Speech By Deputy Prime Minister and Minister for Finance Lawrence Wong at the Lee Kuan Yew School of Public Policy's Festival of Ideas on 14 October 2022

Distinguished Guests, 

Ladies and Gentlemen, 

1. It’s very good to be back at the LKY School and to join you for the closing of the Festival of Ideas. I’m not sure if I can take so much credit for being an assuring voice in the last two and a half years of the pandemic (as Professor Danny Quah had said earlier). I just told it as it was, as plainly as possible. But I must thank all of you who have been in Singapore these two and a half years for your cooperation, your forbearance, the sacrifices you have made, all of us working together to get through hopefully what will be the worse of the pandemic. So thank you very much everyone.

2. The theme of your festival is “Asia at the crossroads: A world disrupted”; I think couldn’t be a more appropriate theme for our turbulent times

a) Because we are truly facing multiple disruptions today

b) Disease and war have shaken our world. Covid-19 – it brought the world to a standstill two years ago

I. Now, the situation is better in most countries because of the protection we have from the vaccines

II. But we also know that the pandemic is not over. I spoke at a different forum previously how nowadays you see all the different letters or different numbers – we’ve stopped going from Alpha to Beta to Delta to Omicron. Now you see numbers – 2, 4, 5, 2.75, XBB, whatever it is, we’ve lost track of the convention because they are all variants of the same lineage, Omicron. But who knows what will happen next? Whether the virus will mutate, whether you will have a new high variant, nobody knows. So it is not over, it may still cause havoc, especially for countries where vaccination rates are still low  

c) Then you have the Russian invasion of Ukraine, which has completely changed the security situation in Europe

I. It has brought about huge disruptions in energy and food supplies worldwide

II. Exacerbated global inflationary pressures, which are significant and widespread 

III. Monetary policy around the world is responding to that but it’s very hard to get the balance right

IV. If it’s too forceful a response with monetary policy, you can cause a deep recession; but if it is too weak, it will lead to persistently high inflation. 

d) So what will happen in the coming months? Well, we’ll have to see how this plays out. We have all been used to an environment of such low interest rates for so long, but interest rates will be higher for a much longer period of time. Will countries be able to adjust to this new normal? What will it mean for debt sustainability, especially for countries with a high level of debt? Will there be new area of systemic risk in the financial system? No one really knows.

e) More fundamentally, the golden age of globalisation is over and we are entering a new world

I. It will be a world marked by more disruptions, uncertainty, and volatility  

II. Some would say that the peace and stability we enjoyed in the last 30 years was really more of an anomaly, due to the pre-eminence of the US

III. We are not entering a new world as such, but really going back to normality – an era of geopolitical contestations and conflict between major powers around the world, which was what has been the case for most of history

3. Indeed, if we take a longer view of history, great power rivalry has been the norm, not the exception

4. This applies to Asia, where we have seen many ups and downs in the long arc of the region’s development 

a) We all know that Asian countries are old societies with deep cultures and long histories

b) Thousands of years ago, Asia was at the frontier of knowledge 

c) Ancient Indian civilisation made significant contributions – Fundamental mathematical concepts and the decimal system, inventions like rocket artillery and coins, can be traced back to India

d) Ancient China was arguably the most technologically advanced society in the world; long list of discoveries and inventions were all available in China centuries before they became known in the West, from gunpowder, to paper, to printing, and the magnetic compass, just to name a few

e) This pre-eminent status lasted for at least 2000 years until around 15th century

f) Then under the Ming and Qing dynasties, China closed itself to the outside world – and the economy and society stagnated  

5. In contrast Europe from the 16th century onwards saw dramatic advances and breakthroughs.  That set the stage for the intellectual movement of the Enlightenment, and later the Industrial revolution

6. Europe dominated the world for the next few centuries. The United Kingdom became the world’s first superpower – conquering territories stretching from the Americas, to Africa and Asia. 

7. But Europe was not monolithic, and many other powers too competed for territory and influence in Asia 

8. It took both WWI and WWII to essentially bring an end to European dominance.  And we then saw the rise of American dominance and Pax Americana  

9. But that did not bring an end to great power rivalry in Asia

a) The Cold War spilled over to Asia soon after, dramatically at first with the partition of the Korean peninsula, then with America’s war in Vietnam, and subsequently Vietnam’s invasion of Cambodia.

10. We have seen this long history of ups and downs, power rivalry amongst different great powers here in Asia. But amidst this period of constant strife and tensions, we continued to find opportunities for growth and prosperity 

a) Japan quickly recovered from the devastation of the war

b) There was the rise of the Newly Industralised Economies –Taiwan, South Korea, Hong Kong and of course, Singapore

c) In more recent decades, China and India have both taken off  

d) Millions have been lifted out of poverty, their economies have been transformed, and now the whole Asian continent is on the move again

11. That’s why people now talk about the 21st century as the Asian century. The 19th century was the British empire; the 20th century was the American century. 

a) People say the 21st century is the Asian century because Asia accounts for 60% of the world’s population. We have a significant majority of citizens entering the middle class in Asia

b) Asia’s share of global GDP is expected to over-take the rest of the world combined in the coming years

12. Within Asia, there are several key players  

a) China will continue to remain a major growth engine  

b) Japan and Korea, who continue to be important economies with significant technological strengths

c) India rapidly emerging as an economic powerhouse with plans to be a developed nation by the time of its 100th year of independence

d) Southeast Asia is fast becoming a growth centre in our own right – with a combined population of 660 million, larger than the EU, and a combined GDP of US$3 trillion, which we expect to double, if not quadruple over the next two decades. In Southeast Asia, ASEAN’s population is also relatively young, and that means there is a demographic dividend to be harvested and tremendous economic potential if things go right   

13. In short, there’s a lot going for the region 

14. But if we learn anything from history and the ups and downs which I have just given you in one minute just now – it’s that there is no room to be complacent.  We cannot just extrapolate recent trends into the future. There will be disruptions and discontinuities.  As we have seen from centuries past, things can change and fall apart very quickly  

15. Furthermore, as we all know, Asia has become a new focus for the great game of international relations. The presence of multiple powers in the region, and their complex power relations will make the shape of the new Asia both critically important and difficult to settle. In particular, worsening US-China relations is a great concern for all of us. America has already identified China as its most consequential geopolitical challenge. We are now in unchartered waters. Asia has seen peace and stability for more than 50 years since the end of the Vietnam war

a. It is hard for us to imagine how things might be different in Asia  

b. But look at how quickly and suddenly things have gone wrong in Europe

c. We must not be naïve in assuming things cannot go wrong in Asia too

16. In other words, the future is not pre-destined – cannot assume that Asia’s rise is unstoppable or that the 21st century will definitely be an Asian century. Don’t believe in the propaganda. It could come to pass, but it may not either.  

17. It’s really up to us as stakeholders in Asia to advance the prospects for peace and prosperity in the region  

18. What can we do to better secure Asia’s prospects? 

19. First, I would say we must seek common ground on shared interests that can form the basis for closer regional cooperation

a) We recognise that Asian countries are diverse and at different stages of development

b) And understandably, the interests of all countries are not always fully aligned

c) So we must temper individual differences with broader strategic considerations to build a diverse yet stable community

d) And the cooperation in Asia must always be founded on the fundamental principles of international law

e) Cooperation must not be on an exclusive basis, but it should really be to strengthen global institutions and the rules-based multi-lateral order  

f) Because failure to cooperate internationally, to preserve stability, and to invest in the global commons will have disastrous long-term consequences for Asia and the world. 

20.       And there are many areas where we have shared interests 

a) In Asia, for example, we will be the battle ground for climate change. 

b) This is a huge challenge, but also an enormous opportunity for the region

c) Countries in Asia are already working on their green transitions but much more needs to be done

d) And no country will be able to manage this climate transition alone. We will need to pool our resources together, especially in the area of finance. 

I. Because we all know there are many potential green projects across the region, which can reduce carbon emissions, but many of them are marginally bankable, they are not commercially viable.

II. To activate these projects, we will need closer collaboration between private capital, governments, philanthropy and international organisations to bring together our resources and finance these projects

III. As an international financial centre, Singapore will do our part to strengthen such collaboration  

21. Second for Southeast Asia, in particular, we should redouble our efforts to strengthen ASEAN integration 

a) ASEAN must be a strong and effective grouping – not ten isolated and scattered economies, each one too small to be worth paying attention to

b) And we do have meaningful plans, including streamlining our customs and trade facilitation processes, or enabling cross border real-time retail payments possible across ASEAN.  So what we have now in Singapore, PayNow, can be tied up to fast payment systems in Malaysia, Indonesia, Thailand, in fact, fast payment systems across all of ASEAN, for more effective retail payments across the board.

c) We must press on with these initiatives, because if ASEAN’s integration were to stagnate while the rest of Asia and the world forges ahead, we will be left behind 

d) At the same time, ASEAN must keep our region open, inclusive and connected to the world 

e) We want to encourage all major partners to build stakes in the region – not just US and China, but also EU, Japan, Korea and India, and other key partners

f) Here in ASEAN, in Southeast Asia, we can foster greater economic interdependence and integration, so that everyone can grow their economic ties with one another, and we will not have a situation where we have line, or worse, a war, that divides ASEAN into two camps. We want ASEAN to be a neutral core, around which we can develop a stronger framework for cooperation. The rules of the cooperation in the region should be determined by us, determined from within, not without. 

g) Here too, Singapore will do our part by boosting our connectivity to serve ASEAN, to serve the region and the world, and finding new ways to cooperate.

22. Third, Asia’s transformation will ultimately be decided by its people. It’s up to us – the people of Asia – to shape the future of this region

a) That is why we must always take a strong stand against confrontation and conflict – because nothing can justify the use of force against another country, or the egregious breach of international laws or territorial integrity

b) We must focus our energies on strengthening the connections we have with one another – building stronger human ties, having more exchanges in knowledge and ideas 

c) Because the transformation of Asia will ultimately be powered by the billions of increasingly skilled workers and entrepreneurs continually searching for new and better ways of doing things 

d) This also underscores the importance for us Asian countries to invest in education and technology, so that we can keep on moving in the direction of knowledge, scientific excellence and innovation, and stay competitive 

e) The good news is that we have deep talent pools in Asia – huge numbers of extremely able and bright people, all hungry to get ahead in their lives

I. Our capabilities in the region are also growing

II. For example, top Asian universities are now producing more cutting-edge research and major breakthroughs, including universities in Singapore

III. Graduates from these universities are also more likely to stay on in their own countries and help drive Asia’s transformation. It never used to be the case in the past

IV. For example, I was just in India, the vast majority of students from India’s IIT, Indian Institutes of Technology which are top notch universities, in the past the vast majority of them would graduate and go overseas to look for jobs; nowadays it’s the opposite, the vast majority will stay in India – not just to work in global companies that are based in India, but also to start up their own companies, and that’s why India is confident that it can have one thousand unicorns in the next two to three years

f) With this strong base of human capital in Asia, we can work together across disciplines and institutions, and enable us to push out the frontiers of possibilities for the region  

23. So to conclude, Asia is indeed at a crossroads – how the region progresses in the coming years and decades will depend on the choices we make

a) Singapore of course will do our best to shape the trajectory of developments in this part of the world towards positive outcomes, and we will work with others to shape the regional and international order 

b) We are of course a tiny little red dot. We are unable to prescribe what other countries do in Asia. We are one of the smallest economies in this part of the world. But we believe that in an uncertain, volatile and turbulent world, Singapore can still make a good living. Amidst turbulence all around us, we can continue to be a bastion of stability, openness and innovation for the region and the world. We can be a reliable and trusted partner, working with partners for peace and stability, and a place where the human spirit continues to thrive. 

c) Together, we can secure a brighter future for Asia. Thank you very much.