PM Lee Hsien Loong's Dialogue at the Special Session of the Nikkei International Conference on the Future of Asia

Ms Sonoko Watanabe, editor-in-chief of Nikkei Asian Review: Thank you very much for very comprehensive address. It was about Singapore’s law, ASEAN or including the US, China and the TPPs. They are topics which I believe that our audience would want to hear. Before we take the questions from the floor, I will ask some additional questions regarding the speech. You mentioned the importance of the TPP and the ratification. As you said, now the Japanese Government, Prime Minister Abe is trying to push the ratification of the TPP in Japan’s upcoming Diet. But on the other hand, in the United States, as you may know, the two presidential candidates, Hillary Clinton and Donald Trump have both said that they are against the TPP. Although President Obama tried to push the ratification of the TPP during his time but the situation looks difficult. What do you think of the situation regarding the TPP and if there will be difficulties if President Obama cannot ratify the process after next year. Would you expect the TPP to be just floating or will there be progress?

PM Lee Hsien Loong: We hope for the best but we prepare for all eventualities. In Japan, your Diet is debating the issue now, I spoke to Mr Abe yesterday and he is quite confident that it will go through. He believes in it and he will push for it. I think the Diet is attentive to what Mr Abe has to say. In America, the Congress pays attention to what the President says but the Congress has an approach of its own. In an election season, very seldom is trade a popular subject for the voters.

Unfortunately, in this election season particularly, trade has become a very toxic subject. The extreme parties, the extreme candidates have pushed both main candidates, particularly Hillary Clinton to disavow the TPP. That makes things difficult. I hope that Mr Obama will be able to get it ratified during his term. Nothing will happen before the 8th of November but maybe after the 8th of November, in the lame-duck Congress, something can be done. Sometimes things happen in the lame-duck Congress. It will not be easy but I believe Mr Obama is trying hard. If he succeeds, we are home. But if he does not succeed, I think we are in for some difficulty. In the heat of an election, things are said which you may regret but it takes time to take back your words and as time passes, the events develop, the agreements get overtaken by new developments and then there will be new pressures to re-negotiate. I think it is going to be very difficult to put the whole package together again. At best it will take some years, at worst it may unravel the whole deal which will be a major strategic setback for the region.

So I think we hope for the best but we prepare ourselves that it may take some years. But even if it does not go through, we need to continue to work towards free trade in the region in all the different ways and including through our set. But also in much more modest ways, for example between Singapore and Japan, we have a comprehensive economic partnership and it was last revised and updated nine years ago. I think this is not a bad time to revise it, improve it further and bring it up to date. It will not make up for the TPP but it will be a signal that business carries on, life goes on and we are doing what we can.

Nikkei Asia: You mentioned the importance of the free trade scheme within the region. In the address, you mentioned China, the mighty giant or we should invite China for the TPP. So do you think China might be more involved in this free trade scheme in the region?

PM Lee: I think China is not ready to join the TPP yet, because of the way it is structured, I do not think the Chinese consider themselves ready to participate in such an arrangement. They are participating in a Regional Comprehensive Economic Partnership, they have a FTA with ASEAN. I think they have been discussing a FTA with Korea and Japan, although I do not think that is ripe. I suspect that would take quite some time. But China will proceed in different ways, on the TPP, their initial position was hostile, I think it has changed from being hostile to being quizzical. Meaning, they are not ready to join but they are interested to know what is happening and what is inside the box and how does it affect them and how conceivably they could be engaged. And one day, in a later phase, in five years, maybe longer, as their economy becomes more developed, as they become more confident and if the political constellation, if the stars are in the right place, it is possible that they will participate in the TPP. I think we should not leave it out, we should not see the TPP as a scheme to exclude China. It is a scheme to promote free trade in the whole of the Asia Pacific and that includes China. So we must leave the door open, so that one day, this is something that could happen and can happen. I think it is a plus, for China and the other partners.

Nikkei Asia: For China, they are expanding quite arbitrary and also the security and we say the development in the South China Sea, the recent developments and also we saw some difficulties with ASEAN in having a coordinated position so that China has ASEAN and China will have a good relationship. And ASEAN has the 50th anniversary but nowadays we think the ASEAN way, unilateral conclusion and no domestic interference for the domestic policy sometimes it will not work so do you think ASEAN can continue to be operated in this old way or do you think we need some change?

PM Lee: What are the alternatives? We can become like Europe, which operates in a tighter coordinated system. But that has its difficulties and you have to have the political preconditions for it and even in Europe, you do not find it easy to do that. Or you can operate like the US, where you have different states within one Government and the federal Government decides on the behalf of all the states. Or you can accept where ASEAN is, which has ten sovereign countries. We cooperate together, we work and adopt common positions where we can align our interests and when we cannot, we just leave it and we resolve that another day. I think what ASEAN has done is a practical way forward, towards consultation and coordination. When we say ASEAN, what we are saying is that we will work together when we can but when we cannot, we will accept that there are different positions, to the extent possible, we should work more closely together.

Even on the South China Sea, there are items that ASEAN has a common position, for example, that disputes should be resolved peacefully and in accordance with the international law and the UN Convention on the Law of the Sea (UNCLOS). We should not resort to force or violence, we should be able to negotiate the code of conduct so that you avoid some mishap and further escalation of the disputes. These are basic principles which ASEAN is able to agree on.

To be able to agree in detail on the comprehensive policy on the South China Sea as ASEAN, I think that is very difficult because some countries are claimant states. Four of them. In fact, some of the claimant states have claims with each other too, so they cannot take a common position. Some countries are not claimant states, like Singapore but we have an interest in freedom of navigation and in the international rule of law. Some countries do not even have a littoral coastline on the South China Sea, like Myanmar. Myanmar’s coastline is on the Andaman Sea, on the Indian Ocean. So their perspective of what happens in the South China Sea must be different. Some countries are in a different geo-political position, therefore have a different alignment and perspective of the world. For example, Laos and Cambodia which are very close friends of China, they have been for a long time and understandably so. To bring, all these together and have a one single ASEAN position, as if ASEAN were one country, I do not think that is realistic. But to work together on basic principles which are in the interest for all ASEAN countries, I think that is what ASEAN is trying to do.

Nikkei Asia: To achieve these targets, what kind of role should Singapore play? Singapore is in a unique position. You have a good relationship with China and the other parts of ASEAN.

PM Lee: We are the second smallest country in ASEAN, other than Brunei, so therefore, we have one of the smallest roles. We are also for the time being, the ASEAN-China Coordinator, the coordinator for ASEAN relations with China. But in this role, it is not possible for us to command ASEAN and to corral everybody into one position, nor are we in a position to negotiate with China on the behalf of ASEAN. What it is possible for us to do, is to be an honest broker, deal straight with all of the parties and try to bring about a consensus where this is possible. We have made some modest success, very small but some steps forward. For example, this last ASEAN meeting, we managed to get an agreement for a network of hotlines between the foreign ministries so if something happens, at least you can talk to your counterpart to try and defuse things. We also got a code on unplanned encounters at sea, in the South China Sea. Which means an agreement on what to do if there are two ships who look like they are going to collide with one another or your aircrafts. In order to avoid a collision and therefore some disaster and escalation. These are steps forward, we are also working towards a code of conduct. It will take time but there is an agreement with the Chinese to work towards a framework for the code, to be ready by the first half of next year so that is a firm deadline which we are working towards.

Nikkei Asia: ASEAN also has a few newcomers, for example, President Duterte of the Philippines, Mr Joko Widodo of Indonesia or Ms Aung San Suu Kyi of Myanmar. Next year, Philippines, President Duterte will be the Chair of ASEAN. Many people are quite concerned about his remarks. For example, yesterday he mentioned that the Philippines do not want to have another meeting with the United States next year. But do you think that this newcomer, new people, new leaders of ASEAN will change some of the ways of ASEAN?

PM Lee: Every new leader comes in wanting to change the world. Every US President comes in wanting to change the world. Most US Presidents leave an impact but not all of them leave the world totally changed. There is a certain momentum and deep logic, plus or minus for the way the world is, you can influence it but you cannot re-write it on a blank slate. ASEAN countries are somewhat like that too. Perhaps, the institutions are less entrenched and the systematic coherence is less enduring but it is not so easy for a person to come in and change everything. Their interests remain with different groups within the country, they would assert themselves. ASEAN regularly sees change of world leaders. The Vietnamese has a new team as well. Singapore have had leadership change several times. Life has to go on and we will adapt to the new leadership, the new heads of government and their personal priorities as well as the way they interpret their national interests.

Nikkei Asia: You have referred to change in leadership. What kind of character would you expect of the next generation of Singapore leaders?

PM Lee: We want able, good and committed people. People who can connect with the population, who can lead Singapore, who are prepared to fight for what they believe in and fight for what we can do together. I have assembled to the best of my ability, a team in Cabinet. They have said that very likely the next prime minister will come from amongst the younger members of my Cabinet. Who? It is up to them to work out and shake out amongst themselves. I am sure in good time, a consensus will develop amongst them as to who the next leader would be. They have to decide because they have to support him and help to make the team work.

Nikkei Asia: So, it is up to the Singapore citizens?

PM Lee: Ultimately yes, because the citizens have to vote for the political party. You have MPs in Parliament and constitutionally, the Prime Minister is a person who commands the confidence of the majority of the Members of Parliament, which means effectively of the ruling party. As a practical matter, how will it happen? I think amongst my young ministers, they will work together, get to know and assess one another. I think in good time they will work out amongst themselves who fits into which role best and who can be the next leader.

Nikkei Asia: Thank you very much. We should take questions from the floor and PM Lee said he's quite open to the different kind of questions. Questions please?

Q: Thank you very much, Your Excellency. I am very much impressed with your encouraging and supportive speech. I lived in Singapore about ten years ago and is very impressed with the development of Singapore, incorporated and convinced that Singapore must be one of the most influential countries, not only in Asia but also in the world. My question is about ASEAN vs China. It is my regret to see that China totally ignores the decision by the permanent Court of Arbitration. ASEAN was not able to make a joint statement that China should abide by the rule. But as long as the ASEAN keeps the present decision making process that everybody must agree, I am afraid ASEAN may not be very effective to get along with China. Do you think if there could be a way to change ASEAN’s way of decision making from the unanimous one to the majority one or is there any possibility of some of ASEAN countries, like eight or seven ASEAN countries make a separate announcement, in the case where all of them cannot agree on one particular issue? Thank you very much.

PM Lee: First of all, I would not say ASEAN versus China. I would say ASEAN and China. We work together. Sometimes, we cross purposes, sometimes we have zero-sum problems, often it is a win-win decision. I think that is the way ASEAN sees the South China Sea, as one element in a broad relationship where there are many areas for co-operation. We do not want to have this item poison the overall relationship.

On the question of the ruling by the Arbitration Tribunal, ASEAN did not express decision but I would also say, on the part of the individual countries, that many of the individual countries did make statements. So it is quite clear where they stand, whether they come together as seven or eight countries, there is no doubt where they stand. In fact, there is no doubt where most of the ten countries stand.

On the question of abiding by and respecting the rule of law, from the point of view of a small country like Singapore, we believe that it is very important. If there is no international rule of law and it is just the law of the jungle, where the powerful do what they will and the weak suffer what they must, there is no place in the world for a small country like Singapore. There has to be rules, a framework of international order in which big and small (countries) operate together and recognise what you can do and cannot do, what is proper and not proper. The Tribunal's International Courts, UN and the Security Council are all part of this framework.

We also recognise that there is a reality in the world. Big powers do not always abide by this. China is not the only one which is like that. There are other major powers and even some not-quite-so enormous ones but who think they can ignore a ruling. If the ruling goes against them, they just go ahead. It has happened with United States and Britain. There are other cases where the issue is not referred to the international tribunal because both parties do not wish to have the dispute arbitrated by an International Tribunal. If they lose, they are not able to accept it or even if they could accept it, they do not want to set the precedent that the matter goes to a tribunal. For example, the Senkaku/Diaoyudao Islands are not referred to the international tribunal, neither by Japan nor by China. So we accept that the world is like that. We have to know that, but from Singapore's point of view, international law is important and when UNCLOS is also very important. I think the more countries respect that, the better it is.

Q: Thank you very much, I am from Syria, from the Arab Republic. It is my honour to attend your lecture. I believe Japan is a great country and they have a very long history in prevailing peace and stability, respecting international law and in helping to create morale. I believe there is more that Japan can do, especially Japan is now a member of the Security Council. As you know, Syria is afflicted by international terrorism, we believe Japan could do more than only humanitarian assistance, especially their role in peace and in the Security Council. Thank you.

PM Lee: We believe that Japan has a great contribution to make to the world economy, to the world and to the region. As you said, its ancient history and culture, there is a lot to share with the world. But Japan's position in the world also has its historic element and the reason for the issue which you raise indirectly is the Second World War and the constitution which followed the Second World War. The way events developed in Asia after the Second World War is different from the way events developed in Europe, between Germany and France, and the other European powers. This has led to certain constraints on Japan, which are embedded in their constitution and I believe the Japanese government hopes to alter. So, I do not think I should venture into that debate but we are happy that Japan is making a contribution. The more Japan is able to have stable and confident relations with its neighbours, particularly with China, the greater would be its flexibility and room for participating in global affairs, beyond humanitarian aid and financial support.

Q: Could I ask you about Japan’s new security legislation under Prime Minister Abe because some ASEAN countries have shown some concerns?

PM Lee: We support the security legislation in the framework of the Japan-US Security Alliance because the Japan-US Alliance provides the assurance and restraint on the possibilities of what can go wrong. Within that framework, Japan can do more. But if you do not have that framework and this is to replace the alliance, that is a completely different proposition. It will raise a lot of concerns and uncertainties and will probably be a minus for Japan.

Q: I am honoured to be here. I am a public servant and I am an alumni in NUS, so I am a good memory of Singapore. I have benefitted much from my alma mater, National University of Singapore. On the other hand, Japan education, especially the universities intake is declining every year by year. Many Japanese students are not going abroad to study. What do you think can be done to the Japanese education and students? Thank you so much.

PM Lee: I am not an expert on Japanese education system. I know you have very good universities and very high reputation like Todai (University of Tokyo) or Waseda or Keio. I have met your executives, officials and ministers and they are not inferior to executives or officials from any other country, so you have very abled people and they are well trained. We give some weight to university rankings. I do not think university rankings are the only thing because every university belongs to a particular country and has a certain responsibility towards that country, to educate and train people not just to be academically outstanding but also to have the right values and exposure to make a contribution to the society.

On what you can do to change things. One of the things we can do to have a greater exposure to students from other countries. In Singapore, our universities students or almost three quarters of them have a chance to go abroad and spent a term or year at an overseas university. In fact, quite a number of them come to Japan and come to Japanese universities and go on exchange. Some attend Japanese language courses, some take courses which are conducted in Japanese and some take courses which are conducted in English. They spend time in Japan, they learn about Japan and I think they help the Japanese classmates to learn something about Singapore. If you could have something like that for your students to be able to go overseas and to be able to welcome more foreign students who come to Japan and meet one another. Young people, it is not so difficult for them to establish a link and to learn and to be influenced. That will help towards having a much more open and perhaps adventurous approach towards higher education.

Q: I am Hashimoto, one of the former ambassadors in Singapore. I thoroughly enjoyed your speech and especially, I appreciate very much on your realistic attitude towards the international relations. Having said so, if I am not mistaken you did not specifically talk about the role of Russia in this part of the world today. I would like to know your view about her role especially against the background that Russia is now developing very close relations with China. My question is, both Russia and China, how can they play a more constructive role in this part of the world? Thank you very much.

PM Lee: Russia and China are quite different. We have talked a lot about China, maybe I would just say a few words about Russia which I know less. Russia is a member of the East Asia Summit. It participates in the ASEAN Regional Forum and it is also a member of APEC. It is part of the structure of cooperation within the Asia Pacific region but Russia’s centre of mass and focus, really is in Europe. The whole of Siberia has about 20 million population which is much less than Japan in an enormous area. Moscow is in Europe, Saint Petersburg is in Europe and their relations are with former eastern European countries with Germany. They sell a lot of natural gas, a lot of trade with Europe. They want to be part of Asia but I think that the emphasis is on Europe.

One of the motivations for Russia to enhance its relations with China is because its relations with Europe are not going well because of Ukraine, Crimea, and MH17. They are looking for alternative friends and similarly, they are looking at Japan for the same reason. Japan hopes that if you can improve your relations with Russia then maybe you can make progress on the problems of the four islands and other issues you have with them. You may be able to cooperate with Russia in terms of development of Siberia and the natural resources there. There is opportunity to work together with Russia and particularly in northeast Asia. In terms of the overall balance, Russia's focus and mindshare will still be in Europe. Between Russia and China, their relations have warmed up. The Chinese are buying a lot of natural gas from Russia. They strike a deal soon after the Crimea problems. I am sure they have got a good deal. I am sure their volume of trade will grow and investments will grow. The Chinese talk about one belt one road which it means going through Central Asia to Europe which includes going through Russia. The trade will grow but Russia, you are talking about 200 plus million people. There is opportunity, there is resources but is not the world market. It is not the US market, it is not the Japanese market and it is not the Indian or the Latin America market. It is a valuable partner and they will make the most of that. That probably sets the limits of what is realistic and what people will be aiming for.

Q: I would like to ask you one thing. In my understanding, Singapore is very successful in increasing foreign labour force. Japan is facing the scarcity of the labour force especially the younger generation. My question is that, what would be the keynote for Japan to increase the foreign labour force. The second question is that, even though Singapore nation might not be satisfied with the Government policy to raise the foreign labour force. What will be your answer to your Singapore nation?

PM Lee: Immigration and foreign workers is a sensitive subject in many countries. It is super sensitive in Japan but it is also sensitive even in Britain. It was a big element in the Brexit debate and influence the outcome of the referendum. It has become a big issue in many European countries, Germany particularly. In America, it is also an issue. It is a challenge particularly for countries where your own population is not growing fast enough, not able to sustain itself, not enough babies and the next generation is smaller. What do you do? First of all, we should do our best to encourage people to have more children and to bring them up, children of our own. At the same time where possible we ought to be able to top up with a controlled inflow of people from abroad. Immigrants, maybe somebody you marry, maybe somebody who comes to work and strike roots here. Maybe somebody who has a particular talent or experience which we do not have and which will be a plus for our society. If we can bring them in, not too many but in a sustainable way and integrate them. Over time, they become like ourselves then I think it makes a valuable additional contribution to our society.

When you have full employment, it is easier to do this. Even then, people look at the changes in the society and you have to reassure people that we are doing this because we want to make sure that there are jobs for Singaporeans. If there are no foreign workers coming in, it does not mean that all of the jobs will be taken by Singaporeans. The company may decide to go somewhere else where they can get more workers more easily and then even the Singapore jobs which are in that company will be lost. I think, intellectually people can understand this but we have to try do it at a pace which people can emotionally accept and which our society can adjust and adapt to gradually. These are very emotional issues and particularly during a hot political period like an election or referendum, they can become a very big problem.

Japan is in a similar situation, your population is already declining. Your working age population has declined, I think three million in the last three years and you need workers. You need construction workers, you need workers in your hospitals, nursing homes and even to become a financial centre. One of the advantages which Britain and London has, is that it welcomes people from all over the world and all over Europe, more so than Frankfurt and certainly more easily than Tokyo.

If you could open up in a controlled way and people can see the benefits then I think it is sustainable and you have done a plus. When your total fertility rate is 1.2 or 1. 3. I think Japan is 1.4 now. In order to make up the numbers and just to reach replacement through foreigners. That is very difficult. Where will they come from? What will they speak? Who will have the same language? Who will be culturally similar and ethnically as similar, that is not easy. I agree with Mr Abe that the solution is to have more women work. To have women find it more convenient to have children and to bring up children and hopefully to bring your TFR, your fertility rate up. So you have more young Japanese in the next generation. That is what we are trying to do in Singapore and we wish you success because if you succeed then I think we have a chance of succeeding too.

Nikkei Asia: Thank you very much. I believe that there are more people who want to pose questions but unfortunately we have to finish the session.

PM Lee: PM: Thank you.