Lee Tsao Yuan
Singapore
“My last point and, perhaps, the most important, is that the fundamental tenet of democracy is that it must bring the greatest good to the greatest number of people.”
“Clarification, Minister. I think my question was really regarding the last part of your comment which said that you would change the Constitution in order to state whether what part of NII would belong to past reserves and to current reserves. Perhaps I was wrong in this matter.”
“As I see it, Minister, if the change of the Constitution is to define the portion of NII that belongs to past reserves, then would the Minister also consider at the same time including in the Constitution the definition of "reserves" that was stated in the White Paper? Because right now it is not in the Constitution.”
“The Minister stated that he would consider changing the Constitution in order to define NII or the part of NII that goes to current or past reserves. Would the Minister also consider at the same time changing the Constitution in order to incorporate the definition of past reserves in the Constitution?”
“Another clarification, please. As far as I understand from the White Paper, and I could be obtuse, supposing you have a future government that informs the President of the day that it disagrees with the definition of the value of State land, in other words, the value of State land at fair market value at the point of transaction, then tho…”
“The Minister said that the principles in the White Paper are binding and that if a future government so decides to define fair market value as not at the point of transaction but at the time it took over office, then that is clearly in violation of the definition of past reserves.”
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“Sir, national military service has been in place for men for more than two decades. Over time it has gained wide public acceptance because of its many advantages, although there was a huge hue and cry in the early years. [Mr Deputy Speaker in the Chair] 4.01 pm The time has come to begin to think about the national volunteer service for women. Lest some parents throw up their hands in horror as they conjure up an image of their precious daughters wearing army uniform, toting machine guns and have grease smeared on their faces, let me explain the scheme which I have in mind. I am thinking of a six-month scheme. There will be three months of basic physical training to instill physical fitness followed by three months of training and support services. This could be either in nursing and medical services or administrative support services to support the armed personnel. It could even be military training. Just as for the men, the best time for this to occur is at the age of 18 or immediately after graduation from "A" level or the polytechnic. However, it would be on a voluntary and not compulsory basis as the national defence requirements are not so urgent. Just as for the men, there should be some recognition of having completed national volunteer service, for example, in the form of some additional salary increment. Just as national service for men has been beneficial in many ways, national volunteer service for women would likewise also be beneficial. It serves the purpose of national preparedness in times of national security emergency. At these times there would be need for medical and other support services just as there is need for military forces. But there is another advantage. National service for men has proved to be a great social equaliser.”
“The committee would be tasked with not merely looking at the institutional infrastructure but also with the educational content at various levels of the educational system. I think that this issue is of sufficient importance to warrant the establishment of such a committee. The committee could be headed by a Minister of State and could comprise educationists from various educational institutions as well as employers. In conclusion, there is no crisis in education. Our educational system has served us well. My concern pertains more to the future and to the need for greater creativity and innovativeness for continued economic growth in the coming decade.”
“Sir, throughout these past 30 years, our educational system has always had its one key objective the needs of the economy. The approach has been pragmatic and, as such, has served the needs of the economy well. In the next 30 years, Singapore will face different economic challenges from those of the past 30. In particular, the challenge of moving up the value-added ladder will entail a search for new business opportunities, in terms of new markets, new production processes, new ways of organising business in order to make things better and cheaper. This calls for creativity. Singapore must become a nation not merely of doers but of doers and innovators and thinkers. Just as the educational system has focused on educating as many as possible in the past, it is imperative that the educational system include a focus on creativity now and in the future. The establishment of independent schools, autonomous schools and the Gifted Education Programme are important moves in this direction. My question is whether this is sufficient. For example, as Mr Davinder Singh has pointed out, there is feedback that first year university students find it difficult to cope with the more analytical demands in the university and yet this represents the most capable in their cohort and the group for which the development of creativity will be the most important. The setting up of committees to review policies, or committees to spearhead major new policy initiatives, is commonly accepted in Singapore. The Economic Planning Committee, Cost Review Committee and the Committee to Promote Enterprise Overseas are some such examples. I would, therefore, suggest the establishment of a committee to look into the development of creativity in the educational system.”
“One way is for courses to be approved by some Government organisation such as NPB before being eligible for the Government incentive. If the principle is approved, the details can be worked out by the experts. In conclusion, I am fully aware that the Government should not do everything. The burden of training should fall on the company and the individual. I am also not advocating a subsidy mentality. However, job-related training is not consumption but is human capital formation and does enhance productivity. Since people are the only resource in Singapore, we need to equip them with skills not only before but during their roughly 40 years of employment. I therefore support the financial policy of the Government but do hope that more can be done in terms of job-related training.”
“I therefore suggest that the Government give some thought to fiscal incentives for the purpose of encouraging job-related training for professionals and managers. The principle of Government subsidy for education is a well established one. Formal education in schools, polytechnics and universities is heavily subsidised in Singapore and justifiably so. If the concept of education is broadened to comprise formal education as well as continuing job-related education, then it would be logical for the Government to lower the cost of job-related training as well as formal education. There are two possible methods of doing so. First, the Government can give a double tax deduction for training expenditures, which means conceptually treating training in much the same way as capital investment. In other words, just as there is capital formation in the physical sense, there is also capital formation in the human sense. The other way is for the Government to subsidise, say, up to 20% of training cost. There is one other possibility - the use of the Skills Development Fund. However, since the SDF is financed by collections from the Skills Development Levy from employers, I suggest that the fund be used for training and skills upgrading of the employees, especially the workers. If the SDF is expanded to encourage job-related training for professionals and managers, then more funds would be needed. Of course, employers can contribute towards this purpose, but I suspect that this would be an unpopular measure in the business community. The scheme would also need to be properly administered. Some controls need to be established so that abuse of the system, such as sending personnel on junket trips abroad, is minimised.”
“Training and retraining need to become a fact of life, difficult though it might be, just as the 80 degree climate is for us. One way to do this is for the Government to encourage job-related training. This is already being actively promoted at the worker level for those with "A" level and below. There are many schemes in place for skills upgrading and retraining of workers. Organisations such as the Institute of Technical Education offer a wide range of courses such as BEST, WISE, MOST and TIME. Many of these are supported by the Skills Development Fund which is administered by the National Productivity Board, a key organisation spearheading this effort. I support the proposals made by Dr Ow Chin Hock and Mr Chew Heng Ching for increasing the SDF. Dr Ow has suggested transferring part of the foreign workers' levy. Mr Chew has suggested channelling part of the budget surplus to the SDF. It would be good for the SDF to be expanded to support "A" level and less worker education. However, there are few mechanisms in place to facilitate and encourage job-related training for professionals and managers - those who have tertiary education. While some companies, especially the larger ones, regularly sponsor such training, others do not. I suspect that productivity could be significantly enhanced if there was a systematic and regular training at the professional level. Take the recent regionalisation effort, for example. It would be helpful if a person going on an overseas assignment went to country familiarisation and cross-cultural communication courses before his or her own posting. While this is routinely done in larger companies such as multi-nationals, it is still not a common corporate practice in Singapore.”
“These three factors - the decline in the relative income of fresh university graduates, the slowing down of upward career mobility and a longer average time spent on education - can lead to frustration because they are changes which have been compressed within a short span of time. The good life is still attainable in Singapore except that it might take longer or the concept of what is a good life may need adjusting. Expectations need to be lowered. This, I believe, is one important social consequence of the heavy investment in education. The second issue which I would like to raise is the re-examination of the concept of education. In today's world, with rapidly changing technology, it is not only computers which become obsolete. Labour skills can also become outmoded very quickly. There is increased pressure to upgrade one's skills which is equally true for the top management as it is for the rank and file worker. Also, it is fairly common for a person to have two or three different jobs in his or her own life time, especially with longer life expectancies and the raising of the retirement age. It is therefore important to broaden the concept of education. Education should not only mean formal pre-employment education. It should also include the concept of continuing education for upgrading job-related skills. I believe Dr Arthur Beng has also spoken on this subject. In today's fast changing world, learning should occur not only in schools and universities, but need to take place continuously throughout one's working life. In order to meet the challenges of more intense competition, it is time to actively promote the concept of a learning nation, a learning society in Singapore.”
“In other words, 10 years ago, university graduates, even from the start of their careers, had higher purchasing power compared to the average earnings in the workforce. Today, however, the purchasing power of fresh university graduates in relative terms is about the same as that of the average wage earner. This is exactly what one would expect with the rapid increase in the number of graduates. This is not to say, however, that salaries of professionals and managers are not high in Singapore. An international comparison would show that Singapore's middle and senior management salaries are already comparable with those of developed countries and higher than those in many developing countries. Second, in the 1960s and early 1970s, the vacuum left at the top by the departure of the British meant a unique opportunity for Singaporeans to move very quickly up the career ladder. It was not unknown, for example, for Singaporeans in their early 30s to become Ministers, Permanent Secretaries, CEOs in the private sector. But that was in a different era. Now, while the practice of meritocracy still rewards the superstars, the maturing of the workforce plus the raising of the retirement age do mean that promotions will occur, but occur at a slower rate. The third implication is that society will have to get used to a longer average time spent in getting educated. By the year 2000, with 85% of each cohort receiving post-secondary education, those with only secondary education or less would face difficulties later on unless deliberate efforts are made to upgrade their skills.”
“Mr Deputy Speaker, Sir, it has been a long day. I would very much like to raise a number of issues in the Budget but I will confine myself just to one. I would like to focus on two related issues in the area of education. First, the social implications of intensive education upgrading and, second, the need for Singapore to become a learning nation. The Minister pointed out that there has indeed been a significant increase in the proportion of the tertiary educated (graduates from the polytechnics and universities) to 54% of the cohort today with a target of 60% in the near future. Take university education as an example. There are many more university graduates now compared to 20 or even 10 years ago. While there were only 1,770 graduates in 1980, for example, there were more than 7,000 in 1993 and this is even excluding the thousands who have graduated from universities overseas. Graduates have to get used to no longer being at the pinnacle of the pyramid. University education has become more broad based. This massive ramping up of the tertiary educated surely has wide ranging social implications. First, consider the salaries of fresh university graduates, for which data are available. Ten years ago, from 1979 to 1984, fresh graduates on average used to earn 1 1/2 times that of the average monthly earnings of the workforce. In 1983, for example, fresh graduates earned nearly $1,400 while the average monthly earnings was about $860. If one were to take gross median income, however, that would be of course less. Now, however, the ratio is 1:1. Fresh university graduates in 1993 received on average $1,920 while the average monthly earnings for the workforce was $1,918.”
“Is there any difference between the socio-economic circumstances of students in the independent schools, autonomous schools and ordinary Government schools?”
“Sir, I thank the Minister that he is considering the possibility of a better feedback mechanism. Could I please suggest that, because of the fact that actually 35% of working people, according to the 1990 Census, use public bus only in Singapore, which means that public bus transport is very important, and that most of these are lower-income people who may not be very used to giving written feedback to public bus companies, there could be a hotline that could be established? For example, is it possible that CASE could be one avenue in which consumers - these are really consumers - could make available their complaints? Could there be a hotline, for example, established by the Public Transport Council?”
“Sir, while I agree with the Minister that much has been done to improve the quality of bus transport in Singapore, I was wondering whether the Minister would consider the following: first, that there will be more effective monitoring mechanisms; second, that these monitoring mechanisms actually be made public; third, that there will be some channels of feedback from the public to, for example, the Public Transport Council, so that if there are any areas, in terms of frequency, or waiting times, and of bus services, etc, the public could actually feed these back to the Public Transport Council, so that the public is aware that these measures are being listened to by the Public Transport Council and the Government.”
“Can I ask the Prime Minister whether he has noticed any increase in reluctance on the part of concerned Singaporeans to publicly express their views after the recent series of exchanges in the newspapers and, if so, whether this is desirable?”
“My question is: will benchmarking - and the public sector is Singapore's largest employer, I believe even for senior positions - have a negative impact on competitiveness? Or will benchmarking, by enhancing good Government, have a net beneficial impact? Fourth question: This pertains to the Administrative Officers. Salaries are an important, but not the only determinant of job attractiveness. There are only so many Permanent Secretary posts, so many CEO positions of statutory boards. A top-grade person aims eventually to be at the top of his or her organisation. The provision of challenging, attractive jobs with decision-making empowerment is a major challenge for the civil service. Does the Government have such plans? I am glad to know from the Prime Minister today that the Government indeed does. To conclude, allow me to reiterate my three main comments. I support the rationale for paying Ministers and senior civil servants well in order to keep public service attractive. I agree with the rationale for benchmarking. I have, however, four questions regarding how the benchmarks are formulated and what their consequences are. I hope that these questions can be answered, and the benchmarks fine-tuned. I know that many of these questions have already been examined within Government. I wish that the Government would share their further thoughts with us on this process.”
“Will there be an increased demand for cars, property and other high-income goods, causing prices of these goods to rise? Will there be a high-end wage-price spiral? I would feel more assured if we could have the Government's assurance that there will not be any significant competitive ratcheting up effect on senior management salaries, nor an ensuing high-end wage-price spiral. There is another possible related macro-economic effect, and that is, on our competitiveness. I asked some MNCs in Singapore for some comparative statistics of managerial salaries. These make for some of the best international comparisons, for MNCs have offices worldwide, and they have standardised job grades and are able to compare salaries with the same job grade. One MNC showed me a comparison of 1994 salaries for a division manager - roughly someone who has been 10-15 years with the company and is a good performer. In nominal terms, the Singapore salary (base salary plus bonus) is higher than that in Germany and th US; about double that in Australia. In fact, Singapore is the second highest on the list after Japan. In another company, a leading US MNC in the computer industry, a Singapore senior manager is paid, in nominal terms, higher than his American and Australian counterparts, but lower than those in Hong Kong, Japan and Germany. There are, of course, many difficulties with international comparisons, but these are rough figures. Singapore's middle and senior management salaries, even when compared with those of developed countries, are already not low. The comparison with developing countries is even more stark. The fact is, as some tell me, that Singapore's salary curve is steep by international comparison. This is in part reflective of the scarcity of top talent in Singapore.”
“I would like to add here that my point is not so much against $800,000 for Ministers. Ministers can be paid a million dollars, $1.5 million. I think the point is that in terms of benchmarking, let us choose as accurate a benchmark as possible. Second question: What happens if there is an economic slow-down and private sector salaries, which have a large profit-related component, decline? Will Ministers and public officers' pay also decline? If so, then we could have the anomalous situation that, because of the two-year lag, the decline comes at a time when there is economic recovery, and Ministers and public officers' salaries fall when their counterparts' salaries rise. Think of 1985 and 1987, for example. Or their salaries register a significant increase in a recession year (1985) because the benchmark was 1983 when Singapore was doing well. One way around this, given that the two-year lag is inevitable, is to take a two-year or three-year moving average to smoothen out year-to-year fluctuations. Third question: What are the macro-economic consequences of the proposed benchmarking? I can think of two. The first is domestic. Currently, top public sector salaries lag behind those in the private sector. With the implementation of benchmarking, the short-term catching up process will cause average executive salaries to rise even if private sector salaries remain the same. But the question is: will private sector salaries rise eventually because of benchmarking? There is only a limited pool of the best and the brightest who are wanted by both the Government and the private sectors. Will benchmarking cause a ratcheting upwards of executive salaries in Singapore?”
“Companies choose whether to peg their salaries at the top 10th percentile, top 25th percentile, or at the median, the 50th percentile. I am also given to understand that in Singapore, a group of about 10-20 large companies get together on a regular basis to share salary information. Each company then decides where they want to be. One company decides to be a market leader and to peg its salaries within the top 10th percentile. Another company may decide to peg its salaries at the 50th percentile. In both of these examples, which are actually used in Singapore in the market, percentile-based benchmarks are used. The percentile-based benchmark is broader. It uses a larger sample and is therefore less affected by outliers. A related point is regarding the base for benchmarking. Conceptually speaking, there are two types of benchmarking basis that can be used. The first, pertaining to Ministers, is what the person would have earned if he or she were still in his or her previous occupation. By using this base benchmark would result in individualised salary schemes for each Minister, and might result in large differences across Ministers. I think that is very unsatisfactory. The second concept, which is the concept used in the White Paper, is to adopt the nearest private sector equivalent. I agree with this conceptual approach. If percentile-based benchmarking is adopted, I have less reservations with the use of the base of six professions. But since a Minister's or civil servant's responsibility is closest to that of corporate management, why not use only those in corporate management as a base for benchmarking? For example, the ministerial benchmark could be the top 10th percentile of all local Executive Chairmen and CEOs, including managing partners of professional firms.”
“If the idea is to benchmark public officials' salaries with those of the top people in the private sector, then taking the average of the top four in six professions, or 15th person, would result in an over-estimation of these salaries, as these top four could be different individuals in every year. Please allow me then to put forward an alternative proposal for consideration. Instead of a person-based benchmark, why not use a percentile-based benchmark? For example, take the top 10th percentile for Ministers, and top 20th percentile of persons aged 32 for Superscale G officers. At this point, I must say that I am hard put actually to recommend a specific percentile without sufficient figures in front of me. Is it top ten? Is it top 15? Is it top 20? To me, that really depends on what the figures are like and because I do not have them here, it is difficult to pinpoint a certain number. The important thing is the principle of percentile-based benchmarking instead of person-based benchmarking. A percentile-based system is used by Hay Management Consultants, a well-known human resource consultancy firm which has 100 offices in 30 countries. Twice every year, they conduct a survey of top management salaries over 90 large companies in Singapore. They evaluate the jobs of CEOs and senior management, determine their job sizes. For the job of a CEO of a company which sells only one product in the Singapore market is quite different from the job of a CEO which oversees multi-product operations in the entire Asia Pacific region. And hence their job grades. This is in order to compare apples with apples in terms of job grades. They then determine salaries for each job grade, and publish the overall results.”
“Please allow me to give an example. Suppose that in Year 1, individuals A, B, C and D are the top four in one of the six professions. Suppose that their average base salary is $500,000. They choose to exercise their stock options that year, and gain an average of, say, $1 million. This makes their average income $1.5 million for that year. Suppose that the following year, these same individuals - A, B, C, D - do not exercise any more stock options. Their average salary goes down to $500,000, which is their base salary. But another group of four individuals - W, X, Y and Z - who have an average base salary of $450,000 and therefore were not among the top four in Year 1, now exercise their share options and gain $900,000. This pushes their salaries up to $1.35 million, and they become the new top four in their profession. The benchmark therefore moves from $1 million in Year 1 to $1.35 million in Year 2. But the average salary of A, B, C and D over two years is $1 million, and that of W, X, Y and Z is $900,000 over the two years. Over a longer period of time, these salaries are likely to be even less, depending on the extent to which share options are given and exercised. A similar example can also be given for profit-sharing, or profit-related bonuses of senior partners in professional firms. One unusually large, plum job can cause profits and profit-related bonuses to jump. In other words, stock options and profit-related bonuses can cause salaries to rise to very high levels in certain years, which may not be representative of the average over time for these same individuals.”
“Mr Deputy Speaker, Sir, I have three major comments on the White Paper. First, I agree that it is imperative for Singapore to continue recruiting top talent into the public service. I agree that good Government is important for any country. It is particularly important for a small country like Singapore, which has relied on its ability to do things, and to do them well to succeed economically. A sound macro-economic environment, telephones which work, airports which are hassle-free - these are all part of what makes Singapore tick, especially a successful regional business hub. Although salaries are not everything, I do agree with the rationale that those who hold public office should be paid well. It does help to keep the system honest and transparent. Second, I agree with the rationale of benchmarking salaries. Better a system of benchmarking than large adjustments every four, five years which cause unhappy ripples in the private sector and the population at large. Third, I have, however, a number of questions regarding how the benchmarking is done, or the methodology of benchmarking, and its consequences. The White Paper is very well written. I must commend the civil servants who did quite a bit of the work in writing the White Paper under the supervision, of course, of the Ministers. It shows that considerable thought has gone into making the case for benchmarking. I am sure that much more analyses have been done than what has been presented. I would only wish that some of these analyses which are not in the White Paper could be shared with the public at large. Four questions remain in my mind after reading the White Paper. First question: Why make the benchmarks person-based, ie, the average of the top four persons, or the 15th person of age 32?”