PM Lee Hsien Loong’s Dialogue at the Forbes Global CEO Conference 2014

Mr Forbes: I have to begin with the obvious question given what is happening in the Middle East, Ukraine, South China Sea, US economy so-so and Europe in the doldrums, Latin America now turbulent after the Brazilian election. So what is your assessment of the global economy, then Asia and then Singapore, in particular?

PM: Well, the world is never completely at peace. I think if you look at it historically, these are peaceful times, but, of course, there are turbulent issues all over in different parts of the world. The American economy – you know better than me – statistically it is a very long recovery but it is also a very weak one. I think the Europeans are in the doldrums and not just cyclically but because of structural issues which will take quite some time to resolve. In Asia, there are strong new governments in India and China. I think they want to make fundamental reforms. It will take some time but they are going at it.  In Southeast Asia, well, we are trying to get our act together. We are talking about an ASEAN Community by the end of next year. We are doing business with the rest of the world. Some of us are involved with the TPP, which is a big thing for us, and we hope to prosper when China prospers and if peace continues in the world.

Mr Forbes: Do you see, talking about the turbulence in the world, international law, what are the prospects that these flare-ups are going to be contained?

PM: I think it varies from place to place. The Ukrainian issue has become much more complicated because of MH17 but the Europeans have a lot of business done with the Russians and they do not want to go to war with the Russians, so this will remain an issue but I do not think it is going to lead to a global conflagration. In Asia, we have disputes. We have the South China Sea disputes between China and several of the ASEAN states – Philippines, Vietnam, Malaysia and Brunei. There is a dispute over the Senkakus between China and Japan. I think the temperature has gone up on both. They are not easy to resolve, but again I do not think that either side wants to push it to the brink.  It is a game of brinksmanship and we have to hope that there are no mishaps and that sane counsels prevail.  But I do not see those issues being solved quickly because sovereignty is involved, because national pride is involved, because there is social media in the countries which work up sentiments and nobody can pull back and say, ‘I made a mistake’, or ‘I made a deal and I just decided to cut the island in half’.  It is not going to happen. So all we can do is to live with the disagreements and manage them and hope that our grandchildren will be wiser than us and can make progress on them.

Mr Forbes: Grandchildren, my goodness. It is a long way. In the meantime, what should the role of the United States be in trying to make sure these disputes do not escalate or rise in the first place?

PM: Well, the US is not omnipotent. You are the superpower, in a way， the only superpower， but you cannot order things in the world as you wish, whether it is in the Middle East, whether it is in Ukraine, whether it is in Asia. But you have a constructive and important role to play because you have got friends all over the world, and you can do things and play a role which no other country can. In Asia, America has played a vital role since the war and it is a Pacific power. Obama has said it will remain a Pacific power and I think any US administration has to say that.  But you have also got preoccupations in many other places. So whoever is the Secretary of State, he is on the jet a million kilometres a year and all continents. So to be able to focus on Asia, to tend your relationships, maintain good ties with China, make sure you keep up with your other friends in Asia and be present constructively.  But you have interests and everybody knows you have interests and I think you have a legitimate role to play because many countries in Asia welcome America’s presence and have deep ties with America.

Mr Forbes: You mentioned ASEAN. How do you see that moving in the future now in terms of cooperation, integration and removing barriers between?

PM: I mentioned the ASEAN Community. We have a target of end-2015 for achieving this ASEAN Community and particularly, the Economic Community, which means free trade in goods, which means freer trade in services, which means better rules for investments, which means more rationalisation of regulations and civil aviation so that we can connect with one another better. I think that we have an ambitious roadmap. We have made about 80 percent of it already. The last 20 percent, of course, are the hardest parts and most politically sensitive. So I am sure that there will be work left over to be done even after we have an Economic Community but we will make progress and we are heading in the right direction. Countries have different preoccupations. I mean, they always do. There is a new government in Indonesia; I think the new President will be focused on domestic issues for a while. Thailand has a military government which is working towards establishing new rules and eventually holding new elections, so they are domestically preoccupied.  Myanmar is still in the process of democratic transition and working towards an election next year which, I think, will be a significant test of whether democracy can work in the country. So we have all got different preoccupations, but I think that we are gradually making progress together. It is not like the European Union which aims for a single market and a single community in all respects, but even the Europeans do not find it simple to be single in all respects. So I think that we have a realistic, even though slightly less ambitious, target.

Mr Forbes: Will the time ever come when you have a single currency? Or will you say no.

PM: Probably after my retirement. The Europeans have asked themselves very seriously whether they should have gone into a single currency and if you took a purely economic view of it, the answer probably was no, but they had other reasons for doing it. In Asia, the preconditions do not exist. I mean, you do not have that same congruence of the system. You do not have the integration of the economies. You do not have a similar basis for even economic policy and for integrating the economies. If you are going to have a single currency in Asia, the simple question is, is it going to be based on the renminbi or is it based on the yen?

Mr Forbes: That answers that question.

PM: Yes.

Mr Forbes: Getting here to Singapore, everyone knows the amazing progress Singapore has made over the years even with periodic crises. You are a country with 5.5 million people. How do you maintain, first of all, your pre-eminence, certainly your centrality as a financial centre? How do you make sure you maintain and enhance your global influence with 5.5 million people?

PM: I think that we just try to do okay for ourselves. It is a continuing challenge. At every level, you have not arrived and you have to find new ways to move ahead and we are at a level now where we have 5.5 million people in Singapore and we say we have to grow, but you have to grow by upgrading the workers, upgrading our own people so that they can do better jobs, earn higher pay and improve their lives. The population has to expand some, gradually in a sustainable way. Talent has to be able to come in to Singapore so that you will create more and wealth and you can generate more business and more good jobs for the people.  But fundamentally, we have to upgrade and transform our economy and our people, the young ones in schools and also those not-so-young who are already working but who need to refresh their skills and who need to pick up new capabilities because the world is changing and that is a big challenge. It is a challenge which all the developed countries face. We are at ‘developed country’ levels of income and GDP, but, in fact, we are not quite at developed country levels in terms of the comprehensiveness of our economy, in terms of having the multinationals, the reach.  So people look at us and they say, ‘Yes, you are doing well’ but we are still a small country even though we are doing well and we never forget that.

Mr Forbes: One of the challenges you face was a growing population, infrastructure not growing as quickly to meet that surge of immigration. You seem to have a situation today where wages are growing faster than productivity. How you ride this tiger? How do you try to fine-tune this?

PM: Well, there are several aspects of that. First of all, we fell behind on infrastructure because the economy was doing well and we just needed the workers at all levels, whether construction workers, whether factory workers, whether they are service workers in hotels, whether they are professionals or bankers. They came in and well, they put a load on us. I think if we had not brought them in and shut them off, we would have faced other serious problems. But the infrastructure shortfall was a problem and we have been building houses. I think we have caught up now.  We have been expanding our metro, our train system, not quite caught up but it is in progress and we are seeing improvements already. So I think the infrastructure problems can be resolved.

The challenge really is how do we upgrade ourselves and grow, not so much with so many people coming in, but with higher-quality growth and as you say, in recent years, wages have gone up faster than productivity. I think in the short term you can wear that and in the short  term I think it is okay because the demand is there, the pressure to come into Singapore to invest, to set up companies is there and, therefore, Singaporeans are in demand.  If that is the value of the Singaporean, I think it is good that they get it and they are really getting a bonus from being Singaporean because people want to come to Singapore and I happen to be a Singaporean, therefore I enjoy a wage which I would not get if I were somewhere else in Southeast Asia.  In fact, that is one of the ways we want to improve the wages of our people. But you cannot push it indefinitely. You are unproductive, the country is drained but people come and hire you and pay you $1 million and you do not have to work. Well sometimes, that happens in some places but I do not think that that is possible in Singapore.

So in the long term, that means productivity has to go up. How does productivity go up? Education of our people, training of our people while they are working so that they learn skills which are relevant to their jobs and also restructuring of the economy so that it keeps on bringing in businesses which are sunrise businesses and gradually phase out those which are not so successful and not so profitable and then we can move. It is not magic, it is not easy, but it is the only way we can do it.

Mr Forbes: One more question before we go to the audience, Prime Minister. The theme of this conference is ‘The Next Horizon’. You mark this year as the tenth year you have been Prime Minister. Next year, Singapore celebrates its 50th birthday. What have you learnt, how have you evolved as a leader? How are you different today than ten years ago. Where do you see yourself in five years, ten years from now, well, before you retire?

PM: More grey hair today and even less hair in ten years’ time, but hopefully, with a bit more sense of the limits but also a bit more confidence to push those limits because it is always a balance you are trying to do. What is possible, what you think is possible, you must know because otherwise, you are just talking in a vacuum.  But what can you make possible beyond what we believe can be done and then you do something a bit more than that, whether it is economy, whether it is education, whether it is in the quality of the city we are building.  We did not believe ten years ago that Marina Bay would look like what it does today any time soon. We had an idea and one year, I actually showed a visualization of what we hoped it would look like on our 50th birthday, which is next year, and there were some buildings up but to make it look prettier and make sure it was convincing, I added some fireworks to animate the picture. We thought it looked good because it was a lot more than we had. But today, if you go around Marina Bay, even without fireworks, I think I am proud of it. So you can do more than you think is possible and looking forward beyond the 50th anniversary, I think that is what Singapore needs to do, to be aware, to be paranoid so you always know that somebody can take your lunch away, but at the same time to have the confidence that I have a good base, I am in a strong position and I am determined to do better and I think that is what we need Singaporeans to think and to feel.

Mr Forbes: Thank you, Prime Minister.  Why don’t we open it up for questions?  Raise your hand and we will try to get a microphone to you. 

Q: Prime Minister thank you, it is Tim Ferguson with Forbes.  All around you in Southeast Asia and South Asia and even in your own city-state, there is a mixed record with regard to popular democracy in recent years. Could you speak to the fate and future of popular democracy in this region?

PM: I think it is a slogan. If you read some of the Western newspapers – I do not count Forbes – when you say pro-democracy, by definition, that is a good thing. But if you look at the countries in Asia, you will know that these are complicated countries and they work in different ways and even when you have elections, the power structure, the politics, the government functions in very different ways in these different countries. In Thailand, you have elections, but the King plays a critical role, the military plays a critical role, sometimes overtly. It has been so for a long time. If you look at India, they have a democracy. It functions in terms of getting a new government in place every now and again, but in terms of addressing fundamental challenges which the country faces, it makes it harder to do than, perhaps is the case in China. If you look at China, they have no elections, but that does not mean they do not have the problems of having a government which is legitimate, which is functioning well and which is subject to checks and balances. If you look at Singapore, we have elections, we have a parliament, we have an elected government and yet, if you ask whether that is a formula which will automatically yield a good government and a successful country for the next 50 years, nobody can say. It depends on the people, it depends on the values of the society, it depends on the quality of the leaders and the connection between the leadership and the population. So I think each country has to find its own way forward. I do not think there is salvation in saying we need more democracy and that will make these countries prosper and Hongkong is just one of the cases in point.

Q: Good evening.  My name is Peter Ter Kulve.  I am Dutch, I work for Unilever here in Singapore. Holland is a welfare state and many of us believe it took some of the entrepreneurial drive out of the country over the many years and all the beautiful multinationals were born in the 1950s and 1960s when there was still a lot of drive. Are you afraid that Singapore is becoming too much of a golden cage for young Singaporeans and it will take some of the entrepreneurial zest out of Singapore as well?

PM: Old people always feel like that. Of course you do worry because the new generation has got different experiences from the old generation and they have grown up in different circumstances and they have different expectations. Usually, they look after themselves, but it is natural as parents or grandparents to watch with some affectionate concern and try to point them in the right direction, usually to no avail. There is one difference between Singapore and Holland. You have oil and gas and we do not and maybe we have been blessed because then we have to work harder for a living.  But it is easy to misunderstand that what you see around you is natural and is permanent and can only get better. It is true it can get better but only if you work hard to make it better. I think the Dutch have become different from the days when you were strict Calvinists, but in Europe people still look at the Dutch with some considerable respect as a Northern European, hardworking and successful society and economy. I think we would like to emulate many of your successes.

Q: Prime Minister, Michael Ma from IndoChine. Climate change – Singapore has done very well in terms of greening, insulation and all sorts of things of greening, things that your father started. How will you convince the other leaders in Asia that climate change is important and, you know, 2045, Singapore could be a metre under water.

PM: I think not 2045. Well, climate change is important. First of all, it is real. I have to say this because some people still say climate change is not real but it is real. We can see it happening. We can estimate how quickly you think it is going to worsen. It depends what human beings do, but I think realistically, we will not be doing enough to slow down, to stop, much less to reverse the process and we have to be prepared for it in Singapore. In the way we reclaim land, I think our requirements are now a few metres higher to provide some tolerance in case we miscalculate the water levels. In the way we build our structures, the standards we require for greenness, that means energy efficiency, we assume that we will have to cut back on carbon emissions. In the habits we try to inculcate in our people, in order to live in an environmentally-friendly and sustainable way.  I think it is not different from what other countries are doing. If you look at even the Chinese, they are putting a lot of investments into solar power, into wind power. They are trying to clean up their coal power plants. That is a Herculean task and I think they know that if they do not, it is going to affect them and they can see it affecting them already, whether it is typhoons, whether it is low-lying lands affected by rising sea levels, whether it is changing patterns affecting their deserts and their snow caps and therefore their irrigation and their agriculture.

So it is not what we say which will convince other people to change.  It is when other countries conclude that this is real and that they are going to be affected and that countries have to get together and deal with it together, then you can move. You cannot go at it alone. The Europeans say they are going to do this, that, the other, they want to reduce their emissions by 80 percent by 2015. I do not think it can be done, especially not if the rest of the world is not doing it because your industries will move offshore and they will say, ‘Why I should I impose these rules and cause the plant to go across the Mediterranean and then the rules are laxer there and the world is worse off because he is pumping out more stuff there?’ They will stop doing that.  

The Australians tried to do it. They had a carbon tax imposed by the Labour Government and Tony Abbott has come in and he has reversed it.  He is one of the reasons why the Labour Government lost the election because you cannot do these things yourself unless there is a global agreement to do it together and a global agreement to do it together depends on the big emitters, China, India, America, Europe, but mainly America and China in the first instance, getting together and being prepared to make a deal and to implement a deal and get it sold to your own population. Congress, if it does not pass a deal, well, the US President can do certain things but really truly, you cannot raise the carbon, you cannot raise your gas taxes, you cannot change your subsidies for coal which you have some for places like West Virginia, and you really cannot live up to your international standards, obligations and if you do not, well the Chinese will say, ‘After you’.

Q: Hello, I am from Vietnam. I have a question for the Prime Minister. As you just said, in Southeast Asia, we have various countries with various races, various policies of different governments. But we all know that in order to have a strong Southeast Asia, we need a big population, the strong purchasing power that comes from a huge population. So how can we do that to promote the trend of Southeast Asia and how do you see the role of Singapore in this change? Thank you.

PM: I think population is one factor in purchasing power but it is not the only one.  America has got 300 million plus population, it is not the biggest country in the world but it has about the biggest purchasing power in the world. So I think the purchasing power in Southeast Asia will come as the countries develop, as middle classes grow, as we integrate our ASEAN economies so that we can get more economic interdependence, cooperation, division of labour and therefore more prosperity for all. That is what Singapore has been encouraging in ASEAN.  We have some influence but of course each country has its own calculations. One of the things which we are doing, both Singapore and Vietnam, in order to prosper our population is to participate in the TPP negotiations. It is a Trans-Pacific Partnership, FTA, did negotiations, which include America, Canada, Mexico. It has got Chile, Peru, Australia, New Zealand, Singapore, Vietnam, Brunei, Malaysia. It is quite a range of countries, both sides of the Pacific, north and south, developed and developing. The key major players are in, America, Japan, Australia, not yet Korea. It is coming to a point where we can about see the end of the negotiations but we have not quite reached that yet and we hope that we will be able to complete it by the end of the year or by early next year. I think the Ministers have just met and they have agreed to set the target of doing it by the end of the year or by early next year. But after that, it has to be sold to Parliaments and Congresses and ratified.  If we can get that, that is a significant enhancement to our trade, to our prosperity and it will answer your question, it will give us the purchasing power and improve our lives.

Mr Forbes: Let us hope, if you get an agreement, that the US Congress and President will get it done in the US, get it approved. Now, other questions  Yes?

Q: Prime Minister, sir, Sanjeev Kanoria from London.  You mentioned that Europe is now moving into deflation and Asia’s challenge is inflation.  What learnings can Europe have from Asia to move to the target inflation rate of two percent? If you could give us some idea on that it will be appreciated.

PM: Well, Europe’s problems is not, in the first place, a monetary one, it is a structural one and the structural problem is that you have got many fiscal policies and only one monetary policy and in that situation, you have to be prepared to have some countries support other countries or lend money to other countries. That means the Northern European countries, which are in surplus, either have to vote aid for the Southern Europeans, which are not quite balancing their budgets, or they have to lend money to the Southern Europeans, their banks will lend money to the Southern Europeans so that the Southern Europeans can have purchasing power and you can buy their exports. And they did the second, I think to excess and now they are not prepared to do the first and therefore you are stuck with monetary policy trying to solve what is both the monetary and fiscal, structural and political problem.   

So Asia’s situation is different. It is not that we are smarter than Europe and therefore we have inflation. It is just that we do not have the Euro, the single currency, and the structural difficulties which Europe has. It is not that the Europeans do not know this, but these are real political problems which will take a long time to massage your way as you gradually get people to change their attitudes and to accept different rules and I think that means that it is going to take some time and there is always the risk that along the way, you have some other mishaps, because actually the fundamental causes for the European problems did not get cleared. You made some changes. The European Central Bank is now different from what it used to be. But in other respects the institutional framework and the political willingness to say, ‘Well, it is all right if the Greece cannot break even, but the Germans will just write the cheque’. That is to put it in a very simplified and caricatured way, but that is the way it is put to German voters and the German voters say ‘No’ and that is a problem.

Mr Forbes: We have time for one more question.

Q: I am Yoshito Hori of Globis Japan. Prime Minister, you seemed to be quite positive on Singapore and Asia. My question is, what kind of concerns you have on Singapore and Asia? In other words, what keeps you up late at night?

PM: I think we are concerned about peace in the region because the fundamental assumption when we look forward and say we are confident is that peace will remain, that countries will cooperate and therefore that we can gradually solve our problems and develop our economies. If we do not have peace, if you have some conflict break out, you have a problem. You could have a mishap over the territorial and maritime disputes in the South China Sea or possibly over the Senkaku Islands; more likely, Senkaku than the South China Sea because they are talking about two significant powers confronting one another. You could have a problem in North Korea which could be very unpredictable. Nobody knows exactly how that works or what can happen.  

We could also have problems from ISIS or groups like ISIS bringing back to Southeast Asia the virus and the radical fervour which they have acquired fighting somebody else’s war in the Middle East. That is a real problem because as I said, there are people who have gone from Malaysia, from Indonesia, a few from Singapore, fighting in Syria and Iraq and the ISIS leaders have said, ‘Go and bring the fight back to the other countries, punish them’.  So if that goes wrong we have a problem in Asia and I have a problem in Singapore. 

Of course, it is incumbent on us to make sure that within each country, we solve our challenges too; challenges like our economic growth and development, challenges like our population growth. If we do not have enough babies, you can look forward to your grandchildren, but there would not be enough of them. Challenges like maintaining political and social cohesion in a very rapidly changing world with income inequalities, with uncertainties, with difficulties which are going to put a lot of pressure on societies and we have to be able to do that, mostly each one in our own circumstances responding to what our own societies need because other people cannot solve these problems for us. But we have to solve our own so that we are able to work together and prosper together.

Mr Forbes: Prime Minister, you have given us a lot to chew on so to speak tonight in a very positive way. So what I am about to give you is utterly inadequate. But I have a lot of them, but I have a lot of them, so I will give you a copy of my new non-bestselling book and it is made out to you, Prime Minister Lee who has brilliantly piloted the ship of state of Singapore in calm waters and in stormy ones with admiration. Thank you very much.

PM: Thank you very much.

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