PM Lee Hsien Loong gave remarks and participated in the Q&A session at the APEC CEO Summit on the topic of "The DNA of Global Growth" in Lima, Peru, on 18 November 2016.
PM's remarks are also available here: http://www.pmo.gov.sg/mediacentre/pm-lee-apec-ceo-summit-forum-discussion-dna-global-growth
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Good morning, everybody.
Thank you for having me here in Peru for the second time, and again addressing the APEC CEO Summit. The theme for today is “The DNA of Global Growth”, which is a right one, because we are all preoccupied with growth, and we have all had a difficult time since the Global Financial Crisis. The Crisis was many years ago, but growth has remained subdued since then.
Among developed countries, America has probably done the best of all, but even then, its recovery has been weak. In Europe, you face intractable structural problems, stagnant economies, and very high youth unemployment. In Asia, we are not doing badly, but growth is not as strong as it used to be, and even China has slowed down.
At the same time, we are seeing a nativist response a reaction in developed countries by those who blame globalisation and progress for making them worse off. We saw this in the Brexit referendum, we see it in the rise of populist extreme political parties in Europe, and of course the election of Mr Donald Trump in the elections in the US, most recently. Because people feel in their country that their lives have not improved. Their incomes have not gone up, thriving industrial towns have become rust belts, and demographic changes have eroded their status in society.
So in such an uncertain time, where can you get growth from? I think it is a given that all of us do want to grow. Even for developed countries, growth is important, because it represents economic opportunities and optimism. Without growth, we have very serious problems. If you look at Japan, they had twenty to twenty-five years of stagnation at quite a high income level. But even then, the loss of optimism, confidence, and the sense of malaise is a very troubling and deep-seated one, which can only be overcome if the economy can grow.
For developing countries, growth is even more important, because it is the means by which people can be lifted out of poverty, and people can be optimistic that tomorrow will be better, and that their children will have a brighter future than they have had.
I would like to offer three brief points to frame our discussion this morning. One, that there parts of the world which are still growing, and that Asia is one such bright spot, two, that we have to continue to exploit and rely on technology and globalisation even as we adapt to its consequences and disruptions, and three, we have to continue to promote economic cooperation and integration.
Let me start with a few words on Asia. We are positive about Asia’s fundamentals because the population is young, the economies are developing, boosted by a rising middle class and rapid urbanisation, and China is continuing to grow, slower than before, nevertheless, but six and a half per cent is nothing to sniff at. Their One Belt One Road initiative is a promising one that will generate demand and investment in the region and bring the region along as China prospers.
India is the new engine, under the new Prime Minister, Mr Modi, it has regained its growth momentum, and it has set off a more competitive dynamic between the different states and regions of the country. So there are ample opportunities in Asia and I hope that Latin American companies will exploit them.
Secondly, we have to exploit technology and globalisation, because these are still the most effective ways of improving the lives of our people. We cannot improve our lives by doing things in the same old ways when better ways have been invented. Lives can only improve when we do things better, through new techniques, new scientific discoveries, new products, and new ways of working together.
Like here in Peru, where companies like MEDLIFE are improving healthcare by using mobile clinics to bring basic healthcare to the less developed areas, so that instead of going to hospitals, healthcare comes to the people. Or Fintech and mobile banking, enabling low-income individuals without borrowing histories to access loans, to create more opportunities for themselves.
So we have to rely on technology, we have to continue to globalise, but we also have to recognise the disruption that this causes, because there will be winners and losers, and to help the losers and help all segments of our population to adjust, which requires the Government to have an active policy, whether it is keeping healthcare affordable, whether it is strengthening social safety nets, and also making sure that workers have the reassurance that they know help is available even though they are in an uncertain and disruptive environment.
More importantly of all, the Governments need to invest in lifelong and continual education so that workers can earn their share of economic growth. Transfers are fine, transfers are necessary, but best of all if individuals have the skills and can be self-supporting and sustaining, earning their way in the new economy. Because the jobs and industries will change many times in a worker’s life, and workers constantly have unlearn and relearn new skills to stay relevant. And businesses, too, have to take a stake in developing their workers, and this is an area that Singapore is putting a lot of emphasis on.
Thirdly, we have to continue to pursue economic integration. It is the reason we started APEC in the first place, and over the last quarter century, by integrating our economies closer together APEC has brought prosperity to our economies. It has boosted growth, generated jobs, made lives better.
Economic cooperation covers many areas – human resource development, connectivity, harmonised regulations, sharing best practices, and of course promoting trade. It is not fashionable now in many other countries to pursue trade liberalisation or free trade, but I still believe that trade liberalisation is a win-win proposition, and important for getting growth for the world. I know why there was a reaction against the trade agenda, and the political difficulties of pursuing a pro-trade agenda. Each country has to make sure that the benefits of trade are shared widely.
While it is difficult to do this, and it is difficult to take dramatic new initiatives in the prevailing climate, we do need to do our best to hold on to the gains which have been achieved, and which have taken decades to bring us here. We must not do things that will hurt ourselves, which lead other countries to retaliate, and undo the progress over many decades. The TPP was one of the highest-profile, major trade initiatives over the last half a dozen years. While it may be delayed for now, but there are still other pathways to free trade in the Asia-Pacific.
For example, the Regional Comprehensive Economic Partnership, which is an FTA involving countries on the Western side of the Pacific Ocean, and other ongoing regional initiatives like the ASEAN Economic Community and the Pacific Alliance, which are all building blocks which will lead towards the ideal of free trade in the Asia-Pacific.
I know that the sentiments for growth are subdued, your APEC CEO Survey shows this. But in the midst of your worries, we must avoid the tendency to be caught up by the news headlines and the sense of uncertainty, and we have to step back, focus on the fundamentals and the bright spots, which are there. And push forward to deliver growth and progress for our people.
Thank you.
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Q: It is not fashionable these days to promote trade liberalisation. Many voters in the West do not feel like they are benefiting from free trade. How big a danger is it if Trump implements anti-trade policy or if the US pulls back from free trade?
PM: We will find ways to live with it but it will be a big minus. America is the biggest market in the world, it is the most open. The Europeans will dispute this, but I think it is really the most open market in the world. It is the engine pushing for freer trade for many years. In fact – less so in recent years because of domestic politics – but in the sixties, seventies, even in the eighties and nineties, without America, you would not have made any progress, first on the GATT and then the WTO. Even now, without access to the US economy and US markets – we can promote growth in Europe, as there are problems there which deserve solving. We can promote growth in Asia, as there are also opportunities there which need to be exploited. But you are missing out on a huge opportunity if America is not part of the story. And it is not only missing out on the positive, but risking a very big negative in terms of destabilising the global trading and strategic system.
Q: PM Lee, what does Singapore do to stay in the game? You are a model for being a business-friendly regulatory environment, so how do you stay on point?
PM: I will make two complementary, almost contradictory points. One, you must have stability. When somebody makes an investment, he is committing to you for twenty, thirty, forty years, he comes in on certain expectations, you must make it quite clear right at the start what those expectations should be, and you have to honour your word, over many terms of government. You must have stability, and predictability in your regulations.
But on the other side, when you are talking about the new economy and disruption, and totally new activities, whether it is Airbnb or whether it is Uber, Lyft and Rideshare, you also must know where old regulations are no longer relevant and have to change, and what the new framework is, which the new activities are. To believe that old rules can apply without any change to a new world is unrealistic, but to believe, like some of the new acolytes proclaim, that regulations are now totally unnecessary and we can just go forth and do a free for all, and everybody will thrive and be happy, I do not think that is correct either. So you need to know how to drop the old rules and what the new ones are which you must put in place.
It is also the same with financial services, fintech. We are looking for ways that you can have a sandbox, where you have a restricted environment, within which people can try new things and I can try new rules and depending on what works, then I open up the sandbox and it becomes the new rule for the whole system. But you need good regulators, responsive but not captured.
Q: What is PM Lee's opinion of the future of China’s belt and road initiatives?
PM: Well, we are happy that China is pursuing the belt and road initiatives. It is a natural thing for them to do. Their economy is growing, their links to the world are also growing, and they naturally want to develop trade routes, the investment connections, the economic integration with their neighbours, whether it is Central Asia, whether it is Southeast Asia, whether it is across the Pacific with America. And we encourage that. We think it is the right way for China to engage with the world. The AIIB is a positive initiative. Singapore is one of the first countries to join the AIIB or state our intention to join. And we think that it will be win-win. But of course nowadays, however strong an economy is, not all roads will lead only there. There will be other links between the countries in Asia, between the countries in Asia with America, with Europe, and China will fit into this global network. I think it is important that we understand that in this new world, there is no country which is the middle kingdom.
Q: How should we better educate people of the benefits of globalisation?
PM: I would say it is not just a matter of education. It is also a matter of making sure the reality reflects the rhetoric. And if you are in the Rust Belt, you will see the world as having got worse. And in states like Ohio, it has got worse, but you have to make sure it gets better. And that is not easy to do. You have got to put investments in, put programmes in, and it cannot be boondoggled. They have really to work. And then young people can feel that there is a future and this is the way forward. Otherwise, if we tell them, “it is all for the best and you are just part of the necessary sorrow in this best of possible worlds”, I do not think you are going to win very many votes.