November 20, 2015
WHEN (Australian PM) Malcolm Turnbull was sworn in as Prime Minister by Governor-General Peter Cosgrove, the two men had one bit of pure policy business to discuss. The Governor-General was about to undertake a state visit to Singapore. Did the Prime Minister want him to carry any message?
Yes indeed he did. He wanted Cosgrove to tell the Singaporeans that the Turnbull government was every bit as committed to the comprehensive strategic partnership between the two nations, which Tony Abbott had signed with Singapore’s Prime Minister, Lee Hsien Loong, as its predecessor was.
This was good news to the Singaporeans, who had a moment, when Abbott was deposed as PM, of wondering whether they had wasted all the time and investment they had put into their relationship with Abbott during the previous 18 months.
Lee rang Turnbull to congratulate him shortly after the leadership change. The two prime ministers finally met face to face at the G20 summit in Istanbul this week.
Just before he left for Turkey, the Singaporean Prime Minister sat down for a lengthy interview with me in his Istana office in the centre of Singapore.
Lee’s father, Lee Kuan Yew, the founder of modern Singapore, died earlier this year. Like all of Singapore’s modern leaders, Lee Jr lives somewhat in his father’s shadow.
Like his father, he is direct, sharp, hard of mind and with a reputation for strategic sagacity.
I ask him about the significance of the comprehensive strategic partnership, and this leads to a general reflection on Singapore-Australia relations.
The agreement, he says, codifies and develops “what has always been a very close friendship”.
“Australia wants to be connected to the region and we are a like-minded partner for you,” Lee says.
“We have found Australia very valuable as a friend, as an economic partner. Also our defence and security co-operation, we would like to take that further too.”
In Australia, the intimacy and the importance of the relationship with Singapore tend to be taken for granted, a little undervalued because it is not accompanied by drama and political conflict.
Lee proposes an explanation of this closeness that embraces interests and national character.
First, interests: “Partly we see the region in compatible strategic perspectives. We have big accounts with China. We are good friends in our case — in your case allies — with the US. We want peace and stability in the region. We are in the region and you want to be part of it — you already are to a considerable extent.”
Then there’s the always enthralling perception of national character, where Lee sees striking similarities: “We are not as matey as you are but we are informal, open and direct. We cut to the point. We don’t beat around the bush and talk elliptically and leave you guessing what we mean. You are like that too, plus, plus. So I think we can get along together.”
The Australian reputation for being down-to-earth and plain-spoken is extraordinarily widespread and a considerable asset.
Lee Kuan Yew was famous for sometimes giving Australia solidly honest advice.
Lee the younger is more diplomatic but, in the context of unmistakeable goodwill for Australia, he does confess to some modest bemusement at the frequency with which we have taken recently to changing our prime ministers: “We got on very well with John Howard for a long time. We have got to know quite a lot of new personalities since then. I do not think it is the best solution for you but that is how your politics works, on both sides of the aisle.
“The trouble is, your election cycles are so short. Every three years you have a new general election and the government has no time to settle down and get things done. But you cannot change that.”
One of the deepest areas of co-operation between Singapore and Canberra is strategic. Singapore is a small territory — 700sq km — with about 5.5 million inhabitants, of whom 3.5 million are citizens.
But because of Singapore’s pivotal position, and its own hard-headed determination to survive and prosper, it has always punched above its weight strategically, always had a powerful voice in the counsels of decision in Washington, and increasingly now in Beijing, as well as in Southeast Asia itself.
Henry Kissinger famously remarked that it was a loss to the world that Lee Kuan Yew was not able to exercise his strategic judgment on behalf of a bigger nation than Singapore. Lee Hsien Loong shares something of his father’s reputation for the shrewd reading of geopolitics.
Not long before we met, the US had conducted freedom of navigation exercises within 12 nautical miles of an artificial island the Chinese had built in the South China Sea and to which they claimed territorial rights.
What does Lee make of this apparently growing strategic rivalry?
“From a small country’s point of view, we don’t want to see a clash between China and America,” Lee says. But there are bound to be differences: “That is par for the course.”
Here is his clincher judgment: “I think overall both sides want to keep it calm. What is missing is what you would call, very loosely, strategic trust. Meaning the Americans believe the Chinese want to challenge them in the Asia-Pacific; the Chinese think the Americans want to block them and at least slow their growth.”
After the US exercise, the Singapore government put out a statement supporting the principle of freedom of navigation. I ask Lee if that was an endorsement of the American action.
“Well, the Americans have to decide what they want to do,” he says. “If you look at it from the American point of view, they are a power with global interests. They have vital interests in freedom of navigation, not just in the South China Sea but many parts of the world. They have to decide, when this is put into question, how they will assert their rights. So I think it is completely understandable.
“It is also understandable that Chinese look at this and say, well, you are raising the temperature and why are you coming in from outside the region? The reality is that America is a power in the Asia-Pacific.”
I ask Lee if he thinks other states, such as Australia, should also conduct freedom of navigation exercises.
“You have to decide where you stand,” he says. “Some of your prime ministers have said that you are the deputy sheriff.”
That, I remind the Prime Minister, is a very old statement (and Howard in fact never uttered those words).
“But you remain very close friends with the US and you also see China as your biggest export market.”
Singapore, like Australia, does a lot to anchor the US in the region. Lee is unapologetic and unambiguous about this: “Our position has for a long time been — and has not changed — that we see the American presence as a positive in the region. They are a force for stability, for security; we would like to help them maintain this presence.”
The US does not permanently base ships and planes in Singapore but it has permanent access to facilities there and rotates littoral combat ships through Singapore on a more or less continuous pattern. This arrangement came about when the US lost access to its two giant naval bases in The Philippines.
“Lee Kuan Yew told (the Americans) that while we cannot replace Clark and Subic, because they are about the size of Singapore, if you would like to have your ships or aircraft come through and stop by in Singapore, we will try and see what we can do to facilitate that.
“The Americans took up that offer and that is why we have this arrangement. I think it is good, it is helpful to the Americans.
“At the same time, we keep an open house and others who come by visiting, we are happy to host them, Chinese warships, Japanese warships and Australian ships.”
Lee’s view then, without verballing him, is very much like the mainstream Australian view: engage and welcome China; keep the Americans close by.
He is modestly optimistic about the medium-term outlook for the Chinese economy but enumerates the economic-reform agenda Beijing needs to embrace.
“For China, my concern is not so much their cyclical ups and downs but whether they can transition to a stable, steady but lower growth rate than they used to have. They used to make 10 per cent per year and it’s not possible to do that any more.
“If they can do 7 per cent for another decade, I think they are doing very well.
“They need to get structural reforms in order to deliver that 10 per cent meaningfully, rather than just in terms of numbers. You may have the output numbers to add up, but maybe empty buildings in the wrong places.”
So what structural reforms does Lee think China needs?
“They have to review their social safety nets. They need pension arrangements, which I think they are paying attention to. They have to deal with tax reforms. They have to deal with reforms for the hukou (internal migration control) system, managing the flow into the cities.
“And they need to do further changes to their state-owned enterprises, to make sure that they are productive and not abusing their monopoly positions.
“Plus they have got to invest in cleaning up the environment which, in the short term, is a financial cost.”
Singapore itself has experienced the falling-off of demand for its exports, especially in manufacturing and its economic growth, though positive, is relatively anaemic.
“In recent quarters we are seeing some weakness in our own economy, particularly in manufacturing. It has to do with demand; the export volumes are not growing,” Lee says.
Though on any economic measure Singapore remains fabulously successful, it is struggling to get productivity growth up. I ask Lee why the IT revolution has not translated into higher productivity.
“It has changed lifestyles and quality of life,” he says, “but it has not shown up clearly in numbers.
“Hopefully, eventually, it will show up in performance, whether it is your hospitals getting scans read by a smart program, faster and more reliably, or whether it is delivering your daily necessities logistics more efficiently.
“It must show up, but it means changing the way you are doing business. It is not just doing the same thing a little bit faster. That’s tough and that means there will be losers, and the losers will yell. So that is one big challenge.”
But there are a lot of challenges.
“Another big challenge is our population trends,” he says. “Our birthrates are not where they should be — 1.3 is our total fertility rate, and we’d hope to push it up a bit.
“But even if we push it up some, we will need to top up with immigration; we need to integrate a new population and then I think, even if we do that, it will not be easy to have a stable, gradually growing population.”
He believes the Trans-Pacific Partnership could add $1 billion worth of benefits to the Singapore economy in removed tariffs, but its greater significance, he says, is it is “a strategic linking together of countries on both sides of the Pacific”.
He also believes the TPP can be a stepping stone to a free-trade area of the Asia-Pacific, in which both the US and China could participate.
A couple of months ago, Lee’s People’s Action Party won a resounding election victory, with a big pro-government swing.
It is true enough that the Singapore government enjoys a friendly media at home, but everyone acknowledges that Singapore’s elections are clean. The votes are counted honestly and people are free to vote as they like.
The government’s success defied all pre-poll predictions. Lee offers three explanations: his father’s death led people to reflect that Singapore’s affluence and success did not come about by accident; there was a feel-good factor in the island nation’s 50th anniversary celebrations; and, third, the government works hard on all the challenges Singapore faces.
Spending some time in Singapore gives you a sense of what, to use Turnbull’s favourite word, an agile and dynamic place it is.
The city has no natural tourist attractions but has created a world-class theme park resort on Sentosa Island; there are a couple of casinos; gorgeous heritage buildings are being converted into a magnificent national art gallery; in the Botanical Gardens and at Marina Bay there are gardens of breathtaking beauty.
It is a global finance centre, one of the world’s busiest ports, a centre of entrepot trade, world-class hotels, good medical facilities much patronised by regional neighbours, small but ultra-hi-tech manufacturing industries, and always something else just around the corner.
Certainly modern Singapore is no accident. And leadership has been a central ingredient in the mix.
Greg Sheridan visited Singapore as a guest of the Singapore government.