Singapore’s ‘fat cat’ ministers to get fatter

April 7, 2007
Singapore Democrats

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Alex Au
Asia Times Online
06 Apr 07
http://www.atimes. com/atimes/ Southeast_ Asia/ID05Ae01. html

Singaporean Prime Minister Lee Hsien Loong recently recommended an 83% pay increase for all his cabinet ministers, a proposal that would up their current annual pay rate of S$1.2 million (US$784,300) to S$2.2 million.

Singapore already pays its senior ministers better than any other Asian country and most Western ones. For instance, Prime Minister Lee’s S$1.94 million is currently three times the US$400,000 US President George W Bush takes home in salary per year. Lee’s salary is currently 1.6 times that of his already bloated cabinet ministers.

Lee said on March 22 that ministers’ current S$1.2 million salaries represented only 55% of the government’s benchmark for standardized politician pay rates. Details of the new salary scales will be announced to Parliament on Monday. It is not yet known whether the government intends to adjust the pay packets to the benchmark in one leap or in a series of steps.

High pay for Singaporean government officials has historically helped curb corruption, which compared with other Asian countries ranks favorably on international graft rankings kept by such organizations as Transparency International. But many here feel that the upward adjustment, which will indirectly benefit Lee’s ruling People’s Action Party (PAP), which currently dominates Parliament by controlling 82 of 84 seats, is in poor taste at a time that many middle- and lower-class Singaporeans face a declining standard of living.

The benchmark Lee referred to – code name “MR4” – is a comparable measure based on private-sector compensation in six fields: law, banking, accounting, engineering, multinational companies and local manufacturing companies. Cabinet ministers’ pay is equivalent to two-thirds of the midpoint between the 24th and 25th top earners in any of these fields.

“For the public service to remain an attractive employer,” said Lee in his March 22 speech, “our terms must keep pace with the private sector. That is why our policy is to pay public servants competitive salaries, commensurate with private-sector earnings.”

However, one would arguably be hard-pressed to find many Singaporean voters who would agree to the exponential salary increase, judging at least by the steady stream of criticism over the proposal published in Singapore’s free-wheeling blogosphere.

“I think the biggest problem with the entire issue is that we have no check and balance. When ministers make the decision to increase their own pay, who approves?” asked Aaron Ng in his weblog known as Hear Ye Hear Ye.

Letters from readers published in the mainstream press have expressed more measured skepticism. “By saying that we need to pay top dollar for top talent we are saying that certain people are indispensable. This may breed complacency, ” wrote Dr Anne Chong Su Yan on April 3 in the government-linked Straits Times.

Benchmark for controversy

Beginning in 1994, the benchmarking formula was established precisely to avoid such political controversy, by providing a transparent way of moving ministers and top civil servants’ salaries in line with market rates. At the time, it was argued that the responsibilities of managing a small country and a civil service that employed hundreds of thousands was roughly equivalent to the responsibility of leading a large business organization.

With its super-large majority in Parliament, the PAP has had no difficulty enacting the controversial rule in the past. But with the current global debate surrounding disproportionate executive pay, paying public officials private-sector rates isn’t fully accepted by the Singaporean people.

Much of the public anger stems from the fact that in absolute terms, the new proposed government salaries equivalent to more than US$1 million per year dwarf the pay of average Singaporean wage earners. This is especially true since the wage gap between upper- and middle-class earners in Singapore has widened dramatically in recent years. And PAP politicians are acutely aware of the growing disparity.

Minister of State for Trade and Industry Lee Yi Shyan (no relation to the prime minister) said in Parliament on November 8: “At the household level, between 1990 and 2005, households in the top 20% experienced the fastest per capita income growth of 6% per annum. The lowest 20% actually [saw] their household income decline between 2000 and 2005. 

“We can see the effect of globalization here,” he noted. “It is pulling both ends further apart. The end result? The top is soaring  ahead, the bottom is falling behind and the middle is feeling the pressure.”

Prime Minister Lee’s proposed pay increase is clearly aimed at keeping the ruling PAP class in Singapore’s upper wage-earning tier. The question is whether the move is controversial enough to create substantial political turbulence.

Three weeks before Lee spoke about the need to raise his politicians’ pay by 83%, the government had defended as sufficient its recent decision to increase social welfare to the destitute by S$30 per month. Minister for Community Development, Youth and Sports Vivian Balakrishnan told Parliament during the budget debate: “An elderly recipient, living alone, currently receives about $260 [US$171] a month. We will increase that to $290 a month.”

Even the ruling PAP’s own backbenchers were underwhelmed by the marginal boost – cognizant, perhaps, that growing wealth disparity was a hot-button issue taken up by opposition parties during last year’s general elections. Member of Parliament (MP) Lily Neo, responding to Balakrishnan, told him: “My single constituents told me that they needed to skip one meal a day to live on the $260 per month. And now, [the ministry] is going to give them $1 more a day.”

Indeed, this “30 dollars” giveaway is the source of much sarcasm in public comments about the proposed ministers’ pay raise. Others think it beggars belief that Singapore’s civil servants and ministers deserve to be paid multiples of what their counterparts in developed countries such as the United Kingdom and Australia earn.

Suspect calculations

To some, the high figures that the benchmarking formula dispenses makes the formula itself suspect. For example, it has been pointed out by many that the top 24 or 25 earners in the six designated fields are not the same individuals from year to year. Different individuals appear within this set, as it often depends on extraordinary bonuses and stock options that individuals receive in one year, but not necessarily the next.

Ministers, on the other hand, are rarely changed through elections, so the same individuals get the high benchmarked salaries year in, year out. Some also wonder whether the formula attempts to compare apples with oranges in that the private-sector compensation used for benchmarking refers to total compensation.

However, the benchmark is believed – and official clarification is rather lacking in this regard – to be used for ministers’ and top civil servants’ basic salaries exclusive of their total compensation packages. That said, it should be noted that there is a one-third discount in formulating the MR4 benchmark, it being two-thirds of the 24th and 25th private-sector high-flyer.

Civil servants and ministers also get bonuses on top of their basic salaries, amounting to as much as four months’ pay in years when the economy performs well. The result of all these combinations and permutations is that it is actually very hard for ordinary citizens to grasp exactly how much their political leaders pay themselves.

What they are left with is an uneasy feeling that all these statistical complications and permutations, and a perceived official reluctance to lay out the bare-bone details, could be masking even more shocking financial realities for taxpayers. Consider, for instance, pensions.

Nearly all Singaporeans save for their own retirement, while ministers get life-long pensions if they have held office for a minimum of eight years and have reached 55 years of age. Again, there’s a complex formula for determining the pension amount, with a cap of “two-thirds of the highest annual salary of any office” held by the individual in question.

The shocker was momentarily revealed in June 2004 – though the mainstream media did not highlight it then nor have they since. That was when an opposition MP asked then deputy prime minister Lee Hsien Loong whether it was true that a “serving minister who turns 55 actually receive[s] both salary and pension at the same time”. Lee, in answer, said yes. There are currently eight cabinet ministers aged 55 and above, including Lee himself.

Alex Au is an independent social and political commentator, freelance writer and blogger based in Singapore. He often speaks at public forums on politics, culture and gay issues.