Interview by PM Lee Hsien Loong with Caixin (Feb 2014)

Hu Shuli, Editor-in-Chief of Caixin: I have been visiting this country quite frequently, and interviewed your father, then MM, seven years ago. I am so impressed with Singapore’s prosperity and economic growth. We would like to know, what is your vision for Singapore’s economic growth?

PM Lee Hsien Loong: In terms of income levels, we are at about developed countries’ levels, in fact higher than some developed countries. I think in terms of the depth of our capabilities, in terms of our technology, in terms of the strength of our enterprises, we don’t have so many MNCs; we are not so strong in research, development, entrepreneurship. We want to keep on growing, we want to keep on improving the lives of our people, materially – which means our GDP has to go up, but also in the more intangible aspects of life – quality of life, the environment we live in, the tone of the society, the way we treat one another. And that is continually work in progress.

Caixin: So when it comes to Singapore’s sustainable development, is there a roadmap in your mind?

PM Lee: I think that we have to develop, connected to the rest of the world, and particularly connected to our region – Southeast Asia and Asia, a region which is prospering, a region which offers us many opportunities. I think our people are hard-working. They are reasonably talented. Given the right education, they can do well. But I think the best way to make use of their talents and their abilities is not just to confine it within Singapore, but to connect to what’s happening around us. So if a company sets up an operation in Singapore, it’s not just for our market, but for the region. If it sets up a headquarters in Singapore, it’s the headquarters for the whole of Asia or the whole of ASEAN. And if our people have abilities as managers and leaders, they can be managers and leaders not just in Singapore, but they can go out and there are many operations, many companies all over the region which will find a good Asian executive a very considerable asset. So Singaporeans can be in Singapore, can be around us in the region, and we have a diaspora, a network and a home.

Caixin: Singapore is very well-known for its flexible immigration policy. Can you elaborate more on that?

PM Lee: Well, our population is finite. In fact, it’s not increasing very much and after some time, unless we get our birth rates up, it will start shrinking, because our birth rates are too low. So to sustain the economy, to be able to sustain our society, in fact just to look after our old people as Singaporeans age, we need a certain proportion of immigrants. We need a certain proportion of foreign guest workers, all the way from professionals to construction workers, skilled, unskilled, specialists, the whole range. But it has to be a controlled inflow, because if the numbers are too great, we will be overwhelmed. And we need to keep the tenor of our society, to have that Singapore character which we have built up. So that’s what we are trying to do with our immigration and our foreign worker policy. When it comes to talent, people who can make a special contribution, our doors are wide open. When it comes to not-so-skilled jobs where we still need the numbers, well, we will have a controlled inflow and we will manage the numbers.

Caixin: Got it. Let’s talk about the domestic and economic policy. How to balance the SMEs and the state champions?

PM Lee: We don’t have state champions very much. We have some companies which are owned directly or indirectly by the Government, through Temasek and a few other vehicles. But to a very large extent, we require them to operate commercially. They do not get special privileges from the Government, neither do they carry special duties imposed on them by the Government. So they operate commercially, they have their own boards which make decisions for them. They are often listed on the stock market, so they are publicly listed. And their shareholders hold the boards responsible for the performance of the companies. So I would not say it’s a division between state enterprises and the SMEs. I think in this environment, with an economy which is changing quite rapidly, it is especially challenging for SMEs to keep up with the pace of change, because costs go up, because business conditions change. The way they used to do business before, tomorrow that niche may disappear and then they have to find a new niche. A big company, you have got some ballast, some stability and you can move one step forward at a time. A small company, you only have one small footprint, not so easy to jump. So we are making an extra effort to help the SMEs to adapt in this environment, and some of them are doing well.

Caixin: And now a question related with balancing issues, that is, maintaining competitiveness and caring about the needy. It is always very hard to balance. Can we expect some policy change?

PM Lee: We have to keep a balance, because in every society there is the yin and the yang. The yang, which is the competitive element which drives the society forward and the yin, the softer, maybe you can say the feminine element which expresses our care and concern for one another and the way we help one another go through life and form a society together. So we have to have the right balance. If you go too much towards competitiveness, you lose that cohesion and sense of being Singaporeans together. If we go all the way the other way and say, well, we don’t compete, everybody will be first in class, then nobody will be first in class and I think we will all be losers. China has shifted from a very 大锅饭, iron rice bowl system to one which is very competitive. We have operated a competitive system with targeted significant social safeguards on housing – public housing, in healthcare, in education. And in this phase, with the competitive environment for Singapore getting fiercer, with conditions getting more challenging for the middle and the lower income people in many societies, I think we need to do somewhat more, to tilt the balance towards the yin side. That means to give greater help to the low income groups so that they can increase their earnings and their assets; to keep our society more open so that people who have talent can move up and will not be daunted by the gaps in incomes between the rich and poor. And that is what we have been doing.

Caixin: But the income gap is still very huge in Singapore. Do you care about that or is it ok?

PM Lee: I wouldn’t say it’s very huge. I would say it’s wider than most other countries, but if you compare us with other cities, then perhaps it’s not so wide, because cities by their nature don’t have that big base which will even out your income distribution. And if you compare to Shanghai, or to Beijing, or to Hong Kong, I don’t think we are that much different. In fact, Hong Kong probably is higher than us. What we should focus on really, is to lift up the low end and make sure that whether you are rich or you are poor in Singapore, you have a good life and if you work hard, you will have a better life. And that’s what we are trying to do. To bring the high income people down just so that we can say we are more equal, I don’t think that is helpful. What you need is to level up and improve the earnings and the wealth of the mass of the population.

Caixin: Can you talk more about the ethnic issue, because Singapore was very proud of its diversity and harmony in ethnic relations?

PM Lee: We are a multi-racial society. The majority of the population is Chinese, but we don’t identify ourselves as a Chinese society. We identify ourselves as multi-racial, Singaporean, and that means that our working language is English. Our minority communities have ample space to practice their customs, to live their own life, their own way of life, practice their own religion. And we put a lot of emphasis on equal opportunities, on fair treatment of all races, and on helping all the communities to move forward as Singapore progresses, and to bring them together so that we move forward not only in step, but also as a more integrated whole. We will never be like Japan, where nearly everybody is the same race, nearly everybody speaks Japanese as the language. It’s a homogenous society. We are not so homogenous, but we want to be integrated. And we accept that if you are Muslim, you will always want to be Muslim; if you are Buddhist, you will always want to be Buddhist. And we will never be one religion. It is not possible, and I think not desirable for us to try to do that. But we want all the groups to live harmoniously together in Singapore.

Caixin: But recently, there was a serious riot.

PM Lee: There was a riot, but it was not a riot between Singaporeans. It was a riot by foreign workers who happened to be in Singapore, and they happened to be mostly Indian workers from India. But it was not a race riot involving Singaporeans, so I would not see that as a reflection of our racial harmony.

Caixin: I see. Singapore owes its success to the great design of its political institutions. The world is changing. Can the current political structure always maintain its relevance?

PM Lee: I think political structures have to gradually evolve with time. We have developed the scheme we now have, over the years. We started off with the British Westminster model. And then we have adapted it, changed it, added to it over the years to get this sort of, quite a unique model which we have in Singapore, still based on a parliamentary system, but with certain safeguards and enhancements. For example, the President is independently elected. For example, we have special arrangements which ensure that the minority communities will always be represented in Parliament but in a competitive sort of way. I think as we go forward, we will probably have to make further adjustments, surely because our society will change. How it will develop, I think it’s hard to say. I believe that there will be a greater degree of competition, there will be a greater desire of Singaporeans to participate in the political process. And we ought to accommodate that, because it’s good that Singaporeans care about the affairs of the country and which way Singapore is going. But whatever we change, we still want a system where you encourage good people to come forward, you encourage voters to elect people who will represent their interests well, and you encourage the Government to act in a way which will take the long term interests of the country at heart. And that’s not easy to do.

Caixin: So coming back, what are the pros and cons of having long term premiers?

PM Lee: Well, we have been lucky the last 50 years we have had political stability and continuity in our system. So we have had turnover, new blood, new generations brought in, new ministers, new prime ministers, but at the same time we have had continuity. So as you change, you change in a smooth way. You don’t have sudden jerks and bumps, and you avoid accidents. Mr Goh Chok Tong was in politics for more than 10 years before he became Prime Minister. I was in politics about 20 years before I became Prime Minister. I think we were very privileged to have that long period of exposure, to learn what Singapore is about, to learn what the responsibilities are, if you are in politics. And also, for people to learn about you, and to get to know you and to know your strengths and weaknesses, where you stand and what sort of person you are, so when you take over, people know. There’s no surprise, there’s no anxiety, but there is a smooth change of gears. We hope to have similar continuity going forward, but I think it would be a very great luxury to have prime ministers, in future, have 10 or 20 years of tutelage. I don’t think we can guarantee that all the time. No country can.

Caixin: You talked about continuity. Do you think Singapore has put in place a system of successful leadership transition?

PM Lee: Well, it has worked for us so far and we are working very hard to ensure that the next transition, the next step will also work. But there is no formula which works forever.

Caixin: Do you think there will be a third PM Lee, after you and your father?

PM Lee: It could be. There are many Lees in the world. I think we are the most common surname amongst the Chinese. But I don’t think that it goes in the family.

Caixin: Ok. I will ask you some questions related to China.  What do you think of the competition between Singapore and Hong Kong? It seems Singapore is in the leading position now.

PM Lee: I don’t worry very much about competition with Hong Kong, because I think we are in different positions. Hong Kong is very successful economically, on the doorstep of China, servicing the Chinese market and taking full advantage of that. Singapore is in a different position, in Southeast Asia. The Chinese market is important to us, but at the same time, we also focus on Southeast Asia, on South Asia, India, and on the rest of the world. So there’s some rivalry, we watch them, they watch us to some extent, but I don’t worry about that.

Caixin: Financial centre?

PM Lee: Financial centre, I think we are in different positions. The big Chinese companies, many of them are listed H-shares in Hong Kong. Smaller companies, some of them are in Singapore, but I think just a small proportion of all the business there is in China. I think that the world is big enough for both of us.

Caixin: I notice that more and more companies are coming to Singapore.

PM Lee: There are some, but so far mostly the medium size and smaller ones.

Caixin: So what’s your view of China’s economic and its financial outlook? How do you think of the role of RMB?

PM Lee: I think the Chinese government are gradually liberalising the restrictions on the RMB, and they would like it to play a greater role in international finance. So there are swop arrangements in RMB, for example, with several of the Asian countries. There are offshore settlement banks for RMB, including one in Singapore, and settlement centres – you have got it in Singapore, you have got it in Hong Kong, I think you have got it in Britain. I think this is a prudent way to approach it, gradually to liberalise. But to open up completely, the way that US dollar or the yen or the euro is completely open on the capital account, I think that is a very major distance to go and will probably take quite some time yet.

Caixin: Singapore is good at fighting corruption and has a clean and efficient civil service. China now is in the process of anti-graft campaign. What should be the next step and what lessons can China learn from Singapore?

PM Lee: I think China’s circumstances are very different from ours. Your scale is much different from ours. I mean, we are equivalent to one small city. Even Shanghai is 20 million people; it’s four, five times the size of Singapore. So what we do in Singapore is not so easy to do all over China. I once had a discussion with a vice mayor in Shanghai, and he said to me, well, you pay your Ministers well and your civil servants well, properly. And if we were Shanghai, just by ourselves, we could do that also. But if I did that, the people to the west of me would have a view, the people to the north of me would have a view, the people to the south of me would have a view, the people in the centre would have a view, and so it’s not so easy for me to move. It’s a real problem; it’s a different situation. 

In Singapore, what we have tried to do is to have strict rules, to have transparent systems so that if there is an exercise of discretion, it cannot be completely without checks and balances. There will have to be some accounting: How was this discretion exercised? Why was it exercised this way? If anybody is discovered to be corrupt or suspected to be corrupt, we will investigate it and we will bring him to justice however high up or sensitive a post he may hold. And at the same time, we make sure that we pay our civil servants properly; wage commensurate with the quality of the officers and commensurate with the responsibility which they hold, so that there is minimum temptation for them to do something on the side in order to take care of the family. But it has to go together. You pay people properly, but at the same time you must hold people to high standards and bring them to account and justice if anybody does anything wrong. And in the last couple of years, we have had a few cases, quite prominent. Some to do with sex, some to do with money. Quite senior officers. It embarrassed us, but it cannot be helped. We have to follow through. You cannot be limp-wristed.

Caixin: A clean government is a dream for Chinese, a dream for China. You mentioned about accountability and high pay. You said it’s both together, both are important. Which one is more important?

PM Lee: I think you need both, and I think both are very difficult to do. Because to pay people well, you have to be able to justify and defend and there’s always public sense that in the public sector, they ought to take a sacrifice. And to some extent, that is true, but if the sacrifice is too great, it’s not realistic. The system will not work. Expecting high standards is also not easy, because people have careers and livelihoods, and it’s never a light decision to decide that somebody is not up to the mark and you have to move him out or maybe remove him from the service altogether.

Caixin: But what should be done first, because with high pay, credibility is still an issue? If civil servants have no credibility, people cannot accept high payment.

PM Lee: So it’s a chicken and egg problem. You have to start somewhere. You could start with one place; you could start with one service. In some countries they have tried to do it starting with the Finance Ministry, with the Customs, with the Immigration people, where you have got more opportunities to be tempted. There is no easy solution, but I see that China is taking it very, very seriously and catching tigers as well as flies.

Caixin: Really hard.

PM Lee: It’s very hard.

Caixin: Singapore is a very mature state, while China is developing rapidly. In your opinion, what is the most formidable challenge that China should pay special attention, domestically and internationally? Two questions.

PM Lee: Domestically, to continue to restructure your economy so that you will not build up social tensions and you can continue to fulfil your full potential. Because your full potential, I think you can grow seven, eight percent for another 15, 20 years quite easily. The energy is there, the determination is there, the people are talented and they are hungry. But to be able to get the systems working, the reforms through, the vested interests overcome, the administration to be efficient and transparent and honest, and the social stresses to be relieved so that people don’t see 富二代 and 官二代 and all these other problems which are unavoidable in a rapidly changing society, I think that is something which will keep your leaders very busy for a long time.

Internationally, China is becoming much stronger. I think it’s becoming much more active in engaging its partners in pursuing its interests, in defending its interests. And one of the major challenges for China is how to do this in a way that when you are defending your interests, but at the same time, you can integrate smoothly and peacefully into the international order, because China will not be the most powerful country in the world. You probably will be the biggest economy in the world within a decade or two, depending on how you measure. But there are other very major and powerful and advance economies, and China has to work with them and there will have to be give and take on both sides. And even with small countries, there has to be give and take, and a sense that in international relations, as the principles of co-existence say, 平等互惠互利, equal, mutual benefit, mutual cooperation. So that is a very difficult balance to strike, because you will have a national sense of pride. You have had 复兴之路, 168 years, China is on the verge of arriving, you want to take your place in the sun. But at the same time, you want to fit in peacefully and be looked at by other countries with admiration and respect, and not just by other people saying, ah, he is powerful, I have to pay attention to him. That’s a very difficult challenge to balance.

Caixin: Yes, very difficult challenge. China has been criticised as being too assertive, but which China doesn’t feel itself. It actually feels it… 

PM Lee: Yes, I think there are different views on that matter.

Caixin: Yes, it is very hard for China to adjust to this type of rapid growth in its status and its power.

PM Lee: Yes.

Caixin: What do you think about rebalance of power of the United States? Is that a show for US’ friends or is that an adjustment the US has to do because of the relative decline of its power in the region?

PM Lee: I am not sure why you would say relative decline. I mean, the US has been in Asia since the Second World War. And even before that, they were in the Philippines because they were the colonial masters of the Philippines. And their presence has been welcomed by countries around the region all these decades. I think that the Americans understand they have an important stake in the region. They have friends, they have interests, they have security interests, and it is important for them to be present in this region and to exert a benign and constructive influence, and at the same time, to develop a stable relationship with China which is based on more trust and more mutual cooperation. So I would look at it like that. If you say relative decline, well, it used to be that every aircraft carrier in the region was American, now not quite so. But I think the Americans are formidable not just because of their military forces or security presence, but also because of their economic ties, also because of their soft power, because people enjoy watching Hollywood movies, enjoy listening to American pop stars singing songs. Even in China, so many of your top people, whether business or whether in government, send their children to study in US universities. So that’s something which I think is accepted.

Caixin: So you don’t think they are (declining)?

PM Lee: Well, relatively speaking, their proportion of world GDP will diminish as China grows, as India grows. But do they become less relevant to us? I hope not, because they play a constructive role and I think they can still do that.

Caixin: So what is Singapore’s understanding and expectation about the “new type of relationship between major countries”?

PM Lee: I don’t know. That’s the term which the Chinese leadership have come up with and they have talked about it with Mr Obama at Sunnyvale in California. I think from our point of view, what we hope it will mean is that the two countries will have a constructive relationship. There will be competition. There will be issues which will arise from time to time. And it cannot be that one side just gives way to the other and therefore we are friends. There has to be a balance and give and take, and mutual understanding of where vital interests are, and then the ability to work together to deal with issues around the world which concern us all. Whether it is global warming, whether it is nuclear proliferation, whether it is security in the Middle East, Iran; China has a stake in all these issues.

Caixin: So do you think it is positive?

PM Lee: Do I think what is positive?

Caixin: The new structure, the new type of relationship.

PM Lee: I don’t know. It depends on how it turns out, but I hope it turns out positively.

Caixin: And how do you see Japan’s future? Japan is the only country still evading the shadow of 1945. Which direction will Japan develop? What kind of impact will it have on the region’s development?

PM Lee: Well, Japan has actually played quite a positive role in the region over the last few decades. Economically, their investments have made a big difference. Singapore certainly has benefited from their investments, other ASEAN countries; even China has very big business with Japan. Their economy is now in some difficulty, their population is declining, their working age workforce has been in decline for, now, I think more than 10 years, and that’s not easy to turn around. But they are still an advance economy and still with a lot of potential to contribute to the region. 

On the Second World War, it is very unfortunate that what happened in Europe didn’t happen in Asia. Because in Europe, after the war, it was quite clear the French, the Germans, they decided never again should there be war. And the Germans, they repudiated the Nazis. They taught all their children that the Nazis were evil, Hitler was an evil man; that Germany shall never again do what the Third Reich did. And they were able to make peace. I think the French and the Germans may not have identical textbooks, but they are friends and they share a common currency and they are in the European Union. That never happened in Asia. So in Japan, there is not that understanding of what happened in the war or that acceptance that Japan was wrong in the war and the aggressor. And that causes problems. But then in other countries too, the degree of coming to terms and moving on has varied. In Singapore, we suffered grievously because three years and seven months of Japanese invasion, many people died. Those who lived through it never forget. But in the 1960s, we made a settlement with them. We made a token acknowledgement that they had some gesture of reconciliation, and so we have moved on. So they invested here, their tourists come here. We visit Japan, Singaporeans visit Japan. We accept that. Doesn’t mean we welcome it when we see a Japanese minister visiting Yasukuni Shrine, for example. Sometimes it’s necessary we state our view. But we have moved on. But in China, I think it’s much harder for you to move on. It was such a long war. It started not just in 1931, but 120 years ago, 甲午战争. In Korea and maybe even before that, they used to think of them as pirates, 倭寇. And then from 1931, you had so many incidents, so many massacres; such a brutal experience, that’s not easy to move on. So today if you watch Chinese television, there are so many historical and semi-historical dramas and movies about that war, and so many of the young people have been brought up on that. So for them to have a positive view of the Japanese as an interesting culture, as somebody you can work with, as somebody you can have a partner, I think that takes very determined leadership and a lot of time.

Caixin: Any concerns about the China-Japan relationship and its possible negative impact to the region?

PM Lee: I think you cannot go to war, because China today is not China in the 1930s. You are a unified country, you are a powerful country, you are a nuclear power. Japan today is not Japan in the 1930s. It’s a totally new generation. If you go to Shinjuku and you see the children with multi-coloured hair, they are not the people who are going shout ‘banzai’ and charged and do a suicide attack. So I think going to war as a deliberate act is not imaginable. But frictions are imaginable, accidents can happen, and then consequences from those accidents I think can be very troublesome. And both sides will lose from it.

Caixin: So how does Singapore position itself in the regional and international geopolitical landscape?

PM Lee: We try to be friends with everybody. We stand up for Singapore. We are not a Chinese society. We want to be friends with China, but we also want to be friends with Japan, we also want to be friends with the US. And we have not done badly in that respect, because over the last few decades, relations amongst these countries have been stable. And I hope it stays like that.  

Caixin: ASEAN will have to achieve economic integration by 2015. Is this achievable?

PM Lee: We will have a scheme. We will probably meet maybe 85 percent of what we have set out to do. It will not be the same as European economic integration, but it will be a significant step forward for ASEAN. 

Caixin: So what is the implication to the region?

PM Lee: I think there should be more growth. There should be freer flow of capital. There would be freer flow of professionals and talent. There should be better transportation links, connectivity, so air links, more flights, more opportunities for business to get together and to prosper together. And we hope therefore, more opportunities for us to manage frictions when they arise.

Caixin: So do you think you will achieve it on time?

PM Lee: I think we will achieve most of what we set out to do, but that doesn’t mean there is not more that we should we aim for beyond 2015.

Caixin: Ok. So what’s your vision on restructuring the financial order in this region?

PM Lee: I think that depends on the IMF and World Bank, as well as regional institutions and we are building them up gradually.  

Caixin: I am going to discuss more with you about TPP issues, which my audience will be very interested in. As a founding member of TPP, Singapore has been the champion of free trade. To what extent do you think the TPP will change the trade and economic landscape of Asia Pacific region?

PM Lee: I think it is a very significant step forward. The APEC countries, altogether there are 21. Ideally all of them would come together and have free trade amongst them. But the 21 countries are very diverse and there are also political complications. I think it would be very hard to have an FTA which includes all 21 countries. So the TPP is a significant step towards such an ideal of an APEC free trade region. It brings in countries on both sides of the Pacific – there is America, there is Chile, Peru; on this side there is Japan, there is Singapore, Vietnam, Australia. So you’ve got people on the east and the west coasts of the Pacific; you’ve got developed countries; you’ve got developing countries; and you’ve got a significant proportion of the economies in the Asia Pacific. So I think it’s a very major step forward. And I hope it will not be the last step.

Caixin: The TPP was supposed to be done by the end of last year.

PM Lee: It was supposed to be done by the end of the year before that too.

Caixin: Yes. So what are the prospects for closure this year?

PM Lee: I think, notwithstanding the previous missed targets, I think they are trying very hard, and we ought to be able to close this year, because if we don’t close this year, there is not much time left on the American political calendar to get it through Congress and to settle the matter. And when time passes, loose ends get unravelled and then it would be a setback.

Caixin: So you think this year?

PM Lee: I think we are very close to completing it. 

Caixin: Any concrete results from Singapore meeting last December?

PM Lee: Well, I think a significant number of the chapters had made progress. There are only a few outstanding chapters which are not yet closed, and we will be hosting another meeting, I think in March [Clarification: Ministerial meeting is in February 2014] in order to try and settle them. 

Caixin: US government is working on the TPA – the Trade Promotion Authority. What relations with the TPP?

PM Lee:  We hope they get the Trade Promotion Authority, because with the Trade Promotion Authority, the process of ratifying the TPP will be more straightforward. Without the Trade Promotion Authority, when the TPP goes to Congress, the Congressmen can vote item by item – I like this; I don’t like this; I like this; I don’t like this. It is not possible. We have negotiated a package. You have to approve – either all or nothing, because otherwise you take what you like and I don’t get what I need. So they have to get the TPA, otherwise I think it’s a big trouble.

Caixin: It is important?

PM Lee: It’s very important.

Caixin: China has expressed interest in the TPP, but also stated clearly that it will not be in the first group of six signatories of the treaty. What are the stakes for China?

PM Lee: Well, it depends how ready you are to move. When you entered the WTO, your premier Zhu Rongji made a very deliberate decision that he wanted to do this as a way to push the opening up and the competitiveness of the Chinese economy and the SOEs. So he committed; he negotiated and he committed, and China made the opening ups which you promised. And I think as a result, you are more competitive and stronger today. I think you should look at the TPP with a similar perspective, from the economic point of view. And if you can join the TPP and commit to that, it will mean major adjustments for some of your, it could be major adjustments for some of your companies or industries, but it should mean overall benefit for your economy. Of course there is also a political angle and a strategic angle that you are joining a TPP in which Japan is also a partner, America is also a partner, Singapore, Vietnam, Latin America, several Latin American countries are also partners. So trade is never purely trade; trade is also an expression of who are your friends, who are your allies, whom you intend to work together with over the long term. And I hope China sees these as friends whom it wants to work together with over the long term. Although I think with Japan, it will take a long time.

Caixin: You mentioned Japan. How significant is Japan’s participation in the negotiation?

PM Lee: They decided – they took a long time to decide; they joined quite late, but they have been participating actively and I think that they understand what is at stake. Mr Abe also is wanting to use the TPP as a way to push the restructuring of the Japanese economy.

Caixin: So what are the most difficult elements for the potential members?

PM Lee: Oh, I think different countries have different difficulties. Some have SOEs; some have intellectual property; some have pharmaceuticals, services. If it is trade, even in trade there are some sensitive issues, but in trade it was agreed in principle that nearly every item will go to zero, so that’s a very big commitment.

Caixin: If we have you grade the three most challenging issues, which three?

PM Lee: Oh, I think we are almost there, so I wouldn’t want to emphasise the difficulties anymore.

Caixin: Ok. Well, there have been bilateral trade and investment treaties between the 12 countries which may further complicate the process of the TPP negotiation. How do you solve the problems?

PM Lee: They exist; it cannot be helped. We have many bilateral agreements, they all co-exist. Trade is a messy business. Ideally we all go to the WTO and there is one agreement, everybody is in it. But the WTO Doha Round is making very slow progress. We had a small achievement in Bali last year, but the main items are not settled, and so we have to make do with the spaghetti.

Caixin: There are overlapping trade agreements – TPP, RCEP..

PM Lee: Yes, many, all sorts.

Caixin: ASEAN plus three, for example. Singapore is in different trade pacts, so how can they coordinate?

PM Lee: I think it’s very hard to coordinate. They overlap. You hope that together, taken collectively, they are a plus, but honestly speaking, it is a burden on businessmen to know all these rules and to comply with all the very different requirements separately and to decide under which scheme they will get the most advantageous terms. But we just have to live with this and hope that over time, we will be able to have a more open environment.

Caixin: The TPP is the most helpful one, is it?

PM Lee: Well, TPP is the one which has the biggest weight in terms of the economies which are participating, and we hope will be of a high quality.

Caixin: And can help to resolve overlap?

PM Lee: No, it will just add another layer on top. The others will not disappear.

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