Mr Haddad:  “Prime Minister Lee, distinguished guests, ladies and gentlemen, welcome to Thomson Reuters and our first Newsmaker Event as this new combined company.  As some of you may know, Thomson and Reuters merged three weeks ago.  We’re now a company with US$15 billion revenues, 50,000 staff operating in 150 countries.  About 1,000 of our staff are based here in Singapore.  They cover the local market, they service our customers regionally and increasingly globally out of Singapore and I’m so happy that so many of them are linked in from their offices by video to see today’s presentation. 

“Everyday, over a billion people consume Reuters’ news content.  They consume it when they’re making trading decisions, real time, when they’re executing billions and billions of dollars of trade.  They consume it online and they consume it via newspapers, one of the media outlets, one of the many media outlets that are our customers.  And today, that news will be fed into it by this event.   Today’s theme is “Turbulent Times: How will Singapore cope?”  Credit markets seizing up, cost pressures around the region, very, very high cost pressures in places like Singapore in certain segments, political uncertainty in the area and we want to carry that theme into this session.  So, this is designed for you, our customers, to ask questions of the Prime Minister. 

“The Prime Minister is going to make a short address to cover the things, to set things up and then we’ll be handing it over to Christina Pantin, who’s our Southeast Asia Editor, who will be moderating the session.”

Moderator:  “.I’m going to let the Prime Minister make a few comments and then we’ll open the floor.  Please identify yourself and your company before asking your question and I will try to keep some order.  Prime Minister.”

Mr Lee:  “Let me begin by directly giving you an answer to the question which is the topic today, which is turbulent times and what is Singapore doing about it.  I would say we are responding to it at two levels.  First, immediate reactions to the immediate situation in the financial markets and the global economy and secondly, longer term, what we are doing for the Singapore economy, independent of the short-term fluctuations, at least, what we hope will be short-tem fluctuations. 

“The short-term position, we’ll have to watch what happens in America.  It could be a V, it could be a U, it could be an L-shaped recovery, which means no recovery although that’s not so likely.  It could even be a W, where things look as if they’re going to get better and then a new problem comes again.  I think that we hope for V, we prepare ourselves for a U and quite a broad U and if things do get bad, which cannot be ruled out, although an L does not appear to be on the cards, we are not without recourse because we have the resources, we have the wherewithal.  If we need to move on fiscal policy to stimulate the economy, we can do that.  If we have to have directed assistance  to help the low-income because unemployment has gone up, right now, it’s at a very low level, but if that happens, we can do that.  We have the means to do that.  And if I have to stimulate the economy or some sectors of the economy particularly, I can do that too.  For example, the construction industry in Singapore right now is very tight.  You can see all the cranes outside of the window, next door, for many projects.  So, we’ve actually had to hold projects back which we need and if things slacken, well, we can bring them on stream again.  So, we are watching and waiting and I think we are positioned to deal with anything which comes along. 

“The other response to the present situation is to deal with inflation, which is a global problem because of oil, because of food prices, which is a new phenomenon.  You can’t completely insulate yourself from global inflation, or from imported inflation, because you can’t close yourself up. And even if you’re a food exporter, your exporters will say, ‘I want to sell this overseas, I don’t want to sell it in domestic markets’.  We’re a food importer so there’s no way we can say we’ll make this cheap and Singaporeans will be able to get rice at half world’s prices.  But what we can do is two things.  One, to have targeted assistance for the low income so that when inflation is up, they can maintain their standard of living and nobody needs to worry that they can’t afford to eat their next meal and we have done that in a very big way.  This year alone, we’re putting out about $3 billion worth of assistance in various forms from the Government on the Budget. We just gave out what we call Growth Dividends, just before May Day, worth about $400 million, as well as Workfare, which is a kind of negative income tax earlier in the year, which was another $300 million.  So, you’re talking about $700 million paid already and there are only about a million households in Singapore.  The degree of assistance for the lower income is considerable and effective.  But these are short-term measures. 

“The other thing we are doing on inflation is to make sure that our monetary policy is appropriate. MAS manages that and in their most recent monetary policy statement, they’ve re-centered the exchange band.  I’m not going to tell you anything which is going to move the Singapore dollar market, but I am telling you that we have done – sensible things so as to moderate the impact of imported inflation on the Singapore economy and on Singaporeans. 

“Longer term, I think we have to do fundamental policies and we have been pursuing this for some time.  First, to educate our people in schools and also train them when they are already in the workforce so that they have the skills and the abilities to earn a living for themselves and will not be caught as unskilled and unemployable and at the bottom end of the income gap.  If you look at the graduates, not just from our universities but also our polytechnics, our Institutes of Technical Education, young Singaporeans coming out today from post-secondary education are well-prepared, not just for jobs they have now but also for what is to come after that.  So, that’s the first thing which we are doing, make sure our people can earn a living for themselves.

“The second thing we’re doing is to develop basic capabilities for our economy so that we are not competing just on price, but also developing new capabilities, so that people will want to come here and take advantage of them.  For example, if you’re talking about research and development, what we have got started, got moving in terms of biotechnology, in terms of interactive and digital media, in terms of environmental water technology, these are upstream investments which are going to enable us to have downstream activities across a broad range of things -- pharmaceutical companies, electronics companies.  Siemens, for example, make hearing aids and their global competence centre is in Singapore.  So, because the R&D is in Singapore, the manufacturing is in Singapore and jobs are created in Singapore; same goes with HP, with inkjet printers; same goes with many other companies.  So, by investing in R&D, we caused a cascade of consequences throughout our economy. 

“Thirdly, apart from R&D, we’re bringing in projects because despite the uncertainties, we see many opportunities for growth, for investments.  The F1 is going to cause a lot of buzz, you’ll certainly hear it from this block for several weeks in a row as we get it prepared and we hope without causing you too much inconvenience.  But it’s a big thing. The project itself may be just a few days, but the tourism, the activities on the peripheries, on the borders, the publicity which we will get and the spin-offs will be considerable. 

“The IRs are coming on stream.  One of them is supposed to come on at Marina Bay by the end of next year and the one in Sentosa by 2010.  This is going to be 10,000 jobs and they’re looking desperately for workers.  I think they will find them, but it will be a lot of work to get the people, train them and put all these together.  It’s a challenge for the organization, but it’s an opportunity for Singaporeans. 

“We’re developing the financial sector.  Many of you are from the financial institutions.  You know that the business is good, particularly if you look at fund management, wealth management, private banking.  Floor plates are growing, head-counts are increasing, activities are being concentrated in Singapore.  Last year, we grew, I think, 17 per cent in financial services.  The banks won’t tell us how quickly their private banking grew, but I think they didn’t do too badly.  They’re poaching staff from one another because we can’t produce enough in time and we’re running up against constraints because we don’t have enough office space, we don’t have enough accommodation.  I think rentals have gone up.  We don’t have enough schools for the expatriate children.  We are addressing this.  I wish we had moved earlier.  I wish we had moved on the banking and financial centre six months earlier than we actually did, but at that time, the market looked cold and nobody was interested and we were unable to generate the interest for it to take off. 

“Now, we’re in a different situation and we wish we had done it earlier.  We are helping UWC to build a new school in Tampines.  They tell me that it is already fully taken up and I see that they are rationing by price, which may finance another school.  But these are capacity constraints which we have to ease and we have provide more to make sure they come on-stream.  Accommodation will come on-stream.  A lot of houses are in the process of being en-blocked, redeveloped and as they come on over the next one, two years, the space will there and the rents will come down.  The rents are a matter of some angst.  It’s causing hardship, if I may use that word, amongst the financial community.  In the old days, when you came to Singapore, you used to be able to obtain a hardship allowance, so you might be able to make the case again, at least temporarily. 

“So, I think that we can deal with these problems.  I don’t know which way the next two years will go.  It can be difficult.  It may be less bad than we expect, but we are setting in phase measures which will see us through and beyond that, and I have confidence that it will work because it’s not just the economics of it but also the social cohesion, the political will and the resilience of the people and in Singapore, you have that.  I’m open to questions.”

Moderator:  “You brought up the long-term, you brought up the policy and I would like to, if you could indulge me, your vision of Singapore ten, 20 years from now.  You’ve talked about the economy, you’ve set out all your plans for how you want to steer the country economically.  Politically, a lot of people are very interested in what might happen there, particularly when we see quite dramatic changes in neighbouring countries, one to the north, in particular, and where do you see that going for Singapore?  Is there a message there?  What is Singapore thinking about in terms of vigorous competition for sort of political positions?”

Mr Lee:  “I think that the way to work this is to keep it contestable but make sure that you always have a good team.  It’s like Reuters.  You never build up your opponents.  Doesn’t make sense;  You’ve got a growing concern, build upon it, compete against whoever comes along, make sure that you have a strong team.  In ten or 20 years, it cannot be the same Singapore.  It’s a new generation.  It has to be a new generation of leadership, new team, new approach, new challenges to be overcome and a new way of engaging a population which is going to be even more globalised and plugged into the world than it is today.  Already today, if you’re a young person, the world is your oyster.  I mean, it’s not people hunting for scholarship or jobs, it’s scholarships hunting for people.  And amongst the Singapore Government, there are multiple scholarships.  Amongst the private sector, there are even more scholarships and it’s not just in Singapore, but if you’re a good, outstanding student, you will write to an Ivy League university and you check in the appropriate box, they will fund you, 100 per cent if necessary. 

“So, in that environment, to build a nation with a sense of cohesion and purpose and vitality and with that dynamism to have different views, debate, a whole spectrum of attitudes and options and yet when it comes down to it, a sense that if the time is tough, our place is in Singapore and our role is to hang together and make it work.  I think that’s the sort of place you want Singapore to be and that’s the sort of place which a new generation of Singaporeans have to build for themselves.  It’s not what we’re going to make of it for them.  It’s what they have to come forward and decide it’s worth their while to make it for them.”

Q:  “I’m Robert Prior from HSBC. It seems to me a lot is happening in Singapore in terms of domestic policy and the domestic economy, a lot of developments are happening.  But I wonder on the external side, particularly on the export side, whether things are happening to same extent, in particular, what I notice is export growth seems to be disappointing, not just in absolute terms but relative to Singapore’s major competitors as well, particularly in electronics.  It seems to me that Singapore is losing the lead potentially a bit in the electronic sector.  So, I wonder what we can, if that’s true and what can we expect, going forward?”

Mr Lee:  “Well, in dollar terms, electronics numbers have been disappointing.  They have been flat, sometimes negative.  In volume terms, the amounts have been going up, but the prices have been crashing and so, if you look at the dollar value of the exports, it’s been coming down.  I think that it’s an inevitable trend for us.  Electronics is still an important factor of manufacturing, but we have other pieces of manufacturing coming along.  Pharmaceuticals is one of them, petrochemicals is another one.  So, if you take our overall export numbers, there are not bad.  It could be better, but in the circumstances, they are not bad.  I don’t think it is a sign of our losing export competitiveness as of now.”

Q:  “My name is James from ING.  We have been known for a long time that we are considered the Switzerland of Asia.  Now, going forward, I would like to hear what would your comment be.  Is it the ambition of the Government of Singapore to make Singapore much better than what Switzerland is today and on top of that, our investment in UBS, is there a strategic direction for us, going forward?”

Mr Lee: “Our ambition is to make Singapore the best we can.  We said we want to aim for a Swiss standard of living by 1999.  In 1999, we looked at the numbers, we came close to it.  We didn’t quite reach it.  Of course, by then, the Swiss had already moved ahead.  But I saw one World Bank calculation based on purchasing power parity which puts Singapore number six in the world in terms of PPP, which is ahead of Switzerland.  Mind you, quality of life in Singapore is not bad, but we don’t have ski slopes and that’s something we’ll have to live with.  But in terms of the overall vibrancy and the environment of safety, of cleanliness, the quality of schools, the quality of medical care and the parks, everything which we are able to do, I think we make sure that we do it to the highest standard in Singapore.  That we can do. 

“As for our investment in UBS, there’s no strategic purpose in this.  It’s a decision which is made purely on its financial merits by GIC and they have done so and I think they know what they are doing.  We do not have ambitions to control the world.  I don’t know about ING.”

Q:  “David Conner with OCBC Bank.  You mentioned inflation and it’s quite obvious that food prices have run up very, very rapidly for basic commodities, rice, corn and so on.  Many people are really quite concerned that this is going to cause potentially significant social unrest in countries like Indonesia, the Philippines and other regional countries.  The question is, what do you think the reaction of the governments is likely to be if there is social unrest?  Will they increase subsidies, perhaps, given the difficulties with regard to their fiscal deficits?  Will they go the other way and try to deal with it?  Clearly, Singapore can afford to deal with these problems, but there are many countries in the region that may be able to and if there is social unrest, how might that impact Singapore?”

Mr Lee:  “You’re asking about how other governments may react.  I think that they have a difficult situation.  If it were a purely economic question, then what they should do, with energy as well as with food, is to say if prices are becoming more expensive, we’ll help the low-income people.  So, we directly make sure that the poor people in Indonesia, Philippines or in Vietnam have enough money to buy rice and will not starve because otherwise, the food prices going up, some of them may actually be priced out from having enough to eat. 

“In practice, it’s very hard to do, firstly, because you may not have the mechanism to implement this and secondly, if you’re going to say give cash away to the poor people only, on the way to the poor people, some of the cash may seep through the pipeline – the bureaucratic efficiency and mechanism is not there.  They have talked about doing this, about reducing the subsidies, raising the prices and making good with direct grants and Indonesia did some of that with energy two years ago, if you remember, when they doubled or tripled their kerosene and oil prices and then gave out money to the poor.  But it didn’t work perfectly in that circumstance and this time, they promised just to hold the prices down, which is a big impact on the government budget. 

“I think that that is going to be a problem.  It is also going to be a challenge keeping the markets open because the political pressure will be -- why not keep the food in the country, we are producers, consume it within, prevent it from going outside.  And several of the countries have said that they are going to ban the export of various categories of rice.  The Indian have said white rice will be banned, basmati rice is okay.  The Vietnamese have said something similar.  The Thais are the only ones who have said the markets are open and, if need be, we’ll open our warehouses and we’ll make sure everybody has enough because in the Thai case, the farmers are very important part of their politics and their economy. 

“It would be a pity if, in fact, countries in this situation closed up their markets because it’s really the markets which are going to make sure the food goes where it’s needed and there is enough for everybody to eat.  And within Asean particularly, we’re going to have an Asean economic union or economic community.  Then there ought to be cooperation amongst the Asean countries to make sure that we coordinate amongst ourselves and, in this situation, that we do not work against one another.  And that’s something which the Asean economic ministers have discussed.  They put out a statement last weekend after they had a meeting in Bali. 

“I think that in the short term, this year the rice harvest looked good.  So, the spasm will likely pass.  In the longer term, the trend towards higher rice consumption, food consumption is likely to grow and in India, standards of living are rising, in China, standards of living are rising, people are eating more rice, more meals per day to start off with; more meat, which means multiple times more grain on the way to the cow before becoming meat and that means pressure on demand side.  And on the output side, it will take years to increase the output significantly because there has been under-investment in research and development and new varieties and new techniques and you can’t turn that around in a short term.  So, we must be prepared to see food prices up for some time to come.”

Q: “Prime Minister, good evening.  I’m Amit Gupta from HSBC, another one.  These are difficult times, there are dark clouds in the horizon, but do you either sometimes or more often think of these times as, from Singapore’s perspective, as times of opportunities which could be in the medium or the long term be real opportunities for Singapore to differentiate itself or to further its ambitions?”

Mr Lee: “Yes, I think so.  I think that you have to deal with the short-term problem and at the same time, you have to keep on driving towards your long-term goals.  And at a time when many governments are going to be preoccupied, if you can keep your eye beyond the immediate, that’s a tremendous advantage.  In the 1997 Asian financial crisis, we made some very major changes in the midst of the crisis, in particular, to the financial sector and as the crisis deepened, we progressively liberalise the financial sector and made many changes which enabled us to come out from it with a much stronger and more vibrant financial industry in Singapore.  And at the same time, we continued with the restructuring and upgrading.  So, where there had to be retrenchments, activities to outsource, where we had to change the mode of business, we allowed it to happen.  We helped those affected but we did not hold back changes which were necessary.  So, by the time we came out from that protracted problem, by 2003, after Sars, we were in a strong position and we zoomed ahead.  So, 2004, 2005, 2006, 2007, four good years and I think we’ve built up a good head of steam.  My attitude was: the going was good, better make the most of it while the sun is up.  I think it's the right approach.  We had strong growth and it has put us in a strong position now that things have got rough again or likely to become uncertain again. 

“So, while we deal with immediate uncertainties, I think we should continue with the longer term projects and as I've described some of them just now, on education, we have major initiatives, we are looking at a fourth university being built in Singapore.  On R&D, we have major projects under way and a considerable head of steam built up because talent is coming in, our reputation is getting established that this is a serious place for top-quality scientists who want to do work in their prime.  It's not the place for people who have already published and are in a semi-retirement status, come here just to lend a brand name to the brass plate.  And that's going to make a big difference over the next ten, 15, 20 years and the projects which we are bringing in now, I think if we can continue that flow and that transformation, by the time this turbulence is over, we will see ourselves in a different phase again."

Q:  "Prime Minister, Peter Flavel from Standard Chartered Bank.  It's wonderful to see the focus that Singapore has in developing its youngsters in terms of academic excellence and the opportunities that they have to study here and the fourth university and also overseas.  What role does engendering perhaps more creativity as well as academic excellence have to play in the future of Singapore?"

Mr Lee:  "I don’t see the two being mutually-exclusive.  I assume that if you define academic excellence properly, creativity counts as part of it and what you need to do is to have a system which has enough flexibility in it so that whichever path you pursue, you are not just absorbing stuff which is already in the books but exploring and developing ideas and taking things another step forward in an unconventional direction and also having a system which enables people who don’t fit into the standard mould to follow their track and it could branch off into another direction or if he follows one way and it eventually turns out that he has got aptitude which develops later, he can come back and re-enter the mainstream again and go on from there. 

“Our slogan is ‘teach less, learn more’.  It's very hard to achieve, but it's something which I think our schools have understood that they have to pursue.  What we have to persuade is the parents--that it's good for their children not to have quite so much homework and sometimes to have some time free and to have creative daydreaming.  But looking at what is going on in our schools--and not just in top schools but in schools all over Singapore--I think that they are getting into the spirit of things.  You see it in the quality of their work, not just the academic results, but in their co-curricular activities, whether they are doing pottery, whether they are doing dance, whether they are doing robotics.  I think we have the champion robotics football team in the world; our human footballers take a little bit longer than that. But all over schools, interesting things are happening.  If you go and visit them and you see the shows which they put on, the plays, the musicals, it's quite remarkable.  These are things which we never could have imagined doing when I was in school.  So, the creativity is there.  I think with the right environment, it’s gradually blossoming and more will happen."

Moderator:  "If I could follow up on that talent question, how concerned are you about the brain drain in Singapore?  I always run across Singaporeans who are working in the hot markets of China and India and if I could personalize it a little bit, what's your philosophy about your own children perhaps wanting to pursue careers overseas?"

Mr Lee:  "It's a reality of the globalized world that talent has a global market and it will go where the opportunities and the excitement is and right now, a lot of the excitement is in America, some of it is in Europe, but especially the US and we are beneficiaries of this globalized talent world.  People come to Singapore, at the same time, our own people move.  If we are going to take people who come here, we have to accept that our people can go.  It's impossible for us to say our people can't go anywhere.  There's no way you can hold them, so it's a reality.  What you have to do and must do is, one, make sure that there are opportunities in Singapore for our young people to say, ‘Yes, there is a future in Singapore, I want to come back and do something about it’.  And two, imbue them with a sense of mission and purpose and identity so that they say ‘Yes, I'm a Singaporean, I can travel the whole world but in the end, my home is Singapore and this red passport means one day I'm going back there and before I retire’. 

“So, I think that's my attitude with my children.  One is studying overseas, two have studied here, another one likely to study overseas.  The one who is now in America will come home because he's on scholarship.  So, that’s a very solemn obligation.  But even without a scholarship, they know that I’d like them to come back one day and I think that counts for something with them."

Q:  "Mr Prime Minister, Richard Beaurepaire, Deutsche Asset Management.  Currently, Asia contributes about 34 per cent of the global GDP and in 20 years’ time, that becomes 50 per cent.  Most of that growth is being driven by China and, to a lesser extent, India.  When you’ve got two giant elephants, or perhaps one-and-a-half elephants in the room, what does that leave in terms of the roles for smaller countries like Singapore?  Do they become subsidiary to the elephants, or is there a specific role?"

Mr Lee:  "I would not take the view that China and India will crowd everybody else out. I'm not sure whether you call it an alarmist view or a triumphalist view, it depends which side you are, I suppose, that China is so powerful and so smart that anything you can do, they can do better.  But in economics, you know that is not true. There is comparative advantage and they may be better and good at a lot of things, but there would be niches for their partners where comparatively speaking, we have an advantage and we will do business and trade with them. 

“America has been for several decades, more than half-a-century, the most powerful economy on Earth and that's been good for us.  It has not crowded us out.  They've given us an opportunity to grow from being a Third World country to a First World country.  And I think if China can become a First World country, like the US, which will take more than 20 or 30 years, I think that would be good for us.  Whether then we would be able to find a role for ourselves depends on how we develop and what we can do, where we can complement China and do which the Chinese are not yet able to do or which, relatively speaking, we have an advantage. 

“For example, we are English-speaking society in Singapore.  I think we would be for a long time to come.  I think it would be a long time before China can develop the same facility in English on a broad basis; elite, yes, but on a broad basis, even in a city like Shanghai, it is not so easy to do.  So, that gives us certain advantages in financial services and IT, in the news business and global commerce.  You are able to connect to a broader world and to straightaway be part of that world without having a filter.  That's one advantage.  If you look at the intellectual property protection, we are able to enforce laws in Singapore and make sure they work.  So, Reuters is in Singapore, your feed is your feed, you will not find somebody having a little branch line tapping off your feed and a whole network making money at your expense.  China knows that they need to fix that, but it will be a long time before they are able to do that. 

“So, therefore, when it comes to information, when it comes to R&D, it will be a long time before everything which people are prepared to do in the West or in Singapore, they are comfortable to do it in China.  One day, they will get there and then we will have to say, well, you are developed, I'm developed too.  You have advantages and it may well be your GDP is higher than mine but if I have skills and expertise and concentration of talent, I can make a living for myself which is many times better than what I'm making today and that's what we have to aim for.  I once talked to somebody in Shanghai.  He said, oh, don’t worry, we are prospering, you will be all right.  We will become developed and you can supply us raw materials and agricultural products.  I have no doubt that they will be developed.  But we will find something else to supply them."

Q:  "Good evening, I'm Sonia Kolesnikov, Newsweek.  If I can go back on the question on society, there's been an enormous influx of foreigners in recent years and the Government has facilitated this influx and it's likely to continue.  In fact, if the population continues to grow probably towards 6.5 million, given that the rate of renewal in Singapore is under what it should be, you potentially face the fact that 40 per cent or 50 per cent of the population you govern are going to be foreigners coming here.  So, as a government, how do you prepare this?  How do you integrate foreigners?  How do you, looking forward, plan for what's going to happen in terms of governing for a whole, just not the people who are voting but also for the foreigners who are here? 

“And if I can add a caveat to this, Barclays Wealth Management released a report today that said in ten years’ time, by 2017, Singapore will have bypassed Hongkong in terms of density of millionaires and will have the highest density of millionaires in the world, which is good news, I guess, for all the bankers here.  And importantly, what it also says is that nearly two out of four households would be millionaires.  A lot of this will be foreigners living here.  So, following up on my first question, it potentially raises even more social issues between the haves and have-nots and the us-versus-them."

Mr Lee:  "This is a difficult issue for any society.  In America, it's a very fraught subject -- no bipartisan consensus, no outcome.  George Bush wanted to change the laws and reform them, he got nowhere with Congress in an election year.  In Europe, just Europeans moving between European countries, it becomes a hot subject.  Polish plumbers became famous in France.  Poles are now a huge community in Ireland and in Britain and a tremendous power of good they have done economically to these two countries but raised eyebrows socially.  So, the British have said now, we will call a pause and we will manage the inflow and let them integrate. 

“And we have to decide in Singapore what our policy is and we've decided that it is necessary for us to be open in allowing foreigners to come to work here, particularly foreigners with skills, because if you want to have a financial industry, if you want to be part of the global network, then you will not only need the numbers of the talent but you will also need that range of backgrounds and expertise from all over the world to be together and to be able to mingle here.  That's why London is successful, that's why New York is successful.  If you ride the London Tube, you hear all kinds of languages other than Cockney English.  If you go to New York and you just watch the pavement, you will see manner, shape, size, colour and sounds of human beings, and food, all kinds and that's why they are prosperous. 

“Now, London and New York are not countries, they are cities in a country.  So, they have a ballast.  We are not only a city, but we are a country.  So, you have to have a hard core of Singaporeans so that the character of the place remains Singaporean while being cosmopolitan.  So, I think priority number one, let's get more Singaporean babies born.  I just looked at the numbers -- we were 1.24 and we made a big effort, we came to 1.26. and last year, we have reached the fabulous number of 1.29.  So, I think that more will need to be done and we’re actively studying of what more we need to do but even if we do more, I don’t see that we would push it to 2.0 or 2.1.  It's not possible.  I mean, the social trends have gone too far this way and it's the behaviour in all of the developed countries.  In fact, it's a behaviour in China and Shanghai where now, they have relaxed and they can have more than one child, but the parents do not want to have more children.  It's a real problem. 

“We also have to continue to have foreigners come in, but we have to able to assimilate and to integrate them into our society so that they take on Singaporean values and attitudes progressively and their children are born Singaporean.  And that's something which we have to work at because although many of the people who come in are ethnically similar -- Chinese from China or Hongkong, Indians from India -- they are ethnically similar to Singaporean Chinese and Singaporean Indians, but culturally, they are different.  So, a Chinese Chinese is different from a Singaporean Chinese, an Indian Indian is different from a Singaporean Indian.  I explained this to one Japanese leader once.  So, he looked at me and said what do you mean Indian Indian?  Well, there is a difference.  The norms are different, the habits and when they jostle and get to know one another in the temples, well, there's a certain amount of getting used to it and there has to be give and take.  And amongst the Chinese too, there has to be give and take between the new arrivals and the Singaporeans on both sides, the Singaporeans to welcome them and the new arrivals to make the adjustments and do not expect that Singapore would be like their country which they have come from. 

“We have to manage the inflow.  There will be some reactions, but we have to try and get Singaporeans to understand that this is in our long-term interests.  If we didn’t do this and we end up an ageing and then declining society, it's big trouble for all of us.  So, I see this as something which will require delicate handling.  We have to reassure people because there is a sense that when foreigners come in, they are taking my job and we've had a hot debate recently on Chinese beer girls versus Singaporean coffee aunties.  I'm sure bankers never worry about such subjects."

Q:  “Marcel Kreis, Credit Suisse. I have a request, Prime Minister.  Could you invest also in Credit Suisse stock so that we aren’t always behind you, yes?  The question is how come the Olympic Torch has bypassed Singapore?"

Mr Lee:  "I don’t know.  We did not settle the route, the organizers did.  I do not see any significance in it.  I don’t think we specifically made a bid for them to come, neither did we ask them not to come if that is your question."

Q:  "Prime Minister, James Trump. America will usher in a new President in January 2009.  I was wondering what is Singapore's stance in terms of the new foreign policy that will come out of the new President that will be elected?"

Mr Lee:  "Which one will be elected?"

Q:  "We don’t know."

Moderator:  "You tell us.”

Q:  “Alright, take all three then."

Mr Lee:  "There always a learning process when a new President comes in as well as an unspeaking process because a lot of things have to be said during the campaign which, when you become elected, you have to reconsider because now, the responsibility is on you and you can no longer take a partisan view.  You are not just campaigning in Indiana or Iowa or North Carolina. 

“We hope that whoever comes in will continue to, first, pursue free trade.  Secondly, take a firm and consistent stand on the struggle against the extremist terrorism. Thirdly, maintain a constructive relationship with China and the other major powers in the world and, fourthly, also have a bit of time in the midst of his many other preoccupations, or her many other preoccupations, to pay attention to Singapore in the middle of Southeast Asia.  That's our wish-list, but we have no votes."

Q:  "Prime Minister, I'm Deborah Ho from DBS Asset Management.  You covered a lot of ground earlier about potentially the various scenarios panning out in the US and how Singapore is ready for whatever pans out there.  But I mean, do you see any other kinds of risks that could potentially pop out in the next three years or so that could derail whatever preparation that we could have made?"

Mr Lee:  "Yes, there's always the black swan and you never know what it is.  But you have to try and think out of the box and see what else could go wrong. I mean, you can have non-conventional threats like Avian flu which turns nasty, which is a real possibility at some point.  You could have terrorism, there could be another strike which could have calamitous consequences.  You could have something go wrong in the Middle East over Iran, for example.  Within the region, if you look at North Korea or Taiwan, the situations look stabilizing.  So, I don’t think that those would go awry, but Rumsfeld talked about ‘unknown unknowns’ and we'll always have to bear in mind, you can project it, but the next crisis will be different from the previous ones.”

Q:  “I'm Hak Bin, Deutsche Private Wealth.  There's been a lot of news about finding the next generation of leaders and then I'm just wondering, why now?  Why is it so urgent, particularly now?"

Mr Lee:  "Because it's overdue.  We would like to have a deep bench and we need to deepen our bench.  I mean, the way we have worked it is not to have no change but to have change which is well-prepared so that by the time it happens, it appears natural, but in fact, a significant transformation has taken place.  And that's how we move from Lee Kuan Yew to Goh Chok Tong and that's how we moved from Goh Chok Tong to me, prepared long in advance.  The transition takes place, everybody says there's no surprise, but that's because a lot of work went in beforehand and I'm 56 years old and we need to prepare for something not so very long in the future. It takes time to have somebody identified, ready, accepted and in a position to say, well, this looks like something which will fly and this looks like a man whom we can have confidence in. 

“It's a uniquely Singaporean approach, I concede.  Very few other countries do this.  You don’t know who the next US President is, you don’t know who the next leader in most other countries.  In China, they do plan ahead and you can see roughly the shape of the next leadership four, five years ahead.  But they have an enormous depth of talent.  From the whole country, you are only looking for one, 1,300 million and you only need to find one General Secretary and one Premier.  But in Singapore, we have 4.5 million people of whom only 3.1 million are citizens and out of that, we have to produce also one Prime Minister and a Cabinet.  It is not so easy to do and you cannot look for one person, but you must assemble a team which is strong enough so that there is range of abilities and skills which complement one another and amongst them, they will work out the dynamics and one of them will emerge and be the leader accepted by the team and accepted by Singaporeans.  That's what we need.  So, we are doing this now because it is not early.  It is time."

Moderator:  “Have you set a deadline for laying out a succession plan?  You sound like you are already deep into the work of it?"

Mr Lee: "We are working hard looking for people.  We already have people brought in and we are looking for more and I think we need more and younger ones too because if you are looking for people to come into politics, ideally you get them in their 30s, which is when I and my colleagues, my generation came into politics and so, you have time and by the time you have become experienced, you haven’t become old."

Q:  "Prime Minister, I'm Yvonne from the Singapore Bureau in Reuters and our question is what do you think is the risk in Temasek’s and GIC’s investment in Western banks?"

Mr Lee: "I think you have to look at it.  The risk in the banks is Temasek's job.  The risk in Temasek overall, that is what we have to see and as far as the Government is concerned, we look at Temasek and GIC on an overall portfolio basis, on a long-term basis; not item by item, not year by year, but taking the whole portfolio over the long term, whether they are able to deliver consistent performance and I think that's the right way to do it. 

“If you start second-guessing Temasek and say you shouldn’t have bought this bank or you should have bought that bank earlier or the terms have been renegotiated, or GIC, then I might as well be on the board.  In fact, I might as well be the CEO, which doesn’t make sense.  We've created them so that they make business decisions and we as shareholders have to maintain the proper governance relationship.  If we start running them, not only will we mess it up, but internationally, that will be obvious evidence that this is a sovereign wealth fund run amok because it’s not being run commercially, it's being run by the political leadership and that's not something which we want to do.  So I think that these are decisions which Temasek has to make.  Their board will hold the management to account and GIC, likewise."

Q:  "My name is Moh Siong, I'm from Citi.  You briefly touched on the Asean economic community just now.  I'm just wondering how you see the progress in terms of the Asean community coming along in terms of meeting the rising competition from China and India and where do you see Singapore's role in driving this community, going forward?"

Mr Lee:  "Well, the target is to have the economic community by 2015.  There's a roadmap, it's worked out in detail.  We helped to draft it last year because we were preparing for the Asean Summit and we were in the Chair and I think it's not a bad roadmap.  It's comprehensive.  There are many items in there which will not be easy to do, but they are all laid out.  So, you know what it is which you must achieve.  Whether it's financial liberalization, whether it's air services, whether it's movement of professionals, whether it's trade barriers and so on, all these have been put together.
We will have to try and keep it on track, Singapore is still the Chairman until I think the middle of the year, July.  So, we'll do what we can as Chairman.  But, of course, the Chairman doesn’t mean commander-in-chief.  Chairman just means coordinator and chief slave.  So, within those limits, we will do what we can. 

“There's also the Asean Charter which is the keystone document which is at the top of the economic community and the social community and the political and security community.  That's been signed, it has to be ratified and we are hoping to do it by the end of this year.  The Filipinos have said that we may or may not do so because of Myanmar.  I hope they will be able to work those practical problems out because there's a lot at stake for the whole Asean and if we hold it at hostage just because of dissatisfaction over one member, I think we will all be the losers."