Singapore Government Press Release
Media Relations Division, Ministry of Information, Communications and the Arts
MITA Building, 140 Hill Street, 2nd Storey, Singapore 179369
Tel: 6837-9666





My fellow Singaporeans,

Compared to the bright sunshine of the early 90s, the recent years look much darker.

Many of you feel that we have fallen into a valley of gloom. You live in fear of retrenchment or have lost your jobs. Our security is threatened by international terrorism. And there was SARS, which weakened our already sluggish economy.

I know that you are worried that we have lost our way.

But just remember this beautiful Chinese verse,

"山 穷 水 尽 疑 无 路

柳 暗 花 明 又 一 村"

"Where the hills and streams end and there seems to be no road ahead, amidst shady willows and blooming flowers, another village appears." In other words, when all seems lost, there is hope.

Tonight, I want to assure you that we are not lost. I will show you the way out of the gloomy valley, and up into the sunny highlands.

Take a Step Back

First, take a step back into the 60s. Singaporeans felt a similar sense of hopelessness and foreboding then.

I graduated from the University of Singapore in 1964. At that time, we were part of Malaysia. There was constant friction between Kuala Lumpur and Singapore, and communal tensions ran high. A few weeks after I started work, racial riots broke out. A year later, Singapore was forced to separate from Malaysia. We felt like an abandoned baby.

In July 1967, we were abandoned again. Britain announced that it would withdraw its troops from Singapore by the mid-70s, reversing its earlier commitment to give us security coverage.

Six months later, Britain dropped another bombshell. It was bringing forward the withdrawal of its troops to 31 December 1971.

We had only a few battalions of soldiers and two old navy ships. How could we protect our people?

Our economy too, was threatened. The British military contributed 20 percent of our GDP. Their departure would throw 100,000 Singaporeans out of work. Our unemployment situation, which was already serious, would get even worse.

Our problems were made more difficult by poor industrial relations. The unions were militant and confrontational. Strikes were rampant. And our labour laws over-protected the workers. For example, when workers worked on a public holiday, they received triple pay. If they had to cycle from one place to another - within the same factory compound - they received a bicycle allowance. If companies wanted their employees to wear neckties, they had to pay a necktie allowance. And if they wanted their workers to cut their hair, they had to pay a haircut allowance!

Prime Minister Lee Kuan Yew took tough measures to get the country out of the economic bind. He amended the labour laws to balance the interests of workers and companies. He scrapped the bizarre worker benefits. He snipped off the haircut allowance.

His bold steps turned the economy around. By the time the British withdrawal was completed, only 36,000 Singaporeans were out of a job. This was a small number, compared to the 100,000 lay-offs we were expecting. The New Nation, an afternoon paper in Singapore, carried the headline:

"The British pull out causes scarcely a ripple."

As a young officer in government service then, I watched Prime Minister Lee rally the people to accept the painful measures. If he had not had the courage, and the conviction of his beliefs, we would never have made it from Third World to First.

Today, Singapore again faces physical and economic threats. We have to deal with terrorism and SARS. Our economy has lacked shine for over two years. Unemployment is rising, this time hitting managers and professionals as well. Can we turn Singapore around, like Prime Minister Lee did in the 60s?

My answer is, yes. We have every reason to be confident. Compared to the 60s, we command more economic and financial resources. Our political and social environment is stable. And we are not on the brink of violence with our neighbours, despite the constant hiccups. For example, in our water dispute with Malaysia, we traded advertisements and booklets, not bombs and bullets.

Moreover, our people are now better trained. In 1968, only 4 percent of each cohort of Singaporeans received tertiary education. Today, 66 percent are tertiary educated. In 1968, the SAF could not have survived a military confrontation. Today, the SAF has a well-trained army, navy and airforce, equipped with the most modern technologies and hardware.

So you see, we have the resources to pull through our problems. More importantly, we have the will.

SARS and Nation Building

If you have any doubts, look at our performance against SARS.

When I visited President George Bush in May, he complimented Singapore for having dealt with SARS in a constructive, disciplined and transparent way.

The World Health Organisation too, was impressed. It has informally invited Singapore to be a full member of its global alert and response network. As a full member, Singapore would join a select group of countries which provides experts to help the WHO when infectious diseases break out around the world.

Individual Courage

So what was it that impressed the international community? First, it was our large reservoir of courage.

I had seen Dr Dessmon Tai in the TV documentary, "True Courage". He is the Head of the Intensive Care Unit in Tan Tock Seng Hospital. Later, I met him at a tea party I hosted for key staff from Tan Tock Seng.

Dessmon said that he was afraid when treating the SARS patients. But he could not show it. He was the Head of the ICU. His doctors and nurses were watching him. So he stepped right into the ICU without wavering. His doctors and nurses followed.

That is the mark of a leader. In a crisis, a leader shows confidence, not fear.

Dessmon chided the doctors who were afraid. He said that the nurses were not afraid, so how could they be afraid?

But the nurses were afraid. Mdm Kwek Puay Ee, the Director of Nursing at Tan Tock Seng, told me how she swung them around. She borrowed Dessmon's line. She told her nurses that the doctors were not afraid, so how could they be afraid?

But we know the fear was there. It was natural. Day after day, our healthcare givers faced the deadly virus. It was a potential death sentence.

Dessmon's wife pleaded with him to resign. She wanted a husband, not a dead hero. Dessmon explained to her that he was trained to do the job. How could he quit when he was most needed? His wife cried but understood his devotion to duty. She supported him.

Dessmon's and Puay Ee's commitment to their job is typical of all the doctors and nurses in our hospitals. Their dedication and sense of duty prevailed over their fear. They drew strength from the support of their families.

Dessmon, Mrs Tai and Puay Ee are here tonight. Will the three of you please stand up to be recognised? We honour you, and all the healthcare workers and their families whom you represent.

I am also proud of our researchers who worked on the genetic sequencing of the SARS virus. In the beginning, they knew very little about the virus. They could easily have been infected.

That was why Professor Edison Liu, Executive Director of the Genome Institute of Singapore (GIS), asked for volunteers. He could not guarantee the safety of the researchers. But despite the risks, more than 50 of his scientists raised their hands. They were from the US, Canada, France, UK, China, Taiwan, Hong Kong, Malaysia, Indonesia and Singapore � quite a collection of international talent. Professor Liu himself is American. The GIS scientists worked relentlessly and sequenced the SARS virus in just two and a half weeks. It was a great achievement.

Collective Effort

Despite their fear of SARS, Singaporeans kept their sense of humour. Khaw Boon Wan and his combat team drank Sarsi to fortify themselves!

Chitra Rajaram, Editor of Tamil Murasu, told me that the great Tamil philosopher of the second century, Thiruvalluvar, advised Indians to laugh whenever they meet misfortune. Thiruvalluvar said there was nothing comparable to laughter for overcoming misfortune and going on to victory. In this regard, I think there is a little bit of Indian in all of us!

So when schools were closed because of SARS, our students rejoiced that "S, A, R, S" stood for "Schools Are Really Shut". When schools re-opened on 16 April, they moaned that "Sixteenth April Return School".

To SIA staff, SARS was a depressing acronym: "Singapore Airlines Retrenching Soon". But to the feisty Malay nurse who recovered from SARS, the acronym had a happier meaning. She proclaimed that for her, SARS stands for "Single And Really Sexy".

This "Single And Really Sexy" nurse is here somewhere. I hesitate to ask her to stand up, because I may lose your attention. But never mind. Miss Ashirdahwani, would you please rise? We applaud you, and other SARS survivors, for the wonderful spirit you all showed in overcoming SARS, and getting on with your lives again.

For me, the most appropriate coinage for SARS was "Singaporeans Are Really Scared". Yes, we were really scared. Scared for our lives and our loved ones. Scared of taking a taxi, scared of going to the hospital. Scared that tourists and customers would not return, and we might lose our jobs. For the first time in our history, all Singaporeans felt the same fear at the same time.

But far from being frozen by the fear, the entire nation sprang into action. We armed every household, every student, with a thermometer. Individuals and companies contributed generously to the Courage Fund. A friend of my wife gave half a million dollars, and she and her husband are not even Singapore citizens. Ministry staff, our soldiers, policemen, CISCO and Civil Defence officers worked day and night to prevent, detect and isolate SARS. MPs, grassroots and volunteer organisations gave a helping hand, and a comforting shoulder, to those affected by the disease.

And, of course, in the eye of the storm were the Ministry of Health and our healthcare givers, led ably by Lim Hng Kiang. They showed outstanding steadiness and team spirit despite the tremendous pressure.

Tonight, I have invited representatives of organisations that were involved in our fight against SARS to join us at the Rally. Because of the shortage of space, some organisations could not be here. But their contribution was also important. May I invite the representatives to stand up. Let us show them our appreciation for a job well done.

People Bonding

A crisis reveals the true character of a people. Singaporeans passed the SARS test with distinction.

We were at war with SARS. To overcome the enemy, we knew we had to work together as a nation. And we did. We closed ranks and stood with each other. We helped each other without regard for race, religion or social position.

During this crisis, I saw a national spirit I have never seen before. Our country bonded with stout hearts, tenacity and determination. SARS did not break Singapore. It made us stronger.

I am very proud of our solidarity.


Challenging Times Ahead

SARS Threat Not Over

Our last case of SARS was three months ago. But the threat is not over for Singapore. Experts have warned that the virus may make a comeback when winter arrives. We hope they are wrong, but we must remain vigilant. Do not throw away your thermometer.

Terrorism: Still Lurking

SARS is not the only threat to Singapore. We are also worried about terrorism.

Two weeks ago, Jemaah Islamiyah (JI) terrorists exploded a car bomb outside the Marriott Hotel in Jakarta. Many people died. Many more were injured, including Singaporeans. Our Embassy in Jakarta is only a 10-minute walk from the hotel. When the bomb went off, our Embassy staff heard a loud bang, and the Embassy windows shook.

So you see, the JI terrorists remain a threat, despite the crackdown by regional authorities. Their support infrastructure is largely intact. Hambali has now been caught, but several other leaders are still out there, planning further terrorist attacks.

Singapore is a prime target for the terrorists. We provided witnesses to help the court case against JI's spiritual leader, Abu Bakar Bashir. Moreover, we were the ones who exposed the JI terrorist network. We must never let our guard down.

No country is safe from terrorism, not Singapore, not even Saudi Arabia. In May, terrorists launched suicide attacks in the Saudi capital, killing many people. Now, the Saudi government has uncovered many terrorist cells in the country.

Experts have stressed that the fight against terrorism will take a long time. This is because we are not dealing with a single organisation with a central command. If we were, we could destroy it. But here, we are dealing with an ideological movement, a movement that has many sympathisers around the world.

It will take some time to defeat the terrorists. As a researcher on terrorism put it in a CNN interview,

"For every single terrorist captured or killed, there are another five coming along on the assembly line. There is an endless supply."

This threat of terrorism will affect the region�s economies, including Singapore. Companies may worry about the security of their investments, and tourists may stay away.


Whither the Singapore Dream?

No wonder young people fear that this is the end of the Singapore Dream. We have suffered one setback after another in the last few years.

Ng Boon Yian, a young journalist with TODAY, wrote,

"The skies are airbrushed a gloomy grey. People are not placing any bets on their future."

Laurel Teo, another young journalist, from The Straits Times, lamented,

"The pay has been lousy since we started work. It doesn't look like improving, and we'll have to slog doubly hard just to keep our jobs. Now, we may never be able to make long-term plans such as buying a car or a bigger home � This � is tantamount to the shattering of the Singapore Dream."

I met Boon Yian and Laurel over dinner with some other young journalists. Both ladies are under 30. Laurel is a Singapore Press Holdings scholar. She attended school in RGS and RJC and went on to Yale University in the US. Boon Yian will soon leave on a postgraduate scholarship for Johns Hopkins University in the US.

Why are these two bright, young girls with promising futures not placing any bets on Singapore?

Maybe they were reflecting the low morale and high expectations of their generation. Our recent setbacks were probably the first serious ones they have encountered in their young lives.

To these young Singaporeans, I say, no, the Singapore Dream is not shattered. True, the sky is grey now. But grey clouds do not stay forever. After the rain, they give way to clear, blue skies. If we use this grey period to remake Singapore, and trim ourselves to become more nimble, we will be ready to grow again when the sun comes out.

All cities and countries evolve, Singapore too. They grow and thrive, or wither and vanish, just like individual species of animals. China was a great nation for two thousand years. Then it went into decline. Now, it is rising again. Great Britain ruled history's biggest empire for several centuries. Now, Britain is not a super-power.

Take also the example of the Pyramids. Before the Suez Canal reopened in 1975, I went to Egypt to look for shipping agents for NOL. I took the opportunity to see the Pyramids. I thought to myself: what magnificent monuments from a glorious past! Egypt had seen better days.

There are many reasons why civilisations rise and fall, and why cities wax and wane. The biggest factor is their ability to adjust and adapt to their changing environment.

Young Singaporeans are Adaptable

I believe that young Singaporeans will adapt to the changing environment.

The Straits Times columnist, Chua Lee Hoong, told me that the shampoo girls at her hairdresser used to be Malaysians. When she was there recently, Singaporeans had taken over. She noticed too, that the waiters at a restaurant that she frequents are now largely Singaporeans. Before, they were Filipinos. A Channel News Asia staff told me that her daughter and her friends, who were about to graduate, were realistic about jobs. In the past, they would have been like other university graduates: choosy. Now, any job would do.

This is good. We must be practical, as practical as Teochew fishermen. They would say, "Kah tak hoi, chew liak her. Hoi zao, her liu, aiyah, bor her hay ah hor." "Catch crabs with your feet, and fish with your hands. But if the crabs run away and the fish slip through your hands, prawns will do just fine."

Some graduates have also taken to roasting gao luk, or chestnuts, for a living. Others are running their own porridge stall. I commend their attitude. They did not sit around and moan and groan. They went out and made a living for themselves.

To Singaporeans who say this is a loss of face, I offer this Hokkien advice, "Lao quee buay xi, bo quee jia eh xi": "Loss of face will not kill you. You will die only if you lose your breath."

Will our graduate hawkers be stuck forever in their present positions? No. I believe they will become successful entrepreneurs one day.

The fact is, there is no fairy godmother who will wave her magic wand to make us rich. The Government can create the conditions for the country to thrive. But the people will have to carve out their future themselves. We should seize even the tiniest opportunity to make a living. Even if it means squeezing water out of rock, we should find a way.

Margaret Thatcher thinks this is what we have done. In her book, "Statecraft - Strategies for a Changing World", she described Singapore as a "man-made miracle". She explained:

"� this little city-state now has everything precisely because it began with next to nothing. Only the skill, creativity and enterprise of men could make it what it has become. It is when talented people� find themselves having to rely on their brains rather than their muscles, that societies progress."

Resourceful Singaporeans

I am confident that if we apply our brains, Singaporeans will be able to adapt this man-made miracle to the changing environment. Our people have a track record of being resourceful.

For instance, we have no oilfields, but Singapore is the world's 3rd largest oil refining centre. We have a small domestic telecoms market, but our telecoms companies have expanded overseas. SingTel is now a major player in Australia. ST Telemedia is bidding to buy over Global Crossing, an American telecoms company.

Even for ornamental fish, we have 25 percent of the world market! When I was young, I used to catch guppies in the longkang. Now, our fish breeders have turned this longkang fish into million-dollar exports! That�s resourcefulness.

Of course, there are also Singaporeans who are resourceful for the wrong reasons. During the SARS outbreak, on several occasions, when our police officers were about to arrest criminals, the criminals started coughing. You know coughing is a symptom of SARS. The criminals thought they could frighten away the police officers with their coughing!

But our police officers were not fooled. They caught the criminals, sent them to Tan Tock Seng, then to jail!

Let me come back to a positive example of resourcefulness: Jack Neo. Our movie making industry suffers handicaps, including the small domestic market and the lack of acting talent. But still, Jack Neo and a few other Singaporeans have lifted the standards of the industry several notches.

I went to see Jack Neo's latest movie, "Homerun", last Sunday. It moved me, because I had lived through the scenes in the movie. In 1961, after my A-levels, I taught for a few months in Kay Wah Chinese Primary School near Thong Hoe Village in Lim Chu Kang. It was a rural school. The students were poor. I saw many toes peeping out from worn-out shoes.

The movie brought my mind back to our past. But I wondered whether our children could appreciate the deeper symbolism of the torn and tattered shoes. Our villages have given way to HDB estates, our cheap shoes to branded shoes.

Last year, I praised Jack for his movies "Money No Enough" and "I Not Stupid". I told my wife, who felt he deserved a National Day award, that two good movies were not enough. Well, Jack's latest movie has become a box office hit. Looks like I may have to revisit the matter of an award for him!

International Confidence in Singapore

So you see, we have many strengths and skills - an indomitable spirit, strong national cohesion, an adaptable and resourceful people. Many international analysts and companies have noted our strengths. And the way we handled SARS has increased their confidence in Singapore.

A global financial ratings agency, Fitch, gave Singapore its highest credit rating in May. Fitch upgraded Singapore because of our proven ability to cope with economic shocks and our success in containing the SARS outbreak.

A market manager of Caterpillar Asia said on BBC that,

"� the way the Singapore authorities dealt with the outbreak is well-noted and, therefore, Singapore is safe, and a place to invest, to live and work. That reputation has grown."

The CEO of an international management consultant company wrote to EDB,

"� I would like to commend (you) on how well your country is handling (SARS)� For me, this is again a sign of Singapore's global competitiveness, as no other country so severely hit has reacted so responsibly and with such effectiveness as Singapore. As we walk into an uncertain global future, these are the qualities a country needs to sustain itself."

These compliments, plus many others worldwide, are worth millions in paid advertisements.

Strengthening Cost Competitiveness

Let us build on this reputation to bring in more investments, and create new jobs.

Our Costs are Much Higher

To succeed on a sustained basis, we must adapt to the reality of stronger competition. Let me explain.

Our standard of living and our business costs are reaching developed country levels. This is happening at a time when many lower-cost competitors are emerging. They are upgrading themselves, and taking us on in several sectors.

In the 70s, 80s and 90s, we learnt to do what the US, Japan and Europe had been doing, equally well but at lower cost. So we grew our economy and improved our lives. Now, China, India and other countries are following the same strategy. They can produce the same things we make, but cheaper. For every one manufacturing worker hired in Singapore, a company can hire 3 in Malaysia, 8 in Thailand, 13 in China or 18 in India.

Of course, our wages do not have to be as low as in China and India. As long as we are more productive, we can earn more. Also, Singapore offers a better environment for doing business than most countries. Our pro-business policies, the cohesion of our society, the discipline of our workforce and the quality of the Government are real advantages. They allow our workers to command a premium over workers elsewhere.

But we have to work hard to maintain the premium, and the premium cannot be too large. Our competitors are rapidly catching up in infrastructure and skills.

Even our advantage in English is being reduced. Other countries now realise the economic value of English. Take South Korea. Not only do parents there want their children to speak fluent English, they want them to speak without a Korean accent. But you know, some Koreans cannot pronounce words beginning with the letter "r", like many Singaporeans. So, "rubber band" becomes "lubber band". I have read that for this reason, some Korean parents drag their children for a tongue operation. The operation makes the tongue longer and more flexible. This is supposed to help the children roll their tongues, and pronounce words starting with "r". I suppose the parents are afraid that their children, when they grow up, may invite foreign business partners to eat kimchi with "lice"!

Our Speak Good English people want me to send Phua Chu Kang for that tongue operation. Then he will stop telling people to "Use Your Blain"!

Migration of White-Collar Jobs

It is not just Singapore wages and jobs that are under pressure. Millions of workers from lower-cost economies everywhere are competing for a share of the global action. Workers in developed countries everywhere will be affected.

This has been happening to blue-collar workers for many years. But increasingly, white-collar workers are feeling the heat. For example, many white-collar jobs in America are migrating to lower-cost economies. Today in the US, 20% of the long-term unemployed are managers, executives and professionals.

And the jobs which are migrating to developing countries are becoming more sophisticated. Microsoft is investing US$400 million in India. These are for highly skilled activities, not routine work.

Financial institutions are also outsourcing their back-room work. In the next five years, two million jobs in financial services will move from developed countries to emerging economies.

Even architectural tasks such as the drawing of blueprints are shifting to lower cost centres. BusinessWeek magazine reported that in the design of a petrochemical plant by a US company, Filipino engineers collaborate with US and British engineers. The Filipinos earn less than US$3,000 a year; the US and British engineers earn up to US$90,000.

In Singapore, we are just beginning to see the loss of white-collar jobs to other countries. I believe the full impact will come faster than many people think.

Keeping Jobs Here

Indeed, the head of IBM (Asia Pacific) cautioned Lim Swee Say that no country should assume that it can hold on to its current share of the global pie. He said that MNCs were "deconstructing" their supply chains. "Deconstructing" means re-distributing their production and jobs across the globe, to wherever they can be done most cheaply.

For example, just because a bank is operating in Singapore doesn�t mean that its computer systems need to be built here. The bank does not need to assess its loans here, or process its credit card bills here. Each task may be done in a different country, wherever it is cheapest or most efficient.

The IBM man warned that Singapore should watch our cost structure carefully, if we want to remain part of the global production chain.

We should take his advice seriously. We must keep the cost of doing business in Singapore competitive. We must wake up to the fact that the world has changed, and there are many lower-cost players around. Do you remember the fairy tale, Rip van Winkle? Rip van Winkle fell asleep and woke up only after twenty summers, to find that the world had passed him by. We must not be like Rip van Winkle. If we slumber for twenty summers, we will wake up so much glummer. For our companies have flown, and our jobs all blown!

How can we keep our costs down? First, make our workers more productive. This way, companies can pay them well, and yet produce goods here competitively. Second, keep taxes and Government fees low. Third, keep our rents and land costs competitive.

All those we have done. This leaves wages and the CPF.

Wage Reform

Our wages are high, compared to our competitors. But the problem is not just the absolute level of wages. It is also the rigidity in our wage system. Too large a part of our wages is fixed. Too little goes into variable bonuses. Also, our wages are tied too closely to seniority. Older workers are paid much more than younger ones for doing the same work. As a result, an established company finds itself carrying higher costs than a younger company.

In contrast, many American companies reward workers based on performance. They hire and fire according to the needs of the company. They are totally unsentimental about it.

Personally, I find this system ruthless. Workers are human beings. They have feelings and families. They are not machines or robots. But I recognise that it is this ruthless pursuit of productivity and profit that makes American corporations unbeatable, when pitted against Japanese companies with lifetime employment, or European companies bound by rigid labour laws.

We need to modify our wage model, and remedy its faults. If a company cannot restructure its wages when business is tough and it has to cut costs, more workers will lose their jobs. And the older ones will be the first to go.

We need not follow the US system all the way. We should continue rewarding seniority and loyalty. But we should not do it excessively, and we should build up a larger proportion of performance-linked pay. With a more flexible wage system, when demand and competition change, companies can respond quickly. Jobs will be saved.

PSA has carried out such wage reforms over the last few months. This is to the enormous credit of its management, unions, and industrial relations officers. It has been a very difficult and painful adjustment. There has been a human cost. But PSA workers know they have no choice. Either PSA adapts, or it is out of business. The jobs of all its workers are at risk.

In the civil service too, salaries are being reviewed. They will be trimmed where they have gone out of line with the private sector.

Keeping Older Workers Employed

Lim Boon Heng wants to revamp our seniority-based wage system to help older workers keep their jobs. I fully support him. Boon Heng has spent 22 years with NTUC. He has seen how difficult it is for older workers who are retrenched to get re-employed. He has seen companies axing older workers first, whenever they have to cut costs.

But it will take more than flexible wages to keep older workers employed. It also requires employers to keep an open mind. Many older workers have told me that they are willing to take lower pay. But companies do not give them a second look.

The employers explain that if they pay older workers less, the workers will not be happy. They think this will affect the workers' morale and productivity, and they will not stay around long. Once the economy picks up, they will make a beeline for a higher-paying job. So the companies prefer to hire younger workers.

I am deeply concerned about the predicament of older workers. If they insist on their previous wages, you say they are too expensive. If they accept a pay cut, you doubt whether they will stay. This gives them no chance at all!

I urge employers: do not pass over workers simply because they are above 45. If older workers are prepared to adjust, give them a fair chance to prove themselves.

CPF Reform

Wage reforms alone are not enough to ensure our long-term competitiveness. CPF forms a large part of wage cost. Therefore, we must also make changes to the CPF system.

The CPF has served us well. Its basic philosophy is to require workers to save for old age. Later, we added other social objectives like saving for housing and medical expenses.

These objectives remain valid today. In fact, Singaporeans now need more in their old age. They are living longer, and medical costs are going up. And with smaller families, they are less able to count on support from their children.

From this social perspective, the higher the CPF contribution rate, the better.

But from the viewpoint of keeping our economy competitive, the CPF should be as light a burden as possible. High CPF contributions increase employers' wage costs. To them, the CPF is a statutory burden, unrelated to the performance of the company or the worker.

We maintained a CPF rate of 40 percent for a long time, when incomes were rising rapidly. But looking ahead, Singapore's growth rates will be lower, while competition will be keener. We need to strike a better balance between economic competitiveness and social objectives.

That is why the Economic Review Committee recommended changes to the CPF scheme last year. We trimmed the use of CPF for housing. We are lowering the CPF rate for older workers. And we are reducing the CPF salary ceiling from $6,000 to $5,000.

But these changes do not go far enough. We have to make further changes in four areas.

Contribution Rates

First, CPF contribution rates.

Our CPF rate is now 36 percent. The Government had earlier committed to restore it to 40 percent when economic conditions permit. I have reluctantly come to the conclusion that this commitment is no longer realistic or wise. In today's competitive environment, it would price us right out of the market.

I propose, therefore, that we give up the 40 percent target, so that we can save jobs. We should find a lower contribution rate for the long-term, one which still gives the majority of Singaporeans enough CPF to pay for housing, healthcare and retirement expenses.

It is hard to settle on a single number as the long-term CPF rate. Economic conditions nowadays are too unpredictable. I would, therefore, want the option of cutting CPF in bad years, and conversely, putting more into the CPF in good years. This will give us greater room to manoeuvre, to respond to the competitive environment. So instead of trying to decide on a fixed CPF rate, I am thinking of setting a range of rates.

For older workers, the range of rates will have to be lower than for younger workers. This is a principle that has already been accepted by the Economic Review Committee. It is to help older workers stay employed.

And while we think about a long-term target for the CPF, we must also ask ourselves: in the immediate future, is our current CPF rate of 36 percent appropriate? If not, what should it be lowered to?

I think we should be prepared to go down to as low as 30 percent, if necessary.

Minimum Sum

Second, as we lower the CPF rate, we have to ensure that Singaporeans still put aside enough for their retirement. Today, Singaporeans can expect to live till about 80.

In this context, the current Minimum Sum of $80,000 is not very much. You may think it is a tidy sum of money. However, most CPF members have pledged their property to make up half the amount. So they only have $40,000 in cash in the Minimum Sum. $40,000 can give you only $252 a month, from retirement at 62 until you are 80 years old.

$252 is a small fraction of the last drawn pay of most workers. We need to increase the Minimum Sum.

There is also the Medisave Minimum Sum, which is $25,000. Right now, even though we call it a Medisave Minimum Sum, we do not actually make people top it up to $25,000 before they withdraw their CPF savings at 55. We need to change this too.

50% Withdrawal at Age 55

Third, we have to tighten the rules for CPF withdrawal at age 55.

Currently, at age 55, Singaporeans can withdraw at least half their CPF money1, even if they have less than the Minimum Sum in their balances. This leaves them very little in their CPF accounts to meet their retirement needs. If we lower the CPF rate, that will leave them even less money.

We should, therefore, phase out the 50 percent withdrawal rule. Eventually, CPF members who reach 55 should keep at least the Minimum Sum and Medisave Minimum Sum in their CPF accounts, before they withdraw any CPF balances.

But we can only implement this gradually over several years. Many Singaporeans who are approaching 55 would have made plans to use their CPF money. We should not disrupt their plans.

Salary Ceiling

Fourth, the CPF salary ceiling. The CPF scheme is meant to meet the retirement needs of the 10th to 80th percentiles of the population. The top 20 percent of earners should be able to plan and provide for themselves. If they want to save more for their retirement, they should do so on their own, and not through the compulsory CPF scheme.

The CPF salary ceiling is now $6,000, and we are lowering it to $5,000 by January 2005. In other words, any income above $5,000 will not be subject to CPF contribution. But $5,000 is still way above the 80th percentile income, which is $3,700.

To focus the coverage of the CPF on our target group, we should further lower the salary ceiling, to below $5,000.

Impact of CPF Changes

I am aware that the CPF changes we are thinking of may be hard to swallow. For some of you, a cut in the CPF rate may be the difference between meeting and failing on your mortgage payments. Others may have been looking forward to a big holiday when you withdraw your CPF money. I know that you are also disappointed that the Government might not restore the CPF rate to 40 percent, as we had earlier intended.

I am afraid that we have to consider these severe measures. Our choices are: adjust, or lose more jobs. For me, the choice is clear. I have looked carefully at the situation and all the options. I am convinced that we have to adjust and reform our CPF system. And the sooner we do it, the better. Otherwise, we will lose our competitiveness and many jobs, especially jobs held by older and lower skilled Singaporeans. We will also store up problems for the future. Singaporeans will retire and find that they do not have enough savings for their old age.

But if we make these tough choices now, we will put right a major weakness in our CPF system. We also signal to investors that we are realistic and long-term in our thinking. We show that we are willing to bring down our costs, and are actually doing so. This will help us attract more investments and more jobs.

Indeed, our key problem in the next few years will be the loss of jobs to lower-cost countries � blue collar jobs, white collar jobs, skilled jobs. China is "the factory of the world". Manufacturing? The Chinese can make many products, at lower cost. India is gaining a reputation as "the world's back office". IT jobs? Indians can do them, at lower cost. Where does that leave us?

To replace the jobs we are losing, we are creating new jobs in new areas. Many Singaporeans will be able to do these jobs, and earn good pay, especially those graduating now from our ITEs, polytechnics and universities. But other Singaporeans, especially older Singaporeans, lack the necessary skills. So we have to trim the CPF rate to keep costs competitive, and keep some older jobs here.

Personally, restructuring the CPF will be one of the more difficult decisions I have to make. But it would be irresponsible of me to duck it and leave the problem to my successor. It is not in my character to shirk responsibility. It is not the character of the PAP Government. The Ministers and I bear the burden of trust you have put on our shoulders, by electing us to office. We will have to do what is necessary for the country's future, no matter how unpleasant.

I am convinced that it is better to take the bitter medicine now, than to let our sickness get worse. We will draw up special measures to ease your pain, and help you adjust to the changes. In the long run, I believe that the upside of the changes � lower business cost, a more competitive economy, and less unemployment � will more than make up for the present pain.

The changes are crucial for us to beat a path out of the current slump, and sustain our growth later. I do not recommend putting off the changes.

I will present the proposed CPF changes in Parliament in the next few weeks.

Increasing Self-Reliance

I know that some of you are getting breathless trying to keep up with the changes around you. You may even be confused. But unfortunately, there is no emergency button that we can press, to stop the world from changing. We will have to adjust to its pace. Otherwise, we will fall by the wayside.

Adapting to the rapid changes requires a mindset change. We can no longer expect life to progress steadily upwards on an escalator. Instead, we must be prepared for life on a roller coaster. Also, our mindset change must go beyond the economy, to other aspects of our lives.

Above all, we must be more self-reliant. The Government will create the framework and the environment for you to thrive. But it should not and cannot micro-manage your life to guarantee you your job and your wealth. You must create and seize the opportunities yourselves. To become a vibrant society with a strong entrepreneurial streak, the Government will have to cut loose the apron strings.

The irony is, western journalists decry Singapore as a nanny state. But many Singaporeans want it that way. They are worried that we are shifting the burden of responsibility and decision-making back to them.

But to survive the rough and tumble of our uncertain world, Singaporeans will have to make more decisions for themselves. They will have to do more for themselves. And they must take responsibility for their actions and decisions.

We have been making changes in this direction over recent years. We are allowing greater risk-taking, experimentation, diversity, choices and decision-making.

Three weeks ago, we lifted the restrictions against bar-top dancing. We also gave the green light to a New Zealand company to introduce reverse bungee jumping here.

Now, when I allowed bungee jumping and bar-top dancing, it is not because I encourage these activities. You will never find me dangling from a bungee cord, or dancing on a bar-top. But you may find me watching a bungee jump, and, I don't know, perhaps one day, I may go and see why dancing on a bar-top gets some people all excited. What I had done was to signal a shift in our mindset to being more relaxed and open-minded, and less strait-laced and Victorian. I want Singaporeans to be self-reliant and robust. So I have to let you decide for yourselves the level of excitement and risk you want.

As for my comments on gays, they do not signal any change in policy that would erode the moral standards of Singapore, or our family values. In every society, there are gay people. We should accept those in our midst as fellow human beings, and as fellow Singaporeans. If the public sector refuses to employ gays, the private sector might also refuse. But gays too, need to make a living.

That said, let me stress that I do not encourage or endorse a gay lifestyle. Singapore is still a traditional and conservative Asian society. Gays must know that the more they lobby for public space, the bigger the backlash they will provoke from the conservative mainstream. Their public space may then be reduced.

I am glad that conservative Singaporeans and religious leaders have made known their views on the matter, clearly but responsibly. I hope we will now move on and focus on more urgent challenges.

I think football fans will welcome my next example of mindset shift. We will be easing the rules on the use of the National Flag and National Anthem. Our present guidelines spell out exactly when and where you can use them. This is very restrictive. Our Flag and Anthem are powerful, rallying symbols for Singaporeans. We will now allow the Flag to be flown, and the Anthem to be sung, on non-official occasions as well, such as football matches. In future, we will specify only the conditions under which the Flag and Anthem cannot be used.

This relaxation is not earth-shaking in itself. But it signals another mindset shift. In the past, we operated largely on the principle that "everything is not allowed unless we say it is". Now, we will give greater room for experimentation. Increasingly, it will be "everything is allowed unless we say it is not" � well, almost everything!

HOPE Programme

Now, self-reliance is equally important for less able Singaporeans. But we may have to give them a leg up, to help them become self-reliant. You see, many poorly educated Singaporeans have fallen into a poverty trap. They tend to have more children than they can afford. And because they cannot provide enough for each child, the next generation remains poor. MPs see many such cases turning up for financial help.

We have to counsel these Singaporeans to keep their families small, and give them the incentives to do so. Then they and their children will stand a much better chance of staying above the poverty line. That is why I am introducing a new programme called HOPE. HOPE stands for Home Ownership Plus Education. It will help these families build up their self-reliance and break out of the poverty trap. HOPE will replace the current Small Families Improvement Scheme.

HOPE will help beneficiaries pay for their HDB flats, their children's education, and skills training. The mothers will be encouraged to work, and stand on their own feet.

In total, families on this programme will each receive $100,000 in benefits.

Political Succession

The last 13 years have passed very quickly for me. I have had more than my fair share of excitement. A few were unwelcome, like SARS, but mostly, it has been good.

When I took over as Prime Minister, I pledged to keep Singapore going.

I have tried to do so by giving our economy more buzz. From 1991 until the Asian financial crisis in 1997, we grew by 9 percent annually. From 1998 to last year, our growth averaged 3 percent. Before, we had electronics as our mainstay. Now, we are also into IT, biotechnology, life sciences, chemicals, and services like finance, education and medicine.

I have tried to make ours a kinder society. We have Edusave, Medifund, Utilities-Save, CPF Top-Ups and New Singapore Shares. We have a strong volunteer movement to help the less fortunate. We are more forgiving of people who tried but failed. We now encourage them to try again.

I have also put in place a more consultative style of government, and opened up more political and civic space for Singaporeans. I believe that Singaporeans cannot be rooted to Singapore with just a physical stake in the country. They must have an emotional stake as well. This comes with active participation in the development of their community. Then they are less likely to quit Singapore. And even if they emigrate, they will not quit emotionally. They will miss their Singapore.

I could not have kept Singapore going on my own. There is a Malay saying, "Bukit sama didaki, lurah sama dituruni". It means walking the hills and valleys together. You have done that with me. Without your strong support, we would not have achieved our goals for Singapore.

Fortunately too, I have a good team of Ministers and supportive MPs. There are many of them to whom I should give credit. But I owe most to my older core team of Tony Tan, Jayakumar, Wong Kan Seng and Lee Hsien Loong.

Tony returned to the Cabinet in 1995 when both my DPMs, Ong Teng Cheong and Hsien Loong, were diagnosed with cancer. Tony could have stayed on in his comfortable nest in OCBC. But he felt an obligation to help me out. He was one of the Ministers who elected me to be their leader after SM. I deeply appreciate his sacrifice for me. It was also a sacrifice for Singapore.

Tony is thorough. He takes the time to mull over issues, looking at them from all angles. But once he makes up his mind, he will not waver. He has made a huge contribution to university education. And with him as Defence Minister, I slept soundly every night. With him as Co-ordinating Minister for Security and Defence, I can continue to sleep soundly.

Jayakumar is an outstanding Foreign Minister, always advancing and protecting our interests. He has made many friends for Singapore. He oversaw our two years in the UN Security Council. During that time, his adept handling of delicate issues involving the Middle East earned Singapore the respect of many countries, big and small. Jayakumar does not smile much, but he is warm inside. He is a dependable colleague, and friend.

Kan Seng is a very effective Minister. Give him the most difficult operational task and he will sink his teeth into it, like a bulldog. As chairman of the Ministerial SARS Committee, he did an excellent job. And without him, this place would be full of illegal immigrants, crawling with criminals, and torn by terrorists. He catches them all.

Looking to the future, my plan for political succession is on track. The new team is taking shape.

After the last general election, we found several MPs with the potential to be Ministers. We threw seven of them into the deep end of the swimming pool. None of them drowned. They learnt to swim very quickly. Boon Wan has a Buddhist calm about him. He has an all-round grasp of the issues, and conveys his ideas clearly and simply. Initially, I was worried that Tharman might be too professorial, and talk over the people's heads. But he has shown that he can connect with the ground. As for Eng Hen, he has demonstrated capabilities beyond medicine and mastectomies. For lack of posts, I could not try out more of the junior office-holders as Acting Ministers.

The junior members of the new team will learn from the senior members. There is, for example, George Yeo. As Minister for Information and the Arts, he gave Singaporeans two unique buildings which you either love or hate. Some think the multi-coloured MITA building along Hill Street is avant-garde; others think it is obiang. Some think the Esplanade is an outstanding piece of architecture; others think it stinks like a durian!

But more seriously, George has transformed our arts scene, and put it on the world map. In MTI, he has enlarged Singapore's economic space considerably through several free trade agreements. George thinks out of the box. He is an invaluable member of the team.

Teo Chee Hean has a deep understanding of the complex issues in education. And he has strong convictions and persuasive powers. Otherwise, he would not have been able to carry through his wide-sweeping changes to our education system. Ideally, Chee Hean should continue in Education for a few more years to see through his ideas. But I need a strong and reliable Minister in Defence to succeed Tony. Chee Hean is someone who can shoulder heavy responsibilities.

As for the new team leader, I have taken quiet soundings from Ministers and MPs on whom they would choose. The clear consensus is Hsien Loong. He is also my choice.

No one doubts Loong�s competence, his leadership qualities and his commitment to Singapore. Foreign leaders and investors respect him. This is important for Singapore.

But I know that some Singaporeans are uncomfortable with Loong's leadership style. Loong's public persona is that of a no-nonsense, uncompromising and tough Minister. Singaporeans would like Loong to be more approachable. They have got used to my gentler style.

But it is not fair to expect him to be like me, just as it was not fair to expect me to be like SM. In 1990, before I became Prime Minister, SM advised me to be tough and be feared. But I thought it best to be myself, and not try to act tough.

In 1988 during a talk to NUS students, SM said I was too "wooden", and advised me to see a psychiatrist, to loosen up. I learnt to loosen up, without seeing a psychiatrist.

My point is, I found my own way to communicate with you, the people. Likewise, I believe that Loong will find his own way to establish rapport with you. He is not me, and he is not his father.

Loong is aware of the people's perception of him. We have discussed it frankly among the Ministers. I have told Loong that he has to let his softer side show.

Already, I see Loong becoming more relaxed in public. In a TV discussion with junior college students last year, he was open, and willing to give and take good arguments, often with good humour. That is the Loong the MPs and Ministers know.

I hear too, that the female students loved the red T-shirt he wore at the discussion. They think he is quite hip after all! Maybe his wife, Ho Ching, should buy Loong more red shirts!

You may also have heard this old story about Loong. Back in 1990, Loong had a quarrel with Richard Hu. Dhanabalan sided with Richard. Loong lost his temper, reached across the table, and gave Dhanabalan a tight slap! The whole Cabinet was thrown into commotion. I then forced Loong to apologise.

I must be suffering from amnesia. I just cannot remember this incident!

Now you know how creative Singaporeans are!

Many Singaporeans have urged me to stay on as Prime Minister. Let me explain why I think it is in Singapore's interest for me to make way before the next general election, rather than after.

First, from my experience, it takes a few years, and a couple of crises, for a leader to win the trust and confidence of the people and to bond with them. Having secured that trust, you want him to stay around for several more years.

Second, given the demands of the job, it is better that the Prime Minister be young, vigorous and in tune with the times.

Therefore, you want someone to serve as Prime Minister from his late 40s to his mid 60s. Loong is already 51. I should hand him the leadership while he is still young and vigorous. I myself became Prime Minister at the age of 49.

I am bringing up the subject of political succession now, to prepare you for change. Ideally, I would like to give my successor at least two years to establish himself as Prime Minister before he fights the next general election.

But I am not stepping down yet. My immediate priority is to get Singapore out of the economic gloom.


Let me conclude.

I know that some of you are anxious, because of the CPF changes. They feel like another heavy blow, coming on top of many others. You are worried about mortgage payments and making ends meet. The future seems terribly uncertain.

I understand your worries. It is not going to be an easy adjustment. But I will help you, by putting in place lifelines and safety nets to cover the essentials. I assure you, none of you will be without a roof because of the CPF changes. None of you will be deprived of medical care, or have to forego your education.

Yes, the wage and CPF changes will cause pain. But Singapore needs to adjust and adapt. Our economy is in transition; we are passing through very harsh terrain. If we do nothing, if we simply stay put, you can be sure that our food and water will run out. So it is better for us to take calculated risks to move out of this gloomy valley, into the sunny highlands.

We must never despair. Win or lose, no one can tell in advance. But if we do not have fighting spirit, we are bound to lose. No army can win a war if its morale is down.

When we were cast out of Malaysia and deprived of a hinterland, we did not despair. When British troops withdrew in 1971, leaving us vulnerable, we did not despair. When the Asian financial storm tore through the region, we did not despair. When SARS struck down Singapore lives one by one, we did not despair. Every single time, we steeled ourselves, faced our problems head-on, and came up with ideas and solutions.

And look where we are today. In a mere 38 years, we have transformed a small, unpromising island into a vibrant city-state with a first world standard of living.

Those of us who struggled to build up Singapore from our poor beginning will never give up on Singapore. Out of nothing, we have created a miracle. Out of a barren piece of land, we have created a thriving global city. We will never let Singapore return to nothing.

We have not come this far to falter now. The only thing that can stop us from achieving our vision is a weak state of mind. Do you believe we can do it? If you say "no", we will not make it. But if you say "yes", we will overcome. We have done it before, and we will do it again.

The journey may not always be smooth. We will come across many gullies and boulders blocking our way. And we may slip and fall from time to time. But your leaders and guides are experienced. They have sound judgment, strong hands and calm nerves. The people have been tested, and have proven true. So as we have always done, when we fall, we will pick ourselves up, brush off the sand and dirt, and climb again.

And we will reach our destination.

My destination for Singapore is a country full of activity, where new ideas are born every day, and long-held dreams are fulfilled. It will be a safe and warm home to raise our children. It will be a place where Singaporeans can always find comfort and encouragement. It will be diverse, with Singaporeans and foreign friends, of different races, religions, cultures, creeds, living, working, playing together. It will be a fascinating city, competitive yet compassionate, busy and yet with time to enjoy friendships and recreation. It will be a nation overflowing with laughter, confidence, life.

You have walked many hills and valleys with me. My fellow Singaporeans, my heart is always with you.

Good night.


1 50% of the combined balances of their Ordinary and Special Accounts, plus any balance over and above the Minimum Sum. However, CPF members with $5,000 or less can withdraw all balances, while members with between $5,000 and $10,000 can withdraw at least $5,000.