PM Lee Hsien Loong's interview with Nikkei's Editor-in-Chief Tetsuya Iguchi on 22 May 2022.
Please scroll down for a Chinese translation of the interview.
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Nikkei Editor-in-Chief Tetsuya Iguchi: Let us start with the situation of the world right now, and particularly the global politics. It seems that confrontation between the democratic countries and so called authoritarian countries has become sharper than ever, particularly since the Russia's invasion of Ukraine. I would like to ask you; how do you see the situation right now?
PM Lee Hsien Loong: I think it is very worrying. Between Russia and the rest of the world, the invasion of Ukraine has caused a lot of tensions, anxiety and righteous indignation, that Russia has violated the international order, they have violated the sovereignty and territorial integrity of another independent state. And that this is not something countries can allow to pass. So that is a very serious ongoing problem.
The war in Ukraine is continuing. The longer it continues, I think the greater the risk of complications arising and escalation. And that has implications not just in Europe, but all over the world.
Separately, the US and China relations have been tense for some time, from the previous administration and even before that, but continuing into this administration.
That is a separate matter, but it can be aggravated by the war on Ukraine. I would not put this as issue between democracies and autocracies. Because what is at stake in Ukraine is international rule of law, the UN Charter. And that is why Singapore is standing there.
If you frame this as democracy versus autocracy, or as good against evil, you are setting yourself up for an unending war. I do not think that is a wise step to take.
Nikkei: What measures do you think should be taken in order to maintain the rule-based order?
PM Lee: First of all, the fact that the UN General Assembly voted overwhelmingly to condemn the invasion of Ukraine is a good sign. It shows that the countries in the world stand up for the international order.
But beyond those gestures – which are important – it is also important for countries to uphold the international frameworks which exists. There are supranational institutions like the UN, as well as the IMF, World Bank and WTO.
These are frameworks which enable all countries to work together even if we have differences and disagreements and even conflicts with one another. If you remove that, or undermine that, then you are back to the law of the jungle.
In the law of the jungle, it is not only the weak who will suffer. Even the strong will have a rough time, because you will be spending all your time fighting one another and dissipating valuable energies.
Secondly, related to this, countries have to abide by the international rule of law. For example, the UN Charter, and the UN Convention on the Law of the Sea. These are rules which apply to everybody, and it is important that countries big and small abide by them. I know that big countries prefer to have freedom of action and are very reluctant to bind themselves. The Russians violated the rules by attacking Ukraine, but other big powers too are often reluctant to allow these supranational bodies to have authority over them. I can understand that, but it is regrettable.
Thirdly, we have to recognise that this is a real world. It is not an ideal world where countries all bow to superior virtue. Therefore, we depend not just on rules but also on a balance of power of different forces, work with different interests, because they have some areas where they cooperate together, but in other areas where they will balance each other off. Within that balance, it is possible for many other countries to find a perch, and to work with multiple parties.
Nikkei: Some people say that the situation is getting quite similar to that in 1930s. Some people even talk about a third world war.
PM Lee: The difference is this time there are nuclear powers. So it is not the same. If you reached such a position [of a world war], you will be in completely uncharted waters. I think everybody is very conscious of the dangers. It will take a lot of wisdom and a lot of restraint and ability to overcome political pressures, to look beyond the immediate in order to head off long term dangers.
Nikkei: So do you think that we can avoid the catastrophe?
PM Lee: We have to do our best.
Nikkei: Talking about the economy, the only difference between the present situation and situation in the 1930s is (that the) global economy is in better shape. But the reality is that global economic growth has been sustained by the expansion of debt and also loose monetary policy for the last 15 years. So the situation is not so good as you can see on the surface. Now, inflation is going up and the central banks are forced to tighten their monetary policy. It might shake the financial market and also overkill the economic growth. What do you think?
PM Lee: Inflation is a problem. The global economy recovered faster than anybody expected from COVID-19. The stimulus measures helped. However, the stimulus measures continued to be applied very generously, for political reasons, even as the economy was already visibly recovering in the US, and also in Europe. Therefore (this) has contributed to a spike in inflation even before Ukraine. Now the war has made it worse because it has disrupted energy supplies, with Russian energy now being blocked from world markets. It has disrupted food supplies, grain certainly. That has added a supply side inflationary shock as well.
A year ago, the central banks were quite relaxed about the prospects of inflation being kept under control. In fact, they worried about deflation and they wanted to bring inflation up to a certain level, e.g. two per cent on average. I think they were too complacent even then. But now it is quite clear that they have to change their stance and I believe that they are doing so.
The difficulty is that now that inflation is quite high, you need quite drastic measures in order to bring it back down and prevent inflationary expectations from taking root. It is very difficult to do that and have a soft landing. There is a considerable risk of doing what you need to do but as a result provoking a recession.
It has happened repeatedly in the 60s, 70s, 80s, 90s. That is a risk which we have to anticipate and watch out for. You will have to take that risk because if you do not act against inflation, that will become a very serious problem for the world.
Nikkei: You think we can overcome the economic difficulty we see right now?
PM Lee: Life will go on. Japan has had economic difficulties since about 1991 [when the bubble economy burst] and life goes on. Japan continues to exist.
Nikkei: In order to overcome the economic difficulty, we need global cooperation. The difficult situation right now is that we are not within circumstances where major economic powers are cooperating.
PM Lee: That is a problem, and it is a problem not just for the global economy but other global issues, e.g. pandemics, climate change, nuclear proliferation. Because without international cooperation, you cannot deal with these common problems facing humanity.
Nikkei: How do you see the economy of Asia, particularly in emerging Asia? Maybe they expanded their external debt for the last 10 or 20 years and now the US dollar is going up on their debt is increasing?
PM Lee: Generally speaking, their debt is not as severe a problem as it was before the Asian Financial Crisis in ‘97-98. A lot of the debt is denominated in domestic currency, unlike the last time when it was denominated in US dollars. But the food and fuel prices will cause them inflation as well as hardship. That is a problem.
Some countries are in a crisis, for example Sri Lanka. But there are specific problems there. Overall I think that the emerging markets will be economic hardship in their societies, but the judgment is that we probably will not have an emerging markets financial crisis.
Nikkei: Talking about the situation in the Asia Pacific. For the last 10 years we have seen the balance of economic and military balance in the region tilt much toward China. I got to ask you how you see the situation and also what kind of role are you expecting the United States and Japan to play in order to have better balance in the region?
PM Lee: As China’s economy has grown and developed, and their influence has grown, their impact on the regional economy has certainly become considerable. They are the biggest trading partner of nearly every country in Asia, including Japan and Singapore. It is natural, and it is something which the regional countries generally welcome, because it creates opportunities for cooperation, trade, prosperity. Many countries want to take advantage of the opportunities presented by China's growth.
China has also been engaging the region systematically. They have the Belt and Road Initiative. They now have the Global Development Initiative (GDI). Singapore supports these. We are a member of the Group of Friends of the GDI.
We think that it is positive, because it is far better that China is prospering and engaged in the region, than that it is operating on its own, outside the rules which apply to everybody else, not properly integrated and coordinated with the rest of the region. Or alternatively that it is unsuccessful, poor and troubled. That can cause a lot of difficulty for the region too.
China’s development is positive for the region, but at the same time, countries in the region all want to maintain their very important ties with other powers, other economies, with America (and) with Europe. For the smaller countries in Asia, we want to do a lot of business with Japan.
Japan compares itself with China, but compared to the other economies in Asia, Japan is the biggest by far. Therefore, we want to nurture these links with Japan, and maintain a balance so that we have resilience and we are not overly dependent on any single party. Overall, we can prosper together, benefit from our interdependence, and have the incentive to keep the region peaceful, stable and secure.
The US has a big stake in the region; their investments are substantial. Their FDI is much bigger than China’s still, although China’s outbound investment is growing. Trade wise, America is not such a big partner as China. But actually, a lot of the trade with China is in intermediate goods, which ultimately go on to America. Therefore, our economic ties with the US are very important.
Under President Obama, America pursued the TPP. Unfortunately, politically it was not possible for them eventually to join. But under Japan’s leadership, the rest of the parties continued, and formed the CPTPP. Now with President Biden, ideally, the US should come back to the CPTPP. But politically it is not possible.
So, the US has now come up with a proposal for an Indo-Pacific Economic Framework, which they are launching next week. And I think Japan is planning to join. Singapore is planning to join. It is not quite a substitute for the TPP, but it is a forward-looking agenda. We support it, because it is a valuable sign that the Biden administration understands the importance of economic diplomacy in Asia. And we hope that one day the political situation in America will enable them to resume talking about an FTA in some form, and talk about market access. But it may take some time.
Nikkei: Before we talk about the Indo-Pacific Economic Framework initiative, how do you see trade with China? I think the proportion of trade with China, for most of the Asian countries, has become much bigger than 10 years ago. And I am afraid that many countries in Asia rely too much on trade with China. So if China stops importing from Asian countries, the effect could be devastating.
PM Lee: Well, you cannot afford not to do business with China. The opportunities are there, the markets are there, and you want to trade with them, and soon, many countries will be welcoming their investments as well. But at the same time, you would like to grow your trade, your links with the rest of the world, with EU, with America. Even Africa and Latin America – these are new markets, but we have to look for potential all round the world, and we have to keep a balance.
But that China is now a bigger part of the world economy, and therefore proportionately you would expect more of your trade to go with China, I think that is a normal situation. If you say China is a big part, but I do not want to trade with them, it will not only be very costly, but you are setting up for more friction and less chances of maintaining the peace.
Nikkei: Singapore is this year’s Chair of the CPTPP. China and Taiwan both applied for membership. How are you going to deal with those applications?
PM Lee: We are the Chair, but we do not decide. We are the traffic police. We have to handle this in accordance with the rules of the TPP. It is an open grouping where economies can join if they meet the standard, which are quite high, and the decision is made by consensus. That means the Chair will consult the member economies, and they will have their views, and if there is a consensus to start the accession process, it will begin. I think the consultation will take a while; individual members will have different views and they may have their own separate discussions with the economies applying, before telling the Chair what their stand is. We look forward to hearing their views and seeing if there is a consensus.
I think when the members make their decisions, they will look at the economics of it, i.e. the trade and investment aspects. But I am quite sure they will also have the strategic and broader perspectives at the back of their minds.
Nikkei: But when you think about having China as a member for CPTPP, Japan's idea for the CPTPP was to have some sort of counterbalance to China's economic power, because if you have a dominant economic power in the region, that country will dictate the trade rules in the region. So we need some kind of collective bargaining power.
PM Lee: Ideally, you would have had the TPP, America would have been there, and then at some stage, the Chinese may well have thought about whether they would like also to join the TPP. And then you would have had a balance. Now, unfortunately, America is, for the time being, not at the table. So that is something which I am sure Japan will take into consideration.
Nikkei: Getting back to the military balance in the region, they have NATO in Europe in order to match up against Russia, but the problem in Asia is that we do not have a collective security framework in the region. Do you think it is necessary?
PM Lee: The history is different. In Europe, NATO came into being between the Western countries and the Warsaw Pact country, the Soviet bloc. And after the Soviet bloc collapsed, and the Soviet Union broke up, NATO continued in existence. And it has now become de facto a group which is dealing with a perceived threat from Russia, which is similar, but not quite the same situation as during the Cold War.
In Asia, the history is different. There was never a grouping in Asia which was the equivalent of NATO. And countries in Asia, many of them enjoy good ties with China, as well as with the US and the US’ treaty allies. Some are treaty allies themselves, like Japan, Korea, and Australia. Many more are not, but are friends of the US, like Singapore – we are a major security cooperation partner. But even many of the allies maintain important relations with China. So I think that that is a better configuration than one where countries are divided along a line and one bloc confronts another. That is the history in Europe, but it has not been the history in Asia. And I think it is better that it remains not.
Nikkei: And also talking about Indo-Pacific Economic Framework initiated by the United States, Singapore is positive in joining the framework.
PM Lee: Yes, we are positive. Because ideally, you want the US and an FTA arrangement with Asian countries, but they could not do it. So this is an alternative which is not an FTA, but a framework which reflects their intent to cooperate on economic issues which are relevant to the region. It includes supply chains, the digital economy, green economy cooperation. These are positive things which are of interest to countries in the region and keep the US engaged, therefore we support it.
Nikkei: I see. But also the details are still unclear, what kind of outcome would you like to have?
PM Lee: No, the details have not been negotiated. The broad areas have been identified and so we will go in and we will try to work out something as substantive and mutually beneficial as we can.
Nikkei: But what do you expect that initiative could be to your country's benefit?
PM Lee: Well, they have four things listed. Trade; supply chains; clean energy, decarbonisation; and tax and anti-corruption. These are broad areas, but from our point of view, we are interested in talking about digital economy, about green economy cooperation, sustainable energy, sustainable finance, carbon trading rules. We see the opportunity to come to an agreement and we would like to start talking.
Nikkei: I would like to ask you the cooperation between Singapore and Japan. We know we already have a good relationship, but do you find any specific area where we can improve our relations?
PM Lee: The digital economy is one of them. We have our Smart Nation initiative, you have the Digital Garden City Nation Vision, which was initiated by Prime Minister Kishida. We can learn from one another to develop smart cities and how to do digital governance. Every country in the world is trying to do this. Some like Estonia have gone very far. In Singapore we have several initiatives, some further advanced than others. We continue to learn from one another.
I talked about green economy just now. That is also a promising area – cooperation on alternative energy and developing sustainable economies.
Separately, there are items which have been on the agenda for some time but have not moved, but we hope is possible in this environment coming up from COVID-19 to start moving.
For example, we have the Japan-Singapore Economic Partnership Agreement (JSEPA), established in 2002. We had one update, but it needs to be updated again. Japan has not been able to do this because you were preoccupied negotiating the TPP and the RCEP. But those are now settled so I hope that we can now start to discuss upgrading our JSEPA.
Nikkei: What is your suggestion for negotiation?
PM Lee: We would like to bring the JSEPA up to date.
The other area which is long-standing is civil aviation and in particular, air rights. We would like to strengthen air links between Singapore and especially flights to Haneda.
Nikkei: So you would like to increase the number of flights?
PM Lee: Of course. The demand is there. Japan is still now restricting travel, but very soon, you will change your rules and we should prepare for that.
Nikkei: Quick follow-up question. So we had an opportunity to interview you three years ago, and regarding the TPP, you said Singapore's view is that we welcome China to join. Now as China apply for membership, are your views unchanged and do you think member countries have more advantages than disadvantages?
PM Lee: We welcome China to join the CPTPP. I have said so publicly. Of course, they have to meet the standards. They say that they will do that. It is something which will have to be discussed in detail. But in the end, the decision is made by the consensus of the members so the other members may well have different views.
Nikkei: In terms of Russia’s invasion of Ukraine, does this have an impact on China's action in Asia Pacific region, including the South China Sea and Taiwan Straits?
PM Lee: I think certainly it will have an impact on our region, because it weakens the global order, and that worries a lot of countries in this region. Therefore, the countries will now be making their own assessments of their defence posture, spending, and strategy, and also the path forward for the region collectively, how to avoid the missteps which led to war in Ukraine, in Europe. And that is a question which needs to be examined not just by small countries, but also by the big countries. Because when you end up in a conflict, it is very seldom only one side which caused the problem.
As for the specific situation in South China Sea, I do not think that the impact is considerable, because in the South China Sea, there is a process going on to discuss a Code of Conduct between ASEAN and China, and the claimant states are all involved. That is in process, although I think it is going to take some time and will be a difficult negotiation. And the countries understand this. Sometimes you can have incidents, but generally the countries do not want to have a physical clash in the South China Sea.
Taiwan is a very complex issue on its own. I am sure the Chinese are studying carefully the lessons of the war in Ukraine. And I am sure on the other side of the Straits, Taiwan is also studying carefully the lessons. I hope that they will draw conclusions which will help them to manage the issue wisely. One conclusion, which many of us looking at the Ukrainian situation will assess, is that when you have a conflict, it is easy to start, but it is very difficult to tell how it will end. And you have to assess not just what happens in the direct conflict, but the broader consequences. Internationally, how other countries will react, how it affects your standing internationally, and also the price of the war and bloodshed.
The only thing worse than a battle won is a battle lost. So even if you win the war, whoever declares that they have won the war in Ukraine, would have paid a very heavy price. And I hope that in the Taiwan Straits, these lessons will be pondered and the parties will be able to manage the situation in a prudent, peaceful way.
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李总理: 我们希望能更新JSEPA 的内容，让它与时并进。
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