Sunday 25 March 2012

Good governance 'also matter of trust'

High level of social and cross-cultural capital required, says minister
By Leonard Lim, The Straits Times, 24 Mar 2012

GOOD governance depends not just on rules but also trust between government and people, said Education Minister Heng Swee Keat yesterday.

Speaking at a Harvard Club dinner, he said: 'Good governance is based on a high level of social and cross-cultural capital. It is not just rules, but a relationship based on integrity and trust.'

Social capital, he added, involves a public's implicit trust of leaders and government, people's inclination to support one another as a community and their willingness to make personal sacrifices for the common good.

Such a society is an inclusive one, Mr Heng said, highlighting a theme that has been discussed recently by Singapore politicians, most notably during last month's Budget debate.

Cross-cultural capital, he said, requires Singapore to be plugged into globalisation and build relationships outside its borders.

The minister, seen as part of the core of Singapore's emerging fourth-generation leadership, made these points as he sketched out the factors critical for governments to navigate change well.

Apart from social capital built by trust, he highlighted two other pillars for good governance: an appreciation of complex reality in policymaking and good leadership that is values-based and adaptive.

On the first, he noted that as circumstances change, what was right before may not necessarily be correct now.

'We need to be open to appreciate the full complexity, and be humble that we do not know everything,' said Mr Heng, who has a master's in public administration from Harvard's Kennedy School of Government. 'We need to evolve and adapt our approach of governance to fit our own context and circumstances.'

He related an anecdote to the audience of about 150 people, which included his wife, fellow Harvard alumni and other guests, to illustrate the point.

When he was a young civil servant at the Ministry of Trade and Industry, a superior told a young officer not to be stuck in a certain mould, when the distressed junior could not find the historical records for a particular decision.

Singapore also needs leaders who can deal with 'adaptive problems', or those that call for a change in the way a society thinks and interacts, or a clarifying of its values, said Mr Heng.

This is different from simply solving 'technical problems' that can be addressed by good analyses and having the right resources.

In times of rapid change in the current global economic landscape, he noted, exercising leadership is even more difficult.

Difficult decisions also lie ahead for Singapore society. These include how to use its limited land space, deciding the population size and make-up, and keeping economic vibrancy despite an ageing population.

But Mr Heng concluded by noting that many countries had made great progress after World War II by grappling with difficult changes. They succeeded by having good leaders and high levels of social capital.

Calling on his audience to exercise good leadership, build social capital and be part of the collective effort to bring Singapore forward, he added: 'If our society stays cohesive, energetic and forward looking, we will ride the next wave of growth.'

At a dialogue that followed, he was asked wide-ranging questions on Singapore's education system, from his push for values-centred learning to Singapore's streaming policy.

The recent decision to give out Edusave cash awards to students who showed good character was also brought up.

Mr Heng expressed disappointment that the discussion had been 'over-simplified'. Edusave monetary awards had previously been tilted towards academic achievements, and the new policy was simply to promote a more holistic education.

'If you want to signal that children who display those great qualities should be recognised as much as students who score in the top 10 per cent... it's important for us not to downgrade one versus the other,' he said. 'And I don't think they are incompatible.'


Education Minister Heng Swee Keat fielded questions at the Harvard Club dinner.
Here's a sampling:

MR LEE'S COMMITMENT TO DOING THE RIGHT THING

'He was famous for saying that 'I'm not interested in being politically correct, I'm interested in being correct.' I saw him at close range, great admiration for a leader for such sense of dedication, such commitment to do the right thing.'

Mr Heng Swee Keat on founding prime minister Lee Kuan Yew being his role model. He was Mr Lee's principal private secretary from 1997 to 2000.

DEFICIT OF GOOD GOVERNANCE

'The birthplaces of democracy are embroiled in deep crisis, partly because it is easy for political parties to win votes by promising things which they cannot deliver, and the other side comes and says I promise you more, and someone else will come along and say I promise you even more.'

On the 'deficit of good governance' and how it is easy to bring a country down the wrong road quickly

SUSTAINABLE SPENDING

'Whatever we do, we have to make sure that it is sustainable. If we run into financial crisis for a few years... are we able to continue with our investments? It's a bad decision to cut back on education just when you run into a crisis.'

On the phenomenon of economies reducing education funding during a financial crisis, and calls here to reduce class sizes or provide free university education


Adapt governance to fit the circumstance
Education Minister Heng Swee Keat spoke at the Harvard Club of Singapore's 42nd annual dinner last night at the Fullerton Hotel. The following is an edited excerpt.

WE ARE entering a period of accelerating change. This brings greater uncertainty. But it also presents many more opportunities. The critical questions are: How will nation states, companies and individuals succeed in such a world? What qualities will be needed to thrive in such an environment?

The answers to these questions are complex. This evening, allow me to address briefly the role of governance in navigating change.

Financial crisis and governance deficit

AT THE height of the financial crisis, when I was at the Monetary Authority of Singapore, a fellow central banker lamented to me that his country was unable to deal effectively with both the short-term and long-term issues. He observed that they had a large governance deficit at the political level. I was struck by how, in many other dialogues with other international colleagues and analysts, and in public debates in the media, the same theme came up.

There was a clear sense of a failure of governance, if one was very critical, or at least a sense of a deficit of governance, at multiple levels - institutional, national and global. So we failed to prevent the crisis. Nor did we respond effectively to address the underlying causes decisively; instead, we are still muddling along, and kicking the can down the road.

At the corporate level, weak governance and oversight by boards allowed management teams in financial institutions to take excessive risks to maximise short-term returns. Regulatory agencies were seen to have failed in developing the capabilities to keep up with the changes in financial markets, or worse, of being captured by the firms they were supposed to supervise.

At the national level, many countries in Europe, including France, Spain, Italy, and Portugal, had their ratings downgraded as confidence in the ability of sovereign governments to deal with the debt problems fell.

The partisan gridlock between the US Congress and White House resulted in the US debt impasse last year. The regional governance structure in the euro zone also failed to address the deeper problems of the European sovereign debt crisis. At the global level, there was also much debate on the reform of governance.

These debates remind us how during the Asian financial crisis in 1997/1998, the causes were attributed to cronyism, corruption and nepotism. The policy prescription then was based on a set of doctrines in economic governance dubbed the Washington Consensus. So during the recent crisis, you would not be surprised to hear that many of my Asian colleagues were amused, even upset, that the Washington Consensus was not consistently applied in dealing with the current set of problems.

Please do not get me wrong - my examples are not to show that Asian policymakers have done better, or that governments dealing with the debt problems today should have done what the International Monetary Fund (IMF) prescribed in 1998. We should seek to understand, rather than to criticise. As a former colleague put it, if we do not learn the right lessons, the crisis, which has brought some much pain, would have been wasted.

For me, there are many lessons. Allow me to share a few. First, the fact that we had two major financial crises within a space of 10 years - in 1997 and then 2007 - shows just how important good governance is.

Second, it also shows that there is no simple doctrine that applies at all times.

Third, I find that the discussion on good governance often focuses narrowly on formal rules and structures, and institutional checks and balances. Certainly, rules are institutional checks that are important and necessary, but insufficient. Let me venture that good governance, whether at the institutional, national or global level, requires at least three other critical ingredients.

Complex, multi-faceted and constantly changing reality

FIRST, good governance requires an appreciation that reality is complex, multifaceted and constantly changing. At Harvard, we are exposed to theories of good management and governance, which seek to distil key principles from messy reality. While these are useful in organising our thinking, all of you here who are key leaders of your organisations know that translating ideas into practice is an art, not a science. It is not a matter of checking the boxes of to-do lists.

Nor are there evergreen rules of managing a company that guarantee success. One of the most influential management books, Good To Great by James Collins, profiled several 'great' companies which have since failed - Fannie Mae was embroiled in the home mortgage scandal, Wells Fargo had to receive US$25 billion (S$32 billion) of Tarp funding, and Circuit City Stores went bankrupt in 2009.

Similarly, in public policy, there are no simple short cuts to good policymaking and good governance. Capitalism was seen as the model of economic governance after the break-up of the Soviet Union. But the recent financial crisis has been so deep and so prolonged that the Financial Times has been running a series on the crisis of capitalism.

While pithy labels are useful to help us grasp complex reality, the fact remains that reality is complex. And circumstances and conditions change. What was right the last time is not necessarily right now. What is right for one company or one country may not be right for another.

I recall years ago when I was at the Ministry of Trade and Industry, a young officer was rather distressed that he could not find the detailed history behind a particular decision. His boss told him: 'Young man, this is a dynamic ministry, dealing with rapidly changing situations. Learn to analyse from first principles, and don't be stuck with the wrong mould.'

Indeed, there is no substitute for going back to fundamentals all the time. We need to be open to appreciate the full complexity, and be humble that we do not know everything. For any society, the historical, cultural and social dimensions interact with the economic and political dimensions. We need to evolve and adapt our approach of governance to fit our own context and circumstance. This is especially so in a time of rapid changes.

Values-based 'adaptive' leadership

SECOND, good governance and good leadership are inseparable. Again, members of the audience here are leading your teams and organisations. We work with other leaders, and know how our bosses and colleagues can make a difference.

We know, sometimes from our own shortcomings, that exercising good leadership is not easy.

Change is always disconcerting, and in times of rapid change, exercising leadership is even more difficult. Professor Ronald Heifetz at the Kennedy School makes a useful distinction between technical and adaptive problems. Technical problems can be solved by good analysis and having the right resources. But adaptive problems require us to change the way we think and interact with others, and to clarify our own values and those around us.

With the world experiencing great changes, we in this little red dot have no choice but to stay ahead with the changes. We will have to make many difficult decisions together - difficult decisions on a range of issues such as our population size and make-up; how we use our limited land resources; and how we maintain harmony in a multiracial, multi-religious city that is also so global; and how we maintain economic vibrancy even as we face the prospect of an ageing population.

But our leaders, whether in the private or public or people sector, must be guided by a mission - a mission to create opportunities together with our people and for our people.

And even as we resolve immediate, vexing problems, let us have an eye clearly on the future and position ourselves to create opportunities and build a better future, for ourselves and our children. We can do so if there is a high level of trust among us. We need good communications and engagement. I believe members of the Harvard Club can play a very constructive role here.

Build a high level of social and cross-cultural capital

THIS brings me to my final point. Good governance is based on a high level of social and cross-cultural capital. It is not just rules, but a relationship based on integrity and trust.

Another Harvard professor, Robert Putnam from the Kennedy School of Government, noted that social capital is 'the collective value of all social networks and the inclinations that arise from these networks to do things for each other'. The Harvard Club and the gathering this evening is an example of a social network.

Social capital involves the implicit mutual trust that the public has of its leaders and government and the inclination of the public to support each other as a community, and make personal sacrifices for the mutual good.

A society with high levels of social capital is one which is inclusive. It is one, as Deputy Prime Minister Tharman Shanmugaratnam put it recently, that has both a strong sense of responsibility and a strong sense of community - a strong sense of personal responsibility and responsibility for our family and friends, and a strong sense of community to help others.

For Singapore, beyond building our domestic social capital, let us also build cross-cultural social capital that will allow us to harness the benefits of globalisation.

Again, many of you have businesses that span the region. With the rise of Asia, and our global orientation, we are well-positioned to be a key Global-Asia node. By staying open and developing an appreciation for other cultures around us, we can build relationships and cross-cultural social capital that extend beyond Singapore and help create a better life for others and for ourselves.

Let me conclude with the observation that many nations which had made great progress after World War II were characterised by an ability of the society to grapple with difficult challenges.

They set themselves challenging goals - such as putting man on the moon or getting out of poverty. They had good leaders and high levels of social capital. It is unfortunate that some of these attributes that make for good governance have been eroded over time.

Singapore is a little red dot with no natural resources, no buffer. But we are a global city situated in the heart of a dynamic Asia. While there are many uncertainties ahead, there are also many opportunities. If our society stays cohesive, energetic and forward-looking, we will ride the next wave of growth.

I am optimistic that we will succeed and I am confident that members of the Harvard Club of Singapore will exercise good leadership and be part of our collective effort to take Singapore forward.



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