Lee, the architect of Singapore's close economic links with China, told the Foreign Correspondents Association of Singapore late Monday, Dec 20, that problems like the China Aviation Oil (CAO) case will happen "from time to time."

"What I consider significant is that the Chinese authorities ... have decided that the CEO should come here and help in the investigations," the former prime minister said.

CAO's chief executive officer Chen Jiulin left Singapore just hours after the company disclosed on November 30 that it had lost US$550 million -- equal to its market capitalization -- on speculative trading in derivatives.

He was arrested and released on bail after returning to Singapore on December 8 but no criminal charges have been filed so far.

The Commercial Affairs Department, which looks into white-collar crime, and international auditors PriceWaterhouseCoopers are carrying out investigations.

State-linked CAO purchases jet fuel in the international market for China's booming aviation industry and was regarded as one of the best-run Chinese companies operating in Singapore.

Lee saw Beijing's handling of the CAO scandal as encouraging.

"To me that signals that they understand the damage that it will do them internationally, not just in Singapore, if the chief executive just absconds," Lee said. "That reduces them to a Third World standard of behavior.

"Is it therefore a hopeful sign that they aspire to a First World Standard? I think they do and if they want to protect their reputation for subsequent IPOs (initial public offerings) and subsequent listings ... then they have to establish credibility that they are not a fly-by-night organization.

"I think that's what it's all about and it's good," he added.

Lee, 81, also disclosed that he once met Chen on a flight from Shanghai and was "taken aback" when the 43-year-old businessman gave his business card and announced that he wanted to buy part of the Singapore Petroleum Co (SPC).

Lee said Chen wanted his endorsement for the purchase -- which eventually fell through after CAO's parent firm backed out -- but he told the younger man he had nothing to do with the SPC.

"He was obviously one of those self-possessed and successful young men who has risen from very humble beginnings," said Lee, who found Chen a "very bright" person.

Lee said "derivatives are a dangerous category of investments" and one can end up with a big loss by doubling bets on future price movements.

The CAO scandal is the worst to hit Singapore financial markets since 1995 when British merchant bank Barings collapsed under the weight of more than a billion dollars in losses from financial futures dealings by young trader Nick Leeson, who served a jail term here.

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