Found this. Should be the one in Feb. Will look for the other
one.
A Winning Formula,
"But we overdid it"
Ngiam Tong Dow talks about people, education and retirement in
exclusive interview with Sunita Sue Leng, The Edge Singapore.
Feb 1, 2004
"I'm not saying I'm right all the time. But neither am I wrong at
the time. I just want to raise the level of informed debate," says
Ngiam Tong Dow.
If he had wanted to spark a debate, Ngiam's speech to the Economic
Society of Singapore on Jan 15 did just that. And if letters to the
newspapers and the follow-up commentaries are an indication, it
shows his views continue to generate debate among
Singaporeans.
From as far away as India where Deputy Prime Minister Lee Hsien
Loong was wrapping up a major business trip, the DPM also
responded, saying, "He (Ngiam) feels he has latitude to express his
views with less restraint than he's been accustomed to earlier, so
good for him."
The ex-civil servant jolted the city-state by taking to task every
major policy move over the last four decades - from land to
transport, taxes, monetary and fiscal policy, housing, education,
immigration and the Central Provident Fund (CPF).
In an interview with The Edge Singapore last Monday, the genial
Ngiam spoke passionately, and in greater depth, on two issues
closest to his heart - population and education.
When we met, Ngiam had read the reactions to his speech. His
initial response? "On the whole, the reactions have been quite
good."
He adds: "People should speak up. And serious debate should be done
in a reasoned manner."
However, he stands firm by his suggestions that the CPF should be
cut to 30% and that it should be fixed at that rate for the long
term. The way he sees it, the CPF is a silver bullet adjustment to
be used in extreme situations.
A fluctuating rate is bad for employers and also for government
entities and planners.
Still, he says he likes DPM Lee's response [affirming there will be
a range in CPF rates]. "It is cordial and informed. Public debate
should be at that level," he adds.
The Edge Singapore: What are the burning policy issues for you? And
why?
Ngiam: The most important issues for me are population and
education. Those are the basis for any country's growth. In the
1960s, Singapore had high unemployment. Every time we passed a
school at one o'clock, Goh Keng Swee [finance minister then] felt
very depressed. He said, 'How am I going to find jobs for all these
young people?' At the time, our population growth was very high,
about 4%. So we introduced family planning, which was very
successful.
And, by the mid-1970s, we had reached full employment and
unemployment had fallen to 3% and below. But like all
bureaucracies, we continued to penalise the third order of birth.
What we didn't recognise was that as soon as women went out to
work, the birth rate would fall naturally.
Is population size so critical? The Scandinavian countries, for
example, have small populations and yet are so successful within
the global economy.
When I was a young officer, we did studies on optimal population
size. We looked at countries like Sweden, Norway, Switzerland and
Israel. All those countries had about three, four, five million
people. So we thought that was the magical figure. But what we
didn't realise was that it was the quality of the population that
matters. Yes, these countries have small populations but their
education levels are very high.
So, when we talk about immigration in Singapore, we should not go
for the numbers game. We have to go for quality. When we allow
people into Singapore, we must make sure that the average level of
education is higher than our average. It must add to the quality
and not just the numbers. That means a selective immigration
policy.
Today, knowledge is the great multiplier. Potential GDP is limited
by land, labour and capital but in today's world, with knowledge
you can multiply the land, labour and capital that you have. To do
that, you need to educate your people. Every Singaporean should be
educated up to A levels. Forty years ago, people didn't even have
primary education. It is very difficult to re-train them now.
Some would say Singapore has achieved a high level of
education.
I don't agree. I think we are too focused on producing scholars.
We're very proud of our scholars, of course, but realistically, the
country cannot move forward unless we have a large base of people
who are well educated. As a former president of Matsushita Corp of
Japan said to me, it is better to have a high plateau of people
with a high average level of education than a few high peaks. In
Japan, the aim was to increase the average level of education to
senior high, which is equivalent to our A levels.
We produce lots of people with good grades but not many creative or
entrepreneurial types. Why is that?
It's the focus on imperial scholars. The former Public Service
Commission chairman, Tan Teck Chwee, used to say to me, if you want
to be creative, you have to be immersed in one discipline, whether
it is maths or music. You have to excel in that one subject, to
have a real foundation in one discipline. When you're totally
immersed in that subject, you can be very creative. For example, if
you want to read philosophy, go ahead. But be very good in
philosophy. In fact, you would study logic in philosophy and if
you're good at it, I think you will be good at writing software
programmes. Today, we are swinging from what was a very formatted
education system to one which has more freedom but my message to
our educationists is, please remember, content is also very
important.
You also feel strongly about the CPF.
The CPF started off at 3% plus 3% in 1955 and it was meant for old
age. And it was because the British government did not want to be
responsible for the pension liabilities of its colonies. But along
the way, the economy grew and real income was going up so fast. I
would say we were too paternalistic as a government. We said
instead of spending on consumer products and holidays, why don't
you set aside more for your housing and your old age?
Unfortunately, we overdid the housing part. We allocated more and
more to housing. At one stage, our rate was 45%. That was the peak.
It was way too high. And housing could take as much as 25% to 30%.
I would say you should not spend more than 20% of your income on
rent.
In the early years, Singapore was very poor. Dr. Goh [Keng Swee]
told the HDB chairman, 'Look, our household income is only S$400 a
month. Even if you set aside 10% for housing, it's only S$40'. He
said, 'I don't care what you do , but I'll contribute S$20. So
build something which people can rent for S$40'. So that's how we
ended up with the one-room flats in the early days. It was dim,
poorly ventilated and smelly.
But we succeeded in housing the nation. However, as incomes rose
and CPF contributions rose, the HDB built more than what was
necessary. If you look at the population structure, there's no need
to build more than three-room flats. There was also no need for a
second bite of the cherry and a third bite. If you want to upgrade,
you should pay for it out of your other income.
We thought we had a winning formula. But really, we overdid
it.
Now that most of the population live in their own homes, isn't it
time to refocus the CPF on retirement needs?
Yes. My proposal is 20% from the employee and 10% from the
employer. Twenty per cent for your housing is not unreasonable. So
the 10% is for old age. But if you want more for old age, which is
the original purpose, something has got to give. Maybe the part
allocated for housing should be cut to 15%. Then HDB should build
flats which you can sell or rent for 15% of income. Why must you
continue to build flats that take up 25% of income? When I became
chairman of CPF, I immediately saw that we were asset-rich and
cash-poor. The balances in the accounts are miserable.
Is it too late to reverse the policy?
No, it's not too late. We have to be quite tough. I would say,
reduce the amount for housing and that for Medisave. So, both the
HDB and the Ministry of Health will not be tempted to add on to
their services beyond what people can pay. Whenever CPF went up,
both these bodies rushed in to get their share of the pie.
We strayed form the straight and narrow path. CPF was started for
old age. We should have stuck to that. But in all things when
you're successful, you just carry on.
We were great optimists. We thought the GDP growth rate would go up
in a straight line, 8% for the next 20 years. The 1997 financial
crisis taught us a severe lesson. In fact, we should have learnt
from the first crisis, in 1986. We cut CPF to 30% and we should
have stuck there. But we raised it back. We did not learn the real
lesson.
So the real challenge for the government today is how to reduce the
amount for housing and Medisave and set aside more for old age. The
old-age problem is already coming on. People of my generation are
already retiring.
The Officer and Gentleman
Ngiam Tong Dow is presently Chairman of HDB Corp Pte Ltd. He has
been a long-time insider of the government machinery, from the
1960s until as recently as last year.
Between October 1998 and June 2003, he was Chairman of the Housing
Development Boards (HDB). Prior to that, he helmed the Economic
Development Board (1975 to 1981) and later, the CPF Board (1998 to
2001).
He was also permanent secretary in several key government
ministries, including the Ministry of Finance (1986 to 1999), the
Prime Minister's office (1979 to 1994) and the Ministry of National
Development (1987 to 1989).
Ngiam, 66, has two grown-up children. He scored a first-class
honours in economics from the University of Malaya (in Singapore)
back in 1959 and also has a Master of Public Administration from
Harvard University.
(This exclusive interview was published in its Jan 26
edition.)
