Sunday, July 3, 2011

Winning back public trust after GE

Jul 2, 2011
By Ngiam Tong Dow

THE General Election on May 7 this year yielded the best possible outcome for Singapore. The People's Action Party (PAP) Government was returned to power with an 81-6 majority although its vote share dipped to 60.1 per cent, reflecting a secular decline. The Workers' Party (WP) won Aljunied, a Group Representation Constituency.

The greatest value of the WP win in Aljunied is that it breached a psychological barrier, giving a boost to the opposition and its supporters. Politics is about winning the hearts and minds of the people. Trust is the cornerstone. This election shows some chipping away of the trust that past generations of Singaporeans had in the PAP. This was shown, for example, in the way Aljunied voters did not heed the statements from senior PAP leaders warning them against choosing the opposition. The challenge for Prime Minister Lee Hsien Loong and his colleagues is to win back their trust.

The PAP began as a multiracial grassroots party. Its largely English-educated leadership was supported by the ordinary man in the street, clerks, postmen, technicians, small businessmen, carpenters and barbers. Mr Lee Kuan Yew and his Cabinet colleagues were seen by the electorate as selfless men, sacrificing promising careers for an uncertain future in politics. PAP cadres rode bicycles to hang up election posters on lamp-posts. The party could not even pay for a soft drink. Former MP Chan Chee Seng told me that they paid out of their own pockets.

[Imagine that Singapore Inc was a small struggling business back then. The partners were dedicated, though rather impoverished. They put in their blood, sweat, and tears for very little in terms of remuneration. But they were driven by passion and vision. And after many years of struggle and success, they have build up a good viable business. And they now seek to a new management at the top. And they tell the CEO candidates that they must suffer as they had suffered and take pittance in pay to show their dedication and passion.

Sure. That would work.]

The founding generation lived frugal lives. My permanent secretary drew a monthly salary of $1,950, just three times more than mine, a young rookie, at $680.

When the gap between the highest and the lowest paid is excessive, the rank and file become disgruntled. Insolence sets in. Morale goes down. The organisation, whether Government, business, or professional practice, begins its slow decline.

[This is an interesting issue. The widening income gap. Economic inequality. The hollowing out of the middle class (is that happening here?) The flight of jobs (again is that happening here?) Globalisation. Job re-design. Is there even a solution to this? Can we abandon captialism? Because that is what some Singaporeans seem to be commenting on online when they ask for govt intervention to hold down prices of flats, and other deemed essentials. If not communism, then socialism.]

The Government has done most things right. Over the five decades since independence in 1965, Singapore's per capita income has increased from $500 to $50,000. Unemployment rates have fallen from over 10 per cent to 3 per cent. The Housing Board has resettled and rehoused 85 per cent of the population. Average education levels have been raised from primary to tertiary levels in one generation.

Yet the Government's popular vote has dropped to 60.1 per cent, close to the psychological tipping point of 60 per cent. I feel that this decline is due in part to the Government's own policies. Some Singaporeans believe less and less that the Government acts in their best interest. In the earlier years, Mr Lee Kuan Yew's rallying cry was that no one owes Singapore a living. Despite its hard edge, the older generation believed that then PM Lee Kuan Yew and his Government put Singaporeans first.

Not having gone through the hard times of the earlier years, the young generation today is not willing to give the Government the benefit of the doubt. They judge the Government by its actions, not just promises.

Changes in two aspects of PAP policies can help build more trust: ministerial salary, and being more open about national reserves.

The formula used for benchmarking ministerial salaries to top earners in the private sector is perceived as a case of heads you win, tails we lose. Worse, it is regarded as self-serving.

A better benchmark would be the median income at the 50th percentile. If we can agree that the core role of government is to raise the livelihoods of the people, then the median income is a good measure of the Government's performance. As a minister's job is more complex than that of the average wage earner, his compensation can be 10, 15, 20 or 25 times the average. Ministerial salaries can range from $40,000 to $100,000 a month or somewhere in between. This would be about $480,000 to $1.2 million annually.

The Government should adopt a clean wage system and not use incentive schemes modelled on the private sector. Profit may be the measure of performance in a company, but not in a public administration. Using gross domestic product (GDP) as a proxy for performance of the Government and using this as one indicator to determine bonuses for ministers is deeply flawed. For instance, the GDP of Singapore can expand simply by importing more low-cost foreign workers - but this would be detrimental to citizens' interests. It is good that a committee has been set up to review salaries of ministers and political office-holders.

[Interesting point about incentives. Could be a valid observation, However, I think his proposed Ministerial salary a little on the low side. Or rather the low end is too low. The high end is about there, but could be higher.]

To my mind, even more crucial than revising ministerial salaries is the need for transparency in the management of Singapore's national savings.

These are accumulated from Central Provident Fund contributions, budget surpluses, revenue from land sales and dividends from government-linked companies such as DBS, Singapore Airlines (SIA), SingTel, ST Engineering, Keppel and Sembcorp. These enterprises were established with equity from the Ministry of Finance or the Ministry of Defence.

Temasek Holdings and the Government of Singapore Investment Corporation (GIC) are the wealth managers for the Singapore Government. Temasek Holdings was established by the Ministry of Finance to manage the equity investments of the Government, such as SIA, Neptune Orient Lines, DBS and other government-linked companies. Though Temasek was expected to play an entrepreneurial role like its predecessor, the Economic Development Board, it has become more and more of an equity investment manager no different from private hedge funds. In fact, it has sold off some knowledge-based government-linked companies.

[Really? You compare them to hedge funds? But being in the dark I have no way of knowing if the comparison is in fact valid.]

Temasek and GIC are profiled in the financial press as Singapore's sovereign funds. They are not. They are just wealth managers for the Ministry of Finance. The ministry is the custodian of Singapore's national wealth. The President exercises custodial powers only over drawdown of past reserves.

[Needs to explain what he means and what is the difference (at least in his eyes) of a SWF and "wealth managers" for MOF. I don't see the distinction. By his own words, MOF is the custodian of Sg's wealth and if these wealth managers work for MOF, then are they not managing Sg's national wealth, which is what SWF do.]

There is considerable misunderstanding over the governance of Singapore's reserves. Few people understand just what the reserves are composed of and which agency is responsible for which portion of the funds. To be sure, Temasek Holdings and GIC do publish annual statements on their funds, even disclosing returns. But these are neither comprehensive nor specific.

The Singapore Government can seek to build more trust with citizens by being more open about the size and composition of the national reserves.

While there is no outcry on the secrecy now, a more open, transparent approach can reduce confusion and dispel any doubts on the issue. I would urge the Minister of Finance to consider publishing an annual audited statement on the size and composition of our reserves. It can be presented as a White Paper to the new Parliament, which is due to begin its term.

[I am suspicious of people who wants to know our wealth, and how it is invested. There is leverage to be gain from such knowledge and it puts us at a disadvantage. George Soros and other robber barons can use such knowledge to their own advantage and to the disadvantage of others. But perhaps there is also the need for transparency to rebuild trust and so there is a need to balance transparency and disclosure with some discretion and protection.]

The writer is a former permanent secretary for finance in Singapore. This article is based on a lecture delivered on Tuesday at the Nanyang Centre for Public Administration at Nanyang Technological University.

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