Speech by Prime Minister Lee Hsien Loong at the 19th Nikkei International Conference on the Future of Asia

Mr Tsuneo Kita
President & CEO, Nikkei

Distinguished guests, ladies and gentlemen

1.   I am delighted to be back in Tokyo and to address the Nikkei Conference on “The Future of Asia” again.

DEVELOPMENTS IN ASIA

2.   The Nikkei Conference has come a long way since (it began in) 1995 when Asia was on the move. The four Asian Tigers were taking off, China was opening up, and India was looking East. However, soon after that the Asian Financial Crisis happened. Many countries ran into serious problems and some observers doubted that Asia would recover.

3.   But Asia did recover, faster than expected. Since then, Asia’s global role has grown.
Asia came through the Global Financial Crisis relatively unscathed. This year, the IMF estimates that developing Asia will grow six times as fast as advanced economies.

4.   Asia is generally peaceful and stable, though there are some tensions. The hottest issue is security on the Korean peninsula. In addition, several regional countries have territorial and maritime disputes with their neighbours. Countries must manage these carefully so that they do not destabilise the region.

5.   One complicating factor is nationalist sentiments, which are rising in several countries. This is because countries are becoming stronger and more confident, but also because disputes over sovereignty have roused national pride. Such sentiments trigger reactions on the other side, and make the problems harder to solve.

6.   The biggest factor in Asia’s success is China’s continuing progress. China is now the top trading partner of many Asian countries, including Japan. China has integrated remarkably well into the international system, given its size and impact. For instance, it has supported UN Security Council efforts to defuse the problem in the Korean peninsula. China does have some thorny problems with its neighbours, such as over the Senkaku/Diaoyu islands, and also in the South China Sea. These issues need to be managed peacefully, in accordance with international law.

7.   India has also progressed steadily. Cities like Mumbai, Bangalore and Chennai are vibrant economic centres. Indian companies like Tata and Infosys have become global brands. India’s young and hungry population can provide a demographic dividend. But India’s economic and political complexities and challenges are constraining its huge potential.

8.   Japan has gone through very rocky times in the past two decades, but is still the world’s third largest economy. It remains an important source of investment and technology for the region. Since Mr Abe became Prime Minister for the second time in December, he has changed the mood in the country, and set a clear agenda to restore confidence and revive the economy.

9.   Southeast Asia is keeping up with the rest of the region. Most ASEAN countries are making steady progress. Collectively, we are building an ASEAN Community by 2015 with a combined population larger than Western Europe’s and a combined GDP that is larger than Russia’s.

US-CHINA RELATIONS

10.   International relations in Asia are evolving with these strategic trends. The key relationship is between the US and China. This is the most important bilateral relationship for both countries and for Asia, and indeed for the world.

11.   US and Chinese leaders want constructive and stable ties with each other. As President Xi Jinping said, “China and the US have enormous shared interests”. US leaders – both Republican and Democrat – agree. They do not seek to contain China, because they know that it is impossible to do so, and unwise to try.

12.   Naturally there are some issues between the US and China, such as over trade, cyber-security, or human rights. Their populations are also concerned about possible threats that the other poses. Americans worry that the Chinese will take away their jobs, and that China will challenge America’s position as the sole superpower. Some Chinese suspect the US of manoeuvring to check China’s rise, and want to assert China’s rights as the country gains influence. Leaders on both sides have to manage these pressures and work together on common problems.

13.   Since the second World War, the US has been a Pacific Power and is determined to remain one. The Obama Administration is rebalancing the US global posture towards the Asia-Pacific. It wants to maintain America’s regional security presence, and deepen longstanding economic and political ties with the region. Singapore supports this because the US presence in Asia has long underpinned regional peace and stability and enabled other countries to prosper. Currently, the US faces difficult economic problems, but America is not a nation in decline. It is enormously resilient and a creative society which has reinvigorated and reinvented itself many times in the past. I believe the US will continue to play a vital role in our region.

14.   China accepts the US role in the Asia-Pacific, but its own international influence and aspirations are growing. China wants to build up its armed forces and take its rightful place in an evolving world order. This is natural for any growing and major power and should not surprise anyone. However, all countries are closely watching how China exercises its rising power. By demonstrating its benign purposes through its actions and restraint, China will reassure other countries, and enhance its own security.

15.   America and China need to institutionalise exchanges to build strategic trust, promote transparency to prevent misunderstandings, and develop clear rules of engagement to avoid incidents. President Obama and President Xi plan to meet in California next month. Holding this Retreat so early in their terms shows their desire to work together on common issues. A major shift in the global balance is taking place, and I am cautiously optimistic that it will be managed by the main players wisely and prudently.

JAPAN’S ROLE IN THE REGION

16.   Apart from America and China, Japan is integral to the future of Asia. Japan’s rebirth after World War II was an economic miracle which benefitted the wider region. Since Japan’s bubble economy burst in 1990, Japan has understandably been preoccupied with domestic recovery and less focussed on external initiatives. We hope that Japan’s recent political and economic changes will restore it to an upward path. We also hope Japan deepens its strategic engagement with Southeast Asia and the wider region.

17.   Mr Abe made a bold strategic decision to join the Trans-Pacific Partnership (TPP) negotiations. Singapore has long encouraged Japan to do so. The TPP is a step toward the ideal of free trade in the Asia-Pacific. Japan’s membership in the TPP is a big plus both because of the sheer importance and weight of the Japanese economy and also because, with Japan in, the TPP will now include Northeast Asia, which is a strategic part of the Asia-Pacific.

18.   Japan will derive greatest benefit from the TPP if it also makes structural changes to its own economy. The Chief Cabinet Secretary, Mr Yoshihide Suga, has called the TPP “the biggest pillar of reform” . Implementing domestic reforms will be a difficult task, but I am glad that the Abe Administration is committed to this. I look forward to Japan’s full participation in the TPP, and wish you every success.

19.   One factor which colours Japan’s relationship with many of its neighbours is the history of the Pacific War. After the war ended, Japan did not fully reconcile its relations with the countries it had invaded. For many years this unresolved issue made it difficult to build trust and confidence. Prime Minister Murayama’s formal apology in 1995 was thus an important step in helping Japan put the history of the war behind it.

20.   We are now in the 21st century. The world has completely changed. The generation which experienced the war is fading away, but the issue continues to cast a shadow on Japan’s relations with its neighbours, especially China and South Korea. It is time to look forward to a better future together, and not rehash old grievances or reopen old wounds. I am therefore glad that the Abe government has backed Murayama’s apology. All parties should put the history of World War II behind them, move forward and forge relationships of mutual benefit and trust.

21.   Japan’s external relations are vital to the region. Japan’s security alliance with the US has anchored peace and stability in the Asia-Pacific since the war ended. President Obama reaffirmed this during Mr Abe’s visit to Washington in February, calling the alliance the central foundation for regional security. We are happy that US-Japan relations are in good shape. However, this does not make it less important for Japan to maintain good relations with other important partners in Asia.

22.   The most important such relationship for Japan is with China. Ties are currently strained, because of the Senkaku/Diaoyu islands issue. Strong nationalistic sentiments have been roused on both sides. But any actions taken now cannot affect the legal position of the islands. We hope that both sides exercise restraint, maintain contacts and gradually de-escalate the situation. I therefore welcome Mr Abe’s commitment to keep the door open for dialogue, and not to close down all aspects of the bilateral relationship because of this single issue.

23.   Both Japan and China have wider interests at stake. How China deals with these bilateral frictions shapes how other countries will see China's rise, and whether they will accept China as a benign power which interacts with other countries, big and small, on the basis of equality and mutual respect. Japan gains from a constructive, peaceful and cooperative relationship with its most important neighbour. As Mr Abe said last December, “Relations with China are one of Japan’s most important”.

24.   Though relations look rocky now, we should not forget that they were much better only a few years ago. In Mr Abe’s first term as Prime Minister, he chose China as the destination of his first overseas visit in 2006, describing it as a visit to “break” the ice. A year later, Chinese Premier Wen Jiabao visited Japan and he described as a visit to “thaw” the ice. In a memorable speech to the Diet, he recalled the friendly relations that China and Japan had enjoyed through the centuries, dating back to the Tang dynasty when the Chinese monk Jian Zhen visited Japan to propagate Buddhism. Events since Premier Wen’s visit have set relations back, but they have not fundamentally changed either the interests or the strategic situations of China or Japan.

SOUTHEAST ASIA

25.   Japan’s interests extend beyond Northeast Asia and the US, to its ASEAN partners and many other parts of the world. In the 1970s, at the height of the Cold War, the Fukuda Doctrine set out a bold vision of an economically united Southeast Asia cooperating with Japan. Japan did much to bring this to reality with its policies and diplomacy, and won many friends in the process. It did so either through economic aid (especially in the Indochinese countries), or through trade and investments (Singapore was a major beneficiary).

26.   ASEAN and Japan remain important economic partners of each other. Bilateral trade is large and increasing. The growing middle class in ASEAN countries will be important for Japanese exporters, whether you are talking about Toyota cars, Fujitsu laptops, Shiseido cosmetics and many other Japanese products.

27.   ASEAN has launched the Regional Comprehensive Economic Partnership (RCEP). It is a free trade grouping that covers the Western side of the Pacific, comprising ASEAN plus ASEAN’s partners Japan, China, South Korea, India, Australia and New Zealand. The RCEP, together with the TPP, will form a broad basis for free trade across the Asia-Pacific. We hope that Japan will participate actively in both groupings. The RCEP will not only create new opportunities for the Japanese economy, but also contribute to an open and inclusive regional order.

28.   ASEAN and Japan celebrate 40 years of friendship and cooperation this year. I look forward to the ASEAN-Japan Commemorative Summit in Tokyo this December, and look forward to working together with our ASEAN partners and Japan to strengthen ASEAN-Japan relations for many more years.

SINGAPORE-JAPAN RELATIONS

29.   Within this broader context, Singapore enjoys excellent bilateral ties with Japan. The Japan-Singapore Economic Partnership Agreement was Japan’s first bilateral FTA, and one of Singapore’s earliest FTAs and it paved the way for Japan’s other FTAs with other Southeast Asian countries. Singapore continues to welcome many Japanese investments, though the profile of these investments has changed with our needs and circumstances. Singapore now hosts operating global and regional HQs of Japanese companies like Fast Retailing, which is the owner of Uniqlo, as well as manufacturing companies like Takeda Pharmaceuticals. Other Japanese companies conduct R&D in Singapore. For instance, Kikkoman and Pokka customise their food products for Asian customers. Singapore is also becoming a hub for companies like Sony and Sumitomo Chemicals to train their global leaders.

30.   Our tourism ties are also strong. Many Singaporeans travel to Japan to enjoy your beautiful country, your delicious food and relaxing onsens. Many Japanese visit Singapore too. I hear that after the Japanese band SMAP filmed its SoftBank commercial at the Marina Bay Sands resort, the Marina Bay Sands has become very popular with Japanese tourists.

31.   Our cooperation extends to helping third countries. Together Japan and Singapore run a programme (the Japan-Singapore Partnership Programme for the 21st Century) that has trained more than 5,000 officials from Asia, Africa, the Middle East and the Pacific in areas such as public administration, trade promotion, urban planning and healthcare.

32.   Singapore also hosts a Japan Creative Centre (JCC), which Mr Abe and I agreed to set up. Singaporeans always enjoy the JCC’s events on Japanese art, manga and fashion, but nothing is more popular than Japanese food festivals! But the JCC has a serious role – to promote Japanese culture in Southeast Asia, and enhance Japan’s ties with its ASEAN partners. Singapore is happy to help Japan in this endeavour.

CONCLUSION

33.   Asia’s future is bright. Countries are striving for growth and prosperity, to improve the lives of their peoples. We are building new institutions for regional cooperation. We are working to maintain a stable, peaceful regional order, even as the strategic balance shifts.

34.   I wish Japan well as you navigate this new landscape. Japan has much to contribute to Asia’s progress. I hope that you find the consensus and will to set yourself firmly on the path to recovery, and show the world that you remain the Land of the Rising Sun.

35.   Thank you very much.