Friday, 15 February 2008

OPQ 22 January 2008: GDP Bonus for Ministers

I filed this question largely because of the high rate of inflation last year, which seems set to continue into 2008. In the past couple of decades, Singapore's inflation rate has typically hovered around 1-2%. That is fairly low, and nominal growth rates will be quite close to real growth rates. But when it begins to hit 5-6%, that is when you see a significant difference between nominal and real rates.

Given that the GDP Bonus is tied to GDP growth, it then becomes important to clarify whether the nominal or real growth rate is used.

As for the question on the Performance Bonus, my curiosity was piqued by a PSD response in Forum which Leong Sze Hian questioned. The PSD was not completely clear, with its statements suggesting that the MR4 benchmark was all-inclusive (and in fact that had been my impression from the Ministerial Salary debate laste year), but going on to refer to an "average Performance Bonus".

I do understand what a benchmark is. It is just that I had always all along thought that the MR4 benchmark represented the theoretical maximum upper-limit for Staff Grade I officers. The fact that it is not, is something that to the best of my knowledge has not explicitly stated in public before.



15. Mr Siew Kum Hong asked the Prime Minister whether the GDP Bonus for Ministers is awarded based on real GDP growth or nominal GDP growth.

The Minister for Defence (Mr Teo Chee Hean) (for the Prime Minister): Mr Speaker, Sir, the GDP Bonus is awarded based on the real GDP growth rate. The bonus is paid out in March every year, based on the real GDP growth rate of the preceding year.

Mr Siew Kum Hong: Sir, I have two supplementary questions. My first question is to ask the Minister whether the GDP growth rate, even the real GDP growth rate, is the most appropriate matrix because the bonus really should be tied to the benefits to Singaporeans arising from economic growth, whereas GDP growth, as a measure, includes the wages paid to foreigners. So my question is, would the Government consider a matrix that strips out components of GDP growth that do not benefit Singaporeans directly so as to more accurately measure the benefits to Singaporeans from the economic growth?

Sir, my second question is this. The Public Service Division recently disclosed that the pay for the Ministers at the MR4 Grade, which is 77% of the benchmark, and I quote, "includes all bonuses such as the 13th month bonus, the average performance bonus and the GDP bonus". The reference to an "average performance bonus" suggests that some would be paid an above average performance bonus. Does it then mean that the better performing Ministers will be paid more than 77% of the benchmark?

Mr Teo Chee Hean: Sir, the issue of finding the best approach to try to measure and pay according to performance for public servants, including Ministers, was debated extensively in this House in April last year. And it is not easy to find a very good measure, a precise measure, and I have explained that the GDP Bonus is a good proxy for most things in the economy. I do not know of any measure which strips out the components in the way that Mr Siew has suggested, which is reliable and well understood by Singaporeans as a whole. So I would still suggest that for ease and simplicity of understanding and implementation, as a broad measure of how the economy has been doing, the real GDP growth rate is a good proxy.

Mr Siew should understand what benchmarks are. Benchmark is a typical salary for a typical grade. If you take an employee in a company and you say, this is his salary grade, there will be some variations within that. Some will get more, some will get less. And this is indeed what we do want to achieve because if we want to link performance to pay or pay to performance, then there must be some variability within that. So the benchmark rate is in fact the typical rate which an average Minister or employee in that grade will be paid. Some may get less, some may get more.


HaveAHacks said...

Actually, "benchmark" can have a whole bunch of different meanings. For someone unfortunate enough to have had to go through a "benchmarking" exercise, a benchmark can mean a very high standard that is difficult if not impossible to attain

Hence it is actually quite unlikely for many people to be able to exceed a benchmark. I think what the honorable minister really meant to say was that the MR4 figure was a "norm" for a C performer.

Kaffein said...

Sorry I disagree with how the benchmark is set. But it doesn't matter anyway, coz it's not going to change anything.

Thanks once again for raising the concern I've been asking but got no answers. And I don't know what debated extensively means? Within his own group, within parliament, or with the public involvement.

Still don't get any answers from the minister though. Just a typical you-citizens-don't know-what's-best answer.

Thanks Mr Siew once again.


family man said...

in this budget debate - can we request for a 13th option for the annuity scheme? ie can we opt not to get into the annuity scheme at all? At the moment, only the self employed has this 13th option when they decided not to contribute to CPF at all. Those smart people are the ones who are businessmen, clever enough to manage their own money, not tied up to age 55 to 62 to 90. If most people opt for the 13th option, it shows that our million dollar ministers are probably overpaid and their schemes cannot stand the test of the FREE MARKET. Thank you.

family man said...

Dear Mr siew, I have half a mind to switch off from the budget debate this year. What with the $34bil spent on UBS, citibank with nary a hoot from parliament, I wonder what is the buss about the budget debate which is peanut by comparison. Inderjit asked about the standchart investment, and was told in no uncertain terms that it is a private arrangement run by someone outside of the house. Is that a coverup? If there is a debacle like Soc Gen, who is supposed to tell the House? (or not at all?) Can the GIC and Temasek Holdings be made to report to the House, beside LKY and Ho Ching? We, the citizens need to know. Thank you.

family man said...

I said I would not watch the speeches, but I did on CNA. You did well today, sir. My sister migrated to NZ with her family. I intend to stay here too.

Siew Kum Hong said...

To haveahacks: I stand (somewhat) corrected, I guess.

To kaffein: Well, I can only try my best, right? :]

To family man: I am glad you changed your mind. I would like to add this, though. It is tempting to "switch off" -- I have a lot of friends who are apathetic, who don't care. But that is, to me, the worst place to be. For those of us who remain here, whether out of choice or necessity, our fates are intimately intertwined with Singapore's destiny. So we need to take an active interest in it, however discouraging and disillusioning it may be. Otherwise, we will only be abdicating responsibilty for our nation's future. I for one will never give up responsibility for my, or Singapore's, future.

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