There are no new arguments for the salary increases. They are obvious and they have been debated thoroughly, but it is a popular issue which hits the popular imagination and it is not the norm in other countries to pay the market rate for the job. We have decided to do this and we know, I know, and the Prime Minister knows that wherever we go, we are greatly envied because other countries would like to do likewise. They just don't have the political strength.

The events of the five years since the last debate on ministerial salaries have shown that determining it by a formula is a practical method. Otherwise in a fast-changing globalised economy we would be repeatedly debating the need for salary revisions. Instead we are fine-tuning the formula from the average of the top four earners to the top eight, in six professions. There may be further fine-tuning down the road but there has to be a formula which is based on the market or we run the risk of the system that we have set out running askew, not immediately but inevitably.

I have grappled with this problem for over 30 years. I had argued this question of ministerial salaries when I was in the opposition in 1955/56, ie, 45 years ago. I urged the Chief Minister of the time, David Marshall to be realistic. His monthly salary was then a princely sum of $3,500 when as a leading criminal lawyer he was making $10,000 - $20,000. I recommended a realistic pay, appropriate to his earnings. But he did not have the political strength to do this and left it at $3,500. So it remained until I developed sufficient political standing to be able to tackle the question and raise ministerial salaries in the 1970s when the economy had taken off.

Allow me to recount briefly how we managed in the last 40 years since 1959. As I have said, the first cabinet consisted of men who had been drawn together by the forces of history. We were young men in our 30s and early 40s, who had been through the sufferings of the war and the Japanese Occupation. We were tempered by that experience to seek independence, strongly driven to change the nature of our society and our economy. My colleagues were outstanding men, a core group that stayed together from the 1950s to the 1980s, providing Singapore with 30 years of stability, solid growth and a transformed society.

But during that period, every few years I had to come to this House to revise their salaries to catch up with the fast growth economy and the ever higher salaries in the private sector. As we raced ahead and became part of the global economy, salaries of our top people were pulled up by those of their counterparts in the advanced countries. This trend is not likely to be reversed, unless we go into decline, in which case, the well-trained and highly skilled will leave, accelerating our fall.

So I advised, and persuaded the Prime Minister to take this formula of automatic adjustment to Parliament. The earnings of our top earners will continue to go up with the growth of our economy and so must ministerial salaries. This trend is strong: average of the top 24 in 6 professions in 1989 (based on the previous year's income data) was $1 million, in 1994 it rose to $1.4 million, increase of 33.3%, in 1999 $2.5 million, an increase of 76%. Had we not had this formula, the Prime Minister would be faced with the awful dilemma of taking the 1994 salary and saying, can we revise it by 76 per cent. Davinder Singh, K Shanmugam and Dr Michael Lim, as lawyers and doctors in the private sector, can confirm how much top lawyers and doctors' earnings in the private sector have gone up in the last five to 10 years.

Now, in tandem with ministerial salaries, and the ministers form the benchmark, are the salaries of those in the higher echelons in the public service -the CJ and judges, attorney-general, auditor-general, accountant-general, the permanent secretaries, and CEOs of statutory boards. They are absolutely crucial officers of the state. Without good men occupying these positions we would be unable to maintain our present standards.

When we took over in 1959 we inherited a Civil Service recruited by the British, with very few locals whom they picked from the best of a small pool of local talent. And it has been one unending process of improvisation and adjustment ever since. For years we could not get good lawyers to be judges because the disproportionate earnings in the private sector which they had to give up to become a judge made it unrealistic. Only after 1990, when we had made radical salary revisions, has there been a full panoply of High Court judges. And it's an unending struggle now between the private sector, which includes multinational legal corporations in Singapore and the Attorney-General's office and the legal service, to compete for top talent.

Let me now explain how we have done it in this chamber to self-renew MPs and ministers besides the Civil Service. We have to recruit at every election, able and younger people. And for ministers, I persuaded, and my colleagues too, able academics with PhDs and professionals to run as MPs, then appointed them as ministers. Many did not make it and the attrition rate was high. They were scholars with good minds, the ability to marshal facts and figures, and present them. But they did not have "judgement" - the ability to make the right decision on the basis of complex and incomplete data. You can't wait until you have all the facts and then decide. It's a moving situation. You have to decide where the trend is and what we should do. So I cast around with my colleagues and tried out successful men, never mind whether they had PhDs or not; had they succeeded in the real world? Men who had been successful in their professions and business and in their own fields. The results were better.

Some of my ministers were very good at judging people. Hon Sui Sen, a former permanent secretary and head of Economic Development Board, was one of our best civil servants. I persuaded him to become an MP and then finance minister. He recommended several, among them, people whom he had worked with: Goh Chok Tong, S Dhanabalan, Tony Tan. They were three heavyweight ministers. We didn't know that when we started. We recruited them in the 1970s but we knew them only in the 1980s. Each year we also selected 20 to 30 (later increased to 100 to 120) of our best students for scholarships to study in the best universities and bonded them to serve the state for 8 years. Parents were poorer then, and scholarships were few. So we had the pick of the crop. From that generation of the 1960s and 70s we have the present leaders of the civil service and the statutory boards, and quite a number of ministers.

But since the middle '80s, especially in the '90s, our economic conditions changed and social attitudes altered. Now scholarships are numerous and commonplace. A few hundreds are being given each year. The Straits Times publishes whole supplements devoted to scholarships on offer, describing and tabulating them in detail. Statutory boards, GLCs, Singapore's big four banks, and major companies, like NatSteel and even MNCs like Exxon Mobil, KPMG and AIA are giving scholarships. They are all chasing scarce talent. Moreover many parents now earn enough to send their children abroad to the best universities to do the subjects of their choice without having to sign a bond. This has changed the whole system of early recruitment and nurturing of the best for higher appointments. For the last few years, the government and statutory boards no longer have the pick of the crop. That means, 10, 15, 20 years down the road, we may not have the same quality of civil servants at the top echelons.

Hon Sui Sen recognised that changed circumstances had altered the values of our young. He persuaded me in the 1970s to abandon handcuffing officers in the government service by their pensions. We were losing too many good top officers, who gave up their pensions, attracted to lucrative careers in the private sector. He said, if you don't pay them pensions you can up their salary and compete. I was uneasy because we were departing from an age-old system. The British ran an empire for 200 years based on life-time employment in government service. Hon himself had spent his whole life in the civil service and only drew a modest pension. He told me: "Look at my pension." It was a pittance because inflation plus growth meant a pension was worth little. He convinced me that younger officers no longer considered their pensions a strong pull factor when deciding whether to stay or leave. They wanted to be paid their worth immediately, and go on CPF. After much reflection, I agreed to abandon pensions in favour of CPF. This led to the next change, to have salaries regularly adjusted to match their private sectors' counterparts or we would end up with only the second and third best. This is a continuous series of exercises.

In the old system, the British recruited straight from the universities. Whether one was a law graduate, doctor, accountant, surveyor, architect, all had similar salary scales. We inherited that. But it was unrelated to reality. Nobody could predict which profession would be in demand. Today it's law, tomorrow it could be something else. So we decided, as a result of abolishing pensions, we had to go with the rate for the market in that profession.

We are faced with multi-faceted problems because of social developments in Singapore and the world. The best are now recruited while they are still studying abroad by top MNCs also chasing talent and prepared to pay off their bonds. What's $300,000 when you can get a good mind that has already been proven. You can watch his school record, you can watch his college record, you can see his capabilities in argument, and presentation and you have a ready-made winner. Whether he's a big winner or a small winner doesn't matter, but you know this is first league.

The present team in government was selected and worked with the old guards before 1990. The selection started in the 1960s. It wasn't very successful because, as I had said, we didn't know how to spot who would make a good minister. So we chose people who sympathised with us, shared our views and had good minds. But they lacked the quality of making decisions, the right decisions. We started to succeed only in 1970s, after 10 years of error. And in 1972, I persuaded Ong Teng Cheong, then an architect to give up his lucrative practice as an architect, to join us. It took several years to wind up his practice first because he had commitments. Then came Goh Chok Tong, S Dhanabalan and Tony Tan. We were so short of ministers to hold heavy ministries that I persuaded two top civil servants - Howe Yoon Chong who was head of the civil service to become minister for defence, and Teh Cheang Wan, head of the HDB, to become minister for national development.

So it was an unending quest for the right man to put in the job. It takes years for a person to be tried and tested as a minister, and to develop the judgement and touch. Every cabinet has its core team and core of goal-shooters and goalkeepers. Not all 11 players have the same star quality. It is the prerogative of the Prime Minister to pick his men, and his responsibility to gel them into a team and get the team to deliver. It is impossible for the PM to pay each player as football clubs do, in accordance to their market price. I would have liked to pay the ministers the way football clubs pay their players. You know, when you have star player and you change clubs, hundreds of millions of pounds change hands. But could I do it? I would cause so much discomfiture, public discomfiture, for the other ministers who are not goal scorers that the team will soon be unable to function as a team.

So a certain balance must be kept. Solidarity of the team and recognition by the captain that he is a scorer and he is a first-class goalkeeper, somehow we have got to get them to share not only the glory but also the remuneration. My core members for 25 years were known to the public - Goh Keng Swee, S Rajaratnam, Hon Sui Sen, Lim Kim San. Prime Minister Goh’s core team must be obvious to all those who have watched how his government has performed, who has scored goals or prevented them from being shot into our goal. I leave it to you to judge. But the point is, the present cabinet members, were all recruited before 1990, including Lim Hng Kiang and Teo Chee Hean, who were selected before 1990 although they were elected in 1991 and 1992 respectively. Since then three have made it as ministers of state - Peter Chen, Lim Swee Say and David Lim. The last intake of MPs was the highest average we ever had but there's a difference between a good player and a Pele, and that's what we have to look for - a striker. If the present team does not get more good men to join them in the next election in 2002, there will be a hiatus a few years down the road.

Good government of Singapore did not happen naturally. It needed a thorough and meticulous process of selection and testing. Finally, I learnt how the big MNCs in America did it, using psychologists and psychiatrists to recruit and to test candidates before promotion. With the help of psychologists and psychiatrists we became better at assessing character and ability. We have assembled together the best persons available and willing. There is no alternative team or group of people outside the government, who can replace the present team. I say this without wanting to disparage those outside. There are some star players outside but you have to form a team and work as a team. If the government should fall, standards of governance will go down, because from 1959, Singapore has had a government which is led by ministers, and not by the civil servants. The permanent secretaries do not settle policy. They do not innovate. It's the ministers who strike out. It was Goh Keng Swee who started Economic Development Board. Hon Sui Sen started NOL, SIA and DBS. They are creative men. This is the opposite of the Japanese system, where their top civil servants shape policy. If Singapore does not have high calibre ministers, our performance will degrade, our economic growth will stumble and our social problems will increase.

Now that we have adequate salaries for ministers removes only one of the factors that stand in the way of recruiting talent. Since the last revision to this formula, the Prime Minister has tried to get many from the private sector to join - top bankers, top CEOs. He ended up only with one - Peter Chen from Shell. Why did the others decline? Some have moved on and become venture capitalists because they are bright enough and shrewd enough to say : "Look, I am 40 plus, if I join you, I will be asked to stay on and on and on if I am successful. If I am not, I am out. By that time I have lost my connections." Some declined because they sized up the ministers and decided they might not quite measure up.

So it is a difficult task. It removes only one obstacle but not an insignificant factor. Politically it is not possible for any minister or any MP to say at the outset that he would not have taken on the task if he knew he would not be adequately compensated. I can say this because I have been at it for over 40 years and am approaching the end of my career. So I can tell you the blunt truth. The period of revolutionary change that threw up people with deep convictions and overpowering motivations is over. This is a fact. We are in an era of high growth, with fortunes being made by the enterprising, whether in a dot.com company or in finance and fund managing, or in the professions. The whole social climate has changed.

I was looking through the latest Forbes magazine. One whole copy lists up all the billionaires in the world with short descriptions of how they became what they are. I am quite sure they sell a few hundred, if not a few thousand copies in Singapore. So all our top minds are reading and say: "Oh, he can do it, why not I try?'' So we have a qualitative change in aspirations and it affects the old guard too. Some of them meet me and say: "Look at my pension. Is this what we are worth?'' So I'll look at them and I said: "But that's the rules we made.'' They said: "Yes.'' So from time to time I persuade the Prime Minister and I say: "Give the pensioners a bonus because we are doing well and but for them, we wouldn't be doing well.''

If I were to go back and ask them all over again and they knew the progress that Singapore would make, they'd tell me: ""You carry on, I'll stay out.''

This is the real world. We are not talking of a hypothetical situation. These are real people who are going through a tremendous global revolution in values.

1. You open Fortune magazine, what is it all about? They also have a list of billionaires.

Perhaps if I were a young man of 35 or even 45 I would pause and ask myself: "Well, why not? Is it so difficult? Somebody else can do this job.'' But the plain fact is very few people can do this job.

I once explained to the party secretary of Shenzhen as Shenzhen was getting started in 1980s. I said: "You have to be satisfied to run a system that enables many millionaires to flourish and you are not a millionaire. If you can do that, then you can succeed. But if you see the millions being made and you want to join in those millions, the whole system will collapse.'' That is the problem. Look around and ask yourself why has it failed? Because your authority to sign or not to sign a licence decides whether you will make him a millionaire or a billionaire. So why not make yourself one incidentally. It is not very difficult.

In many countries, like America, people take on a job in government for a short period and then go out into the private sector where their having served the country is a valuable addition to their bio-data. One of the most successful American treasury secretaries since World War II, Robert Rubin, was persuaded to stay on for part of a second term. For six years the market knew that they had a very able professional, and had confidence in him. The boom in the Clinton years is partly due to him and to Alan Greenspan, Chairman of the Fed. But he wanted to leave after the first term. He was persuaded to stay on, he stayed on for another 1½ years and now he is co-chairman of the Citigroup.

Let me point out how long it takes to get a MP to learn to be a minister and have the public recognise him as such, especially when he is not a natural crowd puller or a mobiliser. There are two kinds of politicans or two kinds of ministers in Singapore - the doer and the mobiliser. The ideal is to be able to do both. When Mah Bow Tan contested against Mr Chiam See Tong in Potong Pasir in 1980, he lost. Because you stand in a crowd and watch two chaps performing, and say: "This chap looks reasonable, he is bright, energetic, so they voted for him." But I happened to know Mah Bow Tan. I knew his career. He had worked closely with me when we tried to help the Singapore Monitor get started to compete against the Straits Times. Half way through he told me: "Look, we can't. It will lose because of the grip of the Straits Times on all sources of news. They have bought all the agencies, all the cartoons, everything. You can't beat them." I decided this man has judgement. So we fielded him in 1984 and only after another 10 years and now 16 years that people have a different impression of him. They know that he is competent and effective. You look at the ministries he has handled. The Prime Minister now gives him National Development.

Next, Teo Chee Hean. Chee Hean, tall, lean and lanky but gawky stood in the by-election in Marine Parade in 1992, against Dr Chee Soon Juan, voluble, exuberant. If it was not a GRC, one to one, he might well have lost because of the basis of judgement. A short note about his CV and you see the physical person and you judge him on what he says in a few rallies. Eight years later, from the things he has done, from the difficult problems he is setting out to solve, people recognise that this is a thinking man and a very serious man who gets things done and he is going to get the schools up to a different level and the teachers too. They have seen the quality in the man, the depth of his commitment and that he can deliver. people know Chee Hean and recognise the quality of the man, his depth of commitment and his capabilities.

Next, Lim Boon Heng, a Colombo Plan scholar, did naval architecture in the University of Newcastle. He worked in NOL from 1971. Because Goh Chok Tong had worked with him, he knew that this man could do things. He persuaded Boon Heng to stand for election as MP in 1980, then sent him to work in NTUC under Secretary-General Ong Teng Cheong. NTUC is not a glamour sector, no great addition to your bio-data that will get you into a higher job. Maybe you can become a human resource or a trade union contact man. But from a good government point of view, it's absolutely crucial because your policies have to be sensitive to the large mass of the semi-skilled and the unskilled and somehow you must be able to craft your solutions so that they also have a place under the sun. Quietly he built up rapport with the union leaders and workers and won their confidence by his sincerity. Eleven years later, in 1991, he was appointed Senior Minister of State for Trade & Industry to test his decision-making power as an administrator. Then in 1993, he returned to NTUC as secretary general and minister without portfolio in the PMO. When a difficult measure like cutting the CPF by 10 per cent was necessary two years ago, he played a major part in persuading the workers and union leaders to agree to this rational but emotionally very difficult cut. The point I want to make simply is it takes many years of quiet work to build up relationships and establish trust and those in the NTUC are doing this job. They are the crucial part of good government.

As I have said, one weakness of the democratic system is that voters do not have a proper assessment of the real person behind a first-time candidate – his character, steadfastness, trustworthiness. The voters know their candidate only after several years. This is true of ministers, the Speaker, of every MP including Opposition MPs. Both Chiam See Tong and Low Thia Khiang have been re-elected because the electorate see them as consistent and steady, and are prepared to have them continue to represent them. Hence it is important that MPs be suitably remunerated. People need time to gauge and assess who has what qualities and is best suited for what jobs that can make Singapore grow and thrive. The danger for Singapore is a sudden change, a new school term with new pupils, new prefects, new head prefect, and new principal. Things will go awry. Hence the importance of continuity.

The virtuous cycle that we have established, which the Prime Minister spoke about earlier today, the cycle of good government making for high growth and social progress, leading to the re-election of good government, could be broken. If it does, it will probably never be re-established. This is the travail of the LDP in Japan. After 40 years in office, they have in the last decade suffered from decreasing voter support.

One factor that will help prevent it happening is not to have elections involving money politics, and to pay ministers, judges, permanent secretaries and CEOs of statutory boards and all officers and professionals in government two-thirds of the rate for the job. The issue is simple: whether the public sector should adopt the market rate. Big corporations give their top CEOs stock options worth multi millions to attract the best, to improve the fortunes of the company. When they fail they're out. Procter and Gamble had two bad quarters and the CEO resigned and they looked for another one. This government has raised our per capita GDP from a Third World to First World levels, from $1,300 in 1959 when I first took office, to $22,000 in 1990 when I stepped down as PM. Ten years after PM Goh took over as PM, it is $37,000. Sit down, ask yourself, was that doing what comes naturally. What needs to be done to achieve that? A working system, good policies, anticipating problems before they hit you. The question really is, can we afford not to increase the $28 million paid to office holders last year by the further $6 million needed for the revisions? See it in proportion to what is at stake. Pay the judges what we used to pay them and ask me whether Chief Justice Yong could have done what he has done in the last 10 years. I knew the problems with the Bar. I knew the problems with the courts. Work was piling up, cases could not be heard. They could only be solved by a complete change of system. I looked for a man who's a lawyer, whom I've known since we were in university together, who had gone into private practice and become a top banker. I asked him to take on this job. He has a real grasp of the outside world. I gave him the support. He says, change it, and he has. In 10 years it's a totally different judiciary, a totally different system because he's been able to persuade good men to take up these jobs.

The sum total increase which we're talking about is $400 million a year and they involve billions in the GDP every year.

Finally, do not believe that we have escaped the problems that have plagued our neighbours, the region- KKN (Corruption, Collusion, Nepotism) that have caused so much damage. Do not believe that Singapore is immune from KKN. It is a world-wide disease, especially endemic in Asia, and we can easily be stricken by it. Only constant vigilance has kept it down. Our market based pay and allowances give no excuse for slippage. It is the duty of ministers and MPs of all parties to be alert, to report incidents of KKN, and to set the example by maintaining high standards in protecting the integrity of our institutions. And you need two things for Singapore's continued well-being: strong institutions and good men to run them.

Thank you.

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