[The following are excerpts from a paper entitled “Lee Kuan Yew: Leading Singapore, Lessons In Leadership,” submitted to Atty. Damcelle Torres Cortes, Professor in Development Management 201 -Managerial Leadership, University of the Philippines – Los Banos (UPLB) – Fidel M. Arcenas]
Governance
& Social Services
Clean and Honest Government
When the People’s Action Party (PAP) government, led by Lee Kuan Yew, took over the reins of government in 1959, it was committed to a clean administration.
“We had a deep sense of mission,” Lee recalled, “to establish a clean and effective government.” From the day, Lee and his ministers took office, they made sure “that every dollar in revenue would be properly accounted for and would reach the beneficiaries at the grass roots as one dollar without being siphoned off along the way.” Lee’s government laid down both the legal instruments and the structural mechanism to rid the government of graft and corrupt practices.
The government also passed laws to avoid the use of money to win elections. Gifts for voters and even the use of cars to take voters to the polling places were prohibited. These laws were strictly enforced even when candidates belonged to Lee’s political party, the PAP.
[“When it comes to deciding whether a leader is believable, people first listen to the words, then they watch the actions. They listen to the talk, and then they watch the walk…A judgment of ‘credible’ is handed down when words and deeds are consonant…If leaders practice what they preach, people are more willing to entrust them with their livelihood and even their lives…This realization leads to a straightforward prescription for leaders on how to establish credibility. This is the “The Kouzes-Posner Second Law of Leadership: DWYSYWD: Do What You Say You Will Do.”]
Not Welfare but Fair Society
Alongside Lee’s efforts to keep the government clean, he made sure that Singapore will be “a fair, not welfare, society.”
Although Lee Kuan Yew believed in socialism and in fair shares for all, he later learned that personal motivation and personal rewards are necessary for a productive economy. He also recognized that people are not equal in their abilities. He said: “If performance and rewards are determined by the marketplace, there will be a few big winners, many medium winners, and a considerable number of losers. That would make for social tensions because society’s sense of fairness is offended.”
Lee also observed that a winner-takes-all society like colonial Hong Kong in the 1960s would not be applicable in Singapore. Hong Kong did not hold elections every five years; Singapore did.
“To even out the extreme results of free-market competition,” Lee said, “we had to redistribute the national income through subsidies on things that improved the earning power of citizens, such as education. Housing and public health were also obviously desirable. But funding the correct solutions for personal medical care, pensions, or retirement benefits was not easy. We decided each matter in a pragmatic way, always mindful of possible abuse and waste. If we over-re-distributed by higher taxation, the high performers would cease to strive. Our difficulty was to strike the right balance.”
House for Every Worker
Lee Kuan Yew’s primary concern was to give every Singaporean a stake in the country and its future. “I wanted a home-owning society,” he declared.To do this, the government implemented a home ownership scheme through the Housing and Development Board (HDB). Lee believed that “if every family owned it home, the country would be more stable.”
Lee also had another motive to make householders homeowners. Parents have to allow their sons to render national service. “If the soldier’s family did not own their house,” Lee explained, “he would soon conclude that he would be fighting to protect the properties of the wealthy. I believed this sense of ownership was vital for our new society which had no deep roots in a common historical experience.”
[“You can never pay people enough to care – to care about their products, services, communities, families…After all, why do people push their own limits to get extraordinary things done?...Why do they risk their lives to save others or defend liberty?...True leaders tap into the people’s hearts and minds, not merely their hands and wallets.”]
Central Provident Fund (CPF)
To set the house-ownership program in motion, the government revised the existing retirement savings scheme under the Central Provident Fund (CPF). Lee thought that the 5 percent contributed by the employer with a matching 5 percent by the employee, to be withdrawn at age 55 was insufficient. The government expanded the compulsory savings scheme into a fund that would enable every worker to own a house – a promise the Lee Kuan Yew made to the labor unions.
“Every year,” Lee said, “the National Wages Council recommended an increase in wages based on the previous year’s growth. Once workers got used to a higher take-home pay, I knew they would resist any increase in their CPF contribution that would reduce their spendable money. So, almost yearly I increased the rate of CPF contributions, but such that there was still a net increase in take-home pay. It was painless for the workers and kept inflation down. This was only made possible by high growth year after year. And because the government fulfilled its promise of fair share for workers through the ownership of their houses, industrial peace prevailed.”
[“Trustworthiness is in the eye of the beholder. This means that in order for your constituents to call you ‘trustworthy’ they must believe that you have their best interests at heart. It means that you don’t want to see them get hurt, be embarrassed, feel harassed, or suffer. You want them to succeed, to be healthy, happy, and prosperous. And because of this, people believe they can take the risks of putting themselves in a relationship with you, even if there are no rock-solid guarantees of positive outcomes.”]
From 1953 to 1968, the CPF contribution had remained stagnant at 5 percent. Lee Kuan Yew raised it in stages from 5 percent to a maximum of 25 percent in 1984, in effect making a total savings of 50 percent including employers’ contribution. The maximum was later reduced to a total of 40 percent. The minister for labor was often anxious to have the workers’ take-home pay increased but Lee refused. “I was determined to avoid placing the burden of the present generation’s welfare costs unto the next generation,” he explained.
Buyers of new HDB apartments rose rapidly from 3,000 in 1967 to 70,000 in 1996. More than half of the buyers in the 1990s already owned the HDB houses. In 1996, there were HDB apartments worth $725,000 per unit, of these only 9 percent were rented out; the rest were owner occupied, ranging in valued from $150,000 for the smallest three-room apartments to $450,000 for executive apartments.
In the later part of 1970s, the HDB set aside lands further from the center area of Singapore for clean industries which could then tap the large pool of young women and housewives whose children were already in school. Most new towns had air-conditioned factories set up by MNCs producing computer peripherals and electronics – Hewlett-Packard, Compaq, Texas Instruments, Apple Computer, Motorola, Seagate, Hitachi, Mitsubishi, Aiwa, and Siemens. These factories provided over 150,000 jobs for more women than men, most living nearby. This helped to double or triple family incomes.
Health Care
Another challenge was health care. As a student in Britain, Lee had observed the failure of the British National Health Service which provided health care to all at excessive cost to the government. The American-style medical insurance schemes, on the other hand were expensive with high premiums. Lee Kuan Yew had to find other solutions.
In Singapore Lee observed that when doctors prescribed free antibiotics, patients took them for two days, and if they didn’t get better, threw away the rest. The same patients consulted private doctors, paid for their antibiotics and took the medicines as prescribed, and recovered.
As an initial step, Lee decided that the government imposed 50 cents for each client at the outpatient dispensaries. This fee was gradually increased over the years to cope with the rising cost of medicines. Despite the imposition of minimal fees, the government’s health budget continued to balloon. A long term solution for health had to be found.
Lee asked the permanent secretary of the health ministry to study how much of a person’s CPF contribution could be allotted to enable him to meet part of his health costs. The minister reported that it would require between 6 and 8 percent of a person’s CPF contribution. From 1977, the government required all CPF members to set aside 1 percent of their monthly income in a special account that could be used to co-pay medical expenses for themselves and their families This was gradually increased to 6 percent, with an appear limit of S$13,000 in 1986. Savings above this limit were transferred to the member’s general CPF account.
When Medisave was established in 1984, each CPF special account had accumulated a substantial amount. To further strengthen family solidarity and responsibility, Medisave accounts could be used to defray medical expenses for a member’s immediate family, grandparents, parents, spouse, and children. This co-payment scheme prevented waste. A patient in a government hospital pays fees at subsidized rates of up to 80 percent, depending on the type of ward. As incomes increase, fewer patients chose the lower-cost wards, which had the highest government subsidies, and chose the wards with more comfort but lower subsidies.
The government allowed the use of Medisave for private hospital fees, subject to price limits for some procedures. The use of Medisave for visit to outpatient clinics and private general practitioners was disallowed since the government believed that more people would see a doctor unnecessarily for minor ailments if they could pay from Medisave than if they had to pay from their own budget.
“In 1990,” Lee said, “we added MediShield, an optional insurance against the cost of catastrophic illness. Premiums could be paid out of the Medisave account. In 1993, we set up Medifund with money from government revenue to cover those who had exhausted their Medisave and MediShield and had no immediate family to rely on. They could apply for a total waiver of all fees which would then be paid from Medifund. Thus, while no one is deprived of essential medical care, we do not have a massive drain on resources nor long queues waiting for operations.”
Pension
How to provide retirement benefits or pensions to a worker who becomes too old work is another problem that the government had to address. In Europe and the United States, the government provided pensions paid for taxpayers. Lee Kuan Yew decided that all workers should accumulate their own savings in the CPF for retirement. In 1978 the government allowed the CPF to be used a s a personal savings fund for investments. When the government formed the Singapore Bus Services (SBS) and listed it on the stock exchange, the CPF members were allowed to use up to S$5,000 of their CPF to buy SBS shares. This was to enable the widest share ownership so that profits would go back to the workers who are the regular users of public transport. This also discouraged demands for cheaper bus fares and government subsidies for public transport. In 1993, when the government floated Singapore Telecom, a large portion of the shares at half their market value were sold to adult citizens. This was intended to redistribute part of the surpluses the government had accumulated over the years of steady growth.
The use of the CPF was later liberalized to include investments in private, commercial, and industrial properties, mutual funds, and gold. If the members’ investments outperformed the CPF interest rates, they could take the surplus out of the CPF. By 1997, 1.5 million CPF members had invested in stocks and shares, mostly blue chips on the main board of the Stock Exchange of Singapore.
To discourage the immediate sale for cash gains, the government offered shareholders the right to b onus shares after the first, second, fourth, and sixth years, provided that they had not sold the original shares. This resulted in 90 percent of the workforce owning Singapore Telecom shares.
Singaporeans’ Desire for Security
Lee Kuan Yew explained that in Singapore’s Asian society, “parents want their children to have a better start in life than they themselves had. Because nearly all Singaporeans are of immigrant stock, their desire for security, especially for their children, is intense. Owning assets, instead of subsisting on welfare, has given people the power and the responsibility to decide what they want to spend their money on.”
