Singapore cabinet to cut pay under reform pledge

SINGAPORE – Singapore’s new cabinet was sworn into office at the weekend pledging to cut its million-dollar salaries as part of reforms triggered by opposition gains in a landmark election this month.

High cabinet pay was among the issues which raised citizens’ ire ahead of the polls, along with the rising cost of public housing, health care and basic goods, and economic competition from more than a million foreigners.

“The government will engage all segments of society,” Prime Minister Lee Hsien Loong, 59, said after his government was inaugurated for a new five-year term on Saturday by President S.R. Nathan.

Analysts, however, said any social and economic changes to be implemented by Lee’s new government to appease a restive electorate are unlikely to undermine Singapore’s business-friendly reputation.

The People’s Action Party (PAP), which has enjoyed huge majorities since 1959, failed to win only six of the 87 parliament seats, but its share of the vote fell to 60 percent in the May 7 election, down from 67 percent in 2006 and 75 percent in 2001.

It was the best ever performance by the fragmented opposition, whose campaign rallies were attended by tens of thousands of people.

Former prime ministers Lee Kuan Yew, the 87-year-old father of the current leader, and Goh Chok Tong, 70, retired from their cabinet advisory positions after the election to give way to younger ministers after conceding that the political landscape had changed.

“We will listen carefully to different voices, understand the day-to-day difficulties and strains facing Singaporeans, address their concerns and be open to inputs on what government can do better,” the younger Lee said after the swearing-in.

The first item on his list was the controversial pay scheme for the cabinet itself, whose most junior member earns more than $1.0 million a year because salaries are pegged to those of top private-sector earners.

Lee formed a committee to review the pay scheme for cabinet ministers, who earned between Sg$1.57 million and Sg$3.04 million ($1.30-$2.45 million) in 2009, according to the Straits Times newspaper.

The head of the review, prominent civic leader Gerard Ee, told the daily that the overhaul will result in a “substantial discount” on comparable salaries in the private sector.

Before the election, the government had fended off complaints by saying attractive salaries were needed to attract talent and prevent corruption.

“The prime minister is very serious about listening to the voters in the aftermath of the election,” Song Seng Wun, a Singapore-based regional economist with CIMB Research, told AFP.

In a strong signal to international investors, Lee elevated Finance Minister Tharman Shanmugaratnam to be one of his two deputies and gave him more power to overhaul policies that directly impact Singaporeans.

Tharman, 54, now also heads the manpower ministry, which manages the intake of foreign workers, as well as the Monetary Authority of Singapore, the central bank, which tackles inflation.

With Trade Minister Lim Hng Kiang also retained, no departure is expected from the basic policies that turned the former British colony into Asia’s second-wealthiest economy after Japan, with a per capita income of Sg$59,813 ($48,411) in 2010.

Instead, the cabinet is likely to focus on ways to address a widening income gap, a key grievance with voters who felt the country’s wealth has not been spread equitably, analysts said.

Analysts from Citigroup said in a commentary that Tharman’s dual role in the finance and manpower ministries “will allow him to better coordinate economic policy” and promote “inclusive growth” to benefit lower-income Singaporeans.

“The finance minister is well respected internationally and is seen as being in sync with the electorate’s appetite for greater diversity of views in parliament,” they said.

Singapore’s economy grew almost 15 percent in 2010 and is expected to expand at a more sustainable pace of 5-7 percent this year.

Vishnu Varathan, an economist with Capital Economics consultancy, expects the growing wealth gap to be a top priority for Tharman and the new cabinet.

“They are going to pursue growth, but a more balanced version of it,” he told AFP. “For foreign investors, there’s nothing to worry about at all… Singapore will fundamentally remain an outward focused economy.”