Mr John De Payva, President, NTUC

Mr Lim Boon Heng, Secretary-General, NTUC

Comrades, Ladies and Gentlemen

Singapore has gone through tough times over the past few years. The economy has been slow. Workers have been retrenched, and unemployment is up. People are worried about their jobs.

On top of this, SARS was a major crisis. 238 people fell ill. 33 passed away. SARS affected all our lives. It disrupted our economy, and delayed our recovery.

Over the last few months, we have been focussed on fighting SARS. That was the immediate priority, and we had to concentrate all our resources on it. But now that the SARS outbreak is over, we must shift back to deal with the economic challenges – the immediate problems of getting the economy back on track and growing again, and the longer term issues of globalisation and competition. Those must now be our priorities, in order to sustain growth, create jobs and cut unemployment.

While preparing for this speech, I met several groups of unionists, to understand better your concerns and worries. I asked them what you wanted me to say. They all emphasised the same point – hope and confidence.

That is indeed a crucial message. But inspiring hope and confidence takes more than making a rousing speech. It comes from seeing the opportunities ahead, and not just the obstacles. It flows from having well thought out plans to take Singapore forward. It grows as we work purposefully together, and make progress towards our goals. Most of all, it strengthens when our efforts bear fruit, and we triumph over a serious crisis like SARS. Because we have done all these, therefore I am confident that we will overcome our problems, grow our economy, and improve our lives.

Let me first talk briefly about our experience fighting SARS.

At the May Day Rally, I explained how we all had to work together to stop the outbreak. If we were lax, new waves of infection could break out and SARS might spiral out of control. But if each one of us acted responsibly and played our part, we could lick the problem.

Fortunately, the situation turned out better than we had hoped. After May Day, we had only one more new case. We defeated SARS, not by the efforts of the Government alone, but through the co-operation and support of Singaporeans of all races, from all walks of life.

Our doctors, nurses and healthcare workers worked round the clock to care for patients with SARS, and suffered casualties doing this. They came under great stress, but remained at their posts, way beyond the call of duty.

The labour movement played a critical role. In the SARS-affected industries, unions worked with the companies to help them stay afloat and save jobs. Hotel workers accepted no pay leave, in effect a deep pay cut. Taxi drivers checked their own temperatures, and disinfected their cars daily, so as to ensure the safety of commuters.

The unions also helped out in the wider community. They collected $300,000 for the Courage Fund. NTUC FairPrice partnered the Central Singapore CDC to deliver groceries at cost to families under HQO who needed help.

Through this collective effort, we not only defeated SARS. We also maintained the confidence and morale of the population, and strengthened the bonds between us. All of us were fighting the same enemy. All of us share the credit. At a moment of crisis, Singaporeans rose to the occasion and overcame the shared danger together.

Equally important, the world has seen how Singapore has responded to SARS. Many countries were affected by the outbreak. But each one responded in a different way, reflecting the spirit of their people, the capability of their government, and the cohesion of their society. Singapore stood out. Our response was reported in the international media – the New York Times, the Asian Wall Street Journal, and the BBC. All the analysts and investors now know that in Singapore they will find a government and people who in a crisis will be steady and reliable. The publicity and credibility we gained was worth more than any million dollar advertising campaign.

SARS sent the economy into a sharp downturn. In the second quarter, our economy shrank by 4.3%. But things are progressively returning to normal. Singaporeans are spending again. During the Great Singapore Sale, bargain hunters and crowds were back in full force. Taxi drivers’ takings are practically back to the pre-SARS levels (if we include the diesel tax rebates).

By this month, tourist volume should recover to 75% of pre-SARS levels. Hotel occupancy rates have improved from just 10-20% at the peak of the crisis to about 60% today. Malaysian and Indonesian tourists are back. In Brunei recently, my hosts told me that Bruneians cheered when Singapore was removed from the WHO list of SARS-affected areas, because they missed coming to Singapore. My SIA flight back from Brunei was full. Hopefully my fellow passengers all visited Orchard Road.

Externally, Hong Kong, Taiwan and China have all brought SARS under control. China, especially, after a slow start took decisive actions to stamp out SARS, and is now poised for another year of strong growth. The US economy is also beginning to show signs of recovery. When it picks up, we too should benefit. For the year as a whole, we should still achieve MTI’s estimate of 0.5-2.5% growth.

We must be careful not to derail the recovery. Our main problem is lack of external demand. We must wait for the US economy to pick up. Then we can export more semiconductors, disk drives, and petrochemicals. But at the same time we must keep under control our own business costs, such as land, utilities, and wages.

This is why the NWC recommended a wage freeze for most companies this year. It is more important for workers to hold on to their jobs, than to press for higher pay and risk pushing the company to close or relocate. I know union leaders understand this – it was evident during the NWC negotiations this year.

The Government is doing its part. For example, ministers have taken a further 10% wage cut this year, to set the lead. PSD has been reviewing starting salaries in the civil service, and expects to reduce them by up to 10%. To cut business costs, HDB has let people set up businesses at home – 2,000 have already done so. We are getting rid of obsolete rules, putting services on line, and reducing government fees and charges, the most recent being the 50% reduction in business registration fees. A leaner Government will lighten the load on the taxpayer.

While we tighten our belts, we must look after the lower income households, and the unemployed or retrenched. We already have many schemes and initiatives to help Singaporeans. I compiled a list, which shows all the things we are already doing.

For the general population, we are lowering direct taxes, and distributing $2.4 billion worth of Economic Restructuring Shares (ERS) in three tranches starting from 2003. We also have other rebates, weighted towards the lower income group. The ERS and other measures are enough to offset the GST increase to 5% for well over five years, and in fact for up to ten years for the lower income group. Later we decided to stagger the GST over two years, but we still distributed the first tranche of the ERS, in full and on time. This year, a typical 3-room HDB household will receive $1,000 more from the government, in ERS and other rebates, whereas the extra 1% point of GST comes to only $270. In Parliament Steve Chia said the GST deferment was ikan bilis. But it was hundreds of millions of dollars worth of ikan bilis.

For needy families and the unemployed, besides Government assistance schemes to help with rental, utilities and service and conservancy charges, individual CDCs have developed many local schemes – to provide assistance for day-to-day, school, medical, groceries and other expenses. These have benefited thousands of needy Singaporeans.

To encourage community self-help, the CDCs are raising their own funds for the needy. The Government matches the funds raised three to one. In addition, the Government also put another $100 million into the Medifund this year to help needy Singaporeans pay for medical bills. But the CDCs do not just give out financial assistance. They also mobilise the community to do their part. Some GPs are waiving consultation charges for needy patients. Other volunteers help take care of elderly patients and bring them to community hospitals for therapy.

The best form of welfare is to find work for people. The Ministry of Manpower and its partners including NTUC Joblink provides services to help the unemployed find work. In the past 18 months, this network has assisted some 20,000 people to find jobs, including those who are receiving financial assistance.

Another group that needs more help are the older workers. They are the most vulnerable to retrenchment, and find it hardest to get re-employed. To help them, the Government started the People-for-Jobs Traineeship Programme (PJTP). The scheme pays up to 50% of the wages of an older worker (aged 40 and above) who takes a job in a different field, for 6 months. This substantially reduces the cost of hiring older workers, and encourages employers to give older workers a try.

PJTP has helped almost 12,000 older workers find jobs. 44% of them stayed on after the PJTP wage support stopped. Through this scheme many older workers, often with only primary or secondary education, have made successful career switches. One worker who used to sell food at a supermarket is now taking care of elderly patients in a nursing home. Another storekeeper became a guest service officer at a hotel in Sentosa.

Employers can play a big part in helping older workers by keeping an open mind to hiring them. The seniority based wages are a problem. But many older workers are prepared to accept lower wages and smaller responsibilities in order to get a job. Employers should try them out, instead of turning them down without even looking at them, as some do. I asked MOM to gather feedback from companies that have hired older workers. The response was positive. They found older workers to be serious, responsible, mature, and less likely to job-hop than their younger counterparts. With the support of employers, our older workers will still have many years of contribution ahead of them.

Some employers go out of their way to hire older workers. Alexandra Hospital actually prefers older workers, because they find that older workers empathise with patients better than younger ones. The security guards in Alexandra Hospital tend to be older workers. In the past, they wore khaki-coloured uniforms, and basically stood around to guard the premises. Now these older workers wear nice uniforms with a tie. But they did not just have their uniforms redesigned, but also their jobs. They have become ‘patient greeters’. They talk to patients, help them in and out of their vehicles and bring them around the hospital. They earn many praises. I know of people who make it a point to bring their elderly parents to Alexandra Hospital, because the patient greeters treat them so well. So with some creative restructuring, Alexandra Hospital created dignified, fulfilling jobs for older workers. Other employers should do the same, and employer associations should do more to encourage this.

Over the next few months, unemployment is likely to go up. The job market will only recover next year. The Government is ready to do more to help workers through this period. We already have the right schemes in place, but we will do more and spend more to help the needy and the unemployed, if the situation worsens.

However, we cannot indiscriminately hand out money to everyone who asks for help. We need to focus our assistance on those who need it most. The assistance should depend on efforts by those facing hardship to help themselves, and especially to look for work. Members of Parliament meet many people facing hardship during our Meet-the-People sessions. We can see that some of them are truly deserving of help, and we go the extra mile to help them. But there are also others who own and use air conditioners and large screen TVs, and yet ask for help with their utilities arrears. So we have to be sympathetic but firm. Grassroots leaders are far better at doing this than government bureaucrats. This is why we are channelling the help through the grassroots and CDCs.

These efforts to help the lower income group, the unemployed and older workers are not just to cope with the temporary downturn. Because of globalisation, even after we recover, we must expect industries to reconfigure themselves, and the economy to undergo restructuring, over and over again. More Singaporeans will have their careers disrupted. As Comrade Lim Boon Heng has pointed out, companies will sometimes need to retrench even when they are profitable, and not wait until they are losing money. No company can afford to carry free riders. Every employee has to be productive, to make a full contribution. Lifetime employment in the same company will become a rare occurrence, if it happens at all. Each time workers are displaced, we will have to help them move on to new work.

One major source of disruption is the opening up of China and India. You know how these two giants are altering the world economy. One union leader told me that he knew how impressive China’s growth was, because he had visited China and seen the country on the move. So had many other union leaders. But unfortunately we cannot bring all our workers to China, to show them what is happening. So as union leaders, you must continue to try your best to get workers to realise what is happening.

We also have to understand how worldwide trends in industries affect us. Take SIA for example. Worldwide the airline industry has been experiencing difficulties, post September 11 and SARS. But it is not just SARS. Far reaching changes are taking place in how airlines do business and compete against one another.

In the past, many airlines were badly run, carrying high costs and offering poor service. So SIA could compete and do well, so long as it operated efficiently and looked after its passengers. But in the US, loss of market share and September 11 drove airlines like United and American towards bankruptcy. They were forced to retrench workers, and negotiate with their unions and pilots to slash costs and remove work restrictions. In Europe British Airways and Lufthansa are doing the same. Even, Qantas, which is profitable, is trimming costs. This will make all of them much more efficient airlines, with greater pricing power. SIA no longer has a comfort zone to operate in.

On top of that, low cost carriers, or budget airlines, are gaining market share. Examples are Southwest in the US, Ryanair in Europe and Virgin Blue in Australia. Budget airlines do not have old collective agreements with over-generous perks. They can hire younger crew who cost less, and offer no frills service at rock bottom prices.

Budget airlines have not taken off in Asia yet, but some are testing out the market. Air Asia, a Malaysian carrier, is planning to offer flights from Senai Airport. They have talked about charging RM19.99 from Senai to Kuala Lumpur. If they do this, many Singaporeans will go up to KL just for yong tau fu in Ampang, or fried Hokkien mee in PJ. Of course we also hope KL residents will fly down, and shop in the Great Singapore Sale. And our retailers must make it worth their while to do so.

This does not mean that SIA should drop the Singapore Girl. SIA targets the higher end of travellers, and premium service will remain its selling point. But SIA will have to cut costs, lower prices and offer even better service in order to outperform its competitors, or else see its business taken away.

SIA’s negotiations with its unions have been much in the news. I am glad that SIA management has reached agreements on cost reduction measures with all its unions. But this is only a first step. Next SIA must restructure its wage system to make it more flexible and responsive to performance. This will be as hard to do as the wage cuts, if not harder. But it is urgent and necessary for SIA and its unions to do it in order secure their future.

I have gone into SIA’s problems because of SIA’s critical importance to Singapore. Whether SIA prospers affects not only SIA’s workers but the whole economy, and our international reputation. So too with PSA. That is why we need to pay close attention to their future.

Singaporeans must understand the challenges of globalisation, and the adjustments we have to make. But we also need to see the positive side of things: how we can make the most of the opportunities that globalisation brings.

Take trade for example. China is a rapidly growing market for us. Last year our exports to China grew by 40%. This year they should grow another 20%, despite the Iraq War and SARS. Many Singapore companies rely on the China market. We already export more to Greater China – PRC, Hong Kong and Taiwan – than to the US. The disruption that we are going through comprises not just of job losses, but also new activities and jobs being created.

We must therefore go all out to grow new activities in Singapore. The new environment offers us many promising opportunities. The Economic Review Committee last year studied our economic prospects thoroughly, and developed plans to grow and upgrade our economy. The plans were delayed slightly by SARS, but they remain sound, and will help to take us the next step forward.

One major strategy is to continue to grow and upgrade the manufacturing sector. So many companies are setting up factories in China that we may think Singapore has no future in manufacturing. But that is not so. We continue to attract a strong inflow of investments. Last year EDB managed to secure $9 billion of manufacturing investments, and $2.1 billion of services projects – similar to the previous two years. This year we should get almost as much investments in manufacturing and services. The projects that EDB brings in each year create more than 20,000 jobs when fully realised. EDB has done very well, especially considering how difficult the environment is, and how sharply investments into our neighbours have gone down.

MNCs will examine a whole menu of factors, in deciding where to invest. Singapore has many selling points. Recently, Seagate announced that it is building a new $200 million plant in Singapore. When completed in 2005, it will create 2,000 jobs. Seagate has been in Singapore for over 20 years. They have also been in Penang, Thailand and China. They know all the countries, their strengths and weaknesses. They concluded that while it is cost effective to do final assembly in China, Singapore is the best place to consolidate its capital and knowledge intensive operations.

Seagate’s new plant here will produce drive media – high-tech, precision-coated disks, on which you write computer data. Seagate chose Singapore because we have a disciplined and skilled labour force, we have the engineering expertise, we protect intellectual knowledge robustly, and we have the infrastructure to ensure that the products are delivered just in time all over the world, including to Seagate’s assembly plant in China.

Another high-tech company, Thales Electro-Optics, manufactures lenses. A few years ago under previous management (it was then known as Avimo Electro-Optics), the company set up a plant in Penang to manufacture low-end lenses. However, because of the lack of skilled, quality manpower, they eventually shifted the Penang plant back to Singapore. Since then, despite cost pressures, the company’s Singapore operation has remained competitive and profitable, because of the strong skills base that it has built up in here. But the company does outsource a small part (5%) of the low end lenses to China.

Currently, Thales Electro-Optics has around 570 employees. In this downturn, the company has consistently hired Singaporeans, but has been experiencing difficulties in recruiting and maintaining local Singaporean workers, and has had to top up with work permit holders. A main reason given was shift work.

Now companies from India and China are also coming. Over the last three years, some 100 Indian companies have come to Singapore. Together, they generated 1,000 jobs. More Chinese companies are floating their shares in the Singapore Exchange, and studying how to use Singapore as a base to tap the regional markets. So one day we will not just list and trade the shares of Chinese companies, but also host their operations and regional headquarters.

One difficulty in developing manufacturing is getting Singaporeans to work in the factories. Many Singaporeans still avoid shift work, or longer commuting journeys, or clean rooms. Unemployment is 4.5%, but still many job vacancies remain unfilled. I met some entrepreneurs recently, and they told me how difficult it still was for them to hire and keep Singaporeans. But I believe that with the downturn lasting longer, people are adjusting their expectations, and becoming more flexible. MOM tells me that job seekers are now keener to try out job matches that MOM has found for them. Fewer now turn down job offers or fail to show up for interviews. We must keep on persuading Singaporeans to change their attitudes, and take up the jobs that are available. The old jobs which are gone will not come back. The new jobs require us to adjust, but they are good jobs, and we must learn to do them.

Besides manufacturing, services form the second major pillar of our economy. We are also seeing results in promoting services.

One promising service industry is tourism. We are going all out to woo more Indian and Chinese tourists to Singapore. The growing middle classes in China and India want to travel, and a bustling international city such as Singapore, offering international cuisine and merchandise, is very attractive to them.

China has become one of our top sources for tourists. If you had been in China earlier this year and tuned in to any of the major TV stations, you might have spotted STB’s TV commercial. It features Fann Wong, who has quite a following in China, encouraging people to stay at least three days in Singapore.

Indians are the top-spending tourists in Singapore. One of their favourite places is the Mustafa Shopping Centre in Serangoon Road, which is why Mustafa’s is now open 24 hours. When the business grows further, it will benefit not just the airlines and the hotels, but wide segments of the economy, including retail, entertainment, the arts, food and beverage.

Another important service industry is financial services. Throughout the Asian Crisis, MAS has been liberalising the industry and reforming its regulatory framework. We are quietly growing our business in fund management and treasury activities, and attracting regional headquarters here. Progress has been slower than we had hoped, because the whole region has been down. But gradually our financial sector has been strengthening, and creating new jobs.

It has not been painless. One result of liberalisation has been to cause the local banks to merge, in order to grow bigger and more efficient. Following the mergers, about 1,300 workers in the banking sector were retrenched. But had the banks not merged, they would have remained small, inefficient and uncompetitive. And when big foreign players come into the market, our banks would be overwhelmed. This would have cost us even more jobs, hurt our financial system, and our whole economy.

This is the way our economy will grow in future. Some old jobs will go, but new jobs will be created to replace them. We have to let the old jobs go, because otherwise we will stagnate and decline. But if we are prepared to adjust and restructure, then we can help those who have lost their old jobs retrain and upgrade to find new ones, and make progress together.

Whether in manufacturing or services, we will need entrepreneurship to succeed in the new environment. We often criticise ourselves for not being entrepreneurial, but it is not entirely true. Singaporeans are launching many kinds of businesses: Luohan fishes, massage chairs, traditional Chinese medicine, and even purified water, just to name a few.

You do not need to be rich or well educated to become an entrepreneur. The owner of one company, Mr Lim Chwee Lim of Richland Logistics, started off as a truck driver. But he noticed that MNCs are increasing outsourcing their non-core business, including warehousing and transport. So his company stepped in to service the MNCs. In six years, the company grew from a $300,000 business into a $27 million business. From one truck and a few workers, it now has 150 trucks and 300 workers.

A successful entrepreneur creates jobs for many more people. This is why we are encouraging people to venture out. We are loosening up Government rules, and reforming our education system to encourage creative, independent thinking. We are also encouraging more entrepreneurs to come to Singapore. They will give our economy the quickness to seize new opportunities and adapt ourselves when conditions change.

In order to upgrade our manufacturing sector, grow new services activities, and help more entrepreneurs to succeed, our economy must be as flexible as possible, and our costs as low as possible. One vital area needing restructuring is our wage system and labour costs.

Unionists often ask me why when we talk about restructuring, invariably workers bear the burden. I try to explain that the government and employers will also adjust, but we cannot avoid paying attention to wages, because labour costs form half of the total cost of doing business in Singapore.

The labour market and state pension systems are key issues for many other countries trying to restructure their economies. In Europe, France and Germany have been trying to free up rigid labour laws, lighten the burden of taxes and social security contributions on wages, and reform their pension systems. It is a very painful and unpopular exercise, because it means cutting back on benefits and social safety nets that people have become accustomed to. The French and German trade unions are resisting all the way. But the countries have no choice. The rigid labour laws are causing unemployment and stifling growth. The heavy burden of statutory charges on wages discourages companies from hiring more workers, or expanding their business.

Even Brazil needs wage and labour reforms. Brazil elected a new President late last year – Lula Da Silva. Lula comes from a very poor family background. He was trained to be a mechanic and lathe operator. Later, he became a trade union activist. He won the elections largely through the support of the workers.

The corporate sector was most worried that Lula would pursue unrealistic left-wing, welfare policies. Instead, once he took office, President Lula started pushing for labour and pension reforms. In May, he led a contingent of all 27 of Brazil’s state governors to personally deliver to the Brazilian Congress his draft reform legislation. The workers are protesting in the streets. But Lula understands what is in the workers’ long term interest, and knows what he must do to protect them.

Labour unions must rethink their role in this new environment. A labour movement that sees its mission as resisting change will over time marginalise itself. In the UK, Germany and Netherlands, workers are quitting the labour unions, and memberships have dropped by a third in the past few years.

In the German MNC Siemens, the workers formed committees of their own, and bypassed their union to negotiate directly with the management for more flexible work arrangements. Siemens managed to conclude over 100 deals that way. Some claimed that what Siemens did was against the law, but both management and workers decided that this was in the best interest of everyone.

Fortunately, Singapore has an outstanding tripartite partner in the NTUC. The NTUC has played a key role in restructuring our economy and championing the long-term interests of workers. As union leaders you have understood that the best way to safeguard the interests of your members is by working with employers and the government to raise productivity, increase output, and so improve the earning power of your members. So you have helped to work out and implement reforms to wages, CPF, and medical benefits, and got workers to accept difficult changes that ultimately benefit them. In this next phase, we will need your support more than ever in order to transform our economy.

But employers have to push for change too. This is especially true in the non-unionised firms, which have been slower to reform than the unionised sector. Singapore is in a unique situation compared to other countries. Our unions push even harder for reforms than some employers. Perhaps these companies feel that they have an alternative. If reform is too difficult here, they can always move elsewhere. But not all companies can move.

Other companies may put off the task of wage reform, thinking that it can wait because their business is still making money. But the reality is that by the time a company is losing money, it may be too late. The best time to make difficult changes is when the company is still profitable. That is the best way for employers to take care of their workers.

With the unions and employers working hand in hand, we can make our labour market more flexible and nimble. This will in turn make our economy resilient and competitive. There are two areas that require our special attention – the CPF, and the wage structure.

First, the CPF. Our CPF system, based on individual savings and self-reliance, has worked well. But even so we have needed to improve and update the system, to stay in step with changing circumstances.

Until the Asian Crisis, the basic philosophy of the CPF was to compel workers to save more. During the high economic growth in the early 80’s, we raised the CPF as high as we could. Incomes were rising, so rather than letting workers spend the extra money and leave nothing for a rainy day, the Government channelled it into their CPF to fulfil social objectives such as home ownership, healthcare, and retirement.

But since the Asian Crisis, with fiercer competition and cost pressures, increasingly we feel the opposite need to keep the CPF contribution rate as low as possible. This is because high CPF contribution rates are costly to businesses, a drag on our competitiveness, and can drive investments and jobs away. So more and more going forward, the CPF system will need to take into account wage competitiveness.

We cannot abandon our objective of adequate compulsory savings. Singaporeans need the CPF system, and its benefits, more than ever. Medical costs are going up, and we must save for them. People are living longer. In 1990, workers who retired at 62 could live on average for another 18 years, until 80. Now, 62 year olds live on average for another 20 years, two years longer than before, until 82. In 10 years time, life expectancy will have gone up some more. Remember that on average someone aged 80 spends 3 to 5 times more on medical expenses than someone aged 62. So we must expect heavier retirement expenses, and make sure that we provide enough for our old age.

So on the one hand we want to keep our wage costs as competitive as possible, but on the other hand we have social objectives to meet. That is why we must keep the usage of CPF sharply focussed. We cannot afford to draw down the CPF for extraneous purposes, such as overseas study or unemployment welfare. The CPF should be used only for essentials, i.e. retirement expenses, healthcare and housing. Furthermore it should cater to the bulk of Singaporeans, and not over-provide for the high income earners, the top 20% who can look after themselves.

Last year, we started making significant changes to the CPF scheme. We are cutting back on the use of the CPF for property purchase, and raising the contribution to the Special Account, to safeguard more savings for retirement expenses. We are reducing the salary ceiling from $6,000 to $5,000. We are also lowering the contribution rates for the 50-55s, to help offset the seniority based wages and make older workers more employable. These changes will help adapt the CPF scheme to our changing circumstances.

Second, wages. We started discussing wage restructuring seriously in 1985, when the economy was in a deep recession. You know the two main problems. Firstly, our wages are still seniority-based. And secondly, too large a share of our total pay is fixed and too little is tied to performance or profits. This is a problem for companies – when business conditions change, they are stuck with high fixed labour costs. But it is also a problem for workers, because it makes it harder for workers to keep their jobs by accepting lower bonuses in a downturn. And it puts older workers at greater risk of losing their jobs.

Since 1985, we have made significant progress in restructuring wages, especially in the civil service, but still not enough. This is partly because wage restructuring is a very difficult process: some workers may get more, but others will get less than before. There is never a good moment to do it. In prosperous times neither companies nor workers see the need for wage reform. In downturns it is too painful to do. But at least during difficult moments like now, workers are more likely to recognise that there is a problem, and accept that bitter medicine will help us to recover from our illnesses.

That is why the NWC recommendations this year were as much about wage reform as they were about tackling SARS. The NWC recommended that if companies are in difficulties because of uncertain business prospects, they should restructure wages without delay. They should reduce fixed and seniority-based elements and convert them to productivity and profit-sharing bonuses. They should go significantly beyond transferring 2% from basic to the Monthly Variable Component. This is the most important NWC recommendation this year.

We should make a strong push for wage restructuring. Comrade Lim Boon Heng told me that NTUC is working with the bigger unions, which in turn have identified about 50 companies. The unions will work with these companies to restructure their wages. If you succeed, we would have taken a major step towards fixing a problem which many countries face, but very few have solved.

I have talked about what we need to do in the short term, to help the economy recover and look after the low income and unemployed Singaporeans. I have also explained what we are doing about our longer term challenges – restructuring wages, improving the CPF system, and growing the economy.

If we felt despondent and discouraged, because of the tougher competition and the changes around us, we would be short-changing ourselves. We know what we need to do to excel in this new environment. We have a first class labour force and a competent and honest Government. We have the resources, the ideas, and the determination to succeed.

Furthermore, Singapore has built up a reputation for quality and excellence. This reputation has spread all over the world, benefiting our SMEs when they go to China, India and even new markets like the Middle East. MNCs are making major investments in Singapore, because they trust our environment and value our responsiveness. Hence workers can earn better wages in Singapore than equally good workers in China or Vietnam.

So when we think about our problems, remember that we have many strengths too, which we must use to the full. Let us help each other through the immediate problems, and press on with restructuring. Let us master new skills, attract new investments and upgrade our economy. Let us strive for a better tomorrow, and make Singapore a better home for all of us.

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