Hu Shuli and Zhang Hong wrote . . . . . . . . .
As one of the Four Asian Tigers, Singapore is known for its strong economy and orderly society. The city-state, with its population of 5.3 million people, is listed by the World Bank as No. 4 in the world in terms of per capita income. As a regional business hub, it is lauded for its sound business reputation and the transparency of its government.
Singapore has also been something of an example for China over the past three decades. A visit by Deng Xiaoping in 1978 provided inspiration for China’s reform and opening up.
Meanwhile, many Chinese officials have studied Singapore’s style of governance. Over the past 30 some years, more than 10,000 Chinese officials have visited Singapore for governance training. What they witnessed is a democracy combined with one-party rule and elitism. They have also seen an open economy that is accompanied by strong state-controlled investment vehicles.
Since 2013, China’s new leadership has pursued various reform measures that, some argue, reflect the Singapore style. On one hand, the market’s role has been further highlighted in resource allocation, and on the other, efforts to fight corruption have intensified.
But the debate over whether the experiences of Singapore can be copied in China has been fierce. After all, the two differ in population size and political systems, and the city-state lacks the regional disparities of China.
Nevertheless, the transformation of Singapore in recent decades can offer valuable lessons to China as it reforms. In an exclusive interview with Caixin in early February, Prime Minister Lee Hsien Loong discussed his expectations for Singapore’s future and challenges confronting the country.
Lee is Singapore’s third PM and the eldest son of Singapore’s first prime minister, Lee Kuan Yew. Before taking office in 2004, he served as the minister of trade and industry, finance minister and deputy prime minister.
Lee shared his views on Singapore’s efforts to balance policy, political institutions and corruption-fighting efforts. He also discussed its role in Asia-Pacific and the prospects for regional cooperation. Excerpts of the interview follow.
Caixin: I’ve frequently visited this country over the years and I’m so impressed with the prosperity and economic growth. Would you share your vision for Singapore’s economic growth?
Lee Hsien Loong: In terms of income levels, we are at about developed country levels, in fact higher than some developed countries. I think in terms of the depth of our capabilities, in terms of technology, in terms of the strength of our enterprises, we don’t have so many multinational corporations, 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 a work in progress.
Caixin: So when it comes to Singapore’s’ sustainable development, is there a road map in your mind?
Lee Hsien Loong: I think that we have to develop connected to the rest of the world, and particularly connected to our region in 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 a 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 ability as managers and leaders, they can be managers and leaders not just in Singapore but they can go out.
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 can have a diaspora, a network and a home.
Caixin: On the subject of domestic economic policy, how do you balance competition between small and medium-sized enterprises (SMEs) and state champions?
Lee Hsien Loong: 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 duties imposed on them by their 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 their companies. So I would not say it’s a division between state enterprises and 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 and business conditions change. The way they used to do business before, tomorrow that niche may disappear and they have to find a new niche.
A big company, you’ve got some balance, some stability and you can move one step forward at a time; with a small company, you only have one small footprint and it’s not so easy to jump. So we are making an extra effort to help SMEs adapt in this environment, and some of them are doing well.
Caixin: Maintaining competitiveness and care for the needy is always hard to balance. How do you view this challenge?
Lee Hsien Loong: We have to keep a balance because in every society there is that yin and yang. The yang which is the competitive element which drives 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 toward 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 and everybody will be first in class, I think nobody will be first in class and we will all be losers! China has shifted from a very “da guo fan” iron rice bowl system to one which is very competitive. We have operated a competitive system which has targeted significant social safeguards on public housing, in health care, 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 toward the yin side. That means to give greater help to the low-income groups, so they can increase their earnings and their assets to keep our society more open, so people who have talent can move up and will not be daunted by the gaps in the incomes between the rich and poor. That is what we have been doing.
Caixin: Singapore owes its success to the great design of its political institutions. The world is changing, so can the current political structure always maintain its relevance?
Lee Hsien Loong: 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’ve adapted it, changed it over the years to get quite a unique model which we have in Singapore. It is still based on a parliamentary system but with certain safeguards and enhancements. For example, the president is independently elected.
Also, we have special arrangements which ensure minority communities will always be represented in parliament, but in a competitive sort of way. I think as we go forward we will 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: What do you think of the competition between Singapore and Hong Kong? It seems that Singapore is in a leading position now.
Lee Hsien Loong: I don’t worry too 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.
As a financial center I think we are in different positions. Big Chinese companies, many are listed in Hong Kong. Smaller companies, some of them are in Singapore, but I think that’s just a small proportion of all the business there is in China. I think the world is big enough for both of us.
Caixin: What’s your view on China’s economic and financial outlook? What do you think about the role of the yuan?
Lee Hsien Loong: I think the Chinese government is gradually liberalizing restrictions on the yuan and they would like it to play a greater role in international finance, so there are swap arrangements for the yuan and several Asian countries. There are offshore settlements banks for the yuan, including one in Singapore, and settlement centers. They’ve got it in Singapore, they’ve got it in Hong Kong, I think they’ve got it in Britain. So I think this is a prudent way to approach it, gradually to liberalize. But to open up completely the way the U.S. dollar or the yen or the euro are completely open on a capital account, I think there’s a very major distance to go and I think it will probably take quite some time yet.
Caixin: Singapore is good at fighting corruption, and has clean and efficient civil servants. China is in the process now of an anti-graft campaign. What should be the next step and are there any lessons China can learn from Singapore?
Lee Hsien Loong: I think China’s circumstances are very different from ours. Your scale is much different from ours. I mean, we are the equivalent of one small city. Even Shanghai has 20 million people, 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, “You pay your ministers well, and your civil servants well, properly. And if we were Shanghai, all by ourselves, we could do that also. But if I did that, people to the west of me would have a view, 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 center would have a view. So it is not so easy for me to move, and it’s a real problem, it’s a different situation.”
But in Singapore, what we have tried to do is have strict rules, to have transparent systems, so if there is an exercise of discretion, it cannot be completed without checks and balances. But 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 the post he may hold is.
At the same time, we make sure we pay our civil servants properly, a wage commensurate with the quality of the officer and commensurate with the responsibilities 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’ve had a couple of cases which were quite prominent. Some have 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 of China’s. You mentioned accountability and high pay. You said both are important together, but which one is more important?
Lee Hsien Loong: 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 it, and there’s always a public sense that in the public sector you ought to make a sacrifice. To some extent that is true, but if the sacrifice is too great, it’s not realistic and the system will not work. Expecting high standards is also not easy because people have careers and livelihoods. 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.
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 customs, with immigration people, where you’ve got more opportunities to be tempted. There is no easy solution, but I see that China is taking it very seriously, and catching tigers as well as flies.
Caixin: In your opinion, what are the most formidable challenges China faces domestically and internationally?
Lee Hsien Loong: Domestically, to continue to restructure your economy so that you will not build up social tensions and you can continue to fulfill your full potential. Because of your full potential, I think you can grow 7 to 8 percent for another 15 to 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 vested interests overcome, the administration to be efficient, transparent and honest, and the social stresses to be relieved so that people don’t see “fu er dai” and “guan er dai” (the children of the wealthy or officials) and all these other problems which are unavoidable in a rapidly changing society. I think that is something that will keep your leaders very busy for a long time.
Internationally, I think China is becoming much stronger. I think it is becoming much more active in engaging its partners, in pursuing its interests, and defending its interests. And one of the major challenges for China is how to do this in a way where you are defending your interests but at the same time you can integrate smoothly and peacefully into an international order, because China will not be the most powerful country in the world. You will probably 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 advanced economies, and China has to work with them and there has to be give and take on both sides. Even with small countries, there has to be give and take, a sense that in international relations the principles of co-existence are used, “pingdeng huhui,” or equal and mutual benefit. So that is a very difficult balance to strike because you will have a natural sense of pride. You have “fuxing zhilu” (the road to restoration), the idea that after 168 years China is on the verge of arriving and wants to take its 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 with other people saying: “Oh he’s powerful, I have to pay attention to him.” That’s a very difficult challenge to balance.
Caixin: What do you think about the rebalancing policy of the United States? Is it a show of strength? Or is it an adjustment the United States has had to make because of its relative decline of power in this region?
Lee Hsien Loong: I’m not sure why you would say relative decline.
Caixin: Relative decline, it’s weaker.
Lee Hsien Loong: America has been in Asia since the Second World War. Even before that they were in the Philippines because it was a colonial master. And their presence has been welcomed by countries around the region all these decades, and I think that the Americans understand they have an important status 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 their benign constructive influence.
At the same time, it has 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 it’s a 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. Even in China, so many of your top people, whether it’s in business or government, send their children to study in U.S. universities.
Caixin: What is Singapore’s understanding and expectations for the ‘new type’ relationships between major countries?
Lee Hsien Loong: I don’t know. That’s a term the Chinese leadership have come up with, and they’ve talked about it with Mr. Obama in 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. It cannot be that one side just gives way to the other, and therefore we are friends. There has to be a balance and a give and take, and a 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’s global warming, whether it’s nuclear proliferation, whether it’s security in the Middle East, Iran. China has a stake in all these issues.
Caixin: How does Singapore position itself in the regional and international geopolitical landscape?
Lee Hsien Loong: 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 U.S. We’ve not done badly in that respect because over the last few decades our relations among these countries have been stable and I hope it stays like that.
Caixin: ASEAN will have to achieve economic integration by 2015. Is this still feasible?
Lee Hsien Loong: We will have a scheme. We will probably meet 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 us.
Caixin: What will be the implications for the region?
Lee Hsien Loong: I think there should be more growth, there should be freer flow of capital, there will be freer flow of professionals and talent. There should be better transportation links for connectivity. So air links, more flights, more opportunities for business to get together and to prosper together. And we hope, therefore, more opportunities to manage frictions when they arise.
Caixin: So you think you will achieve it on time?
Lee Hsien Loong: I think we will achieve most of what we set out to do, but that doesn’t mean there isn’t more we should aim for beyond 2015.
Caixin: What’s your vision on restructuring the financial order in this region?
Lee Hsien Loong: I think that depends on the IMF and World Bank, as well as regional institutions, and we are building them up gradually.
As a founding member of the TPP, Singapore has been a champion of free trade. To what extent do you think the TPP will change the trade and economic landscape of the Asia-Pacific region?
I think it’s 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 toward such an ideal of an APEC free-trade region. It brings in countries on both sides of the Pacific. There is America, Chile, Peru. On this side there is Japan, there’s Singapore, Vietnam, Australia. So you’ve got people on the east and 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 Asia-Pacific. So I think it’s a very major step forward. And I hope it will not be the last step.
Caixin: The U.S. government is working on TPA – trade-promotion authority – which would mean Congress has to vote yes or no on a trade deal the president submits. What relationship with does it have with the TPP?
Lee Hsien Loong: We hope they get the trade promotion authority because with a trade promotion authority the process of ratifying the TPP will be more straightforward. Without the TPA, when the TPP goes to Congress the congressmen can vote item by item, saying “I think this, I don’t like this, I think this, I don’t like this.” It’s not possible. We have negotiated a package. You have to approve either all or nothing. 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 big trouble.
Caixin: China has expressed interest in joining the TPP, but also stated it won’t be in the first group of signatories. What are the stakes?
Lee Hsien Loong: 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 economies and the SOEs. So he committed, he negotiated, and China made their openings as promised, and I think as a result you’re more competitive and stronger today.
I think you should look at the TPP with a similar perspective, from an economic point of view, that if you can join the TPP and commit to that, it could mean 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, 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. Who do you intend to work with over the long term. And I hope China sees these as friends it wants to work together with over the long term, although with Japan I think it will take a long time.
Caixin: There are overlapping trade agreements. The TPP and RECP, and ASEAN has three. For example, Singapore is in several different trade pacts. So how are these coordinated?
Lee Hsien Loong: I think it is very hard to coordinate. They overlap. You hope that together, 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 severally, and to decide under which scheme they will find 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.
Source : Bamboo Innovator