Subtitles section Play video Print subtitles Let me just begin with a few programming notes since this is actually being filmed for television. Please don't be upset if the prime minister looks more at me than at you. The conversation is going to be recorded for, what we at CNN like to call hundreds of millions of people. The second point, if you can just turn off your cell phones, BlackBerrys, iPhones, whatever you may have. There was an incident recently in the New York Philharmonic, where a gentleman kept his new iPhone on and the conductor stopped the concert midway through, and waited till the iPhone was turned off. I will not do that. I promise you I won't embarrass you, but if you can just take a moment. -I'll turn mine off too. Do you know Prime Minister, I once asked, this was many years ago when the BlackBerry had just been invented, I asked Richard Holbrook, I said have you ever tried these, they are amazing, they can keep all your contacts, all your calendars and he said, I have something much better than this. I said what? And he said, it's called staff. I assumed that you had the same, so I assumed you didnג€™t have one. All right, so we'll start. It is a great pleasure to have with us Lee Hsien-Loong, the Prime Minister of Singapore. Welcome Prime Minister. -Hello. You have always been a very careful watcher of the Chinese economy, so I want to start by asking you, one of the great concerns people have, looking out this year, is that the Chinese economy is going to slow down, that it has built in certain excesses, that in order to get out of the financial crisis the government over-spent, over-lent and that these excesses are now going to bring some kind of a tough landing if not a hard landing in China, what do you think? I'm an optimist on this fundamentally. I can't say that they'll be no bumps in the short-term, but I think in the long-term the trend will be up. They've built a lot of infrastructure, they have built a lot of capacity in many industries, autos, some of electronic industries, but it's an economy which is growing very rapidly, urbanizing very rapidly, needing a lot of facilities whether it's roads, hospitals, schools, houses, by the millions, and every year one percent of the population is moving into cities, which means 13 million people needing all this infrastructure. So I think that there may be a rough landing, but they will get through it. Do you get the sense that they are trying to shift from a model that is more oriented towards exports to one where their own consumers spend more money and if so, are they taking the measures needed to raise consumption in China? I think they get it. They saw what happened to their exports in '08-'09, when there was a global crisis and the exports plummeted. They saw how vulnerable they were then and the mantra that they must stimulate domestic demand is quite pervasive. I'm not sure whether they've taken all the measures they need to do, that which has to do with restructuring their social safety nets so people have confidence to spend. It has to do with restructuring and tidying up their state own enterprises, so that the profits are distributed and properly utilized. Has to do with having the right balance between investment, which they've done a lot of and consumption, which is a different thing, which you have to have quite fundamental changes in order to cause happen. So this will be work for the years to come. And for the next leadership in China, You have probably met many of these people, what do you think of this new generation and do you think that we can see some bold new moves that people have long been predicting or hoping for in China, either economic or even political? The prospects of political change in China have been dangled before everybody by people like premier Wen Jiabao. I think there will be continuity between the present generation of leaders and the next. Similar molds, the next generation came of age during the cultural revolution some were sent down. Some of them belong to the first vintage year of the university intake. After universities re-opened when the cultural revolution ended. In 1975, right? '77, something around that. So very capable people, but I think they will be cautious, I think it will be a collective leadership, rather than any single dominant personality, which means that they will act cautiously. They will need some time to find their feet, but I hope that they will address the problems which some of which have been put off for over the last couple of years, which are not easy to solve, they are both economic ones as well as political ones and the present leadership, Hu Jintao, for example, has acknowledged these issues and when they celebrated the 90th anniversary of the party last year, he listed fundamental problems, including moral lassitude, including corruption, including disconnect from the people which really goes to the heart of the Communist Party to govern in China. So they know these problems, they need to find the solutions. But do you think the Communist Party can engage in serious political reform without threatening its monopoly on power? We will try very hard, nobody can say that they will succeed. It's a society which is changing just like every other society in the world, it's opening up. It's not a monolithic society at all. The internet is pervasive. I think they have 400 million internet users or something, more than America has. It's a very diverse society. They speak up and when there public incidents now you get mobilization rapidly and angst and unhappiness expressed, even by people in the establishment, even the television news viewer shows her disapproval of what she is reading. So that's a new world. Let's talk about the other super power in the Pacific, the United States. The United States went through a flurry of diplomatic activity, political activity over the last three months. The East Asia Summit , ASEAN, the proposal for this new trade area. The Trans-Pacific Partnership. The Trans-Pacific Partnership, and a kind of military cooperation arrangement that could be described as a military base in Australia. Now, the Philippines are talking about perhaps having American troops back. Do you think these moves are stabilizing the Asia-Pacific region? We fundamentally think its good that America is interested in Asia and in the Asia-Pacific region. And their presence since the Second World War tremendous benign influence. It's generated peace, stability, predictability and enable other countries to prosper, including China and I think it's good that America continues to take a close interest in the region, not just on security issues, but also economic issues and cultural and on a broad range of areas. But it cannot be for a few months at a time in a spasmodic style. It has to be sustained over a long period of time, really over many administrations and decades and America has got many preoccupations around the world, so we hope on your busy plate Asia doesn't fall off the edge. But we are naturally very happy that President Obama and Hillary Clinton have made the effort and have put Asia quite high on the agenda. We hope it will be sustained. Is there any prospect of American troops in Singapore? We actually host facilities in Singapore and American ships and aircrafts stop by from time to time and use those facilities. That's different from having a naval base. And a naval base would be a bridge too far? A naval base would be twice as big as Singapore. It can't be done. You've reclaimed lots of land to build casinos, you could probably build a naval base. But let me ask you about the Chinese reaction. The Chinese reaction to this same flurry of diplomacy and these new agreements has been somewhat cautious and in some cases hostile. Their official position is that they are very happy to have more members join the East Asia Summit and America is welcome to join and Russia is welcome to join and Europe is welcome to join as well and the more the merrier. That's the official position. The private position probably is a weariness, they are watching, they think that there will be people in America who are not quite happy that China is prospering and would like to hinder that process. And they will not want to let those people succeed. So I think that there is cooperation, but there is also watchfulness on both sides. Do you think that Barack Obama has pursued a successful foreign policy in the part of the world you care about? I think he has put a lot of attention on it and the outcome has been constructive. These are issues which need long-term management, and the most important item to be managed is America's relationship with China and it hasn't come to blows, although there has been tension and that's a positive. Do you worry about the rise of protectionism? If you listen to the United States, President Obama's state of the union, he had a few tough things to say about China, but if you listen to Mitt Romney, who until yesterday was the punitive republican nominee, he has some very tough things to say about China, particularly unusual coming from a republican. Does listening to all that for a place like Singapore, which so depends on free trade, scare you? Some of it is election year rhetoric in America, but I think the general mood in America on free trade has been negative for some time because of uncertainties brought on by globalization, because workers haven't seen an upside in terms of their wages, they're worried that their jobs are insecure and they could get retrenched because industries may move off-shore and jobs are not being created in America in the same way in a very large scale as they used to. When you make an Apple I-phone for example, the pieces come from all over the world, they are not made in America. So that's an underlying mood which worries us and which, I think, constrains the administration when it comes to free trade and one of the reasons why we are not getting anywhere with the Doha Round under the WTO. It's perhaps also the reason why the administration has decided to proceed on this Trans-Pacific Partnership as the one significant trade initiative. We hope they persevere and they don't take too hard a line and are able to come up with a constructive outcome. When you look at the outlook for the next few years, do you feel that you will be able to continue to grow and prosper in a booming Asia? What keeps you up at night? Well, I think Asia will boom. There will be ups and downs. We will be affected by Europe, if Europe goes bump in the night, but if it doesn't, well there's a certain momentum and the countries in China, in India, in South-East Asia, which will help to carry us forward. What worries us in Singapore is not that the world will not prosper, in the ups and downs of the world, a small boat like Singapore with not very much room to maneuver, can you make sure that every time you catch a wave head on and you are not flipped over. Because once we are flipped over that's it. When you look at the American debate, one of the things that is often talked about is this issue of out-sourcing, moving factories off-shore, and if you look through the specifics, you often find companies that are trying to figure out where to locate and Asian governments will often offer very rich inducements to these companies to move their factories to Asia including the Singapore government. So do American State governments. So you think you're just playing the same game that Americans... We are trying not to play the same game. My attitude is, I am prepared to forgive you taxes if you come, but I won't give you money if you lose money. So I'm prepared, if you have powerful, if you are in such great demand, I may not be able to levy my full pound of flesh on you, but I see no reason why I should give you money to come to Singapore, through some grant or subsidy or some other scheme when in fact you're not creating economic value for Singapore. What would you advise... So some projects we'd like to have, but we have decided how generous we are able to be and they've gone elsewhere and our people pursuing investments, the Economic Development Board, are sometimes disappointed, but I think there has to be a limit otherwise you are taken to the cleaners. What would you advise President Obama, if he's trying to revive manufacturing. One of the things Asian countries have done very successfully has been to adopt industrial policies where the state in some way or the other provides help, incentives, tax subsidies of various kinds to industries, and has been quite successful. Should America have a more kind of nationally planned industrial policy? No, I don't think I would describe it as industrial policy. I would describe it as investing in the preconditions to enable a wide range of industries to develop, take root and some of them to prosper. So invest in education. Invest in infrastructure. Invest in building up a financial system, which can support your manufacturing activities. Make sure your government is clean and efficient and forward looking so that you anticipate the next bump in the road and smooth the road for your industries. Then the industries will prosper, but you need to have hard working people, well trained people, disciplined people, unions who understand what this is about and will work with employers to bring this about. And that is a work of several administrations. The World Economic Form has this list of global risks and I was struck by the fact that the number one risk on its list is rising inequality and it's happening of course in the United States where there's this big debate... All over the world. But it is happening everywhere and I was wondering if you would reflect on what it means and what you can do about it because you yourself have had to deal with this in Singapore where you have this long tradition of paying public servants very well, which is why you have one of the lowest level of corruption in the world. It's one of the reasons. But one of the things that you have had to do was in response to some public outcry you've had to cut the salaries of public sector employees including your own. No, no, only of the ministers not of the civil servants. So why did you do it? Well, it became an issue during the elections. There are reasons for needing to pay people well, pay people properly are well established, because you must pay commensurate with the responsibility of the job, and commensurate with the quality of the person you are looking for to do that job. And the job is vital because you make a wrong decision it's billions of dollars and you put the wrong man in, that's a disaster. And anybody who comes in must make a calculation, must think what are the financial implications, not just for him, but for his wife and children or spouse and children.