason is because some of those who are unemployed are deterred by having to work third shifts or having to travel further to work. And the fact that they are able to express these preferences is because one way or another, they are able to make do with contributions from family members or from their own savings. If the hardship were very acute, then even third shift work or even work in Tuas would be snapped up. Mr Tay's other question is one which concerns us more in Singapore. It is the rapidly tightening labour market and how we should adjust our manpower policies in order to feed the growth that is in our economy. I do not think that working the old method is the right way to go, particularly for SMEs. Because of the Internet and e-commerce, middlemen are being weeded out in many industry sectors. So those who require foreign workers to do work the old way may find that a difficult approach to take. Some restructuring is required but, at the same time, we recognise that in the SME sector there is a need for a greater allocation of foreign workers and we review these allocations all the time, and feedback from SMEs, from Mr Tay Beng Chuan and from the various business chambers and associations will be very helpful to the Government Ministries involved.

Sir, I would like to ask the Minister whether we can examine the extent of the problems in future, particularly the problems affecting the older workers who are unskilled and uneducated. With the relocation of the labour intensive industries, is the problem likely to be aggravated? What concrete steps will the Ministry be taking besides retraining to assist these older workers? At the same time, I would like to find out whether there is a mismatch between the manpower that is available, the older workers, and the jobs that are out in the market. If this is the case, could we take a better integrated approach in trying to follow through these workers who are unable to be deployed for employment?

Sir, there is a limit to what we can do to bring down the unemployment rate without causing economic inefficiency to the system as a whole. I believe we are now below 3% again. If not yet, then we are likely to be quite quickly. If we try too hard to lower the natural unemployment rate further, we may end up causing unnecessary inefficiency to other parts of the economy. The Department of Statistics will study the problem in greater detail and if there are practical solutions that we can take, we will. But I do not think we should distort the entire economy just to bring that number down. It was a major problem in 1998, and maybe early 1999. It is no longer a major problem now.

Sir, with the relocation of labour intensive industries, will the problem be likely to be aggravated? If that is the case, are there any proactive steps that we are taking?

Sir, Dr Vasoo raised a point which is very valid, a point which concerns not only MTI but also the other Ministries greatly, ie, given the new trends, the knowledge economy and the fact that at least for some years to come salary ranges will stretch out, and those who are unskilled will find it more and more difficult to find good work in Singapore, how should we best accommodate them without reducing them to subsidy cases in the housing estates. The issue is being reviewed by all Ministries to see how we can bring work closer to them so that they can spend part of their time looking after their grandchildren, part of their time attending to their own household affairs and, maybe when they are free, doing some part-time work. In the old days, we used to separate out industrial estates from housing areas because they were polluting, they needed space and heavy equipment was involved. But in the new economy, there will be many industries which do not require this generous allocation of spaces, and which can be brought closer to housing estates and therefore within easier commuting distances. We are now looking at master planning in Singapore to see how we can better bring work into the housing estates, so that part-time and irregular time work can be more readily available to those who would otherwise be structurally unemployed.

Sir, can I ask the Minister what steps are being taken to promote social consciousness among the talents and top earners that they have a responsibility towards the massive majority who may not have the talents or the abilities they possess but they were able to exercise those talents and abilities to earn top salaries and incomes, because the majority provides the social opportunities, and part of that social consciousness is to give back to society? And also for employers, when they offer jobs to people, they should take into account not just the market factors of the lowest possible and not to benchmark them with foreign workers but also take the human perspective and offer them jobs which they can have a living wage. Many people may have turned down jobs because their salaries are so low and they do not just cover ---

Order. Mr Thomas, are you making a speech?

No. I am just explaining.

Can you proceed to your question?

I am just asking whether the Government will promote a living wage as well.

Sir, Mr Thomas has touched on a problem which is very fundamental and which concerns the Government a great deal. When I was in Davos at the WEF Meeting in January this year, they had one session called "The Age of Disloyalty", that with globalisation and with international talents becoming mobile, are we all linked only by money and nothing else? Is there such a thing called "patriotism" or "loyalty" left to corporations, tribes or charities? Because we are a cosmopolitan city and our young are all educated in English, they are internationally mobile. While we tell ourselves that we should be in the game, bring foreign talents to Singapore, we are also in danger of losing our own talents to other countries and even when they are in Singapore, are they loyal to Singapore? This is the question which concerns us a lot because, in a crisis, whether or not we have this sense of solidarity makes a difference between success and failure, between life and death, between victory and defeat. So national service will remain important. Our willingness to look after those who are weak, subnormal or crippled in our midst is very important. This is one reason why the Government has been very careful to avoid subsidising charities or self-help organisations completely without requiring these organisations to also raise their own money. The widow's mite is very important. Without that fund raising effort, there will be no ownership of schools, hospitals or community organisations. Many of us complain that we are constantly being roped in for fund raising, but all the effort in fund raising is actually a process of social bonding. We help to build that community centre or that church or that mosque, and that creates a sense of ownership and of rootedness in Singapore. National service requires all Singaporeans, whether those who are at the top or at the bottom, to feel collectively that when it comes to a crisis, we must all work together for the common survival of the state. But this is not a question which can be easily answered by the Government. The Government can do its part. All of us have to do our part as parents, as teachers, as community leaders, that while we adjust to market developments, we do not forget that in the end what holds the community together is not just money, but a sense of solidarity and a sense of common destiny. That we must always have in Singapore. We can have foreigners to help us, we can have foreign talents coming in to supplement various positions, but at the core, we must have a group of people who feel completely Singaporean.

I would like to seek a point of clarification with the Minister. Why does the Minister see the setting up of a credit on-line as a strategy on distribution or welfarism? Because we are not giving to the people, we are lending them money although on extraordinary low interest terms, does he not see that this is also a strategy of growth because we are allowing the 10% to have a sum of money upon which they can start a new venture?

Sir, it is not my intention to reject offhand Mdm Claire Chiang's proposal. What I was saying is that there is an interest subsidy involved and whether an income subsidy should be provided through reduced interest rate is something that we have to look at very carefully to ensure that there is no moral hazard associated with it. I am not saying that it should not be done. What I am saying is that it is not an idea which can be implemented without very careful thinking of the consequences following downstream. Many of the lower income families will not be able to pay back their loans, in which case they may have to be declared bankrupts. Do we want that to happen? Is that a good idea?

Sir, the Minister earlier did not answer my question on the effect of social cohesion and social stability should the gini coefficient gets worse. May I also ask the Minister whether more incentives could be given to employers to ameliorate their bias on hiring older workers, for example, giving more tax rebates to such employers?

Mr Speaker, Sir, I did spend some time talking about why it is important to provide a sufficient social safety net at the bottom to maintain community solidarity and social cohesion in a society. As to whether we should subsidise employers to take on older workers, again we have got to ask ourselves whether this is the best way of achieving our objective. It may create distortion and game playing and may be quite difficult to police because some of the older employees should be employed in their own rights. But since there is such a scheme available, they too will apply for subsidies. While we should agree on our objective that we should help those who are at the bottom, we should be very careful about the way in which we achieve that objective because it can create side effects and lead to other problems.

Can the Minister tell us whether the Skills Redevelopment Programme and other skills training programmes are focused enough to tackle the problems of the bottom 10% unskilled and less educated workers?

The various economic agencies monitor very closely the trends in the labour market, which companies are retrenching, which companies are growing and need workers and we try to achieve the best match between those who are sheding workers and those industries which need workers. The SRP programme offers courses to create as good a match as we can achieve.

Sir, I am talking about the bottom 10% of the workers. Are the programmes actually focused enough?

It includes the bottom 10% who can be retrained. But as I said earlier, it is sometimes not as easy as it sounds because to go back to school to be retrained requires a certain discipline and a certain willingness to relearn. It is not always easy. For some workers, especially the younger workers, it is not a problem. For others, it is a problem.

The Minister has spoken of targeting particular assistance to those without jobs right at the bottom. I tend to agree with that. May I ask the Minister how targetted are we right now? Can I assume that each of the jobless in the lowest bottom 10% actually has an individual file with the Ministry or are they actually relatively faceless people? The second and broader question is that I take the Minister's explanation of globalisation and our current policies of many-helping-hands, etc, to basically say nothing needs to be done at present. What is the trigger point of either the bottom 10% or the gini coefficient that will make this Government move?

Sir, I do not think it is wise for us to open a file on every Singaporean who is unemployed in Singapore. If he needs help, it is for him to ask for help and a file would be opened. But for us to open a file in advance of his asking for help will lead to all kinds of unnecessary problems and it is bad public policy. Mr Tay is wrong to say that our position is that nothing needs to be done. The whole point of my answer earlier was that a lot of things are already being done and our policies are constantly being reviewed to make sure that the problems are attended to.

Further to my earlier question, Sir, I would like to ask the Minister this question. We do have SMEs that need unskilled workers and unskilled jobs are available. If this lower income group of people does not like to take up these jobs and yet, on the other hand, our tight rigid labour policies do not allow us to employ more foreign unskilled workers, can the Minister advise us what we should do?

Sir, Mr Tay has raised a question for which there is no easy answer. Ideally, of course, we should just open the doors and bring in the foreign workers and all SMEs will be happy. But if we bring in foreign workers in unlimited numbers, then the wages of Singaporeans at the bottom will be very depressed. That may be good for those who are high income earners because then they can get many services on the cheap. But is it good for Singapore? We already have, out of a population of four million, one million who are non-citizens. How many more can we accommodate in our midst who are not one of us? So there has got to be a limit. And within this limit, we have got to ask ourselves how we should allocate the numbers between those who work in the high-tech, financial, pharmaceutical, petrochemical and wafer fab sectors and those who work in coffee shops and restaurants. MTI's policy has always been that where we can upgrade we must try to upgrade, mechanise, automate, sub-contract. In the knowledge economy, more and more middlemen would be bypassed. Should we slow down this process or should we accelerate it? If we do not facilitate this transformation, the difficulties would be more difficult for us further downstream. It is better that we go with the flow. Today, we can order groceries on the Internet and it would be delivered to you the following day, eggs, vegetables, meat, whatever. It comes straight from the factories to your home, bypassing the shop, which means no rental cost, lower manpower cost. Many of the SMEs are unable to make this jump because they are staffed with older people and their children are not interested to take over the parents' businesses. As a result of which they are unable to restructure themselves. Those who restructure themselves, operate franchises, they are able to make the transformation. 1.30 pm

Order. End of Question time. [Pursuant to Standing Order No. 21(3), Written Answer (Cols. 485-6) to Question No. 20 on the Order Paper is reproduced in the Appendix. Question Nos. 6 to 19 and 21 to 25 have been postponed to the sitting of Parliament on 30th June 2000.]

Mr Speaker, Sir, the last years have seen dramatic changes in our economic prospects. Until 1997, the Singapore economy was growing strongly. Asia was booming, and Singapore rode the wave of prosperity. Then the Asian crisis struck, and Singapore was not spared. We shifted gear to weather the storm. We reduced business costs by cutting Government charges and taxes, reducing CPF contributions, and exercising wage restraint. This helped companies to remain viable, saved jobs, and prevented our economy from crashing. Now the crisis has passed, and the Singapore economy is growing strongly again. We are benefiting from the sacrifices and cohesion of Singaporeans, who worked together to cut costs, accept the CPF reduction, and keep our industries competitive. We made healthy growth of 5.4% in 1999. This year, MTI has announced 9.1% growth for the first quarter, and has raised the growth forecast for the year to 5.5% to 7.5%. The quick recovery has caused the labour market to tighten. Retrenchments dropped by almost half, from 29,100 in 1998 to 14,600 in 1999. Seasonally adjusted unemployment fell from a high of 4.3% in December 1998 to 3.4% in March this year. Total employment rose by 39,900 in 1999, after declining by 23,400 in 1998. Private sector wages are going up, in some cases sharply. The global backdrop to these developments in Singapore and in the region is the ferment of the New Economy and the process of globalisation. These have proceeded apace, regardless of the problems in Asia. The IT revolution has dramatically changed the global economic landscape. It has unleashed tremendous dynamism, especially in the US, by raising productivity, opening up entirely new businesses, and revolutionising existing ways of doing businesses. Underlying the dot-com fever, a real and far-reaching transformation is taking place. The spectacular success of companies like Microsoft and CISCO Systems, based on sheer brainpower rather than tangible assets, has attracted enterprising and ambitious people to start new ventures in the knowledge sector. The new economy is a powerful magnet to draw talent, especially young talent, from the old economy. These young people have a strong desire to be part of the IT revolution, to change the world, and of course to make it big. In the US, investment banks and law firms have traditionally been the most sought after employers, offering the best paid jobs. Now, investment banks are facing difficulties hiring graduates from business schools, which are their traditional source of recruits. And law firms are having to increase their pay of junior lawyers, even at the expense of the earnings of senior partners, to stop their junior lawyers from leaving and joining dot-coms. Globalisation has created a single world market for talent. Today, talent is highly mobile, in great demand everywhere, and commands a world price. Countries all over the world have opened their doors to talent. Silicon Valley is full of Asians, including a few Singaporeans. The alternative to a job in one country is not another job in the same country, but a job nearly anywhere in the world. In Singapore, too, we are feeling the impact of these trends. More Singaporeans in the private sector are taking up opportunities abroad, and more civil servants are leaving the Government to join the private sector. Singaporean students in the US are being head-hunted before they graduate. The head-hunters say, "Come, join me. Here's a sign-on bonus and a BMW, before you start work." The Legal Service is losing lawyers to local law firms as well as to foreign ones. And British recruiters have come to Singapore to hire our nurses to work in England. Singaporeans sense the opportunity, and the excitement of the IT revolution. Enterprising and ambitious people are taking the plunge, and starting new companies. Some are senior executives who have left the security of their well-paying jobs to venture into the New Economy. But many others are young Singaporeans, hoping to become not just the next Sim Wong Hoo, but the next Bill Gates. This year alone, eight Administrative Officers have already resigned, of whom three left to join start-ups. And these are good officers. But they are convinced that they are witnessing a revolution. They want to be part of this revolution, so that when they look back later, perhaps in their old age, they can say, "Yes, we tried". These developments pose new challenges to Singapore, and particularly to the public sector. Recruiting and retaining talent is vital to the civil service, as it is to any private sector company. But with the economic pick-up and the powerful forces of globalisation and the IT revolution, attracting and retaining talent is quickly becoming a real problem across the whole civil service. The Government has to respond promptly, to adjust and adapt to the new labour market and operating environment. This involves changing not just salaries and terms of service, but also the way we incentivise and reward our officers, and even more fundamentally, our approach to managing the flow of talent in the public sector. The public sector has thrived in the past by reshaping itself to cope with a changing environment. It must continue to re-invent itself, faster than before, to stay up-to-date and relevant. The civil service needs to offer attractive and challenging prospects, to induce young Singaporeans to take up a public sector career. We have kept salaries in the public sector competitive, and we will continue to do so. However, we need to approximate not just private sector pay, but also relevant private sector personnel management practices. This is particularly so for the Administrative Service, which is our main avenue for managing and developing leadership in the public sector. Today, I will brief the House on the following changes: (1) A new approach to managing public sector leadership talent; (2) Civil service salary revisions and this year's NWC award for civil servants; (3) Review of salary benchmarks for the Administrative Service, Political and Statutory Appointment holders; and (4) Restructuring salaries for the Administrative Service, Political and Statutory Appointment holders. Managing Public Sector Leadership Talent Let me, first, cover managing public sector leadership talent. The Administrative Service is the premier service in the public sector. Administrative Officers occupy key posts in the ministries, helping to formulate policies and to supervise the running of ministries and departments. The most senior and critical civil service appointments in the ministries are mostly occupied by Administrative Officers. These appointments include the Permanent Secretaries, Deputy Secretaries, CEOs of major statutory boards and the heads of key departments, in other words, the top ministries and some of the posts one level below the top. We term them "Public Service Leadership (PSL)" jobs. Identifying and developing officers for these PSL jobs is vital. Each year, the Government has sought to garner a fair share of top talent from the new cohort to join the Administrative Service. We hope that from among them, sufficient numbers will stay in service and eventually make the grade to fill the PSL positions. Traditionally, officers appointed to PSL positions expected to stay on in these positions until they retired. However, this is no longer viable for several reasons. Firstly, young officers nowadays do not think in terms of a lifetime career in the civil service, gradually advancing through the ranks till they reach their top posts a few years before retiring to draw pension. They see a job in the civil service as just one of several steps toward fulfilling their lifetime career aspirations. They are energetic and ambitious. They want a faster sense of progression, and the chance to take on larger and more challenging responsibilities earlier in life. Secondly, we need to advance officers to Public Service Leadership jobs early, preferably by their early 40s, to keep leadership in the public sector young and vigorous. In the private sector, professionals and executives can expect to reach the peak of their careers by their 40s or early 50s. So a model where you mark time, or as they say hentak kaki, until you are 55, then you reach your top job, you serve for a few years, you go into retirement, play golf, is not one which will work for us or which will attract the young people. Thirdly, not all officers appointed to PSL posts in their early 40s can realistically stay on in these posts for 20-odd years until retirement. We need adequate turnover in these posts. This will prevent the organisation from becoming too settled in its ways, and it will also encourage young and capable officers to stay on in the service, in the realistic hope of reaching a PSL post. Because otherwise the young officer looks up and says, "Here's my Permanent Secretary who was promoted early. He is now 40. He has got 22 years left, by which time the retirement age may have reached 67. Why should I hang around?" And he will be off looking for more exciting challenges elsewhere. So we need to balance this need for turnover and renewal in the civil service, with adequate career security for the officers. We want to build a corps of highly motivated and dedicated officers who take a long view of the issues which they handle. In other words, if you mishandle something and create a problem, you will still be around to deal with the problem when it comes back to haunt you. It is not enough for officers to know that they can make it to the top if they have what it takes and they give their best. They need predictability in their service career paths, both before and after reaching a PSL post. Officers must feel assured that their careers are being managed systematically, in a fair and transparent framework. We do not want civil servants to be less than totally dedicated to their tasks, because they are quietly preoccupied making provisions for themselves just in case their careers take an untoward turn. Bearing in mind both imperatives, the Government has decided to introduce a "flow-through" mechanism of fixed-term appointments for Public Service Leadership jobs. Under this framework, the retirement age for Administrative Officers will remain at 62, like other jobs. Officers with the potential to be promoted to PSL posts will remain in the Administrative Service, while those judged unlikely to do so will be re-deployed to other parts of the civil service. Administrative Officers who make it to PSL posts will be appointed for fixed terms. An officer appointed to a PSL post at the Deputy Secretary level will be given a 10-year term, during which he may hold two or three DS level appointments. If he is subsequently appointed to a PSL post at the Permanent Secretary level, that will also be for a 10-year term, starting at that point when he reaches the Permanent Secretary level. As a general rule, officers will relinquish their PSL appointments on completing their 10-year terms. Some may have their PSL terms extended, but this will be the exception. We seek to maintain a constant flow-through of talent and a constant rejuvenation of public sector leadership. Officers who relinquish their PSL appointments but wish to stay on in the public service will be offered suitable non-PSL jobs, subject to availability. They can then serve until the age of 62. Officers who do not wish to take up a non-PSL job will be freely granted early retirement and can then start a second career somewhere else. Remuneration at the PSL level will take into account the significantly heavier responsibilities of PSL jobs. PSL officers will generally receive larger performance bonuses than other Administrative Officers. They will also receive a special PSL Allowance, in addition to other components of their salaries, so long as they are still occupying their PSL posts and have not relinguished these posts. The PSL Allowance will initially be one month per year, and will be built up later to two months per year. In addition to introducing fixed-term appointments for PSL jobs, the Government will also broaden training and development opportunities for Administrative Officers. This will help to develop talent for the service, and make the service a more attractive career. For example, every Administrative Officer with the potential to hold a PSL appointment will be sponsored for one postgraduate training programme while in service, in other words, a Master's degree of some kind. Some Permanent Secretaries will also be granted sabbatical leave, to recharge themselves intellectually, and update themselves on new developments in their policy fields. The transition to fixed-term appointments for PSL posts must be managed judiciously and sensitively, to ensure stability and continuity in the public service. These changes will be implemented together with the salary revisions for the Administrative Service that I will be announcing later. We will make suitable transitional arrangements for the current incumbents of PSL jobs, and address any concerns they may have over the new framework. Civil Service Salary Revisions and NWC Award While we focus on the Public Service Leadership positions, we must not neglect the main body of public officers, at all levels and in many different services. For the whole system to work well, every public officer has to contribute his or her best. Every one of them needs to be properly managed, paid, and incentivised, and not just a few top officers. The Government has conducted a full review of civil service salaries. Salaries of most schemes of service have not been revised for at least two years because of the economic downturn. However, with the strong economic recovery, private sector's earnings have risen substantially. CPF data indicate that except for secondary school leavers, the starting annual salaries of the civil service are generally lagging significantly behind the 75th percentile salaries in the private sector. The gap is greatest for graduates with pass degrees, where the annual private sector starting salary is about 36% higher than the civil service; and those with technical diplomas, where the private sector is about 51% higher. Resignation rates have also gone up across the entire civil service. For example, this year, 284 officers from the Senior Officer Service (which means 12% of the total staff strength) resigned in the first five months of the year compared to 267 for the whole of last year. So if you extrapolate that, by the end of the year, 1/4 will be gone and after two years, you will have no army left. While some outflow of staff is normal in a market economy, especially during a strong economic recovery, excessive outflow will undermine the civil service and jeopardise public services. The civil service must be able to attract and retain sufficient talent to continue to function stably and effectively. The Government has already announced salary revisions for several schemes of service, which face particularly critical problems of outflow and staff shortages. These include senior officers from the Commercial Affairs Department, the Legal Service, the Nursing Service, and the Medical Service. Now we have decided to make a general salary revision for all civil servants. We are mindful that civil service salaries should follow private sector salary trends, and not lead them. We do not want excessive civil service pay adjustments to increase wage pressures on private sector firms. But it is also critical for the civil service pay to keep pace with the private sector, and not to lag too far behind. This civil service salary revision coincides with this year's National Wages Council (NWC) award. The Government has accepted the NWC's recommendation that "workers should be rewarded with wage increase in line with economic recovery". Instead of making a salary revision and a separate NWC adjustment, the Government will consolidate the two into a single salary revision exercise. The consolidated salary adjustments will include a further restoration of the Annual Variable Component (AVC), increased performance bonuses, higher monthly salaries, and more portable medical benefits. Annual Variable Component First, the annual variable component. The civil service has been paying an AVC of 2 months every year since 1991. We had built it up gradually after the last economic recession in 1985. In 1998, the AVC was reduced to 3/4 month because of the economic crisis. Last year (1999) we paid an AVC of 1 month, (we restored 1/4 month) plus another 1/4 month of Special Bonus at the end of the year, when we found the economy recovering more strongly than we had expected. This year, because of the positive economic outlook, the Government has decided to increase the Annual Variable Component by 3/4 month. We will pay 1 3/4 month of AVC in total. 3/4 month will be paid in July, and 1 month in December. This will bring us close to restoring AVC to 2 months, where it was prior to the crisis. Performance Bonus Next, performance bonus. Currently, only civil servants in the more senior grades are paid performance bonuses. The salaries for the rest of the officers do not depend on their performance. But we must strengthen the link between pay and individual performance, by building up a performance-related component in the total wage package of every civil servant. This salary revision provides a good opportunity for us to do so. The Government will pay a performance bonus to all civil servants who currently do not receive any performance bonus. The base rate will be 1/2 month per year. This means that an average officer who has put in good performance will receive a performance bonus of 1/2 month, while officers who perform better than average will receive more. For the civil servants who already receive a performance bonus, we will increase the base rate for their performance bonus by 1/2 month. This will cover all civil servants - Divisions III, IV, the road sweepers, the cleaners, the clerks, the senior officers. Everybody will have one component of his pay which will depend on his performance. You perform, you will be rewarded; you do not perform, this is the first signal. If you continue not to perform, further strong signals will be on the way. A 1/2 month performance bonus is only the first step, because 1/2 month is not quite large enough. As and when additional salary adjustments are justified in future, we intend to further build up the performance bonus component to a base rate of at least 1 month for all civil servants. Monthly Salary Increase In addition to the performance bonus, we will increase monthly salaries for most schemes of service by an average of 5.4%. In keeping with the spirit of NWC recommendations, the 5.4% increase in monthly salaries will be in the form of a $50 lump sum plus a 3.8% increase. This formula of a fixed quantum plus a percentage of pay will benefit the more junior and lower income officers. The actual percentage increase in monthly salaries will range from 11% for the lower division officers to 4% for senior Superscale officers. The average total salary increase for a civil servant from this revision is about 13%. I say "average" because it will depend on your grade, your service, your performance and whether additional adjustments are made for your service. This includes the 3/4 month AVC increase, the 1/2 month increase in performance bonus, and the 5.4% increase in monthly salaries. This revision will significantly narrow the salary gap between the civil service and the private sector, but it will not completely close it. Specific Services Now, let me mention a few specific services. The SAF has traditionally paid a premium over civil service salaries, given the strategic need to attract a fair share of talent into the SAF in order to maintain a credible defence force. To maintain the premium, MINDEF will also be revising salaries of SAF personnel upward by an average of 13%. Several services still face particularly serious staffing problems, or have salaries which are further out of line from the private sector. They will receive higher salary revisions than the general civil service. The Intelligence Service and Foreign Service will receive salary revisions of between 11-31%. The Management and Technical Support Services, which recruit polytechnic diploma holders, are also experiencing higher attrition rates. The most serious gaps are in the lower grades. The salaries of the relevant grades for these two services will be increased by about 20%. Further Adjustments We expect some other services to require further adjustments beyond this salary revision. In this dynamic environment, waiting for the next annual cycle of salary reviews will be too slow. The Public Service Division will work with other Ministries to review their respective staffing situations within the next three to six months, and make adjustments where justified. I will just mention two. One is the Ministry of Home Affairs which is reviewing the scheme of service for its uniformed personnel, to ensure that the Home Affairs Uniformed Services remain an attractive career choice and the services recruit their fair share of quality staff to ensure the safety and security of Singapore. MHA has engaged Towers Perrin to conduct the review, which is proceeding well on track. The consultants will present their overall recommendations at the end of August, covering mainly career structures, benefits, continuous learning and development, and work environment issues. And the Home Affairs Uniformed Services Council will then consider the recommendations. Two, the Education Service. In this revision, the Education Service will receive the average increase of 13%. However, teachers play an important role in educating our next generation of Singaporeans for the knowledge-based economy. We must continue to attract and retain good and committed teachers. The Ministry of Education will undertake a further review of the pay structure of teachers to shape it to better meet both MOE's organisational needs and the teachers' personal aspirations. Portable Medical Benefits In addition to its core wage guidelines, the NWC recognised that with an ageing population, rising medical costs and increasing job mobility, there is a need to refine existing medical benefit schemes to make them more portable. It noted that the Ministry of Manpower had set up a Tripartite Committee on Portable Medical Benefits to study the issue. The Government agrees with the NWC that there is an urgent need to address the issue of medical benefits for workers. During the Budget debate this year, Mr Yeo Guat Kwang and Mr Thomas Thomas had also suggested that the civil service review its medical benefits schemes. Mr Yeo Guat Kwang specifically suggested that "unused" portions of the annual $350 cap on outpatient subsidy for civil servants who are on the Medisave and Subsidised Outpatient Treatment (MSO) Scheme be credited into the Medisave account of officers. These are officers who have 1% extra of Medisave paid to them to pay for their hospital expenses and who have a $350 limit which they can claim if they have outpatient expenses, and many of them do not claim the full amount. The question is: what happens to the balance at the end of the year? And Mr Yeo suggested that the balance, instead of going back to the Government, should be paid into their Medisave accounts. This would make medical benefits in the civil service more portable and encourage younger officers to stay healthy. I have replied that this suggestion had merit, and promised to review the matter. The Government has decided to accept Mr Yeo Guat Kwang's proposal. Starting this year, if an officer does not use up the full amount of his annual outpatient cap of $350, the balance will be credited into his Medisave account. The average unused outpatient subsidy per MSO officer in 1999 was $276. As there are about 31,300 officers on the MSO Scheme (this includes a few Members of Parliament), it will cost the Government about $8.6 million to transfer the unused balance into the Medisave accounts of the officers. This amount will increase over the years as the MSO population increases. Review of Salary Benchmarks Let me turn now to the review of salary benchmarks and restructuring of salaries for the Administrative Service, Political and Statutory Appointment holders. The 1994 White Paper on Competitive Salaries for Competent and Honest Government established two private sector salary benchmarks to peg Ministers' and Administrative Officers' salaries. The benchmarks were based on the salaries of top earners from a basket of 6 professions, chosen as far as possible to be similar to the nature of work performed by Ministers and senior civil servants. The 6 professions were: bankers, accountants, engineers, lawyers, MNCs, and local manufacturers. Specifically, the White Paper recommended pegging the salary for a Superscale G Administrative Officer to the principal earned income of the 15th person aged 32 belonging to the same 6 professions (15P32). The salary for a Staff Grade I Minister was pegged at two-thirds the average principal earned income of the top four individuals from each of the 6 professions regardless of age (2/3 AVE24). The formulas would be reviewed after 5 years, ie, in year 2000. The key advantage of this approach was that the benchmarks would be computed annually, based on IRAS data, and the salaries of Ministers and Administrative Officers would automatically follow the benchmarks up or down, albeit after a lag. This has taken place. In 1996, both benchmarks went up, and Government salaries followed. In 1997, both benchmarks went down, and Superscale G salaries were cut by 2% and Staff Grade I salaries were cut by 7%. In 1998, the Superscale G benchmark decreased marginally, but the Staff Grade I benchmark increased. In view of the economic crisis, Superscale G salaries followed the benchmark down, but Staff Grade I salaries were frozen even though their benchmark went up. Government salaries were again frozen in 1999, despite increases in both benchmarks. However, while Government salaries have been frozen since 1998, top private sector earnings have increased substantially, despite the economic crisis. The 2/3 AVE24 benchmark increased by 13% in 1998, 29% in 1999, and 23% this year. The individuals in the benchmark were not salaried workers, whose employers had failed to exercise wage restraint. They are lawyers, accountants and engineers, who are professionals earning fees that depend on their volume of business. They are bankers, whose bonuses depend on the profits of their banks. They are CEOs of manufacturing firms, multinational or local, many of whom receive stock options. Why did their earnings go up? The immediate explanation is that their businesses did well. The more fundamental explanation can only be globalisation and the knowledge economy. In other words, while the Singapore economy went down, not the whole of it went down, some parts continued to thrive and prosper. They were linked not to our region but to America, Europe and to the rest of the world. And some persons, the best lawyers, the best bankers, the best CEOs of multinationals were in demand. They could command that higher price and they did well, and their firms also did well. Benchmark Formulas Based on the latest figures for the existing benchmarks, the Superscale G annual salary should be $363,000, 50% more than the current $242,000. The Staff Grade I annual salary should be $1.64 million, about 90% more than the current $861,000. Instead of simply accepting these figures, and increasing salaries to match them, the Government has thoroughly reviewed the salary benchmark methodology and framework. We have found that the benchmark of 15P32 for Superscale G is sound. It has been effective in attracting and retaining good officers in the Administrative Service for the past 5 years. We will retain the benchmark as it is. In the case of the 2/3 AVE24 benchmark, the basic approach of comparing the salaries of Ministers and senior civil servants with a basket of top earners in the 6 professions is sound. The 6 professions remain relevant and appropriate, and the discount factor of 2/3 is reasonable. Empirically, the benchmark has been reliable, moving in line with wider trends of earnings of top professionals. However, the robustness of the 2/3 AVE24 benchmark can be improved in several respects. Firstly, the base of the benchmark is narrow. Only the 4 highest earners are chosen from each profession. These 4 may not be representative of top members of the profession, but may just be the few individuals who happened to have had an exceptionally good year. We therefore propose to broaden the base of the benchmark from the top 4 earners in 6 professions to the top 8 earners in 6 professions. We will thus be considering principal earned incomes of 48 individuals instead of 24. This will make the benchmark more representative of the top professionals. Secondly, the benchmark uses the arithmetic average of the 24 incomes. In other words, we get the 24 figures, we add them together, we divide by 24 and use that average. The average is satisfactory if the 24 incomes are clustered fairly close together. But if there are a few extremely high incomes in the group, this will affect the average, and will make the average less representative of the group as a whole. Therefore, instead of using the arithmetic average, we will take the median income of the group, ie, the 24th highest income among the group of 48. We have 48 people. We rank them from the highest to bottom and we choose the 24th person, who is in the middle, and we use that as the representative. This fixed rank approach will not be skewed by the presence of a few very high income earners, and will yield a more stable benchmark. Because I am choosing the income of person number 24, so even if person number 1 earns $10 million instead of $2 million, it does not affect that figure of the middle person unless the whole group moves, in which case it is fair for the median and our benchmark also to move. Thirdly, the benchmark treats stock option gains just like any other form of income, for example salary, bonus, or partnership share. But stock options are volatile. Executives may exercise in a single year stock options which they have accumulated over several years, especially in a bull market. To accept the full amount of stock option gains without any discount is unfair and will skew the benchmark upwards. In the past, gains from stock options formed only a small part of the top earnings, but they may become more important in future. Stock option gains form part of income, and are taxed as such. We therefore cannot ignore them in estimating private sector incomes. However, to allow for the uncertainty and volatility, we will discount by half any stock option gains before computing their median income. In effect, we are assuming that the stock options that are being exercised have been accumulated over 2 years. So whatever the stock option gain is, we divide by 2. For example, if a person earns $1 million in salaries and bonuses and another $1 million in stock option gains, his total income for the year will be $2 million. However, for purposes of the benchmark, we will discount the stock option gains by half, ($1 million from salaries and bonus, $1/2 million from the stock option gains) and we will use the figure of $1.5 million in our calculations. As a result of these changes, the Ministers' benchmark will be renamed 2/3 M48, instead of 2/3 AVE24. The latest value of 2/3 M48 is $1.21 million. $1.21 million per year ranks 206th among private sector earners. In comparison, when we first set the 2/3 AVE24 benchmark, the figure was $811,000, which ranked 101st among private sector earners. You can see from the old benchmark to the revised one, we have maintained roughly the same relativity. In fact, it has come down from 101st to 206th. Besides refining the 2/3 AVE24 formula, another significant improvement to the present scheme is to reduce the 18-month time-lag in applying the benchmark. Private sector earnings in Year X are reported to IRAS in Year X+1, and the benchmark is calculated and applied only in July of Year X+2, which is 18 months later. By then, the private sector earnings will have moved, and the benchmarks will already be somewhat out of date, especially if the economy has changed direction, which can happen, as we have seen, quite suddenly. To make the salary comparisons more timely, we will reduce the lag in the process from 18 to 12 months. Instead of waiting for the full IRAS data at the end of Year X+1, to be applied only from July of Year X+2, we will compute and apply the updated benchmark in January of Year X+2, based on partial IRAS returns. Restructuring Salaries for the Administrative Service and Political Appointment Holders In addition to reviewing the benchmarks, the Government has made fundamental revisions to our salary and grade structures. This will bring them closer to private sector practices, and give the Government more flexibility to reward deserving officers. We will change our structure from salary points to salary ranges. We will also increase the proportion of variable pay in the annual salary, by introducing a new "GDP-related bonus", and by building up the performance bonus. Salary Ranges First, let me explain the salary ranges. The Government has operated on a system of fixed salary points for its senior officers. Each Superscale or Staff Grade corresponds to a single salary point. The political and statutory appointment holders are also tied into the same fixed-point system. In other words, this is your rank, this is your salary. There is a one for one correspondence. If you are promoted, your salary goes up. If you are not promoted, your salary remains fixed. In this system, promotions and salary revisions coincide: we cannot give an officer a pay increase without also promoting him. This system is rigid. No other organisation in Singapore uses such a system. Private firms and even some statutory boards use salary ranges, where each rank or grade corresponds to a range of salaries. Managers can then adjust an officer's salary without also having to promote him. The Government will introduce a system of salary ranges to replace the present system of salary points for Administrative Officers and political appointment holders. The existing 14 Superscale and Staff Grades will be banded and consolidated into 9 salary ranges. The existing 4 Timescale grades will be converted to 4 salary ranges. I have an Annex explaining this and the Clerk will now distribute Handout 1. [Copies of Handout 1 (Cols. 489-92) distributed to Hon. Members]. Handout 1 - Table 1: Salary System Based on Salary Ranges If you look at Annex 1 in the Handout, you will see on the left side the old system of salary points for the Superscale and Staff Grades, and they are replaced by ranges which we have renamed and renumbered. Most of the political appointments will also move on to the new system of salary ranges. This salary range system will give us more flexibility in personnel management. We can reward officers with merit increments within their salary range each year, depending on their assessed potential and demonstrated performance. We will no longer need to wait several years to promote an officer, in order to increase his salary. Staff Grade I will now correspond to salary range MR4. "M" stands for Ministers' range. 'S' further down stands for Superscale range and the Timescales are just 'R' ranges. So Staff Grade 1 will now correspond to salary range MR4. The 2/3 M48 benchmark will be the "Ministers' Benchmark", and will determine the lower end of the MR4 range, which is the entry grade for Ministers. The political, statutory and judicial appointment holders will be merged into this framework. Ministers are currently on three salary points (Staff Grade I, Staff Grade II + 12%, and Staff Grade IV). They will be moved to three corresponding ranges of MR4, MR3 and MR2. Deputy Prime Ministers will be moved to the MR1 range. The President, Prime Minister, Senior Minister, Chief Justice, Speaker, Chairman PSC, Attorney General and Auditor General will continue to be at fixed salary points. Their salaries will retain the same ratios to the Ministers' Benchmark as in the existing salary structure. Larger Variable Component Secondly, we will increase the variable component of annual salaries. This presently consists of the 13th month NPAA, the AVC, and the performance bonus, which together make up about 30% of the total annual pay of senior officers. We will increase this variable component to approximately 40% for senior officers, in other words, Superscale Range 9 and above. This way, a large part of the salary increase will be in variable pay, which will depend on the performance of the officer and the state of the economy, instead of in fixed pay which the officer will receive regardless of how he performs. We will increase this variable pay by creating a new "GDP-related bonus", and by building up the performance bonus further. We will also introduce a bonus pool so that performance bonuses are paid out over several years. The details are at Annex 2 (Cols. 491-2) of Handout 1 which I have just given you. Annex 2 - GDP-related Bonus Implementation and Phasing in of New Benchmarks Although the gap between the revised benchmarks and the present salary levels is large, this is because we have lagged behind the private sector, which moved ahead while we froze public sector salaries. This is an exercise to catch up, not to race ahead. The civil service salary revisions will benefit 70,000 civil servants. While the 13% revision will make most salaries competitive, some schemes of service will need further revisions and special arrangements. We are proceeding with these, but in the interim we will not hold back the more general revisions. For the Administrative Service, the more pressing changes are the ones that affect the younger officers. We must move urgently to retain the bright young officers who are the most mobile, and the most likely to consider leaving for the private sector. The Government will therefore move Superscale G salaries (now SR9 salaries) to the full 15P32 benchmark; in other words, $363,000 from 1st July. For the more senior officers and the Ministers, the problem is less pressing. Also the Government is mindful that while the economy is recovering strongly, the CPF restoration is still being phased in. We should not send the wrong signal that we can now abandon all restraint in wage settlements. However, we have to adjust salaries to reach the benchmarks over time, if the benchmarks are to be meaningful. Therefore instead of implementing the full revised benchmark of 2/3 M48 immediately, we will phase it in over 3 years, in 4 steps. In the first step, we will move salaries to 80% of the Ministers' benchmark. This means an annual salary increase of 12% for a Staff Grade I (MR4) officer or Minister, from $861,000 to $968,000. At $968,000, he will rank 367th among private sector earners. Nearly all of this increase of 12% is in the bonuses. The monthly salary will hardly change (it will increase by only 0.3%). The Clerk will now distribute Handout 2. [Copies of Handout 2 (Cols. 493-4) distributed to hon. Members.] Handout 2 - Table 2: Pay Comparison Before and After Salary Revision Handout 2 shows the pay comparison before and after the salary revision for the Prime Minister, Ministers at Staff Grade II, Ministers at Staff Grade I, Superscale B which is a significant grade for Permanent Secretaries, Superscale G, which is the lower benchmark and Member of Parliament. The left hand side shows you the current monthly pay, the current annual pay and the current ranking against private sector earners. The right hand side shows you the revised monthly pay, annual pay and ranking and also the corresponding new names for the grades. So you can see Members of Parliament at present receiving an allowance of $9,100 per month will in the revised scheme receive an allowance of $11,900 per month. Salaries for grades between Superscale G and Staff Grade I will be adjusted by percentages in between the 50% increase for Superscale G and the 12% increase for Staff Grade I. For grades above Staff Grade I (MR4), including the statutory appointment holders and the higher grades for Ministers, salaries will be increased by 12%, proportional to the new Staff Grade I (MR4) salary. After this revision, the Prime Minister's salary will be $1.94 million, which will rank 63rd among private sector earners. The Government will subsequently reduce the discount on the 2/3 M48 benchmark to 10% in July 2001 and to 5% in July 2002, and will fully achieve the benchmark in July 2003. All the salary revisions for the Civil Service, Administrative Service and political appointees will be implemented with effect from 1st July 2000. They will be effected via payroll in August 2000, with back payment for the month of July. So anybody who receives a pay slip in July without new numbers, please stay calm. It is on the way. Costing The salary revisions for the entire civil service (excluding statutory and judicial appointees) will increase the Government's wage bill by about $400 million, or 13%. The wage bill for political appointment holders will increase from $28 million to $34 million, or about 20%. This is higher than the 12% increase for the Ministers, because the political appointments below the Ministers, for example, Ministers of State and Parliamentary Secretaries, will have larger increases, because they correspond to the Superscale grades. Conclusion Mr Speaker, Sir, while the details of this salary revision and review of benchmarks are complicated, the principles are simple and well-established. Our policy is to pay people according to their market value and contribution, in the case of political appointment holders, with a discount. Paying officers properly is essential to recruiting the quality of talent that we need to build a first-class public service. This is not a new departure. The issue of public sector pay and, particularly Ministers' pay, has been repeatedly debated in this House over the years. In 1994, the Government tabled the White Paper on Competitive Salaries for Honest and Competent Government. After a full debate, Parliament endorsed the White Paper "as the basis for setting salaries of Ministers and senior public officers". Today's Ministerial Statement is entirely consistent with that policy. The proof of this policy is in its results. Foreign investors and international ratings agencies like PERC, WEF and IMD regularly rate Singapore's competitiveness highly, and an important element of these ratings is their high assessments of the quality of the Government and political leadership. Even more important, the Government has consistently delivered results to Singaporeans. We have navigated the country safely through the Asian crisis, delivered strong economic growth year after year, and raised the standard of living of all Singaporeans, rich and poor. We could not have achieved any of this, without competent and dedicated political leaders and a first class civil service. These salary revisions will help us to maintain these critical strengths, and continue to score new wins in the years to come.

Sir, pursuant to Standing Order No. 42, I beg to move, "That Parliament do now adjourn." Question proposed.

2.27 pm

Mr Speaker, Sir, thank you for giving me this opportunity to speak. I am sure the hon. Members in this House will join me in thanking the Deputy Prime Minister for his Statement, given in his usual candid and lucid manner. And I am sure Members in this House will also want to thank him for the generous allowance to Members of Parliament. Sir, the issue of Ministerial and civil service salaries has surfaced several times in this House in the past. But for Members like myself who entered this House only in 1997, it will be the first time that we have an opportunity to give our views on the matter. The debate in 1994 on the White Paper entitled "Competitive Salaries for Honest and Competent Government" raised many of the issues that I am sure will be raised again in this House this time round. Sir, the Statement today refines what was put in practice after Parliament endorsed the White Paper in 1994. The principles, as stated by the Deputy Prime Minister, remain much the same - clear, transparent principles of reward, competitive salaries to attract top talent into the public sector and, following from that, the benchmarking of salaries to comparable posts in the private sector. In the October 1994 debate, Prime Minister Goh reminded this House and Singaporeans that one of the crucial questions is, "What sort of people in the Government will best provide you stability, a healthy environment, good-paying jobs and bring you more prosperity?" Sir, at the turn of the century, I believe that Singaporeans will accept the wisdom of the policy of attracting top talent into the public sector - from Ministers, Parliamentary Secretaries to Permanent Secretaries and other civil servants. What is readily apparent to many who would pause to think of recent events is that Singapore has weathered the economic storms of the past two to three years far better than many other countries in the region - countries that have an abundance of resources that we do not have. What we do have is a strong, reliable Government and a resilient people, who are prepared to take hardship and to ride out the storm together. But the story could have been different. We could have been no better off or indeed be worse off than many of the worst hit countries. What could have happened, for instance, if instead of being Ministers, they have been employed in the private sector, taking care of their own companies rather than the general well-being of all Singaporeans? Would we be in this position today, when we can point once more to a healthy growth rate in our economy, when there is a gradual restoration of the cuts in salaries and CPF that we have endured over the past couple of years? To me, and I am sure to many right-thinking Singaporeans, the crucial policies taken by the Government to combat the economic crisis in 1997 made the difference between what happened to us and what happened in the region. I do not wish to be smug about this. Many Singaporeans still suffer from unemployment, loss of income and other hardships. But still recovery was not long in coming and all this because of the swift, decisive and, more importantly, correct decisions taken to stave off the ill-effects of the crisis. Lest people think that we may be blowing our own trumpet, it is gratifying to know, as Members of this House must have read in today's Straits Times as well as the Straits Times on Monday, 26th June, that the Singapore Government had been rated top in Asia for economic effectiveness and leadership quality. Their management style is described as moderately interventionist, which is distinct from being intrusive or highly intrusive. This is the view culled from a survey on Asian leadership conducted by a Hong Kong think-tank, the Political and Economic Risk Consultancy (PERC). The survey is based on the views of expatriates working in the region conducted in the first quarter of this year. In other words, we have the views of those expatriates, most or all of whom, I presume, are working in the private sector, stating quite firmly and simply that the leadership in Singapore is "High Quality". No other leadership in the survey attracted the same rating. If there was, and such leaders are paid less, we can, I think, ask the DPM for an explanation. Sir, I was struck not so much by the results of the PERC's survey which was expected, as also by another major piece concerning Singapore in the latest issue of the Economist, that very respectable English publication. It ran a feature on e-Government. The reporter said that "after e-commerce and e-business, the next Internet revolution will be e-Government". What surprised me was that the only country that merited a detailed feature was Singapore. According to the Economist list of Net neighbourhoods, ie, people with Internet access at home, Singapore came second only to Norway. It is ahead of countries like the US, Germany, UK, Canada, Japan and Australia. At the same time, in the feature on Singapore's approach to e-Government, the report quoted an international survey of sites offering integrated service delivery through the Internet conducted last year by America's General Service Administration. It stated "that Singapore eCitizen Centre is the most developed example of integrated service delivery in the world." Sir, these singular achievements, together with many relating to our infrastructural facilities like our airport and seaport, do not come about spontaneously. Neither do good Government spontaneously emerge from a population. If only that were true. But the histories of many countries bear testimony to the fact that the rise and fall of economies, of societies and even of civilisations rest on political and public leadership in times of war, of crisis and of revolution. Sir, Singapore is facing challenges the like of which have not been experienced before. We face global competition for talent, we face competition with developed countries which have far better resources and much larger populations than we have. Are we as a people going to be so small-minded as to begrudge the political and public leadership their just rewards? Or are we going to be positive, and look beyond ourselves, have the interests of the nation at heart, and say, "Well done, carry on" and be properly rewarded? Sir, I support the refinements made to the quantification of salaries for civil servants and political leaders. I particularly welcome the institution of performance bonus for all civil servants. But lest it be thought that it can be taken for granted that one would not cast a critical eye on the public service as a Member of this House, I should like to end by asking the DPM to assure us of three things: First, that the selection process for the top leaders, whether as Ministers, office-bearers, Permanent Secretaries or other PSL appointments, be as rigorous, if not more, than what it has been before. Second, that we should consider some form of independent mechanism or body to monitor and evaluate the quality of decision-making in the civil service. We do not in Singapore prefer to use the legal process for challenging civil service decisions. In other countries, such as the European countries and North America, there are significant developments in the area of administrative law where good practices such as candour, transparency and regard for the individuals are implemented. We should like to encourage such values in the civil service, and as many have said in this House during the Budget debate this year, we should expect now a higher standard of communication and transparency from the civil service than before. Finally, may I ask the Government to make all possible haste to restore the cuts to CPF and other wages to alleviate the hardship that is still felt by many. Singaporeans would want to be assured that the Government would, as the PM has said, "provide stability, a healthy environment, good-paying jobs and more prosperity". Sir, I thank you and support the measures on public sector salaries.

Sir, I thank you for allowing me to make some comments on the measures. The last time when the salaries and benchmarkings were commented upon, it was in a different environment where the economy was doing well and many of the salaries have not gone up to the million dollar ranges. This time round the issues will probably be more emotive because there are many other issues at hand, for example, the economic recovery has been patchy and certain sectors have not fully recovered. There is still a significant minority of the households in Singapore who are low income families. Many of these will find these million dollar salaries, especially for the high office holders, very mind-boggling numbers which they cannot quite fathom and understand. Of course, there will be some people who believe that political leaders should always be altruistic. I am here not to defend anybody but to try to take a level headed approach to some of these issues and try to dissect the emotive issues from the logical and rational thinking. The first question we want to ask ourselves is whether there are any grounds for salary adjustment. The economic crisis has seen either a freeze or a downward adjustment in remuneration for senior Government leaders and civil servants. A strong and far-sighted political leadership that we have and an efficient civil service have helped Singapore to steer ourselves through the crisis with minimal damage to the economy. Our political leaders have formulated policies that have allowed Singapore to have a speedy recovery. The upswing in the economy has been fast and, as Members have read in the recent PERC report, our Singapore Government has been rated No. 1 in this region. With the recovery in the economy, there have been several pull factors which have made it more difficult to retain good leaders in the civil service and in other areas of the civil service as well. I think there will be this global pull for talents which DPM has mentioned, and we cannot escape the fact that this pull will increase when stock options become a part of life in the private sector. It will be increasingly more difficult to attract top quality leaders to join the political leadership. We need to make these adjustments to market changes to retain the talents and to attract new talents. The second question that will bother many people is whether the degree of pay rise is justifiable. DPM has explained that the percentage of pay rise across-the- board has been tailored to meet different segments in the civil service according to the type of professions or departments that they are in. I support the move to moderate the increase in the base pay and instead move towards variable and performance linked bonus system. I think it is very heart warming that, for the Ministers especially, the base pay increase has only been 0.3%. That is a good message to send across and that a significant part of the adjustments will be through a performance related system. This is a move that should be lauded. The next question that many people will ask is not just the percentage of increment but the absolute amounts in the salary increase. Is it justified? Yes, the sums are large and we must look at this in perspective. We must be able to compare apples with apples and pears with pears. Some Members must have read in the last few weeks that there was a report in the Straits Times that said that a drop in the share price of several electronic and manufacturing companies on the Stock Exchange had resulted in a paper loss of tens of millions of dollars for these individuals. I am also aware of companies where employees have stock options worth millions of dollars. If we take the perspective that our top Government leaders are the key drivers of Singapore Inc., then certainly they should deserve to get a remuneration comparable, if not better than those given to the top management of these companies. I am especially pleased that even though the benchmarks and the formulas have been decided upon, the Government has been transparent enough to come forward to bring the issue to the forefront and debate this again and put this up for comments by other Members of Parliament. If we look at it logically and rationally, these moves are good moves but there are many emotional issues at hand and we cannot escape from these emotional concerns that will be expressed or have been expressed. As I have said earlier, economic recovery is patchy and there are sectors of the economy that have yet to recover fully from the crisis. Would it be a rational argument to say that the pay of Ministers and civil servants should only be adjusted after all sectors of the economy have been restored or recovered? I do not think so. In fact, we should ensure that we continue to attract good talent into Government and civil service so that we can drive the economy to greater heights and restructure the economy to meet the challenges ahead. This would be a solution in helping those sectors of the economy that have been weak. Another emotive concern of many people is, I think there is not a small minority of Singapore households that have incomes at a low income range, and they will never be able to get even one year's remuneration of the top earners in their whole life time. Hence, some people will argue, "Yes, there will be too great an income divide between the top and the low income families." This is a very emotive issue that will find favour with many people. It will pull at our heart strings. Yes, there are low income families that will certainly continue to require assistance. If we look at it in a more rational way, we must ask ourselves whether the savings that can be obtained by not having a pay increase, what will it do to help them compared to having a good Government and a first class civil service that can attract high quality investments and help workers upgrade their skills. That is a better solution to helping the lower income families. Another emotive issue that the absolute amounts that the Ministers and top civil servants will get in their remuneration package are so large compared to the average household that it will be very difficult for them to accept these numbers. These are million dollar numbers and some of them in their whole life time will never see these numbers. I do not disagree that these numbers may be mind-boggling or seem very excessive for the average families in Singapore. Again, we have to try to put aside our emotions. Five or 10 years down the road, there will always be low income families. But there will always be top corporate leaders in the private sector that will earn salaries beyond the imagination of the average Singapore families. Should we stop paying our top political leaders and our civil servants high salaries because there are low income families who will not understand the quantum of the pay? Or should we pay top political leaders and civil servants a remuneration that is close to the market so that we have good people who will lead the country and will be able to help these low income families improve their standard of living? I think the answer is obvious. Finally, there are those who believe that, yes, politicians are here on a calling and to be altruistic and therefore they should sacrifice for the nation. This sort of statement will find favour with many people. But we must ask ourselves, how many of our top talents in the private sector will be willing to step out of their high paying private sector jobs with corporate benefits and go into the political arena. Do we sincerely believe that altruism alone can attract the best to come forward and to run our country? If we believe that, we must be mistaken. I think to many Singaporeans, the concerns and worries that were present during the Asian economic crisis appear to have been an issue of the past. In my day-to-day practice as a doctor, I continue to meet people from other countries, including Indonesia, and they are still significantly affected by the social and economic consequences of the crisis. Just this week alone, I met one who said that he had to relocate from his home in Indonesia because of the social unrest. He has got to move somewhere else out of Indonesia to live with his daughter. I have got another patient who came to me and said that he was very worried because his land had been occupied by other people, and he feared for the safety of his family. These accounts by these patients remind me that I have to count my blessings. I do not take this for granted. I am happy that I have a home, I do not have to worry for my safety of my family, and I have a job and stable income. And all this has been made possible because we have a strong political climate and a strong economy. I do not take this for granted, but I am thankful that we have a good Government that has made all this possible for all Singaporeans to have a safe home and a prosperous nation. I believe that we should invest in our future, and really our future depends on attracting and retaining top talent in the Government and in the civil service so that these talented people can continue to make Singapore the best home for every Singaporean.

Mr Speaker, Sir, it is very difficult to do a benchmark and define a formula that can reflect what a Minister or a top civil servant in Singapore should be paid. The general feedback from many Singaporeans is that we are paying our Ministers and civil servants too high a salary as compared to any other country in the world. But the question we should ask ourselves is whether we can really make a fair comparison by looking at the salary scales of Ministers and top civil servants in other countries. My contention is that we cannot and should not because there is no other country like Singapore around the world. The nature of things here is very different compared to those in any other countries. So Singapore leaders therefore decided to define a unique formula that suits our system and the system basically addresses issues like corruption prevention, attracting the best talent to join the Government and compensating for what the Ministers lose out by not participating in the private sector. In my opinion, we should look at the salary formula on a stand-alone context of the Singapore environment and in the context of addressing the issues that I just mentioned. Just as the board of directors and the top management of each corporation or company will have to determine the best compensation package to attract and retain the best talent and to motivate them to do well for the company, in the same way the Government of the day in Singapore has determined the salary formula and compensation package that the Deputy Prime Minister has just announced. And it is best suited to achieve the objectives of recruiting and retaining talent and to keep the Government clean. Sir, the man in the street, however, will see the quantum of salary increases for the Ministers, as so huge and unimaginable for them to achieve easily. I do feel for the man in the street and therefore it is the responsibility of the Government to ensure that every Singaporean has the opportunity to achieve their full potential and earn as much as they deserve to earn. Everybody should be ensured of a good quality of life in Singapore and it is the responsibility of the Government and the Ministers to ensure that this happens. If the Government fails to do so, and the Ministers fail to do so, then the people in charge do not deserve to be paid what they are being paid, just as in any country, where the CEO and the top management are held accountable for their poor performance and their compensation package is affected accordingly. I also feel that it is not useful to compare the quantum of the Ministers' salary to that of the man in the street, because if we do, then obviously there is a tremendous skew and the gap will be really big. I feel that we should look at the Ministers' compensation package on a stand-alone basis based on the responsibility they have been charged with and this cannot be easily compared with anyone else in Singapore. We must look at the issue on an absolute basis. Any relative measurement will result in too much of an emotional debate, as my colleague Dr Michael Lim talked about earlier. In fact, it will be emotional because of our inability to compare accurately the roles and responsibilities of the jobs against which we are comparing. Sir, having said that, it is also a common practice in the private sector for the top management to be paid a very high compensation package, as compared to the average worker in the company. So a relative measurement in such a situation is also not useful. The relative measure of a CEO's or Minister's salary should be really the competition and therefore a company or a government should continue to attract, keep and motivate them. To be able to continue to attract, motivate and keep them in the company, the compensation package should be more attractive compared to the alternative employment and package that the competition can provide. In this case, for the Ministers and top civil servants, the competition is the private sector. For our CEOs, it will be another company. Sir, the formula chosen by the Government basically aims to use the private sector as a benchmark. I can accept this formula because the private sector does provide alternative employment opportunities for the Ministers and civil servants and therefore the competition is there for the same talent. However, I feel that the formula used in the past was not quite a good measure of what salary increments the top private sector earners really received. The biggest flaw in the formula was that every year, the top four earners in each professional group were most likely not the same people in the following year. In fact, these people were probably the outliers within their profession and taking an average of such outlier numbers results in something that does not truly reflect what the best earners in the private sector really receive. And it does not really reflect the essence of what the formula was supposed to do. Secondly, the top earners in most cases made their money as a result of extraordinary performance and received extraordinary bonuses or stock options, as the Deputy Prime Minister rightly pointed out. With the changes in the formula that the Deputy Prime Minister announced, specifically in increasing the total number of people used as a benchmark and using the median instead of the average of 48, I believe we should, to a certain extent, address the issue of the outliers. It is also prudent to discount the variable component of the private sector salaries in computing the benchmark for Ministers and civil servants, and especially stock options tend to really skew the data out of place. The reason is that, as the Deputy Prime Minister mentioned, the point of exercise could be the result of stock option accrued over many years of employment. So, therefore, it was not fair in the past to use this to compute the average. Similarly, by making smaller increments in the basic salary and by allowing huge performance bonuses, we are getting closer to the private sector's method of compensation where it is more equitable. The Deputy Prime Minister earlier announced that about 40% of the increment or benchmark salary actually goes to the variable component, and I think it is a good move, and this will only be paid if the performance of the Minister or the civil servant is good. I would urge the Deputy Prime Minister to continue to fine-tune the formula so that we can better achieve the intended goal of a private sector system of compensation package. I especially support the fact that should a Minister or civil servant do extremely well and typically there will be just a handful of people each year, then we should not shy away from giving them huge bonuses, be it six months, 10 months or even 20 months of bonuses, and this is what is being practised in the private sector. This is not given to everyone in the company, just a handful of them who really did very well. Finally, Sir, since we have chosen a private sector benchmark for the system of compensating our Ministers and civil servants, I feel that we should accordingly expose the Ministers and civil servants to the risk of employment, as faced by the top management in the private sector. So while the top managements in the private sector are paid very high salaries, they face tremendous risk in whether their careers should continue within the same company. In my opinion, we cannot just adopt the good part of the private sector practices and leave out the bad part. I therefore feel that while we have accepted a transparent system of compensating Ministers and civil servants, we should accordingly have a transparent system of how their performances are measured and how they are penalised for their poor performances. And penalising means not getting a bonus, and it may not be a sacking as you know, it takes time. It is only fair that Singaporeans know about this part of the formula and that we are sincerely practising a system where people do not get rewarded even if they do not do their jobs well. I know that this is a very difficult thing to do, especially for the Cabinet, but I would say that this comes as the hazards of the job, in return for such an attractive compensation package. If we can show this in practice that we are really compensating the good performers and not rewarding the poor performers, then I am sure that we will have no problems in getting Singaporeans to support the system that we are putting in place. The problem is that many of them are just looking at the good part of the story and not the other part of where poor performers do not get rewarded. Sir, with that, I support the proposal that the Deputy Prime Minister has put up.

Mr Speaker, Sir, I agree with the Deputy Prime Minister that we must have competitive salaries for Ministers and civil servants to maintain a competent and honest government. Such competitive salaries could be slightly higher than the average salaries of the professionals in the private sector and can be adjusted regularly according to our economic performance, productivity growth, and inflation rate in line with the recommendations of NWC. The aim is to make sure that they can lead a comfortable life financially commensurate with their official position and status during their dedicated service in public office. The business community generally understands and accepts this. But what we are concerned is that, according to the formula given by the Government, the salaries of the Ministers and top civil servants will be based on the average income of a few top earners who are the exceptionally successful bankers, accountants, engineers, lawyers, manufacturers or MNC chiefs. These top income earners, I believe, are not mere wage earners like the Ministers and top civil servants drawing a fixed salary with good job security, regardless of the ups and downs of our economic conditions and the balance of payments. They are, in fact, enterprising businessmen and risk-takers who have to pay a high price in terms of financial losses and legal obligations in the event of their business failures. The incomes these top earners earn from business success could be exceptionally high and some of them might in future earn as much as Bill Gates or Li Kashing. We therefore have to ask ourselves: Is it appropriate or realistic for the Ministers and top civil servants to expect an income comparable with such top earners in the private sector? Ministers and top civil servants must strive to earn their respect, trust and confidence from the people, in order to have their continued support in policy implementation. In the true spirit of tripartism, the average businessmen and workers would expect the Ministers and top civil servants to set a good example by putting the community before self and making some personal sacrifices, in terms of time and money, in pursuit of national interests and issues. How could the Ministers and top civil servants continue to earn the respect, trust and confidence from the people if they are inclined to demand a high income comparable with those of Bill Gates or Li Kashing? Mr Speaker, Sir, businessmen and employers in private sector are currently facing upward pressure of business cost arising from the economic recovery. Any large across-the-board increase in the civil service salary may create a spiral effect, leading to runaway increases in wages, prices and charges, in both public and private sectors. This would drive up our total business cost, forcing many companies to close down or relocate elsewhere in the face of fierce competition from the regional economies. This, together with the increasing cost of living, will cause even more hardship to the low income group. The business community would therefore like to urge the Government to be more moderate in the upward salary revisions for Ministers and civil servants and consider other supplementary incentives or rewards to keep the deserving staff in the civil service.

Order. I suspend the Sitting and will take the Chair again at 3.25 pm. Sitting accordingly suspended at 3.03 pm until 3.25 pm.

Sitting resumed at 3.25 pm

Debate resumed.

Mr Speaker, Sir, thank you for allowing me to join in the debate. Sir, I support the Government salary revision. In particular, the Government should be commended for taking the initiative to fine-tune the salary benchmarks and formula, making it even more realistic and practical. Sir, after suffering pay cuts and being held back, in terms of benchmarking, during the Asian economic crisis, the question is: when should pay be adjusted for the public sector? Is it too soon? Is it too much? I think not. Sir, we have a good Government. A good Government that shines like a beacon of light in the darkest moments of the Asian economic crisis. There is none better than the Singapore Government. It delivers. The Government brought us out of the economic crisis safe and sound. And Singapore is well-positioned indeed to ride the next wave of political and economic opportunities in the region. Whereas, in comparison, our neighbours have economic and political upheavals. We have peace, stability and economic growth. The Government has indeed given us security, peace and prosperity for more than 40 years. It has enhanced the assets of all Singaporeans. What more can we ask of a good Government? We must pay well in order to have good men and women in the Government. The good men and women would make a major difference to the well-being of the entire nation. Let us not hold back but instead ensure that our country, Singapore, is in good hands, and that we have a bright future to look forward to. We can of course pay less, but we will get less. Rather, we should invest in our future and our children's future. It is, in my opinion, a very small price to pay to ensure that we have good Government, and good men and women in the Government. Even the Political and Economic Risk Consultancy (PERC), a Hong Kong-based think-tank, ranked Singapore first for the overall qualities of the political leadership and its successful economic management of the country. This is an independent research institution and it puts the Singapore Government right at the top, well ahead of Hong Kong, Taiwan, Japan and South Korea, with the rest of the other countries in the region trailing far, far behind all of us. Sir, this is the real world. Let us not pretend that we can continue to have good Government without paying appropriate and realistic salaries. You get what you pay. This is the fundamental parameter and lesson from the private sector. We know it only too well because many of us are from the private sector. Sir, it is indeed better to give realistic salaries to the public sector than to end up as a broken-back country and face the prospect of being refugees on the high seas, sailing to nowhere, as we have witnessed in so many other countries. Sir, a new generation has grown up in Singapore, fascinated by IT, the dot.com and the life sciences. The Government has to compete for talents in the open market, even more so in the knowledge-based economy. Let us also not forget that good talented Singaporeans can also go global, go out of Singapore's shores to seek other opportunities in the brave new world outside. Sir, I wish to make one point about performance of the public sector staff. I am glad that the Government is putting a greater portion of the pay into performance bonuses and incentives but I must highlight the perception that persists that the civil service is an iron rice bowl and many can get by day by day. The point here is that we must not be seen to be harbouring poor performers. We are not aware that many poor performers are downgraded or removed, whereas in the private sector, the risk factor is much, much higher, and staff are hired and fired according to performance and circumstances. With higher pay, it is only right that we expect the Government to be more stringent in the selection and promotion of staff in ensuring accountability and not hesitating to act on non-performers. We must pay market rate. That is the right thing to do but, at the same time, market-related performance for the public sector staff must also be expected. The higher the pay, the higher should be the performance. The civil service should not forget that ordinary Singaporeans, the men-in-the-street, are indeed their pay masters, as well as their customers. Sir, what is of concern to all Singaporeans is the widening income gap in the country, which is very much part of the global trend in the wake of the new economy, something we cannot totally avoid. It is impossible to close the income gap completely and swim against this tide but Singapore should do all we can locally to minimise the income gap. We must not allow the income divide to become a political divide of the haves and have-nots. We should take every opportunity to emphasise job training and skills upgrading for the bulk of the population, especially those older workers who need to re-adapt and retrain for the new economy. In conclusion, I dare say that we indeed have a good Government and we should be thankful that we have a good Government, and we should support this pay revision.

Resolved, That the debate on the Statement made by the Deputy Prime Minister be exempted at this day's sitting from the provisions of Standing Order No. 1. - [Prof. S. Jayakumar].

Debate resumed.

Sir, first, let me give a short response to Dr Ong Chit Chung on the point about private sector jobs being more risky than those in the civil service. I am not sure whether he intended to echo what Mr Inderjit Singh had earlier said about the job of political office holders - whether that was the real point. But I think he will agree with me, observing governments in different parts of the world, that there is no riskier job than that of a political office. I think the risk may be different but the job is no less risky. Dr Ong Chit Chung rose ---

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

Yes.

Sir, I was not referring particularly to the political office holders but to the civil service as a whole.

Sir, I take the point. But now in the PSL scheme, those appointed to the top jobs would be appointed for 10 years and, after that, they would have to leave. Now it is not quite the same as the private sector but there is a limit as to how long the person will serve in that job and that does not mean that if the person really fumbles in the job, he will not be removed. I do not think that is the intention of the Government. Earlier this afternoon, Members debated a full hour on the widening income gap. The numbers that were released by DPM BG Lee puts this in sharp focus. Members will observe how much the income gap has widened in top talent and the workers in the factory. This trend, however, is not a Singapore phenomenon. I have been associated with the trade unions for 20 years. It is my job to see how others pay workers elsewhere and what incomes were like between management and workers. I know that this trend has its origins in the United States. In the 1980s, US companies restructured and re-engineered to regain the competitiveness they had lost to other MNCs, particularly the Japanese. One of the key changes they made was to provide new and attractive incentive schemes to top executives, the most significant of which are stock options. The stock option message is clear. If you make the company grow, your share in it grows as well. By the 1990s, US companies had regained their vitality. New ideas emerged, using new technology. As the revitalised US companies sweep the competition, MNCs elsewhere followed these successful United States models. In Europe, the United Kingdom led the way and these methods are now spreading in Western Europe. Indeed, there is an on-going debate raging in some continental European countries steeped in socialist thinking. They ask: are the wages of top earners obscene? European MNCs are not waiting for the conclusion of this debate - they have to survive, and therefore, they are fighting for their share of top talent who will make a difference to their future. What is the result? Under the administration of Tony Blair's New Labour, the income gap in the United Kingdom is now wider than it ever was during the Thatcher years! French Socialist Finance Minister, Laurent Fabius could not persuade one top talent he wanted to join and work for him. Why? He was locked up by his company with stock options! And the Japanese have taken notice. They too, are beginning to embrace American methods. They have started to employ non-Japanese to lead their troubled companies and I am sure that they must pay top wages to get those foreigners to work for Japanese companies. Some people ask: can we stop the income gap from widening? In other words, let the Americans and the Europeans and even the Japanese go their way and let us go our way. This is unrealistic. We cannot buck the trend. Ours is rated as the most globalised economy by one research company, AT Kearney reported in The Economist. Therefore, what happens elsewhere will come to pass here as well. Our top talent will compete for jobs at top first world wages. Go to New York, Silicon Valley, London, Hong Kong or Tokyo - you will find some of our best talents there. They are paid what top talents in the world are paid. Many of them earn several millions a year and they do so quietly. Do we want more of our top talent leaving to join first world companies? Are we satisfied that they do well in the first world countries, creating jobs there? Or do we want them here, developing companies, creating jobs for Singaporeans? I think we want the latter. Fortunately, we still have most of our top talent here. But try to narrow the income gap here by imposing a limit on top end wages instead of letting market forces work - we will merely see the migration of our top talent. The cost would be a sluggish economy, higher unemployment and lower wages across the board, not just low wages at the top, but lower wages also at the bottom. Far from helping the lower income, we will be consigning them to third world standards of living. If we are concerned about the welfare of the less-skilled lower income families here, which, evidently many Members are, judging from the debate earlier this afternoon, then we must not only retain our talent but also attract more talent here. Only a thriving economy will create good jobs for all, including the less skilled. We must have some of the best talent in Government and in the civil service. Some will say that the wealth of the country is not due just to the efforts of Government or the civil service but due to the hard-work of the people of Singapore. True, I agree but our hardworking people need leaders to show them the right way. If we do not have top talent to analyse the problems we face and devise the right policies and plans, all their hard work will be in vain. I made my first of several trips to Vietnam in 1992. I was deeply impressed by how motivated and hardworking the Vietnamese people are. They had abandoned the centrally-planned economy, where everyone was paid almost the same low wages, for the market economy, following what other communist countries had done. I made my most recent trip two weeks ago. One Vietnamese asked what I think of Vietnam. Well, there has been progress. Some Vietnamese are better off. They drive cars or motorcycles. Their traffic jams in the evenings are not due just to bicycles but also to many motorcycles. But they could have done a lot better, if their leaders have been bolder in accepting market-oriented policies. They could have attracted more investments creating jobs in Vietnam. Instead, today they are planning to export 300,000 workers overseas, the solution which Mr Zulkifli might have suggested for our lower income and low-skilled workers. But I do not think that is the way to go, because to send our low-skilled workers overseas means paying them wages of third world countries. They get a better pay working here in Singapore. Vietnamese workers, I think, toil harder than Singaporean workers but they do not enjoy the quality of life our workers have. What is the difference? It is in the quality of leadership - in Government and in the civil service. Without capable leaders showing the right way, our workers can work hard but see no improvement in their lives. I do not mean to criticise the Vietnamese government. The transition from a centrally-planned economy to a market economy is not an easy one. But the point is: hard work by the people alone is not enough; the policies must be right. We do not want Singaporeans to toil hard for little return. We want them to have good jobs here. We want them to be better skilled, more productive and earning higher wages. While our economic recovery is firm, let us not underestimate the problems that we face. The transition that we have to make into the knowledge economy is not an easy one. At the same time, many of the jobs we now have are under threat. We have done well in a number of areas. But this success does not guarantee the future. We have to draw a lesson from the Fortune Top 100 list. In 20 years, the names at the top are quite different! So even in the sectors where we are rated among the best, we can be left behind. Take, for example, the port of Singapore. It has been our lifeline since the founding of modern Singapore. In recent years, we have seen how new ports close by can pose a real challenge to PSA. Take Changi Airport. It has developed into the leading hub in the region, even though, geographically, Bangkok is better sited. But this position may not last forever. Two days ago, I flew back from London. The Singapore Airlines flight was almost full. However, most of the passengers did not stop over in Singapore. The majority changed to connecting flights to Australia. Good business for SIA and Changi Airport, but not our hotels or shops. The same day (27th June) at noon, I read in the New Paper that with the new Boeing 747-400 and flight paths over China, Qantas can fly London-Sydney refuelling at Bangkok, cutting one hour from the journey. That is only the harbinger of things to come. In a few short years, a new generation of aircraft can fly London-Sydney non-stop. So will most of those who commute between Europe and Australia over fly Singapore? Will Changi face the same fate as Honolulu? Honolulu used to be a stop-over for trans-Pacific flights, but aircraft now fly non-stop across the Pacific. Will Changi face the same fate as airports in the Middle East, once a necessary stop between Asia and Europe? What implications have this development for Singapore Airlines? What new strategies must it adopt to remain one of the leading airlines in the world, maintaining 25,000 jobs it creates, mostly for Singaporeans, and we are not talking about jobs for the lower 10% of Singaporeans. We are talking about good jobs. Take another example: the telecommunications sector. Technology has changed so fast in this sector, and the ground rules have likewise changed. Today SingTel has a tough challenge to remain a national champion generating thousands of good jobs for Singaporeans. In order to strengthen our chances of remaining our telecommunications hub in the region, we have opened up the sector, adding greater pressure on SingTel. Better to open up, create jobs for Singaporeans, even if they work for foreign companies, than to continue to protect SingTel and risk losing everything. These are but three examples. They show that we are not just competing with countries in the region, we are competing globally. Therefore, we need to get the best talent in Government, in the civil service and in our leading companies. If US companies, European companies and, most likely, also the Japanese companies all pay top wages for top talent, we will see top end wages here rise as well, if we are to retain and attract our share of talent to tackle the new challenges before us. The income gap may widen, but it will widen because wages will rise much more slowly at the lower end. But it does not mean that there is no improvement in the lives of those at the bottom. Will the income gap stop widening? At this stage of our development, it will widen further, but it will slow down. Even in the United States, the gap will not widen indefinitely. It must also plateau off, even swing back and narrow somewhat. Indeed, the dip in the Dow Jones index and Nasdaq recently has, in many instances, reduced the variable payments top executives get. One day it may be a more prolonged dip. If that happens, it will happen here as well. When that will be, it is difficult to predict. Our task is to get people in Government and in the civil service to devise policies that will ensure that the low income share in the progress of the country, even with their relatively lower incomes. It means successfully attracting investments to create good jobs for all our workers. It means keeping HDB flats affordable, ensuring that good healthcare is available to everyone, that children from all families get the best education they deserve. For now, we have to follow the world-wide trend and pay top talent the high wages they can earn elsewhere. But more of the annual wage for them should be variable, as in the private sector. I am pleased that the new wage structure that DPM BG Lee announced matches more closely private sector practice. Apart from ensuring that our workers continue to have good jobs, and their families continue to enjoy a decent life, we must maintain equal opportunities for all, irrespective of family income. This has been so throughout our short history. The children of poor families have been able to go all the way to university, and then into jobs. It is still so today. When I left for London recently, one SATS employee, a Muslim woman, assisted my mother-in-law with a wheelchair, pushing her to the boarding gate. I had a casual conversation with her, and found that she was going on leave next month - on holiday to Canada. It pleased me that an ordinary worker of SATS can afford to take a holiday so far away. But what pleased me much more was her telling me that she would be visiting her son who is there studying to become a doctor. So our system today allows children from humble families to rise to the top! We must make sure that this remains so. And even if we may have to live with a higher income disparity than we have been comfortable with, we know that in the next generation, the children from low-income families also have a chance to get to the top, and draw top wages. So our policies must not only ensure everyone has a good job, a comfortable home and access to healthcare, we must also ensure that our education system remains a social leveller that gives every child equal opportunities to go as far as his abilities allow him or her. Sir, I have taken this line in this debate because I know there is a lot of concern for the plight of the low-income. There is concern about this sense of unhappiness seeing others earn top wages, and that maybe the solution could be to narrow the income gap. But to me, after 20 years working with the trade unions, I know that the best way to help the low-income is to ensure that they have a job, that they can earn a living and hold their heads high. And that way is to make sure that we have top talent in Government, in the civil service and also in our companies.

Mr Speaker, Sir, thank you for allowing me to join in the debate. Sir, salary revision both in the private sector and the public sector attracts tremendous attention. What is important for us is to ask ourselves whether salary revision is essential. I think it is essential in order that one has to provide some rewards and incentives to attract the best, and one cannot escape this, whether in the low-income group, the middle income or the top bracket, the revision is essentially necessary. At the same time, we should ask ourselves how can we attract good, honest people, people with integrity and ability, into the various sectors. I think that is the basic question that we have to ask ourselves, that if we do not pay respectable rewards and incentives to people, could we attract them, sustain them, or would we in the long run be worse off? These are basic questions that we have to ask ourselves and the answer is obvious. If we need to have a versatile organisation, versatile enterprise, versatile Government, then we must try and attract the best into the public sector and also into the private sector. The private sector always attracts the best all the time because they reward the best through various measures and incentives. Sir, the world is changing. We are not competing amongst ourselves. We are competing with people outside and in the international arena. The world has become complex. Knowledge has changed. There are now borderless industries, ideas, travel and these are very complex issues that we need to tackle. And would Singapore and Singaporeans be able to face these challenges of a complex nature and how do we prepare people and encourage and recruit people in the public sector? I think that is a very important question that we all have to ask ourselves. The question is to try and see how we can provide them respectable incentives and rewards in order that we can get them to give their best. Sir, for the working class and the average workers and the families in the heartland, we have to ask ourselves whether we would be better off if we have dishonest and incompetent people managing the Government. I am sure we would not be better off. We will be worse off. So the question is: how do we, as Singaporeans, make sure that we attract the best possible people into the public sector? I am sure Members will agree with me that an effective civil service and a sound political leadership together with a hardworking population are key factors to promote economic and social progress of any nation. We have seen this happening in the United Kingdom. They attract reasonably talented people into the civil service. We have seen this happening in Ireland. Ireland was at one time not really making progress but it has reformed and changed. It is making very good progress today. The United States, Canada and new emerging places have undergone reforms. Even, as Members know, Poland, which was a very planned economy, today has changed. The leadership has changed. They have been able to attract talented people into the Government of Poland. Mexico is changing. South Korea, in fact, is also undergoing reform and changes, despite the problems of the chaebo. Sir, the problems have been created by all these chaebos. They are trying to clean it up. As Members know, it requires good people to think through what can be done. Good government is a valuable asset to people as lives can become better. Therefore, it is very important for us in Singapore to attract people of quality and, I say, most importantly, people with integrity, into the civil service and politics. In order to do so, we need to reward them adequately and also provide them incentives. This is a good insurance for Singaporeans because we continuously need honest and capable people in Government not only to look after our assets but to build our assets further. We have accumulated more than $80 billion but we will have to look after it to build it further so that we will remain viable and versatile. Sir, imagine what poor government can do to the lives of Singaporeans when dishonest and less able people are attracted into the civil service and politics. Can we make progress? Not too distant time, we know of the Lim Yew Hock Government. See what has happened? We had a corrupt civil service. We had inefficient and not competent people managing it. Many Singaporeans suffered. Their lives were no better until we had a change of Government in 1959. So it is not too distant. We should remember that this is not too far in history and I hope people do not have short memories that such a problem can happen. In many places, such a problem has come about. Our public resources and funds can be squandered by people who are dishonest and incompetent. We will all end up as losers as each of us has to carry at the end of the day the public debt created by incompetents who have found their way into government. This is happening in many places and I am sure Singaporeans can read about it and the problems are quite real. We have seen this happening right now in Latin America, in the Balkans, in Africa, in Asia and nearer in our region. People are suffering as a result of rampant government corruption. As a result, the better off will leave because of instability. I studied in Hong Kong and I had lots of friends who studied together with me in my post-graduate studies. Prior to 1997, many of my good friends have migrated because of the fear and concern of political instability in the future. There are a lot of talented people who have gone to Canada, the United States and Australia. I have gone back to revisit them but I could not find some of them. This is real. I shared, studied and lived with them in the hostel. Today, many of them are in many other places other than Hong Kong because of political instability. As a result, Hong Kong has lost many of its talents to many of the developed countries. Sir, in the end, I say that if we do not have good people in Government and the civil service, we will be no better and we cannot guarantee that this cannot happen to Singapore provided that we ensure that we have good people who can be attracted into politics and Government. If we are not careful, we will suffer the same fate. So it is better that we give our able people in Government and the private sector respectable rewards and incentives. Sir, while we reward the capable in Government, we should also take care of the well being of the working class, ie, the heartlanders. The cost of living is expected to increase and it is important that basic services such as education, health, housing, transport and PUB charges continue to be affordable. I would like to ask the DPM whether such costs will remain reasonable and affordable. How would the Government continue to look after the interests of the working class? What plans does it have because we are moving towards rewarding good Government servants, good Administrative Officers? Therefore, can we ensure that we have in the civil service people who are of quality so that we are able to make further progress? Sir, the salary revision and the increases have implications on consumer cost and create some inflation. I would like to ask the DPM whether one would expect an inflationary trend which can affect our economy to some extent. With all these changes, would it have any spiralling effect on the cost of living of the ordinary people? Since the last salary revision, have we been able to attract good people into the civil service? Are the attrition rates manageable? What is more important is: are we getting people with good public service attitude into the civil service since the changes instituted at the last revision? Is the civil service showing dividend in having made further progress by attracting good people into Government? In the final analysis, we have to ask ourselves whether a better civil service is a good insurance for the working class Singaporeans. It is very important for Singaporeans to examine this. I must say that it is very important, looking at the Hong Kong context and many other countries nearer our region, that when we cannot attract honest and good people into Government, ultimately even the poor has to pay the price. Many of the poor, the working class, are paying the price for having incompetent people in Government and we should not let this happen in Singapore. Sir, I support the salary revision proposed by the Government.

(In Mandarin): Mr Speaker, Sir, in the past, civil servants gave people the typical impression that they were eating from an "iron rice bowl" that could not be broken, and the senior Administrative Officers were holding "golden rice bowls". Today, when we debate on the revision of the salaries of civil servants, is this an implication that more "iron rice bowls" would be turning into "golden rice bowls"? If we look at the major reforms to the civil service in recent years, with all the privatisation and corporatisation, we will find that the various personnel incentive policies given to the civil service are gradually approaching those in the private sector. This is inevitable. The main reason is, in this era of globalisation and new economy, not only the various countries are competing for talents, the public sector and the private sector are also competing for talents and brainpower. The Government must ensure that the civil servants, who are charged with the extremely heavy responsibility of formulating and implementing public policies, are of the best calibre. They must be better than those personnel in the private sector. In order to attain this fundamental condition, these top civil servants must be rewarded according to their performance and even be remunerated substantially. Just now, DPM Lee mentioned that the PSL job cannot be permanent. They can only hold the office for 10 years. This is a breakthrough. It is a compromise between the "iron rice bowl" system and the high remuneration policy. Perhaps we should change the title of "Permanent Secretary", lest it gives people the impression that the office of permanent secretary is so permanent that they continue to hold the office forever. The people of Singapore want to have a good Government, one that is of high integrity, one that is honest. As such, in 1994 when Parliament debated the salaries for the Ministers, our emphasis was on "Competitive Salaries for Competent and Honest Government". I feel that even in this new economy of today, this principle remains unchanged. Today, as we re-debate this issue, DPM Lee introduced a more practical and relevant formula. As the Ministers' salaries are equated to the 206th and 367th ranking among the top earners in the private sector, I would be grateful if DPM Lee could enlighten us as to what professions these corresponding personnel in the private sector come from. If the top management staff from more professions and more corporations are drawing this level of salaries, then our people will have a better understanding and will be more willing to accept it. Our Ministers would have no difficulty handling the types of jobs, and there is no reason why they should not be remunerated as well as the chief executive officers in the private sector. On this principle, we should also want to "cherish our talents, value our talents and cultivate our talents". We want not only a honest and far-sighted Government, but also capable and efficient civil servants. These are the wishes of the people of Singapore. We are fortunate to have both a good Government and a very efficient civil service. This is indeed most commendable. As we know, in a certain country, although the central government has absolute power, the local government officials do not observe the rules as they are too far away from the controlling authority. The officials collude with the rich businessmen and the people are the ones who suffer. The many excellent policies of the government cannot be effectively implemented. In another country, there is a perfect civil service system. The civil service is stronger and more powerful than the government. The government is at the mercy of the civil servants, and is entangled by money politics. Likewise, the people suffer. On the other hand, although we have a team of highly efficient civil servants, there are times when too much emphasis is placed on efficiency at the expense of humanity. They have sacrificed the "human touch". As such, while I support paying good civil servants handsomely, I also urge the Government to strongly promote the plan to send civil servants to the community to feel the pulse of the ground. They must touch the ground, so that they can understand the feelings of the people. In implementing its policies, the People's Action Party Government should make the people feel that the action is for the good of the people. Touch their hearts. This is what we call the "heartware". Under the system of the new economy, the income gap between the top earners and the low-income group tends to become wider and wider. This is inevitable. We must let the people understand that for all the policies of the Government, interest of the people is always the prime consideration. In this aspect, I wish to commend the performance of the CPF Board. According to a report of Lianhe Zaobao on 5th April, some 7,000 senior citizens, influenced by a certain rumour, rushed to the CPF Board to collect $250 because they were under the impression that they might not get the money if they were to go there late. The staff from CPF Board manifested their care and concern for these old folks. They not only saw to it that these old people get the money immediately, but also deployed extra helpers to move some chairs over for these old people to sit on and treated them very well. They have certainly put to full play the well-intentioned policy of the Government in a most vivid manner. Otherwise, even a good policy can turn out to be one detested by the people. The Service Improvement Unit appointed by Prime Minister Goh Chok Tong has been actively monitoring the service standard of the various Government departments, and proposed many people-friendly services. Being a member of the monitoring unit, I am personally aware of many efforts put in by the civil service in this aspect always with the interest of the people at heart. While supporting the revision of salaries for civil servants, I would also urge the Government not to forget the workers who may be drop-outs in our new economic system. We know that skill upgrading is the best security for our workers. However, many older workers have difficulty upgrading their skills. I hope that our Government would review the various policies, so as to be more focused on how to help these workers who cannot keep pace with the rapid changes in our economic system, in order that these older workers could also have a stake in our prosperity. The people of Singapore generally understand and accept the principle of "competitive salaries for competent and honest Government". The workers of Singapore also understand that without a good Government and highly efficient civil servants, we will not be able to attract foreign investments and create job opportunities for our people. Last month, I went with a group of trade unionists to a neighbouring country to attend a conference. While waiting in the holding room to board the aeroplane, I saw a group of labourers from that country who came to Singapore illegally to work, and had to be repatriated after being found out by the authority. Our workers understand that if we do not have a good Government and good civil servants, they may face the same predicament. However, many workers, particularly those in the middle and lower income group, are perplexed as to why many charges are being adjusted upwards before their wages are adjusted and their CPF contributions are not fully restored. With the revision of salaries of civil servants, will it bring about another round of high-salary war when the private sector boosts up its offers in order to lure the best talents to its fold? I hope that the Government will monitor closely the development in this aspect, as well as the feelings of the people.

(In Malay): Mr Speaker, Sir, we have heard the Deputy Prime Minister speak on why civil servants are to get more pay, and Ministers too. But after all the adjustments have been made, the salaries of civil servants and Ministers will still lag behind top private sector incomes. Some people still ask why there is a need to peg the salaries of senior civil servants and Ministers to the private sector. But if we want good quality staff and people in the Government, we have to pay the market salary or almost near market rates. Senior civil servants play an important role in the running of the country. Ministers have even heavier responsibilities. The decisions taken by Ministers have far-reaching implications, politically, economically and socially. With a good political leadership, Singapore has achieved tremendous progress over the years. Just look at the GDP for the last few years or when we have attained self-government. At the current prices, the GDP in 1959 was $2 billion. In 1969, it went up to $5 billion; $20.5 billion in 1979; $58 billion in 1989; and $144 billion in 1999. This means that from 1959 to 1999 the GDP has grown 71 times, or in percentage terms, 7,100 per cent! This is not a small increase. It is not a surprise that some people think the success of Singapore is a miracle. How has this been achieved? We have often heard of the media hype about Singapore's economic miracle. The truth is that our economy has grown because Singaporeans as a people have worked together. The Government is the one that has brought about this economic growth. The Government has brought in the confidence. The data of the GDP that I have tabled before you are the achievement that has been brought about by the Government which has led us even during turbulent times. It is not only the economic aspect. We also have political stability because we have a Government that is sensitive to matters in a multi-racial, multi-lingual society. We enjoy industrial harmony because our unions work together, and not in conflict with employers. Unions and employers are both accepted by the Government as social partners. There are not many countries that have this collaborative system in which we have achieved. Many countries are trying to develop this partnership, which shows that the benefits of such collaboration which we have been enjoying are recognised. This cannot be achieved if our Government does not have an open mind or has not encouraged such cooperation or collaboration. Therefore, this underlines the importance of good leadership. As a result, we have been able to maintain social cohesion. Over the years, we have been able to put the social safety net that has provided the minimum standard of protection for society. Public housing, education and health care are heavily subsidised. So is transportation. Other than that, we have also the asset enhancement scheme. Without a good government, we may not have good governance. Without a good government, it is impossible for Singapore to achieve this level of social and economic development. Without a good government and civil service, we cannot maintain this quality of life. As a trade unionist and also a former journalist, I have visited many countries, rich, poor; big and small. Generally what I have noticed is that good governance is led by good government and it has helped in the economic growth and social development of the country. The reverse is true. Here we have seen how the political and economic structure may be demolished when a government closes one eye on corrupt practices or the leaders of government themselves are corrupt. It does not happen in Singapore and we should not allow such things to happen in Singapore. Therefore, in order to maintain good leadership in the Government, our community must be prepared to pay a premium to attract good talent and high-calibre people to be in Government or in the civil service. I am not surprised at reading the report of the Political and Economic Risk Consultancy (PERC) based in Hong Kong recently. According to PERC, the Singapore Government emerged tops among Asian governments for its effectiveness in economic policies. Singapore is also top in the banking and legal systems. Expatriates feel happy to work in Singapore. It clearly shows that the Singapore Government has brought about a good life for Singaporeans. Should we be reluctant in giving this reward to the leaders of Government and senior civil servants? I do not believe so. If we compare what has been enjoyed by the community with the salary scales that have been suggested by the Deputy Prime Minister, it is not too much. Would higher salaries for senior civil servants or political office holders create a wider income gap in Singapore? I think not. Therefore, I support the Deputy Prime Minister's statement to upgrade the quality of leadership in the civil service. However, this does not mean that we are not concerned about the income disparity which is a debatable issue recently. Although we cannot stop this widening income gap in a developing economy, especially so in a KBE, we should avoid social tension as a result of this income gap. We must always assist the lower income group to upgrade themselves, to have good skills and a higher and stable income. Generally, I think people would not question the salaries of Ministers or senior civil servants. But the people want to know if the Government would continue to care for their welfare. Every citizen is important to us all, whether he is the poor or rich; the educated or less-educated; or has skill or without skills. We should help the children of every family to achieve the highest education according to their ability. We are fortunate that the meritocractic system that is in place always allows the children of the poor families to move upward through education. So no one needs to feel that they are caught in a poverty trap. In Singapore, there are many schemes implemented by the Government to assist the unfortunate. When we have budget surpluses, the Government tops up the CPF. The grassroots bodies and charities also help the poor. Trade unions also render their assistance. On the union front, each year, the labour movement gives away $1 million to assist the children from poor families in educational scholarships and bursaries. I hope the Government will continue to assist voluntary organisations and the trade unions so that they could continue to assist the lower income groups and also to ensure that inflation is maintained at a low level. The Government should help these bodies to assist them face inflation and the challenges of a knowledge-based economy by upgrading their skills so that they will be able to maintain and have a stable job. We are able to do all this and also to avoid adverse social consequences if we have a good government and a good civil service. The proposal of the Deputy Prime Minister in this area is good and I support it. My hope is, as mentioned by Mr Lim Boon Heng earlier, that people should not be envious of this situation by just looking at the figures that have been proposed for the senior civil servants and the political leaders. We should consider their responsibilities, duties and contributions and what they have to do to lead the people of Singapore. Mr Speaker, I support the Deputy Prime Minister's proposal.

Thank you, Mr Speaker, Sir, for letting me join in this debate.

4.31 pm Sir, this mechanism in place about five years ago to pay civil servants and political appointees is now due for some review and, as mentioned just now by the Deputy Prime Minister, giving us some refinements and adjustments, which are to be welcomed. First, in particular, I am very happy that there is a widening of this group of the top end of the income earners to be included in this pegging and also to take the median as the average, instead of just a simple average. I would like to ask, together with the view expressed by the previous speaker, Mr Seng, that in the light of this new pegging of the rate, at 2/3 of M48 plus the 50% discount and 12% increase, at the 367th position of the high income scale, what is the equivalent range of income earners in this position? What kind of people, what profession, what category of employment do they belong to? It would be good if the DPM can give us some information on this range of income earners so that we can compare and see how our Ministers and civil servants are paid in relation to these income earners. Sir, in this new salary adjustment for civil servants, two particular groups of people would be looking at it from different views. One is the higher income earners - the professionals, managers, owners of shares, investors and enterprises - who are looking at it from one view. And then the other view is really the ordinary man in the street. It is to be expected that these two views are quite different. To the internationally mobile, the managerial, professional type with professional qualifications and managerial competency working in large business organisations, the figures are not so intriguing. It would of course be correlated to the level of performance and reward. And in the high level of professional earnings and international MNCs' top executive earnings, these figures are not out of the realm, quite in the ordinary. As to the point raised by one previous Member of Parliament, Mr Inderjit Singh, about this hazard part of the salary reward, perhaps the DPM could clarify at another occasion whether this hazard part is really taken care of in the performance-related part of the salary scale. I believe, if I am not mistaken, that this performance is almost at about 40% of the salary. So there is really quite a risk part of the salary reward in this performance-related factor. If a shareholder or stakeholder in a company were to employ a staff or manager to run the corporation, it would be quite rational for him to hire the best team who can deliver. And modern governments and public services really require knowledge, skills and competency to match those in the private sector. That is how the world is becoming more and more global and governments and business organisations are relating to each other more and more. Can you imagine public servants in the Ministry of Communications and Information Technology or the Info-communications Development Authority who are not able to match the private sector business executives, the group that they deal with every day? The public servants would be led around in circle by these private sector business executives, doing no good to the public interest. And leaders of the Government of Singapore must also deal with many of the issues impacting on our stability, economic growth, investments, employment, training, retraining, rising standards of living and homes for the people. These issues that the Government of Singapore has tackled are proven. The records speak for themselves. Another good example was, what many Members of Parliament have just now brought forward, how we came out of this Asian financial crisis with relatively little damage. If you were to look at the performance of governments all across the world and see how a country came out of this very severe financial crisis with very little damage, and in fact much strengthened, then I can see that there is a great justification to reward our civil servants. Having this mechanism in place is not really to just reward present executives or public servants in the Government, it is really to attract top flight people in future to join the Government as well as of course to retain them. And in Singapore, politics is not about the politics of envy, but of governance to ensure growth, employment for 50,000 entrants to the labour market each year and rising expectations from an increasingly more knowledgable working population. So the demands are not really so simple and easy. Competition is a fact of life in this globalised economy and we are part and parcel of this. We are in the centre of it. There is no choice. MNCs compete and pay for human resource, not manpower. They bring these human resource talents from everywhere to anywhere, where they can maximise their returns on their business. And in this globalised economy, everyone is in competition in the market. It is world wide and everywhere, and we cannot run away from it. Competition for foreign investment is also world wide. Countries engage in this to generate growth and employment opportunities for these countries. Investors and shareholders want the best return. Talents also want the best reward. So paying talent his worth ensures worthwhile value performance. However, this competition for investible resource is only half the picture. The other half of the story is what we have been talking about for some months in Singapore, ie, to encourage entrepreneurship and growth in our economy, income and jobs for the local economy. But we must realise this. The same yardsticks apply - remuneration, stock options for the local economy. And what we can see in this is that the new global economy paradigm really values mobility. Capital moves instantaneously to any place which gives its maximal return, even if briefly. People move from where they have been born to where their talent of worth is given expression across national boundaries. And we cannot prevent that from happening in Singapore. People come here to work because employers find it worthwhile to employ them. Singaporeans venture overseas because they are valued and are engaged with the special skills and competitiveness and are paid their worth for this. We cannot have one set of evaluation criteria for people in the private sector and another set for the Government public sector. We are kidding ourselves if we do, particularly so in Singapore. I have just read a report yesterday. The Singapore Government is again voted the least corrupt in this index. Is running the Government the same as running a corporation? My view is that modern government has changed so much because of technology, and public demands are almost as fickle as consumer demands. And the Government of Singapore is quite unique in this respect. It owns and has many GLCs. I believe the contribution or size of our GLCs in the total economy is of very substantial figures which operate in the private sector. When the Government servants are seconded for a term or two in the private sector in the GLCs for exposure, as they do now, under this new scheme to train and expose our public servants, can one imagine a senior civil servant who, by his years of achievements from school to adult work, has to accept and work with a lower salary than a private sector senior executive? It is unrealistic, especially if he has to undertake more important assignments for the company or the shareholder who is the Government of Singapore. How much more unrealistic to expect the bosses of these senior civil servants, the Ministers and the office holders to be paid less than these executives? So there must be a scale of value and a scope of responsibilities to jobs, we must not be afraid to attach to men holding these offices to safeguard our livelihood, our homes, our lives and our national well-being. Ours is an upward mobile society. Just now, the Secretary-General of the NTUC mentioned this point about how he was so impressed by the lady who is working in SATS going to Canada to see her son who is studying to be a doctor. There are many examples of such cases in Singapore where parents and children really move up very fast because of their achievements. And I can give another example. In Queenstown where I am representing - Queenstown is an area with very old three-room flats - I have come across an ordinary police staff with two children, one graduated at Harvard, another one graduated at Oxford, both on Government scholarships. It is quite unheard of anywhere in the world. But our society allows such people to come out and move up across the social structure by means of their achievement and capability. I hope the Singapore Government will make a re-commitment to the mobility and flexibility in our society for people to achieve and maximise their potential. We should not short-change our people who are in the public service by restricting their rewards and the way in which they can generate the income and wealth for their own families, expecting everything will fall in place by themselves. Things may well fall apart. I would like to address the issue of income gap which many people have been talking about. The issue of salary review and adjustments for civil servants and Ministers and office holders really should not be mixed up with the discussion on income gap. And I perfectly share the view expressed by Mr Lim Boon Heng that the income gap will not be getting closer when there is economic growth. In fact, this is a very common phenomenon. Economic development economists have been studying this. Whenever there is sustained economic growth, income gap widens. The only countries in the world where income gap is narrowing are the poor countries getting poorer. The gap is completely closed when everybody earns the same income. Proponents of this phenomenon remind me of some defunct ideology that has been proven not to work. The proper concern is really to level up the low income households, not to worry about the income inequality gap, or to close it. And this levelling up of income households can be done by an appropriate wage increase in competition in the market and by widening our social safety net infrastructure which the Government of Singapore has been adequately providing. But the Government, I encourage, should take more efforts to examine these areas where there can be more safeguards, more opportunities to allow for access for our workers to good public health, public housing and education. Workers should ask whether their income and employment opportunities have improved over the past few years, whether their companies have done better as a result of appropriate remedial policies of the Government in the wake of this Asian financial crisis and the re-emergence of competition from the neighbouring countries especially with a new, much lower exchange rate regime in these countries. They are really giving Singapore the real competition, unless we move ourselves up into higher technology end. And Government should respond by ensuring that there is room in society for everyone to be upward mobile by education, training, re-training, skills acquisition, giving them equal opportunities and access to all levels of society by dint of their success and achievements. I would ask the Government for re-commitment for maximising the potential of everyone throughout his work life, to have the necessary skills, preparations and opportunities to stay employable, to have affordable access to health, education and housing. And I ask my fellow Singapore workers to be concerned about this rather than to be concerned about closing the income gap. I urge the Government to re-dedicate ourselves to this precept of Singapore 21 where every Singaporean matters to enable everyone to maximise and achieve his potential. That, to me, is a very tall order and I say let us hire the best people for the job.

Sir, I have always spoken in support of pay rises for Ministers and civil servants strongly, and I do so again. Many will welcome or at least not question the rises for civil servants. However, the focus will be on Ministers' salary rises. This is a hot topic and has always been so. On this topic, there is really only one question: do we accept that Ministers' salary should be referenced to top earners in the private sector? The answer is really a no-brainer. This is not a new point. It was established in 1994 when salaries were linked to top incomes outside. But despite this, questions will again be asked when Ministers' salaries are increased. It is these three common questions. The first two are questions of principle and the third is the question of detail. The first question of principle is a suggestion by some that, in absolute terms, Ministers are already earning top salaries and that, therefore, their salaries should not be increased further. This suggestion overlooks a basic point. That is the point about relativity. Regardless of actual numbers, can we have too large a gap between public and private sector incomes? If there is a large gap, then do we honestly expect to get the best for the top public sector? In these matters, one has to be honest and not hypocritical. We want the most talented in Cabinet. Why not pay them what they would get outside? $34 million is cheap to pay for a corrupt-free, top quality Government. Look around in both developed countries and developing countries and see what happens when people stinge on Government salaries. You do not want your Ministers who take favours from private sector people to take free holidays or stay in their hotels, as has happened in developed countries. That cheapens the Government. Let us pose the question another way. If we approach the question de novo and without political consideration, would we only rank that a Minister's job as being as important as that of the 200 top earners outside? Should we not have people in the top 50, in fact, the top 20, and if we have such people in the Cabinet, is it then fair to pay them what the 200 earners outside earn? Yet, with all these revisions, that is what the proposal aims at, and even that, it will only be achieved in the year 2003. Any private organisation that does that will simply lose their talent and will end up as a secondary organisation. Therefore, for the first question, the focus should not be on absolute numbers. It should be on relative linkage. Singaporeans have to realise that as a result of the growing economy, incomes have indeed risen and yes, there is a large income gap. It is a fact. At the top, our people in the private sector command world-class income. We cannot realistically pay our Ministers any less. What we have to hope for is that over time, the right policies and education will help a much larger proportion of the population to reap the full benefits of becoming a world-class economy. I will now deal with the second question that is often asked. Even among those who accept the principle that there should be a linkage between public and private sector salaries, the question that is often asked is whether we do, in fact, have Ministers who command these incomes outside. It is a sensitive question but it misses the central point which we are discussing now. The point of principle is whether we accept that the Ministers' salaries, without reference to individuals, should be at least equal to what the 200 earners outside earn, having regard to the importance of the job and the pressures of the job. If we agree with that principle, then the salaries should be adjusted to that scale. It does not matter whether specific individuals, who are Ministers, would be able to command those salaries outside. That is a systemic issue. We should agree on principles and not let arguments over individual personalities dictate the principles. On detail, the question that is often asked is, in the private sector, the list of individuals who are top earners may change from year to year. By linking ministerial salaries only to incomes, the question is whether the ministerial salaries are protected from the vagaries of the marketplace which may affect top private sector earners, and whether over time, the Ministers would, in fact, earn much more than any specific individual outside. Again, that question overlooks a central principle whether there should be a linkage between a Minister's job and his specific rank outside. It does not matter who the individuals are, whether in the public or private sector. The salary of a Minister should be linked to a range in the private sector because that is what the Minister's job is worth. Then the Government should ensure that its Ministers are of the calibre to command such incomes, whether they are in Government or out of Government. It is like saying what salary will you pay a CEO of a major bank. There will be a base which will be high, regardless of the individual, but specific individuals may get differing bonuses. Sir, after all these revisions, frankly, the ministerial salaries, are still not competitive. The world outside has changed and salaries are increasing outside and they are only part of the picture. The investment opportunities that are available to private sector professionals are simply not available to Ministers. With the changing environment, the best outside can make a vast fortune in the new economy which will make these ministerial salaries appear loose change. Do we or do we not believe that at least some of our Ministers can make that kind of money if they went outside? The Minister's job is a thankless job if he looks at it as a job. The pressures, the public scrutiny, the imponderables are such that you have to really approach it as a calling rather than as a job. And this country, as most of the countries now, is competing at an increasingly complex environment and without natural resources and with only our people to go by, good stewardship is now at a premium and it is all the more important that we get the best. Sir, let me end by saying this. I have said it before but I strongly believe it and will repeat it. When someone suitable is identified and is asked to become a Minister, you only want him to ask himself the following three questions: (i) Am I intellectually good enough? (ii) Can I do the job? (iii) Do I want to do the job? You do not want him to ask a fourth question: can I afford it? If that question is asked, we have failed. Sir, I support the changes.

(In Mandarin): Mr Speaker, my Parliamentary colleagues have brought up some very important points in support of the Ministerial Statement made by Deputy Prime Minister Lee Hsien Loong. I would like to add a few points. Firstly, on CPF. In 1997/1998, when we were facing the Asian financial crisis, our workers cooperated with the Government. They accepted the Government's proposal to cut their CPF benefits by 10% in the employer's CPF contribution. Today, we are proposing to increase the salaries of our Ministers and civil servants on the premise that the economy has recovered. On this point, I would like to ask whether the Government has a specific time-table for this 10% cut in the employer's CPF contribution to be fully restored. The economy has recovered and this is the time we should seriously consider restoring the cut in CPF to our workers. Secondly, today, we announce the rise in the pay for our civil servants. Tomorrow, this will be reported in the newspapers. The response from the market is usually very fast. Even before these announcements were made, transport charges, PUB charges, taxi fares have already gone up. Tomorrow, with the report of pay rise in the newspapers, the various retail outlets and the hawkers will spontaneously jack up their prices. As such, I am worried that the salary increase for civil servants in Divisions III and IV may not be able to match the price hike outside. Although their salaries have gone up, their standard of living may actually take a downturn instead. I feel that for the civil servants in the lower-income group, the increase in their salaries should not be computed in terms of percentage points. For those with a salary of $10,000, a 10% increase would have been $1,000. But for those earning $1,000, 10% is only $100. They pay the same 70 cents for the same cup of coffee. We should give them the increase in real terms so that they enjoy a real raise in their income. Although we may not be able to close the gap between the high earners and the low earners, we should at least try to give the low earners a better deal. Thirdly, the principle for pegging the Ministers' salaries to the top earners in the private sector. In 1994, it was pegged to the top 24 earners and today it is pegged to the top 48 earners. This is an improvement. But for those in the private sector, those who are the top earners such as the CEO and the senior managers, they do not have security in their work. This year, they may have a high pay but next year, they may not get the same pay. So when we are pegged to the top 48 earners, they are actually a different lot of people from year to year. So next year, we may be looking at another group of people in the top earning bracket. Some members of the public feel that this is not a very fair method. Let me give you an example. There are two aeroplanes taking off at the same time. One aeroplane 'P' representing the public sector and the other aeroplane 'M' representing the Ministers. The two aeroplanes take off at the same time. After some time, aeroplane 'P' has to land to refuel, but aeroplane 'M' can have a refuel in mid-air and it does not need to land for refuelling. So in the long run, aeroplane 'M' would have gone faster and further away than aeroplane `P". I feel that we should peg to the same group of people on a long-term basis, rather than changing every year. In this way, it would be fairer. Our income varies according to our economic progress. If the economy has gone up, then everyone will enjoy higher income, and if the economy is not doing well, the income will go down. It applies to everyone. Fourthly, in this year's Budget, no mention was made of this proposed increase in pay for our Ministers and civil servants. Since this pay rise will take effect from July this year, which is within the current fiscal year, will the increase to the civil servants' salaries affect the service that will be provided to the members of the public, eg, in the Ministry of Health, the Ministry of the Environment or the Ministry of National Development? Will the service quality be affected because they have to spend more money to pay for the higher salaries of the civil servants? Fifthly, I am worried about those who are unemployed. In 1997-1998, because of the financial crisis, quite a lot of people were retrenched. Many people could not find alternative jobs, particularly those who do not have good skills or those who are more elderly. They have tried very hard to apply for new jobs, but the success rate is very low, mainly because they are older. They may be in their 40s or 50s or they do not possess computer or special skills, and they are unable to secure new jobs. Two years have since passed. Even if they have some savings, they would most probably have been used up by now. Now they face this problem of not having enough money to support themselves and their families. While we are proposing pay rise to our civil servants, we should also take the plight of these people into consideration, and show some kind of special concern for them. We have talked a lot about training and retraining. But these training and retraining programmes do not benefit them physically unless they can have a job with income to support themselves and their families. First of all, the Government should have an overall plan to look after these people who are presently unemployed and to give them some free training and job opportunities so that these workers who are now unemployed would be able to find jobs. Sir, I support what Minister Lim Boon Heng has said. We must make sure that everybody is employed. The first thing is to have a job. Salary comes second. We should not compare ourselves with others. If you compare yourself with others, you will only be frustrated. So long as you can find a job to support your family, high pay or low pay does not matter so much. In fact, whether the pay is high or low is a very subjective point. One important thing is that we must make sure that everyone has a job, so that his family can have food to eat.

Mr Speaker, Sir, the wage increase which was announced today is a good thing, in the sense that it is in line with the National Wages Council's recommendation which actually gives recognition to the sacrifices of workers during the recession. The other thing is that it keeps faith - there is reward for sacrifices. At the same time, I also accept the economic reality that you have to pay high salaries to attract and retain - and the word used - talent. But instead of using the word "talent", I would prefer "people with the appropriate skills and abilities" that can meet the needs for the work they do. To pay people their worth is definitely acceptable. But in trying to solve one set of problems, we must also be aware that sometimes we create other problems, and there are also concerns. We also have to be aware of what the concerns and problems are, and try to resolve them. In my own mind, sitting there and listening, I can think of three basic concerns which many people have. The first one is: who pays for the increases? There are going to be increases and it has to be paid. The normal thing to ask is: will it result in increases in fees and in Government charges? And a lot of costs of living are going up. Will it be more expensive for ordinary citizens of this country? The other thing is: how do we measure talent? Who are the talents - the right people with the right skills? We bring in people with ability. We talk about market. We talk about efficiency. And they are very high in IQ. They write good papers and have good ideas. But there is also another important element, which is the feel for the people. The emotional quotient of our top civil servants is also important. The third thing is that, even at Question Time the discussion and the debate were that it seems to be that the demand for the skills of a few people at the top are going up. Therefore, their earnings are spiralling upwards, and they are going up and up. There are people at the lower level whose jobs are getting casualised, jobs are being outsourced and there is a spiral downwards, and the net result is that the gap is getting bigger and bigger. We heard that in economic terms, this widening gap is inevitable. But is this socially and morally acceptable? Will it result in a change of values? Are we only measuring efficiency in terms of dollars, and in terms of money? I reflect on this and I think one of the answers to some of these questions can be found in history. I would like to ask whether history can teach us some things, and a few things strike me. One is, in France, during the time of Louis XVI, they had great income disparity. When the Queen was told that the ordinary people did not have bread, she said, "Give them cake!" The net result was the French Revolution. England, at the same time, was also in a similar situation, but they did not have a revolution. There were a lot of poor people. Income gaps were very wide and leaders were out of touch. I read somewhere that one of the reasons why there was no revolution in England was attributed to just one man who went from town to town, village to village, on horseback. His name was John Wesley. He basically gave a lot of ordinary people hope - hope beyond their difficult circumstances. He did not just preach and talk about the world to come, but he also converted many of his ideals into practical help, in the sense that he built schools; he housed people who were in difficulty; he helped the poor; he gave practical assistance, built orphanages and he helped. At the end of the day, the ordinary working people in England were motivated to work hard, to save more, to earn more and also from their earnings, to give back more, and the social standard of living changed. And that was a bit of a social revolution. Another thing that comes to mind is that at the beginning of the 20th century and at the end of the 19th century, 1% of the US population owned 45% of the national wealth. They had all the ingredients for a great revolution or uprising, but it did not take place. Europe had lesser differentials but they had revolutions - the Russian revolution and the Great War. Why did it not happen in the US but happened in Europe? I sit back and I think that one of the reasons is that in the United States, everybody had opportunities through education. Europe was very class divided. And one of the lessons that I learned and one of the key things is that we also need social consciousness. We cannot have a good society whereby people who are eligible and who are entitled to get their worth is paid less than their worth. I think people must get their worth. But the people who get the high pay, who earn well, must also realise that they have to give back something to society. And there are also people who have lesser abilities, lesser talent than them, and they have to be supported. It is not just the creation of wealth but it is also having the right social conditions and stability. I think we must be aware of this. When it is very secure, when things are very smooth, when we do not have these problems, many of us will not think about it. But in moving forward from these events, the difficulties of the ordinary workers who do find a lot of pressures of cost of living, some of them find it very difficult to understand why some people should earn so much more than they could spend. But, at the same time, if these people do explain and we understand that it is for the overall good, it helps. The other thing we learn is that everybody should have opportunities to move up, and the best way is through education. In the US and in many other places, the answer was education, and there must be social mobility. Because when you move up the ladder of success, sometimes the ladder is slippery, you slip. But when you fall there must be sufficient safety nets. And along the way in working life, the chance to move and upgrade is very important in our society. Can we have that? As regards social safety nets, I would suggest that we also relook at our social safety nets. We have got basic safety nets of health, education, housing. These are important. But what is poverty, what is poor, also changes the relative values. I remember when I was young, a lot of homes did not have a refrigerator. The telephone was not in every home. Television was not in every home. But, today, these are considered very basic. The UN says that the poverty line is US$1 a day. But in our society, because our norms are different, the poverty line is also different, and it is also relative. If somebody has it, we also want to keep up with the Joneses. Therefore, we also need to relook at our social safety nets as well as realise that because there is a lot of casualisation of labour at the bottom end, people feel very insecure. We should increase protection for this group of workers, because they do not have the bargaining power or the skills to earn top wages and they need help. And on help, I accept that the best form of social security for anybody is social security with dignity, and that is to have jobs and have the pride of being self-reliant. Sir, I think it is important that we help our people to be self-reliant and have the ability to move up. Therefore, the key for the majority of us would be opportunities and that the role of Government beyond economic growth is also social growth, social cohesion, and cost of living. And if we do all that, then I think we will have people in our society who are strong. They get stronger, and we know that we cannot strengthen the weak by weakening the strong. The strong gets stronger but it is without weakening the weak. If we have the right values, then I accept that we should not have the politics of envy but rather the politics of saying that "if this is something that everybody can achieve, I too have the opportunity to get it. My children can also have the opportunity to have it" and therefore everybody wins. Sir, on that note, I have no difficulty in accepting that anybody, whether it is Ministers, civil servants, the private sector and ordinary workers, who deserves should get his fair worth. 5.15 pm

Sir, I rise to endorse the need for sustaining a suitably and adequately motivated public sector and for retaining talent as well as to make specific comments on the changes as outlined by the Deputy Prime Minister. Much has been said by many of my colleagues on the importance of good and honest Government to our economic and social well being. So I shall not belabour the point about the adverse consequences of having less than upright and incompetent Government. Equally so, attention has been centred on the fast changing global economy and therefore on the need for a dynamic, responsive and upright public sector to enable us to cope and position ourselves. In this context, the public sector must continue to work closely with the private sector, embracing economic challenges together as one single team rather than two camps, the administrator, or even worse, the bureaucracy versus the actual doers. Hence, the civil service needs to be more nimble-footed, more responsive and to be exercising foresight as a matter of habit. I should add here that we do not begin at zero base. We do have a civil service that we can justifiably be proud of. However, the macro competitive landscape is imposing more and more demands on us. This has great implications for all levels and grades within the civil service as it is now incumbent on every public officer to take ownership of and responsibility for his Ministry's or Department's mission. The Government, as employer, must therefore in turn ensure that there is sufficient non-quantitative motivation, guidance and counselling to enable each public sector employee to give of his or her best. For the ones who still tend to "maintain the status quo" or hide behind a faceless bureaucracy, they need to be guided on to individual and team excellence. Essentially, this is a change in culture and mindset. Towards this end, the move to highlight and reward performance is inevitable and much needed. The emphasis on nurturing and preserving credible and competent leadership cannot be overstated. Sir, it is this very spirit of motivating public sector employees to perform at their potential that should arrest our attention. The absolute numbers and the size of increases are, of course, important and news worthy. But what is more important is that essentially there is a need to maintain relativities and to approximate private sector practices, for example, that more will move into the variable and less into the fixed. The sure thing in the form of an iron rice bowl, fixed increments and salaries is fast becoming scarce in the real world. Sir, let me now go on to make comments on the specific changes to benchmarking and the emphasis on performance. Firstly, benchmarking. Two questions are frequently associated with the construction of the benchmark: How representative it is and the extent of risk that is embodied. As my colleague, Mr Chay, has also pointed out, by enlarging the pool from 24 to 48 professionals and taking the median instead of the average, the modified benchmark has become more representative and reduces the risk of outliers providing an upward bias to the numbers. However, many will still ask why 48, not 96, or some other larger number. In this regard, I think it will be good for the Government to explain how the pool size is arrived at. Sir, we note too that the Government recognises that stock options can substantially inflate overall compensation and has therefore discounted this in the benchmark. Once again, is halving accurate and will future refinements be made to approximate actual proportions in the private sector? Secondly, the extent of risk assumption which is also associated with the emphasis on performance. Sir, many will ask how closely does the revamped compensation scheme for top leaders resemble that of the private sector. In other words, how much risk does a top public sector leader assume in his job and career? With more going into the variable and less into the fixed, the link to performance and overall economic well being is closer. This is a move to be applauded and it should not stop here. Next, as to what would constitute a good performance measure, for example, using GDP growth as a proxy, there will always be the challenge of developing a measure that has a more direct correlation to work across the different Ministries. Otherwise, the lack of differentiation at the individual level may be a source of unhappiness. For companies, whether it is sales or profitability targets, there is usually little ambiguity as they can easily be translated into individual targets as well. Finally, Sir, allow me to say that I recognise it is a difficult balance to strike between the need to arrest the attrition of talent from the public sector and harmonising the changes with the overall wage climate in Singapore. Whilst it is clearly necessary to check and debate on the justification for benchmarking, we have to be mindful that the checking exercise does not become an emotional tussle and derail us in our long term quest to be knowledge intensive. As my colleague, Dr Vasoo, has alluded to, we would always have to ask ourselves what the consequences of alternative actions or the status quo would be. In the larger scheme of things, where employment would increasingly be less predictable and less structured, the individual Singaporean's worth will increasingly hinge on value creation for a fast changing economy at his level. Essentially, it boils down to having the appropriate attitude and response regardless of where one works, whether it is in the public or private sector.

Sir, I rise to support the spirit and principles behind the proposals raised by DPM Lee today. Raising compensation levels of Ministers and senior public servants has always been an emotive issue for any country. Nevertheless, there is a need to reinforce and understand the fundamental reasons why it is required at this particular juncture. Singapore is not just an isolated nation in the rising sea of global trends facing all economies in the world. The effects of globalisation are being felt at the far corners of the world. There is now a world benchmark for talent, and not just a domestic one. Mobility of people and the growth of opportunities in the international arena have spawned a whole new level of the ball game in attracting and retaining talent. By many accounts, our Government and civil service have been very successful, transparent and progressive in transforming our country and citizens to the top tier in GNP per capita, in education matters, health and many other services. They have indeed delivered for the nation. A hallmark of our success has been the clear incentives in rewarding dedication, efficiency and results, with market benchmarks. This has ensured that some of our very best and brightest continue to serve our country for the benefit of all. Indeed, the Government and its bureaucracy have been ranked tops by many international benchmarks, not least the recent Economist survey on e-Governments for which it is stated that we have the largest potential in enabling the successful transition of the economy and the nation into the new e-millennium. We all recognise the lure of the dot.coms and its ability to reward richly. Similarly with the rising prosperity of the world and enlarged opportunities for our limited talent pool, the opportunity costs to those who can deliver for the nation have risen. We can never compare and compensate like for like with the market as there is the noble duty of public service attached to the jobs in Government. However, we can certainly give due recognition and reward in as fair and effective a manner as possible. The recent PERC report as appeared in the Straits Times today ranked Singapore tops for its leadership. Our Ministers certainly deserve the recognition. They also deserve the adjustments proposed in this exercise. In particular, I applaud the measures to phase the adjustments for Ministers' salary over a 3-year period as well as the annual review to better reflect the fluctuations in the market. This is indeed a testament to the robust integrity of the way in which we scrutinise and refine our system continuously in the public interest. Sir, despite the logical and rational reasons that had been debated at length in the past and to-date that the Government faces in attracting and retaining talent, we still have to address some of the emotive and pertinent concerns of our citizens. I would therefore like to raise a few concerns and seek clarifications with DPM. Sir, Singaporeans are feeling the effects of the recent increase in fees and rates, in transportation, utilities and other basic charges in the economy. There is a fear that there could be further increase in fees, rates and other charges as a natural consequence of raising public sector wages. DPM has stated earlier today that the proposed increases in salary of public servants arising from this exercise will amount to some $400 million. I would like to ask him if this amount has been provided for in the current budget. If not, where would the expenditure be funded? If yes, could we have the assurance from him that this exercise would not lead to any consequential increases in rates and fees of Government charges. The timing of the exercise is also a source of concern for a large minority of our population who have yet to feel any tangible effects of the economic recovery. These include families whose members have suffered retrenchments or SMEs and small businesses that are still finding the environment difficult to successfully operate in. I would like to ask if the Government has done any studies into the potential impact on employment and wages, ie, its impact on our economic recovery arising from this exercise. If the consequence of benchmarking public sector wages leads to pressure on the private sector employers to follow suit to attract and retain their own talent by raising wages, this may stifle the nascent and segmented economic recovery that we have benefited so far. Will DPM comment on this concern? On a related note, rising wages increase the opportunity cost to relocate and discourage Singaporeans to take on more entrepreneurial roles by creating more "comfortable" employees in both the public and private sectors. This seems to go against the spirit of entrepreneurialship and enterprise that we have been trying to cultivate so aggressively in the last one year. Greater risk averseness and higher opportunity costs in the public and private sectors will reduce labour mobility. There may be less incentive as a result to exploit opportunities as fast as we should be. Would DPM therefore be able to comment on any expected effects this exercise may have on slowing the initiative for greater enterprise in our economic model, which is essential to our survival in the new millennium? Sir, I support the proposal but would like DPM to address some of the concerns I have raised arising from this exercise.

Sir, this is not an easy matter to debate. Salaries of Ministers and civil servants are a matter of intense public scrutiny. Public funds are involved. Many perceive Members of this House as being judge, jury and beneficiary and ultimately it is an extremely emotive issue. I am therefore glad that the Government has chosen to adopt an open and transparent approach to this debate. One would imagine for a matter which is fraught with such problems, the instinct would be to shirk away from debate. But this Government has not done that and it has placed all the facts on the table for Singaporeans to look at openly and consider. It is typical of this Government's style and I welcome it. Sir, the need for top talent in the public sector is, in my mind, very obvious. The public and private sectors are twin engines of growth. Public sector capacity is critical for the growth of our nation. It is difficult to think of any country where the public sector has been weak or slovenly in its response to challenges and which has yet managed to maintain and sustain consistent growth and economic and developmental success. There are a few where there is this asymmetry and in those cases the benefits have been in very narrow pockets and not sustainable. The public sector is a key determinant of the enabling conditions for economic growth and broad-based development. These include not just physical infrastructure but the laws and policies, education system, law and order, etc. Sir, the bottomline is we cannot fly as high or as fast with only one engine firing. If we accept the need for top talent in the public sector, we must be ready and willing to pay competitively. Only then can we hire the best, demand the best, and make no apologies for it. Charity and sacrifice is best left to the individual to decide for himself or herself. Sir, I think back to the time when I joined the Administrative Service in 1987. Over a period of six to seven years, three-quarters of my cohort resigned and left for the private sector. This was before the civil service pay adjustments were introduced in 1994. These are good friends and they are no less loyal to Singapore than anybody in this Chamber or any other Singaporean. But they left because of the economic realities. They too had needs. They had families. They had children. They had mortgages to pay and they had expectations and aspirations commensurate with their talent. It was quite unrealistic to expect them to take a substantial reduction in pay when they could see what they could command out there. So they left. And they felt that they could continue to contribute to Singapore in other ways, and many of them still do. But the bottomline again is that the civil service and the public sector was the poorer for their departure. The question then is how much is enough. Sir, this is subjective. We have a formula. Is it too high? Is it too low? Or is it right? We could perhaps look at it from some angles. The first question to ask is really: have they delivered? And I think it is generally acknowledged not just by Singaporeans or Members of this House, but globally, that we have a public sector that is amongst the best in the world. The PERC survey that many Members have cited is just one in a series of examples. In the World Competitiveness Reports, we have consistently been rated high and one of the critical factors has been governance. It is not just the quality of the leadership but also the fact that it has been able to stay ahead of the curve and not just keep up. More recent examples of that will be the manner in which the economic challenges of the recent crisis were managed, the drive into a knowledge-based economy and the initiatives in e-government. Not many countries have set the pace. And we have to see what has all this cost us. If I recall correctly, with all these pay adjustments, the DPM has said the total cost will increase to $34 million. This is less than 0.01% of our GDP. If you call it an investment, I think it is reaping good returns. If you want to call it insurance, it is a very low premium to pay. Sir, I think the need for such competitive pay is equally obvious if we contemplate the alternatives. We should not measure the cost of public leadership in terms of just the salaries that the leaders earn but of the total cost they could cost the nation, in terms of poor decisions or in terms of other unsavoury tendencies. Sir, I would like to focus on some aspects of this review for further comment. The benchmark that has been used to compute civil servants and Ministers' pay has been the object of much confusion and even mythology. Does it include foreigners? Does it include stock options? Is there a discount? How big a discount is it? And does it include the wages or the earnings of banker entrepreneurs? It has also been the object of criticism that the base that has been chosen has been too narrow and that Ministers and the top civil servants are therefore not subjecting themselves to adequate risk in their earnings. In that regard, I welcome the broadening of the base from 24 to 48 for the higher benchmark and the 50% discount from stock options. It is also laudable that most of these increases are going to be channelled to the variable component and to increase it to as much as 40% of the total wage. I think these are important steps to address some of the questions in the minds of the public. But I do have some specific questions on this benchmark and its application. One question really is the net effect of the entire benchmark and the discounting has been to peg the Ministers' pay at 200, if you take the full amount of $1.21 million, or 360, I think, if it was taken at a discounted level of $900,000. So the question that begs to be asked is: could an alternative formulation be considered, or maybe it has been discarded, which is to consider a broader pool at the top of, let us say, the top 400, and then taking the median of 200? The reason I say this, Sir, is in any statistical analysis, a small sample tends to have greater volatility and variability. To use that as a base to compute a benchmark and then to apply a discount is probably going to raise more questions. And perhaps if the net effect of all of these is to peg the Ministers' pay at 200, then why not do that and, say, take 400, and take the median. I think this is something I would just like to hear some clarification on, whether this has been considered and why it has been discarded, if so. The other issue is the question of transparency. The sceptics will say that this large variable component of 40% is merely a device to camouflage the true extent of the pay rise accruing to the top civil servants and Ministers, and I think this needs to be addressed head on. One way to do that is to be transparent about the range and performance bonuses given to Ministers. I do not mean by this that individual Ministers' names be put and the bonuses be stated next to them. But I think it would be a very strong effective signal if the public is told that the range and performance bonuses earned by the Ministers is X to Y. That would tell them, first, that the variability is genuine and it will be effected at the top levels, and secondly, that the Ministers are subjecting themselves to the very discipline that they expect of top civil servants as well, in terms of pay variability. Sir, the final comment I have is on the issue of timing and sensitivity. This pay rise comes, and there is no denying this, at an awkward time, because CPF cuts have not been fully restored and there have been recent increases in transportation costs and other charges. One could argue that there is never a good time for such pay rises. But the quantum is significant and for many, they would find it difficult to fathom. I think it is very laudable that in this exercise there has been a concerted effort to space out the increase and minimise the upfront increase. It demonstrates that a lot of thought has gone into being sensitive to average Singaporeans and their perception. But I wonder whether an additional step in terms of accelerating the CPF cut restoration could be considered. I think that would demonstrate to Singaporeans that the leaders are in it with them and that when things get better, it gets better for all.

(In Mandarin): Mr Deputy Speaker, Sir, Deputy Prime Minister BG Lee Hsien Loong has made a Ministerial Statement on the increase of salaries for the Ministers and public servants, and he has used the mechanism deployed in the previous exercise with some improvements, such as increasing the pool of top earners from 24 to 48 and using the median point, instead of the average. These are good improvements. Perhaps some people may question whether this is an appropriate time to propose such a substantial increment to the salaries of the Ministers and civil servants given the present economic situation. Since 1999, our economy has come out from the rock bottom situation. Our exports have grown strongly, particularly in the exports of electronic parts. Last year, our economic growth was 5.4% and the income of the professionals had increased substantially. Since the civil servants' salaries were pegged to the private sector, I think it is only fair that we look into increasing the salaries of the Ministers and public servants according to the current market trend. But now we are moving into a new economy whereby the economic structure has transformed in such a way that many traditional industries are unable to pick up, and some workers are unable to cope with the demand of the new economy. Many SMEs are not doing well, and many workers have lost their jobs. These are the people who suffer losses in income and they find it difficult to accept the substantial increase in the salaries for the Ministers at this point of time. As for those who are lucky enough to stay employed, the cut in their employers' CPF contribution has yet to be fully restored and they cannot help feeling unhappy about this increment of salaries to the Ministers and public servants. The pegging of salaries between the public and private sectors is something which we have debated and accepted many years ago. It is a very creative measure. Singapore is the only country in the world with such a formulation. The Government has pegged the public sector's pay to the 6 top earning professions in the private sector. The public sector has been responsible for policies that govern the nation and to lead us in our economic development. In the meantime, our Ministers' pay is pegged at only two-thirds of the top earners in the private sector. This is very reasonable. With the economic recovery, the earnings in the private sector have gone up. So it is only fair and reasonable that we make adjustment to the public sector's salaries at this point of time. However, the gap between the public sector and the private sector could even be widened because at this time, everyone is fighting for talent. In order to retain the top talents in the public sector, we have to increase their salaries. But in the private sector, they would also take the public sector's salary as a benchmark as well. They would also increase the salaries for their own staff in order to retain their talents. This would bring about a chain reaction and, in the long run, the wage cost in Singapore would go up and this would affect our competitiveness. The only solution is that we have to improve our productivity to offset the adverse effects brought about by higher wage costs. The economic recovery is not across-the-board. There are some sectors in our economy, particularly in the SMEs, which have not fully recovered, and the higher wage cost would be an added burden to them. However, if we do not increase the salaries of our talented professionals, what would have happened? Under the development of information technology, we are becoming globalised and our talents would easily be attracted by other countries, so long as they offer better terms of employment and better pay. Many of our top talents would be attracted by the overseas employers, and go over there. So we have to pay them good salaries in order to retain them. This is a reality which we cannot run away from. At the same time, the salary in the public sector must also be competitive so that we can retain the top talents in our public service. Therefore, an appropriate adjustment is necessary and cannot be avoided. If we do not adjust their salaries, many talents and top brains will be lost to the private sector. If we do not have first-class talents who can make decisions correctly and resolve all the difficulties to lead the Government, particularly in a time of crisis, it will certainly lead to disaster. For example, in 1985 and 1986, when we faced such a grave economic crisis, if it were not because of the Government's prompt action, we would not be able to get out of the crisis so quickly and emerged stronger than before. So I think a high quality government is very essential. Only with a good government, could we have good economic growth and a good standard of living for our people. Of course, some people may argue that our first and second generations of political leaders had sacrificed themselves to serve the people without insisting on good pay. It is because of their sacrifices that we are able to enjoy what we have today. Then why is it that we must now pay relatively high salaries to attract and retain talents in the Government? I think the answer is that we are now living in a different era. Our society is peaceful and stable. Our economy is growing rapidly and talents are easily attracted to other sectors because of their market value. Nowadays, when the young people choose their courses of study, they always think in terms of how much they can earn in the future. This is inevitably the criterion for their choice of studies. In future, whether or not they are prepared to be civil servants or political leaders, one of the major considerations will be how much they can get in terms of salaries. If we compare the salaries of our Ministers to the top earners in the private sector, they are still one-third less. This is a sacrifice that they have to make. So, in future, will the top talents be prepared to make this sacrifice to be in the public service? It is still a doubtful point. If we do not have good salaries for the Ministers, it would be very difficult to attract top talents to form the Government, and it would be a great loss to our nation. The proposal raised by DPM Lee is not just for the salary increase for the present batch of political leaders - the Prime Minister, Deputy Prime Ministers and the Cabinet Ministers - it is, more importantly, a preparation for the future. To the present lot of Ministers and public servants, they have a stable and adequate pay. A pay rise of 10% or 20% is not that critical to them. In economic terms, the "marginal utility" of money is getting lesser and lesser. Sir, the important point is that we want to set up a mechanism to ensure that we have generation after generation of high quality people in the Government to promote the progress and development of the economy of Singapore. I support the Deputy Prime Minister's statement.

Resolved, "That the Debate be now adjourned." - [BG Lee Hsien Loong].

Debate to be resumed on what day?

Tomorrow, Sir.

So be it.

Resolved, "That Parliament do now adjourn." - [BG Lee Hsien Loong]. Adjourned accordingly at Eight minutes to Six o'clock pm.

asked the Deputy Prime Minister and Minister for Defence why there have been more lapses in his Ministry's financial procedures and accounts, as revealed in the Report of the Auditor-General for the Financial Year 1998/99 (Paper Cmd. 8 of 1999).

MINDEF has given a detailed account of each of the cases cited in the Auditor-General's Report of 1998/99 during the recent Budget Debate on 14th March 2000. Just to reiterate, in all the breaches raised by the Auditor-General, there is no loss of funds due to misuse of funds or frauds. All the lapses have been rectified and all funds accounted for. MINDEF has also taken further measures to ensure that similar lapses do not occur again.

asked the Minister for National Development if the Housing and Development Board will relax and simplify its policies and rules governing the resale of HDB flats to enhance their market value and make it easier and faster for flat owners with changing needs and circumstances to shift their place of residence between HDB estates or between HDB estates and private residential estates.

HDB flats are built to meet the housing needs of Singaporean households. They are highly subsidised. Thus, there is a need to have rules and conditions for the purchase and use of these flats to ensure that they are for owner occupation. At present, the minimum occupation period for new HDB flats and resale flats purchased with the CPF Housing Grant is 5 years, while that for other resale flats is 2.5 years. These rules are intended to prevent rapid churning of HDB flats for speculation purposes. They are not so onerous as to prevent genuine cases of upgrading to take place, whether to a bigger HDB flat or to a private property. Annex 1 Table 1: Salary System Based on Salary Ranges Salary Points Salary Political Ranges Appointments Staff Grade IV, V MR1 DPM/Minister MR1 Staff Grade III MR2 Minister MR2 Staff Grade II MR3 Minister MR3 Staff Grade I MR4 Minister MR4 Superscale B SR5 Senior Minister of State Superscale C SR6 Minister of State Superscale D SR7 Senior Parliamentary Secretary Superscale E SR8 Parliamentary Secretary Superscale G SR9 Senior Principal Assistant R10 Secretary* Principal Assistant Secretary R11 Assistant Secretary R12 Senior Administrative R13 Assistant Administrative Assistant R14 *:Newly introduced range. Annex 2 GDP-related Bonus The GDP-related bonus will directly link the pay of political and statutory appointment holders and senior Administrative Officers to the state of the economy. The size of the bonus will depend on the real economic growth of the economy. The bonus will be 1 month if the Singapore economy grows by 5% in the calendar year, the mid-point of its estimated long-term growth potential (4 - 6%). It will be 0 month (the minimum) if the economy grows by 2% or less, and 2 months (the maximum) if the economy grows by 8% or more. In between, it will vary linearly with GDP growth. The intention is to eventually build up this bonus to an average of 3 months, with a range of 0-6 months. Performance Bonus Performance bonuses were first introduced for Superscale officers in the Administrative Service in 1989. Since then, they have been extended to timescale Administrative Officers as well. The performance bonus norms will be raised as follows: Political and statutory appointment holders and Administrative Officers in Superscale C and above presently receive performance bonuses averaging 4 months of salary. This will be increased to an average of 5 months for those in Salary Range SR6 and above. Administrative Officers up to Superscale D1 presently receive between 1 - 2 months of performance bonus on average, depending on their grades. This will be increased to an average of between 3 - 4 months. How many months of performance bonus an officer actually receives will vary from person to person. Those with unsatisfactory performance will receive no bonus at all, while an outstanding officer will receive much more than the average quantum. Several appointments currently receive fixed bonuses instead of a performance bonus: the President, PM, SM, Chief Justice, Speaker, Chairman PSC, Attorney General and Auditor General. This will continue under the revised framework. Their fixed bonus rate will be set at the average rate for senior officers. Bonus Pool Under the bonus pool system, an officer will be paid half his performance bonus for the year immediately. The Government will contribute the other half into a bonus pool. The officer will be entitled to receive the amount in the bonus pool in two equal instalments 12 and 24 months later, provided he continues in Service. Officers who resign or are dismissed from the Service will not be allowed to withdraw any balance in the pool. However, officers who retire from the Service will be allowed to withdraw the balance. The bonus pool system will not apply for the President, statutory appointment holders and judicial appointees. Annex 3 Table 2: Pay Comparison Before and After Salary Revision Current Revised Grade Monthly Annual Ranking Range Monthly Annual Ranking Prime $85,000 $1,699,000 85 -- $85,300 $1,940,000 63 Minister MR3 Max $55,700 $1,422,000 137 Minister $49,800 $1,134,000 239 $49,900 $1,274,000 180 (SG II + 12%) MR3 Min $44,600 $1,138,000 239 MR4 Max $47,400 $1,210,000 206 Minister $37,800 $861,000 491 MR4 Min $37,900 $968,000 367 (SG I) SR5 Max $39,800 $1,016,000 318 Superscale B $28,000 $638,000 929 SR5 Min $28,800 $736,000 699 (Significant Grade) SR9 Max $18,800 $390,000 >1000 Superscale $13,400 $242,000 >1000 SR9 Min $17,500 $363,000 >1000 G Member of $9,100 $137,000 -- $11,900 $176,000 Parliament