Q&A with PM Lee Hsien Loong at Economic Society of Singapore Annual Dinner 2012
Transcribed from the video of the event. The audio on the video wasn't great, so this is entirely done by ear. Apologies for any inaccuracies.
Mr Jørgen Ørstrøm Møller: My name is Møller and I work at ISEAS Singapore but I used to be the Danish ambassador from Denmark. And I can tell you that the Danes are very happy paying taxes. According to surveys the Danes are the most happy people in the world, and every political party in Denmark advocating a tax increase is wiped out at the election. But I think the description you gave, comaprison between the Scandinavian countries and Singapore was absolutely correct, and it shows the difference, that you cannot build an economic model without taking into consideration the societal structure. And that is the starting point.
But my question is not about the welfare system. My question is a short one about economic integration in Asia. In the last month or so, we have seen China, Korean and Japan agree to make a free trade area. And we have seen China and Japan agree to make direct payment mechanisms without using the dollar. What do you think would be the impact on Asia and on Singapore on these two things?
PM Lee: I think it's part of a trend towards greater interaction between the Asian economies which has been developing across the last ten, fifteen years as China has become a more dominant, or much heavier player in the world. Trade amongst us has grown on the western side of the Pacific. There are many other free trade arrangements amongst the countries in Asia. ASEAN has agreements all over the northeast Asian countries. And Australia and New Zealand has also brought into the net. At the same time we have also been building networks that straddle the Pacific through the TPP, Trans-Pacific Partnership. And we also have been building networks that go further: the Koreans have a network with the EU; Singapore is negotiating an FTA with the EU, and we want to be part of this wider network. So I think as long as individual pieces fit into a broader quilt and pattern which is reasonably comprehensive, I think it is a good thing. If we had a bloc, and Asia has free trade agreements among themselves and America is on its own and Europe is on its own corner of the world, I think that would be bad. But arrangements to have direct clearance between the renmingbi and the yen, I think it reflects the desire of the Chinese for the renmingbi to play a wider role internationally. It is understandable that as their trade grows they want to see this happen. I think it is not so easy to do because a lot of trade happens in US dollars, and I am sure that much of the trade between China and Japan are also in US dollars. And even the Euro has not replaced the US dollar as the major currency for trade on a very big scale. So it's a long term trend.
One factor which the Chinese have to consider carefully is that without freeing up their capital account, there is a limit as to how far you can go allowing trade to be settled in your currency. And there are valid reasons why they will take a long time to open up their capital account.
Mr Prasenjit Basu: I'd like to ask about two sacred cows if you don't mind. One has to do with the fact that Singapore runs current account surpluses of 20% of GDP year after year, and has built up an enormous amount of foreign assets. Would the dividends from those foreign assets be a potential source of revenue in the future? And also potentially, would the dividends from land sales be a potential source of revenue that can be used in the future? So that is one sort of sacred cow which I want to discuss.
The other one is bonded scholarship programme. At a time when Singapore has universities that are very attractive to Asians from China and India, who are attracted to NUS, SMU etc, is there a conflict between the continuation of bonded scholarship programmes where the best Singapore students continue to go overseas rather than go to Singapore's own universities?
PM Lee: On your first question, I think that our current account surplus overstates the situation because if you look at our basic balance which would include long-term capital flows, you will see that there is significant remittances normally out because the MNCs are here and they reasonably want to remit their profits and earnings, and if you don't export you cannot, you won't have earnings to be remitted. So the net is smaller. We do have reserves. We do tap on these reserves for spending. It's not dividends, but it is investment returns. And the balance which we have to decide on, enshrined in the constitution is, well, 50% of the investment returns can be spent, 50% will be invested for the future and taken on a long-term basis so that you buffer the ups and downs, and in a down year you don't have to starve, and in an up year you don't go on a splurge. I think we will try and keep that 2% of GDP contribution to our budget of 17% spending is not small and I think is very welcome.
Land sales. It depends on what sort of land sales. If you're renting out the land for 3, 4 years, well I'd say that's fair enough, that's current income. If it's 99 years and you want to spend it upfront, I'd consider doing it over 99 years. So I would be hesitant of treating that as a bonanza. I know that Hong Kong treats land sales differently from us. But it is not something you can depend upon reliably from year to year, because in some years it can be very good in some years it can be zero. And you're really bringing forward value which should be a continuing income stream which should be over the long term.
As for scholarships overseas and whether we should not encourage more of our students to come to Singapore universities, I think we should encourage more students to come to Singapore universities, and offer them in our universities, an experience close to something which they can get overseas. Maybe combine with what you can do overseas. Maybe you can do an undergraduate here and a post-graduate in US or America. You can spend a term on an exchange programme overseas or a year. Or we can build institutions which provide an approximation of that experience, like the Yale-NUS college, or the new SUTD where we are partnered with Yale in one case and MIT in another. And I think that it will bring our education system to another level.
But students around the world want to go to certain places where they see other very bright students. And if you're getting into Stanford or Yale, or MIT or Harvard, or Oxbridge, then you are maybe in the top one-half percent of the population and you are with other students who are in the top one-half percent of the population. So the experience, the ferment, the excitement is different. We will try to approximate the quality of education, but then if we had that cutoff for our intakes - if we had instead of 10,000 students going to university a year, we might have 500 students go to university a year. And I think we can't do that in Singapore.
So I think realisitically, some of our students will want to go abroad, and our challenge is to make sure that they get a good education there, they keep their roots in Singapore; one day they come home and they are part of the Singapore family.
Mr Benjamin Mark: I am Benjamin Mark, I am one of the essay competition winners. I was interested to find out what you think are the opportunities and challenges as we go forward in terms of the environment, in terms of what we can expect from the environment as an economic growth source or as a threat to our economic development.
PM Lee: I think the opportunities are also potential challenges, because whether China is a market or China is a competitor depends on whether we can stay ahead of the waves. And similarly with our neighbours in Southeast Asia. It's good for us that they prosper, but if they move ahead and we haven't moved ahead, then some of the business which are now in Singapore will say, "why should I stay here? If I go a few hundred kilometers, or a few kilometers away, well I can do much the same at a fraction of the cost." And that means we will be hollowed out and we will lose business.
It's a challenge which all countries face. Taiwan has seen this with one million of their people reputedly in China. A lot of their industries now, the mass of it, are in China. Maybe the headquarters still in Taiwan. And what must they do? Well they have to liberlise, they have to open up, they have to be able to attract talent back - their own as well as foreign talent - and they have to be prepared to engage with the mainland because cutting themselves off doesn't solve their problems. You can't prevent the mainland from propering by not doing business with them. And you can't prosper by yourself without having China, India, Europe and the rest of the world as part of your markets and as part of your community. So we are going to be in that same situation, in terms of the external challenges.
The domestic challenge, which is a very considerable one, is how do I keep on growing without easily expanding? We have grown 6.7% a year since 2003. It's been good, it's more than we expected, but it's also brought growing pains. We've had to expand our foreign workforce from work permit holders to employment pass holders to professionals, and we're stretching at the seams. We can cope with that problem but we cannot indefinitely stretch at the seams at a 100 to 150 thousand new people per year in Singapore. It is not possible. At some stage it has to slow down, and gradually it will have to taper off, and you have to depend on qualitative growth, which means productivity improvements, which means upgrading, which means transformation, not just new things coming in and doing good, but old things gradually, through a process of creative destruction, being replaced by new activities and people being regularly moving from old jobs to new jobs, old skills to new skills. And in the process keeping our productivity up, 2, 2.5% every year for ten, fifteen years more, maybe. Not very many developed countries have done it. Can we do that? We have to try.
We have to get some growth. We have to get some inflow of talent and people because there is no country in the world where you can squeeze the economy, the size gets smaller and the incomes rise at the same time. Never happens. Well in principle you can say "if I do my sums right, I can achieve this magic", but in practice you can only get incomes to rise if the economy is rising as a whole, if there are new opportunities and people come in and say "yes, this is the place where it is easy to start business, is exciting to be, and I can try new things." We need to maintain that spirit of being exciting, of being welcoming, of being open and adventurous at a time where there are constraints to our size, and also at a time where our population is growing gradually less young, and therefore perhaps less adventurous. And that's a challenge.
Dr Omkar Shrestha: I am from Nepal. This question is slightly light-hearted and frankly partly prompted by some of the TV programmes I watch on the Japanese TV stations. In your speech you were saying, "it is already happening, and perhaps more so in the coming ten, twenty years, that Singapore is running up against land and labour. The pressures to reduce the inflows of the foreign labour is intense. The ageing and shrinking population is a stark reality, and yet urgency to remain competitive defines our success and survival." Against such a background, in the next ten, twenty years, do you foresee Singapore society going a robotic way, as like I said, in some of the programmes that I see on Japanese television. How do you see the robotic way [of doing things] playing in the coming twenty, thirty years in addressing the labour shortage problem?
PM Lee: Yes I do. Even without that background I see that happening. It is happening dramatically, in software, in hardware, in devices. It's not just the little gizmos which go round the floor, cleaning, vacuuming the floor up or washing your dishes. Or one of these Asimov things which can talk back to you. Or Siri on your handphone, where you can ask the weather or tell them where you are. But very sophisticated systems which can do things which human beings used to be needed to do. So it is not just putting chips in a mechanical way according to a fixed program, but to be able to see the environment, assess, deal with uncertainty, adapt, move, recover from mistakes, learn. And that means they can read company reports and extract information, they can read legal reports and find out whether precedences are relevant. They may be able to read x-ray scans and spot tumours and patterns better than skilled human eyeballs. And one light-hearted example in the Wall Street Journal just recently: Scientists have made a tremendous breakthrough and they can now make a robot which knows how to debone a chicken. You may laugh, but it was a challenge because if you do it too hard, the bone chips go into the flesh, if you don't do it hard enough you leave flesh on the bone. Human beings learned how to do this, robots found it difficult. Now a robot knows how to do that.
But the upshot of this is, pressure on the low-end workers which you have seen, is now going to become pressure on the middle. Your office staff, your people who make appointments, set up arrangements for you, gather data for you; twenty years from now many of that will be routine. Siri may well replace your personal secretary. Not this version, but some version still in the works. And if you look at human things - things which humans have to do, Google has been developing a driverless automatic car, not to drive on tracks or on monorail, but to drive in traffic, with human cars. And they've driven a hundred thousand kilometers or something, and the human has only had to intervene once. And Nevada, the next state to California, has now decided they will license driverless cars to drive on its roads. Twenty years from now, can you imagine that not happening? It will be available. It may be driving buses. It may be driving aeroplanes. In fact you can drive aeroplanes today, except that passengers find it safer to hear that captain in the cockpit, and so you still have two pilots, and therefore the pilots have a career and the airlines have to manage. But pilotless aeroplanes? I mean the Americans operate all kinds of unmanned aerial vehicles, so I think robotics will be a big part of the next twenty years and a big pressure on our society.
If we can adapt to that, now people can learn to be smart enough to operate the robots - program them, use them, and direct them. Then of course we rise one level and life is better. If you don't make that change, then we have a problem. And I think we have to prepare our people so that they can learn to learn and operate in that new environment.
Mr Ei Sun Oh: I am Ei Sun Oh from the S Rajaratnam School of International Studies. I am wondering how can Singapore position itself even better between the two contending superpowers, namely the United States and China, in terms of, for example, addressing some of the domestic concerns, the domestic well-being of Singapore. Is there a way Singapore could position itself even better, to help, for example, in reducing the gap between the rich and the poor.
PM Lee: Well, we want to be friends with both the United States and China. And as long as they are reasonably friendly with each other, it is easier for us to do this. I think we have not done too badly. We have very good links with China at many levels, business as well as government. And we have very good ties with the US, the multinationals as well as the government, as well as academia, as well as personal ties. I think we will try to do that. As for how this will impact our economy and our rich-poor divide, I am not sure. Because whether we have good ties with them or not, we are going to have to address the economy and the rich-poor divide in Singapore, or the rich-poor gaps in Singapore. I think doing business with them creates more opportunities for us. Certainly taking advantage of what China has to offer enables us to prosper, enables our companies to prosper. And if our companies do well, then you have more tax revenues, you have more jobs that Singaporeans can do, whether the jobs are here or in China. And I think there are more resources you can use to invest in Singapore. So last week I had Mr Wang Yang here visiting us, or this week, on Monday, which is the party secretary of Guangdong province. And he was interested in how we work on social cohesion because Guangdong, having made economic progress now sees social stresses. And as Wang Yang explained to me, when you solve old problems and you think people have reach a new level and should be happy, new issues arise and you have to deal with them. And I said, "that's our experience too." And we can compare notes with one another.
So I posted this on my blog, on Facebook, and some people who responded on Facebook asked the question, "How does this help Singaporeans?" Well I think that I didn't sign any contracts with Mr Wang Yang, but the fact that he's interested in us and he finds us interesting to observe and to pick up some ideas from, and we have some mindshare with him, and some significant projects in Guangdong which our companies have invested in, I think opens up many opportunities for both countries to have win-win cooperation which I think is good for us and I am sure will also be good for our income distribution, indirectly in the long term.
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