The Genius of Paying Politicians $1.6 Million: William Pesek
By William Pesek
April 13 (Bloomberg) -- Singapore is getting lots of flack for boosting the pay for new government ministers to S$2.5 million ($1.6 million).
That seems like a huge paycheck for anyone who isn't acting in front of a movie camera or who isn't an ``American Idol'' finalist. George W. Bush makes $400,000 a year, and some say he's the leader of the free world. Shouldn't the U.S. president make as much as Justin Timberlake, J.K. Rowling or Jackie Chan?
Well, perhaps not that much, though Singapore is acting to narrow its own gap. It's increasing the pay of Prime Minister Lee Hsien Loong and President S.R. Nathan by 25 percent. Lee will get S$3.1 million annually. Amid public criticism, Lee said he will accept only his 2006 salary level for the next five years and give the rest to charity.
Controversy aside, Asia might be better off if governments paid top officials more.
One reason: It's hard to get the best and brightest to enter politics when they can make infinitely more money in the private sector. Many of us Americans would be happy to pay more to a president who knows better than to invade other countries without provocation, hire incompetent people or dismiss global warming as a conspiracy.
Yet the most important reason relates to rooting out corruption.
Money in Politics
There's an old saying in Asia that the real money is in government. Not the paychecks, but the kickbacks. That reality was summed up by the latest corruption-perceptions index by Berlin-based Transparency International. Out of the 163 nations ranked in 2006, Indonesia came in 130th, level with Ethiopia, the Central African Republic and Burundi. The Philippines ranked 121st, along with Nepal, Honduras and Guyana.
Asia's two nascent superpowers -- China and India -- were tied for 70th place. Thailand came in 63rd, Malaysia was 44th, South Korea was 42nd and Japan was 17th.
Dodgy legal, judicial and corporate-governance systems keep rapid growth from filtering down to those who most need it. They also lower credit ratings and raise bond yields. For growth to flourish, economies need foreign investment. If that capital is to come, investors want a sense of certainty that their investments will pay off.
Asian Development Bank Chief Economist Ifzal Ali calls corruption a ``cancer'' that must be treated if the region is to reach its potential, and he's absolutely right.
I came to a similar conclusion in July 2002 after spending a day in Jakarta with lawyer Todung Mulya Lubis. Peers call him Indonesia's answer to Eliot Ness, the crime-fighter who brought down gangster Al Capone. Lubis's fight for legal change routinely invites death threats, underscoring the lengths to which businesspeople and politicians will go to protect the status quo from which they profit handsomely.
Two years later, I spent a day with Teten Masduki, who ran Indonesia Corruption Watch, a non-profit group that scours government and military agencies for signs of dirty dealings. Masduki focused on an issue that has come up without fail when I have met with activists in capitals such as Kuala Lumpur, Manila, New Delhi and Hanoi: paltry government pay.
Singapore's public-compensation model could help Asia shake its daunting corruption problems.
There are risks to making top government officials millionaires. Such a system could breed complacency among those who, once in power and getting a nice paycheck, might sit back and do little. Yet if you pay good public servants more coming in the door, they might be less inclined to accept back-door bribes.
``If civil servants were paid more in countries like the Philippines and Indonesia, corruption would be reduced and the quality of service would improve,'' said Luz Lorenzo, economist at ATR Kim Eng Capital Partners Inc. in Manila. ``But this should be combined with a stricter crackdown on erring government employees, too.''
Lorenzo's last point is a key one, and some wonder what more money will achieve on its own. The pay of ministers in Denmark, Finland and Switzerland is nowhere near that of Singapore ministers, but their quality of life and economies are much better, said Low Thia Khiang, one of the 94-seat Singaporean Parliament's three opposition members.
Still, overpaying politicians might make them less likely to dip into the cookie jar. Some may earn their big salaries and engage in graft anyway. The hope would be that far more won't feel the need to pad their incomes or abuse power.
Corruption is a touchy issue in Asia. Yet the region has more people living on less than $2 a day than China's entire 1.3 billion population and eradicating corruption would spread the benefits of economic growth.
If paying top Indian, Indonesian or Filipino officials $1 million resulted in greater efficiency and increased investor trust, the end may justify the means. If paying Japanese and South Korean politicians more money reduced the stranglehold that business interests have over their economies, then so be it.
``As long as the economic performance remains robust, people won't begrudge healthy compensation,'' said David Cohen, Singapore-based economist at Action Economics.
Some say throwing money at corruption isn't the answer and that it's too simplistic to think a bit more capitalism at the highest levels of government will spread capitalism. It's clear, though, that what much of Asia is currently doing isn't working for most of the region's people.