Mr Lee Yi Shyan at Parliament on Salary Adjustments for Ministers and Senior Civil Servants

SPEECH BY LEE YI SHYAN, MINISTER OF STATE FOR TRADE & INDUSTRY ON SALARY ADJUSTMENTS FOR MINISTERS AND SENIOR CIVIL SERVANTS, 9 APRIL 2007

Introduction

Our debate today is about fair pay for ministers and civil servants. Their job is to lead the country, translate vision into reality. If they do their job well, our economy will grow, society will remain cohesive and lives of Singaporeans will improve.

Before we can come to any conclusions, I think we need to address three questions:

(a)what is the job about, ie what is at stake

(b)What kind of people do we need to do the job well; and

(c)What is a fair pay for these people.

What is the job about, what is at stake?

The job of any modern government is a complex one. It not only has to address current issues, it also has to plan for the future. It has to affirm the successful, it also has to encourage and assist the weak. It has to protect its citizens, but also challenge them to be responsible. It should not be populist, but should seek to strengthen consensus and unity amongst its constituents so as to achieve a common vision.

While these job descriptions may seem common for many governments, the job of governing Singapore is made much more difficult because of our smallness and vulnerabilities. Despite all odds, we have accomplished much. Singapore is worth much more now than forty years ago and the stakes are high.

How much is Singapore’s worth?

Based on our GDP of S$210bil growing at 4 to 6% annually, every 5-year term of good government will produce new combined value add in excess of S$1 trillion.

What about our foreign reserves managed by GIC, savings in the banks and investments in the SGX? They run into hundreds of billions.

We all know that commercial buildings are worth a certain price. Likewise, our factory buildings, MRT system, roads, airport and seaport all have monetary values that can be realised if they are listed and sold to international investors. Yet, we have not put a price tag to these assets.

Imagine if we go one step further and impute values to the intangibles of the operating environment in Singapore: safety, reliability, stability, efficiency and integrated-ness? These are valuable attributes money can’t buy, yet, these values have become synonymous with Singapore’s infrastructure.

Singapore’s value is also expressed through other countries’ curiosity at our achievements.

Just a few months back, a Middle Eastern country actually wanted to buy over the entire JTC. In Saudi Arabia, one marketing brochure for a new, 150 sq. km City reads “Singapore in the Middle East”. Many of the oil-rich middle-eastern countries are diversifying their economies by building new cities and infrastructure. Many of them wish they could build an “instant Singapore” into their systems. I think if we had offered, they would have bought up not just JTC, but PSA, CAAS, IDA, MOE and many other key institutions too.

Sir, as far as I know, not a week passes by without a foreign delegation in town studying our systems, with the aim of adapting it back in their countries. They come from China to the Middle East, Russia to India and not to mention officials under training from Asean countries. They are interested in our urban planning, environmental protection, medical 3M, eGovernment, workers upgrading programs, CPF and soon Workfare Bonus Program.

This week, the second Jiangsu province delegation, comprising 18 party secretaries and 11 mayors are visiting Singapore. What makes the delegation unusual is that either the Number 1 or 2 persons of the major cities in Jiangsu are here at the same time. They are very serious about studying our urban planning and public administration system.

When the first Jiangsu delegation visited us in November last year, one of the mayors commented to me: “In terms of individual buildings, I believe we have more outstanding architecture than you have. But when you assemble all our buildings side-by-side, your city looks so neat and beautiful. They are in harmony. So what is your secret”.

Our former chief national planner, now a senior director of RSP Architects, Mr Liu Thai Ker has been doing architectural and city master-planning work all over the world. He reminded me that “Singapore is the world’s only brand new, well functioning global metropolis built up in the past forty years”. That is why we are a subject of case study and analysis, from countries near and afar.

What kind of people do we need to do the job?

Does it make sense now that we know we are dealing with trillions of assets in Singapore, and we want to relax the system and allow lesser people to run the country?

Consider an executive search firm’s view below:

“Singapore's bureaucrats are seen as "positive minded achievers who know how to work ethically within the system with a view to actually get things done and deliver to the population quality products and services” – be it in healthcare, public amenities such as transport & housing, utilities like water & power, environmental issues and, most important, education”.

“The current "global initiatives" of Singapore to expand its presence beyond its shores and into the large emerging markets of India, China, etc. are being watched closely. Singapore's experiences in setting up SEZs in Bangalore (ITPL) & in China are practically textbook cases for many countries which are looking to expand their GNPs by co-investing worldwide. The successes of Singapore’s Civil Service Professionals in these areas make them extremely valuable to countries seeking to repeat these achievements. So the next wave of Executive headhunting from Singapore to many other countries in emerging markets could involve senior civil servants - at salary levels far in excess of the ones currently prevailing at home. This process could start happening within the next 2 to 3 years as more and more countries are on a platform to take off & need high quality governance to ensure sustainable world class infrastructure is in place”.

Sir, I am worried that there might be an exodus of talents from the civil service. If we are unable to appreciate our own talents, others will express appreciation on our behalf.

Of course, I am not trying to over-simplify any career decisions at the senior level to just a single dimensional consideration of “dollars and cents”. In fact, I believe it is most common for any executive offered a new opportunity to consider 4 key factors: (a) mission and meaning of the job (b) challenge and growth opportunities (c) environment for self and family and (d) monetary compensation.

In the talent wars out there, firms are competing by raising the bar in every of the 4 components above. If all that we can offer in public sector leadership are the first 3 components, and have a very weak 4th component, it is most unlikely that we can compete effectively against other career opportunities, much less convince anyone to take up public sector leadership positions.

For multinationals, they can recruit worldwide for their CEO and the senior management team members. In Singapore, for positions of ministers and permanent secretaries, we can only choose from the limited pool of top local talents. We cannot possibly appoint foreigners or PRs to the cabinet, least we will end up having many foreign ministers! This is a severe constraint on our building the best team from a population base of 4 million.

What is a fair pay for these people - Market Benchmarks

The Straits Times reported on 6 April that Mr Wee Cho Yaw was the best paid banker at $9.25 million last year. DBS’ Jackson Tai and OCBC’s David Conner were reported to receive around $7.5 and $5 million respectively. In the real estate sector, CapitaLand's Mr Liew Mun Leong was paid $5.14 million, City Development’s Kwek Leng Beng received $4.25 million and Keppel Land’s Lim Chee Onn $5.5 million. Earlier on, it was also reported that SingTel's new CEO, Ms Chua Sock Koon, would be paid $5 million if she meets her performance targets.

I think our companies paying their CEOs regionally-competitive salaries is a good sign. As our companies grow in sophistication, assets and their international reach, their management teams will also be valuable to other international companies. I am sure their boards, in deciding the level of compensation, have taken into consideration the job scope, complexity and the market value of these leadership positions.

Some people argue that running a business is different from running a country. Running businesses require functional and execution skills; you also need market knowledge and business acumen. Hence, you need to pay top dollars for this unique blend of rare qualities.

For political leaders, don’t they need to possess strong functional skills and the political acumen to take into account a wider range of variables in decision-making? See how the Thai stock market plunged by 15% and US$25 billion was wiped out overnight on the announcement of currency control measures.

What about anticipative work, such as averting terrorist attacks, keeping our sea lanes open, keeping drinking water flowing, ensuring sand and granite supply coming? Do they need organizational skills and execution skills? Do they need plans and preparation? Do they need imagination and risk-taking?

I believe good political leaders not only need to be rational and analytical - the head factor, they must also have the character, empathy and temperament – the heart factor. They must have exceptional abilities to connect with people.

It is fair to assume that the top 500 professionals in Singapore have the basic “head” factor. Then as we begin the filtering process, using the “heart” criterion and relevant skill sets, removing the PRs and non-Singaporeans along the way, we will quickly come to a much shorter list of qualified potentials. If we talk to them, telling them the kind of drastic pay cut they need to expect, and the heavy burden and nature of the political office, I think they will consider the 4 components of a career choice, speak to their family members, and finally, politely decline the opportunity to serve. We will have very few people coming forward. With the war for talents intensifying, the situation will be worse in the future. Should we then lower our standard of selection, by going down to the next 500 or next 1000?

The further down we go, the less capable people we are recruiting into the team. The less assured will be our future.

Some people argue that business leaders are faced with greater risks. But won’t leaders of nations face the same risks and more? We just need to remember the Asian financial crisis, 911, SARs, terrorism, the possible pandemic flu, the rise in oil prices in recent years, and the more recent shortage of sand.

A business can leave a hostile operating environment, retrench workers and pack up and move on to greener pastures. However, our government cannot relocate Singapore. We have to accept the situation as it is, retrain displaced workers, restructure on a national scale, sustain livelihoods and maintain confidence.

Bankrupt businesses can fold up under Chapter 11 and get reborn with new capital and owner. If Singapore folds up, we would not even have a place to call ‘home’ anymore.

Some people argue that corporate leaders face fluctuating incomes every year. They argue that ministerial pay should be tied to their work performance. Yes, but we should also recognize that good business leaders deliver strong performance over a period of time. Likewise, we should look at a cabinet’s performance in leading the country in its 5-year term or longer.

However, I also want to caution against an over-zealous performance-based implementation that will encourage short term behavior. We know that not everything that is quantifiable is important, and not every important thing is quantifiable. Many decisions taken for a country must be long term in nature. Master-planning of the city, the population model, policies on a social safety net, defense policy etc. Even when to build our new MRT lines has very long term implications.

If we over-incentivize short term behavior, as you see how many other governments do, we could end up implementing populist policies, squandering our reserves away and neglecting capacity building and investments for the future. In the corporate world, we have heard of CEOs creating short term results or turnaround by stripping assets, scrapping staff training and trimming R&D just to maximize profits. A company can be propped up for a few years but will die of poor nutrition thereafter. This approach should not be the outcome of our performance-based compensation system for ministers.

In perspective

I met with the Chairman of a large industrial park developer in a neighboring country two years ago. I was curious at his business model. I asked him: “Industrial park development in most countries is a money-losing proposition. Government typically has to put in a lot of infrastructure around the industrial park for it to work. Roads, water, power plants, sewage system, telecommunications - all are very expensive investments. In Singapore, we set up JTC to do just that. How is it that you can develop greenfield industrial parks and still make money?”.

The founder-Chairman replied: “Oh.. in my country, the government is not so organized and have people like yours. We the private sector must organize ourselves to build our own industrial parks. Besides charging land rental, I also provide utilities, telecommunications, canteens, workers’ uniforms, housing … anything that my tenants need I would provide. We create a revenue model from our tenants and. we become profitable”.

Impressed, I asked further: “You have created a new industrial park from ground up. What about your capital city? It is a large metropolis. But traffic congestion is choking it. Is there any plan that you or your government has to tear some old buildings down, widen up roads, build more subway lines and perhaps also bury overhead power cables underground?”. Without much hesitation, is entrepreneur said: “No, if the government attempts to do that, there will be riots. They will be overthrown the next day. We are too democratic, too many voices and there are too many interest groups. Don't forget, our government is weak. Your PAP government is half a communist! When you say you do, you will do!“

Sir, whatever others may call us, we deliver benefits to our people.

The latest Merrill Lynch report has this to say about Singapore: “At the risk of being abstract, we would say that Singapore is amongst the best countries in the world. . . There is no prescribed way to analyze a state’s Grand Strategy. But you can start with its perspective. How it sees its goals, strengths and fears…. These are key issues for a country… countries with governments that have strategic vision and the ability to implement, also have strongly-performing stock markets. Those that don’t, have not.”

Sir, persuading the ablest men and women to lead this country must be an urgent priority for the present generation of leaders. The Prime Minister needs every tool he can have to make it easier, not harder for talented people with the right character to come in. We should give our strong support to the proposal to pay ministers and senior civil servants, and statutory appointment holders market-based salaries.

Sir, paying S$56 million for a cabinet to run a GDP of S$210bil is cheap. You can’t get that anywhere in the world.

Conversely, paying a team of $46 million (or $4.6 million as practiced in some countries) can be too expensive, if the result is a floundering economy, high unemployment, empty government coffers and a divided people. All these can happen faster than you think, with an incompetent government.

Sir, the choice is clear.