PM Lee Hsien Loong at the interview on Chicago Tonight (April 2010)

CT: Leaders from more than 40 countries were in Washington this week to attend the global summit on nuclear security hosted by President Obama. Among them the Prime Minister of Singapore. Although not a nuclear power, Singapore is a major shipping hub and therefore a key player in the prevention of illegal cargo shipments. Singapore is also a major player in the global economy. Earlier today, the Prime Minister of Singapore, Lee Hsien Loong, spoke at the Chicago Council on Global Affairs. He is Harvard educated and is Singapore’s third Prime Minister. His father was the first. He has also served as Minister of State, Minister of Finance and Minister of Defence.

Mr Prime Minister, welcome to Chicago and welcome to Chicago Tonight:

PM Lee Hsien Loong: Happy to be here.

CT: We appreciate you spending time with us. First of all, let us talk about the nuclear security summit. There has been some criticism of it subsequently because the criticism is that at the end of the summit, the communique and the plan was so loose and informal that the summit was not that productive. Was it?

PM Lee: I think it was a useful initiative and I think President Obama did the world a favour by focusing countries’ attention on this, important although not urgent problem.

CT: You say it is important not urgent because one of the premises of the summit was that it is important to keep track of nuclear materials so that it does not get into the hands of terrorists?

PM Lee: It is important because unless you do something about it, one day you are going to have a disaster but it may not happen tomorrow and there are so many other priorities to worry about immediately. So to get all the leaders together, focus on it and see what we can do severally and together, I think that is useful. Of course what we say and do is one thing but there are other participants in the world. Some are non-state players, some are state players. Iran was not at the conference. North Korea was not at the conference and they are part of the problem.

CT: One of the ways in which Singapore would be affected is the fact that you are a major shipping hub and therefore could be key in terms of monitoring shipments. What do you see your role as being?

PM Lee: We participate in various global initiatives. There is the proliferation security initiative, there are other cooperations between countries to track shipments, to share intelligence, to intercept shipments which are suspected and inspect cargoes and we participate in those. We implement the UN Security Council resolutions to do with these nuclear security issues and we hope that we will be able to play our part to keep the global trading system safe because all you need is one warhead to slip through and that will not only cause a big disaster but cause a complete loss of confidence in the whole trading system and may break down and it will be a disaster for the world.

CT: Such as warheads, it is nuclear material itself for example, nuclear material that might be used to make a dirty bomb. Your country itself has concerns about militant Islamic terrorists, terrorism, how would you assess the threat level in your own country?

PM Lee: On terrorism in general, we take it very seriously. There are terrorist groups in the region. We once busted a cell in Singapore which was planning to let off seven truck bombs very seriously.

CT: Was this the Australian..?

PM Lee: No, this was an Indonesian group, Jemaah Islamiah, and we did not know they were in Singapore but after 9/11…

CT: The attack was targeted at Australian interests…?

PM Lee: No, no, the Australian was a different thing. They were targeting the American Embassy, the American School, your servicemen who are sometimes in Singapore because your Navy ships are in Singapore and they were doing it very seriously. We found them after 9/11 but in fact they had been there before 9/11 and we did not know. After that, we tightened all our security preparations and now every time we have a major function, we are on full alert.

CT: Mr Prime Minister, what brings you specifically to Chicago?

PM Lee: We have very good links with Chicago because you have companies in this region, Chicago, Illiniois, Midwest, which have invested in Singapore like Motorola or UL or Abbott or Baxter. We also have a lot of students who are studying in universities here, University of Chicago, Northwestern, University of Illinois and it is important for us to cultivate our friends here.

CT: Your country is obviously very connected to the global economy and right now there seems to be some preliminary signs that perhaps the economy is pulling out of a recession or at least there’s a positive spot. In fact your country just revised its GDP projections for this year to five to seven per cent?

PM Lee: Seven to nine.

CT: Seven to nine per cent, thank you. Is the recession over do you think?

PM Lee: For Singapore we’re expecting a good year this year. In fact the first quarter we have made 13 per cent growth year on year which is remarkable, both as a rebound but even more so as a base from which we can establish a good year this year. So I think Asia is moving and doing well. We are keeping our fingers crossed that America will continue a steady recovery, may be not as vigorous as we would like but as long as you keep moving forward, it will be good for Asia.

CT: The numbers you just mentioned and China announced that in the first three months of this year, their economic growth was close to 12 per cent, is that heating up a little too quickly? Is there a danger that things are getting too good too fast and therefore the possibility of a bubble might present itself?

PM Lee: I do not think the economies are overheating. There are possibilities of froth in the asset markets. I think the equities markets have been very ebullient recently. The real estate has also been rising rather sharply in many cities in Asia, including Singapore. We are a little bit worried. It is partly confidence in the recovery, it is partly also loose monetary conditions, interest rates are low, there is a lot of liquidity pumped into the financial systems and this is what happens and prices go up. People are thrilled, it goes up further they get carried away. We have done some things to try and cool down our own property market but we are watching it carefully.

CT: How would you assess the job President Obama has done handling the recession in this country?

PM Lee: I think President Obama and his economic team have done a very good job. If they had not made the right decisions under unprecedented and potentially catastrophic conditions, we would be in a very serious position today. But they did, we averted a disaster, now people say perhaps it was not so serious after all but it could have been.

CT: You personally have a strong background in finance and business and monetary policy and as you know there is a package of proposed financial reforms in this country, more regulation, different kinds of regulation, there has even been a suggestion that the six largest banks are now “too big to fail” and maybe they should be broken up. What advice would you give to the decision-makers in this country as someone who sees the United States as an important trading partner?

PM Lee: I think learn the lessons from the crisis but prepare for the next problem rather than the last one. One of the problems the last time around is that you knew what the banks were but there were things which you did not count as banks like Goldman Sachs or Morgan Stanley, the investment banks, which were not subject to rules and some of them got into trouble and then you had the shadow market, where people were borrowing and lending and depositors were not involved. But when the shadow market crashed, that threatened to bring down the whole financial system.

CT: What do you mean by the shadow market?

PM Lee: When people have CDOs, when they had swaps, when they had..?

CT: Derivatives and that sort of thing?

PM Lee: Derivatives, money market funds, funds outside the main banking system and it became big. People took risks too lightly and after a while when a problem happened, from one corner it spread to the whole system. You have got to find a way to have a supervision which is going to adapt because whatever rules you make, the people who are operating, bankers and the financiers, will find a way to optimize within those rules and there will be some place which is just beyond the pale and then you have….

CT: Not just optimise, completely get around the rules is what you’re saying?

PM Lee: If they do, if they go too far, they’ll go to jail but you can optimise it and somewhere you have got to adapt and you can not easily be one step ahead of them but you shouldn’t be more than two steps behind them.

CT: With respect, Prime Minister, in your country they might go to jail, in our country they tend to get bonuses?

PM Lee: Mike Milligan went to jail, Bernie Madoff is in jail, so you are quite good at doing that.

CT: Let us talk about your country for a second, Singapore, a country of five million people. Geographically it is not too different from the size of Chicago, former British colony, major player in international finance. What is your vision for Singapore? What do you want it to be in the future?

PM Lee: I think there is no final vision. This is a city which is always work in progress, which we hope will always be changing, transforming itself, an outstanding living environment in the tropics where people can fulfill their human spirit. There will be opportunities, there will be prosperity, there will be a sense of equality and participation and there will be talent who are living here, who are creating things here, who are making ourselves useful and relevant to the region and to the world.

CT: It sounds like your target is kind of a moving target, it is not like there is one thing in particular that you see…?

PM Lee: Each time we get somewhere, we will look further and aim to go beyond, we will never arrive.

CT: You have spent time in the United States. You went to the Kennedy School of Government at Harvard. You spent time training with the military here in the United States, you were at Fort Leavenworth. Are there any particular memories of the United States that have stayed with you, memories or encounters or lessons that had been useful to you in your job as Prime Minister?

PM Lee: I spent a year at Fort Leavenworth in Kansas, not very many foreigners get to spend one year in the middle of America with limitless cornfields and enormous amount of...

CT: Some people say that’s the middle of nowhere?

PM Lee: Well Dorothy was there.

CT: Dorothy, yes. But you’re not in Kansas anymore?

PM Lee: I’m not in Kansas anymore but I’m in the Midwest and it gives you a sense of the warmth of the people and in command school, especially, a healthy respect for the professionalism and dedication of the US Armed Forces, the officers, what they’re trying to do, the missions they are given and the spirit and the cohesion with which they apply what they need to do to their duties. If you read the newspapers, if you read the criticisms from time to time when something goes wrong, then you might get the impression that really what a bumbling and perhaps unfeeling organization the armed forces could be. But actually if you talk to the people, you have a very good respect for them because they are decent, wholesome, trying their best, putting their lives in danger, in the way of danger for the country and for a certain ideal.

CT: How about from the Kennedy School of Government, any enduring lesson that you took from your time there?

PM Lee: Your students work very hard, they are very bright and you are able to attract talent and students from all over the world to come and interact and enrich the experience and that is the way you become a good university and outstanding city and that is what we are trying to do with our institutions and our city in Singapore.

CT: Let me ask you this, those are some of the positive lessons that you learnt from your time in the United States. Is there anything that you learnt in the United States that you thought you know what, I do not want Singapore to be like that? Was there something that struck you that way?

PM Lee: You have rough spots in your cities. Kansas City has rough spots, particularly on the Kansas side of the state line….

CT: By rough spots, what do you mean..?

PM Lee: Boston has rough spots, rough areas where you would not like to be going walking on your own along the streets at night or even in the daytime and people are poor, law and order is a problem and there is a sense that… there is not a sense of community. That’s something which we try to avoid in Singapore.

CT: In fact, one of the things Singapore is known for is just how clean it is. Why is cleanliness so important in Singapore?

PM Lee: Because we did not start off with these instincts. When we started off it was a dump, it was messy.

CT: It was a dump, it was messy?

PM Lee: Yes, the river was awful. If you closed your eyes you could detect when you passed it because you could smell the thing. My mother used to have a law firm near the Singapore River and she had a blind telephone operator, came to work by bus and he always knew where to get off the bus.

CT: He smelled his way to the office?

PM Lee: He smelled his way. If we are going to change that, you must make a religion out of it and there has to be strict rules, well enforced and people gradually must learn that there are different social norms, that you may not be in your own home but you have treat it as your home and gradually we are making progress. We have not got there yet.

CT: Yet there is that reputation in fact. In fact many Americans might recall an instance back in the mid 90s where there was this instance where there was an American teenager who was accused of vandalism?

PM Lee: Michael Fay, he was not accused of vandalism. He vandalised many things. He damaged cars, he spray painted, scraped, he did many bad things, he did not dispute that.

CT: In fact he was caned, he was caned four times, there was a big outcry in this country at first and yet interestingly some of the polls taken in this country showed that the majority of people supported the punishment even in the United States. How do you respond to the perception sometimes that Singapore is too tough on crime, is too tough on enforcing the rules?

PM Lee: I am not sure how to respond because we have to decide what works for us and the approach we have taken has worked. We cane vandals, our own as well as whoever else is in Singapore because the law can not be more generous to Americans than to Singaporeans. We deal very severely with drug traffickers because we think that is potentially a very serious problem if we did not...

CT: Death penalty?

PM Lee: Yes, death penalty and from time to time we have to hang some of them because despite the death penalty, people still take the chance, the money is there. And also for the people who are for the syndicates. If you can go through Singapore undetected, at the far end, you have a better chance because they will say he came from Singapore, he cannot be carrying drugs. So therefore we have to keep it up but what to do? This is a dangerous world. Finally what are the rules which provide safety, security and law and order to the vast majority of our population?

CT: It is a balancing act, isn’t it?

PM Lee: Yes.

CT: It is a balancing act between safety and security and individual freedom. For example, let me bring something up that has been in the news here in this country recently. This year you and two previous prime ministers including your father threatened to sue the New York Times, they own the International Herald Tribune for an op-ed piece and the op-ed piece was about family political dynasties in Asia and your name was mentioned as one of those dynasties and you sued and the New York Times issued an apology and paid a fine and this is not the first time that you and the government have sued media outlets? Why do you do that?

PM Lee: No, not me and the government. This is me and my predecessors, personally. We do that because it is vital to us to maintain our reputation and when something very serious is accused against us, the matter must be resolved one way or the other. Either it is true in which case we are in serious trouble and should be out or it is untrue in which case the world must know about it and we must clear our reputation. You cannot leave it be that people say terrible things about you and then you say, I say, you say, I say, is it true? Is it not true? Does not matter, we carry on. What kind of country would we be? What would people think of us? And when it comes to integrity, honesty, meritocracy, these are key values of our system. It is the basis on which we have built the whole of Singapore's government, civil service, society and success. And if at the core of that, the prime minister is a living lie, then the whole cannot stand. So the matter has to be resolved. In the case of this article, the same journalist and the same newspaper, the Herald Tribune, had made the same accusations in the mid-90s and we sued them, they apologized, they paid damages, they promised never to do it again. But they did, so we had to take the matter seriously.

CT: Some people would look at the latest article and say it is fairly innocuous, it was just a list of families in Asia that happen to have relatives who have succeeded one another in the government.

PM Lee: Such as Kim Jong-Il? And I am to take that as a compliment and you seriously believe that he meant that as a compliment? If you seriously believe that, he should have defended the case, gone to court, produced the evidence and made his argument. And we would have been there, we would have given evidence, we would have gone to the witness box, taken an oath and been available for cross-examination and he could have destroyed us.

CT: Now your family has been criticised in the past because of the extent of.. there are so many of your… various family members who have prominent positions in government, to what extent can someone criticise people in positions of authority…?

PM Lee: You can say anything about us so long as it is true. And when it is not true, then you should not say. But that is the way it stands. There are family members, my wife is CEO of Temasek, it is the government’s holding company for its companies. It is not because I appointed her. Her board appointed her. There are processes, there is due diligence, it goes to the president, the president had to approve it, he could have said no. She is there in her own merits. She is not there because she married me. I married her because she is that sort of person who is capable of doing such things. So you have to understand how the system works and you have to go on the right basis. If you turn things upside down, we have to try and put them back up again.

CT: Your party has been the ruling party since self-government in 1959 and the group Freedom House ranks Singapore as 'partly free' in its Freedom of the World report, the Economist ranks Singapore as 'hybrid regime with democratic and authoritarian elements' unquote in its democracy index. How do you describe Singapore?

PM Lee: It does not bother us. Singapore is a country where you have got an elected government which acts in the interests of its people and where the government has legitimacy, mandate and trust. And I think it will continue to work like that provided we get the right people into government and provided we continue to evolve our system as the world changes and as Singapore changes. We have to find our own way forward. We are not the United States of America. Even Chicago is not like the United States of America.

CT: Why do you mean by that?

PM Lee: Your mayor has been mayor for 21 years. Have you asked him the same question?

CT: You may recall that the mayor's father was mayor for a very long time too.

PM Lee: We are not aiming to be like Chicago. We are aiming to be Singapore and to succeed in the middle of a very unpredictable and exciting region, many opportunities but many threats and risks.

CT: Threats and risks, which leads me to a similarity that Singapore may have with Chicago and that is a very diverse population. But this diversity, one of the things that I have read that you said was that there are existing fault lines that you have to be attentive to because of your population?

PM Lee: Because of race and religion. It is quite fundamental. It never goes away. In America, you are a diverse society, race and religion are defining features. I mean we are all Americans together, you serve in the armed forces together, you have a black president but it does make a difference in the opinion polls what the blacks think, what the whites think, what the Latinos think, what the Americans think, they are quite diverse. In our case, race and religion coincide. Malays are Muslims, the others are not. And that is a very delicate mix to manage. In many parts of the world, people do not live peacefully together, Muslims and non-Muslims.

CT: Is that one of the reasons why there is…

PM Lee: …in Singapore they do.

CT: Is that one of the reasons why there is such an emphasis on the rule of law, on sense of order, even something as seemingly superficial as cleanliness because you are trying to just sort of, you are trying to maintain overall stability, is that all worked into it?

PM Lee: That is one of the factors both to make sure that if anybody does anything bad, we catch it in time before a disaster happens. Also so that everybody has absolute reassurance that the rule of law is applied impartially, whatever your race, whatever your religion, whatever your background, the same rules apply. If you did not have that, we could not live as one harmonious society together.

CT: In fact, your country has been consistently rated one of the least corrupt countries in the world and also gets very high marks for corporate governance and transparency. Why is that so important to you?

PM Lee: Because otherwise we would be no different from so many other cities in the world or in Asia. We have a couple of million people. Doing things in a so-called Asian way where you can get your way around, you can lubricate your access, and if there is a problem, the problem can be overcome with a little bit of judicious…, in China they call it guanxi, connections, or some suitable wining and dining and a little bag is passed and maybe with diamonds, maybe with something else and the problem is overcome. If we did that we are just the same as them. Why should anybody come to Singapore? But they come to Singapore, the banks are here, their headquarters are there, they themselves live there, because we are different.

CT: In fact Singapore has been rated the most business-friendly country in the world. So this evidently is working.

PM Lee: We try to be that.

CT: You said in the past that you want Singapore to be along these lines. You said in the past you want Singapore to be “brand name”. What do you mean by that?

PM Lee: We want people to think of Singapore as representing quality, excellence, initiative, creativity. So when you think of Singapore, you think of Singapore Airlines, you think of Singapore's companies which carry a certain reputation when they go abroad, you think of our education system which does a good job of educating a wide range of our students. It is a place that works, it is a place where people are proud to belong. And it is Singapore, so when you say Singapore Changi Airport, or the Singapore Air Show, or the Singapore Grand Prix, so it means something positive. Once upon a time when you said Singapore, at best they will ask where is that, somewhere in China? Now I think that would not happen quite so often but you want to go beyond that recognition to also a certain respect and regard.

CT: You are about to open up a couple of large casinos?

PM Lee: One is open.

CT: One has opened already and another one is in the works?

PM Lee: Yes.

CT: There has been a big debate in this state, in the state of Illinois whether or not there should be additional casinos and more seem to be coming. Do you think it is going to be worth it because it is such a big debate here, so whether or not relying on casinos as source of income and a source of attracting tourism, is it really all that positive? Why did you decide? Why did Singapore decide to go this route?

PM Lee: We had a big debate. We have been against it for a very long time and for good reason because we didn’t want to be the place where people come just to gamble. And each time we had a recession or a downturn and we needed to create jobs, somebody would say why not build a casino. The coins will flow out and we said no we are not that desperate. But the idea did not completely go away and about five years ago soon after, around the time when I became Prime Minister, we had to address the issue again because our people told us look, Las Vegas has changed. It used to be crime-ridden, it used to be a purely gambling and a sin city and there are still gambling but if you go and visit the new resorts in Las Vegas, it is not just gambling. There is food, there is entertainment, there are conventions, there is shopping, there is lifestyle, there is family activities and it is big business. And unless we have things like that in Singapore to bring in the tourists, well, it may be beautifully clean streets but how do we attract people to come to Singapore just to look at our clean streets? So we pondered that and we had a discussion, the religious groups were dead against it because I mean morally they had reservations and the social groups are also against it because some people will go overboard and then their families will suffer. And these were reservations we had to take very seriously. So we considered the matter, we had a public discussion which went on for probably more than a year and finally we decided that we had no choice. We had to proceed but we put in safeguards and it is really to attract new tourists and not for Singaporeans. You cannot completely stop Singaporeans from going anyway because they can go on a cruise ship and international waters are just a short distance away, they can go to Malaysia, there is a casino there, they can go to Indonesia, any number of facilities, formal or informal, so what is the point?

CT: So it was a decision made that overall the benefits outweighed the…

PM Lee: The benefits outweighed the costs and the downsides were not something absolute but something which we had to manage. So we made a compromise. It is for foreigners, we cannot, we don’t really want to ban Singaporeans from it but we'll charge Singaporeans a hundred dollars to go in each time.

CT: Well, that is another revenue source and a deterrent I suppose.

PM Lee: A helpful one.

CT: Let me ask you about, let's take up the topic of pay for government officials. Something that is a big deal in this country in a way which I will try to make clear and that is you are the highest paid government official in the world.

PM Lee: But far from the richest.

CT: Who is the richest?

PM Lee: I have no idea.

CT: But your pay is roughly three million dollars a year.

PM Lee: Singapore dollars.

CT: Let us hold on to that fact for a second. The corruption rate in Singapore is one of the lowest in the world. In our country, we pay our public officials fairly modest salaries. Would you say there is an argument to raise the pay of public officials in this country so that there is less temptation to engage in corrupt acts?

PM Lee: It is not for me to say it but one of your previous chief justices, the one who passed away. What was his name?

CT: Warren Burger?

PM Lee: No, quite recently, the previous one before this.

CT: Rehnquist you mean?

PM Lee: Rehnquist, he wrote in his annual judicial report that the judicial pay is going to cause a very serious problem because judges are getting paid less than starting lawyers and unless you make a realistic pay policy, you are not going to have competent judges because they are hearing cases and deciding cases and the juniors appearing before them are being paid several times what the judges are, who do you think is going to be the better lawyer? I am just telling you what your chief justice said.

CT: Well thank you for that reminder. We are about to in this state, you may not be aware of this, we are about to embark on a trial against a former governor who is accused of attempting to sell political favors.

PM Lee: I read about that.

CT: Well, anyway so I thought the question might…

PM Lee: It is quite remarkable. I don’t know that pay will solve that problem or that governor's problem but our view is this is a fundamental issue which we have to get right. It is not a popular issue because nobody wins votes by saying we must pay politicians a lot of money.

CT: Certainly not in this country.

PM Lee: Or in any other country but unless you have got the whole system right and the attitude, our attitude is you must pay for the quality of the person you want and pay for the responsibility of the job which you want the person to do. And what can be more responsible than running a central bank or running an economy or running an education system where you are not only dealing with billions of dollars, but where if you make a mistake, the livelihoods or the futures of millions of people will be at stake. We want the best person and you want him to be properly motivated and focused on his job and not based on a revolving door. You can pretend not to pay him. After your presidents retire, they all have book contracts and speaking contracts. That is one way. We have decided to do it differently.

CT: Mr Prime Minister, thank you for your time and we appreciate you being on Chicago Tonight.

PM Lee: Thank you very much.

CT: And there is more about Singapore on our website and Chicago Tonight will be back in a moment so please stay with us.