The World Is Out of ICU
Image: Roslan Rahman/ AFP
Lee Hsien Loong,
Prime Minister of Singapore
In Power Since: 2004
Education: Graduated in the Mathematics from University of Cambridge, UK; Master’s in Public Administration from the Kennedy School of Government, Harvard University
Career: Before entering politics, he was a Brigadier-General in the Singapore Armed Forces. Was appointed Deputy Prime Minister in 1990. He also concurrently served as Minister for Finance from 2001 to 2007
Do you think the global economy has recovered? Are we out clear?
It recovered a lot better than we expected. Certainly Singapore has benefited from that but worldwide too if you look at America, confidence has returned, economy is growing. Unemployment is still high, bank lending is still somewhat tight and they still have structural issues to deal with. The economy is on the mend, I mean Europe has problems of course. We are out of the intensive care unit (ICU).
What are the weak links today?
In the short-term you have problems in Europe in some of the countries like Greece, Spain, Portugal and Italy. In the medium-term we have to think, first of all, about the attitude towards globalisation, towards trade, and towards openness in America. When unemployment is high, that is always under pressure, and you also have to think about the structural issues of financial regulation, reforms which Americans are focussed on.
For the longer-term, the issue of the deficit is significant, in America definitely, and also in quite a number of the European countries. If these are not overcome, it’s very difficult to overcome the other imbalances in the world such as the American trade deficits and imbalance between China and the rest of the world.
What is the danger that America could turn inward-looking?
If you look at the mood, in America there is no mood for any free trade agreements. They have one with Korea [that] is not making progress, one with Columbia, not making progress, there are couple of others. The Doha Round is not making progress either.
The mood in the Congress is very negative and that reflects the mood amongst the American public because there is no market for free trade now since unemployment is high and the unions are against free trade and the unions strongly support the Democratic Party. This is the Democrat administration which makes things more difficult to address. So that’s a first loss.
The second loss is that in the process of doing little tit for tat justice you progressively do harm to the system and to confidence in each other’s good faith in trade and that can be cumulative and corrosive.
Singapore has recovered much faster than the rest of the world. You grew 13 percent last quarter. Did you just get lucky?
It’s a rebound from a very big dip last year. In the first quarter last year we shrank by 10 percent. First quarter this year we have grown by 13 percent, so we are just above water. There are three reasons for this — one, because the global situation has been more favourable than we expected.
Two, because we took measures even before the crisis to invest in our economy, to launch new ventures such as the integrated resorts and the casinos which are now just open and these are coming on stream now and that is giving a significant boost to the economy.
Thirdly, we probably did the right thing last year when the economy nose dived. We implemented a very significant fiscal package to help companies to cut costs and save jobs. So that they hold on to their workers for the time being when on training programmes and the government subsidised it.
Government even subsidised the wage bill of companies. Social security cost of employing workers. So they didn’t have to let go of the workers straightaway. The workers could stay on and they could go for training, become more productive. So when things turned, the companies were in good position to ramp up their production. The workers were there, they didn’t have to hire and train again. Everything was set.
What was scarier, the Asian crisis or the one we went through?
The Asian crisis engulfed many countries around us and we were affected too. We had to take some significant economic measures too, including cutting our central provident fund, which is very difficult politically to do. I think the Asian crisis prepared our people. They remembered how volatile a world we live in. Therefore, when this came we were surprised but not totally shocked.
You have said, “If you have India as well as China, we will have two wings to fly with.”
We have to stay ahead and we have to keep on the developing capabilities. We should make us relevant to China and to India to [be] able to have companies which will be able to participate in the Chinese economies and Indian economies and add value to it. We have companies which are in India developing industrial parks as well as developing tech parks all over, several, six or seven parks in different cities.