"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
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
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
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
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
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
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
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.)