Lee Kuan Yew on Asean, the economy and S'pore

AS ASIA APPROACHES THE year 2000, the region faces an immediate future in which more is uncertain than certain. In a wide-ranging 75-minute interview with Asiaweek's Ann Morrison, Roger Mitton and Andrea Hamilton, Lee Kuan Yew, Singapore's Senior Minister and Asia's senior statesman, was occasionally unsure about what the millennium would bring.... But he was certain in his vision of an economically integrated ASEAN and continued People's Action Party power in Singapore.

Note: The Straits Times carried this Asiaweek intereview, including unpublished excerpts released by Mr Lee's office. However, questions pertaining to the Opposition in Singapore, available from the Asiaweek website, were not published in the Singapore paper. Those questions and Mr Lee's responses are found here. We take up the interview where Asiaweek asks Lee about the region

How is ASEAN doing as we enter the next century?

There's no great ideological divide between the ASEAN countries. The Communist system is gone. We are just varying degrees of democracy or of authoritarianism. Every country wants economic and social progress. After the severe financial and economic setbacks, nobody's got time for ideological or expansionist issues. Moreover China's entry as a dominant claimant in the Spratlys has muted territorial quarrels between ASEAN states as to who owns what coral reef. ASEAN countries now say let's close ranks and negotiate together, a natural defensive move.
Is ASEAN also moving toward more unity, more trade, investment, a common currency?

A common currency, no, that is difficult. More trade, more investments, yes. How long will it take? For ASEAN's founder members, the target date 2003 will probably be met. The new members will take another five or more years after that. They have been admitted for overriding political objectives of solidarity, although they are at a completely different level of economic development. There isn't the same fit.

Why did you object to the Thai initiative to re-evaluate ASEAN's non-interference principal? Would it not have been more consistent with the Vision 2020 goal of more open societies?

That may seem the logical approach, but it's not what would happen. You've seen the ruffled feathers and the bristling which Philippine President Joseph Estrada caused when he broke ASEAN protocol and met Anwar's wife, Wan Azizah. He's testing and stretching the limits. The Malaysians take it very seriously; they sent protest notes. We think this idea will be counterproductive; it would break up the organization. The new Thai foreign minister meant well. As a Harvard graduate, he has imbibed liberal ideas. Lately he has drawn in his horns somewhat. This development will take some time, maybe after a generation change of leaders. We have to desensitize hitherto taboo subjects. If Malaysia and Indonesia are sensitive, then how much more so the Vietnamese, Burmese and Cambodians must be.

Singapore is also sensitive to criticism and responds robustly, often causing problems with Malaysia.

We don't pick quarrels. As ASEAN's smallest member, we have to stand our ground, or our rights will be rolled over.

But aren't new initiatives needed to shake ASEAN out of the doldrums? Even its own leaders say it has lost clout?

"It has to lose clout, because it has lost its attractiveness as a group that offered profits, growth, exports, investments. When the economic meltdown took place, every leader was in state of disarray. All governments are in varying degrees of disbelief at what has happened, the suddenness of the devastation. Without a bomb being dropped, currencies were trivialized, asset values collapsed, shares, properties, sound companies went bankrupt - banks were imperiled. It is a time for stocktaking and restructuring, a painful regaining of control over our economic systems and getting back into growth. It will take between two to five years, more in some cases. But we'll recover. If the Dow does not have a hard landing, Singapore should get back to growth in 2000 or 2001."

Looking back, what are your thoughts on the crisis?

It was a misfortune that it was allowed to happen. In Indonesia, setting aside questions of human rights and morality, Suharto, for all his faults, brought 8 percent to 10 percent growth annually. He probably wasted 3 percent to 5 percent on his cronies, friends and family, but the country was moving ahead. He was 77 - he's not going to live forever. Would it not have been better for Indonesians if there had been a gradual transition and not this breakdown? Now tens of millions are impoverished.

Why did it happen this way?

The crisis got dangerous when the IMF wanted to reform not just the Indonesian economy, but also Suharto's governance of Indonesia. That was when he balked; that brought about the collapse. The IMF, of course, had to cater to the mood of the US Congress. Congress would not give out more money to the IMF unless corruption and nepotism were stopped. Suharto became a litmus test of IMF resolve. Had it not been linked in that way, had it just remained a question of the economy being put right, Suharto would have gone along with the IMF. But he refused to change. When he restored projects which were scrapped because his family was involved, that was a direct challenge to the authority of the IMF and the markets sold out Indonesia. The rest is history.

So did the IMF help or hurt?

Both. It came in to help. Because it did not fully understand what had gone wrong, it applied a remedy used in Latin America where the governments were profligate. In Asia, the governments were running budget surpluses. It was their private sectors that had borrowed extensively and without the knowledge of their central banks. The Indonesians had no idea their private sector had borrowed $84 billion.

According to a World Bank chief economist Joseph Stiglitz, it was wrong to raise interest rates so high to shore up currencies because that squeezed the economy and destroyed the banks and the corporate sector.

In South Korea, the IMF moved more positively; the US Treasury called up the banks to say: 'You should roll over these loans,' - encouraging them to do so. That saved South Korea. If that had been done in Indonesia, if the banks had got that message, the markets would have read the signals, and the rupiah would not have gone down to 17,500 to the US$. Indonesia would not have been devastated.

Yet the crisis did precipitate radical reforms in Indonesia, Thailand and South Korea.

I don't think this meltdown was necessary to have catharsis or cleansing of the system. Besides, are you sure they have reformed? We are not talking about passing new laws. We are talking about changing human behavior, cultural habits and patterns of conduct. Can those in charge now wake up the day after the new laws are passed, as different individuals and say: 'Oh, I can't do this, it's wrong. I can't lend you this money without collateral any more?' I don't think so. It will be a gradual process. One chapter does not suddenly close and a clean new page opens with total transparency and proper bookkeeping and so on. Change in business culture does not happen that simply, that swiftly."

Your cherished Asian values also took a beating in the crisis.

Read what I've said, I don't refer to Asian values. Look, what went wrong in Singapore? Nothing. Because our systems were right, nothing to do with our values. The same with Hong Kong. The countries that went down did so because their systems were weak. They had no proper banking supervision. No proper corporate governance. That - aggravated by corruption, collusion, nepotism and unwise corporate decisions - led to misallocation of resources, wrong investments. That did not happen in Singapore; we were set back because our neighbors were hurt. It did not happen in Hong Kong, but they were affected by the general downturn and their pegged currency pulled the economy right down. Like us, they have proper systems. We have open tenders. Nobody gets a contract because he is a friend of the minister. That's what saved us from these troubles. That's what was missing in Thailand and Indonesia, and also South Korea. They have to set up proper systems.

But the 'Asian miracle' was often attributed to Asian values, not systems.

You attributed it, I did not. I talked about Confucianist values, not Asian values. There are as many Asian values as there are different types of Asians. There are Hindu values, Muslim values, Buddhist values and Confucianist values. Even among Confucianists, there are differences, though they form one coherent group. Those values are not going to change fundamentally. I'm not trying to defend Asian values. It's for each country to defend its own position. I'm saying that you're not going to have culture change overnight. These are deep-seated habits, embedded in the subconscious of a people."

Could Singapore have mediated between Indonesia and the IMF, or explained the importance of systems to Malaysia?

I don't think anybody can tell Dr Mahathir what to do. His own Deputy Prime Minster tried and see what's happened. In the case of Indonesia, we did try very hard, together with the IMF and the US Treasury. As I've explained, what the IMF wanted was a reform, not just of the economic system, but of governance. In other words, a reformed President Suharto. He didn't want to change. So the collision. Suharto did not understand that he was vulnerable after he had opened up his economy and was at the mercy of the market.

Are you optimistic about post-election Indonesia?

I don't know how long it will take to recover. Other nations hit by the crisis have not had their societies come unstuck in this way. Much will depend on how it comes out of the election, and whether the next government has the support of the people and the unity and coherence to pull the country together. It is no longer just the economic fabric that's torn apart. It is the fabric of Indonesian society that's tearing. Previously, never mind whether it was authoritarianism or suppression of separatists or whatever, there was a sense of being one people of one country. Now, the social glue that holds people together has come unstuck. It needs to be restored. That requires a government with national reconciliation and rehabilitation at the top of its agenda. And it will have to do that at a time when it's also got to get the economy restructured.

Even its territorial integrity is in doubt?

Not yet. Could be, if wrongly handled.

In Malaysia, will Dr Mahathir and the Barisan Nasional be returned to power in the coming general elections?

It will depend upon when the elections are held, the state of the economy at the time, and whether by then the prosecution would have proved the sodomy charges against Anwar. If the economy continues to pick up as it has been doing, I would say that Barisan Nasional will win the elections and continue its dominance into the next millennium.

The future of Anwar Ibrahim's political career will depend on whether the prosecution can prove that he is a homosexual. Proving sodomy in a criminal court of law is difficult. Moreover, Anwar has some of the best lawyers in criminal practice to defend him.

Dr Mahathir however is a fighter who never gives up. This could be the most decisive fight of his political career, one to preserve what he has done in the last 18 years - his legacy. He is fighting to win.

You once said people get the government they deserve. Is that what Singaporeans have?

The team that is in charge is the best there is in Singapore. It has a tougher job than the one I had. Mine was a simpler job of catching up. Now they have to keep up with competitors going ahead at a tremendous pace. They have to make sure they're not left behind by technology and globalization. They must be proactive to meet the threats to what has been achieved. They cannot wait for it to hit Singapore. For example, global banking, the speed at which electronic banking, e-commerce, the Internet, the proliferation of new financial products have come about, mean that domestic barriers will be penetrated by technology. If this government carries on the way I did over the last 30 years, protecting local banks to make them grow, then it's in for trouble. We are a venue for 200 of the world's biggest and most competitive banks. Unless we get ourselves up to a comparable level, we'll be like New Zealand where all their own banks have been taken over and are foreign-owned.

And that's just the banking sector.

Right. It's the same with airlines, shipping lines, we've got to go global. It's much more difficult. Building up a Singapore work culture, working as a Singapore team, that was difficult enough to achieve. Now we must interface with other cultures and different systems to work globally. This is much more difficult. We used to be on a separate playing field. Through technology the big players are now penetrating our playing field. We must be able to keep up with these international players - or be reduced to nothing.

What are the social implications for Singaporeans?

That's part of a debate occupying our younger generation. What does Singapore mean to them? A hotel? They travel and they work abroad. If, as a result, they have no abiding loyalties to Singapore, then the core that holds Singapore together will melt away. That's a real risk. In my generation, there was no question of this core melting away. The global environment has changed. We have educated the next generation in English. The cultural barriers to their fitting into developed western societies have been lowered; many of our students studying overseas stay on for doctorates and, later, jobs. Quite a few never come home.

Perhaps they dislike your paternalistic style where it's said the people are accountable to the government, not the other way round?

No, people need not be accountable. All they need are passports and they are off. They simply take away their CPF and other assets and close their account. That's the challenge. The present ministers are capable, but their tasks are formidable.

Not from the opposition though, since you've hammered it into the ground. [Back to top]

We have some crazy opposition figures who are spoilers. Lying low in Australia for two years after he was trounced in the last elections, Chee Soon Juan suddenly returns. He takes a loudhailer, ostentatiously flouts the law to seek arrest and publicity, insists on going to jail by refusing to pay his fine, to be able to say 'I am a martyr.' He has impressed the foreign media. But to win in Singapore he has to impress the Singaporeans. I saw no sign of that. He amused them.

But did he deserve to be treated so harshly?

He said that his boss at the national university had lied and fabricated the minutes of a meeting. His boss said: 'Just a moment, the dean was present, so was my secretary. You apologize.' He refused. He is just dishonest and was shown up on television as a flawed character. He is going to lose the next elections. He has been openly called a liar and a cheat and challenged to sue. He dared not. because he had lied and was a cheat."

It seems that every credible Singapore oppositionist is pulverized - look at what you did to J.B. Jeyaretnam.

Just a minute. Ask yourself: Need Jeyaretnam have lied to the people at election time that I as Prime Minister gave a banking license to my brother? It was not true, so he should apologize, right? He refused. His defense in court: 'I didn't mean that at all.' The case went right up to the Privy Council in England. He lost. A second time, again at election time, he said I advised a minister to commit suicide to avoid the embarrassment of an investigation for corruption. That's a crazy accusation. Can I let that kind of accusation pass?"

Yet on one occasion, he won in the Privy Council and you ignored the decision.

No. He never won in the Privy Council on his criminal conviction. He appealed to the Privy Council against disbarment by the Law Society because of his criminal conviction. The Privy Council said he should not be disbarred. The appeal on the conviction was not heard by the Privy Council. He was restored as a lawyer, but his criminal conviction stood.

Still, you make sure Singaporeans know that there is no doubt the PAP is going to win every election.

The opposition openly acknowledged that Singaporeans want the government to continue in office by fielding less than half the total seats in the last two elections. Thus the PAP was returned to office on nomination day. This could happen again in the next election.

When will the second volume of your Memoirs be ready?

It is almost already. I need to write up my chapters on ASEAN and Indonesia, after I see how the chips fall in the coming Indonesian elections. It will mark the end of one era and the beginning of a new one.

In the first volume, you wrote of secretly meeting the leader of the Malayan Communist Party, alone, at night, in a deserted housing estate. You were already prime minister and you could easily have been bumped off?

Yes. But he also took a risk. He was the head of an illegal organization. If he had been captured they would have broken through to his cell. That would have been disastrous for him. They don't give up, these fellows. When they lock horns with you, they do so for life. You know, he is still very much alive. More than 30 years later, in 1994, we met in Beijing. Read about this in the next volume of my memoirs.