| BUSINESSWEEK ONLINE : APRIL 5, 1999 ISSUE | ||||||||
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| INTERNATIONAL -- ASIAN COVER STORY
Deputy Prime Minister Lee: Opening the Society, Slowly (int'l edition) Deputy Prime Minister Lee Hsien Loong has a complex task: making Singapore's hugely successful economic model more creative for the next century while a complacent population awaits instruction. On Mar. 12, he spoke in his office with Business Week's Singapore Bureau Chief Michael Shari and Asia Correspondent Mark L. Clifford about the city-state's ambitious plans, his hopes for a gradual opening of society, and the impact of the crisis. NOTE: This is an extended, online-only version of the interview that appears in the April 5, 1999, issue of Business Week's International editions. Q: What part of the Singapore model withstood the test of the crisis, and more importantly, looking forward, what needs to be retooled? What are the real priorities? A: Our policies have proven themselves. We're not in the same difficulties as other countries around us because of our conservative fiscal policies, high savings, investments in people and infrastructure, emphasis on social cohesion, and a long-term approach rather than emphasis on quick comforts. These will have to remain. But it's going to be more difficult in the next phase. The challenges will be greater. Q: Is there a danger that Singaporeans are perhaps too complacent or too used to strong government to make the fundamental changes that you're talking about? A: I think they are now more thankful that the government is exercising strong leadership, than they might have been under more tranquil circumstances. It is hard to be complacent when there is bad news around you every day, when you can see it in the newspapers and on TV. It's not in a faraway place like Africa or Latin America but right on your doorstep -- and it could easily happen in Singapore too. Q: Whereas this has been a government that's very much top down, do you now need people to participate more? A: Yes, we need that. There is a lot more room for participation in civic society. It's something we have to encourage because it's not the way our society has developed. It's not in our cultures. The population is happy to take the lead from the government and leave it to the government to govern. So if we want to shift away from this, and give people more say, then they cannot just express casual views after some drinks in the coffee shop. They really have to think about issues and work hard at them. Then we can gradually work out a new model. Q: How long have you been thinking over the concept of a knowledge-based economy? A: It's a tag word which encompasses various things which we have been doing for some time. For example, promoting entrepreneurship and activities which involve information, knowledge, and analysis rather than just repetitive or manual skills, and bringing in talent. And also getting the social framework set up so that these elements can flourish. Q: Singaporeans are now looking to Silicon Valley as an entrepreneurial model. Will you have to open up the political structure here? A: The political structure is evolving. I don't see the very close linkage that Western journalists do. Some seem to believe that you must get rid of the ruling People's Action Party in order to have business flourish. Whether or not an entrepreneur becomes like Bill Gates doesn't depend on his political affiliation. What is really holding us back from getting as far ahead as we conceivably could is talent. We need more talent. We're trying our best to bring talented people in and to get them to be happy to live here and to contribute here. That's the key. Q: If there is a large influx of highly trained Western professionals, do you think they could start to change Singapore's society? A: If they come here and sink roots here, their norms will adjust to ours. Or if we are wrong, then eventually we will change. Different countries have different norms. Singapore has sensitivities in matters of race, language, and religion. These are not going to go away for a very long time. Therefore we have to be extra careful. If you want to make a speech or publish a book, if you want to organize a function to demolish the government, there's nothing to stop you. Just apply for a permit, and we will give you a permit. But if there's a risk that this is going to cause some disturbance and risk lives, that's another matter. We've seen it happen many times before. Q: Can you have liberalization in the economy without loosening the social structure? A: That's an empirical question. A civil society is gradually developing. The composition of the society has changed. 10 or 15 years ago, graduates made up about 2% of the population. Now they make up about 7%. The layer of professions and managers, educated and skilled people, is much thicker. So the contribution which they can make is also greater. There are now groups like The Roundtable which are nonpolitical but want to have a voice. These are serious-minded people who discuss, write papers, and publish articles from time to time. They make valuable contributions. Two of them are Nominated Members of Parliament. If you look at the opposition, however, they haven't improved, but that's really not where the future's coming from. Q: Is Singapore serious about bank consolidation and banking reform? A: We're liberalizing the domestic banking sector. This will increase the pressures to consolidate and upgrade. We plan to do it over five years. We will announce the plan within a month or so. The banks know this and are seriously reconsidering their positions. But we can't determine who is going to marry whom. Even parents can't do that anymore. Q: How many banks will Singapore have in the end? Will we just end up with the largest, Development Bank of Singapore? A: There is room for more than one well-established Singapore bank. The domestic market is big enough for two major banks to develop. But it's not yet clear which the other one will be. Q: And in the region? A: The existing banks already have a network of branches in the region. And I think they will be expanding their overseas activities. If they merge and rationalize, they will have a broader base to develop that. Banks that want to be more than niche players will have to develop overseas. The Singapore domestic market is too small. Q: What will this mean for foreign banks? A: It will mean more opportunities. We're aiming for a level playing field. But that doesn't mean all-comers. In any country there are prudential requirements and conditions. Banks must show a long-term commitment before they are allowed to participate in the domestic banking market. But we will eventually have open rules. Q: Are you accelerating the process? A: When central bankers make haste, they do so with due deliberation. We don't put on our jogging shoes and run. We're not aiming for a Big Bang. We're aiming for steady, progressive adjustments which eventually will lead to a significant transformation of our banking sector. But at the end of it, we still want strong Singapore banks and well-anchored domestic players. Q: Do you want a stronger Monetary Authority of Singapore? A: We have to build up the MAS because the banking industry has grown. Market discipline and free play only work if there is somebody to set and enforce the rules, and make sure that there is no monkey business, that banks are properly inspected, and that problems are found and fixed in good time. If you have very stringent admission practices, then you know that those in the ring are probably safe and you don't have to look at them every day. But it is different if you are going to be more open. Q: But that's a big change. A: It's a progressive shift. We have never been a command economy. It's a free economy, but the government has exercised a firm guiding hand in some key areas. The government will continue to play a major role in areas like housing, education, and health. But even there we will leave as much room as possible for competition and market incentives. Q: How important is it to restructure the government-linked companies? A: The GLCs are generally run efficiently. They are not like the chaebols in Korea, which had special government lines and cheap funding and therefore developed into noneconomic enterprises. But our GLCs have grown over the years. I believe a certain amount of rationalization and possibly even hiving off, is possible and desirable. You want the GLCs to be run along private industry lines -- that is the way to equal them in performance. You want banks to assess loans to GLCs strictly commercially. There are also the issues of how you reward people, organize your companies, structure your balance sheet, take risks. These all tend to be harder to do if you are very close to the government bureaucracy. Q: What about privatizing a majority stake and having shareholders, international or domestic, manage the company? A: Having shareholders is not the problem. Having a lead shareholder who is really anchoring the outfit and has a vested interest in it, that's more difficult. For some critical companies, like Singapore Telecom or SIA [Singapore Internaltional Airlines], I'm not sure we want them to be managed by a foreign shareholder. A significant minority stake is not a problem. But a majority or a controlling stake? Suppose we had a military emergency and needed Singapore Airlines to do national service. Should it do national service or should it say, "Shareholders will be taken care of first?" Q: What's happened to Singapore's policy of investing in the region? A: It is the right policy. It ran into a storm which nobody anticipated and we have taken some hits. But for the long term, if we don't go regional and only stay in Singapore, our companies will forfeit the potential to grow faster than our indigenous economy. So they have to go regional. There will always be risks, but we have to diversify and manage them. For individual projects, we have to make hard-headed assessments. If it's turned bad or is no longer viable, then we must cut losses. We can't throw good money after bad. But across the board, to say, "Well, I will no longer go overseas", that's wrong. We never know, for some reason one day we may have a domestic recession when the region is doing well, and if we're all in Singapore, then we have lost a buffer. This is not really the time to wade in and shower money around. It never is. But we can still find opportunities in a discriminating sort of way and prepare ourselves for the day the region recovers. Q: Does somebody need to be held responsible for mistakes in the GLCs or some of the more egregious mistakes in terms of investing overseas? A: GLCs have to operate as much as possible like commercial companies. They have managements in charge and boards in charge. The board answers to the shareholders. If the board doesn't do its job, we'll change the board. Q: The grumbles are, 'The boards aren't quite as independent as they should be.' Is that a fair criticism? A: The board has to be held fully responsible. But it is easier for this to take place when there is significant private-sector participation in the company and on the board. Because if it is a fully government activity, then even though we must still step in and clean up, the temptation is to help out and postpone the decision. Then the problem becomes much greater. This is why we have devoted a lot of attention to divesting the companies and bringing in private-sector ownership. Q: How can Singapore strengthen its social cohesion as it plans to in the face of a crisis? A: Perhaps crises help. One of the reasons Singapore society has been cohesive over these last 30 years is because it went through searing formative experiences in the 1960s against the communists before Malaysia, then against the communalists in Malaysia, then when the British left, we faced a dire threat to our livelihoods. We had to pull together and stay together. This current experience is a similar challenge to a new generation of Singaporeans. This is an unpredictable environment. We need the confidence that whatever happens around us, we have the wherewithal and the wits to survive it and to pull through. We must convince Singaporeans that they have reasons for confidence -- in Singapore, in their leaders, and in themselves. We can make it, whatever the upheavals, riots, and disturbances in the region. Our bonuses may be cut, but nobody will starve. We are in this boat together; the rich are not looking after themselves and leaving the poor in the lurch. If we manage the crisis this way, then it will be a plus for Singapore. Q: Have you been successful? A: We can never do enough, but we've made a lot of effort. We have been talking to the people, working with the unions, working through the grassroots and the Members of Parliament. We share our worries, explain what needs to be done, why cutting Central Provident Fund contributions and trimming wages is the right move. We get people to see that this will help, and that if we had not done this, we would have had more retrenchments and a deeper recession. People can see economies similar to ours that cannot do this and therefore are in greater difficulties. Q: Do you mean Hong Kong? A: Among others. Singapore is different from Hong Kong. Our histories and geopolitical circumstances, the values, norms, and instincts of the populations are different. Therefore there are things which we can do but they can't, and vice versa. In Singapore's circumstances, without a capable and strong government, we are in trouble. We cannot run like Switzerland, where the government is almost invisible and the country prospers by itself, surrounded by a tranquil and prosperous Europe. We're not in that situation. We are in a much more uncertain, unpredictable environment. Many things need to be done, and done promptly. The only way to accomplish this is by having strong leadership. Q: What do you see as your personal contribution to Singapore's leadership? A: I help the Prime Minister. I spend a lot of time on the economy and the economic ministries. He has also put me in charge of the Monetary Authority of Singapore. I also help the Prime Minister sell the policies, explain them, and form a national consensus of what Singapore needs to do. Q: What's the importance of American investment in the region? A: American investments are very important now that the Japanese flow is down. The Americans have tended to be the larger investors. The Europeans have not invested in the region quite as much as you would expect based on the size of their GDP. Their historical links are not quite the same. Their psychological distance is further. Q: Is the worst behind us, as far as Singapore is concerned? A: The mood has picked up. The stock market has recovered markedly since September. But our prospects will depend on what happens to the region. If it remains stable and doesn't go seriously wrong, maybe we'll exceed what we have forecast -- minus 1% to plus 1% economic growth -- and possibly do better than 1%. But if something goes wrong with the region, then the downside is not guaranteed either. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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