Goh Chok Tong
Singapore
“This is what your father said during the debate on the Nassim Jade episode: "The proudest thing (for your mother) are her three children − upright, well-behaved and honourable... They are brought up straight, they are likely to stay straight. It is like, as I have said, a code of honour. If you break that code, you have brought shame...”
“They are not just the headaches of the Prime Minister and his team. They are not just the headaches of the PAP. They are also the headaches of the Workers' Party and every Singaporean. On their own, the Prime Minister and his team cannot resolve them. They require us, the Members of Parliament, and the people, to work with them.”
“The national financial education programme, MoneySENSE, continues to work with partners such as the Association of Banks in Singapore (ABS) and the media to educate consumers on the responsible use of credit facilities and the factors consumers should consider before taking on debt. PROPERTY AGENTS' COMMISSION RATES 2.”
“Mdm Halimah Yacob asked the Minister for National Development (a) in 2008, what is the takeup rate for the interim rental housing scheme that is provided to those without homes; (b) what are the reasons given for rejections under this scheme; (c) whether the rental rates were affordable; and (d) how many applicants had rejected the rental…”
“MAS is working with relevant government agencies and stakeholders to study the issue carefully, and to consider the various proposals that have been raised, including the feasibility of introducing a no-fault regime.”
“Mdm Cynthia Phua asked the Minister for National Development (a) if he will provide an update on (i) the use of sustainable alternative materials in the construction industry and (ii) the cost of construction materials in view of increasing inflation rates and rising oil prices; and (b) how will the high material and labour cost impact on…”
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“As my Deputy, he was like my badminton doubles partner. He could smash and retrieve, which complemented my strengths in drop-shots and netplay. He was not only a most supportive and valuable deputy, but also a key Minister handling many jobs at any one time - having many balls in the air and not dropping them. He dealt with difficult issues like pulling Singapore out of recession and restructuring of the economy and financial sector. Just look at the holes he has left behind now that he has become Prime Minister. He has to retain the Finance portfolio and I have to cover the Monetary Authority of Singapore because the younger Ministers are not ready. The political changeover has got off to a very good start. The new Prime Minister has connected well with the people with his swearing-in speech and his first National Day Rally. Most importantly, he has generated a new sense of excitement, especially amongst younger Singaporeans. We need a fresh burst of energy and ideas to break through the wall of challenges and seize the opportunities ahead of us. I am optimistic about Singapore's future. I strongly believe that our future will be bright and exciting. Asiais on the move. Yes, there will always be challenges. But this is what makes life exciting and worth living. The brave will reap the rewards. Singapore has succeeded because it has enjoyed good clean Government and capable leadership. ForSingapore to continue to prosper, able and committed men and women must come forward and dedicate themselves to the well being of their fellow Singaporeans. Prime Minister Lee has called on all Singaporeans to help him shape the future together, to build aSingapore for all Singaporeans. I join him in this call. Regard me as an example of what is possible in Singapore.”
“I have watched how democracy is practised in these countries. It has not brought them the better life they hoped for their people. Their people remain mired in poverty while their politicians fight to serve themselves more than their country. It is not by chance that we have honest men and women in Parliament, and I include here the opposition MPs and the Nominated Members of Parliament as well. It is by the will of a group of honest men and women who believe in running a clean and honest Government based on meritocracy. There are many individuals I should thank but I would like to highlight only two. First, I would like to recognise Minister Mentor Lee Kuan Yew.As Senior Minister in my Cabinet, he was an invaluable member of my team. After he stepped down as Prime Minister, he made it his mission to ensure that the second generation leaders succeeded. He was honest in his critique and generous with his advice. He had a large databank of wisdom and experience and an international network of contacts built up over 31 years as Prime Minister, from which we drew and benefited. I found SM Lee an immensely useful, wise and trusted counsel.That was why I advised Prime Minister Lee Hsien Loong to retain Mr Lee Kuan Yew in Cabinet as Minister Mentor. MM is a national resource and too valuable an asset for Singapore to lose. I can tell you that fears that Prime Minister Lee will find it difficult to be himself because of his father’s presence in Cabinet are unwarranted. I have worked with both MM Lee and Prime Minister Lee for more than 20 years now. I know that PM Lee is his own man and that his father will not cramp his style or stifle his ideas. The other person I would like to thank is Hsien Loong or Prime Minister Lee.”
“As I have said before, thank you for walking the hills and valleys with me. My heart will always be with you. Life has a strange way of leading you to places where you did not plan to go. Sometimes, you end up in a better place; sometimes, worse. I did not set out to be Prime Minister and, least of all, leave a legacy. I wanted to lead a simple and quiet life. Politics was not in my blood. I did not prepare myself for it. But I owed my country something. Without the Government bursary, I would not have been able to go to university. Without equal opportunities, I would not have been recruited into the Singapore Administrative Service or become the managing director of the national shipping line. Without a party that believes in planned and orderly leadership renewal, I would not have been invited to enter politics. Hence, when my peers and colleagues elected me to be their leader after the 1984 General Elections, I could not refuse to take on the responsibility. I knew it would be a tough job. But I am the product of a political culture which scours the country for good and able people to serve. I had to play my part for Singapore. And I wanted our children to continue to enjoy the peace, stability and prosperity which the first generation leaders had given us. So I took on the job of Prime Minister and gave it my best shot. I am happy that I have made a contribution to Singapore. In this, I was fortunate to have a solid team of Ministers and MPs to help me. The PAP MPs play a critical role in helping the Party win elections to form the Government. Had the Party been fractious, had our Government been weak or had Parliament been packed with rowdy and cantankerous opposition members, we would have gone the way of many developing countries.”
“Mr Speaker, Sir, as I sat there listening to the speeches by Seng Han Thong, Wang Kai Yuen, Ravindran, Halimah and the other MPs, I thought to myself that this motion is not really necessary. I am not used to hearing praises or tribute heaped on me, so I did feel a little awkward. Besides, Prime Minister Lee has already paid tribute to me -notonce, but twice - during his swearing-in speech and the National Day Rally. I thought that was more than enough and more than I deserved. To be given the privilege and honour of serving my fellow Singaporeans is reward enough for me. Nevertheless, I thank all Members of Parliament for their warm sentiments and kind words in moving this motion. In many a country, Prime Ministers are often unceremoniously removed – sometimes by their own party colleagues. I am grateful that such a fate has not befallen me. I hasten to add thatmy success is also the success of my Cabinet colleagues and the MPs of my party. We have shared the responsibility and worked together in looking after Singapore. Many Singaporeans have also saidkind words about me. I thank them. Let me add here that I could not have done my job alone and certainly not without the strong support of Singaporeans – young and old, men and women, Singaporeans from all walks of life. I cherish their warmth and encouragement. I appreciate their understanding when I had to take painful measures to solve our country's grave challenges.In some countries, tough policies would have been met with demonstrations and riots. Here, the people rallied behind the Government to overcome common problems. It is a joy working with Singaporeans and for Singaporeans. You can see the results – a peaceful, cohesive and thriving Singapore.”
“PSC scholarships are awarded so that the Government can build up potential public service leaders, not entrepreneurs. We are careful not to take in more scholars than we need. In 2002, the number of scholarships that PSC awards per year was reduced from 120 to about 50-60. This year, based on our manpower needs and the pool of candidates who meet PSC's requirements, PSC has awarded about 30 scholarships. About half of each cohort of scholars eventually leaves the public service. We do not know how many of them become entrepreneurs. The Government will not stand in the way of scholars who wish to leave after a few years if they do not see themselves making the civil service a long term career. We hope that the training and exposure we gave them in the civil service is useful for their next career. However, the Government should not provide incentives, support or fall back job guarantees to encourage scholars to go into business or to the private sector. To do so is to go against the enterprising spirit. Where there is a need, such as the development of talent and skills for a specific industry, the Government has collaborated with the private sector to offer scholarships, eg, those offered by EDB. LIFT RESCUES 2. Mr Steve Chia Kiah Hong asked the Minister for Home Affairs how can civil defence officers open lift doors and help people trapped in the lifts if the lift keys are kept by contractors appointed by the Town Council and the officers do not have any spare sets.”
“Ask him if he would like Potong Pasir to be part of a GRC.”
“Yes, I took strong objection to the use of the word "betrayal". So when I heard Amy Khor used the word twice, I said, "My God, she is repeating the same word as Mr Low Thia Khiang which was quoted in the Straits Times that the PAP has betrayed the people." These are very emotive words. I would never let such a word pass me, which was why I took some time to debunk him. But he is not naive, he is not a knave. So I have therefore decided to debunk him in a light-hearted way. If he was a knave, I would have used a different style to debunk him.”
“Mr Speaker, Sir, I have explained why, when there are compelling reasons, we should not be so stubborn as to stick to 40%. We had made a promise and I have said, yes, and I have got to pay the price for this. And there could be a price because there could be people who will say, "You had made the promise. Therefore, I will not support you." But I can tell you that, when the results are there, more people will support us for being practical, adaptable and realistic. Hon. Members: Hear, hear!”
“But the difference between the Member and me is that I tell the people the truth. When the situation has changed, I told them that these are the setbacks we have suffered, these are the problems, let us move from 40% to 36% to 33%. Whereas here, as I said, even at this stage, after my speech, he is still fanning the fire. Does he seriously recommend that we go back to 40%? I made the promise that we should go back. I am telling the people now that if we go down to 33%, would the Member stand up and tell the people that 40% is right for Singapore now? Would he? Would he answer me?”
“Mr Speaker, Sir, we have been debating this issue in the House for the last four days, and Mr Low is raising the same questions again. We can have another four days to go through the issue. The point is that Mr Low agrees with us that we must make some changes to the CPF. I say 33% is, in my opinion, the best rate. As I said, nobody knows in the long term which is the appropriate rate. He again, for the sake of playing opposition politics, says 35%. We have thought of that. 35% is neither here nor there. We might as well stay at 36%. But if we want to make a change, we make one which is sizeable enough, which is 3%, or go right down to 30%. But we have gone through all this. There are many reasons why we are in the current economic situation, and I, for one, believe that demand is a very important factor in the equation. So I would not myself support going down to 30%. Once we go down to 30% and, later on, if we want to go up to 33%, or more, it is difficult. So let us settle for something which we think is doable, which is 33%. And a few years from now, if our wages go up because the demand for workers has shot up suddenly and it is high, we can then adjust the CPF upwards, not necessarily to 36%. When we do that, we would put the funds for the new rates into the Special Account, not the Ordinary Account, and Singaporeans should plan on the basis when they are buying a house, on 33%. But if we are wrong, and indeed we need to cut costs further, then we have room to move down by 3%. But the crux of the matter is that Mr Low is not in disagreement with us that we must tackle the CPF as one of the instruments to bring about economic competitiveness. As for amnesia, I have gone through this just now. Yes, we made a promise. I made a promise at the elections.”
“Then when the winds blow again next year, we are lighter and will be able to go much faster. I am deeply appreciative that MPs have supported the changes to the CPF. I hope fellow Singaporeans will also stand solidly behind the changes. Let us show the world our solidarity and our firm resolve to recover our competitiveness. If we reinforce our hardheaded reputation, we will give investors even more confidence to invest in Singapore for the long-term. They will know that rain or shine, wind or no wind, they can count on the people of Singapore. They will know that here, we have a people who will never give up, who will never give in, and who will always pull together as one united nation. Has the music stopped for Singapore? Is the party over? No. We are merely changing the Elvis Presley and Jailhouse Rock records, to something more modern on CDs. The songs may be slower, and you may have to change your dance steps. But you can still enjoy. Where will Singapore be in 38 years' time? No one can tell for sure. But if I have to bet, I would put my money on Singapore remaining in the First World. Because I know that a nation's destiny lies in its people, and here, in this little nation, we have a great people.”
“If the wind is against us, it requires a lot of skill just to stay in the same spot and not go backwards. So in this difficult global economy, you will find that we are moving slowly. But when the conditions improve, and I believe they will by next year, we will pick up speed. Indeed, the external environment is brightening. The US economy picked up momentum in the second quarter and has continued to accelerate. It is expected to grow by 2.3% this year and 3.7% next year. This is good news. Stronger US growth will benefit the EU and Japanese economies. Already, Europe has seen sustained improvement in business sentiments. Clear signs of stronger growth are also visible in Japan. The regional economies too, should improve their performance. Indonesia, Malaysia and Thailand are expected to grow by a higher 4% to 5% next year. China's growth will likely remain at more than 7% this year and next. At the same time, the global electronics industry continues to recover. Worldwide sales of semiconductors are likely to grow by 11% this year and 21% next year. The improvement in the external economy will have an uplifting effect on Singapore. Already, visitors are returning. The manufacturing sector is seeing signs of a pickup. Our businesses too, are more optimistic. Many analysts, therefore, expect the Singapore economy to rebound by between 4% and 5% next year. MTI is also confident of stronger growth. This is a further reason why we should not delay the changes to our CPF system. When global demand picks up, we want to be there to catch the wind. We want to put ourselves in the most advantageous position. In this regard, cutting CPF costs is like throwing overboard some of the weight in our sailboat.”
“But even as the US worked to restore order in Iraq, we were hit again, this time by a health crisis. SARS struck Singapore in March. Travellers returning from Hong Kong unwittingly brought the virus home. Thus began the outbreak in Singapore that caused several months of anguish. We had no control over these external events, which badly affected the confidence of investors and tourists in the region. Unfortunately, these crises are not over. The international terrorist network is still functioning, and SARS may make a comeback. So we must be prepared for more shocks, and maybe another sudden plunge to our growth. We must also prepare for a permanent change in the external competitive environment. Before, we were competing in the league of emerging economies, without China and India. We did well. Now, these two giants have joined the games. India is a rising star in services sectors such as IT, accounting and other backroom work. China joined the World Trade Organisation in 2001 and since then, has dominated the global manufacturing market for lower-end products. All these external developments - the crises and the stronger competition - have slowed down Singapore's economic growth. This is because ours is a small economy, very much dependent on external markets and foreign investments. External demand accounts for more than two thirds of our total demand. Trade is nearly three times the size of our GDP. And 80 cents of every dollar invested in the manufacturing sector is foreign money. As for jobs, 50 out of every 100 jobs in the manufacturing sector, and 20 out of every 100 in the services sector, are in foreign companies. We are like a sailboat, dependent on the wind to move. If the wind is behind us, we can sail very fast. But if the wind dies, our boat will crawl.”
“On its part, the Government will ensure that Singapore is pro-business, and conducive to starting and growing a company. We have reduced business registration and renewal fees. We have now allowed people to run businesses from their homes. The Government is also improving access to financing, especially for SMEs and start-ups with little or no track record. Yes, there could still be red tapes, and, perhaps, if our MPs can point out where the red tape is, we will be more than happy to give them a pair of scissors to help us cut the red tape. Conclusion Let me conclude by putting our current difficulties and prospects in perspective. The last six years have been extremely uncertain and painful for the world and for Singapore. We encountered crisis after crisis, which severely dampened the global economy. In 1997 and 1998, the loss of confidence in the Thai baht sparked off the Asian financial crisis. Indonesia was the most badly hit. It plunged into several years of instability and uncertainty. The financial crisis also damaged other economies: South Korea, Hong Kong, Malaysia, and the Philippines. Singapore, too, was hurt. On 11th September 2001, Al Qaeda terrorists shattered America's sense of invulnerability. A month later, America, supported by international forces, declared war against the terrorists. They pounded Taleban and Al Qaeda positions in Afghanistan, and rolled into the country. Throughout 2002 and 2003, security forces across the world cracked down on terrorists. But the terrorists struck back. In October 2002, Jemaah Islamiyah terrorists killed several hundred people in Bali. Last month, they claimed more lives in the Marriott Hotel bombing in Jakarta. In March 2003, President George Bush went to war against Iraq. The war was over quickly.”
“The extension houses state-of-the-art equipment and new-generation technologies. When the new plant reaches full capacity, it will provide 2,000 jobs for our people. The best days of manufacturing are still ahead of us. Fourth, we are growing our services sector. Singapore is already well established as a hub for info-communications technology, trading and logistics, and financial services. We will strengthen our hand in these industries. At the same time, we will grow new service sectors like education, healthcare and the creative industries. In healthcare, for instance, our handling of the SARS outbreak has enhanced our reputation. The Genome Institute of Singapore is now working with Roche, a pharmaceutical giant, to commercialise its SARS test kit. In the private sector too, our capabilities are well-known. Overseas patients come here for complex operations such as the separation of conjoined twins. Each hospital bed requires at least four staff to man. If we have another 500 private hospital beds to serve overseas patients from China, Indonesia and the Middle East, that would create another 2,000 well-paying jobs for Singaporeans. Fifth, we are seeing a blossoming of entrepreneurs. These companies are not necessarily start-ups, or from the high-tech sector. A traditional SME that is constantly renewing its products is Bee Cheng Hiang, the company that makes ba kua. In addition to its classic range of ba kua, or barbecue pork, the company now offers crispy ba kua, made from pork loin, for the health-conscious consumers. It also has gourmet ba kua for the connoisseurs. It sells ba chang with ba kua filling. And it collaborates with Pizza Hut and BreadTalk to offer pizza with ba kua, as well as ba hu in the bread.”
“Our consortium must do a good job of it, and make luggage collection at Baghdad Airport "safe". I was in Baghdad in 1979 for a trade exhibition. I lost my luggage at the airport. Four or five other delegation members also lost their bags. Our bags were stolen at the airport. The SIA station manager had personally ensured that all the bags and luggage which belonged to the Singapore delegation were put on the plane that flew to Baghdad. I regretted because before I left, Mr Ngiam Tong Dow, who was then the Permanent Secretary of the Ministry of Finance, told me that the Arabs were very sophisticated and urbane people, and so I packed my best suits, shoes and ties and put them in the luggage, and I never saw them again. To help more companies succeed overseas, IE Singapore, the former Trade Development Board, will support them in building international capabilities. It will provide on-the-ground facilitation. It will double the number of overseas fairs and trade missions. IE Singapore will also launch a $10 million "International Partners Programme" to encourage Singapore companies to hunt in a pack. Our GLCs and larger firms will lead the smaller ones in consortia to secure overseas jobs together. This is the demand part. I heard Mr Chay say just now that we also need to create demand, not just attack the cost side alone. Third, we will continue to climb up the value chain in manufacturing. We can no longer compete as a low-cost manufacturing base. But we retain a competitive edge in higher-end manufacturing. We have, therefore, upgraded our industries to keep up with the latest technology. We have and will continue to build up our R&D capabilities. Seagate, a disk drive manufacturer, is building a new extension in Singapore.”
“These FTAs provide our companies tariff-free access to a combined market of one billion consumers, among other advantages. For instance, with the US-Singapore FTA, Singapore food in the US will be cheaper. Singaporeans and their friends in Silicon Valley will save 4-5% in cost when they eat Tee Yih Jia's popiah and roti prata, and Thong Seik's fishballs. They will eat more of such food. Without an FTA with the US, American-flagged ships have to pay the US government a levy of 50% of their bills, for repair work done outside the US. Now, the ships will save on this levy when they are repaired in Singapore. There will be more business for our shipyards. It is not only Singapore companies that benefit from our FTAs. Consumers too. The Senior Minister went to a function for former PAP MPs recently. He was surprised to see Kirin, a Japanese beer, being served. He took one. I told him it could be because of our FTA with Japan. I did not know the price of Kirin beer, but I had checked on the price of Asahi beer. It had come down from $20 per six-pack to $17. Indeed, selling to customers all over the world must become a way of life for our companies, given our small domestic market. I am glad that our companies are venturing further afield to less familiar territories, beyond our traditional markets in East Asia. BG George Yeo led an economic mission to Kazakhstan recently. He was surprised to find that a Singapore company has a large market share in 3-in-1 coffee, not just in Kazakhstan, but also in Ukraine and Russia. Also, Keppel Offshore & Marine has set up shipyards in Kazakhstan and in Azerbaijan. And a Singapore consortium recently won a bid to provide ground-handling services at Baghdad International Airport.”
“We are moving towards a more diverse education system to nurture talents in different fields. The junior college curriculum is being revised to focus more on developing thinking skills and multi-disciplinary perspectives. The polytechnics have adopted an inter-disciplinary approach to learning. And our ITEs provide opportunities for their students to engage in problem solving, independent learning and collaborative work. In addition, over the next few years, NTU will be transformed into a full-fledged, comprehensive university. NUS will become a multi-campus university system, with new campuses. We will also consider allowing private universities to be established in Singapore. All these changes will equip the young generation of Singaporeans with the flexibility, inventiveness, and ability to cope with rapid change. They will enable our young to pick up easily technical skills and knowledge once they join the workforce. Our efforts at human capital development are not limited to the schools and universities. We are also putting high priority on workers' training and skills upgrading. The new Workforce Development Agency will help Singaporeans find and keep jobs. It will spearhead new programmes to re-skill unemployed Singaporeans to fill job vacancies. It will also drive the skills upgrading of employed workers in a more systematic and targeted way. The second thrust of our economic strategy is to expand our economic pie by going global. We have been successful in going regional. Now, we must go to the Four Corners of the world, wherever there are opportunities. To do so, we are weaving a web of Free Trade Agreements (FTAs). To-date, we have agreements with the US, Japan, Australia, New Zealand, ASEAN and the European Free Trade Association (EFTA).”
“They will not be sufficient to make Singapore competitive. We must cut costs in all other areas. As DPM Lee explained on Friday, we have done this, and continue to do so. Office and industrial rentals have come down by 39% and 46% since early 1997. Our income tax rates too are coming down. Our economic strategy does not focus only on cost cutting. We cannot possibly compete on costs alone. If we try to match the wages offered by lower-cost competitors, we are engaging in a downhill race. We will all end up at the bottom, with lower standards of living. Our economic strategy must, therefore, go beyond cost competition. Inderjit Singh claims that the Government has no strategy for economic recovery, that we have no plan. But I remind him that in December 2001, I set up the Economic Review Committee to comprehensively review policies and propose strategies to promote the further growth of the Singapore economy. In February this year, the ERC came up with its recommendations. The recommendations set a clear direction for Singapore's economy over the next 15 years, while addressing the current slowdown. So I do not understand why Inderjit Singh said that the Government did not have an economic plan. Has he not read the ERC report? Never mind. I shall now outline for him five of the key thrusts of our economic strategy. First, we have to offer something valuable that our competitors cannot do as well. This is why we are continuously improving the capabilities of our workforce. In this regard, we have invested heavily in our education system. Our schools equip our students with strong foundations in Mathematics, Science and the Humanities. And our post-secondary education already ranks amongst the world's best. But despite these achievements, we are not sitting still.”
“Instead, they should stand their ground and debunk this betrayal nonsense. Amy Khor also mentioned that she knew of unhappy Singaporeans who were contemplating selling their assets, and migrating. Perhaps, in these difficult times, this is a sensible thing to do, from their perspective. And I understand that they feel disappointed and frustrated because of the poorer job situation. But they should remember who created the conditions for them to acquire their valuable assets, which they can now sell and migrate to Australia or New Zealand as men of means. Where did they receive their education, and how much subsidy have they enjoyed? They have done well in their lives, and have the resources to migrate, because they were in Singapore. If Singapore had not nurtured them, would they have any assets to sell? Do they think Australia or New Zealand would welcome them if they were not well-educated? More than just CPF cut We have cut the CPF by 3%. Ang Mong Seng told the House that employees said "Heng ah!" Well, I am glad that they heaved a sigh of relief, because some employers howled with disappointment. That is Singapore for you. You cannot please everyone. Will the 3% cut work? Is it too little? Nobody can tell in advance whether 33% is the right rate. But in my considered judgment, it is the most appropriate in our circumstances. If Singaporeans accept the rate cut and the other changes to the CPF, this will send a powerful signal to investors that we will go all out to compete. This is the real value of the rate cut. Later, if 33% proves to be still too high, we will lower the CPF rate to 30%. But I do not think we have to do this for some years. I agree with the MPs who said that our economic recovery strategy cannot be CPF cuts alone.”
“What ideas does he have for solving our economic difficulties? He is another politician, not a political leader. Mr Steve Chia is another politician. He tried to hunt with the hounds and run with the hares. In girl-boy relationship, I call this two timing. You have to decide which party you want. You cannot try to go with one girl and then behind her back, go with another girl. MPs must remember this distinction between a politician and a political leader. To be a leader, you have to lead, not win support by making popular statements, or fan the fire of discontent. To be a leader, you have to analyse problems, explain them to the people, work out the options, choose a solution that you believe is right, and sell it to the people. Singaporeans are discerning. They are not ungrateful. If you are sincere and work for them, they will support you. Of course, you must produce results and improve their lives. The results do not have to be immediate. But they must come over time. Retuning the CPF is an example of leadership. Together with our other measures, it will make Singapore more competitive, bring in investments, and save and create jobs for our people. I also advise PAP MPs not to unwittingly erode the trust between the people and the Government. Yesterday, in her speech, Amy Khor said that some Singaporeans felt betrayed by the CPF cut. She used the word "betrayal" twice. Mr Low Thia Khiang used the same word in his attack on the Government. "Betrayed" is a very strong word. I know that Amy Khor supports the CPF changes. She said so. And she was only echoing the views of some of her constituents. But PAP MPs should be careful not to broadcast such strong words, when there was no betrayal. They must not sing the same tune as opposition MPs unwittingly.”
“This trust has been built up over many years, since the PAP came into power in 1959. Mr Low knows that his party will not make headway in elections, so long as the trust is there. PAP MPs must therefore never squander this trust nor allow anyone to undermine it with selective amnesia or other political trickery. Mr Chiam is not here today. But does Mr Chiam See Tong also suffer from selective amnesia? I think his condition is a variant of this. It is called "quoting out of context". He shows a shift in the Government's position, without explaining the context of the shift. The objective is the same as selective amnesia. Used repeatedly, and if not countered, it will erode the trust the people have for the Government. In this regard, Mr Chiam made a "washy-washy" speech. Yes, I said "washy-washy", not "wishy-washy". It is not amnesia, I assure you. I remember very well Indranee's speech on "wash-wash". I say "washy-washy" because Mr Chiam made another attempt to wash in public, past speeches by Ministers. He wanted to show that we had changed our position and therefore, were not men of our words. But his tactic does not work, because the Government has no dirty linen for him to wash! We keep our PAP shirts and pants very white. Yes, DPM Lee said in 1985 that the CPF was part of workers' wages and should not be cut. That was over a decade ago. Our competitiveness situation has since changed. So we have to make corresponding changes to the CPF to suit the new environment. Mr Chiam, however, does not seem to change his view of the world even when the world has changed. In fact, the only change I have seen Mr Chiam make was when he changed political parties! Where does Mr Chiam stand on the CPF changes? Is he in favour of the CPF rate cut? Or is he in favour of status quo?”
“If I have total amnesia, the people will sympathise with me, at least that is what I hope. In Mr Low's case, he has selective amnesia. When he accused me of not keeping my promise to create jobs, he conveniently forgot to tell this House that since the general election in November 2001, the world has been threatened by terrorism, destablised by wars in Afghanistan and Iraq, and frightened by SARS. He conveniently forgot to tell the House that these events were beyond our control. He forgot to tell the House that if the events had not happened, our economy would have grown by at least 3% this year. Selective amnesia is not a medical condition. It is a political condition, to be admonished, and not treated with sympathy. In case Singaporeans miss my punch line again, the common name for Mr Low's selective amnesia is "opposition politics". Let me tell you briefly the employment situation since the 2001 election. Despite the external events that shook investor confidence in our region, we continued to attract a high volume of investments. In the manufacturing sector, EDB attracted $9 billion of investments in 2002. These investments will create 14,000 jobs when fully realised. EDB also attracted $2 billion of investments in the services sectors they promote. This will create another 7,000 jobs. The 7,000 jobs are in addition to jobs in other services sectors that are being promoted by other Government agencies. On a net basis, we lost 23,000 jobs last year. But Singaporeans actually gained 19,000 jobs. Foreigners lost 42,000 jobs, hence the overall loss of 23,000 jobs. I have spent some time dismissing Mr Low's allegation because his tactic is a corrosive one. He is trying to corrode a fundamental pillar of the PAP - the trust between the people and the Government.”
“To keep the promise, we might cause more harm than good to Singapore. Even the people would not want us to keep the promise. In short, circumstances must have changed so drastically that only a naive person or a knave would argue for the promise to be kept. Mr Low Thia Khiang is neither naive nor a knave. But he made a fierce speech attacking the PAP and me for breaking our election promise to create jobs for the people. He said that instead of doing so, we are now cutting workers' wages by lowering the CPF rate. I was not in the Chamber but I heard his bark from outside. Why do Mr Low and I respond differently to Singapore's economic plight? The difference is: he is a politician; I am not. I regard myself as a political leader. Let me explain the difference. When we are faced with a grave problem, I explain the problem to the voters, and work out the options to solve it. I choose what, in my view, is the best option after a thorough discussion with my colleagues, with MPs and sometimes with grassroots leaders, even if that option means pain and discomfort in the short term. If necessary, I give some anaesthesia or painkillers. And if I have a little money in my pocket, I hand it out to give a little cheer. I never duck an issue even if it will cost me some votes. I let the results speak for themselves. Mr Low, on the other hand, sees a fire in a problem and, instead of putting it out, looks for the biggest fan to fan the fire. And when he sees a wound, he looks for a bucket of salt to rub into the wound. In our current plight, does Mr Low Thia Khiang offer constructive suggestions to help Singapore recover? No. On the contrary, he accuses me of having total amnesia, of having forgotten my election promise to create jobs. Total amnesia is a medical condition.”
“But only 20 turned up for work on the first day. One quit after a few days. In the end, the company managed to recruit only 19 Singaporeans for 400 vacancies. The company was forced to turn to its Malaysian recruitment contractor. The contractor promptly produced 360 candidates. The company hired 151 of them. That was last year. I asked EDB whether the company was doing better recruiting Singaporeans this year. EDB reported it still had a problem. Let me add that if ST Microelectronics had not been allowed to recruit the 151 Malaysians, it would have shelved its plans to expand in Singapore. And the 19 Singaporeans would not have a job today. There are also jobs available in the marine industry. Last month, the President of the Association of Marine Industries, Mr Heng Chiang Gnee, sent me a letter. He wanted me to convey a message to Singaporeans. He wanted them to know that there are still many jobs available in the marine industry, from tradesmen and engineers, to supervisors and managers. My point is, there are jobs available in Singapore. If we change our mindset and move away from our comfort zone, we need never be out of work. Trust between people and Government The third quality a nation needs in order to overcome its challenges is trust between the people, and between the people and the Government. Again, Mr Nandan urged me not just to feel for the people, but to act on my feelings. Do not fear. That is what we have done and what we will do. You have heard DPM Lee. He has announced many measures to help Singaporeans cope with the CPF changes and our economic difficulties. We will not break our promise to help Singaporeans adjust. But sometimes, if we cannot fulfill a promise, like restoring the CPF rate to 40%, it is because of compelling reasons.”
“They are a test of the adaptability of our people. They are a test of the character of Singaporeans. From the feedback I have received, I believe Singaporeans have passed with flying colours. They may not be happy with the CPF changes, but they accept that the measures are necessary. They are not arguing against the measures, but rather, they are asking the Government to cushion the blow for less able Singaporeans. This is a legitimate request. Singaporeans should also be practical about jobs. If the market is not so rosy, we should not be too choosy. We should be prepared to take on less attractive jobs, rather than stay unemployed for long periods. There are enough jobs for all Singaporeans even now. There are 85,000 unemployed Singapore residents. But in the manufacturing and services sectors alone, there are 200,000 jobs held by foreign workers. This means more than two jobs per unemployed Singaporean. If these Singaporeans are prepared to lower their expectations, and work shifts or in the sun, all 85,000 unemployed residents can be gainfully employed. Let me give you actual examples of job vacancies that Singaporeans do not want to fill. Mr Tharman Shanmugaratnam told me that ST Microelectronics tried to recruit 400 workers last year. The company offered a starting pay of $1,150 for wafer fab operators and $1,500 for technicians. This was for working only 15 days a month, and did not include overtime allowances. Quite an attractive deal, I thought. But Singaporeans did not think so. Do you know how many Singaporeans turned up for interview? Only 87, for 400 vacancies. Do you know how many walked away when they found out they had to work shifts, and in a clean room? 23. Of the 64 who stayed for interview, 35 were offered jobs.”
“He is the Executive Secretary of the Union of Gas and Power Employees, a union leader. I was very impressed by the tone and content of his speech the other day. Union leaders in many other countries would have berated their governments for cutting workers' wages. They would have taken to the streets, like the French and the Koreans. But here, we have far-sighted and realistic union leaders. Mr Nandan supported the CPF changes because he understood the gravity of the situation. At the same time, he urged the Government to help the workers adjust to the changes. It is not just Mr Nandan but other union leaders as well. I meet them from time to time, so I know what they think and how they think. They are a sensible and practical lot. They listen to reason. They understand facts and figures. They know what is going on around the world and how their jobs are affected. If they are convinced of the need for tough measures, they have the courage to sell them to their members. They are the true leaders of the workers, not the politicians in the so-called Workers Party. There is another group of people who have been instrumental in our industrial harmony. Many of us do not even know they exist. They are the Industrial Relations Officers or IROs, in NTUC. There are about 50 of them. They are the link between the union leaders and the workers. They may work unnoticed, but they are out there in the direct line of fire of unionists. IROs, union leaders like Mr Nandan, and NTUC leaders like Mr Lim Boon Heng give investors confidence in Singapore's labour situation. Do other Singaporeans have the same common sense and pragmatism as our IROs and union leaders? I ask because I see the CPF changes not just as measures to improve our competitiveness.”
“For me, they are, first, the quality of a country's leadership; second, the character of the people - whether they are sensible and practical; and third, the trust the people have in each other and in their government. These basics, they never taught them in my course at Williams. I learnt many useful lessons there. But the real lessons I learnt only after I joined the PAP. Quality leadership First, the quality of the leadership. As Prime Minister, I have to receive Chairmen and CEOs of MNCs from time to time. Very often, they have investments in Singapore or are thinking of investing. EDB recommends that I see them. Are they just courtesy calls? No. The Chairmen and CEOs are trying to confirm for themselves that Singapore is a good and safe place in which to invest. They are sizing up the leader of the country. They want to know: is he pro-business? Is he competent? When difficult problems demand a solution, will he be a populist or will he take tough actions? Can he carry the people with him if he has to make tough decisions? Even when I was the Minister for Defence, I received investors. The meetings had nothing to do with the Defence Ministry. The investors wanted to meet me simply because I was the designated successor to Prime Minister Lee. They wanted to know whether their investments would be safe with Singapore's future leader. Looking ahead, investors will now want to see how the new team performs. I am confident of the new team. Sensible and practical people This leads me to the second fundamental factor for a country to succeed - the people. What is their character? Do they have skills and capabilities? Can they learn? Are they sensible and practical? Singaporeans, I think, have a reputation for all that, and more. Listen to Mr Nithiah Nandan.”
“It could well have been my fate and the fate of Singapore. Fortunately, as of now, among the 16 countries represented in my class, Singapore has come out on top. But in 1966, if my professors in Williams College had done a ranking of the 16 countries - which ones were most likely to succeed by the end of the 20th century - I think they would have got the answer wrong, especially with regard to Singapore. Indeed, in the 1960s, many pundits wrote off Singapore because we were an artificial country. We were, and still are, only a dot on the map. We had no natural resources, no hinterland. We were a migrant society with no sense of nationhood. There was communal tension and distrust. That is why I have never taken our prosperity for granted, or assumed that what we have today will get better and better in the years to come. For the same reason, I am unfazed when we are besieged with problems. Given our natural limitations, we should expect the occasional problems. I have seen what have happened to my classmates. I have seen how countries have gone up and come down. In fact, we should be surprised that we have far fewer problems than well-endowed countries. When confronted with problems, I go for the basics, the fundamental qualities that make a country successful. CPF changes, lower Government fees, lower land and rental costs, lower taxes - all the things that MPs raised in the House today and the days before - they are necessary, but they are not sufficient. If the basics are wrong, we would not be debating any CPF changes. We might well be fighting for our lives in the streets. Or we might be paying some snakeheads to smuggle us to another country. So what are the basics?”
“The East Pakistanis felt that the Government in Karachi had squatted on them. So, East Pakistan, with a little help from India, became Bangladesh. I have also wondered what has happened to the handsome, young Egyptian from my class. I had planned to visit Egypt, after my course, on my way home. At that time, I thought that I would never travel again. So, I actually planned my journey from the US to Montreal, London, Paris, Rome, Cairo, then to Bangkok and Singapore. So, my Egyptian friend gave me the names of some hotels in Cairo. But a few weeks before my course ended, war broke out between Egypt, Syria and Jordan on the Arab side, and Israel on the other side. The war lasted six days. Egypt lost Sinai and the Gaza Strip to Israel. My Egyptian friend was shell-shocked. I cancelled my trip to Egypt. As for the other five African countries, I am sad to say that none of them made it. You may recall the names of Jomo Kenyatta of Kenya, Julius Nyerere of Tanzania, and Milton Obote of Uganda. I have met Jomo Kenyatta and Julius Nyerere. They were larger than life, the hope of Africa. But they could not deliver development to their countries. President Milton Obote came to Singapore for the Commonwealth Heads of Government Meeting in 1971. While he was here, Idi Amin deposed him. You know, of course, the damage Idi Amin then inflicted on Uganda. As for Ethiopia and Liberia, they have gone through countless civil wars. In 1993, a part of Ethiopia broke away to become Eritrea. And Liberia today is still suffering from internal strife. My Liberian classmate worked in the central bank. I used to play table tennis with him. What central bank is there in Liberia today? Which country was most promising? The fate of my classmates and their countries has a sobering effect on me.”
“The streets were wide and the buildings were new. It was a pleasant neighbourhood. Marshal Josip Tito, Yugoslavia's Head of State, hosted a reception for the conference participants. When he walked in, his charisma filled the room. But he looked old and frail. He did not stay long for the reception. I wondered then how long he would remain in charge of Yugoslavia. Mr S Rajaratnam, as you know, had a curious mind, especially when it came to politics. In Belgrade, he asked to meet an imam, a Muslim spiritual leader. He wanted to know how Islam was practised in Yugoslavia, a predominantly Orthodox Christian country. The imam, an oldish man, seemed happy and secure. Of course, he spoke through an interpreter. He lived in a small but decent-looking two-storey house. Tito died in 1980. And, soon after, Yugoslavia began to break up. Today, Tito's Yugoslavia has splintered into five countries: Slovenia, Macedonia, Croatia, Bosnia and Herzegovina, and Serbia and Montenegro. And I am sure that the old imam did not expect the horrors that befell the Muslims of his country - the ethnic cleansing by the Serbs. Let me give you another example. In 1966, Pakistan comprised West Pakistan and East Pakistan. At a dinner discussion during my studies in Williams College, a Pakistani student, who had graduated one year earlier, held forth that the trend in the world was against separatism. He said that nowadays, the states in a country preferred to stay together. He could not think of any country having broken up in recent years. I reminded him of Malaysia and Singapore. "Ah," he said, "that is an exceptional case." Five years later, his own country also proved him wrong. In 1971, East Pakistan fought to separate from Pakistan.”
“This was a special course for government officers from Third World countries. I was then working in the Economic Planning Unit under the Ministry of Finance. There were 20 of us in the class. We came from 16 Third World countries. Besides Singapore, the Asian students came from Malaysia, the Philippines, India and Pakistan. The African students were from Uganda, Tanzania, Kenya, Liberia, Ethiopia and Egypt. Mexico, Honduras, Bolivia and Colombia represented Central America. And from Europe, we had Yugoslavia. We were 20 young, eager beavers, with great dreams for our countries. But, unfortunately, 38 years later, those dreams have disappeared for many. Looking at the political and social developments in each of the 16 countries represented in my class, and how much their peoples' lives have improved from 1966 to 2002, I think only three of the countries have succeeded beyond a doubt. They are Malaysia, Mexico and Singapore. They have brought about development, and given their people a better future. Perhaps I should add India to this list, now that it has begun to open up its economy and some results are showing. The remaining 12 countries have either made little progress or, worse, gone backwards. Some have really fallen into a valley of gloom. Take Yugoslavia. In the 60s and 70s, Yugoslavia was a beautiful country and a popular tourist destination. My friend from Yugoslavia told me that you could actually go bear hunting in Yugoslavia and, if you want to be sure you can kill a bear, you just pay the tour guide for it and the bear will be killed. I visited Belgrade, the capital, in 1978. I went there with Foreign Minister S Rajaratnam to attend a Non-Aligned Movement meeting. The conference was held in a new part of Belgrade.”
“We welcome suggestions from Mr Inderjit Singh, the general public and businesses, MPs, as well as from public officers themselves. The more ideas the Panel receives on wasteful expenditure, the more effective the Panel will be. I do not think the civil service is fat. But if we find that there is fat beneath the waste, we can set up a Cut Fat Panel. Certainly, 38 years ago, we had no waste, no fat. We were a lean and hungry Third World country. But, today, we are a First World country enjoying plenty of creature comforts, McDonalds, Kentucky Fried Chicken and other fast food. Thirty-eight years ago, many of our mothers worked as maids or washerwomen. Today, Singaporeans not only refuse such jobs, but one in seven households employs foreign maids. Another example is overseas travel. I took my first plane ride at the age of 25, and that was to Kuala Lumpur for a scholarship interview. Today, thousands of infant Singaporeans fly before they can even walk! All of us want this good life to continue. But is it guaranteed? Thirty-eight years from now, will Singapore still be in the First World? Or will we be back in the Third World? This is not an idle question. I ask myself this question time and again. Nations may be endowed with rich natural resources, or none at all, but that does not destine one to be rich and the other, poor. We must understand what it takes for the nation to succeed, so that we can make Singapore endure. Thirty-eight years ago Dr Ng Eng Hen has cited the examples of China, Japan, Ireland and Finland to show the fluctuating fortunes of nations. Let me elaborate on the same theme, but from a personal perspective. In 1966, I went to Williams College in the US to do a Masters programme in development economics.”
“Mr Speaker, Sir, it has been a long four days. I might not have been in the House physically, but I can assure hon. Members that I listened in quite regularly to the debate in the House. The fate of nations I thank the MPs for contributing to the debate on "Retuning the CPF". I believe all of you support the changes, even the opposition MPs, and if I am wrong, please let me know. You may not fully agree with the extent of the changes, but you concur that we cannot go back to a CPF rate of 40%. You accept that we must do something about the Minimum Sum, salary ceiling and withdrawal rule. DPM Lee and the Minister for Manpower have answered the questions on the CPF changes and the help measures. I shall not repeat their points. This afternoon, in summing up the debate, I will go beyond the CPF changes, as I believe our present difficulties are temporary. I will talk about the basic factors that will make for a sustained recovery. Those of you who said that the CPF changes alone would not do the trick are absolutely right. The changes are not a miracle cure. They are necessary and will bring down our wage costs. But, by themselves, they are not sufficient. We need to do more, to make a difference to our cost competitiveness. As many MPs have emphasised, we must and will keep taxes and other costs down. And we will tighten up the civil service. We run an efficient civil service, comparable to the best in the world. But because of many years of good growth and strong budget surpluses, we might have been a little indulgent in our spending. I support, therefore, the setting up of the Cut Waste Panel. Mr Inderjit Singh said that this is not enough, and that we must go beyond cutting waste. But let us get on with the Cut Waste Panel first.”
“We owe our past success to teamwork - the people, the employers and the Government working hand in hand. As a team, we have won many matches for Singapore. If we continue to pull together as a team, we will also triumph over the upcoming challenge. But we must also alter our strategy and improve our capabilities, because the competition has become stronger. If we do not, we will surely not reach the highlands. In this regard, the changes to the CPF scheme are an important component of our wider re-strategising for the economy. They will go a long way to improve our cost competitiveness. We must implement the changes, and at the same time, help those who are affected to adjust. With the changes and your co-operation, I am confident that we will not revert to being a Third World country again. On the contrary, we will strengthen our position in the First World. [Applause.] ADJOURNMENT MOTION”
“The GST increase is part of our economic restructuring. It is to make up for the loss of revenue from our lowering of income taxes. The Economic Restructuring Shares will enable Singaporeans to offset the GST increase for several years. Conclusion - Teamwork Let me conclude. The changes I have announced are the most drastic we have ever made to the CPF system. They are necessary because we are seeing the most drastic changes yet in our external environment. China and India especially, pose formidable competition, with their abundant, skilled and low-cost manpower. We have to lower our costs to remain attractive to investors, even as we embark on a wider exercise to lift our economy to a higher plane. I know that Singaporeans are worried about the future. They wonder whether we can ever return to sunny days, given the strong competition. But remember, we transformed ourselves from Third World to First in just 38 years, against all odds. We have developed many strengths and advantages along the way - the common use of English, the rule of law, harmonious labour relations, excellent infrastructure, and a good reputation. These strengths will continue to stand us in good stead as we face stronger competition. Most importantly, we have a strong team, working together for the success of Singapore. For example, our workforce is first class. We have established companies that are well-run, financially sound and expanding. At the same time, we have entrepreneurs who are starting a variety of businesses and venturing beyond Singapore. Our grassroots and community leaders help keep our nation united. And our media plays a constructive role in helping our people understand our surroundings and challenges better.”
“From 1st January 2009, members turning 55 can only withdraw 40% of their Ordinary and Special Accounts, and then the remaining balances, if any, after they have met the CPF Minimum Sum and the Medisave Minimum Sum requirements. This percentage of withdrawal will go down by 10 percentage points each year. In other words, 30% in 2010, 20% in 2011 and so on. Table 9: Withdrawal of OA and SA Balances at Age 55 Until 31 Dec 08 50% (unchanged) 2009 40% 2010 30% 2011 20% 2012 10% From 1 Jan 2013 0% Come 1st January 2013, CPF members who reach 55 can withdraw the balances in their Ordinary and Special Accounts only after setting aside the CPF Minimum Sum and the Medisave Minimum Sum. This means that the first group of Singaporeans to be fully subject to the new rule will be those who turn 45 on 1st January 2004. Help measures I understand the worries of Singaporeans. From feedback, I know that they have been anxiously re-looking their finances since I announced the changes at the National Day Rally. Most Singaporeans will be able to cope. But many may have to do some belt tightening. The Government will help ease their adjustment pain. We have put together an assistance package. It will include measures to help homeowners cope with their loan repayment, which may be affected by the cut in CPF. The package will also contain further measures to help the low income and unemployed, and tide businesses over this period of slow economic growth. DPM Lee will announce the details later in the debate. There has been speculation whether the Government will postpone the implementation of the one-percent increase in GST scheduled for 1st January 2004. No, we will not. We will be proceeding as planned. We have delayed it by one year already. We should not delay the increase any further.”
“Withdrawal rule at age 55 The final area of change is the CPF withdrawal rule when a member turns 55. This is to ensure that Singaporeans will have enough for their retirement, healthcare and housing expenses, despite the lower CPF rate. Meeting Minimum Sums before cash withdrawal Presently, at age 55, CPF members can withdraw 50% of their combined Ordinary and Special Accounts balances. They can do so even if this leaves them with less than $40,000 in the CPF, which is supposed to be the cash portion of the current CPF Minimum Sum. The 50% withdrawal rule will leave many members with insufficient CPF balances to see them through their old age. Now that we have to lower the CPF contribution rate, the problem will be even more acute. We will amend this rule. We will still allow members to withdraw their CPF at age 55, but only after they meet the CPF and Medisave Minimum Sums requirements. However, CPF members will continue to be able to withdraw the first $5,000 in their CPF accounts, as is the case now, even if they have not met the Minimum Sums requirements. No change for next 5 years I know that the changes to the CPF withdrawal rule will upset many plans. Older Singaporeans are looking forward to a tidy sum of money at 55, to do what they have yearned for a long time. Some will use it to pay off outstanding mortgages, or their debts. Others will use it to go on a long holiday, or to invest in business ventures. Therefore, we will not make any changes to the withdrawal rule for the next five years. We will not upset the plans of those who are over 50 today. Phase out 50% withdrawal by 2013 We will start to phase out the 50% withdrawal rule only from 1st January 2009, and then do so over a further period of five years. This is shown in Table 9.”
“Enforce Medisave Minimum Sum Next, under current rules, a CPF member who has less than $25,000 in his Medisave Account is not required to top it up to $25,000. This is the case even if he has excess balances in his Ordinary and Special Accounts which he can withdraw at age 55. The purpose of the Medisave Minimum Sum is to make sure that we have enough money set aside to meet healthcare expenses in our older years. As life expectancy increases, Singaporeans will spend more on healthcare. Furthermore, on average, someone aged 80 spends three to five times more on healthcare than someone aged 62. Each additional year of life adds considerably to healthcare expenses. It is, therefore, unsatisfactory to allow CPF members with excess balances in the Ordinary and Special Accounts to withdraw the money at age 55 without topping up the Medisave Minimum Sum. We will progressively require them to do so, as shown in Table 8. Table 8: Medisave Minimum Sum to be Topped Up Before CPF Withdrawal at Age 55 (in today's dollars) Current $0 1 Jan 2004 $2,500 1 Jan 2005 $5,000 1 Jan 2006 $7,500 1 Jan 2007 $10,000 1 Jan 2008 $12,500 1 Jan 2009 $15,000 1 Jan 2010 $17,500 1 Jan 2011 $20,000 1 Jan 2012 $22,500 1 Jan 2013 $25,000 From 1st January 2004, we will require CPF members to top up their Medisave Minimum Sum to $2,500, before they make any CPF withdrawal at age 55. Over the next ten years, we will increase the top-up requirement by $2,500 every year, adjusted for inflation. In other words, on 1st January 2005, Singaporeans must top up their Medisave Minimum Sum to $5,000; on 1st January 2006, it will be $7,500; and so on. By 1st January 2013, CPF members will have to top up their Medisave Minimum Sum to $25,000 (today's dollars), before making their CPF withdrawal.”
“The current Minimum Sum is $80,000. Half of this can be in a property pledge. So most CPF members have only $40,000 in cash in the Minimum Sum. This will fund a monthly payment of only $252 from age 62 to 80. It is a small fraction of most workers' last drawn pay, and is not enough for their basic needs. We will, therefore, increase the Minimum Sum from $80,000 to $120,000 in today's dollars. As before, half of this can be in a property pledge. The other $60,000 in cash will yield a monthly payment of $378. This is still not much, but more adequate than $252 presently. Table 7 gives the details of the phasing in of the Minimum Sum. Table 7: CPF Minimum Sum (in today's dollars) Current $80,000 1 Jul 2004 $84,000 1 Jul 2005 $88,000 1 Jul 2006 $92,000 1 Jul 2007 $96,000 1 Jul 2008 $100,000 1 Jul 2009 $104,000 1 Jul 2010 $108,000 1 Jul 2011 $112,000 1 Jul 2012 $116,000 1 Jul 2013 $120,000 The CPF Minimum Sum will be raised by $4,000 a year, and adjusted for inflation, starting 1st July 2004. It will reach $120,000 (today's dollars) by 2013. Today, the life expectancy of Singaporeans is about 80 years. We will, therefore, adjust the monthly payment amounts, to make the Minimum Sum savings last around 18 years for most members, from retirement at age 62 until they are 80 years old. Maintain purchasing power of Medisave Minimum Sum Besides the CPF Minimum Sum, there is also a Medisave Minimum Sum. This is currently $25,000. Minister Khaw Boon Wan will do his best to keep healthcare costs reasonable. But we should still expect costs to increase over the years. We will, therefore, adjust the Medisave Minimum Sum every year to take into account inflation of healthcare costs. This will preserve its purchasing power.”
“The phasing in of the CPF salary ceiling is shown in Table 6. Table 6: CPF Salary Ceiling Current $6,000 1 Jan 2004 $5,500 1 Jan 2005 $5,000 1 Jan 2006 $4,500 The salary ceiling for additional wages, consisting typically of bonuses, will be adjusted proportionately. Pensionable civil servants have lower CPF rates and a higher salary ceiling than non-pensionable workers. Their salary ceiling will also be adjusted. The original plan to reduce the CPF salary ceiling from $6,000 to $5,000 will save businesses $260 million a year. The additional reduction to $4,500 will save businesses another $137 million. In total, our businesses will save $400 million in wage costs annually, come 1st January 2006. Reward workers through variable pay Even in this difficult economic environment, some companies are doing well. The cut in the CPF rates and the lowering of the salary ceiling will give them windfall profits. I urge these companies to use the savings to reward their workers through the variable pay component. This could be in higher performance bonuses or monthly variable components. CPF and Medisave Minimum Sums The changes to the CPF rate and salary ceiling will give employers substantial wage savings. But they will mean less CPF savings for workers. This makes it even more important that the savings be used only for housing, healthcare and retirement expenses. To ensure that members have enough for healthcare and retirement, we must adjust the CPF and Medisave Minimum Sums, and tighten up the withdrawal rules at age 55. These are the third and fourth areas of change. Raise CPF Minimum Sum to $120,000 The CPF Minimum Sum gives CPF members a monthly payment after their retirement at age 62 a certain sum of money. It is the nest egg that will see them through their old age.”
“We had earlier planned to increase the Medisave Account contributions, up to the ERC target rates of 7, 8 and 9%, but we will now defer this move. The figures are given in Table 5. Table 5: Medisave Account Target Contribution Rates 35 and Below Above 35 to 45 Above 45 Old1 7% 8% 9% New 6% 7% 8% 1Existing contribution rates are 6%, 7%, 8% for respective age groups. The Government had earlier accepted the ERC recommendation to change to target rates of 7%, 8%, 9%. CPF Salary Ceiling Let me move on to the CPF salary ceiling. The ERC established the principle that the CPF scheme should focus on workers earning between the 10th and 80th percentile incomes. The lowest 10% of wage earners cannot rely on the CPF alone for their retirement needs. They will need other social support schemes. On the other hand, the top 20% of wage earners should be able to look after themselves. If they want to save more for their old age, they should do so on their own. We should not make it compulsory through the CPF scheme. Otherwise, it will add rigidities to our wage system, and impose additional cost burden on businesses. Lower Salary Ceiling to $4,500 Following the ERC review last year, we had already decided to reduce the CPF salary ceiling in two steps. First, from a monthly salary of $6,000 to $5,500 on 1st January 2004. Second, from $5,500 to $5,000 on 1st January 2005. However, $5,000 is still higher than the 80th percentile monthly salary, which is currently $3,700. We will, therefore, lower the salary ceiling further from $5,000 to $4,500 on 1st January 2006. It is $4,500 and not $3,700, and there is a reason for this. Assuming a reasonable rate of wage increase and inflation, by 2006, $4,500 will be just a little above the 80th percentile income.”
“On 1st January 2006, the contribution rate will be reduced by a further three percentage points: again, one point from employees and two from employers. This will bring the CPF contribution rate to 27%: 18% for employees and 9% for employers. Table 3 before you gives the details. Table 3: CPF Contribution Rates for Workers Aged Above 50 to 55 Date Total Employee Employer 1 Oct 2003 33% 20% 13% 1 Jan 2005 30% 19% 11% 1 Jan 2006 27% 18% 9% The cut in CPF rate will save employers $1.3 billion a year. It will boost our efforts to draw in investments, and create jobs. Revised Special and Medisave Accounts Contribution Rates Next, the contribution rates for the Special and Medisave Accounts. The ERC had earlier recommended higher Special Account rates for CPF members. The proposal was 5% for CPF members aged 35 and below, 7% for those aged 35 to 45 years, and 9% for those aged 45 to 55 years, ie, three steps, 5%, 7% and 9%. This was to help members set aside more cash savings for their retirement. Higher rates are needed if we allow members to withdraw 50% of the Ordinary and Special Accounts at age 55. However, if we change the policy on CPF withdrawal at age 55, as I will explain later, we can afford to have the Special Account rates lower than the ERC target rates. The new target Special Account contribution rates will therefore be 5% for members aged 35 and below, 6% for those aged 35 to 45 years, and 7% for those aged 45 to 55 years. This is shown in Table 4. Table 4: Special Account Target Contribution Rates 35 and Below Above 35 to 45 Above 45 to 55 Old 5% 7% 9% New 5% 6% 7% Next, Medisave. The Medisave Account contribution rates will remain at 6% for CPF members aged 35 and below, 7% for those aged 35 to 45, and 8% for those above 45 years old.”
“It would save many companies from going under, in particular, SMEs. It would draw in more investments. It would spur job creation. A third group of Ministers and MPs agreed that demand was the immediate problem. But they argued that cost competitiveness was a problem that we must also start to fix now. They felt that we should bring the CPF rate down to 33%, and even lower later, if necessary. After a vigorous debate, the Cabinet decided that the best way forward was a moderate cut to the CPF. It should be enough to help companies save costs, but not so drastic as to puncture domestic consumption. The Cabinet concluded that the more immediate problem was a lack of demand for our goods and services. This is the external demand for our goods and services. But cost competitiveness was also a problem, and it would get worse in the coming years. With effect from 1st October 2003, the CPF rate will be lowered from 36% currently to 33%. Employees will continue to contribute 20%. Employers will contribute 13%, 3 percentage points less than now. Table 2 shows CPF contribution rates for workers aged 50 and below. Table 2: CPF Contribution Rates for Workers Aged 50 and Below Date Total Employee Employer 1 Oct 03 33% 20% 13% For older workers aged 50 to 55, we will bring the CPF rate down to 27%, ie, 6% lower than for younger workers. But to cushion the impact, we will not do it immediately. Their CPF rate will come down to 33% on 1st October 2003, the same as for younger workers. On 1st January 2005, it will be reduced further to 30%: employee contribution will be cut by one point to 19%, and employer contribution by 2 points to 11%.”
“I shall now ask the Clerk of Parliament to distribute a Table, and further Tables later on, showing the long-term target CPF contribution rates for the various age groups. [Copies of Table distributed to hon. Members.] Table 1: Long-Term Target CPF Contribution Rates Age Total Employee Employer 50 and Below 30 - 36 % 20% 10 - 16 % Above 50 to 55 24 - 30 % 18% 6 - 12 % Above 55 to 60 18.5% 12.5% 6% Above 60 to 65 11% 7.5% 3.5% Above 65 8.5% 5% 3.5% Immediate cut of 3% in employer rate Having looked at the long-term CPF rates, let us look at our immediate situation. Is our current CPF rate of 36% appropriate? Is it the best rate? Is that optimal? If not, what should it be? The Cabinet spent more than two months grappling with this question. We also brainstormed with the PAP Members of Parliament. Some Ministers and MPs felt that the current CPF rate of 36% should remain. They were of the view that the external outlook was brightening. Singapore companies were feeling more upbeat. Moreover, a cut in the CPF would not solve our immediate problem, which was the lack of demand. On the contrary, it would dampen domestic demand further. It might also have a negative effect on property prices. A second group of Ministers and MPs argued that our economic difficulties had dragged on for far too long. The competitive landscape had changed fundamentally. Our costs were now much higher than our competitors. Singapore needed to respond quickly and decisively. These Ministers were also worried that if our wage costs were too high, we might see a jobless recovery, like in the US. This is a situation where the economy grows, but few jobs are created. This second group of Ministers and MPs felt, therefore, that we should cut the CPF rate immediately to 30%.”
“We propose that this range of rates be from 30% to 36%. The employee contribution rate will be fixed at 20%. The employer contribution will vary between 10 and 16%. We will not have any formula to decide what the actual CPF rate should be at any point in time. We will look at the prevailing economic conditions, and assess accordingly. If there is to be a rise or cut in the rate, we will give as much notice as possible, to allow for advance planning. I do not envisage fine-tuning the rate every year. We will only adjust it from time to time, when conditions have changed significantly. Our analysis shows that even at a 30% contribution rate, the large majority of Singaporeans will still be able to save enough for their retirement needs, healthcare expenses and housing. For instance, a worker earning a 50th percentile income, or $2,000 per month, will be able to purchase a 5-room HDB flat. This is provided we tighten the withdrawal rule at age 55, as I will explain later. Long-term variable rate of 24-30% for workers aged above 50 to 55 For older workers, we will set a lower range of rates. Last year, the ERC established the principle that the CPF contribution rate for older workers should be lower than that for younger workers. This is to help older workers keep their jobs, and for those who are unemployed, help them find new jobs. For those aged 50 to 55, we will set the long-term range for the CPF rate at 24% to 30%. The employee contribution will be 18%. The employer contribution will vary between 6% and 12%. No change in CPF rates for workers above 55 We will not change the CPF rates for workers above age 55. The rates are already low. They are 18.5% for those aged 55 to 60; 11% for those aged 60 to 65; and 8.5% for those above 65 years old.”
“But looking forward to the future competitive environment, this is no longer advisable. It would price us out of the market. We would lose more jobs. We should give up the 40% target, to save jobs. The Government did not rush into this decision. We struggled between our commitment to restore the CPF rate to 40% and the economic reality. You see, the trust between the people and the Government is paramount. It is the basis upon which we have carried out many tough but necessary measures to improve the lives of our people. It is therefore not an easy decision for the Government to give up a commitment it has made. It risks breaking the trust between the people and the Government. But we have no choice. If investors think that we are going to restore the 40% rate in the future, they will factor this into their cost calculations. They may not come. Even those who are here may make plans to move out to cheaper locations. I hope Singaporeans understand why we are not restoring the 40% contribution rate. Our priority must be to save jobs for our people. Longer term variable rate of 30-36% The question is: what CPF contribution rate is appropriate? Nowadays, the world economy changes rapidly. It is not practical to try to identify a single number as a long-term rate. No one can be sure how the competitive situation will evolve. We must also expect our economy to run into rough weather from time to time. We should thus make our system flexible, so that we can put more into the CPF in good years and cut the rate in bad years. This will give us room to respond quickly to the changing economic environment. I feel, therefore, that it is better to set an upper limit and a lower limit for the CPF contribution rate for the long-term, instead of a single rate.”
“Our business costs then were lower than those in developed countries. And we faced limited competition. Many of today's emerging economies were under communist regimes at that time. Others were highly regulated and protectionist. China and India, for instance, were not open and attractive to foreign investments. Singapore, in fact, was one of the earlier and most ardent advocates of an open, MNC-based economy. But times have changed. China and India, with a combined population of more than two billion people, have entered the economic race. So too have many other countries, like in Central and Eastern Europe. They are following our MNC-based strategy for economic growth. Their low cost of doing business is extremely attractive to investors. On the other hand, the cost of doing business in Singapore has reached First World levels, as has our standard of living. Cost competitiveness is a key worry for Singapore today. Therefore, from the economic perspective, we should keep the CPF contribution rate as low as possible. The lower we go, the less the pressure on companies to move out because of high wage costs. Wages account for as much as 20-30% of total business costs in certain industries. A new balance is needed This is why we need to retune our CPF scheme - to strike a better balance between our social objectives and our economic concerns. We will need to address four aspects of the CPF system: the contribution rates, the salary ceiling, the CPF and Medisave Minimum Sums and the withdrawal at age 55. CPF contribution rates First, the CPF contribution rate. The CPF rate is currently 36%: 20% from the employee and 16% from the employer. The Government had intended to restore the CPF rate to 40% when economic conditions permit.”
“Social objectives The CPF is Singapore's most important social safety net. Its first and principal objective is to provide for the retirement needs of Singaporeans. Later, we added other social objectives like saving for home ownership and healthcare. These objectives remain valid today. In fact, the needs have grown. For instance, retirement expenses will go up because people are living longer. An article in the New York Times talked about the possibility of living to 600 years old, because of the promises of genetic medicine. It explained that our organs might break down. But scientists were now breeding special animals that could grow replacement human hearts and lungs. Scientists have also found a chemical in red wine - for those who love red wine, please note - which may slow down ageing. And gene therapy will allow us to conquer many previously incurable diseases. I do not think many people relish the idea of living to 600. Can you imagine having to face your enemy for 600 years? But I think most people would not mind living to 100. In fact, a good number of Singaporeans are already living to near a century. Today, 40,000 Singaporeans are over 80 years old. Of these, 5,000 are over 90! Prolonging lives will lead to new social problems, and certainly, a need to save more for a longer old age and higher medical expenses. So from the social perspective, the higher the CPF contribution rate, the better. Economic concerns But increasingly, we must also consider the impact of the CPF on our cost competitiveness. In the 70s, 80s and 90s, cost competitiveness was not an overriding concern. We had good growth year after year. During those 30 years, we grew by 8% annually. Our salaries too rose by an average of 8% every year. We could afford to put a lot into the CPF.”
“Production and related workers form 34%, while clerical, sales and service workers made up the remaining 23%. The migration of white-collar jobs will pick up speed in coming years. Analysts expect many jobs in data entry, data reconciliation, call centres and other back-end functions to move to lower-cost countries. As you can see, our economy is restructuring rapidly, whether we like it or not, whether we are ready for it or not. It is, therefore, important for us to have some levers to pull, to influence the pace and direction of this restructuring. Then we can minimise the negative impact on Singaporeans. These levers include reforming our tax regime, moderating our land prices and rentals, investing in education and skills training, moving into research and development, constructing the Biopolis to nurture the life sciences and pharmaceutical industries, and developing other growth sectors like medical and educational services. But these changes will not be enough to stem the outflow of jobs. We will also have to keep our wage costs competitive, and not too far out of line with those in the region. Presently, for every manufacturing worker in Singapore, a company can hire 13 in China and 18 in India. For every accountant in Singapore, a firm can hire two in Malaysia and six in Thailand. The large wage differential will push jobs out of Singapore, and discourage new investments from coming in. This is why we must go beyond the recommendations of the Economic Review Committee (ERC), and make further changes to the CPF scheme. The CPF retuning will affect all Singapore workers. It will be painful, which is why I have decided to present the CPF changes myself. At the National Day Rally, I outlined the changes. Today, I will lay out the details.”