Mr Speaker, Sir, we are debating, today, a critical issue.  We have discussed this for more than 20 years, each time we have adjusted public sector salaries.  The last time we did it was in 2000, and now we have decided to adjust salaries again.

     There has been no change in the policy.  We have had this benchmark formula for 10 years; in fact, for more than 10 years, since 1994.  It has worked.  It has enabled us to induct Singaporeans of ability and integrity into the system.  We have built a strong team in Government.

     But now we are making a large adjustment - large, in terms of the quantum.  There has been a change of Prime Minister since 2000.  There have been two general elections since 2000, a new team of MPs in the House, and a younger generation of Singaporeans has come of age.  So it is good that this important issue is fully debated in this House on this occasion.

     Politically, this is a most difficult decision for me to take.  Logically, it is quite clear what I have to do, but it is something which is very difficult to get people to understand, first of all, and then, emotionally, to accept that this is necessary.   And yet, this is an absolutely critical issue.  If we do not tackle it now, the problem is not going to go away.  It is just going to get worse, and we will eventually end up in serious trouble.

     Sir, we have discussed this at length over several months in Cabinet.  The Senior Minister and Minister Mentor particularly strongly encouraged me to do it.  They have been Prime Ministers.  They know the importance of having good Ministers to help them with their work.  But after all the discussion and debate, and after all the views have been expressed, finally, it is my responsibility as Prime Minister to make the call.

     I have decided to move now, because of the overriding importance of keeping our salaries competitive in the public sector - civil service as well as political appointment holders.  To make it quite clear why I am doing this and also to give me the moral standing to defend this policy with Singaporeans, I will hold my own salary at the present level for five years.  The Government will pay me my full salary because that is the way the system will have to work.  But for five years, whatever the increase in the salary above its present level, I will donate to suitable good causes.

     I do not expect other Ministers to follow me.  This is a Cabinet decision, but I am the one who is carrying the ultimate responsibility, and not them individually.   We encourage all Singaporeans to donate to good causes.  What individual Ministers want to do is up to them.  What individual MPs want to do is also up to them.   I know that the Ministers and the MPs already support various worthy causes, but it should not be a public ostentatious display of how generous and self-sacrificing they are, but a private matter for them to decide at their own discretion.

        Mr Speaker, Sir, let us start by asking the right questions.  What is this about?  It is not just about the salaries of Ministers or MPs or civil servants.  It is about our future.  How can Singapore produce the best government to secure a bright future for ourselves and our children?  Ask yourself four questions.  What kind of government do we want?  What kind of people do we need to run such a government?  How can we sustain this system for the long term? And then only ask yourself the last question: how should we pay those people serving in Government as Ministers or as civil servants?

     But, first of all, let us ask what kind of government we want. We can look at other models around the world. One model is the Swiss model, I will call it "invisible" government.  Invisible because the government is low profile, the canton takes charge, 30-odd cantons, highly decentralised system, the country runs itself.  Mr Low Thia Khiang himself said that the Swiss has no President or Prime Minister.  In fact, they have a President, but he takes turns every year: one year, one term, next year, next President.  He also runs the Cabinet.  It is just pro forma. I bet you that Mr Low does not know who the present President is.  Neither do I.  That is "invisible" government.  A model for Singapore?

     Another model might be the Japanese model, say, in the 1980s before the bubble burst. I would call it "auto pilot" government -  strong civil service, rotating Ministers, civil service highly competent, maintaining the policies, managing the policies, basically maintaining the status quo.  Ministers, politicians are advised by civil servants - any time, the civil servant tells you, you better listen to him because he has spent 30 years there, whereas you are likely to be there maybe 18 months.  It works very well, maintaining stability in a calm environment. But when the weather changes, you must dive and manoeuvre.  You have a problem because the civil servants cannot do that.  You need Ministers to come out and do that.  And if you do not, you are in turbulence.  This is what happened to Japan in the 1990s after the bubble burst.  They could not change policy.

     The third example, I would cite, is New Zealand, but there are many countries like that, and I will call it "routine" government - government which works just as a matter of course, and salaries are lower than in the private sector.  Some good people come in from time to time.  But they are not trying to assemble the best possible team all the time, either in the civil service or in the political leadership.  So, once in a while, you have a strong leader, like Helen Clark now in New Zealand or John Howard in Australia, and they dominate and they span several terms, 10 years maybe, or longer.  Then the kaleidoscope changes, leaders come, leaders go.  It works.  But it does not aspire to be at the peak all of the time.

     I am not saying that these are bad systems for these countries.  They work for these countries in their circumstances.  But Singapore's situation is totally different.  We are a tiny, multi-racial, multi-religious, one little red dot out of so many little dots in the middle of South East Asia, lack land, lack air space, lack sea space, lack water, sometimes, also run short of sand and granite, operating in a fast changing competitive global environment against very powerful competitors.  So, in this situation, what is our model?  Our model is "paranoid" government - a Government which worries all the time, which plays a crucial role in this system. It is proactive and looks ahead over the horizon. Whenever people tell you not to worry, you start getting concerned.  You listen to people and businesses, you respond to their needs.  You produce imaginative sound policies to transform Singapore.  You are totally committed to improving the lives of all Singaporeans. That is our system. But it is not just words, it is not just rules, it is not just Instruction Manuals, or IMs, it is how the people inside work the system.  It means that you must have a strong effective government - small, lean, efficient - but gathering the best possible team to provide the country with the best possible national leadership.

      Some people think that now that we look like a First World city, we have arrived, good things will happen to us automatically, and do not need to make a special effort.  Why do you need a high quality Government?  Mr Low Thia Khiang made this argument.  He cited Finland, Denmark, Switzerland.  But others think so too.  So I will cite one letter which was published in the Straits Times' Forum page, and he said exactly this: "It is not that citizens do not appreciate the fact that Singapore ticks but all First World cities tick - hygienic eating places and clean running water are commonly available in all First World cities."  So we are First World city, we will have clean water, we will have safe food, no problem.  They should ask themselves: are we in that happy position?  How does Singapore become a First World city?  Were we born like this?  How will Singapore remain such a city?  Supposing the PAP does not painstakingly build up the present and the future teams of MPs and Ministers, will one magically emerge like Brigadier Generals in Mr Lim Biow Chuan's example? Because yesterday he said, in the US Army if 50 BGs are put in an aeroplane, and they disappear over the Atlantic Ocean, another 50 will emerge.  If the 90 people in Parliament today disappeared into the South China Sea, will another 90 people emerge?

      Will Singapore survive, much less prosper, without a capable team in charge?  How did we get here? With strong political leadership and effective government.  It did not happen automatically or by chance.  It will not happen automatically.  It only happens through a deliberate and systematic process to build the team, to build in talent at all levels. Civil service – scholarships, career development, recruitment in-service and from outside, Singaporeans and some from overseas.  MPs - nation-wide search and exhaustive tea sessions.  Ministers - systematic head hunting of talent, with the right character, right leadership attributes and team building, so that there are not so many prima donnas.  If I have David Beckham and Marilyn Madonna, I may become busier rather than more successful.  We did not start out like this.  The first generation - Minister Mentor Lee Kuan Yew, Goh Keng Swee, Toh Chin Chye, Rajaratnam, Othman Wok - they were thrown up by revolutionary times.  But after the revolution passed and we went into peace and tranquility, they found that left to itself or left to chance, party politics in Singapore is not going to produce a new leadership equal to the task at hand.  If we had not done anything, the PAP would have been like Mr Chiam See Tong’s Singapore People's Party – same leadership, same cadres, same ideas, of the past, not of the future.

      Therefore, Minister Mentor and others went out systematically building a successor team.  That is why we are all here today.  And this approach has worked.  We have had a second generation of leaders, one transition; a third generation of leaders, a second transition.  And it is a system of government which delivers results.  NEWater - to turn a strategic vulnerability into a competitive advantage.  Education - excellent schools for all, outstanding post-secondary institutions.  You look at our ITEs.  ITE East looks like a university; 7,000 study there. When the Middle East folks saw ours, they wanted to build the same.  Our architects are now in the Middle East building four ITEs for them. We will help them. Clean, non-corrupt government and many other things that we take for granted in Singapore, which are unimaginable in most parts of the world.

     Other countries are very keen to learn from our success.  You look at the cooperation projects we have in China, India, Russia, and the Middle East.  I tell our people, be careful, we only have one civil service.  We can only run one country well.  So do not over stretch yourself.  Do not think that we can make little mini-Singapore all over the world.  But people are very interested to learn from us.  They want to know how our system works, how our Government works, how they can do the same, how we can help them to get there.  And every visitor who comes to Singapore from Asia or Africa and even from Europe, Eastern Europe, they ask me "How do you do this?"  Recently, I met President Museveni from Uganda and the first thing he asked me was, "Can Singapore do an industrial park in Uganda?"  It is a great compliment to us.

     This quality of the Government is one of our most critical assets, most sustainable competitive advantages, built up over many years, very hard for other countries to replicate.  It is what Mr Lim Swee Say calls "da ruan jian", ie, big software.  You can replicate computer systems, a department here and there, maybe a service bureau.  But for the whole government to work like this, it has to be either all there or it is not there.  And so we had better zealously uphold and improve upon it.

     To maintain this quality of Government, we need a first-class team - officials, MPs, Ministers.  This job has become a lot more complex.  In the old days, they called it "government"; now they call it "governance".  It sounds a bit more erudite but, basically, it means it has become more complicated.  In the early days, the Prime Minister could rely on a few key Ministers.  So Minister Mentor Lee had Dr Goh Keng Swee, Mr Hon Sui Sen, Mr S Rajaratnam, Mr Lim Kim San and, wherever there was a problem, he would send a key Minister to go there to fix the problem.  Dr Goh Keng Swee was in the Finance, and when we needed to build up a Defence Ministry, he went to MINDEF.  After a while, he went back to Finance because the Ministry of Finance needed to be sorted out some more; then he went to Education when he was needed there.  One man, multiple Ministries, but one after the other because, after all, it was just one man.

     But, today, the responsibilities of all of the Ministries have grown.  And if we still operated the Ministries of Defence, Finance or Education the way we did back in the 1960s and 1970s when Dr Goh was running them, we would be antediluvian – out of this world, left behind.  So I need good Ministers in the Ministries of Finance, Defence and Education at the same time.  But not just in these three places, but also the Ministry of Foreign Affairs; Ministry of the Environment and Water Resources to deal with water; MICA to deal with the new media; and the other Ministries too.  So we need a strong and comprehensive team in the Cabinet.  Every Minister has got to be on top of his job.

     We have outstanding civil servants.  I am proud of them.  Some of the MPs have suggested maybe their civil servants do not work hard enough, not assessed rigorously enough, maybe they should be publicly chastised and we should see when you punish them.  But I say these are good guys, by and large, and, as a team, there are very few like that in the world.  We are proud of them.  But that does not mean that, because we have good civil servants, we do not need good Ministers.  In fact, if we have good civil servants and we have weak Ministers, the civil servants cannot work and the system will freeze up and we will be in auto-pilot mode.  Because, if you want to change GST, if you want to do Workfare, if you want to transform the whole education system or Medisave, these are not bureaucratic fine-tunings by civil servants who write papers.  These are political decisions by Ministers who say, "Yes, I want to do this.  It is a big thing, it is difficult, but I am going to decide.  If the Cabinet agrees, we will sell it to the people.  With the civil servants in this framework, now let us see how we can best achieve this."

     So the Ministers have to both lead as well as manage.  Mr Siew Kum Hong yesterday said Ministers should lead, not manage.  I say they have to do both.  If we have Ministers who only make political speeches but do not know what is happening in their Ministries, we will be in big trouble.  The Minister has to be on top of his Ministry.  He is not just presiding as a non-Executive Chairman.  He is at least the full-time Chairman, sometimes the CEO, and he sets the tone, makes the big decisions and directs the Permanent Secretary, Deputy Secretary and the Directors, and makes things happen.  On top of that, we expect him to go out and deal with his constituents, to hug babies from time to time, and to come here and charm MPs from time to time.  It is all part of the job.  Those are the Ministers whom we are looking for.  Therefore, we need Ministers who have learned this job for years, not just people who rotate in and out of Government.

     I discussed this last year with an American professor.  Not just any professor, but the Dean of the Kennedy School of Government at Harvard, David Ellwood.  He was visiting Singapore for the first time and was amazed at what he saw.  He said politicians all over the world tend to focus narrowly on short-term issues.  But, here, how is it we are forward-looking, tackling longer-term challenges?  What is it which makes Singapore different that we can do this?  And he recounted his own experience.  He is an academic, studies poverty in America, and spent his whole career on the subject.  Then, the Clinton Administration came in, he went into the government to try and achieve something, became an Assistant Secretary.  But after two-and-a-half years, the kaleidoscope turned, and he is out.  He pushed for welfare reform.  But you cannot reform a welfare system in two-and-a-half years.  You may need 20 years.  He asked, "So how is it in Singapore you can do that?"  I said, "It is our system, our people.  It is because we care, but it is also because we know that if we screw up for the long-term, in five or 10 years' time, there is a high chance that a lot of us are still going to be here to pick up the mess, and we do not want to make a mess for ourselves, and therefore we serve Singapore well."

     So we are looking for Ministers like that.  It is not just competence.  We are looking for Ministers who must be committed and dedicated to Singapore, are trusted and supported by the people, and determined to improve the people's lives.  To do that, they must have a sense of duty and responsibility to build this nation.  They must have a desire to serve and to give back to society, a conviction that Singapore is worth fighting for and, finally, the confidence that, if they join the Government, they can do something worthwhile.  You are not writing on water and then the river flows on and you have wasted your time.  You are building in stone and concrete for long after you have retired, as Mr Tan Gee Paw said.  He is not a Minister, but the same ethos pervades the system.

     And these remain the overriding requirements when we look for people in political office.  What is their mission?  It is not just maximising the value of our business, but making Singapore something special: a home for all our people, a land of opportunity, an inclusive society, a bright future for our children.  Dr Goh Keng Swee said it best.  He made a valedictory speech in 1984.  He was still Minister.  This was his last major speech before he retired.  I think it was not published because some parts were sensitive - still are - but the Establishment was there, heard him and has not forgotten.  I will read just one passage:

     "To the New Guards soon joining us, may I say this:  Welcome to you.  Some of you will discover before long that you have joined a Holy Order that expects total commitment from you.  That will be your moment of truth.  You will then regard the present condition of the Republic not as a pinnacle of achievement but as a base from which to scale new heights."

     I was one of those who entered politics in 1984.  I was there.  Mr Wong Kan Seng, Dr Lee Boon Yang, Mr Mah Bow Tan, Mr Speaker, Mr Yeo Cheow Tong and Mrs Yu-Foo Yee Shoon are still Members of this House.  I think many of us were there.  We will remember the occasion and the words.

     So how do you keep this going?  You have got to build the strongest possible team in the Cabinet, in the Government, to govern the country, serve Singaporeans now and well into the future.  How do you sustain it?  Keep the good people coming.  We have a team in place, but we have to look ahead.  You look at the people who are coming up today - public service leaders, such as Ravi Menon.  He was in the news recently.  He was Deputy Secretary in the Ministry of Finance, about-to-be Second Permanent Secretary, MTI.  He started 20 years ago in MAS, did not make the cut for the PSC Scholarships.  Rumour has it that he failed the IQ test.  One of the brightest souls but, fortunately, there are second chances in Singapore.  He did well in MAS.  I spotted him, persuaded him to go to MOF.  It is a new field but he took the challenge.  He did well, was given broader responsibilities.  So, this year, he is going to be 2PS, MTI.  It took 20 years to develop such a person.

     The Ministers are an equally long process.  Senior Minister Goh Chok Tong entered politics in 1976.  He spent 14 years before becoming PM in 1990.  I joined politics in 1984 and took over as PM after 20 years in 2004.  I was the longest-serving Deputy Prime Minister in the world. Happily so.  Therefore, it is not too early now to start looking for the next PM.  Building the next team and leadership of the team is my most important task.  At every election in the last few terms, we have brought in new Ministers and MOSs, people with potential, or Backbenchers and became Ministers.  In 1997, we had Mr Lim Swee Say and Assoc. Prof. Yaacob Ibrahim.  In 2001, we had Dr Ng Eng Hen, Mr Tharman Shanmugaratnam, Mr Khaw Boon Wan, Dr Vivian Balakrishnan, Dr Balaji Sadasivan and Mr Raymond Lim.  That was a bumper year.  In 2006, last year, I had RAdm Lui Tuck Yew, Ms Grace Fu and Mr Lee Yi Shyan as MOSs, and Mr Masagos and Mr Teo Ser Luck as Parliamentary Secretaries.  And we have promoted, from the Backbenchers, Mr Gan Kim Yong, Mr S Iswaran, Mr Zainul Abidin, Mrs Lim Hwee Hua.

     So we have a strong team in place because of what we have been doing.  Now, we must plan for the succession.  Take the Minister for Law, Prof Jayakumar, for example.  He is 67 years old.  By 2011, he would be 72.  I must have a successor ready by then.  I have been discussing this with Prof Jayakumar.  In fact, he has been discussing this with me.  He is anxious that I find a successor because, he says, by 2008, ie, next year, he would have been the Minister for Law for 20 years.  I will have to find a successor, either from the present MPs or maybe a lawyer in the university, AG's Chambers or in private practice.  Where do I find him or her?

     Take the next PM.  Mr Lim Swee Say said yesterday, "I do not know who the next PM will be."  Other countries sometimes have instant PMs or Presidents.  I do not know who the next US President will be.  But I do not worry and the US is not worried either.  I mean I am concerned but I am not alarmed.  But, in Singapore, do you want an instant PM?  I can have instant trees - just plant and water - tree-planting day.  But a PM?  It happens in other countries.  In Britain, the Labour Party has been in power.  This is their 10th year.  So if the Conservatives win the next election, David Cameron and his team will have hardly anybody amongst them who has ever been in government and they will be in charge from day one.  

   One journalist, very astute, asked me, "Dalai Lama zao dao le ma?"  Have you found the Dalai Lama?  But I am not looking for one Dalai Lama, one anointed leader.  I must find and bring in the whole team of MPs and political office-holders. Then amongst themselves, eventually, some of them will become Ministers, some will become DPMs and they will settle, and one will emerge, and will become the next PM.  I am already 55 years old this year.  I just drew my CPF.  MM retired at 67.  SM retired at 63.  Singapore should not have a 70-year-old Prime Minister.  So what sort of people are we looking for for this succession?  We are looking for people in their early or late 30s, young enough to be young still in 10-15 years' time, and somebody to come out from that group. And I want to be able to assemble together the best possible group of such young 30s and 40s, so that we can offer Singaporeans the best choice. Then, 10 years from now, one of them, at least, will be ready to take over as PM.  Last election, I had brought in quite a number of under 30s, the P65s.  But I need to reinforce the team further. Next time, I need the P70s and then the P75s. And then, I will have a more rounded team.

     So the question is:  how should our system work so that we can find the best top team for Singapore?  Will it make it easier to find this team and will we get a better outcome by making it harder for people to come in and making salaries low so that you will not come in unless you are prepared to take a large pay cut.  How does that help Singaporeans have a better choice?

Let me tell you the PAP's experience in recruiting talent.  We are looking for able and committed people. They are moving up their careers. Some of them are at the peak of their professions.  Some of them have careers, but they have decided that they will spend time doing community work.  Mr Lim Biow Chuan is one of them. Ellen Lee was another.  Others have become almost full-time volunteers or have become full-time volunteers, unpaid workers, like Denise Phua.

The key criterion for us is not how successful their careers have been or how much they earn, but whether they have shown that they care, not just for themselves, but for others beyond their immediate families. And that is a question I ask their referees when I write letters to the referees to give me their views.  Have they shown, in any way, that they care for others and have done something for others?

For office-holders, we are looking for people who can run a Ministry, make things happen, take a higher view and persuade people to follow them.  I can tell you that we have turned down people who are very successful in their professions and in fact, who are visibly keen to be fielded.  Because we did not feel comfortable, we were not quite sure what their motivations were.  On the other side, we have searched out people doing good work in the grassroots who can contribute on a wider stage. And that is why we have this line-up of 24 new candidates in the last General Election. And that is why Parliament today has a changed composition - sounds different, feels different.  Sometimes, for the older Members, they say, "Wow, the world has moved on. How do I continue to make a contribution in this debate?"

We value people to whom an income is irrelevant and who will do what they feel they want to do regardless of the pay.  When we find them, we will field them if they are suitable.  But I cannot design the system on the assumption that everyone is like that because not everyone is like that.  It is very hard to persuade a good person to take the plunge.  In China, "xia hai" means go into the private sector.  I think in Singapore, this is "deng shan", climbing the mountain to enter the Government - they think very carefully.

They have to disrupt their lives, enter the hurly-burly of politics with all these uncertainties - so many demands and new responsibilities, public exposure and constant scrutiny, loss of privacy.  Ministers are like a fish in a goldfish bowl, MPs too, in fact. Quite a number of candidates asked me before they came in, "If I become an MP, can I still wear shorts and go to the hawker centre for my Sunday breakfast?"  I said, "Yes, go ahead.  I do it once in a while.  If people wave at you, you wave back at them.  If they do not wave at you, you better get scared."  But loss of privacy is a real problem. And risk of failure, not just a loss to themselves, but also the risk to Singapore, the shame, obligation and the burden of the knowledge that you may have let Singapore down.  Because not everybody succeeds and not everybody does equally well.  And even if you do okay, others may do better and there will be comparisons made.

You take the 2001 batch. We had seven musketeers or samurais, three doctors - Balaji, Vivian and Ng Eng Hen.  They are still with us.  They have all served well but they have taken different routes.  Ng Eng Hen has become Minister; Vivian was acting Minister and subsequently became Minister.  When I promoted Ng Eng Hen and Vivian, I spoke to Balaji.  I said, "You have done good. Your Ministers are satisfied with you but I am not ready to promote you to be Minister yet.  I do not think you are ready but I am promoting Ng Eng Hen and Vivian, and I have to tell you, to be fair to you.   So if you feel that you want to decide that this is not for you and you want to go back, do something else, or go back to neurosurgery, this is the time you have to think about it."  Balaji said to me, "I am staying.  I am a neurosurgeon.  I calculate all possible consequences, good and bad, before I operate.  I have come in.  I have decided. I have stopped practising."

At first, we encouraged the doctors to half-practise so that they keep their hand in just in case, but Balaji and, in fact, the other two all decided that it is not fair to the patients. They are no longer au fait operating everyday, not current with the latest developments.  If they make an operation, even assisting somebody else, something goes wrong, it is on their conscience.  Balaji told me "I have come in, this is my future and this is what I am going to do.  If you find me useful as an MOS, I will be happy to serve."   So I said, "Good for you.  I think the more of you."  That is the sort of people we are looking for.  But it is not easy to find people who are like that.

Before the last General Election, I spent a long time talking to many people, specifically talent - spotted and head-hunted key potential candidates, some office-holders, others who could make particular contributions.  I did not just depend on the tea sessions that whoever came in for tea and they percolate up and eventually we are left with whatever comes up.  We looked at their profile and we went out to talent spot.  The people who saw me, nobody accepted on the spot.  In fact, if anybody had accepted on the spot, I would straightaway have made a mental mark and probably would have wondered, "Should I proceed?" Because it would have shown that he did not understand what a big thing it was that I was asking him.

     But, fortunately, after they had time to think it over and discussed it with their family members, and several more chats with me, a good number agreed to come in for various reasons. One said, "I am a sucker for a challenge".  One said, "Yes, I want to do it.  My family agrees.  I can come in."  Another one said, "Well, I really am not keen because I do not think I am good enough.  But if you tell me that you cannot find somebody more suitable and you think that I am up to the mark, I am prepared to go on your word."

I did not discuss pay with them.  But I know that amongst those who came in, from the private sector, people like Grace Fu, Teo Ser Luck, Masagos, most took pay cuts. Ditto for those promoted from the backbenchers like Gan Kim Yong or Iswaran.  They knew this too because they know what the scales are.  But despite this, they agreed to come in.  If the gap between the Ministers and the private sector is wider and widening, will it make it easier or harder for me to assemble a new team?  Will Singapore have a better or poorer choice of leaders?  Will we and our children be better or worse off in 10 or 20 years' time?

It is not just Ministers, we also need quality MPs. Therefore, we need a proper MP's allowance.  We considered this very carefully back in 1994 when we first went on this benchmarking. Should we benchmark MPs to a token amount or a substantial allowance?  We hesitated to set a substantial allowance for fear of people pursuing the job for the allowance.  The concern is not on the PAP side because we put our candidates through a whole series of tests and chances are, if somebody is like that, we will catch him early; and if we do not catch him early, we will throw him out soon.  But how about the Opposition candidates? Do they have the same Quality Control?

In the last General Election, the NSP team in Pasir Ris GRC said that if they were elected, they would provide free healthcare and contribute one-third of the MP's allowance to a community fund. They could only do this because we had revised the MP's allowance up.  Fortunately, the voters were not taken in, so I have Teo Chee Hean who is here today as well as Michael Palmer and several others.  Eventually, we decided that we will have a substantial allowance to reflect the quality of the people we want.  Backbench MPs who do their jobs conscientiously make major sacrifices of their time and career and this is so whether the MPs are working in large firms or running their own businesses and practices.  I say this frankly, the MPs will not want to say it of themselves, but they all know that it is true. Your top boss may say, "Marvellous!  This is national service.  It adds to the lustre of the firm."  Your direct boss or the one above him will say, "You make up your mind. Do you want to be a lawyer or do you want to be an MP?"  And if you have no bosses and you are your own employer, your clients will ask, "Will you have time for my problems?"

So the MPs who have come in as backbenchers have a very tough time.  And the MP's allowance is not going to make good the sacrifices but it is going to be an important gesture to recognise the effort that they have put in. And so, when we revised the rest of the salaries this time, we not only revised the MP's allowance but re-pegged it to restore the relativity which was there in 1994.  And I am quite sure that Mr Low Thia Khiang and Mr Chiam See Tong have also experienced this, not abstractly, but themselves, because without this proper MP's allowance, I think it would have been very difficult for them to continue as practically full-time MPs for nearly 20 years.

Therefore, this way, we built up a high quality Parliament.  This Parliament may be small.  It is only 84 plus 9 plus one, which is 94.  But it compares well with Parliaments in any developed countries - US, UK or Australia - anytime. We are not as eloquent as the British in the House of Commons. We may not be as rude as the Australians in Canberra Parliament, or maybe we are just more tongue-tied.  In Canberra, Paul Keating, who was Prime Minister, would call the Opposition - I looked this up, by the way - "sleazebag, harlot, piece of criminal garbage, animals on the other side".  I apologise for the unparliamentary language.  In that, we cannot compare.  But in the quality of the debate, in the preparation which goes into the speeches, in the thinking, we compare with any of them.  Man for man, if you meet them, I think our people measure up, and that has shown itself even in this debate, this time, on this subject.

     But to keep like this, we have to pay people properly.  Otherwise, we are not going to get good people; and if we do not have good people, the standard of government will go down over time.  And if we have a bad team, it is very difficult to build back with good men, because good men and women will not want to work for a bad boss, and will not want to belong to a dud organisation.  They want to go where the excitement, the challenge and the quality is.  So we are here, we cannot go down and come back.  We go down, and we go down further.

     Just now, I mentioned the Dean of the Kennedy School.  Now I read to Members an email from a friend of mine.  This is the former Dean of the same Kennedy School, Graham Allison, whom I have known for 25 years. He was the Dean and he is now a Professor there.  They make a study of governments.  That is their profession.  I will read you his email.  He was in Korea.

     'On Friday, I picked up the Straits Times, and on the front page saw the story about your comments about Ministers and civil servants' salaries falling behind the benchmarks in the private sector.  The notion that the Minister making $1.2 million might be underpaid will strike most Americans as incredible.  But I would say right on.'

     He is not just doing a rah rah.  He explains:

     'Singapore's demonstrated interest in "first-class governance" is a fascinating topic for study.  In any other realm of life, we believe that there is a connection between financial rewards and the ability to recruit and sustain a first-class workforce.  Yours is one of the few governments in the world that practises that bit of common sense.  Good for you.'

     "In any other realm of life, we believe that there is a connection between financial rewards and the ability to recruit and sustain a first-class workforce."  This is not just an uneducated view.  This is the view of somebody who headed the School of Government in Harvard.

     This system of paying people properly has worked.  We are not arguing the merits of this pay increase in the abstract, just in principle, in an ideal world or in theory.  But with the benefit of the experience of the last 20 years operating the system, adjusting it and moving step by step.

     Look at the last 10-15 years since 1994.  We have maintained an inflow of talent in the civil service, not just the Administrative Officers but also the other services - the uniformed services, teachers.  The quality of the service has gone up because we have had the inflow.  We have been able to turn over the under performers.  We have brought good people in, and it is no longer so easy now for the private sector to poach from the Government.

     One private sector media executive, who was in the Government, says, "You must say this because we used to be able to poach people from the Government any time.  Now we can't poach AOs any more."

     We have cleaned out.  The under performers have gone.  And it has made an enormous difference to the quality of the service. 

     I know some MPs want us to do public lynching - this person, for the following shortcomings, hang, drawn and quartered.  Ministers even better!  If I did that, would I have civil servants and Ministers?  Do you do that in your companies?  It is always with finesse and politeness - resign, given notice amicably.  So, just because you do not see us exercising discipline visibly and ostentatiously does not mean that we are not managing the system tightly and properly.

     For the Ministers, we have brought in people in each election.  Money corrupts, says Prof. Thio.  Power corrupts, yes.  But in this system, have we had wrong people come into Government and corrupt the system?  Where?  Instead, because of this, we have got the Government clean, efficient, capable.  So, when we had the Asian financial crisis and SARS, team Singapore rose to the challenge.  When faced with competitive challenges from China and India, the team comes up with new policies to keep Singapore competitive - the Biopolis, the IRs, create new jobs, replace old jobs lost, Workfare, ComCare.

     Could we have done all these?  Would we have had the instruments, the team and the capability to do these had we not moved boldly in 1994, and again moved in 2000?  If we had hesitated on 11th September 2001, then we would be 30% behind where we are now, and I think we would have already lost many people.  We will be in deep trouble today.

     Without proper pay, the integrity of the system will also be at risk.  High pay does not guarantee a clean system.  Enron is an example.  Some MPs have mentioned.  I concede that.  But, nevertheless, proper pay enables us to keep the system clean.

     Look at so many countries fighting corruption all over the world, all over Asia, all over South East Asia.  Members will say that these are backward countries.  We are now First World.  Even in the developed countries, in the UK - Tory government, Labour government - they have problems of sleaze.  What does "sleaze" mean?  "Sleaze" means Ministers giving advantages, Ministers receiving benefits, Ministers staying in hotels, Ministers arranging for things to go through.  This is Britain, not a 42-year old country.

     In the United States, the Republicans lost the mid-term elections.  Iraq was an issue but so was sleaze, because their Congressmen and Senators were found doing bad things with money and the voters punished them.  But that does not clean up the system.

     In Asia, China is fighting a wave of corruption, not just ordinary corruption but top-level corruption - government officials, Party leaders.  The Party Secretary of Shanghai, Chen Liangyu, Politburo member, removed.  Mayors, Vice Mayors, some of them executed.  They can execute one corrupt person.  Can they eradicate the practise of corruption?  So the problem continues.

     In South East Asia.  Yesterday, Mr Lim Swee Say told Members one story.  I will tell Members another.  I met a prominent South East Asian businessman very recently.  I told him that corruption is a problem.  He said, "Yes, money politics. The government says they will eradicate it, but it cannot be eradicated.  It's permanent."  Why?  Many reasons.  But one factor - and a major factor - is that the public sector salaries are way below the market.

     We have got to keep our system clean at all costs.  "At all costs" means, if anybody does wrong, however high up it goes, it will be investigated.  And if there is any allegation, however high up that allegation goes, it will also be investigated.  We have done it with Ministers.  I have been investigated because of Hotel Properties Limited (HPL).  Younger ones may not remember, but it was 10 years ago.  We had a long debate in this House.  So has the Minister Mentor.  Nobody is above the law.

     What will happen if people are not properly paid?  Well, it will start with small things.  Eventually, it will get worse, and then we will be just like the others.  I can tell Members some stories about that, but I will have to save that for another time.

     Our whole system works like this.  It is a culture which is well established.  Everybody knows the rules.  Everybody knows that if he touches something which is wrong, he will be found out. Anyway, he should feel bad about himself.

     Therefore, because we have this system, we can deal with big issues, big things, properly.  Take the IR.  For the two tenders, billions of dollars were at stake.  One was $5 billion and the other was $4 billion.

     What is remarkable about them?  It is not that they came, but how we handled them.  Usually, for big projects, because so much money is at stake and it is so easy to corrupt people, we do a tender on price.  They have to seal their bid and put it into the box.  Witnesses open the box.  It is quite objective - highest price wins.

     I wanted to do that for the IR, because it is such a big project, and a big subjective element in assessing the project.  And if we decided to go on beauty parade, then there will be arguments - choose the best one, were you really fair and so on.  So I stayed very firm to the line that I want the project to be tendered, and we designed a tender scheme to make it work.  Unfortunately, it could not work.  So I visited Las Vegas.  I went to four of the casinos, talked to their CEOs.  They all raised this with me.  They said, "This won't work.  You won't get the best project."  So I asked, "What should we do?"  The reply, "Fix the price and compete on quality."  I said, "How do I assess the quality.  It is subjective."  They said, "You have to do that.  Otherwise, you will not get a good project."

     Some very clever people said, "We know what you are trying to do.  You want to design a tender to make us do the right thing."   Says a Chief Executive, "I am a mathematician too.  I know how these tenders work.  So if you set these rules, I will play your game.  But I think you are setting the wrong rules and you are making us play the wrong game."

     So when I came back, we changed the policy and we decided on a beauty parade.  It is not Miss Universe.  We have to have a whole system assessing the project objectively on many criteria.  Some we can measure, some we have to judge, some it is subjective feel.  And at the end of the process, we must have the integrity of the system and the quality of the judgment, so that Singaporeans know that we have done the right thing.  The participants agree that we have done the right thing, and nobody suspects or alleges any hanky panky.  So we did that.  And at the end of it, through proper procedures and due diligence, the Evaluation Committee picked the two best projects for Singapore.  Who else can do that in the world?

     Merrill Lynch wrote us up and I quote:

     'Singapore's process was transparent, supported by the community and attracted the world's largest and best IR companies.  The government's decision was accepted and respected by all parties, and people believe the two winners were the best bidders.'

     Think about that.  What kind of civil service, what kind of Ministers do we need to make that happen? Prof. Jayakumar was on the Committee; Mr Lim Hng Kiang, Mr Raymond Lim, Dr Vivian Balakrishnan, Mr Mah Bow Tan, supported by Permanent Secretaries, Singapore Tourism Board and Sentosa Development Corporation.  System discipline, no leaks, no bribes, no monkey business.  Therefore, we get the best projects for Singapore.  How much would it have cost to just adjust half a point here, half a mark there, and you come up with a different outcome?  How much in that kind of a society would participants have found ways to encourage people to come to such outcomes?  But, in Singapore, they knew what the game was and we got the best outcome for Singapore.  I think that is worth quite a lot.

     So competitive salaries is one of the basic requirements to protect the integrity of our institutions.  Many MPs have raised the other side of this - the question of moral authority.  They have made this argument that public service requires selflessness and sacrifice, that Ministers especially must have moral authority to lead, not just to manage.  Therefore, you cannot expect wages comparable to the private sector.  That is the gist of the points made by many MPs like Dr Thio Li-ann, Ms Sylvia Lim, Mr Lim Biow Chuan, Ms Denise Phua, Miss Eunice Olsen and others.  I agree with these propositions in principle.  You must be selfless, you must have some sacrifice, you must have the moral authority to lead, to get people to follow you and, therefore, it cannot be exactly the same as the private sector.  So I will differ slightly from Shanmugam.  Shanmugam says, "Why should there be any sacrifice?"  I say, "Let there be a sacrifice so there is no doubt that the person in this is not making money and not in this to make money.

     But let us ask: where does moral authority come from?  I think it comes from leaders who care for the people, who improve the lives of the people, who are motivated to serve others and not enrich themselves, and from leaders demonstrating that they are more often right than they are wrong.  You need a bit of financial sacrifice.  Some, but this is not an auction.  You sacrifice "X", I sacrifice "2X", you match me, and the one who makes the biggest self-sacrifice will get the job.  You look at the countries which have low-paid Ministers.  Do they have higher standing with their people because of that?  I know that Ms Denise Phua, Mr Lim Biow Chuan and others disagree with this.  And I know that many of these who have spoken up for the opposite view hold their views out of deep conviction.  For example, Mr Lim Biow Chuan, according to Dr Lee Boon Yang who has known him for many years, has held this view ever since Dr Lee has known him.  He supports the PAP on everything else but on this one, he thinks we should not do it.  I respect those views, but I cannot agree with that.  In particular, I would disagree with Ms Denise Phua when she talks about the nexus of power and money.  I am not worried about somebody wanting to become PM for the sake of $4 million.  I am worried about somebody wanting to become PM and hoping to collect $400 million – pay is zero, but collect $400 million under the table.  That is what we fear.

     We do not expect Ministers to earn as much as top earners in the private sector but it must not be too far out of line from what a person of similar ability can earn outside, otherwise it becomes not workable.  That is the principle on which the benchmark is based.  First, estimate what the successful corporate executive or professional can earn, then you apply a discount, then you work out a formula that is fair and stick to that formula - whether the things go up or down, follow that formula.  When the private sector moves, we also adjust. That is what we call 2/3M48.

     There are some people who want to benchmark Ministers against their previous professions.  For example, they say engineers, they are paid, I think, $600,000 and there so many engineers in Cabinet, so that is what you should be paid.  Ms Lee Bee Wah was quite alarmed.  She raised it just now to point out that quite a number of engineers are no longer in that list because they have moved out to become Chief Executives and other things.  And I am saying this again here by special request of the Ministry of Education and MTI because they are very worried that people may take that engineers column literally and the students will stop studying engineering and go and do law.  So I think Ms Lee Bee Wah did us a favour, explaining that engineers have done very well and lots of bright students ought to go and study engineering. 

Or veterinary surgeons. There was one letter in the Straits Times which says Dr Lee Boon Yang is a vet, so you should pay him a vet salary.  Dr Lee Boon Yang is not just a vet.  He was a vet.  He was spotted by Mr Goh Chok Tong, who invited him to tea and assessed that he was not just a vet, and fielded him.  From Parliamentary Secretary, Senior Parliamentary Secretary, Minister of State, Minister - he proved himself at each step. He is steady, has judgement, can size up people, can get good people to work for him and get things done.  So such a person can do many things, whatever his original training, and I should say, in case Members do not know, that quite a lot of very talented people became vets in the 1960s and 1970s.  Colombo Plan scholarships were offered for veterinary science. At that time, pig farms were a significant part of our economy and we needed vets to look after them.  So if you look at the vets who have done well in the public sector, it is not just Dr Lee Boon Yang.  Cheng Tong Fatt, who became Permanent Secretary (National Development) and he became an Ambassador to China, Chin Siat Yoon, currently Ambassador to China, Ngiam Tong Tau, the brother of Ngiam Tong Dow, CEO of the AVA (Agri-Food and Veterinary Authority) for many years.  Three very able people - all three of whom separately were awarded the Meritorious Service Medal.  So if you can find me some more vets like them, please tell me.  I will invite them to tea.

     There have been many suggestions from Members to improve the benchmark.  Mr Teo Chee Hean dealt with most of them yesterday.  You can argue about the technicalities and refine them, and we will consider the refinements and improve the benchmark incrementally.  For example, Ms Denise Phua suggested having a range around the benchmark rather than at a single point.  I think, in the private sector, they call them compa-ratios.  You have a benchmark and you then plus or minus maybe 20% or so.  We do not have that exactly but effectively we do that.  For example, we often appoint Acting Ministers - the substantive grade is Senior Minister of State.  So he is not receiving the MR4 benchmark.  He is receiving one below that, SR5 Permanent Secretary's salary.  If he is confirmed, he goes to MR4 and there is also room for Ministers to be promoted to MR3 and MR2.  So Ministers have this range above and below the benchmark but whatever the fine print, the benchmark is basically sound.

     Mr Teo Chee Hean has also explained why the $2.2 million figure which the benchmark has produced this year is reasonable.  I leave the technical verification to PSD and the Minister-in-charge, but I apply a reality check.  First reality check - $2.2 million ranks 206 amongst private sector earners.  Are the 206 jobs in the private sector more important than being a Minister and being a Senior Permanent Secretary?  I think presently there are only four Permanent Secretaries who are in the MR4 grade and above and the Ministers.  206 jobs in the private sector bigger than those?  50 maybe, 100 possibly; 200, I do not believe so.  My second reality check - what are the CEOs of the companies earning?  Business Times published a table on Monday, listing the companies in the Straits Times Industrial Index.  I do not think they have data for all of them but they have data for most of them.  So they published a list of the CEOs and how much they were earning.  I have taken that and made a table which I would like the Clerk now to distribute.  [Copies of Table distributed to hon. Members.]

     This is what you see in the Business Times, but I have also added a column for market capitalisation.  Just for a sense of size.  55 companies.  The top earner was Venture Corp - Mr Wong Ngit Liong earning $16.75 million plus, followed by Wee Cho Yaw, $9 million, all the way down to a company called "People's Food", earning quarter million dollars.  The middle number of these 55 would be probably between 27 and 28 - Comfort Delgro and Genting International - for $1.75 million.  So $1.75 million for two companies with market capitalisation of $4 billion to $5 billion.  My Ministers are earning $2.2 million.  I think we passed the sanity check.

     But I would also ask you to look at the market capitalisation column because it is interesting.  What are the biggest companies?  The banks - $30 billion plus.  SingTel is the biggest, $50 billion.  And I would ask you this question.  If Singapore Inc were a listed company, what would its market capitalisation be?  Think about it.  My GDP, which is the profit earned in a year by Singapore Inc, is $210 billion.  The price earning ratio on the SGX average is now 20.  If I calculated a market capitalisation, if Singapore Inc went for IPO, this is a $4 trillion company.  So I think that we are well within the right ballpark for what these jobs are worth as Ministers.  But whatever the formula, whatever the detailed number, the reality which you cannot run away from is that the private sector is moving, it is moving up, and so must we.

     Several MPs suggested that we delegate our responsibility for setting pay to an independent pay commission.  There is a conflict of interest, we cannot settle our own pay, let somebody else do it.  But I do not believe this will settle the matter because whatever the commission recommends, finally, the responsibility comes back to the political leadership.  The buck stops here.  If he recommends high, are you going to take it?  If he recommends low, are you going to solve your problem?  Who will answer for the outcome?  So, finally, the responsibility lies with the political leadership.  The Cabinet is accountable to Parliament, it is accountable to all Singaporeans.  Every five years, Singaporeans have to judge and decide whether we have done the right thing, whether we have delivered on our promises, whether they have got value for money.  And, in fact, at every election, Mr Low Thia Khiang and Mr Chiam See Tong have made this an issue.  Starting from the very first election in 1984 which I contested, when Mr Chiam See Tong made a very powerful speech at the Fullerton Square and said, "One month salary for the Minister, one year's work for the worker and you still don't have."  So that, finally, is the test.  Are we doing the right thing?  The people have to decide whether we have kept the trust with the voters.

     The Opposition and some other MPs too disagree with this Government's approach and have suggested various other ways of doing it. Ms Sylvia Lim made a pitch just now to say this is unrealistic, only 0.1% of people in that top category.  Why not look at the median wage, which is US$2,000 or S$3,000?   But will that approach do better at producing a team for Singapore and producing a successor leadership, a new PM, DPM and Cabinet for Singapore? 

     Just as a thought experiment, I would ask Mr Low Thia Khiang and Ms Sylvia Lim to produce their line up of Ministers, their dream team. Name it.  They do not have to be Workers' Party members.  You can take and choose any Singaporean, including PAP Members.  If you cannot find a complete line-up for the Cabinet, at least tell us who will you appoint as Minister for Finance, who will you appoint for Minister for Law, from the best people out there in the private sector.  Tell us and tell Singaporeans how much you intend to pay them. The median wage? 100 times the 20th percentile? How much do you want to pay them?  Is it realistic to have such a dream team if you do not pay them properly?  Then Singapore can decide. 

I am not saying that we have the best possible team, that this team is perfect. I readily concede that we need to reinforce it.  I readily concede that the ability and the skills of the Ministers vary.  Each is different, some are stronger than others, some have skills which complement one another.  But every Minister is worth his pay.  Those who make the grade stay, others who do not leave.  And by paying properly, we can improve, we can strengthen the team over time.  We can compare with other countries.  But unfortunately the comparison was done wrongly by Mr Low and some others.  Because if you compare with other countries, you will find that other countries also face the problems of paying their political leaders properly.  It is not true that low pay works better for them.  The reality is they cannot master the political consensus to pay more realistic salaries because the politicians are in low standing, the public will not support it.  In some countries, the politicians rank below used car salesmen in public trust.  You say you want to pay yourself, what have you done to justify this?

     But benchmarking to the private sector is not something special to Singapore.  The other countries tried it too, although they had not been able to do it.  The Americans tried it, the British tried it, did not work.  Yesterday, Mr Shanmugam delivered an outstanding speech in the House, not all the Members were here.  One part of the speech which the newspapers did not report was what he said about what happened in America in the Judiciary which is, according to the American Chief Justice Roberts, a constitutional crisis.  And he went on to the details, but I think it is an important subject. 

     Let me explain again what happened to America.  America established a market-based framework in 1989 to adjust government salaries annually, based on increases in private sector wages.  So every time the private sector went up, the government went up, benchmarking to the private sector.  They made one adjustment. They were supposed to follow through every year.  Congress never followed through for fear of a public backlash.  So now, the whole system is stuck because all the salaries are related - the Congressmen, Secretaries of the Departments, civil servants, Judges - all their salaries are inter-related and if they do not move on, the Congressmen, everybody is stuck.  So the Judges are particularly without recourse because nobody speaks for the Judges.  And that is how they have ended with a constitutional crisis.  And I would quote a passage from Chief Justice Roberts' annual report last year. The whole of his annual report was devoted to this one subject of judicial salary. I will just quote one paragraph:

"The dramatic erosion of judicial compensation will inevitably result in a decline in the quality of persons willing to accept a lifetime appointment as a federal judge. Our judiciary will not properly serve its constitutional role if it is restricted to (1) persons so wealthy that they can afford to be indifferent to the level of judicial compensation, or (2) people for whom the judicial salary represents a pay increase.  Do not get me wrong - there are very good judges in both of those categories. But a judiciary drawn more and more from only those categories would not be the sort of judiciary on which we have historically depended to protect the rule of law in this country."

      So the Americans have a very, very serious problem.  So, too, the British.  They also have a policy.  Top end of senior civil service pay, they call it the "SCS", senior civil service. So we have at least 80% of the private sector median for broadly comparable jobs, and the Ministers are linked to the senior civil service. So comparable jobs, private sector, median 80%, we are looking for comparable jobs, private sector, median 2/3.  So, in fact, their formula is more generous than our formula but they have not been able to do it.  The latest report by the independent salaries review body - they have a salaries review body - said, "Since 2002, we made clear that the government was failing to fund the senior civil service pay system in such a way as to meet its own targets. The government acknowledges that it is proving more difficult to recruit high quality candidates from the private and wider public sectors." 

      So you can be a 5,000-year old country like China, 1,000-year old country like Britain, a 250 year old country like America, or a 42-year old country like Singapore.  Human nature takes a long time to change.

     What do they do?  They cannot raise salaries, but find other ways around the problem - short term in office, then make up earnings through lectures, connections.  Bill Clinton's earnings, you have heard Mrs Josephine Teo yesterday, as an ex-President, $40 million in lecture fees, that is not bad; $12 million in book advance, never mind the royalties per book. And the wife also can write a book, she also has $8 million book advance.  Somebody said to me, "But that is all right.  That is private sector.  It is good for him."

If you are in a job and you are calculating how do you look after yourself day after tomorrow, after your retirement, what does that do to your motivation, your commitment, your sense of responsibility in the public sector, in the job.  But if you do not do that, how do you take care of your family?  That is the system, that is the revolving door.  Do we want that?

     There is another approach.  You can top up salaries with additional perks.  In Hong Kong, until 1997, it was a British colony, so every civil servant has a fully paid holiday for the family to the UK every year because it is meant for the expatriates, Englishmen.  So even the Hong Kongers who were recruited into the service, they also get a holiday in Britain.  Even the Hong Kongers whose children are Hong Kong Chinese get an allowance for their children to be educated in public schools in the UK.  That is part of the terms of service.  Other countries too.  One ASEAN Minister told me that the system was like that and there was nothing cloak-and-dagger or underhanded about it. The system is like that.  As a Minister, once a year, she and her family are entitled to one holiday, fully paid, anywhere in the world.  Is that better for us?

     We have decided to be open, upfront, transparent – what you see is what you get (Wysiwyg), or, in this case, what you see is what they get.  No hidden perks, no post public sector benefits, which is what Ms Sylvia Lim mentioned in the Straits Times, only the pension for the office holders which is the same as what the civil servants receive and even that has been frozen since 1994.  We are going to study how to include the pension into the benchmark comparison as well as whatever superannuation benefits which the private sector has.  It is not so easy because, in the private sector, you have golden parachutes, golden handcuffs, all kinds of things, which do not show up in the annual pay.  So I am not sure if I count them in, whether I am going to be behind or further ahead, but I think we should find out what the status is, so that we can understand the real comparison and position.

     Besides, these salaries are not fixed.  One third of the Ministers' package is presently variable, after the revision, half is going to be variable and it depends on two things - the GDP, how well the economy is performing and his individual performance.  Teo Chee Hean has explained why we have chosen GDP as the umbrella indicator to bring everything together, not just low income family, but also middle income, high income, security, infrastructure, housing, health.  It all comes down to GDP.  Because with that, I can solve many problems.  But because different Ministers have different responsibilities, I also have for each Minister a performance bonus. The Prime Minister decides how much the Minister will get, how he has performed in his portfolio.  I do not want Teo Chee Hean to spend all this time worrying about the bottom 20%.  What will happen to the SAF?  But I do want other Ministries, like MCYS, to worry about the bottom 20%; MOM to worry about jobs; MTI to worry about generating growth, getting investments, and that goes into the performance bonus for each one of the Ministers.

     There is a range, because not all the Ministers carry the same burden or have the same responsibilities.  And the load will vary from year to year because the challenges and the circumstances change.  If there is SARS, if there is a security issue, if there is an economic recession or an education transformation, our focus goes there.  But there is a distribution, some get more, some get less.  I have a table which I will ask the Clerk to distribute which shows you the numbers and the distribution. [Copies of table distributed to hon. Members.]

     So you can see that we have been stringent in our evaluation.  Only two Ministers were in the highest bracket of eight to 10 months' bonus, more than a third were in 0 to 5 months' range, and the rest were in the middle, and similar numbers for the Ministers of State.  The Parliamentary Secretaries are on a more stringent scheme.

     I should explain that this is not over and above the benchmark.  This is part of the benchmark.  So when we say MR4, it is not a guaranteed amount.  It depends on growth and performance, but we depend on every person giving of his best so that, as a team, we can deliver results for Singapore.

     Sir, these are all the arguments which we can make and which I think are strong arguments why we should do this.  But despite these arguments, I know that a lot of people still find the Ministers' salaries policy difficult to accept.  And I think there are some reasons for this.  The income gap is widening, the economy is doing well but some people and businesses are still facing difficulties.  As one grassroots leader told Mr Lim Boon Heng: "Ministers' pay goes up, our pay did not go up, our business has not improved, prices of goods and services have also gone up."  These are real problems on the ground which people feel and which colour their perceptions.  So some people say, "In principle, I support the salary revision, but this is not a good time."  I agree.  RAdm Teo said, "But we must do it in good time", meaning early.  But I would concede that this is not a good time now because we have just raised GST, not everything has been sorted out in the economy.

     But on the other hand, firstly, there is no good time.  Secondly, and more importantly, there is urgency.  I considered waiting one year. This might have made the package easier to explain and might have shown more sensitivity because we have just done hard policies with the GST.  But this is a problem which is very urgent.  It is urgent because it has been seven years since we last adjusted.  Since then, the private sector has surged ahead.  You have seen the charts RAdm Teo has shown to you for the benchmarks, particularly for MR4.  The Government held back after 9/11.  It held back after SARS.  In fact, it had not merely held back; it took pay cuts of 10% and, after SARS, another 10%.  We took the pay cuts but, in the last two years, the gap has still widened, and the private sector is now rallying ahead.

     If we look ahead, the whole of Asia is booming.  Many Singaporeans are going after opportunities all over Asia.  If Singapore does as well as we expected to do, then the opportunities and rewards in the private sector are going to be tremendous.  And not just the dollars, but the excitement, thrill, the adrenalin of going into new markets, starting new businesses, creating a new presence in first-tier Chinese cities, second-tier Chinese cities, the Middle East, India, and Central Asia.  If we wait till next year or the year after, the Government will lose people, the service will say this is a government which shies away from a politically prickly decision and, meanwhile, we will lose ground further.  By the time we move, even a 33% increase will not be enough.

     So we cannot afford that.  We have to move now.  And we have to keep on adjusting as the private sector moves, because this is a dynamic situation and we have to stay abreast of it.  That is why the Ministerial Statement says we are making one move on 1st April 2007, a second step on 1st January 2008 and the third step on 1st January 2009.  If Asia continues to thrive, some of these adjustments are going to be large.  But we have to do them.  Not a fresh decision, but as a consistent policy already debated and decided upon.  This policy is for the future.  Mr Lim Swee Say explained it yesterday as "Old Lim Swee Say" and "New Lim Swee Say".  So I told him both Lim Swee Says better make a speech in Parliament, which he did.

     But let me put it my way.  We are preparing for the future against the backdrop of a new globalised Asia completely transforming itself.  And this policy is intended to work not for us, but for a new generation of Singaporeans.  The test is not whether my present Ministers will leave, because I know some MPs asked, "Who has left yet?"  I think Ms Sylvia Lim asked that question too.  The test is whether we have good Ministers here to face good MPs in this Chamber in 10 or 20 years' time. 

       We must and we will tackle the problems which people feel and which make them sour on this issue - income gap, middle-aged workers, healthcare costs. These are important priorities for me and my team, and we have started many programmes to deal with them: Workfare to help the lower-income workers; ComCare to help the needy; improvements to Medisave, MediShield, Medifund to make healthcare more affordable; and upgrading of HDB flats to enhance the value of your property and improve your quality of life. This applies even to rental flats; it goes all the way throughout our society.  We will do more to help those who are in trouble - the poor, the needy and the unemployed.  How can we do so most effectively?  By building a good team which will grow the economy, conceive the ideas to tackle these and future problems. And by having good people who are in touch with your needs, doing their best to make your life better, and who care for Singapore.

     This is going to be a controversial and emotive issue for a long time.  But I am convinced that we are doing the right thing.  The cost of building the team to serve Singaporeans is tiny, compared to what they can deliver, what is at stake.  What is the cost of having the wrong team in charge of Singapore?  It is what the Beijing News article called "zi hui cheng ben", ie, opportunity cost of making the wrong decision.  Where would we be now, if we had not thought of NEWater many years ago?  How would our children be coping if we did not have first-class schools in every HDB town and 40% of every cohort failed PSLE, which used to be the case when I was in school?  What price do we put to safe streets and law enforcers whom the public can trust?  Have we made the right decision?  I am convinced so, but time will show and Singaporeans will decide.  By the next election, we will present our report card to Singaporeans, then judge us on our performance, whether this Government has delivered on its promises, whether you have better jobs, better lives.

     Mr Speaker, Sir, on Monday, RAdm Teo quoted a piece from Richard Vietor, a Harvard Business School professor, who wrote a chapter on Singapore Inc.  I think some of his passages are worth quoting.  I will just read you this:

     "Singapore has become a rich country.  It has remained secure in Southeast Asia amid countries far larger and somewhat less stable than itself.  Singapore has done this through a combination of great leadership, effective developmental strategies, and strong government institutions.  It is difficult to think of another country with a similar set of government institutions that work so well...

     "Yet, Singapore's future remains uncertain.  While it continues to grow quickly, the challenges of becoming a knowledge-based economy are immense.  Singapore has done it in the past and thus serves as an admirable model of what is possible.  It remains to be seen if the country can continue in the future."

     It is the task of all of us to get the best team to lead Singapore, and to prove that Singapore's success can continue well into the future. 

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