The Singapore story runs from generation to generation. No one is more aware of this than Lee Kuan Yew, prime minister from 1959 to 1990. In a 90-minute interview with Asiaweek's Ann M. Morrison, S. Wayne Morrison and Roger Mitton, a healthy-looking, relaxed Senior Minister talked about Asia, the world, his family and his latest volume of memoirs From Third World to First, which will be launched September 16, his 77th birthday. Excerpts from the conversation:

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Did the response to the first book influence the way you approached this one?

Not really. I cannot write my memoirs and hope to revise them. On sensitive subjects my words have to be weighed carefully. They must convey what I thought and felt. It's written primarily for younger Singaporeans who have to face the same basic equations of stability and prosperity. A secondary objective is to get Singapore understood by policymakers in America, Japan, China, Western Europe, and in the region. If they understand why we did what we did, why we may still have to do certain things, that may lead to an easier relationship. The argument about Asian values: we didn't want to pick a quarrel with the West. But we have certain basic beliefs which have held this community together, and if we lose those values, we are done for.

Throughout the book, you seem concerned about an erosion of these beliefs.

It is because we are more exposed than most countries. Many of our students study as undergraduates or post-graduates abroad. They come back with different experiences of other societies. They have to be reconciled with the realities of Singapore. Singapore changes in the process, but not totally. The people who come back are a highly-educated, influential minority. They can set the pace, but there are times when the bulk of the people just won't go with them. Now with the Internet, Singaporeans are open to Western, especially American, values. With the Japanese, the Chinese, there's an automatic censorship, the English language. They interpret only what they want to interpret, but we have opened up our whole society. So I see a rapid infusion of new ideas and new values. I hope the basic values of family, responsibility for children, respect for parents will remain, otherwise, it will be a difficult society to manage.

There seems to be a leadership vacuum in ASEAN.

It has been devastated by the Crisis. ASEAN can be restored. A new generation of leaders will help build stronger financial systems. It will take time. Over the next few years, if the original ASEAN members get together to market ASEAN as a group, we will gain more politically and economically than if each tries separately to promote itself. The original group was Indonesia, Malaysia, Thailand, Philippines, Singapore. Indonesia is tied up at present by internal problems and therefore can't pull its full weight. But the others can do joint marketing of our investment prospects. Let's reach common positions when we talk to the Europeans and the U.S. If we show a cohesiveness, confidence will come back.

What about the prospects for Northeast Asia?

The Japanese will recover, I've not the slightest doubt. The Koreans will do it too in a few years. When the Chinese join the World Trade Organization, they will have a difficult time with the state-owned enterprises and their banks with the non-performing loans. But look at their record, with Zhu Rongji in charge and Jiang Zemin backing him, they'll do it. Over time there will be a jostling of leadership between Japan and China. At present, the economic leadership is clearly with Japan, but in about 20 to 30 years, people will think differently about the renminbi and it will not look so sickly compared to the yen.

Your book clarified the important intermediary role that you have been playing between the mainland and Taiwan.

A peripheral role to pass personal messages. I'm going to Taiwan in a few weeks to update myself. I've met Chen Shui-bian several times in Singapore. I've waited for the excitement of the elections to subside for him to have a sober assessment of the hard issues facing Taiwan. I would like to hear him.

What would your advice be to the Chinese, to Washington and to the people on Taiwan about the mainland-Taiwan situation?

I said in a speech at a conference held by the Chinese People's Political Consultative Congress, that as long as the US, Japan, the EU and the countries in East Asia recognize and support one China, China should be able to take its time to resolve this problem - it's not something which can be done overnight. I urged restraint.

For Washington, a former US National Security adviser told me just after the Taiwan elections, that whoever is president faces the same set of problems as the last one, and the options are limited. He's right. But a new team always comes in with the euphoric belief that it's got something special to contribute.

If China does not disintegrate, reunification is inevitable. That's what I told president Lee Teng-hui. If China disintegrates, all bets are off, so why try to pre-empt? It's a matter of time for them to get the system changed. Taiwan, Hong Kong and Singapore will be useful to them for another 10 to 20 years because we still know bits and pieces which they do not know. In another two or three generations we may be learning from them. This is going to change the world, unless they implode, which I don't think likely.

What advice would you have for whoever is the new US leader about China?

It's the same I've expressed, from Nixon to George Bush. This is a power that has been dormant or comatose for some 200 years, partly self-imposed isolation, partly conquest and domination by a foreign people. Their overwhelming urge is to recover what they consider to be their rightful position in the history of human civilization. You can either make friends and influence them to become a rule-abiding member of the international community or try to obstruct, block, abort their development in which case, you can expect a suspicious, xenophobic and disruptive player.

TMD [Theater Missile Defense] would be such a block?

TMD, if it's directed to include Taiwan, will make real trouble. If you say reunification must take place peacefully by consent, then give them TMD, that means they don't have to talk. So the Chinese must conclude that as long as there's a powerful America, there will be no reunification. What is the result? [The Chinese] will pursue their ultimate strategy.

On Indonesia, you were fairly optimistic about President Wahid Abdurrahman's leadership. Is that still the case?

I was optimistic when he came in. But like everybody else we have been disappointed at the problems he faces. We just have to stay optimistic.

Fireworks accompanied the publication of the first volume of memoirs. It seems that you're now more accepting of shifts in relations with Malaysia.

My relationship with Dr Mahathir goes back to the 1960s. We've had our ups and downs and at the moment, it's up. But I'm a realist and know there are limits to the ups and the downs. Anyway, I'm no longer leading the Singapore side. It's Prime Minister Goh Chok Tong. I can act as a facilitator. Building the relationship has to be done by the younger members on both sides. Networking is possible between the younger leaders of both sides. They're much more savvy about global economics and what is to be gained by synergy.

Did you sense that Mahathir's political position had weakened within the United Malays National Organization (UMNO) when you visited Kuala Lumpur?

Within the party his position is unchallengeable. Any weakening is with some parts of the Malay ground. In Kuala Lumpur recently, I met editors of Malay, English and Chinese newspapers, and also think-tankers. I thought the Anwar issue was over. They told me I was wrong. Some said that to heal this rift in the Malay ground, some pity, or compassion, must be shown to Anwar. They said they were reflecting the views of those who have drifted to [opposition Parti Islam SeMalaysia] Pas. My reports had not prepared me for this. But I do not think Mahathir's position in UMNO has been weakened. I asked several UMNO leaders whom I've known for years, whether UMNO would be better off if Mahathir had left Anwar alone, and now left him in position as successor? They all said no, that in spite of the electoral damage it has cost, they still felt that it was necessary to have taken action against Anwar. In other words, the UMNO leadership is united behind Dr Mahathir.

Do you see Anwar in your scenario for a new generation?

From the way [UMNO leaders] spoke to me, I do not think that they will invite Anwar to rejoin. However, Anwar will be valuable to the opposition as a stick to beat Mahathir with.

You once mentioned the possibility of Malaysia and Singapore re-merging at some future time.

I was asked that question by a foreign correspondent in 1996. Malaysia was then in an expansive state. I replied, "It's not to be ruled out." The reasons why we joined Malaysia were not fickle ones, but the problems we did not foresee that made for our departure are still cogent.

But you seem to be optimistic. You talk of the younger generation of leaders on both sides, free from traumas of the past.

Not only that, people are better educated on both sides and not just the leaders. There is now a thicker layer of educated Malays, educated in Malaysia and abroad. They've seen the world. If you read the articles they write in newspapers and magazines, they show a grasp of the realities of the modern world which we and they face. It makes sense to synergize when there are possibilities of win-win cooperation. It's silly to make it a zero-sum game.

You didn't discuss the Singapore opposition in great depth in this book although you were preoccupied with J.B. Jeyaretnam [of the Workers Party] in the 1980s.

Does he deserve more space? Where is his substance? My chapter "Straddling the Middle Ground" explains why I do not see a challenge to the People's Action Party until there is an able and credible group that's denied entre or incorporation into the PAP. If the PAP rejects social activists, able people, equally competent and committed to the public good, but with different political views, then you've got a nucleus for an opposition that can challenge the PAP. I can think of several social issues where you can swing some electoral votes away from the party.

You mention that you use psychological tests to look at potential PAP candidates. Have you taken any of these psychological tests?

No, my tests were real-life tests. My colleagues and I, we went through an elimination obstacle course. If we didn't pass, we would be skeletons left on the wayside. Psychological tests are not fool-proof but it's the best you can do in the circumstances.

There is an ongoing controversy over the high salaries for cabinet ministers and civil servants. Is there a timetable for the restoration of the Central Provident Fund contributions, which were reduced during the Crisis? Yes, there is. While we held our ministerial salaries down, private sector earnings were going up. The gap was widening, not only for the ministers but also for the civil servants. So do you sit back and do nothing because you are afraid of an unhappy public reaction because the CPF has not been restored? Let's [raise government salaries] or we'll be worse off in a few years after more people have resigned from the civil service and we have lost good middle-rank officers. Anyway that's the way I governed. I'm glad they [the cabinet] did it. What's the alternative? You want to save a few million dollars? Look at the billions that the Marcoses spirited away, leaving the country in hock for $28 billion. Try to find another government in Asia that's spotlessly clean. Keep it that way because it's Singapore's political and economic asset.

Are you concerned that Singapore will never see the likes of you and your generation again?

It's just not possible. A golf pro once demonstrated a trick shot. He took an egg, put it on a tee and he took a sand wedge. And he said, "I'll hit that tee, snap it and the egg will drop on the grass unbroken." And he did it. He snapped a tall wooden tee and the egg dropped down unbroken. I wanted to see how actually it was done. So I said, "Do that again." He said, "No, I may not be as lucky the second time" [laughter]. Several times we've been lucky and survived. You've got to start with today and ask, where do we go? This is a generation that's out to succeed. Bright young officers want to take no-pay leave for three years [to try to get rich in business]. Some have actually left. This is a different Singapore. My Singapore was hungry.

You mentioned your father in the book as being carefree. Could you speak a bit more about him?

He was the son of a wealthy man and brought up as such. He told me that he had an account which his father allowed, at Robinsons, John Little, the big names in Singapore. He had a good life. But when he had a family, and the slump came, he still acted like he had this father to pay his accounts. That was his character. At the same time he had a violent temper.

You say that you think your children might be a little too indulgent with your grandchildren?

I think they are, but that's the younger generation - double-income parents, father and mother trying to make up with quality time, whatever that means, and buying their children things. It is a problem. Late marriages, small families, not as bad as China with single child but nearly as bad. Children are spoilt. I'm apprehensive. The army seems to do some good - knocking sense into them. From everything done for them at home, suddenly they have got to do their own beds, polish their shoes and so on. That has been a saving grace. But the girls don't go through this. I think we should do something about that. You can't wish poverty and hardship on people. I'm quite sure if we had stayed at Sri Temasek, which is the residence meant for me, with the butlers and orderlies running around, picking up balls for my children, they would have become different people, lesser people. They went to school like everybody else, took the school bus like everybody else, did things they were asked to do like other schoolchildren. And they won on their own.

Your son Hsien Loong has a reputation as being quite a tough person vis-a-vis Goh Chok Tong's more conciliatory style.

He's a different person.

More like you.

For that reason, I was against his succeeding me. The country needed a break. He's got to get the support of the MPs and the voters. After 16 years, the MPs and ministers know him well. His double helix, only one is from me, maybe he's got a better helix from his mother [laughter]. He's got to develop a certain feel for what it is that will work with our people. There were things which I had to do and couldn't discuss with people. If we had discussed desegregation - housing, schooling - we would have had an enormous row. My older colleagues and I knew that. We deliberated and decided that in the long term [if] it's good for the people, let's do it. How? Let's break up the ghettos and rebuild. We did not allow them to choose their neighbors, which means when their children went to school they are mixed. When they do national service they are mixed. Had we flinched, we would have had a different Singapore, one more prone to riots and trouble. When people say consult the will of the people, I say yes of course, but after we've done it. I do not believe that popular government means you have to be popular when you govern. It means at the end of your term, those unpopular policies which you have had to implement have produced results that enable you to win the popular vote again. Otherwise we wouldn't have won successive elections.

You say in the book that city-states don't have a particularly long history.

I didn't write that to frighten Singaporeans. This is a unique period we've lived through, 1945 till now. It's not going to be repeated. There was a world war that broke up the European empires, resulting in the emergence of 150 or more nation-states. Not all are happy. How many of them will survive? So, it behoves my generation to tell our next generation: [the future] looks fair, it looks fine, but there are imponderables. Will there always be that international backdrop of stability and security? Will the UN Security Council resolutions carry weight? It looks good for another 20, maybe 30 years. In 30 years, China will be of a considerable weight, the Russians will be on the road to recovery, and the Indians may also be a considerable factor. Nobody can tell what it will be like 50 years from now.