Singapore PM to freeze his pay for 5 years, donate pay hikes

Singapore PM to freeze his pay for 5 years, donate pay hikes
Posted: 11 April 2007 1643 hrs

SINGAPORE: Prime Minister Lee Hsien Loong says he will hold his own salary at the present level for five years and will donate any increases in his salary during that period.

He made the announcement in Parliament on Wednesday, as the House continues its debate on salary revisions for government ministers and civil servants.

Mr Lee said making a large adjustment in public sector salaries now is politically a most difficult decision.

But it is something that must be done.

While it is very difficult to get people to understand and emotionally accept it, he said the issue is absolutely critical.

"If we do not tackle it now, the problem will not go away; it will just get worse - we will be in serious trouble," he said.

After discussing it at length in Cabinet, and with Senior Minister Goh Chok Tong and Minister Mentor Lee Kuan Yew in particular strongly encouraging him to do it, PM Lee decided to move now because of the overriding importance of keeping public sector salaries competitive.

The Prime Minister said that to make clear why he is doing this, and to give him the moral standing to defend this policy to Singaporeans, he will hold his own salary at its present level for five years.

The Government will pay him his full pay, because that is how the system must work.

But for five years, he will donate the increase in his salary from this and subsequent revisions.

Mr Lee said he does not expect other Ministers to follow.

While it is a Cabinet decision, he told Parliament, he is carrying the ultimate responsibility, not them.

So what the individual Ministers and MPs do is up to them.

Mr Lee said that he knows they already support various worthy causes.

It should not be a public ostentatious display of how generous they are, but a private matter for them to decide at their own discretion, he said.

Mr Lee told the House that the issue is not just about salaries of Ministers and civil servants.

It is about Singapore's future - how it can produce the best government to secure a bright future for the people.

He explained that a strong political leadership and effective government will not happen automatically or by chance.

It only happens through a deliberate, systematic process to build the team and to bring in talent.

But it did not start out like that.

Minister Mentor Lee and the first generation of leaders went out systematically building a successor team.

This approach worked with a second generation of leaders, and now a third.

Citing examples like NEWater, which turns a strategic vulnerability into a competitive advantage, education, and a clean and non-corrupt government, Mr Lee said that Singapore's system of government has delivered results.

To sustain the system, the country must build the strongest possible team in Cabinet and government to govern and serve Singaporeans now and into the future.

He told Parliament that building the next team is his most important task.

Citing the example of Law Minister Professor Jayakumar, who is now 67, Mr Lee said he must have a successor ready by 2011.

The Prime Minister himself is 55.

So he must find and bring in a whole team of new MPs and political office-holders.

Mr Lee said that he wants to be able to assemble together the best possible group of young persons, who are now in their late 30s or early 40s, so they can offer Singaporeans the best choice.

10 years from now, one of them should be ready to take over as PM.

One key requirement, Mr Lee said, is to pay people properly.

He stressed that while the government does not expect Ministers to earn as much as the top earners in the private sector, it must not be too far out of line from what a person of similar ability can earn outside.

He also explained that the formula for benchmarking public sector salaries to the private sector is basically sound.

Mr Lee did not agree to a suggestion to delegate the responsibility of deciding Ministers' pay to an independent pay commission.

He said this will not settle the matter as finally, the responsibility lies with the political leadership.

It is accountable to Parliament and to all Singaporeans, who will have to judge and decide whether it has done the right thing.

To comments by opposition member Low Thia Khiang, he asked the Workers' Party chief to produce his line-up of Ministers and say how much he intends to pay them.

While Mr Lee conceded that his present team is not perfect, he said every Minister is worth his pay, and by paying properly, the team can be improved and strengthened.

Other countries also face similar problems over the pay of political leaders.

Some try to benchmark public sector salaries to the private sector, but have not succeeded.

Mr Lee acknowledged that despite all the arguments, the policy is not easy for people to accept.

The income gap is widening and although the economy is doing well, some people still face difficulties.

Mr Lee also agreed that it is not a good time for a salary revision when the GST has just been raised and not everything is rosy in the economy.

He said he had considered waiting one year, but the problem is urgent.

Since the last adjustment in 2000, private sector incomes have surged ahead.

Waiting one year would mean having to make a bigger move.

Meanwhile, the government will lose people.

Hence it must move now.

Also, it must keep on adjusting as the private sector moves.

Mr Lee made clear this policy is for the future, against the backdrop of the new globalised Asia.

He said the test is not whether these Ministers will leave, but whether there will be good Ministers in Singapore in 10, 20 years' time.

The Prime Minister said he is convinced the government has made the right decision. - CNA/ir

Singapore pay rise highlights inequality

Singapore pay rise highlights inequality
John Burton
Financial Times
10 May 07
http://www.ft.com/cms/s/bc31d474-fe92-11db-bdc7-000b5df10621.html

Singapore's government recently provoked a public furore in the normally placid city-state of 4.5m people when it announced it would increase the salaries of government ministers to more than $1m a year, making it probably the best-paid cabinet in the world.

The reason for the howl of protest was that the move came as Singapore confronts a growing gap between rich and poor. It ranks 105th in the world in terms of income equality, based on United Nations data. Wages for the bottom 30 per cent have fallen in the past five years as demand for unskilled labourers shrinks.

The controversy reflects a wider issue of whether government officials in Singapore and elsewhere should be paid more to attract the best and the brightest when salaries for executives in the private sector are rising sharply.

The issue also raises the question of whether work in the private and public sectors are comparable and how common performance standards can be applied to both.

Singapore's government has often been compared with a well-run corporation, one of the few places where the phrase "bureaucratic efficiency" is not an oxymoron. Many top officials hold degrees from universities such as Harvard or Cambridge.

Since the 1990s, the salaries of cabinet ministers and senior civil servants have been linked to top wage earners in the local private sector. Under the formula, the officials receive two-thirds of the median income of the top eight earners in six professions - bankers, lawyers, accountants, executives with multinational corporations, local manufacturing executives and engineers.

Lee Hsien Loong, the prime minister who is due to receive $2m in pay this year (although some will be donated to charity), says the latest salary increase is necessary to keep up with a surge in executive pay when talent is in much demand. He cited Singapore's strong record of clean government and good governance as justification for the high ministerial salaries.

Lee Kuan Yew, the prime minister's father and independent Singapore's first leader, dismissed critics as lacking perspective, saying that the $46m being paid to top officials represented only 0.022 per cent of Singapore's gross domestic product of $140bn.

But opponents maintain that the government is comparing apples with oranges. "The CEO or manager has to think only of the bottom line. But a political leader must maintain integrity, moral authority to inspire and rally people," says one opposition legislator, warning that ministers will be out of touch with citizens.

Others believe the pay increase could accelerate a brain drain that the government wants to prevent. "The message the government is telling us is to adopt a mercenary attitude. So a lot of people will say it's OK to go overseas if a better-paying job is on offer," says a young Singapore professional.

Moreover, questions have been raised about whether the current government salary formula is appropriate or too generous. A review of the 18 cabinet members reveal none has an accounting background, one worked in financial services, one for a multinational company, two for local private companies and three in law.

Most of rest had some form of engineering background, although three were in the medical profession (not included in the pay formula).

Unfortunately, engineering is the lowest paid among the six professions to which ministerial salaries are benchmarked, with the median income of the top eight earners in the sector amounting to about $400,000, a third of the salary most ministers will receive.

Another challenge is how to determine whether the job performance of ministers can be measured in the same way as executives in the private sector. Singapore's economic growth appears to be the key performance indicator for top officials, akin to a company's profits. On that score, the government has performed well in recent years. But critics say the measurement is too broad and does not take into account other factors, such as income equality or the standards of social services.

Take the example of another small developed country. New Zealand, with a population of 4.1m, has a much slower growth rate (1.6 per cent) than Singapore (7.4 per cent) and its $106bn economy is smaller, with a per capita income of $26,000 versus Singapore's $30,900.

But it ranks higher on the UN Human Development Index in 20th place against 25th for Singapore and its income gap is much narrower. Does Singapore's faster growth but less developed social structure justify its prime minister being paid more than five times the salary of the New Zealand prime minister - or the US president, for that matter - ask critics?

Yes, replies the government, because Singapore is "unique". It is a physically small island in an unstable part of the world, with a multi-ethnic population, that pose special challenges to its rulers. As the debate continues, one thing appears certain. Ministerial salaries will rise further if the present system is maintained. Chief executives and senior managers in Singapore are still paid less than their counterparts in Hong Kong, Australia or South Korea, but their pay packets are likely to increase as global companies compete for their talents.

Moreover, given Singapore's close-knit political world, any investment bank or private equity fund would pay top dollar to recruit a minister, which may be the best rationale for paying them so much to keep them in government service.