Remarks by PM Lee Hsien Loong at the APEC CEO Summit 2013 Panel Discussion

Norman Pearlstine: Thank you very much and it is a pleasure to be here this morning for an hour in which we shall discuss the state of the world and given that there seems like quite a bit of time for such a subject, I thought we would begin by asking Prime Minister Lee if he could give us a quick overview that would set the stage for our discussion. Good morning.

PM Lee: Good morning. Good morning, everybody. I am very happy to be back at the APEC CEO Summit to be talking to this distinguished audience. The last time Indonesia hosted APEC was 1994 and at that meeting, the Indonesian leadership, together with the other leaders announced the Bogor Goals, a target of free trade in the Asia-Pacific region and it was an ambitious programme to boost trade and investments, reducing barriers, promoting the flow of goods, services and capital. And indeed, over the last 20 years odd since then, APEC, guided by the Bogor Goals, has played a significant role in catalysing the integration and the regional development of the Asia Pacific. Tariffs have come down by half; goods trade has quadrupled and APEC economies have grown twice as fast as the rest of the world and that includes the developed as well as developing countries. But if you look at just the emerging markets, in fact, they have grown four times as fast as the rest of the world.

Today, 20 years later, we have made a lot of progress in Asia Pacific, but it is a time of uncertainty for the global economy. In America, there is a weak recovery going on, but the political problems are far from resolved, as you can see from the Federal Government shutdown, which is going on right now and has made it impossible not just for the Administration to carry on with its normal diplomatic activities but also to address longer-term structural problems with a fiscal deficit, infrastructure, education which a lot of sensible observers know that America needs.

In Europe, too, there is stabilisation, but at the same time, there remain deep structural problems. They have taken significant measures to calm the markets, to quell the panic which was there a year, two years ago. For example, the European Central Bank has significantly shifted its stance and goes beyond its original anti-inflation campaign. But some very basic problems will be there for a very long time. First of all, there is no sense of political identity in Europe which enables them to operate as one country; one country which can manage their banking system as one; one country which can have a fiscal policy which can have transfers, which can have the successful countries helping the less successful parts of Europe to move along in the same way as the United States works, when it works.

It is a real structural problem. Many of the countries have competitiveness issues. They cannot all become like Germany, but they do have to make significant changes in their social safety nets and their labour laws and their safeguards and in their willingness to adapt to a very rapidly changing and open world. And it is not just the southern European countries – Spain, Italy, Greece – but even some of the other countries, including France, which need to make changes and where there is really not a clear consensus yet amongst the population that this is the way they want to go. And, therefore, we must expect in Europe, we hope a continuing, gradual progress, but from time to time, the risk of mishaps and the fundamental problems reasserting themselves are there.

In the developing world, the prospects are brighter, provided the countries continue to strengthen their infrastructure, continue to strengthen their business environment, continue to improve the basic conditions which have allowed them to grow steadily, vibrantly over the last 20 years.

In China, growth has slowed this year, maybe 7.5 per cent, but I think the leaders know that they have to work on these issues; that there are economic reforms which need to be done; that their social safety nets need to be built up, healthcare, housing, education. Infrastructure is in hand but the other issues which have to take place on a very big scale are very vexing ones and everybody is watching what the new leadership is going to do. The Third Plenum of their Central Committee, which is going to make major policy decisions, is about to happen in November and everybody is watching them to see which direction the new leadership will take. There are some signs - they have launched a new experimental free trade zone in Shanghai which is going to have more freedom for services and particularly for financial services, but how that develops will be something we will be watching closely.

But China cannot be the only story in Asia because Asia is a very big continent and the rest of Asia has also to prosper as one because otherwise, it will be imbalanced and I think there will be a lot of tensions and difficulties which will arise. Japan is part of the Asian story. Mr Abe has set a new tone since he took over last December with Abenomics. It is a catchy term, but it encapsulates the idea that Japan has to make some fundamental changes in order to set itself right after a very long period of malaise and stagnation.

Mr Abe talks about Three Arrows: monetary policies, a very drastic form of quantitative easing; fiscal policies, spending more, getting confidence back and most importantly the Third Arrow, structural reforms which will get the Japanese economy set right over the long term and including participating in the Trans-Pacific Partnership as one way, one lever to open up the economy. We all hope that it will succeed, but structural reforms by their nature, I think, would take years to implement and more years to show results and we hope that the Japanese will be able to stay the course and show themselves because from the point of view of the rest of Asia and Southeast Asia, a vibrant Japanese economy has a lot to contribute.

Southeast Asia itself is doing quite well, all things considered. The potential is there. The combined population is the size of European Union (EU). The combined Gross Domestic Product (GDP) is among the largest economies of the world. It has got the resources. It is progressively consolidating its economic regional cooperation. The Association of Southeast Asian Nations (ASEAN) is talking about ASEAN 2015, the vision of an ASEAN Community and we are making progress in that direction.

So besides Asia, there are other parts of the world which we should also look at and we must not think that Asia is the only story in the world because in Latin America, the countries are doing well. In Africa, there are also countries are doing well. It varies across greatly, but it is a time of rapid change and flux in the world.

But continued prosperity for our countries depends on two broad factors. – one, that countries do things right on their national policies and two, that they do things right cooperating with one another. On national policies, we talk about infrastructure, about skills development, we talk about promoting innovation and improving the overall business environment to encourage private sector to grow and develop. And amongst that also addressing concerns which businesses have. PricewaterhouseCoopers (PwC) recently did a survey which I think surfaced some of these issues – strengthening regulatory and legal frameworks, making procurement processes more transparent. I think the countries know what the issues are and the challenge is making it happen.

But countries need to work together as well in order to get the regional context, backdrop right – removing barriers to trade, particularly non-tariff barriers, improving supply chain flows so that the trade can move with minimum hindrance and pursuing FTAs bilaterally, regionally. We have got many such projects going on in the Asia-Pacific region. I think the one which has the most attention is the Trans-Pacific Partnership because the US is participating with countries on both sides of the Pacific, but there are other initiatives as well. There is the Regional Comprehensive Economic Partnership which is on the west side of the Pacific. There is the Pacific Alliance, which is on the east side of the Pacific and these are all building blocks eventually towards the Free Trade Area of the Asia Pacific because it is a complex region and you cannot do it (an FTAAP) in one big bang. So (we have) different pieces overlapping, eventually merging into a coherent whole.

But the regional context also depends on peace, stability and security because that is a prerequisite for any economic progress. So there will be business opportunities in Asia in this environment. The middle classes are growing, incomes are rising, people are travelling, people are spending, lifestyles are changing and that is a tremendous business opportunity. There are also opportunities for production because as more countries join the global economy, as countries like Indonesia and Vietnam improve their business environments, there will be opportunities for companies to invest, to manufacture, to export and to create prosperity wider.

But we hope that the businesses will also do their part to promote this process – firstly, encourage governments to be open and not to go for protectionist measures. I know everybody says this, but I know every business lobbies their government in order to look after their interest. But it is important to maintain that public support for openness and integration because unless you have that, if we all close ourselves or even hinder the process of trading and doing business with one another, I think we are just going to make things worse for all our countries.

At the same time, businesses can provide concrete feedback to governments on what they need to do more or how they need to perform better. And the feedback has resulted in useful initiatives through the APEC process. For example, we have got the APEC Business Travel Card, we have got the Asia Region Funds Passport and we hope that we get more ideas from the business people. Every time we meet as APEC, we meet the business community and from these, new initiatives can come.

So with we value forums like this CEO Summit. We get a chance to talk to you and we get a chance to hear you as well and hear your concerns and pick up ideas from you. Thank you very much.

Norman Pearlstine: Thank you so much, Mr Prime Minister. Dennis Nally, as Chairman of PwC International, you preside over the publication each year of the APEC Survey of CEOs that Prime Minister Lee referred to in his comments. I wonder if you could talk about some of the key findings from this year and perhaps focus specifically on issues regarding attitudes towards the infrastructure and towards consumer demands.

Dennis Nally: Good morning, everybody. It is great to be with you today. This is actually the third year that PwC has conducted this survey in conjunction with APEC. Hopefully, you have a copy of that. We encourage you to take a look at it. I think there is a lot of great information in there, not only from an overall perspective but also as it relates to individual countries.

As was indicated earlier, this is the most comprehensive survey we have done to date. About 470 CEOs and executives actually participated in this year’s survey. All 21 APEC countries were involved in this. So I think it is a very good look at how the CEO business community is actually feeling about the prospects for the next several years itself. It is a comprehensive report, about 30 pages. Let me see if I can boil it down to about four or five key points to stimulate maybe some thoughts.

First off, I would say some good news. CEO confidence levels are actually up this year as contrasted to a year ago and I think that is very positive message notwithstanding the challenging economic picture that we are collectively looking at around the world today. Forty-two per cent of the CEOs that participated in the survey are very confident about their revenue growth over the next 12 months and that compares to about 36 per cent a year ago. So again, a very positive trend in terms of confidence levels coming from the CEO community.

Also under this one, prospects for deployment actually looked good – 70 per cent of the CEOs that responded to the survey are actually adding headcount over the next three or five years and only 11 per cent actually planned to reduce headcount and that prepares to about 26 per cent a year ago. So, much more positive view around the outlook, as well as jobs, going forward.

In terms of investment, I think some interesting information. Again, more big leaders. Sixty-eight per cent of the CEOs are actually increasing their investments in the APEC economies over the next 12 months. I think that really sends a very powerful message around the importance of this part of the world to business strategies to focus on and we asked the CEOs what is behind this. Their messages were actually fairly consistent. First and foremost, they looked at the emergence of the middle class and the continued development of that, which is going to create all kinds of opportunities. Certainly, the rapid urbanisation is taking place in many of the 21 APEC countries and then, finally, it will demand, as the Prime Minister indicated, for infrastructure development all driving the growth agenda, if you will, looking forward.

When we look at where investments are to be made over the next three or five years, the CEOs identified three primary countries involved. First, not surprisingly, China; second, Indonesia, we are here today, and the United States, which I think is an interesting perspective in terms of the top three destinations for investment. And we talked about how were the CEOs planning to deliver the growth that is envisioned in their business plans. They really unanimously focused around the emergence of the middle class as driving their growth agenda, which is really interesting, to me anyway, is that they really focused on the development of new products and new services that can really meet the demands of this emerging middle class. In fact, 25 per cent of the CEOs in the survey planned significant changes to the product mixes, brand and customer service agreements to really capture this growth which I think is a real trend in terms of what we are beginning to see here.

And what is really interesting about this point is that when we go back to 2006, we talked about the growth agenda. Back then, as everyone in this room knows, it was all about labour and manufacturing efficiencies and now we are talking about new products, new services to capitalise on the middle class. So really interesting change and focus in terms of how the CEOs are thinking about the growth agenda going forward.

The fourth point I make is what is really holding the CEOs back today from achieving growth in investments that they are really trying to achieve and the first, as the Prime Minister indicated, a lot of has to deal with regulatory consistency around intellectual property, governance, which really could unleash even more investment and more realisation of the growth potential which is interesting. The second, which was also alluded to, which is the need for increased focus in the level of investment for infrastructure. In other words, we realised the potential really exists in this part of the world.

And finally, maybe just to close, we talked about the CEOs’ assessment of what has really been happening from a trade negotiation standpoint and, by and large, I think CEOs are very positive about the ongoing development, the ongoing discussions around individual trade negotiations. In fact, 69 per cent of the CEOs have actually said that the multiple trade tracks that were being pursued in this part of the world have very clearly created additional opportunities for them to achieve their growth agenda. And to me, what was really interesting about this, you go back to 2001, there were actually five free trade agreements that existed in Asia and today, we have 71 in place, and what is really interesting is there is another 84 negotiations to realise this potential. So a continuation of movement to really open up trade amongst the countries within APEC.

And that is the good news. The challenge, I think, that exists here on the trade front is really, how do you deal with that increased complexity, how do you really deal with the increase in costs of dealing with these multiple trade agreements and ultimately, I think there is a clear message from the CEO community to continue to evolve this to get a much more aligned and consistent approach to deal with trade in this part of the region. I think that is even a firmer indication of the ability to really achieve the growth agenda, the potential that exists in this part of the world.

So the bottom line – good news, positive stories, challenges, yes, but I think some real opportunities coming through the survey and again, I really encourage you to take a look at the survey results. I think there is a lot of information that could be useful as you think about your businesses, as you think about, you know, the next several years. So for the moment, back over to you.

Norman Pearlstine: So Raymond, I wonder whether you could pick up on that, as President/CEO of Moody’s, you not only have great information about corporations but you also, of course, are engaged in ratings of countries as well as companies and I wonder if you really share Dennis’s optimism about the region, whether there are trouble points that you ought to focusing on or areas that could have a level of concern that might be a little bit different from the overall perspective?

Raymond McDaniels Jr: Sure. First of all, I want to say how honoured Moody’s is to be here and to be participating and we are very appreciative of the opportunity. In terms of Dennis’ comments and Moody’s views about the region, I think they are all consistent, broadly speaking. The region has had a good growth track record. There has been some significant achievement across many countries. We have, in terms of speaking about credit worthiness, in our view’s credit worthiness, the economies in the region are stable. They have been resilient and that is certainly a positive as we move into what will probably be a more difficult macroeconomic environment driven by eventual monetary tightening in the US and the consequences for different countries around the world as a result of monetary tightening.

To that end, I would just point out that the discussions about quantitative easing and the taper or reduction in quantitative easing have certainly already been revealed in the market reactions. There has been some market volatility, currency evaluations, interest rate movements. So the effects of tapering, when it does eventually come, have already been anticipated by the markets and that is not surprising. I would point out that when the taper does begin, that is not in itself monetary tightening. That is just a reduction in the degree of accommodation that we have through purchase of treasury securities and mortgage securities in the US. And I think that will be probably not until the end of 2014, perhaps even into 2015, before we see that quantitative easing has stopped completely and we move into a period in coming years of higher official interest rates and actual monetary tightening.

Now, the consequences for that are not domestic to the US. They do have implications for the rest of the world and the APEC countries, but we are looking at a situation where the consequences should be quite different as we move from country to country, depending on countries that have fixed interest rate versus floating interest rate, regimes where there is borrowing in domestic currency or in foreign currency, the degree to which economies are driven by exports and the degree to which the strengthening dollar and hopefully, economic momentum in the United States encourages more imports and supports exporting economies.

So there is a significant degree of variation that we would anticipate seeing in the coming years and the Asian region is certainly coming to this period of perhaps more difficult economic conditions from a position of strength. As I said, there has been stability of the region, there has been good growth in the region, there has been accumulation of reserves and all of those speak very well for the ability of the Asian region to continue to grow through a different set of conditions than we have experienced in the last couple of years.

Norman Pearlstine: Thank you very much. No conference from APEC could really begin to take off without some serious discussion about China and we are honoured to have with us Frank Ning, the Chairman of China National Cereals, Oils and Foodstuffs Corporation (COFCO), a major player in terms of their consumer products but also broadly involved in areas of importance to the Chinese economy. Frank, could you talk a bit about what we see going on with the economy now and specifically, what implications of a new President this year might have for the economy, going forward?

Frank Ning: Thank you. First of all, it’s nice to hear what the PwC report said about China. So, China is still one of the most popular destinations to travel and to invest and Prime Minister Lee also mentioned China’s economy. Every time, the world economy kind of face some challenge, people worry about China first, whether China’s high growth will be slowing down. Since the first financial crisis in Asia in 1998, ten years later, in the US in 2008, all these financial crises, then people worry about how China’s economy would respond to that crisis and it slowed down and dragged the world economy even further into a recession.

But all the worries, concerns in the past, today, proved, are wrong. Why? Because the momentum of the economy with growth are in a different kind of driving test and structure. So it is an economy with 1.4 billion people with 800 million people urbanisation, with reform in every aspect of the economy and with the foreign investment coming into the country, over US$100 billion a year and with the ability to export and the ability to absorb, ready to serve, ready to use technology from all over the world and also with the relatively stable and with a more economical, mature government. So put it all together, the whole thing drove the economic growth for the last 20 years or more.

But today, China again faces its own challenge. So like everybody said before, you cannot rely on exports any more or too much, you cannot rely on government investment too much, you cannot rely on low-cost labour too much, you cannot rely on many kinds of ...(indistinct)… I mean, not taking care too much or you cannot rely on all this currency depreciation. Actually the currency has been appreciating in the last five years or ten years.

So put all altogether, here is the new challenge. So will the economies slow down? A little bit. To which level? I think to a level the change in the economy feel more comfortable to get a relatively reasonable full employment. So every year, there is going to be at least about ten to 15 million people move from the countryside into the cities to find jobs, every year, over ten million college graduates to find jobs. So at least, the economy must grow at a level to be able to absorb these labour forces. Otherwise, we are facing instability, we are facing a lot of social problems.

So how long can China shield this? I think our President will be here tomorrow to talk about it in a more official way, but reform and transform its economy from an investment type, from a low-cost type to a more technology-type, to a more domestic consumption-type economy. And also the whole reform by the whole state-owned companies will have that. So put for all these reforms together and also, I think there will be still some government investment, government spending investment, foreign investment, domestic investment to maintain a level of growth and give lead time for the economy to gradually transform itself into a more self-sustainable and also consumption-related economy.

So I think, I am still very confident. From our point of view, from COFCO’s point of view, we feel consumption is still strong, we feel people move their diet from rice to milk to pork to beef. All these things drive the economy to still grow and also China kind of needed the supply of all these very fundamental basic consumption growth which will again drive the growth of the economy. That is still a possibility and also we will see the reforms come. Thank you.

Norman Pearlstine: Thank you very much, Frank. Prime Minister, I wonder if we could expand the conversation a bit to talk about geopolitical risks globally, of course, Egypt, Syria, Iran or places where there have been changes in government or turmoil that has certainly gotten the world’s attention within the ASEAN region even in a week where Moody’s gave the Philippines an investment rating; martial law had to be declared in Zamboanga to deal with tensions in power being the MILF and MNLF, the Korean Peninsula has certainly had a level of tension this year and for all of the good feelings towards China, Japan, Vietnam, the Philippines to name the three countries that have been involved in territorial disputes with China. Do any of these issues jump out at you and say this is what we are ought to be paying attention to in the year ahead or are all of them if you will problems that you sort of already taken into account when you think about economic opportunities over the next year or so?

PM Lee: I do not think there is any, I do not think we can easily identify one problem which is going to be the thing to blow up. But I think we watch the overall trends and as I said just now, all projections of economic progress, development, integration and so on assume that there is stability, peace and security and if we do not have that in all bets are off. In the broadest sense, the stability, peace and security in Asia-Pacific depends on the key relationships between the superpowers and the big powers in the region and the most important relationship is that between America and China. It has to be managed stably, responsibly on both sides with a long term perspective, and America has to continue to be engaged in this region because it plays a very important role which no other country can replace, not China, not Japan, not any other power. And that is something which we continue to encourage at every opportunity. I think the Americans have said that this administration has said that it intends to shift towards Asia-Pacific, they said pivot but I think they have changed the term now but basically to invest resources, attention and presence in this region in order to develop the relationship. But Americans have many other preoccupations in the world – Syria, Iran, they are developing relations with the European countries. So for all the intention and the will, the circumstances do not always push in that direction and that is a practical problem.

Within the region, what are the issues which need to be managed? You have listed some of them. I think the individual issues will be addressed one way or the other. I do not expect them to lead to war. You could have mishaps, you could have confrontations, it could happen at sea, whether over the Senkaku-Diaoyu Islands or in South China Sea. It could happen on land, on the Korean Peninsula but I do not think any of the countries want to go to war, all of them want to manage the relations predictably. Even North Korea, I do not think wants to go into war. What needs to be managed, what you need to watch is whether even as all the countries say that we need to manage this peacefully and with give and take, it is possible to work that out into a practical accommodation on the ground which doesn’t harden the confrontation and at the same time, respects the political pressures in their respective countries. And all countries have got political pressures, whether you are a democratic country with elections, whether you are a communist country with a different system. There are sentiments amongst the population that these territories are ours, this is sovereignty, this is sacred, this is not negotiable, not at any price and when things are not at any price, it becomes very difficult to make a deal. So that is something which we are watching. The South China Sea is on the agenda between several ASEAN countries and China. ASEAN as a whole is negotiating, wants to negotiate a code of conduct with China so that even though you cannot solve the problems, we can manage them and keep them under control. But I think that is going to take some time.

But the other issues you mentioned, there are separatist problems in several of the countries. You talked about southern Philippines, Thailand I think has got an issue in the South. Other countries too have got various separatist movements. As long as there are local problems, each country can manage that. If international terrorist groups take advantage of this local disorder in order to go and set up bases on training camps, then we have a problem. It has happened before. We have had the Al-Qaeda-linked groups operating in the southern Philippines and using the southern Philippines for training, we have Singaporeans who have gone there and be trained there and come back and we picked them up fortunately before they did any harm. But I think the terrorism issue is something which is a continuing, low grade illness which can flare out from time to time.

Norman Pearlstine: Thank you very much. One of the things that interested me in all of the opening comments was that there was no particular reference to India and in years past APEC meetings questions would be raised about India versus China who would grow fastest towards; who would show ability to sustain development. It seems as though that question is no longer front and centre and that if anything questions about India’s ability to maintain even the lower growth levels over the last couple of years is increasingly in question. Did your survey address India at all and if not, some of PwC perspective, you talk a bit about …I might ask you to follow up on that as well.

Dennis Nally: So I think a great point. I would say the survey did not specifically address India per se but it’s just a comment or two. I think the one thing the financial crisis has demonstrated to all is how inter-connected all these economies are around the world and, therefore, it’s no longer you know appropriate just to look at, you know what is happening in a particular country, the need is to look across multiple countries’ economies to really assess competitiveness, how one country competes in the global economy and I think what you see happening in India today is as a certain economy look forward because of whether it’s good governance, policies, regulations etc, other countries have potentially fallen behind. And so when I think when you look at the growth rate said that we are seeing happening in India today versus what is projected in other parts of the world or other countries, the competitiveness of the India economy compared to other economies is slowing down. And we are seeing that certainly with the level of foreign investment that’s going into India today versus maybe what you would have seen three to five years ago and I think that’s an interesting way to think about whether there are big opportunities today and what countries and economies need to do to really remain competitive on the global front. And I think you see in some of that effective growth rate in India, at least in the foreseeable future.

Norman Pearlstine: Let’s talk a bit about... Perhaps we could also give the conversation a bit to Latin America which is obviously an important part of APEC as well and get some of your thoughts regarding Brazil, Mexico, Chile and other parts of the region. But first from our Moody’s perspective, how do you look at India these days?

Dennis Nally: Well, India recently has been particularly hard hit in terms of the impact of market volatility on currency value and that is from a I am looking at this from a credit perspective that has implications to the extent in particular, that entities borrow in foreign currencies makes their ability to repay more difficult and increases the likelihood of credit events. And that’s without at all single out India. It’s an observation that would apply to multiple jurisdictions but there has been a particularly acute reaction in terms of currency devaluation, rapid currency devaluation in India recently. The other comment I would make and again this would not point either primarily or exclusively to India but generally speaking, growth policies are easier to pursue than reform policies and to the extent the reforms are necessary that is a more difficult, less popular, more difficult political challenge and so necessary reforms that countries need to pursue or going to be challenged, particularly moving into a more difficult economic environment. So using periods of good growth to pursue needed reforms is absolutely critical and we don’t want to lose those windows of opportunity.

Turning to Latin America, again, we think that Latin America is generally speaking well-positioned, going into a more difficult macroeconomic environment that I think many would anticipate. Again the growth that we have seen in recent years has been impressive. It slows, that would not be surprising in the kind of environment that we are looking at. But again, it is definitely a growth region, a region that has shown both cyclical and a kind of structural ability to grow and that structural ability to grow is going to bode well for the region looking ahead to 2014, 2015.

Norman Pearlstine: Frank, you also in addition to having a .perspective on China or a purchaser from many parts of Latin America, do you have specific thought that with regards to countries that you look to in terms of either price stability or political stability that you have concerns about or give you cause for optimism and will make that a last question from me and then we open up to the floor for questions following this response.

Frank Ning: Okay, I will be very brief. Because China has a large population so compare to its natural resources, I see a lot of constraints. So I or when China look at this world on economies, we look at how another country with how large territory, how many population, how is their resources which will be complementary to the Chinese economy. So that is why I mention this few countries like Brazil, like Russia, Ukraine, Kazakhstan, in every aspect in aspect of agriculture, mining, oil, with relatively not that many population but a vast resources. So I think in the future, these few countries will again play a major role and enjoy higher growth because of their ready to use resources to serve them so which also the Chinese companies are looking at more closely to trade with them. Thank you.

Norman Pearlstine: Thank you very much. If we could, I like to now open to the floor for questions and if you are called on, if you could please go to a microphone and identify yourself, we’ll be grateful for that. Yes, sir?

Q: Thank you, sir. My name is Kuan from Chamber of Commerce and Industry. I have two questions – one question to Excellency Prime Minister Lee and second question for Mr Frank Ning. First question is I want to ask you about the more deeply response on the act in America about the shutdown of the government. I would like you to give more comments on that, the impact to the Asian region, especially at the country that like just new in the democratic process. The second question to Mr Frank, you said about growing of China in the investment. I just want to know what issue strikes you for the food security in your country. Thank you very much.

Norman Pearlstine: Thank you. Mr Prime Minister.

PM Lee: Well, obviously, we prefer a US Government which is working to one which is not and we prefer a US President will be able to travel and fulfil his international duties to one who is preoccupied with his domestic preoccupations. And it is a very great disappointment to us that President Obama is unable to visit to attend APEC and to attend ASEAN or to make the visits he intended to before and after that to Malaysia and to the Philippines and I am sure the hosts must be very disappointed too, because America is a very important partner for us. But we understand his problems and his priorities and we hope that he will be able to resolve them quickly. As I have said earlier, it is also not helpful for the American political system to be in gridlock when you have to make some quite basic decisions on how to keep your fiscal state in balance in the long term and how to strengthen your competitiveness over decades because these are jobs which take more than one presidential term to carry on. But America is a very vibrant and resilient country and notwithstanding all these problems, I think in 20 years from now, it will still be a powerful country in the world and that is good.

Norman Pearlstine: I think that the shutdown is getting a lot of publicity, it is probably going to remain an issue through the 17th of October where the more important question of whether America defaults or not that will come to a head and I think a number of us do feel that knowing the way Congress usually operates, there will be some kind of temporary band aid that will just make an issue we can revisit it again before Christmas, but that may be too pessimistic a view. Frank, would you like to respond to the question about food security in China, please.

Frank Ning: Yes, I hope the US can open their museums for the Chinese tourists to visit because they are already in Washington. So, for food security, I think you cannot isolate the Chinese food security by its own. It is very much a worldwide issue. To be short, I am very confident there would be no food crisis at all in the whole world. Because in the last let us say 30 years, the food production, agriculture has been steadily growing according to the demand. Even food is being something very low cost for everybody. By that, I mean food companies or agriculture companies are not really making good returns at all but they still kind of continuing investment some stage from government to maintain the worldwide food supply. There are some small issues in some countries which are not a worldwide food crisis issue, it is an affordability issue. We got a lot of food stock in our inventory but somebody in Africa or somewhere still starving because this is not really a worldwide food crisis. So having said that, for China, China has been working hard in the last 30 years, trying to be self-sufficient. So in the last ten years almost, the Chinese agricultural output has been steadily growing to a level of 600 million metric tonnes this year which is about 95 per cent self-sufficient. So having said that whether still we have to say the Chinese are kind of moving their appetite from eating rice or wheat theoretically now more eating more let us say high protein – beef, pork, chicken, fish, et cetera.

So there is a conversion rate there. The conversion rate is relatively one to four, some four to one, something which again will push the kind of agriculture consumption in China up because even when they eat less rice, but if you eat more pork, or beef, you cause more animal deaths. For example, last year, COFCO, we bought 3.5 million tonnes of wheat from Australia, first-class good wheat but when we ship into China for animal feed and Australian trading partners are very surprised by the reality that China has taken more animal feed than any growing people eat. So, from there, I think China will maintain its own first priority to produce enough food for its own population. But China would trade more with the outside world. For soybean, for corns, for seeds, wheat, everything, for sugar, for palm oil and agriculture products. But I am quite confident technology efficiency and also agriculture investment plus a very good potential from Brazil, from Russia, from domestic area, a lot of agriculture potential there and much more capacity I think today we can produce. So I think we are relatively confident as long as we keep research investment into agriculture area, so China and the world will be safe on food supply. Thank you.

Norman Pearlstine: Thank you. Yes, another question, please. Yes, please.

Q: My name is Kim Tian from the International Law Institute of Washington DC. And my question is to the great Prime Minister Lee who is so level-headed and wise so I want your advice on this. On the issues of being able to attract international investment, how do you convince countries to open up their borders and stop just protecting their national market and also be prepared to open up for international competition, not just asking for international investments and the second question is about reform and on procurement and corruption. As you know, reform is basically a redistribution of wealth and resources, so how do you convince countries and the powers that control within a country that anti-corruption measures and transparent procurement is important for them when that would mean that they would have to lose some of that power control? Thank you.

PM Lee: I do not have magic answers to these questions. There are very difficult questions. I think on the first one, why do countries try to protect their markets rather than open up when we know that opening up is good thing in general for everybody. I think one answer is that people feel insecure about the uncertainties of change. If you open up, what is going to happen to my job? And can I have some other place to go to? And if there is prosperity generated, does it come to me or does it go to some other group, maybe a minority which benefits greatly from globalisation instead of a majority which feels that we are entitled to share that prosperity and that is becoming a serious problem and unless countries are able to develop policies which enable more of their people to benefit from globalisation, and give people more assurance and stability and buffer against the uncertainties which globalisation brings, I think these questions are going to continue. It is a reality.

There is of course, the issue of special treatment because there will also be companies which will press their case vigorously which may get control in the political process and they make political donations and then the politicians have to listen to them and pay attention to their special interests which are contrary to the interests of the country as a whole and I think many countries can see this and that is the specific problem which needs to be overcome. But the broader issue of assurance of prosperity of wide benefits from globalisation is one which many countries face.

As for anti-corruption, I think every country knows that corruption is not good and that you need to take measures to clean it up, to enforce, to maintain standards and to keep the whole system clean but it is not so easy to get it straight because once it is entrenched, it is like a cancer or more like a computer virus, you remove one piece of it, the other piece is still there and it grows back and unless you can go in systematically, or comprehensively, maybe you have a revolution, start from a clean slate, then you rebuild society in the new model. But that is mostly not possible and so countries have different degrees of success in dealing with corruption. And that is one of the things which businessmen must take account of when they decide where they are going to invest.

Norman Pearlstine: Yes, sir.

Q: Thank you very much, Mr Moderator. My name is Professor Ken Morgan from Flinders University in South Australia. My question is to Prime Minister Lee. From your father, to your Prime Minister Goh, to yourself, you three have been able to lead Singapore every decade adapting to change and innovation. As we look forward, where do you see the future in adaption of innovation, primarily when it comes to scaling up for future students? I mean you have to start looking out to prepare at the lower school but also into the universities and to Dennis Nally, how do you see aligning in your views dealing with CEOs over those issues, meaning you know, where they see the future demand for training education. Gentlemen?

PM Lee: Well, education is one of our top priorities in Singapore and we are investing in our young people not just from schools to universities, but across the whole spectrum of skills, abilities, interests and roles. And so you can see that it is just not our schools which have got good investments, good teachers, well-paid, well-resourced, well-trained, and well-supported, so that they can do a good job of teaching students in all our schools in Singapore which is why we have a slogan “Every School Is A Good School”. But we go beyond schools to look at our universities, our polytechnics, our institutes of technical education. Every student should finish school and nearly everybody does and after school, should go on to post-secondary education.

In the Institute of Technical Education, he gets good technical training and preparation for entering the job market, or for further education should he want to. In the polytechnics, they get a technical course, high standard, highly-employable. In the universities, we try to tilt people to subjects which are science, technology, bio-based, courses and skills which will find them jobs and will keep them employable for a long time to come and one important element of keeping employable is to learn how to continue to upgrade and up skill yourself even while you are working. Because you graduate from school when you are 20 to 25 but you are going to be working till you are 65, 70 maybe beyond, and in 40 years, the world will change and what you learned will have become obsolete and you must be able to continue to reprogramme yourself, download new firmware, reboot, if necessary and continue to be useful for a very long working career and that is what we are trying to do.

Norman Pearlstine: Thank you very much. My thanks to all of our panellists for doing well and it was a remarkable job of covering a huge amount of territory and a very large number of issues that are setting the stage for further discussion in the panels to come and speeches to follow. I do think that the overall view about the opportunities in Asia and the continued performance within APEC and the economies is appropriate.

I also think it was very telling that so many of our speakers talked about the difficulty of reform and I think, well, the opportunities for innovation, the opportunities for investment and infrastructure, education, and so forth are well understood. One of the things we will want to keep our eye on over the next year is the political solutions that will result from elections in India, from new governments taking hold in countries where with countries having to deal with issues that have come back to haunt them from decades past, whether it would be in Chile, or in Malaysia in policies and I think all of that will lead to great discussions over the next couple of days. So again, my thanks to the panel for doing such a great job setting the stage this morning.

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