Gautam Banerjee
Singapore
“Sir, I thank the Minister for the explanations. Given the complexity of the process, the inherent risk of the assumptions that have been used in this expected long-term rate of return and, obviously, the interest by everyone in making sure that the process is robust and transparent, would the Minister consider, at some stage, giving a lit…”
“Active citizenry cannot be forced but we should continue to actively encourage our youth in the State's affairs. We should make them feel safe to voice their views. In this regard, all of us in this House must be willing to keep an open mind on the ideas brought up by our youth and continue to actively engage them.”
“As we bring in new locally-trained doctors as well as foreign doctors, nurses and other hospital staff, I would like the Ministry to pay more attention to their career development.”
“If we have what it takes to weather the storm, we should ensure that the strong winds do not tear down the arts and cultural scene that we have painstakingly built in recent years.”
“In conclusion Sir, I hope that we will take a long-term view and continue to make foreign talent welcome and feel at home in Singapore because they will not only help us survive the downturn but, in the light of tough competition ahead, will help us emerge from the downturn stronger and more resilient. New Citizens”
“We will need "off budget" measures to supplement, modify and tweak policies, both existing and those introduced in this Budget, and we need to do this swiftly and decisively throughout the coming months.”
The complete record
Every one of 139 lines we hold for Gautam Banerjee, in date order, each linked to its source. Free to read, in full, without an account. Page 3 of 3.
“A recent Government report stated that between 1st October 2005 and 30th September 2006, about 45% of CPF members who invested their CPF savings suffered losses, while another 32% had returns of less than 2.5%. This is not surprising because for the average individual to invest in funds is always going to be a very daunting task, he or she has neither the time, knowledge of markets and products or the scale to be able to afford proper advice or obtain beneficial rates. Even as a fairly sophisticated finance professional, I struggle with my own personal investments. What chance then does someone, who is not connected with the world of finance, have to make a success of investing a few thousand dollars in CPF approved funds? They would be better off leaving their retirement savings with a trusted public institution, such as the CPF Board, which has the expertise and scale to do a consistently better job in managing their money. It is heartening to note that, in recent weeks, the Government has recognised that CPF balances should earn higher rates of interest and is proposing to peg the interest rate on savings in the CPF SMRA to an appropriate long-term bond yield. However, as the Minister for Manpower has himself said, in the short term, this is unlikely to have a positive impact because current bond yields are below 4%. I sincerely believe that a lot more could be done to improve the returns on the CPF Ordinary and SMRA accounts. Given the huge balance at the disposal of the CPF Board, if it operates in the same manner as other large State and company pension funds, the returns it could generate over the long term for CPF holders would be better than what is presently being achieved or being proposed.”
“After all, both SRS and section 5 schemes provide retirement savings and the tax on the benefits should be harmonised. Improving returns on CPF accounts Before I conclude, I have some observations and suggestions for the administration of our CPF scheme. The current interest rate on the CPF Ordinary Account is 2.5% and the interest rate on savings in the CPF Special, Medisave and Retirement Accounts (SMRA) is 4%. However, large pension funds should be able to use their expertise, scale and clout to invest in a range of both fixed income and other investment products to get higher returns compared to bank interest on which the interest on CPF Ordinary Account is pegged. I asked a leading actuary currently working for my regional firm, who has lived and worked in Singapore for more than two decades, to do a quick desk-top survey on the historical returns posted by large company pension funds over 10 or 15 years. The results of this informal survey indicate that the average compounded investment return after all expenses is around 8% per annum, which is comfortably over bank deposit rates and therefore substantially higher than what balances in the CPF Ordinary and SMRA accounts are presently earning. Of course, in Singapore, we can withdraw a large part of our CPF balance and invest it ourselves in a wide range of approved CPF funds if we think we can do better than what the CPF Board provides by way of investment return. Here again, the experience is very mixed and both anecdotal evidence and Government reports point to many doing poorly with their personal CPF investments.”
“Thirdly, some companies vary their contribution to the section 5 scheme according to their profitability, with relatively high contributions in good times and lower contributions when times are not so good. The key aspect is that, unlike the CPF which adopts a broad sweep across all companies, this approach is focused on the company itself and employees and shareholders together benefit. How does a section 5 scheme increase employees' retirement savings? Suppose a company pays one month's bonus into a section 5 scheme each year. Assuming an investment return of 5% per annum in the section 5 scheme, the retirement income will increase from less than 30% from the CPF alone to over 45% - still not the 66% target but a considerable improvement on the $15 a day. The World Bank states that there should be at least three pillars for retirement savings: (a) a mandatory State scheme, which provides basic benefits like the CPF; (b) company pension scheme, which provides a significant part of retirement savings; and (c) voluntary individual savings. In Singapore, recent demographic changes have highlighted the fact that the CPF alone is inadequate for a reasonable continuation in living standards in retirement. The shortfall cannot be met by children or, for the lower income employees, by voluntary individual retirement savings. A practical option available is to have additional retirement savings through section 5 schemes. The tax disadvantage of such schemes is that the benefits are taxed in full despite the fact that the benefits include investment income, which is generally tax free in Singapore. In order to encourage the establishment of such schemes, consideration should be given to taxing the benefit the same way as SRS, ie, 50% tax free and 50% taxable.”
“In Hong Kong and Malaysia, for example, the benefits are tax free. Even in a high tax jurisdiction country like the UK, 25% of the benefits are tax free. Unlike voluntary individual savings, the collective nature and regularity of the contributions to section 5 schemes enables companies to use their bargaining power to ensure minimal upfront bid/offer expenses and that the investment management fees are as low as possible. This, of course, means much better investment returns for the employees. Secondly, companies have access to the best investment advisers and managers whereas individual employees on their own will not. Thirdly, employment pass holders can be members of section 5 schemes whereas they are excluded from the CPF. Given our declining birth rate, we need to attract foreign talent to keep our economy going, so this must be viewed as a positive. One fallacy is the argument that if employers establishe retirement savings schemes for their employees, this would increase the cost of doing business in Singapore. This is wrong for a number of reasons. Firstly, nobody is forcing companies to establish such schemes. The companies, which have recently established section 5 schemes, were keen to have an element of compensation, which encourages employee retention and dampens job-hopping. They felt that it is important to show that they were concerned about the deficiency in their employees’ retirement savings or, in the case of employment pass holders, that they should have some form of company sponsored retirement savings. Secondly, instead of paying employees relatively high bonuses, companies can always restructure employees' compensation by paying smaller but still reasonable bonuses and paying the balance into a section 5 scheme.”
“Government has already tried to encourage voluntary individual employee savings by introducing the Supplementary Retirement Scheme (SRS). This has been quite poorly supported for a number of reasons. The basic reason for employees to take out an SRS is because of tax relief on their contributions. However, the majority of employees - certainly the 25% lower income employees - do not pay income tax so that the SRS does not offer any attractions for the average employee and simply is a tax shelter for the higher income employees. When the SRS benefit is received, 50% of it is taxable. But this 50% includes investment income, which would otherwise have been tax free if the employee had saved outside SRS. Not only that, the benefit is taxed in full with a 5% tax penalty on top, if the benefit is drawn before age 62 or, in the case of expatriates, before 10 years after commencement date. Furthermore, it is not cost effective for employees to voluntarily save on their own because of high investment management, administration and agent’s expenses. Section 5 IRAS approved company retirement savings schemes I feel that this is far and away the best solution, despite a certain tax disadvantage. Section 5 of the Income Tax Act specifically permits companies to establish retirement savings schemes for their employees. Company contributions to such schemes are tax deductible up to generous limits. Employees are not taxed on such company contributions. The tax disadvantage is that the benefits are taxable in full but the benefits include investment income, which would normally be tax free in Singapore. In other countries, generally, the benefits from company retirement savings schemes are not taxable in full in order to encourage companies to establish such schemes.”
“The normal way to estimate what the CPF alone provides is to take model employees and to make various assumptions about salary growth, housing, marriage, etc. Based on a reasonable set of assumptions, the 25% lower income employees have the equivalent of a retirement income of less than 30% after housing and medical. In terms of a salary of $1,500 a month, this means a retirement income of $15 a day to last for almost 30 years. This is well short of the target of 66% or $1,000 a month. Clearly, other sources of retirement income are essential. The CPF has been a resounding success in helping Singaporeans own their home. But the jury is out whether the CPF alone will be enough to provide adequate cover for our ageing population. I believe that we need more than just CPF. Other sources of retirement income In traditional Singapore society, children supported their parents financially in retirement. However, the combination of a very low birth rate and significantly increased longevity means that this source of retirement income is no longer available to anything like the same extent as in the past, especially for the 25% lower income employees. What about voluntary individual employee savings? The problem with relying on voluntary individual employee savings is that the average employee - not only in Singapore, but globally - does not have the necessary discipline or even awareness to save for his retirement needs. He is certainly unaware of how much he needs to save even if he is aware of the need for saving. This is certainly true for the lower income employees. Do you think the average employee would continue to pay his CPF contributions if the CPF announces that employee contributions are voluntary? The answer is quite obvious!”
“This demographic disadvantage has severe economic and social consequences. In the past, it would be normal for four or five children to financially support one retired parent, the other parent and all grandparents having passed away. A combination of low birth rate and increased longevity means that we now have 1.2 children trying to financially support two retired parents and four retired grandparents. It is certainly quite impossible for the 25% lower income employees to do that and to save for their own retirement at the same time. Longer life expectancy at retirement means a lot more money is needed to avoid a collapse in living standards at retirement. Longer life expectancy also means much higher post-retirement medical costs. For example, medical costs at age 75 are some four times the medical costs at 55 and at age 85, are about seven times the costs at 55. Before retirement, many employers would cover employees' medical costs through medical insurance but after retirement, a person has to pay for his own medical costs. The generally accepted global standard is that a reasonable continuation in living standards requires an income in retirement of about 66% of salary immediately prior to retirement. In reality, the 25% lower income employees for whom the cost of basic necessities is a relatively large proportion of income would require a post-retirement income of more than 66% to avoid a reduction in living standards, while the reverse would be the case for the higher income employees. What I want to do is to focus on the 25% lower income employees since it might be argued that higher income, better educated employees can look after themselves. What does the CPF alone provide?”
“Mdm Deputy Speaker, thank you for allowing me to join in the debate. Our Government has once again demonstrated visionary and responsible leadership in dealing "head-on" with a very serious issue - our fast ageing population. This is a thorny problem affecting many countries and no government has come up with a satisfactory solution to date. This is so because the issues are complex, potentially very expensive to handle, requires courage, determination and a collaborative approach not only by Government but the employers, employees and society at large. There is no "silver bullet" or easy fix to this very difficult problem. The proposals by the Minister for Manpower yesterday have been very well thought out, break new ground and will be welcomed by all. But given the magnitude of the problem, the measures announced by the Government will not by itself solve all the problems of an ageing population. This is going to be a long journey with perhaps no end, and we have to be bold, take some measured risks, collectively own and solve the problems as a united country. Madam, it is common knowledge that we are in the middle of major demographic changes. We have experienced a poor birth rate over the past 30 years with the population nowhere near replacing itself. At the same time, life expectancy has rapidly increased and on retirement at age 62, life expectancy is now over 20 years and this is expected to increase to 30 years in the near future. The over-65s as a percentage of population was 6% in 1990, is 7.5% today and is projected to exceed 20% in 25 years' time. Consequences of the demographic changes What are the consequences of the demographic changes? Our current birth rate is about 1.2 instead of the population replacement rate of 2.1.”
“In the near future, the Asian powerhouse economies, China and India, will also do the same. The due process of setting accounting standards by the International Accounting Standards Board, or IASB, is fairly elaborate and requires considerable resources. The board members of the IASB have decorated financial reporting backgrounds, 12 out of 14 are full-time members. They are supported by a team of technical directors and managers. Before the issuance of a new or revised standard or interpretation, accounting issues are often discussed by the Board, their comments and decisions are recorded and reported publicly. Discussion papers and proposed draft standards are issued to all stakeholders for comments, roundtable discussions are held and, sometimes, field tests of the standards are conducted, all in the interest that the standards issued are of high quality and capable of practical implementation. My point, Sir, is that the due process, which is necessary, is also costly. The proposed ASC and its predecessor, the CCDG, in the past, had a form of due process in place for the adoption of IFRS as Singapore Financial Reporting Standards. Similarly, it is not unreasonable to expect some elements of independence and due process for setting accounting standards for statutory bodies if this is to be done by the Accountant-General and not the ASC. But how will the Accountant-General achieve this without considerable duplication and cost? Would it not be better to entrust all accounting standards setting to the ASC?”
“Coming back to Singapore, if the Government entrusts accounting standards setting for statutory bodies to fall outside the jurisdiction of the proposed ASC, then like in the UK, an independent and robust process should be put in place to approve changes to accounting standards, specifically for statutory bodies. In the UK, for example, although the Treasury has the power to issue its own accounting standards, it cannot depart from the established framework without endorsement from the FRAB, which is independent of the Treasury. I am sure that, as Members of Parliament, we would feel more comfortable knowing that the accounts of our public entities are being prepared based on Financial Reporting Standards adopted by the ASC and, if and when there is a departure, they have been reviewed and approved by an independent body, not just another group within the Ministry of Finance. Mr Speaker, Sir, when it comes to governance, independence and due process must not only exist but also be seen to exist. Thirdly, I would like to deal with the issue of due process and cost. Let me explain to all of you the due process of setting IFRS, which I appreciate many non-accountants among you may not be familiar with. The reason why I am making reference to IFRS is that Singapore Financial Reporting Standards are based on IFRS and, in almost all cases, word-for-word, identical to IFRS. The use of IFRS as the basis of Singapore Financial Reporting Standards allows our companies to be benchmarked against international companies easily and, among other benefits, gives them better access to key capital markets. In fact, more than 100 countries, including Hong Kong, Australia and those in the European Union, are in the same position as Singapore.”
“The central government departments, agencies and other bodies prepare financial statements that are made available publicly in accordance with the Government Financial Reporting Manual issued by the Treasury. Although the standards are issued by the Treasury, which is part of the financial control function of the government, by law, the Financial Reporting Advisory Board, or FRAB, led by an independent Chairman, has a statutory role to ensure that any adaptations of, or departures from, the UK accounting standards for businesses and companies in the government accounting manual are justified and properly explained. Members of FRAB consist of preparers, auditors, academia, accounting standard board members and economists. The FRAB issues yearly reports on its activities and recommended departures from the UK accounting standards. These reports are read at Parliament hearings and are available publicly. It should be noted that the UK government will adopt International Financial Reporting Standards(IFRS) for its public sector entities from financial year 2008-2009, including publicly-funded initiatives and public-private partnerships. They took the time just to make sure that they were comfortable with it but they would now adopt it for PPPs. The FRAB is in the process of evaluating the adaptations from IFRS that are required. Hence, the international practice is very clear. Substantively, the same rules and due process apply to both the private and the public sectors.”
“Indeed, some people would liken the Accountant-General to be the Government's CFO. Businesses do not set their own accounting rules for financial reporting to shareholders. Of course, their views are taken into consideration in the due process of issuance of new or amended accounting standards. However, they are never able to set their own rules. The governance and segregation of duties are paramount to public confidence and trust. So why should the practice in the public sector be any different? One reason given in the explanatory statement to the Bill is that, unlike companies and other corporations, statutory bodies are accountable to Parliament, whose priorities and interests in the matter are distinctly different from ordinary stakeholders. While that may be so, when it comes to the adoption of appropriate accounting standards for statutory bodies, most MPs would, I am sure, be happy to rely on the judgment of an independent body of competent individuals following due process. A related point that I would like to make is that while statutory bodies are accountable to Parliament, they do have a number of other stakeholders such as their employees, customers, creditors and, in some cases, where they have tapped the financial markets, financial institutions. So, wherever possible, laws and regulations relating to statutory bodies should be transparent and consistent with the private sector. Secondly, I would like to deal with the issue of comparability. How do the proposals in this Bill compare with the practice in other countries? Sir, in Australia and New Zealand, the same bodies set the accounting standards for both the private and public sectors. In the UK, it is different.”
“Mr Speaker, Sir, thank you for giving me the opportunity to comment on the Accounting Standards Bill. I would like to declare my interest upfront. I am both a practising public accountant and also serve as a board member of a statutory body where I am presently the Chairman of the Audit Committee. Hence, my keen interest in the Bill. I would like to begin by applauding the Government for seeking to establish through this Bill an Accounting Standards Council, or ASC, whose main function will be to formulate accounting standards for companies and non-profit making entities. This is an improvement on the present arrangement as the role of the current standard setting body, the Council on Corporate Disclosure and Governance, or CCDG, does not extend to non-profit making entities such as charities and co-operative societies. However, the Bill also has the objective of requiring statutory bodies to prepare their accounts and financial statements in accordance with accounting standards set, not by the proposed ASC but by the Accountant-General. I have several reservations about this proposal. Firstly, an accounting standard setting body must have some elements of independence, appropriate representation of different stakeholders' interests and be seen to follow due process. Can the office of the Accountant-General, no matter how conscientious and competent, meet these exacting criteria for a standard setting body? Unlike the proposed ASC, which is likely to be made up of representatives from the private and public sectors, the accounting profession, academia and other stakeholder representatives, the Accountant-General is an arm of the Executive and would generally not be perceived as independent of statutory bodies.”
“I am not aware of the number and types of inquiries that the IRAS receives on a daily basis, but it would be difficult to see how its workload can be reduced if there is uncertainty in the law that requires a ruling. It is better to flush out problems and uncertainties upfront rather than for businesses to grapple with these uncertainties in computing their GST. After all, with the increase in the GST rate, the amount of tax collected will increase substantially and the IRAS should prepare itself for the extra workload to help businesses get their GST computation right the first time. The Ministry has also commented that with the proposed fee, the GST ruling will be legally binding on the IRAS. On this point, I cannot recall circumstances where the IRAS has withdrawn its rulings in the past, unless, of course, the facts of the case and the law changed. In conclusion, Sir, I support the Goods and Services Tax (Amendment) Bill. I would, however, request the Minister to consider the two points I have raised on fundamental issues of open and comprehensive public consultation and the administration of a tax which is fast becoming an important source of tax revenues. 3.10 pm”
“A self-assessment regime should make it easy for businesses to understand their tax responsibilities and obligations, because the tax department has effectively shifted the responsibility for determining the correct amount of tax to the taxpayer. However, in Singapore, there is a concern that many businesses may not fully understand their responsi bilities under a self-assessment system, which is still a relatively new system. This is borne out by the amount of tax and penalties collected from GST audits by the IRAS, which is consistently higher than that collected from income tax audits. Clearly, businesses in Singapore need more help from the IRAS to meet their obligations in a self-assessment environment. Paying for advanced rulings is not consistent with this objective. While some jurisdictions charge for advanced rulings, we should take the cue from countries like Australia, which conducted a review of its income tax self-assessment regime in 2003. In considering the role of the Australian tax office and the provision of rulings, the Australian Treasury 2004 discussion paper questioned whether the tax office should continue to provide private rulings free-of-charge. The final review report concluded that private rulings should not be charged for. What it said was that, and I quote, "... within a self-assessment environment, taxpayers have the right to know the manner in which the tax laws apply to their circumstances (rather than being a privilege that would justify charging a fee)." In its response to the public comments, the Ministry of Finance has said that the charging of a fee is to deter frivolous requests and that the Inland Revenue Authority of Singapore would continue to respond to normal inquiries.”
“So, if you give them reason to believe that you have already decided on a policy and are merely going through the motion of consultation on the peripheral issues, you will undermine the whole objective of getting public "buy-in". On my second point, the present Bill proposes to introduce a new section 90A in the Goods and Services Tax Act. Specifically, section 90A intends to implement an advanced rulings system for GST, which requires the payment of a fee to the Comptroller of GST. I recall that when the proposal was first made in the Goods and Services Tax (Amendment) Bill 2006 released in September last year, there were reactions from tax practitioners and others that having to pay for a GST ruling gives the wrong signal in a self- assessment system like the GST, whereby taxpayers have to determine the correct amount of GST to account to the Government. I remember this being discussed in the Business Times in an article on 7th November 2006. Perhaps, at this juncture, I should explain, for the benefit of Members, the difference between the two main systems of tax collection - the official assessment system and a self-assessment system. Under an official assessment system, a taxpayer provides information to the tax authority to apply the law and calculate the tax liability. In Singapore, income tax operates on this system, where as long as there is full and complete disclosure, the taxpayer has discharged his or her responsibility. With self-assessment, the responsibility to determine the correct amount of tax to pay is shifted to the taxpayer. The Singapore GST system operates on a system of self-assessment, which means that it is the responsibility of a GST-registered business to prepare its GST returns accurately and on time.”
“Mr Speaker, Sir, thank you for allowing me to join in the debate on the Goods and Services Tax (Amendment) Bill. At the outset, let me declare my interest. My firm PricewaterhouseCoopers provides GST consulting services. Sir, I speak in support of this Bill, which seeks to improve, among other things, the efficiency of administering and collecting GST. I also commend the Ministry of Finance and the Inland Revenue Authority for the public consultation process which took place before the Bill was presented in Parliament. Having said that, there are two points I would like to raise. The first point is on the public consultation process itself, and the second point relates to the proposed implementation of an advanced rulings system. Let me start with the public consultation process. In seeking public comments, the Ministry stipulated that the scope of the public consultation was to obtain feedback on areas of the draft legislation that needed greater clarity. However, many were disappointed that the consultation exercise was not intended to be a consultation on the policies, judging from the following statement in the Ministry of Finance's website at the time, and I quote, "The policies have already been decided through the due process." We were left guessing as to what constituted "due process". In this respect, I would ask the Minister to review the scope of any future public consultation, as there could be policies or matters relating to the fundamentals of the tax system that perhaps needed to be aired with the public at large. There are many cynics out there.”
“I would also recommend that the review of the benchmarking process be done at more regular intervals because of the fast-paced world we live in, with business cycles becoming ever shorter. Refining and updating the way we benchmark Ministers' salaries to the private sector will help to clear the noise around leader quality and process which has caused unnecessary distraction from the real issue that our Ministers' and civil servants' remuneration has substantially fallen behind what they could possibly earn in the private sector. Sir, I support the motion. 5.12 pm”
“But, in Singapore, we do not have this luxury. We must continue to invest in our leaders and have good faith that they will deliver a bigger pie and secure a better future for all Singaporeans. Top civil servants and Ministers are not promised an iron rice bowl as there are already mechanisms in place to motivate them to do well and to deal with under-performance. Sir, before I conclude, let me now make some observations on the present benchmarking system, since both speakers before me had some comments on the system. After so many years, should the benchmark still be based on the salaries of the six professions identified in 1994 and last reviewed in 2000? While benchmarking is important and brings credibility to the whole argument of having Ministerial and civil service salaries pegged to the market, I would suggest that fine-tuning is necessary to ensure that the professions selected are indeed the alternative professions that our top civil servants and Ministers would have joined. In the constantly evolving world of business and commerce, we are seeing new categories of employers attracting the best and brightest. One possible new category, for example, would be private equity. I would also create a category to include the top listed companies in Singapore by market capitalisation. This, in my opinion, is a more relevant grouping today than local manufacturers, which is presently included as a category for the benchmarking exercise. For our Ministers to decide on an alternative career in the private sector, it is not inconceivable that they would end up as CEOs for our listed companies.”
“I agree that attracting and retaining talent in public service is not by way of high remuneration package alone. Our public servants must demonstrate that they are in it for the long haul and for the good of the people and not just for the money. But the important point this misses is the battle for talent that rages in today's global and connected world. Our Administrative Officers and Ministers are paid well in absolute amounts, compared to most people. This is because they are the cream of the crop and there is a price that we need to pay for such talent. Whilst this absolute amount may seem large, it is actually much less than what they would have received if they had chosen a different career path. Talent today is highly sought after and extremely mobile. If they decide to walk off to another job tomorrow, the opportunities are abundant for them and they are almost guaranteed to be paid higher. They can opt for more privacy and not have their pay subject to public debates. This is a reality that does not sink in well with most people. But it is a stark reality that has far-reaching implications for the future of Singaporeans. This brings me to the third fundamental question: what choice do we have if we are not willing to pay for good Government? Can we afford not to have good Government? I dread to contemplate a scenario whereby Singapore is no longer able to attract and retain the best and brightest in the civil service and the Government. Imagine having no long-term strategies, substandard policies and poor execution of public policy. Investor confidence would crumble and our economy will go down a few notches. The personal equity and worth of all Singaporeans would be at risk. Other countries can rely on their natural resources in case things go wrong.”
“Sir, there are others who feel that our Government leaders are paid too much, compared to the leaders in other countries, such as the United States of America, Britain or China. They argue that Singapore is a small country. They ask, "Why should our PM be paid more than President Bush when the latter has a more demanding job?" This comparison is grossly unfair and misses the point altogether. The key issue here is that of opportunity cost. If our Ministers decide not to be Ministers, they would not be Ministers in another country. Chances are that they will be in the private sector. What if some of our Ministers opted out of politics? Chances are that they will be the head honchos of some of our listed companies and command higher remuneration packages. There are several such examples of ex-Ministers running successful public and private companies. Is the calibre of our Ministers less than our top CEOs? With all due respect, no. Can our Ministers do an equally good job, if not better, in leading any of our top listed companies? You only have to look at the track record of our former Ministers who are now at the helm of successful public and private sector companies. Why are they not paid as well as the private sector? That is because of the notion that public service is a calling that involves personal sacrifice. Paying public servants too much, it seems, would otherwise send the wrong message that money is everything. Public servants are expected to look after the people's interests over and above their own personal interests. Public servants are expected to be noble people with an overarching mission to do good for all Singaporeans. I agree with this view, but only to a certain extent.”
“How can we attract and retain the best and brightest in the Government? This leads me to the second fundamental question: what price are we willing to pay for good Government? For me, whether it is from the business sense or from the view of a private citizen, the answer is an obvious yes. We must pay our politicians and civil servants well. However, when I read the Forum page and what netizens have to say, the answer is not obvious to everyone. Sir, there are some imaginative people who think that Singapore is now on auto-pilot and there is therefore no need to pay our leaders much. They feel that the challenges that our current leaders face are nothing compared to our nation's first generation of leaders. They reason that since our first generation leaders did so much and yet were paid much lesser, why should our present leaders be paid so much for doing much less? Let us ask ourselves: are the challenges that the current Government facing any less difficult? I certainly do not think so. To begin with, this is not a fair comparison. The challenges are of a different nature, as our nation is now at a different stage of development. Challenges of globalisation and keeping Singapore ahead of the competition are no less daunting than the pioneering industrialisation efforts. The challenges of binding a nation of cosmopolitans and heartlanders are no less difficult than the challenges of starting a new nation. The threat of terrorism is more pervasive and sinister, compared to the strikes and demonstrations of yesteryears. The views and expectations of the present population are of a different level of sophistication. All things considered, there is no way in which our present Government can operate in the auto-pilot mode.”
“But there are still many more challenges that the Government faces in its efforts to bring greater value to Singaporeans from all walks of life. A number of our citizens are suffering from the adverse effects of globalisation, which inevitably creates winners and losers. Those that have been left behind by globalisation would need to be nurtured back into the economic and social mainstream and we will have to preserve social mobility by steadfastly holding on to our meritocratic traditions. Our ageing population will pose challenges for public policy and we need to do more to engage our younger generations and netizens. But, on balance, our Ministers and top civil servants have brought much value to our Singaporeans. I believe that no reasonable person inside or outside of this House can dispute this claim. What is disputable though is whether the current situation is sustainable. There is a Chinese saying that wealth cannot be retained beyond the third generation. Thus far, our third generation leaders are trying to prove this saying wrong. Can Singapore's wealth be maintained by our next generation of leaders? That will depend on whether we still have the best and brightest in this House and in the civil service. Looking at the attrition rate in the civil service, I am not so sure. Sir, the competition for talent is very real. We are losing talent in the civil service to the private sector, the private sector in Singapore is losing talent to other competing cities and countries. Perhaps, we are making up by having foreign talent come to Singapore to compensate this, but the civil service risks being the biggest loser in the competition for talent, especially in a buoyant economy. This does not augur well for the future of Singapore.”
“But we need not have to rely on anecdotal evidence, because there are many independent studies and surveys that benchmark Singapore very positively across a range of variables and indicators. For example, a recent study by the partnership for New York and my firm on 11 global cities has ranked Singapore as the global city which is most conducive for doing business. Considering our short history, the fact that Singapore is even shortlisted as a global city alongside such giants as New York, London, Paris and Tokyo is, in itself, no mean achievement. Singapore is also ranked fifth in the World Economic Forum's latest Global Competitiveness Index. Our per capita income puts us in the league of first-world countries. The only other post-colonial nations in this premier league are Kuwait, Qatar and the United Arab Emirates, all countries which are rich in natural resources. Compared to other countries that achieved independence in the 1960s, we are way ahead of our peers. Under the World Bank classification format, many of these countries are still languishing in the low-income group of less than US$875 per capita, whilst we have already made it to the high-income bracket with per capita which is at least 12 times higher. Singapore also tops the ranking of 13 Asian communities for being the least corrupt country in the region, according to a survey by Political and Economic Risk Consultancy (PERC). To what do we attribute all these accomplishments? Of course, our people are very hardworking and industrious but, without a good Government and good public institutions, it would not have been possible to achieve this exemplary report card.”
“This is because good leaders and good governance will inevitably increase the value of an organisation which, in turn, will bring about greater value to all its stakeholders. If we apply this reasoning to the motion, I believe there are three fundamental questions that we need to address. They are: Firstly, do we have a good Government in Singapore? Secondly, what is the price that we are willing to pay for good Government? Thirdly, what might be the consequences of not willing to pay for good Government? Let us commence with the first question, "Do we have a good Government in Singapore?" Before we can decide how much to pay someone, we must begin with an assessment of the value that the person brings to the position. Have our top civil servants and Ministers brought value to Singapore? Here, I would like to share my personal experience and those of my senior local, regional and global colleagues who have been in and out of Singapore for various meetings and conferences over the years. During their visits to Singapore, they have had the opportunity to meet our Prime Minister, some of our Ministers, ex-Ministers and top civil servants. My overseas colleagues have themselves established personal and working relationships with Government leaders and senior civil servants in their respective countries. So I asked them if they were impressed by the calibre of leaders that we have in Singapore, compared to their own leaders. Their answer is an overwhelming yes. My answer is also an overwhelming yes because, for more than two decades, I have personally witnessed how effective, far-sighted and pragmatic government and governance have helped businesses flourish and bring about a significant improvement in living standards for most Singaporeans.”
“Mr Speaker, Sir, any public discussion on salaries, particularly salaries for those public guy in the public service is likely to be an emotive issue. The open discussion we had on this sensitive subject has generated feelings of uneasiness and even some envy and resentment. A strong, responsible and sustainable leadership requires difficult and controversial issues to be discussed in an open and transparent fashion, not behind closed doors. Hence, it is to Government's credit that it has taken bold steps of openly bringing this important, if not sensitive, matter for public discussion and debate. [Mr Deputy Speaker (Mr Matthias Yao Chih) in the Chair] 4.56 pm Sir, in any organisation, there will always be some who are unhappy with how much their leaders are paid. They see it as a zero sum game. They wrongly assume that the size of the pie is always fixed. They think that what is given to their leaders is entirely at their expense. But this is not the case in dynamic and growing organisations. If an organisation is able to attract and retain the best and brightest who would then bring about growth in the size of the pie, all stakeholders will benefit from it. Conversely, if an organisation is unable to attract and retain its best and brightest, it will end up being managed by less than competent people. All things being equal, chances are that this pie will shrink and the stakeholders will eventually lose out as the competition intensifies. Paying less may be a populous tactic to achieve short-term gain and will appeal to those who want to play to the gallery. But it is a wrong strategy to pursue in an organisation's objectives or to achieve long-term sustainable growth and development.”
“My question relates to the proposed licensing framework for private schools. Could I ask the Minister, when he comes up with this new framework, to consider, in addition to the educational standards and quality, also the governance and internal controls in these institutions because we had a string of problems and financial scandals relating to private schools? I think we need a holistic approach to the licensing framework because when students come to these schools, they do not envisage this. They think that in Singapore, they are well taken care of. We do not want the collapse of these schools to damage our brand name.”
“With the various initiatives and investments we are making to promote arts in Singapore, I would just like to ask the Minister whether he thinks we are doing enough to promote the arts as a mainstream career for Singaporeans - it tends to be an alternative career because of things like critical mass and so on - and with the art schools being set up and other investments and infrastructure, whether in time to come we should increase the amount of communication and encouragement to get talented Singaporeans to take up arts as a mainstream career.”
“Sir, this research suggests that as Singapore's population increases, we can expect a more than proportionate increase in economic and creative output measured by such criteria as patent activity, number of super creative people, wages and GDP per capita. This is good news, particularly as Singapore's infrastructure can comfortably support a much larger population than the present 4.5 million. However, as we open our doors to new migrants, we must manage the sentiments of some Singaporeans, who feel that the influx of foreigners will threaten their jobs and career opportunities. It is important that we calm such emotional responses by reassuring our citizens that incoming foreign talent, in most cases, will not be competing with them for jobs. In fact, new migrants help to fill important gaps in the workforce and even create new jobs for Singaporeans by attracting new types of industries and businesses to Singapore. However, we have to face the fact that there is a segment of our population whose jobs are most at risk. They are the lower-skilled and lower-wage workers. But they face competition for their jobs not from fellow Singaporeans or new immigrants but from workers in low-cost offshore centres. Technology, better communication and the development of new business models has meant that their jobs are capable of being shifted to the country with the lowest wages. The Government has responded to this problem not by cutting down immigration but by assisting this group of workers by introducing measures such as Workfare and providing generous training opportunities to upgrade skills. Managing Talent”
“Sir, for a small city state that has embraced globalisation, the development and management of talent must be a top priority. So I am very encouraged that this important area is receiving attention at the highest level - the Prime Minister's Office. If I draw parallels with the commercial world, this is in line with the best practice in the world's leading corporations where the CEO's office typically takes charge of attracting, retaining and developing talent. I fully support the two-pronged approach we are taking to ensure that we have an adequate talent pool to support our economic ambitions. Firstly, our educational infrastructure at every level is continually being improved so that we impart the right skill sets to every Singaporean in order to develop them to their highest potential. We are also reaching out to Singaporeans living and working overseas through the Overseas Singapore Unit. The objective being to keep our citizens abroad abreast of developments and opportunities back home. As a result, hopefully, some of these well-qualified Singaporeans will return home while others will be informed ambassadors of Singapore. However, with our falling birth rate and because increasingly value creation in our sophisticated economy is based on intangibles such as knowledge, ideas and innovation, we have to look to immigration to boost our population. The Government's policy to substantially increase Singapore's population is supported by research which indicates that by almost any measure, the larger a city's population, the greater the innovation and wealth creation per person. These research findings are the subject of an article in this month's Harvard Business Review by Geoffrey B. West of the Santa Fe Institute.”
“By listening to them, we not only help them to make the decision to stay, but we also learn what is likely to attract others to choose Singapore in the future. At present, and as far as I am aware, we do not have a mechanism for the Government to obtain formal and regular feedback on matters affecting this stakeholder group. Given the strategic importance of the group to Singapore's future growth and prosperity, we should seriously consider setting up formal channels for regular feedback so that appropriate action can be taken on a timely basis. We must not make the mistake of treating our foreign talent pool as transient migrants. Instead, we should make them feel as comfortable as possible from the outset by being inclusive in the way our policies are framed and in our informal dealings and mindset. This will give these individuals the confidence and courage to make Singapore their permanent home and help attract the steady stream of new talent from overseas that we need, if we are to achieve our economic growth targets. Sir, I do not pretend to have all the solutions to these issues, but what is clear is that they need to be moved up the rankings of importance. Singapore has been second to none in planning and putting in place its infrastructural "hardware", but we need to ensure that our software continues to be best in class because, ultimately, knowledge, innovation and creativity will be the difference between the winners and losers of tomorrow. Sir, I support the motion. 3.56 pm”
“But in my view, there are some features which we must add to this admittedly attractive environment, in order to keep us ahead of the increasing competition for foreign talent. Low personal tax rates are just one of them. But the cornerstone of any strategy aimed at attracting foreign talent for the long term has to be to create an environment which focuses on the longer term needs of this group. In short, they need long- term financial security and the fiscal support to have families, which is now only available in respect of Singaporean children. Employer-sponsored pension arrangements are something many of them will have taken as a given. But they arrive here to find that there is very little available, as far as long-term security is concerned. In this context, it is easy to say, "Yes, but if they become Singaporeans, then they get all these benefits, CPF included". The point this misses, as most long-term "expatriates" will tell you, is that Singapore grows on you. Quite often, they were just passing through with no plans to stay, or were here for a defined short term. Forcing them into decisions early before they have had a chance to feel comfortable here in general and, in particular, asking them to give away their links (emotional and physical) with home, namely, their passport, is more likely to frighten them off, rather than encourage them to make plans for a longer-term association. There needs to be something that fills the transition, and something significant. Because our "local" foreign talent pool happens to be outside the political mainstream, it should not mean that their voices should go unheard.”
“This may be just the number that planners are using to base their projections for planning purposes. But it does represent a significant increase from the 4.5 million we have today. Based on the current birth rate of about 1.2, compared to a rate of 2.1 that is required to keep the population of Singaporeans steady, it is clear that the bulk of any future growth in our population would have to be imported. So the group that I mentioned actually falls into two subgroups, namely, those who are here and whom we presumably want to keep, and new talent from overseas that we have to attract to Singapore. So the message is clear. Not only will we have to fight to get the talent in the first place, we will also have to find ways of making sure it does not leave. Sir, but the 2007 Budget has virtually nothing to offer this group of individuals who, I believe, are important stakeholders and partners in our economic journey. A reduction in personal income tax rates would have been viewed positively by the group who are already here. They are faced with having to cope with an increase in the cost of living, particularly a steep increase in residential rental rates. Soon, they will be hit with the full force of the GST hike, with no corresponding offsets, nor will they benefit from the increase in employers' CPF contributions. Sir, perhaps, at this juncture, the Government feels that Singapore is still able to attract its fair share of talent from overseas and there is no necessity for any fiscal incentives or encouragement. This may well be true. After all, we are a competitive destination, with an excellent infrastructure, a pleasure pollution-free environment, a low crime rate, all of which contribute to a comfortable and gracious lifestyle.”
“I submit to you, Sir, that our ability to attract such talented individuals and successfully integrate them both in the workplace and in our society is a critical success factor if we are to grow our economy at a consistently healthy rate. Simply put, Singapore has a lot of homegrown talent but not enough if we want to remain competitive in this highly competitive globalised economy. And due to our lack of natural resources and small hinterland, we cannot afford not to be competitive. Sir, the shortage of skills and talents is one of the main threats to our long-term growth and prospects. This is the view of a majority of CEOs who participated in one of the latest global CEO surveys which sought the opinions of more than a thousand distinguished CEOs from 50 countries, including companies in our region. The worrying news is that the competition for such talent is global and fierce and getting fiercer by the day. Some years ago, when my firm placed recruitment advertisements in regional newspapers, we were able to draw several hundreds of applicants. Today, the same advertisements have far fewer applicants. This is because we are no longer competing only with cities such as London, Hong Kong, San Jose or Sydney for talent. New centres, such as Shanghai, Bangalore and Dubai, have emerged. In time to come, other cities in Eastern Europe, the Middle East, India and East Asia will all be competing with us for the same talent pool. It was interesting to note the comments of the Minister for National Development which were reported in the press on 10th February 2007 and in Parliament yesterday. These suggested that, according to the Concept Plan, Singapore's population could be 6.5 million.”
“Included in this group are the traditional "expatriates" who are brought to Singapore by their employers usually for fixed periods to serve a particular need. These individuals are usually well taken care of by their companies and enjoy a wide array of benefits, such as housing, schooling for their children, transport and home leave allowances. In many cases, they also get the benefit of "tax equalisation" which effectively shelters them from differences and changes to the Singapore tax rate relative to their home country. However, a growing group of foreigners who are now living and working in Singapore do not belong to this financially privileged expatriate group. Who are they? Well, they are highly skilled individuals who have made a conscious personal decision to come and work in Singapore. They have picked Singapore over their home country or other competing locations. This group of foreigners is often described as "expatriates on local terms" because they enjoy little or no fringe benefits. They have to take care of their own housing and schooling needs for their children. They do not enjoy any tax equalisation and they have to provide for their own retirement. Why are they here? I guess it is another facet of globalisation. Talent is mobile and moves to centres where there are good career opportunities and which afford an attractive lifestyle. Singapore has been able to attract this talent pool from all parts of the world - the UK, Europe, Australia, New Zealand, South and Southeast Asia, China and even as far as South America and Africa. Why are they important to us?”
“May I suggest to you that there are three distinct groups of stakeholders whom we need to actively engage and partner with, so that we can journey ahead with speed and agility, avoiding the political road bumps and social potholes along the way. The first and most important group, of course, are our fellow Singaporeans. Singapore citizens are the mind, body and soul of the nation. The second group consists of corporations, both local and foreign, who have invested in and operate out of Singapore. The third group comprises non-Singaporeans who live and work in Singapore, sometimes outside of Singapore and help us to achieve our economic goals and objectives. The first two groups of stakeholders are already receiving a fair amount of proactive attention from the Government and, in the case of companies, Government agencies, such as IE Singapore and the Economic Development Board. The 2007 Budget Statement, for example, has introduced a number of very helpful measures to assist low-wage Singaporean workers who may have been adversely affected by globalisation. These include restructuring the CPF, Workfare and the GST offset package. These measures will help to build a more inclusive society and promote social cohesion and harmony which are essential, if we are to stay focused on implementing our economic strategy and not be distracted by social tensions and instability. But what about attention to the third group of stakeholders? Have we done enough to ensure that we have sufficient new talent to energise the economy and enable us to go the full distance? Sir, my next point concerns the third stakeholder group, ie, the non-Singaporeans. This is not an easy group to deal with because of the diversity within its ranks - ethnic, economic, cultural and mindset.”
“On a positive note, the new landscape means lots of new opportunities which, as the Second Minister for Finance so elegantly expressed, play to Singapore’s strengths. But it also makes our economy more volatile and dependent on external factors that are beyond our direct control. For example, the value of our annual exports today is significantly higher than our annual GDP. If there is a slowdown in the US or one of our other major trading partners, it would have a significant adverse impact on our economy. As a small city-state with a large external wing to our economy, we also have to be wary of other risks which could easily derail our economy, such as pandemics, terrorism and natural disasters. We are also vulnerable to external social instability and vulnerability to policy changes by foreign governments, as the recent survey by Political and Economic Risk Consultancy (PERC) suggested. We need to recognise these risks and be prudent in the way we manage our economy. We have to balance current spending with the need to build up our resources for the future. Mr Speaker, Sir, I believe Budget 2007 achieves this fine balance. But prudence alone is not sufficient. We also need to have speed and agility in quickly adapting to changes in the global economy. Our past economic success has been built on these principles. Going forward, we need to adhere more steadfastly to these principles, if we are to take full advantage of globalisation while managing its downsides. Above all, we need able and trustworthy people to be in charge of our economy. Sir, this leads me to my second point. If globalisation is to play such an important part in driving and shaping our economy, we need to recognise the stakeholders in our economy who are impacted by globalisation.”
“Our strategy of engaging multinational companies, welcoming foreign direct investment and having an international mindset, accompanied by business-friendly policies, has served us well. The World Bank recently published a league table which showed that Singapore’s ranking among the world’s largest economies improved the most in the last 20 years. Between 1984 and 2005, Singapore crept up the world rankings from 59th to 39th position, a rise of 20 notches. Other East Asian countries which were plugged into the global economy also did well compared to countries which had a purely domestic focus. Taiwan, for example, improved 14 notches and Hong Kong 12 notches. The global business environment, however, is changing rapidly because of fundamental changes in the nature of value creation, in the competitive landscape, in technology and innovation and in traditional business models. Value creation, for example, is increasingly based on intangibles, such as knowledge, ideas and innovation. New value chain models are beginning to appear in which companies are increasingly in strategic and collaborative relationships with their suppliers, a departure from arrangements based solely on cost. The competitive landscape has also changed dramatically as millions of young people from China, India, Brazil and Eastern Europe, who had hitherto been excluded from the global economy, have obtained access to capital, technology and education. The change in global demographics away from the West to Asia Pacific will also have a profound impact on where wealth will be created and where the future corridors of economic power will be located. What does this all mean for Singapore?”
“Mr Speaker, Sir, I would like to begin by congratulating the Second Minister for Finance for articulating so clearly Singapore’s economic strategy and development roadmap for the next five to 10 years. In communicating his vision for our future, the Minister was unequivocal about Singapore fully embracing globalisation. The Minister sees globalisation as an important engine which will continue to power Singapore’s economic growth and prosperity. He illustrated how globalisation is working to Singapore’s advantage, pointed out some of the challenges it poses and outlined how Singapore would respond to these challenges so there would be ample opportunities for all Singaporeans. In my address today, I will cover three areas: First, I will share my perspectives on globalisation as a key driver of the Singapore economy; Second, I will identify three important groups of stakeholders who all have important roles to play in our economic journey; and Third, I will examine whether any of these stakeholder groups require additional Government attention or assistance to enable them to contribute fully to our national economic agenda. I will now share my perspectives on globalisation and its importance as a key driver of the Singapore economy. Singapore has very little choice but to embrace globalisation. We are a small city state that punches well above its weight, not by accident but because we had the foresight to plug ourselves into the regional and global economy right from the outset. We are a major hub economy, a regional financial services centre and a preferred destination for multinational companies operating in this region.”