Lee Hsien Loong
Singapore
“Yes, of course, every time I sell the land, I put money into the Reserves, but I am not putting the money into the Reserves all today. I am putting it in a stream of payments, 30 years apart.”
“Speaker, Sir, I do not think it was a very difficult question to figure out, that when I spoke to MTI, I spoke to the Minister, because Mr Gan Kim Yong is the Minister for Trade and Industry.”
“" I think that would have been unjust because he has not been charged. If there is a case, the case has not been heard, he has not been found guilty or acquitted or whatever. I cannot prejudge a case based on an incomplete investigation – started recently, or a partial investigation, just entered into the formal phase.”
“Mr Speaker, Sir, first, Mr Leong is quibbling over words. In February, Mr Tan Chuan-Jin told me, "I offer to resign". I said, "Yes, sort out your constituency first". In other words, decision taken. The moment to execute it, I will decide. So, it is quite clear. Legally, he has not resigned.”
“Sorry, Mr Speaker, to respond to Ms Poa on why not no pay leave. It is my judgement to make. The Civil Service works in one way; their basis is if you have been convicted, then you are on zero pay and other consequences will follow.”
“I am very happy to note that Assoc Prof Jamus Lim appreciates the second key and is seeking a third. And I hope that it portends a change in your attitude towards the Elected President and his custodial powers. But I think the Brazil example is a very interesting one.”
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“I would call it "auto pilot" government - strong civil service, rotating Ministers, civil service highly competent, maintaining the policies, managing the policies, basically maintaining the status quo. Ministers, politicians are advised by civil servants - any time, the civil servant tells you, you better listen to him because he has spent 30 years there, whereas you are likely to be there maybe for 18 months. It works very well, maintaining stability in a calm environment. But when the weather changes, you must dive and manoeuvre. You have a problem because the civil servants cannot do that. You need Ministers to come out and do that. And if you do not, you are in turbulence. This is what happened to Japan in the 1990s after the bubble burst. They could not change policy. The third example, I would cite, is New Zealand, but there are many countries like that, and I will call it "routine" government - a government which works just as a matter of course, and salaries are lower than in the private sector. Some good people come in from time to time. But they are not trying to assemble the best possible team all the time, either in the civil service or in the political leadership. So, once in a while, you have a strong leader, like Helen Clark now in New Zealand or John Howard in Australia, and they dominate and they span several terms, 10 years maybe, or longer. Then the kaleidoscope changes, leaders come, leaders go. It works. But it does not aspire to be at the peak all of the time. I am not saying that these are bad systems for these countries. They work for these countries in their circumstances. But Singapore's situation is totally different.”
“Therefore, I would like to urge the people to support this policy so that we can continue to attract talent for the future generation, it can continue to ensure the prosperity of Singapore, and Singaporeans will have the reason to continue trusting the Government. (In English): Mr Speaker, Sir, let us start by asking the right questions. What is this about? It is not just about the salaries of Ministers or MPs or civil servants. It is about our future. How can Singapore produce the best government to secure a bright future for ourselves and our children? Ask yourself four questions. What kind of government do we want? What kind of people do we need to run such a government? How can we sustain this system for the long term? And then only ask yourself the last question: how should we pay those people serving in Government as Ministers or as civil servants? But, first of all, let us ask what kind of government we want. We can look at other models around the world. One model is the Swiss model, and I will call it "invisible" government. Invisible because the government is low profile, the canton takes charge, 30-odd cantons, highly decentralised system, the country runs itself. Mr Low Thia Khiang himself said that the Swiss has no President or Prime Minister. In fact, they have a President, but he takes turns every year: one year, one term, next year, next President. He also runs the Cabinet. It is just pro forma. I bet you that Mr Low does not know who the present President is. Neither do I. That is "invisible" government. A model for Singapore? Another model might be the Japanese model, say, in the 1980s before the bubble burst.”
“If you go and ask the grassroots leaders what is the biggest problem faced in helping the poor people, I think many experienced grassroots leaders will tell you that the biggest problem is not the lack of money. Rather, it is to find enough people to volunteer to help the needy as well as to encourage the poor people to be self-reliant, and upgrade themselves. This is the most difficult aspect. So money is not the crux. The question is: which is the best channel to help them? So I would like to urge all Singaporeans and all Members to think about this problem calmly and carefully. Only then can we truly find out the best way to help Singaporeans. If I had wanted to avoid this unpleasant debate brought about by the salary revision, I could have waited for a few more years or after I have retired, then it is somebody else's problem. And I do believe the Ministers will not mind, and Singaporeans will not be upset. No one would come after me and question me why I am not revising the Ministers' salaries. This is an easy thing to do. But this is not a responsible way. Our problems will get more serious and, eventually, our system would be undermined. I know that this move will bring about a debate, in fact, a controversial one. But I have still decided to proceed. It is my duty to do what is right, and I have the duty to explain why I am doing it, and to safeguard the long-term interests of Singaporeans. Singaporeans have always trusted the PAP because it is an honest and reliable Government. And they know that the Government truly wants to change the lives of Singaporeans and it has always given out good report cards. So I think now, we can all apply for "瑞莲学校" - Sylvia Lim Secondary.”
“Is this a natural fact? Is this something that falls from the sky? Or have we achieved this together through the people’s hard work and leadership of the Government? Why are we able to do this? This is because we have a good mechanism. It is because our Ministries are efficient. Because our civil servants understand that this is not only a job, this is a calling. So, the leadership, whether it is the Ministers or the civil servants, they care for the less unfortunate in the society. And they try their best to help the poor upgrade their skills so as to stay relevant. How best to help the poor and those in peril? We have done a lot and will continue to do so. But it has to be in moderation, and this is not easy. If the help is little, the poor families will not get enough assistance. If we help too much, they become too dependent, and this brings about laziness, and aggravates the problem. Our MPs and grassroots leaders are constantly working hard to help the poor especially those with difficulties coping with a livelihood. The Ministers, Deputy Prime Ministers and Prime Minister, also work hard to help the residents in our constituencies. Our grassroots leaders also help us to understand our residents and their problems, and actively help solve their problems. Just go and take a look at one of the meet-the-people sessions, and you will know that Singapore is different from other countries. Not only the PAP is working hard, I know that Mr Low Thia Khiang and Mr Chiam See Tong have put in a lot of efforts in their constituencies. So for many years, they have continued to hold their standing. Do you see that in other countries? Not necessarily.”
“With good economic growth, we can use the resources to implement policies and schemes to help the poor and the less fortunate. In Singapore, we have quite a lot of such programmes, ie, advisory committees, development assistance councils, charity organisations, voluntary welfare organisations, etc, and various assistance schemes. For those who really need help, the support is made available. In Singapore, most low-income families own 3-room flats, and how much is it worth? Depending on the district, a flat in Ang Mo Kio is worth about $190,000. As for the city area, it could cost over $200,000. After paying off the mortgage, how much will the families have? We have made a calculation, and figures show that the net value for a low-income family is about $150,000. So, it is not true to say that low-income families do not get attention from the Government. And I think it is not right to say so, and dishonest to say so. Some people cannot afford a 3-room flat, so they stay in a 1- or 2-room flat, and about 8% of our people stay in 1- or 2-room flats. Even 1- and 2-room flats enjoy upgrading programmes, such as lift upgrading and these are free because they are rental flats. So much so that, when they cannot find storage place in the event of an upgrading, it becomes a problem for the Government. Although the Government looks after the people in all possible ways, there is also a limit to it. Even for the poorest families, their children have a chance to receive good education. Every neighbourhood school is a good school. If their results are good, they can go to a reputable secondary school and the best junior college or polytechnic. They will then have the opportunity to break away from the poverty cycle and bring about a better life for their families.”
“Every five years, Singaporeans will have a chance to judge the performance of the leaders through casting their votes, and decide who they want to lead the nation. Several MPs raised concerns about the lower-income groups. And they have linked together the Ministers' salaries with the problems faced by the lower-income group. They compare the salary increments of Ministers with the amount spent on social assistance schemes. They thus feel that the Government has neglected the needs of the poor. When people make such comparisons, it can easily become an emotional issue. And I do understand why some have intentionally made it emotive. I understand these sentiments. Because when you look at a poor person, an elderly or a handicapped person not having enough to eat or no place to stay, it is natural that you feel bad for them. Besides sympathy, we will also need to think. The long term goal of the salary revision is to attract talents so as to make the country prosper, and create wealth for our country so that we can improve the lives of all Singaporeans, including the lower-income families. In this way, we can reduce the number of poor families and improve their lives. It is easy for us to talk irresponsibly about giving generous welfare - that is the easy way out and definitely the popular thing to do. It is just like the God of Fortune giving away money, and everyone will be pleased. For that, we do not need outstanding leaders to do it. The question is: what is the long-term consequence? Because this is a short cut as well as a short-sighted view. It is not financially sustainable, and we cannot solve all their problems entirely. Therefore, a more rational solution, I believe, is to develop our economy with all our strength.”
“Now, the Chinese economy is soaring but the young people have no interest in going into politics, because that is no longer the best route to success and wealth. In the past, when the officials "下海" (xia hai), it was considered a big thing as the risks were very high, Xia hai means to leave politics to go into business. But now the young ones, as a headstart, are already swimming in the sea, starting their own businesses, or working for foreign companies, MNCs, etc. And it is common for many to switch job from government to private sector, because there are a lot of opportunities in the private sector and the pay is many times more. Very often, it is not just a few times more, but 10 to 20 times more. In Singapore, we need talented people in both the Government and private sector. So we aim for a good balance of talent in both the Government and private sector. We subject all candidates for leadership positions to stringent requirements. In ancient China, many people entered the government for fame. In China, to win promotion and get rich has been a major preoccupation for many generations. But we do not want this to happen in Singapore, and we do not want people who are looking for promotion and wealth. We want people who genuinely want to contribute to the country. So, the existing salary policy is a key strategy for us to attract talent. But this is only part of our overall strategy. We will test and assess the candidates to ensure that they have the necessary capabilities and integrity. Finally, Singaporeans will have to decide. And the political leaders eventually will be tested by the people.”
“Today's Cabinet is different from the one in 2001 after the General Election, which is also after the 911 attacks, as we have a different Cabinet now. Compared to 2004, after I have taken over as Prime Minister, we have also replaced the members of the Cabinet. This is only in a span of five years, or two years ago. And within such a short span of time, we have already renewed our Cabinet. This goes to show that our policy is effective, and through this policy we are able to attract talents as well as to maintain our standards. I hope that in the next five years, we would continue to strengthen the Cabinet and draw in new blood. In ancient China, the imperial examination was a system for people to move up in ranks. And parents at that time hoped that their sons - the girls were not given the opportunities - could do well in the examinations and become government officials. And if the top scholar "状 元" (zhuang yuan) is lucky enough, he might even marry the emperor's daughter. This tradition had gone on for thousands of years, and was a tested path to wealth. In today's China, it has inherited the better side of the system and thus maintains high quality leadership at the senior levels of government. Their Ministers, Central Government, Party Secretaries, Governors and Mayors, are generally very capable and resolute. They can be better than us in lobbying for projects, leadership, reforms and bringing forth new ideas, etc. In fact, some are much better than us. And it is for this reason that China is successful in reforming and opening up in the past few years. Without these leaders, China will not advance by leaps and bounds. However, the Chinese government also faces difficulties in attracting new talent in recent years.”
“Should the Government make a wrong decision, the people will suffer. But making the wrong decision will not necessarily mean that civil servants will suffer, and the hidden cost will be transferred to the people. Hence, it means that even though the Government is wrong, it is the people who will have to bear the serious consequences. This is called the hidden costs because you cannot see it. Of course, such circumstances are rare. And it also reduces the opportunity cost of policy-making. If we do a good job, we can achieve 7% economic growth and 3% if it is not so good. If we have a drop in 4% of economic growth a year, our total GDP is $200 billion, and 4% of our GDP is $8 billion. This is a considerable figure. This is the study of a Chinese analyst, and he understands this unique aspect of Singapore. We have already reached such standards. But how are we going to pass it from generation to generation, to continue to attract capable policy-makers and to keep a good Government? In my opinion, the most important thing will be to continue to attract high calibre talents. The ideal future leaders must have both ability and political integrity. It is vital to have competency but, more importantly, to have public spirit. They must do their utmost for the country and to improve the lives of Singaporeans. If we have such leaders, then we can win the trust of our people and achieve exceptional results. Only then, MP Seng Han Thong's feedback can be solved satisfactorily. The Government's salaries have to keep pace with the market rate and only then can we can attract the right people to form our leadership team and strengthen the new Cabinet. In the past 10 years, we have managed to do so.”
“As Members, you must think about it, and Singaporeans also must think about it carefully. One of the answers is that Singapore places great emphasis on attracting talented people to join the civil service and the political leadership. This is not an academic Professor living in an ivory tower. In fact, many Chinese leaders and the central government of China have realised that Singapore is unique in this aspect, so the Chinese press has published many positive articles on this. Recently, Beijing’s newspaper《新京报》The Beijing News published a commentary. Let me share with Members what the author said: "The people responsible for policy missteps will eventually leave, but the agony brought about by these missteps has to be borne by society. Singapore attracts talents into the Government through a series of measures. These people form the backbone of the Government, and carefully formulate policies, under the watchful eye of the public and public opinion. This results in very low hidden costs, which could transfer from the Government to the people, because of missteps in the policy-making process, and significantly reduces the opportunity costs of policy decisions." As this is a very important sentence, I shall read it again, so that we can understand the meaning. "Because we have an open and transparent system, the government is under the watchful eye of the public and public opinion." So the Government has no choice but to pay attention to the peoples’ thinking, the peoples’ sentiments, and we have no choice but to do well in the job. Because we have good people to form the backbone of the Government, we can make prudent decisions, so that in our policy-making process it will significantly reduce opportunity costs.”
“But it is also because of a good Government who exercises able leadership, and cares for its people. What we have achieved is obvious to all, there is no need to say more, and many countries have sent their personnel to observe and study from us. China is one of them. Every year, hundreds of officials from China visit Singapore on study trips. I think we are among one of the top countries in the world where the Chinese officials come on most study trips. The Chinese academics analyse our system carefully, and they have published various reports and articles. They are greatly impressed by us in three areas: firstly, the Singapore Government has a continuous self-renewal and improvement system; secondly, they want to know how Singapore stays clean and efficient; and, thirdly, as China today is talking about building a harmonious society, they feel that Singapore is indeed a harmonious society, because the gap between the rich and poor is not too wide, the poor are looked after, there is social security and there are plenty of upgrading opportunities. Hence, they feel that Singapore is a useful model and is worthy of study in these few areas. The day before yesterday, MP Josephine Teo mentioned about Professor Lu Yuan Li from Shenzhen University. He had spent some time in Singapore, and stayed at the East Asian Institute, National University of Singapore. He conducted a comprehensive study on the governing system of Singapore. He is now writing a book and the title is "The Singapore’s System". He asked two key questions. Firstly, how does a party in power for a long time preserve its vigour in the long term? Secondly, how does a party in power for a long time preserve its honesty? These are basic questions we should ask ourselves.”
“This is because a lot of people have intuitively felt that the Ministers’ salaries are already very high. Just like what Mr Low Thia Khiang has said, it is an astronomical figure. And to further increase it is not reasonable. A grassroots leader asked Minister Lim Boon Heng frankly: "If $1.2 million a year is not enough, then how much is enough?" Although it is difficult to convince the people, we have no choice but to pay attention to this important issue. Because *Cols. 553-562. our salary policy is to ensure that Singapore has a good Government, continue to have honest and capable leaders and this is a key strategy. As the Prime Minister, and after weighing the circumstances, I have decided to take action immediately, to adjust the Ministers' and civil servants' salaries. If we were to wait for one or two more years, we will definitely lose one or two more cohorts of talent, and that will weaken the leadership team, as well as the competency of the Government. At the same time, it is necessary for us to make the people understand. My considerations are for the future of our nation, and not for my own salary. Therefore, I have decided to donate my salary increment for the next five years to charity. An honest and capable government is a unique feature in Singapore politics. It is also a key strength of Singapore. Our Government has strong capabilities, high efficiency, honest and upright, and free from corruption. But, most importantly, the Government values the interests of the people above everything else. Our children have good schools, our workers have good jobs and everyone has a good home. This is not by chance or something that falls from the sky. They are results achieved through the hard work of every Singaporean.”
“I have decided to move now, because of the overriding importance of keeping our salaries competitive in the public sector - civil service as well as political appointment holders. To make it quite clear why I am doing this and also to give me the moral standing to defend this policy with Singaporeans, I will hold my own salary at the present level for five years. The Government will pay me my full salary because that is the way the system will have to work. But for five years, whatever the increase in the salary above its present level, I will donate to suitable good causes. I do not expect other Ministers to follow me. This is a Cabinet decision, but I am the one who is carrying the ultimate responsibility, and not them individually. We encourage all Singaporeans to donate to good causes. What individual Ministers want to do is up to them. What individual MPs want to do is also up to them. I know that the Ministers and the MPs already support various worthy causes, but it should not be a public ostentatious display of how generous and self-sacrificing they are, but a private matter for them to decide at their own discretion. Mr Speaker, may I now speak in Mandarin before coming back and make the main arguments in English. (In Mandarin): [For vernacular speech, please refer to Appendix A *.] Mr Speaker, Sir, these few days we have been debating on the issue of adjusting the Ministers' pay. This is a very difficult political issue at hand, because it is not easy for us to convince the people to accept this change. Furthermore, it is also difficult for them to understand and emotionally accept it, and accept it with a willing heart. That is a very difficult task. Why is it so?”
“Mr Speaker, Sir, we are debating, today, a critical issue. We have discussed this for more than 20 years, each time we have adjusted public sector salaries. The last time we did it was in 2000, and now we have decided to adjust salaries again. There has been no change in the policy. We have had this benchmark formula for 10 years; in fact, for more than 10 years, since 1994. It has worked. It has enabled us to induct Singaporeans of ability and integrity into the system. We have built a strong team in Government. But now we are making a large adjustment - large, in terms of the quantum. There has been a change of Prime Minister since 2000. There have been two general elections since 2000, a new team of MPs in the House, and a younger generation of Singaporeans has come of age. So it is good that this important issue is fully debated in this House on this occasion. Politically, this is a most difficult decision for me to take. Logically, it is quite clear what I have to do, but it is something which is very difficult to get people to understand, first of all, and then, emotionally, to accept that this is necessary. And, yet, this is an absolutely critical issue. If we do not tackle it now, the problem is not going to go away. It is just going to get worse, and we will eventually end up in serious trouble. Sir, we have discussed this at length over several months in Cabinet. The Senior Minister and Minister Mentor particularly strongly encouraged me to do it. They have been Prime Ministers. They know the importance of having good Ministers to help them with their work. But after all the discussion and debate, and after all the views have been expressed, finally, it is my responsibility as Prime Minister to make the call.”
“The Foreign Maid Levy Relief was intended to encourage married women to continue working and raise families. It is not meant as a general relief for any household that may need help from maids. This is why the Foreign Maid Levy Relief is only available to married working women. There are other ways in which the Government supports Singaporeans who are looking after their aged parents. First, there is the Parent Relief. The relief is $5,000 per parent if the parent is living with the taxpayer and $3,500 if the parent is not. Second, those who need to engage a maid to help them care for their aged parents pay a lower maid levy as they are eligible for a $95 per month Foreign Domestic Worker Levy Concession. Individuals can claim the concession as long as their parent, parent-in-law, grandparent or grandparent-in-law is a Singapore Citizen or Singapore PR, aged 65 years and above, staying in the same household. Both the Parent Relief and Foreign Domestic Worker Levy Concession are available to singles. WRITTEN ANSWER TO QUESTION FOREIGN DOMESTIC WORKERS POLICY (Working in one household) 1. Mr Zaqy Mohamad asked the Minister for Manpower as dual-income families may place their children and their domestic foreign workers (DFW) at their parents' house while they are at work, (a) what is his Ministry's position on this, given that current policy dictates that the DFW works only at the employer's house; and (b) whether there have been any cases of prosecution or disciplinary action taken against such employers.”
“I think if it does not get worse from what it is now, we will be doing very well. ADJOURNMENT OF DEBATE”
“Mr Speaker, Sir, I am not sure how Mr Chiam would explain this fact that the countries with minimum wages all have higher unemployment rates than Singapore. Yes, wages are sometimes low and Singaporeans are not willing to work. I think when we say workfare, in fact, it helps to address this problem because when you work, the employer pays you and the Government will help to top up. So better work, you get something more. What is the difference between workfare and the minimum wage? The difference is for workfare, I am putting the burden on the whole of society, the Government, which means the State. With the minimum wage, we are putting the burden on the employer. You say the wage is too low, the worker refuses to work. If you impose a higher minimum wage, the employer will say, "It is too high. I refuse to employ a worker." In the end, the two still cannot meet. This is an argument which has gone on for a long time in many countries. We have got a formula which has worked for us. I think we just stick to it.”
“Do not worry, you will be all right. I can achieve that. We have argued over whether you should have the GST on essentials or not, selectively or not, or better to tax everything under the sun. Those are technical arguments. Whichever way I do it, my purpose is to make sure that the lower-income groups are better off. And the way we have grown Singapore, the lower-income groups have indeed been better off. I can consider again whether to raise GST, but he did not ask me to consider again whether to tilt the playing field. There is no item which you can do without having to ask where the resources are in order to meet those goals. And we are upfront and candid about it that this is what we are going to do and it is going to cost some resources. This is what we believe that we have to ask Singaporeans to bear. For the middle-income, they will generally be about okay. For the higher-income, I think the way we should do it, the higher-income should end up paying more overall than they now do. It is part of being one society. I am not going to tax 50% on income tax. I am not going to tax 20% on GST, or 25% the way the Scandinavians do. But I have to make an adjustment - 2% - I think this is fair and I think Singaporeans will support it.”
“Mr Speaker, Sir, the Leader of the Opposition has had ample opportunities to explain what he means by a permanent unconditional needs-based welfare system - in his manifesto before the elections, during the campaign, when he spoke during the debate on the President's Address, and when his Party Chairman spoke during the debate. He did not. Dr Vivian challenged him. He said, nothing wrong with that. He did not elaborate. I have spelt out what I understand him to mean by a permanent unconditional needs-based welfare system and explained why the Scandinavian model, which he has referred to, does not work. He said, no old age pensions. That is very good. I think we should write that down somewhere. No weekly payments. That is even better. I will write that down too. Then what does he want? We can debate that. I have explained at great length what I mean by doing more to tilt the balance, tilt the playing field, help the poor, enable them to help themselves to upgrade and work. I think that is the right way to do it. I have also said what are the things which we should not do. The debate has had ample opportunities to be joined. This is not the moment for another long supplementary discussion. On the GST, I advise the Member to be patient and to wait till the Budget. 15th February is not very long. He said that the offset package is for five years. He has not seen my offset package. It is not just an offset package to deal with the GST. It is a whole set of measures which we are taking in order to tilt the playing field in favour of the lower-income groups, which is what we have to add up and tally in the balance. My purpose is to help the lower-income groups and my way of doing it is to say that GST will go up, but I am going to help you.”
“Sir, we worry a lot about the challenges ahead, and especially about the social issues which we have to tackle. But let us see these issues in perspective. Let us remember, as Ms Josephine Teo said, "to celebrate what is right about Singapore". And we have a lot to celebrate. Our prospects have never been brighter. Our overall environment is positive. Our economy is vibrant. Our people are well-educated and equipped to excel in a globalised world. I received several visitors from Africa recently, including President Pohamba from Namibia. He had not visited Singapore before. He congratulated me effusively. He said, "As soon as I arrived at the airport, the airport itself, the drive into the city, the streets and buildings, it is like paradise. I have not been up there. I do not know anybody who has been up there who has come back to tell me about it. But from everything which I have read, this is what paradise is like." I think we should improve on what we have and not just be satisfied that it is like paradise. But we are in a strong position. Let us stay united in purpose. Let us stand firm in our determination to succeed. And let us work together to build a competitive economy and an inclusive society. [Applause.] 6.07 pm”
“But if we raise it from 5% to 7%, it will give us precious extra resources to implement social programmes like workfare later on. Our aim is to help lower income groups and the elderly, it is not to increase their burdens. So when we implement the GST increase, it is not just a GST increase; it is a package which will fully offset the impact of the GST for these groups and begin to strengthen the social safety nets and tilt the balance in favour of the lower income Singaporeans. We will not just raise the GST, but we will have a comprehensive offset package. We know how to do this. We have done it twice before - in 1994 when we introduced the GST and then, in 2003, when we raised the GST and implemented the Economic Restructuring Shares (ERS) package. And we made sure that a large segment of Singaporeans ended up not worse-off. This time again, we will do a comprehensive offset package, but we will weight it more heavily towards the middle- and especially towards the lower-income group and the elderly poor. I am quite confident that we will be able to do this. When should we do this - earlier or later? I think it is better to do this now when the economy is doing well. Then we can manage the adjustment. We have the flexibility to adjust our programmes depending on how things turn out because over the next 5-7 years, we do not know what the trend of globalisation will be like. We do not know what difficulties will come our way. Better get this done, settled, ammunition prepared, powder dry. Any troubles, we will be equipped to cope with them. We are working out the details. We will announce it in Budget 2007 which will be on 15th February 2007. Mr Tharman Shanmugaratnam will deliver the Budget as the Second Minister for Finance.”
“To do this, we need to amend the Constitution. We will amend the Constitution and work out the details with the Elected President. But it is not sufficient just to depend on NII to meet our future spending needs. We also have to plan ahead to make sure that we have enough revenues, including from taxes. Direct taxes cannot go up. In fact, we have been bringing down our direct taxes, ie, personal income tax and corporate tax. We have brought them down to 20% over a long period of time. In fact, we may have to lower them further. Hong Kong is competition for us. Their corporate tax is 17.5%. They are thinking about GST. If they do a GST, they may decide to bring their corporate tax rate down and we may have to follow suit. The Central and Eastern European countries are also very competitive. Many countries in the former Soviet bloc, eg, Poland, Hungary, Slovakia and the Czech Republic, have corporate taxes which are below 20%. Slovakia and Poland are just 19%. In the Baltics, eg, Latvia and Lithuania, they pay only 15% tax. They are highly competitive. Many of them have joined the EU so they have an additional advantage over us and increasingly, they are direct competition to us. They will attract investments which may otherwise come to Singapore and we have to watch them. If we have to bring our corporate tax down, every percentage point we bring it down, from 20% to 19%, for example, will cost us $400 million a year. It is big money. Therefore, we need to consider raising indirect taxes, in other words, the Goods and Services Tax (GST). It is now 5%; I think we need to push it up to 7%. Even 7% will still be lower than nearly all other countries which have GST or VAT.”
“But we have to balance this argument against the claim of future generations - our children and grandchildren. We want to give them a better life, more security, and to let them start off with something a bit more than we started off. I do not think we want them to say, "Our parents' generation saved a lot of money and they spent it before they left." So we have to balance the claims of the present and future generations. In fact, that is what we have been doing. We invest the reserves prudently. Out of the returns from the investment, out of this kitty, we draw an income stream which will fund Government spending and enable the present generation to have its fair share. But we keep the nest-egg intact, so that it will grow from year to year and be something which we can pass on to our children. Under the Constitution, the Government can spend up to 50% of Net Investment Income (NII) on past reserves, and 50% of Net Investment Income has to be kept for the future. I believe this is the right formula. It is a fair balance between the claims of the present and the future generations, and will protect our reserves, our seed corn, from being depleted. But we can refine the implementation of this 50% rule because, currently, the definition of Net Investment Income only includes dividends and interest. This is not quite right, because a significant part of the returns on our reserves are capital gains. We should look at total returns on the reserves as the basis for deciding how much it has grown. Therefore, we intend to change the definition of Net Investment Income to include realised capital gains. This will increase the amount which we can draw on average. Some years, if the markets are bad, we may end up with less but, on average, we should end up with more.”
“So Singaporeans are really having a very cheap Government - high quality but cheap Government. But we will have to spend more. I think this is inevitable over the next five to 10 years. Infrastructure investments are going to cost money. We are spending $5 billion on R&D over the next five years. For healthcare, as medical technology improves, as our people age and we go into hospitals more often and get more treatments, spending is bound to go up. It has already gone up over the last five or seven years. And year by year, it will continue to go up. Social spending has been going up. Dr Vivian Balakrishnan showed the House some numbers last week on how MCYS' welfare spending has been rising, but those are quite small, compared to what we will have to spend if we start to tilt the playing field and start to say, across the board, give people who are in the lower-income group an extra boost and in many years, not just once in a while. Therefore, it is better for us to start building up our resources now, so that when we need to spend more, we will have the means to do so. Therefore, comes the question: how do we finance this? Mr Inderjit Singh, in his speech last week, asked about our reserves. I was surprised that nobody else did. But it is a pertinent question. The reserves are something which we have built up for a rainy day because we are highly dependent on imports. We have no natural resources. That is all we have and we have to husband them carefully and use them only when we really need to. There is an argument, of course, that the present generation accumulated the reserves, so we also should have a claim, especially when we grow old. I think this is a valid argument.”
“The scheme became a heavy burden on British society - national health, social welfare, state pensions. The economy dragged until ex-Prime Minister Margaret Thatcher came along and started to try and put some of these right. So we have to be very, very careful - experiment, learn and modify as we go along. Do not go overboard and end up with excessive welfare for the lower-income, and end up encouraging families to break up and to abandon their old folks. Do not over-extend subsidies to people who are not poor, because if I grant a lot of benefits for people who are not poor, then what I will have to do is to tax them, take money from them so that I can give them back the services and spend the money on their behalf, which I do not think Singaporeans need my help to do. Once we have made a mistake, unwinding is impossible, because once people have been given welfare benefits, it becomes an entitlement; it is permanent. There will be budget deficits, taxes would have to keep on going up and we will be in the Scandinavian situation. So if we compare the Americans and the Europeans, there is a difference between the Americans with their vibrant competitive economy and the Europeans with their heavy burden of social spending. If we do more for the lower-income and the elderly who are needy and also invest more for their future, then Government spending has to go up. There is no other way. We have kept this Government lean and trim. The Government spends only 14%-15% of the GDP, ie, $1 in $7 approximately. This is lower than virtually any other country in the world. The Europeans, as I told you, spend more than half their GDP. We are even lower than Hong Kong, which spends 18%-19% of its GDP.”
“We will top up something to provide for your future, ie, in the CPF, for Medisave, housing and retirement. This is how it worked, and I think it fits in quite nicely with the way the CPF scheme works, because for lower-income workers earning below $750, the CPF contribution rate from the employees' side is lower, as we want to make sure that he has enough to live on and we accept that he is not able to put aside quite as much for the future. But with Workfare, I can help to make good this shortfall in contribution from the employee to his CPF when he is working, so that he will have enough for medical, retirement and his house, and he will have enough because he is taking back in cash more of what his employer pays him, to meet his current needs. We will implement more workfare schemes in future. The precise mechanisms and formulas, we will experiment. We will try out different forms. But the principle will be the same - you help yourself, we will help you. It is essential for us to tilt the balance in favour of lower-income Singaporeans, because globalisation is going to strain our social compact. That is why we are doing all this. But I would like to caution Members that we should proceed with care. I know a lot of Members have used the words "slippery slope". They will appear all over the Hansard if you search for them. But it is a really slippery slope. Many social welfare schemes which have ended up in serious trouble have started off with good intentions. The New Zealanders started like this in the 1930s and ended up with a system which they could not afford and have had to unwind. The British started off with such a scheme. As Dr Goh Keng Swee once described it, the conception was immaculate, but the way it worked out was not immaculate at all.”
“If you are well-off or middle-income, you can still buy the flat, but I do not think you need quite as big a subsidy. And that was the idea of the CPF Additional Housing Grant. If you are at the lower end, you can get up to $20,000 more when you buy an HDB flat. That is quite a lot of money, because a 3-room flat can cost up to $110,000 if you buy it from the HDB. $20,000 is nearly an 18% discount on the value of the flat. This is an avenue which we will continue to pursue and, over time, we will see how the grant works out and increase the grant so as to continue to do more for lower-income Singaporeans. We want the lower-income to own a property which is valuable, to have something to live in and to retire on, and this is a good way to do it. The third thing we will do for the lower-income group is Workfare. We first introduced Workfare in the Progress Package this year. About 330,000 low-income workers benefited from the first payout of Workfare on 1st May this year, and they received $150 million all together. On 1st May next year, there will be a second tranche, and more workers will benefit from that because I think there are more people who are employed this year. It was a once-off measure, but we introduced it having in mind that this is the direction which we would need to go in the long-term. So we are experimenting and testing it out. It is a sound principle. If you are willing to work, jobs are there. So the minimum you should do, if you want us to help you, is to help yourself by trying to get work. And if you work, then the Government will top-up what you earn through your own efforts. We will top up something to help you meet your current expenses and costs of living, in cash.”
“We created Post-Secondary Education Accounts a few years ago. What this means is that the Baby Bonus, when the child reaches the age of six, if he (or his parents) has not spent it all, we will take that money, put it into a Post-Secondary Education Account so that when the child gets to post-secondary, ie, ITE, polytechnic or university, he can use it to pay for his school or university fees. It is a good idea. But, so far, the first group of children who will have money in their Post-Secondary Education Account is only five years old. It is going to take them 11 years before they reach 16 and really kicks in. So, what about the 11 years' worth of students who are older than five and below 16 years old? They are in schools now. Why not we think of some way to put a bit of money into their Post-Secondary Education Accounts, just like we put into their Edusave Accounts, and when they reach tertiary or polytechnic, then they can use this money which can help pay for their school fees? Mr Shanmugaratnam thinks it is a good idea. I asked him, "Are you speaking as the Minister for Education or Minister for Finance?"; he says, "Both". So, I think it is something which we will pursue. Next, HDB home-ownership. It is still important to build up assets of Singaporeans and build up more for the lower end. In the past, all families enjoyed the same housing subsidy, regardless of income. It can be a household family income of $8,000 or $1,000, but when they buy the same flat, you pay the same price, you get the same subsidy on the loan. But, actually, we should tilt in favour of the lower end. If you are from the lower-income, poorer but making the effort, we should give you a bigger subsidy when you buy a HDB flat, and we should pay that subsidy into your CPF.”
“Then it is up to you, you want to turn on the light, that is what it costs. You do not want to turn on the light, you save the money and you can take the cash. What we should do is to help the poor directly in a long-term way fundamentally. How can we do that? First, through education because with education, we can ensure that the next generation has every opportunity to do well and to break out from the trap of poverty and to move up. And education starts early. Dr Lily Neo made a passionate plea for pre-school education. Mr Michael Palmer also raised this. I do not know that we will go as far as they would like us to do immediately. But we have gone some way in this direction and we have schemes like the Kindergarten Financial Assistance Scheme (KiFAS), we have schemes to upgrade the kindergarten teachers, we are putting money into education from kindergarten upwards all the way to primary, secondary and tertiary levels. As some MPs have noted, per child, the Government is spending $100,000 in subsidies by the time you graduate. We have the Edusave Merit Bursary (EMB), which is meant for children from lower-income families. I know some parents who have higher income complain that their children are deprived of EMB, because they did not meet the income criteria. But the scheme was set up specifically to help the lower-income children to encourage them, to give them an extra boost so that they will do better. We have other schemes which are open to everybody. But the EMB is meant to be for the lower-income children who do well, and I think it achieves that objective, and helps them to level up. There is one more idea which we can pursue on education. I have discussed it with Mr Tharman Shanmugaratnam and we are looking at it.”
“But we will build on this and do more. Housing - we also have a good scheme. But what we need to do is to help Singaporeans to realise the value of their homes, as I explained earlier. If we do this, it will help Singaporeans of all income groups. But specifically for the lower-income groups, we should do more systematically to tilt the balance in their favour. Mdm Halimah raised this when she moved the motion and Mr Seng Han Thong talked about it too. There is a right way to do this and there is a wrong way to do this. The wrong way to do this is to have a legal minimum wage which Mr Chiam See Tong proposed; is to keep out foreign workers and immigrants, which nobody has proposed, but the Workers' Party asked us to think about; is to subsidise individual consumption items, like utilities, electricity, public transport, which is not the way we have gone. A minimum wage will not work because you will just make it harder for low income people to get work. Because the employer will say, "Why should I hire him? And I cannot afford to pay him more." You are putting a burden on the employer which he cannot bear. It is a social burden. Keeping out foreign workers and immigrants will not work because if there are no foreign workers here, the jobs may not come to Singapore. The investments may not come to Singapore. In fact, they may go elsewhere. And those who are here may leave. Subsidising electricity or public transport is not a good idea because if you do that, firstly, a lot of the subsidies will go to people who are not poor; and secondly, you are encouraging people to use electricity, burn more fuel, more gas. Actually, what we should do is to directly assist you and give you a U-Save grant if you are poor.”
“Now, in this new environment, what should we do? I think there are two things we should do, two broad approaches on how we should react to this new environment. Firstly, to strengthen the safety nets; secondly, to tilt the balance, shift it, in favour of the lower-income groups who do not benefit proportionately from growth. To strengthen our safety nets, we should build on the pillars which are there. The CPF - we have been reforming it and making changes over the last few years. I think we need to enhance it to help members to earn better long-term returns on their savings. It is not easy to get the right way to do it. That is why we have taken some time, but it is something on the agenda, to find ways to help members to earn better returns on their CPF savings. We are improving the 3Ms. Mr Khaw Boon Wan lives and sleeps with this everyday, and he will tell you more about it tomorrow. Medisave - extending this to other chronic illnesses if the current pilot succeeds, which we will have to make it succeed. MediShield - providing more risk sharing for large bills through insurance, which MOH is presently looking at, in other words, giving you more insurance and more protection for very large bills. Of course, you have to pay higher premiums, but I think the premiums can still be affordable. Then Medifund - to take care of the needy, especially the older Singaporeans who are poor, and who do not have sufficient funds in their Medisave. We will build this up year by year. I think we will find ways specifically to look after older, poor Singaporeans who need medical care. Medifund has done a lot of good work. Just last year alone, in FY 2005, it helped nearly 300,000 patient cases, so some patients were probably helped more than once, and it paid out $40 million.”
“Firstly, enterprise and drive to create wealth, rather than merely redistributing a smaller pie; secondly, self-reliance rather than welfare; and, thirdly, saving for ourselves and spending within our means rather than taxing for others and borrowing from the future. So in this way, we can get the people to perform to the best of their abilities; we can keep our economy competitive and flexible; and we can attract more investments and more talent, and improve the lives for all Singaporeans. These are the principles which are reflected in the key pillars of our social safety net, which are the CPF system, the 3M system for healthcare, and housing, HDB. These social safety nets are self-sustaining based on self-reliance and mutual support within the family; we encourage individuals to make the effort to work, we encourage families to save for their own needs and support one another. There is a Government safety net but it is as a last resort, and we have to look at your situation to decide whether you are meritorious and this net should be extend to you more generously or less generously. The Government has not been ungenerous and we have done a fair amount of transfers. We have helped Singaporeans, both when times are hard and they have needed help. We have also done some when times have been good, when we have surpluses to share. So the initials are many. If I gave you a list, I would need another few pages - Utilities Save, Economic Restructuring Shares, Medisave top-ups, Additional CPF Housing Grant, Progress Package. Overall, over the last five years, we had spent $10 billion in total. It is a vast sum. But I think it was spent within the context of this model - with the CPF, with the 3Ms, with the housing - and it is sound.”
“So every dollar you earn, 60% goes to the state. For every krona you spend, one quarter of that goes to the state. And the first dollar you earn, maybe 20% goes to the state. And so, high taxes, high government spending accounting for more than half of the GDP. Even then, the Scandinavian countries are not without problems. In the 1990s, they had a long period of decline. Over the last decade, the average growth had been less than European growth, 2.2%. And it is an economy where one third of the people is employed by the government. Everybody is a civil servant, of some kind or other. Even then, high unemployment. Finland has an unemployment rate of around 8%, compared to ours which is below 3% today. It is a very expensive show to keep going. Because the basic problem is that high taxes sap the incentive to achieve, to excel, to go and create new wealth. We cannot follow the Scandinavian model. We are Singaporeans. We are in the middle of South East Asia - English-speaking, multi-racial, completely open to the world. If we try to do that, talent and businesses will leave, no investments will come. Singaporeans who cannot leave will be stuck because the ones who are able will leave. The ones who are not able will have no capable persons who are here to lead the country, to take care of them, and we would be in serious trouble. So what is our social model? How do we ensure that our economy can grow and that Singaporeans can benefit from this growth? I think we have to take three approaches, emphasise three things.”
“And you will have two middle-class economies or more in China and maybe India, and Singapore will have the pressure off us and we would be able to improve our life, provided we work and upgrade ourselves. But meanwhile, 15 years is a very long time. We have to work and tackle this problem. One seductive argument on how to tackle this is that we should go for welfare. It is not a new argument. It is not a brainwave which has just struck somebody since the election. It is an old argument which other countries have had and which we have to know about and deal with. We have treated welfare as a dirty word. The Opposition, I think the Workers' Party, has called for a "permanent unconditional needs-based welfare system". I think that is an even dirtier five words. Why do we say this? I think we have reason for it. Some MPs have suggested that the Scandinavians make it work. They have welfare. It is successful. Let us follow them. But our situation is fundamentally different from the Scandinavian situation. How so? They are homogenous societies. So their people, their cohesion, is much stronger, top and bottom you stay together, you help one another. They are monolingual, non-English speaking, less likely to emigrate if the pressure is on them. They are rich in natural resources. Norway has oil, it is 20% of their GDP; Denmark also has oil; Finland has timber, and they have a large and wealthy continent as their hinterland. If they go south, they have the Germans, they have the British, they have the whole of Europe. If we go around us, that is not what our hinterland is like. Scandinavians do not depend on multinational investments. Their model is different. They go on high taxes - VAT which is equivalent to our GST - at 25%, personal income tax up to 60%.”
“But now that the economy is up, our collective agreements are reaching good settlements, good from the point of the unions - higher annual increments, better bonuses, low wage workers are enjoying higher increments and higher variable payments. The labour market is tightening and wages are going up. So, that is one reason why we can be confident that we can tackle this problem. The second reason we can take comfort is that I do not see the wage gap widening forever. Chinese and Indian wages are going up. The Chinese and Indians do not aspire to be poor forever. They want to be successful too. They want to be prosperous. They want to be middle-class, to travel. And their wages are going up, year by year. In Shenzhen, by double digits. There are shortages of workers, companies cannot find enough, they are thinking of going inland. But the conditions inland in China are not the same as the conditions in Shenzhen. So you cannot pay workers the same as in Shenzhen, and they may be cheap, but they are not as productive. And in India too. Not all 1,000 million Indians can man call centres. Some can speak English - the well-educated graduates. But as their economy grows, this supply is tightening. And they will have to work hard to expand the supply, and their wages are going up. So Bangalore wages, some of them are more expensive than wages in Singapore. So I think that, as this happens, the pressure on Singapore and Singapore workers will ease. It will not happen overnight. It may not happen within the next five years. But in 10, 15 years, over time, I believe that is what is going to happen.”
“It is now affecting low income workers, but the Chinese and Indian skill levels are moving up, and their aspiration is to move up, and the competition will increasingly be not just with the low level unskilled workers but also increasingly with the middle level skilled workers, and even professionals. For example, our hospitals are outsourcing the reading of x-ray films to India. You take the x-ray (it is digital) and it is zapped to India on the Internet, an American-board qualified Indian doctor in India reads the film, writes a report, sends it back all within half an hour, which is more than we are able to do with Singapore doctors in Singapore, because they have the people and the resources. So globalisation is going to put pressure not just at the bottom end but increasingly also at the middle and going up. And we have to see how this affects us, watch this and manage the situation as it unfolds. But the picture is not all gloomy because what we are doing to restructure and to upgrade is showing results. The economy has bounced back in these last two years, things are getting better for most Singaporeans, including at the lower end. If you look at the companies which have restructured, the workers down the line have benefited. You can see this in SIA, you can see this in PSA. Grace Fu, who has first-hand knowledge of this, explained to Members last week how in PSA, they turned it around and now it is growing again, which they could not have done had they not bitten the bullet and taken the very unpleasant measure to retrench 600 workers three years ago.”
“So the question is, for Singapore as a whole, is globalisation good or bad? I believe that globalisation is a big plus. Because of globalisation, we have grown and prospered. Because of globalisation, we are the busiest port in the world, we are a big financial centre, wealth management centre, fund management centre. Because of globalisation, we are a major tourist destination, attracting talents and attracting investments from all over the world, linking up with our neighbourhood but not constrained to our neighbourhood, and so we are able to reach beyond them, connect up with China, India and the world, and stand out as a first world country in Asia, in terms of job opportunities for our people, and quality of life for Singaporeans. China and India coming along - that also benefits Singapore. Because our people in our businesses are pursuing many opportunities in China, all over Asia, in fact. I met many of them in China recently, some of them were in Chengdu. I asked them: how is it? They said, "Well, my people were at first reluctant to come. Now they are here, they are very happy. Some of them do not want to go back." But we have people all over - in the Middle East, Russia, and Eastern Europe. We are taking advantage of opportunities overseas. We are creating opportunities in Singapore. To put it quite candidly, if China and India were not up, I do not think investors would be competing with one another to build integrated resorts, whether in Marina South or in Sentosa. It is because of the region that we are able to do this. But, of course, globalisation is going to create new problems, and one of the most difficult to deal with will be the income gap.”
“In particular, countries like France, and to some extent Germany and Italy, are paying a high price for resisting globalisation - stagnation, high unemployment, lack of vitality and verve, in contrast particularly to America. What more Singapore? So we cannot keep it out. Supposing we squabble among ourselves, supposing we now decided that we will argue over how to divide what we have, instead of going out and working together to increase the pie for everybody, I think all will suffer too. Because the investments will stop coming, the cohesion will not be there, the steps forward to deal with our next problem over the horizon are not going to be taken and we are going to fall back and become just like all the other countries which are seeing the world pass them by. So what we have to do in this situation, with globalisation happening, is to stay united, work together as a team, get our people to understand, first of all, that the world has changed and that we must change with it. Then, we all understand that we must work together and do our best to upgrade the economy, restructure the economy, retrain our workers, reskill them, adapt ourselves for this new situation. But I think we can take comfort because so long as we, as one country, come out ahead, then, as Singapore, we can generate the wealth and we can ensure that all the citizens will benefit from the country's success. If the whole of Singapore were going to be hit negatively and as a result, it is going to lose 10%-20% of GDP, I will still have to lump it, but I think that will be a very, very different situation. But if the result of globalisation is that I can grow, and there is going to be wealth which can be distributed, then I think I can solve this problem.”
“I quote him: "Here's how it looks to many people out there … China and India are vast - they have a nearly infinite supply of labour that is competent to do a wide range of things … and since it comes off the farm, it comes at a very low price…That's good if you are a consumer [because you buy their things they make], good if you are a commodity producer [because you sell them oil, steel, gas], good if you are a superstar who can combine with that labour to be more productive than anybody else. But if you are an American or a European without a fancy college degree, if you are a Latin American, if you are an Eastern European, if you are an African [he is too polite to say if you are a Singaporean], if you are in the vast middle who don't want to compete on price with Chinese or Indian labour, and aren't smart enough to start the next Microsoft, you are caught in between … And so, what is [globalisation] concretely going to do to create opportunity for [you]?" My response to him went something like this. Singapore is a small country, we accept the world as it is. These changes around us - in China and India - are going to happen whether we like it or not. Can we stop it? No. Are they going to continue to grow? Yes. Do we have the power to wish them away? We have no such magic. So the question is, given that this is the situation, let us sit down, accept it, and ask what is the best strategy for us to respond to this situation. Supposing we took the approach of protectionism and we said, shut out the competition, don't let them in, try to go it alone, postpone change, I think the results will be worse for us. As it is even for Europe, which is a continental-scale economy, is trying to keep out and slow down the change.”
“If you are older and also lower income, you have a bigger problem. This is a problem which affects many countries because the root cause of it is not Singapore, it is not our policies, it is globalisation. It is the way countries have gone today in a global economy. China, India and Vietnam and others are now impacting the world’s labour markets, with millions and millions of workers at the bottom end, and increasingly not just at the bottom end but also coming up to more skilled jobs. So America and Europe have seen this happen. In America, the median income (the 50th percent) of the average American, or near the middle, has hardly moved even though the economy has grown and top incomes have grown a lot. Even China and India, where they are highly competitive and forcing change in the rest of the world, have not been spared too because their top incomes are rising rapidly and their bottom incomes, particularly in the rural areas, are still stuck at the bottom. So their income gaps are widening, causing the Chinese to have to talk about harmonious development and taking care of the lower income groups. So it is a global problem. The question is: how do we respond? The IMF World Bank meetings were held in September recently and this was a major topic in all the forums, debates and sessions. And I discussed this with Larry Summers at one of these sessions. Larry Summers was President of Harvard - he is now a professor there. And he put it provocatively - why many people oppose globalisation, why it hurts.”
“And this is going to cause them a lot of problems and we must not go that way. Better for each of us to save for our own future needs. Then we can all enjoy peace of mind and fulfilling lives in our golden years. The other major social issue which I want to talk about is the stretching out of incomes - the income gap. Many MPs have talked about this. We have known about this trend for some time. If you look back, the turning point was 1997 - the Asian financial crisis. Before that, wages went up across the board. After that, the pattern was quite different. I circulated two charts to show how it changed. From 1990 to 1997, if you look at how income increases from the bottom 20% to the top 20%, all in between, everybody got good income increases. The bottom income got 7.2% per year, while the top got 8.8% per year. There is a gap, but not a big gap. Even the bottom got 7.2% which is a very rapid rate of increase of incomes. It means that within 15 years, you double your income. After 1997, the picture changed. The top incomes grew more slowly than before, 4% per year. But the bottom incomes grew a lot more slowly, only 0.3% per year. It is a completely different pattern. The working out of that over the last eight years, since 1997, is what has generated the income gap and the feeling on the ground that cost of living is high, that life is not getting better the way it used to get better. It is not just the numbers. It is also the human stories, some of which MPs have shared in this House - how lower-skilled workers have been displaced from their jobs and unable to get back into the workforce, or if they get back to the workforce, find new jobs which are less desirable than the old ones, at lower pay. And older workers similarly have a problem.”
“That is a different proposition altogether. We need a sustainable approach. You saw the numbers. You see how quickly the number of old people and the proportion of old people is growing in Singapore. Some MPs, and some other commentators outside writing in the newspapers, have suggested old-age pensions, which they argue every Singaporean should have as of right, because I am born here, I carry a pink IC, I should have an old-age pension. But if every old person, whether rich or poor, is entitled to an old-age pension, it is going to impose a very heavy financial burden on the State, which means a very heavy financial burden on young Singaporeans, because they are the ones who are going to be working and paying the taxes, which is where the State will get the money. What will happen? Can you say, "You work, I am entitled to this"? In Singapore, what do you think will happen? Some will work. Others will say, "Sorry, the burden is too heavy, I am off overseas. I can look for alternatives elsewhere. I am mobile. I can go to Hong Kong. I can go to China, seek my fortune. I can go to America, Australia, Europe - the world is my oyster." Other countries have this problem, because they went on a system of tax and pay for their old folks. And if you look at the European Union or the US, their social security problems are looming, are predictable. You can see the train crash coming but you cannot prevent the train from crashing, because if you want to change it, the old folks say, understandably so, "I have already paid for the generation before me. It is now my turn, and you are telling me no more, the music stops here?" The music is not going to stop here. It is going to carry on another generation.”
“So they are not poor in terms of assets for the future. They have to service their loan, they have to pay the rest of the mortgage, but we have helped them to have a very substantial asset. I think we can take credit for that. I think we can take comfort in that because that means our problem is much more manageable. The issue for people like this who have a house worth a lot of money is how can we help them to unlock the value of that house as they grow older, so that they still have a home to live in - maybe a smaller one, maybe a shorter lease - but unlock some of this value and convert it into a stream of income which will support them and see them into their old age. We have several ideas. Mr Mah Bow Tan is working on this and he explained some of the things which we are doing when he spoke in Parliament on Friday. Overall, in terms of financial adequacy of our old folks, we have a good system based on individual savings and home ownership. It ensures that most Singaporeans have put aside enough savings for their old age. There will be a few who will not have enough, because they have not been in regular work, because they have been ill, because some misfortune has befallen them which is beyond their control, because they do not have a family. The Government will do more to help them and will help them to do more to help themselves, as we have been doing. For example, when we had the Progress Package, I paid special attention to the elderly. This is the way forward and when we have future packages, this is what we are going to continue to do. But looking after the elderly who are needy through no fault of their own is a much more manageable problem than saying that the State has to provide for the elderly, whether rich or poor.”
“And I have asked Mr Lim Boon Heng, because he expects to hand over NTUC to Mr Lim Swee Say at the end of this year, after he has handed over NTUC, not to retire because he has a new responsibility - continue as Minister in the Prime Minister's Office to oversee this matter of ageing issues on my behalf, and bring together all the efforts of the different Ministries so that we are able to get a whole-of-Government response to this whole-of-Singapore problem. On financial security of older folks, I ought to say something a bit more today. We have not neglected this. We have provided for the financial security of older Singaporeans, and the most important way we have done this is through the CPF. We have built up the CPF. We have put aside substantial savings. We have allowed Singaporeans to invest these savings in housing, and property values have appreciated for many Singaporeans. Not all, because some bought on the open market at the peak and their prices have come down. But if you take the overall picture, the vast majority of Singaporeans - well over 90% - who bought houses have seen their assets appreciate, and they now have a substantial nest-egg put aside in the CPF and in their house as they grow old. It is not just wealthy people who have done this. In fact, even the lowest income groups have been provided for. And even the bottom 20% of the population - I showed this data some time ago in the previous Parliament - have in their homes a significant asset. First of all, most of them own their houses which they live in. Secondly, if you may ask what value do they have in their house? How much is the house worth, after subtracting the amount of the loan which they have not paid back? On average, this bottom 20% by income has $138,000 worth of equity in the home.”
“We started tackling various aspects of this piecemeal - the lift upgrading programme, the barrier-free access - these are really about old folks. Twenty years ago there would have been no market for lift upgrading. You are young, you walk up one flight of stairs, what is that? But when you are old and your knees are not so good, or when your parents are wheelchair-bound, that is a big thing. And when we are wheelchair-bound, that is a bigger thing. So, we have the Maintenance of Parents Act, to keep families together so that children help to look after their parents, and do not just dump them on the State, as Dr Maliki pointed out in his speech last week, it sometimes happens in Singapore. We had a Tripartite Committee on Employability of Older Workers, which Gan Kim Yong chaired to see how we can get employers to keep older workers working longer, not just to 62 but beyond 62, not the same job but adapted to a different job, and not the same pay but pay appropriate to the new job which they are able to do. We had another Committee on Ageing Issues which Dr Balaji Sadasivan and Dr Maliki Osman chaired, to look into the social aspects on how we can try to adapt to this. But although this work is all valuable, I think we need to go beyond that. We need to take a holistic approach, and I know who is a good person to ask to do this job - Mr Lim Boon Heng. Because Mr Lim has had a close interest in this subject for a very long time. He has given us many suggestions and shared with us many of his insights as to what the problems are likely to be, what we can do about them.”
“The number of elderly has gone up to 291,000. There is one elderly person to only 9 working-age persons. The median age has gone from 24 to 36. If you project fast forward another 15 years, 2020, the elderly will now be 575,000 - more women than men, because women live longer. Each elderly person has only 5 working-age persons to support him. The median age will have gone up to 40 years old. If you look at the shape of the pyramid, the bulge is now around 60 and the narrow part is down where the younger population is. If you project this forward another 10-15 years, that bulge is going to become red, and the working population is going to be where the purple ones are - a small waist supporting a heavy elderly population. Let's look at it another way. Look at the next chart to get the numbers into something which we can understand. In 1980, there were 112,000 old people, about one Toa Payoh today - one Toa Payoh of old people if you put them all together, which we would not do. In 2005, there were 2.5 Toa Payohs. By 2020, there will be 5 Toa Payohs of old people. So, this is a tidal wave which is coming towards us. In fact, we are the tidal wave ourselves, because the 2020 people will be this generation, many of these MPs who will be standing there and expecting to be supported by the younger generation. And I know that there are many problems which people who are old and people who can see this coming worry about - housing, financial security. What happens if they have not enough CPF, or their CPF runs out or they live longer than expected; working longer, retiring later - how to be able to work longer; healthcare, which is why healthcare is such a hot subject in Singapore. We know this.”
“To maintain the quality of this Government, the political leadership and the civil service, we have to continue to get good men and women, attract them to join and stay in the Government, and offer them fulfilling and competitive careers. That is why the President talked about this in one paragraph of his Address, and this is something which we will have to continue to focus on in the next five years. Besides investing in our future, we must address social problems that will grow with time. One of these issues is our ageing population. You can see it happening before your eyes. The older MPs will remember 15-20 years ago when they went on house to house visits, the profile of the residents they met, and when they go house-to-house today, how the profile has changed. Many more are elderly, many more are old couples living by themselves, sometimes just one person because the partner has passed away, if they are lucky, with children elsewhere in Singapore or nearby who will visit them, if not, living alone, hopefully, with neighbours keeping an eye on them. I have circulated some charts which show how this has changed. I have chosen three snapshots - 1980, which is 26 years ago; 2005, last year; and the next snapshot is 2020, 14 years from now. In 1980, we were a young population. You look at the bulge, the fat part of the pyramid - it is people in their 20s and 30s. Very few were old. Elderly 65 and above - the red tip of the pyramid - 112,000. Working people were many, older ones were few. For every elderly person, there were 14 working-age persons, and the median age of the population was only 24 years old. In 2005, which is approximately today, the pyramid shape is completely different. The bulge is now not around 24. The bulge is now around 50.”
“If you have been reading the newspapers, you will have noticed some very major investments which have come in over the last few months. Just recently, Intel and Micron decided to build a $4.7 billion water-fab plant here. It is going to create many jobs and spin-offs for local suppliers. It is a project which we have been pursuing patiently for a long time with Intel. EDB has been working hard at it. I think many generations of case officers must have gone through this, but finally we have landed the big fish. ExxonMobil is another company close to deciding on a multi-billion dollar petrochemical cracker on Jurong Island. It is going to be one of their biggest projects. I met their Chairman and CEO recently, Rex Tillerson. I had met him in the US, and Minister Mentor had also recently met him in the US. He came and he met us here again. I said, "We will do our best to help you. Not everything is under our control. Steel prices are global, but what is within our control, we will manage. We are not necessarily the cheapest. We are not necessarily the quickest and dirtiest. But we will offer you a stable and predictable environment in Singapore." And the Chairman said to me, "That counts for something." So, good government is why Singapore workers are able to get jobs and command a premium. That is why we do not have to be as cheap as workers in China or workers in India or workers in Vietnam. It is because of the quality of the Government, the quality of the system our people belong to. You are able to be productive, and people are prepared to reward you to work well.”
“And you have to have the whole system work so that whether you are promoting meritocracy, whether you are talking about religious harmony, whether you are keeping Singapore corruption-free or anticipating change or creating an environment for growth, if you press the right buttons and give the right instructions and work with this first-class instrument, it can deliver what Singapore needs. This is what Mr Lim Swee Say calls "big software". "Small software", you are just working individual departments and solutions, doing computerisation, streamlining more efficient operations. But the "big software" is how the whole thing puts together into a first-class system, where all the pieces work. It is like a precision Swiss watch - every component is top quality, and every component fits precisely into every other component. That is our most sustainable competitive advantage in Singapore. Other things people can copy. They see us plant green along the roads - you go to China, many cities now plant green along the roads. They see us clean up Singapore River, some Chinese cities are trying to clean up Chinese rivers - harder, but at least in principle they can do it. But to see the public service work the way it works in Singapore and to transplant that into another country and make it work there, many countries have asked us to help them to do it. But we tell them, "We can give you advice on how we have done it in Singapore. It is not so easy to do it in a different environment. You have to find out how to adapt this to your circumstances, and do it yourself." But for us, it is an enduring competitive advantage. And that is one of the reasons why we have been so successful in attracting investments here.”
“In MEWR, Dr Yaacob has a plan, which is the ABC Plan - "Active, Beautiful and Clean" waters. The idea is to have the water bodies cleaned up, beautified, linked up with our parks and green spaces so that they become new community spaces for lifestyle and recreation activities. And, of course, we are renewing our HDB estates as well progressively - all kinds of upgrading programmes which you know about. The purpose is to create a quality living environment for every level of Singapore society, including the lower income groups. So whether you live in a rental flat, three-room flat or a private property, this will be a first-class living environment. It is good for us to live in, and it is also good because it enhances the values of the homes of Singaporeans. So every corner of Singapore is going to be something special - beautiful, unique and a place that all of us enjoy and feel we own. And I think people know this. I met one leader of a neighbouring country recently. He told me, "Every time I go Singapore, I look at the place, I admire it."He comes back and tells his own people, "Why can't we do the same? Singapore is beautiful - improve, match them." That is the result of our investments. But the last investment which I want to talk about which makes all the other previous ones possible is building a first-class public service. This, like R&D, is a long-term investment in the future. It takes many years to build up. You have to have that quality of people, that ethos of service, the system, the efficiency and the performance.”