SINGAPORE SUMMIT 2014 GLOBAL ASIA CONFLUENCE...GLOBAL ASIA CONFLUENCE POST-SUMMIT REPORT Contents 02...

SINGAPORE SUMMIT 2014

19 - 21 September 2014

GLOBAL ASIA CONFLUENCE

POST-SUMMIT REPORT

Contents02 Preface

03 Executive Summary

04 Summit Welcome Address by Minister for Education Mr Heng Swee Keat

08 Opening Remarks by Conference Chairman Mr George Yeo

12 Plenary Session 1: Staying Ahead, Sustaining Growth

15 Plenary Session 2: Asian Economic Integration and Its Global Implications

18 Distinguished Guest Speaker Address by Dr Sri Mulyani Indrawati

22 Dialogue with Prime Minister Lee Hsien Loong

30 Plenary Session 3: Geopolitical Risks in Asia and Implications for the Global Economy

33 Plenary Session 4: Global-Asia Energy Dynamics

36 Summit Participants

38 Summit Programme

No part of this publication may be reproduced, stored in any informationstorage or retrieval system, or transmitted, in any form or by any means,electrical, mechanical, photocopying, recording, or otherwise without thepermission of the copyright owner.

The views expressed here are those of the participant(s) involved in therelevant discussions and do not necessarily reflect the views of all participants or organisers of the Singapore Summit.

02 | SINGAPORE SUMMIT 2014 POST-SUMMIT REPORT

The 2014 Singapore Summit gathered over 400 advisers and friends of the Monetary Authority of Singapore, Singapore Economic Development Board, GIC and Temasek. CEOs from the world of finance and business as well as thought leaders from 32 countries engaged in lively discussions across a span of topics on global and regional macroeconomic developments, trade integration, geopolitics and the changing energy landscape.

Preface

For its part, the Singapore Summit is well on the way to carving out a distinctive role as a less formal and staged forum than Davos with a unique insight into Asia’s issues, and matching what the Shangri-La Dialogue has achieved in the defence and security sphere, between them making Singapore the intellectual hub of policy discussion for Asia.Lord Charles Powell, Member of the House of Lords, Great Britain

The Summit had great attendance and content. Part of the reason I love to attend the Summit is that it opens my eyes and mind to a perspective that is hard to envision while living in the United States. The vibrancy and growth in the region leads to a growing confidence and excitement about the future.Michael R. Splinter, Executive Chairman of the Board of Directors, Applied Materials, Inc.

I think what has been special about this conference is its ability to convene some extraordinary people around a one day Conference. All the leaders come from different parts of the world but they are all interested in Asia. In just a very short period of time, there is a chance for great discussion, a chance to connect with a lot of people, and a chance to participate around intellectually enticing themes that are relevant to a changing Asia.Jaime Augusto Zobel de Ayala, Chairman & CEO, Ayala Corporation

I have found this Summit extremely interesting – it has been well-organised, it has been extremely succinct, and it has covered both economic considerations but also, very interestingly and importantly, geopolitical considerations. You have attracted an extraordinary group of industry and government leaders here. From my point of view, it has been very valuable.John Nelson, Chairman, Lloyd’s of London

Participants were cautious about the potential impact of monetary policy changes on global markets. They recognised that even as broad economic transformations are taking place in Asia, the region is still dependent on easy global monetary conditions, benefitting from consumer demand and cheap financing from mature markets. While some Asian economies will be impacted from the tightening of the United States’ monetary policy, participants acknowledged that these economies, with their deeper reserves, have become more resilient. Participants also recognised that the tapering of United States’ monetary policy signals that the United States is on the path towards recovery. Companies will be more forthcoming in deploying more capital for investments, which is welcomed news for Asian economies.

Participants also shared their optimism on the business opportunities within China, India and ASEAN. While growth has moderated in China, it is a change from investment-led growth to a higher quality, consumption-led growth, which would benefit Asia in the medium term. India, with new leaders at the helm, will invest more in its economic fundamentals, ushering in a new era of governance that is more transparent and business friendly. Southeast Asia will be a beneficiary from the growth in China and India; it will also play a more important economic role in Asia’s growth as its member states strive for deeper economic integration. ASEAN economies like Indonesia and Thailand bear watching, as their new leaders chart a fresh path towards stable, long term economic growth.

It is against this backdrop of multiple growth engines within Asia that intra-Asian trade has grown tremendously. Major trade initiatives are raising hopes that a more integrated Asia will provide a further boost to Asia’s growth. Under the ASEAN Economic Community (AEC), ASEAN is taking steps towards developing greater economic linkages amongst its members by 2015. The Regional Comprehensive Economic Partnership (RCEP) will help further integrate ASEAN with its major trading partners in Asia. Many of the key economic powerhouses on both sides of the Asia Pacific are aiming to finalise the finer details under the broader Trans-Pacific Partnership (TPP).

Reaching agreement on all these trade initiatives is no mean feat, as countries have to reach agreement across multiple trade-related issues, while overcoming domestic sensitivities.

Underpinning Asia’s growth and its deeper economic integration is a stable global and regional order. Some participants expressed concerns over the disparity between the rosy economic picture and occasionally tense geopolitical situation in Asia. However, there was a general sense of cautious optimism about China’s relationships with the United States, Japan and Vietnam, as economic interdependence was cited as a key incentive for nations to undertake steps to avoid further escalation of tensions. As Asia prospers and becomes more important economically, the region needs to proactively contribute to sustain the international order it has thrived in. ASEAN, given its reputation as a neutral third party with its excellent connections, is well placed to play a bigger role in mitigating geopolitical tensions in the region.

Beyond trade and geopolitics, participants also considered the dynamics of the global energy market. The shale gas revolution has had a dramatic impact on energy flows in North America, putting the United States firmly on a path to energy independence. China is poised to unlock its shale potential and be part of the next wave of the shale gas revolution. With technological advances, renewables are no longer a far-fetched reality. Countries are increasingly adding renewables into their energy mix, with the possibility that alternative energy may reach price parity with traditional energy sources in less than 30 years.

While there will be occasional challenges that will affect the economic and the geopolitical landscape within Asia, there are opportunities for both Western and Asian companies within Asia arising from the “Global-Asia Confluence”. The full benefits of the Confluence can only be reaped, if both the private and the public sectors undertake steps to engage in structural reforms, make the necessary investments in their economies and peoples, and to keep markets open.

With the easy monetary conditions in the United States likely to come to an end soon, the global economy is at a critical juncture. Countries are re-evaluating their growth strategies and seeking greater integration with each other, even as they undertake domestic structural reforms to boost competitiveness. In emerging Asia, institutional and structural challenges remain even as the region transforms itself to achieve high quality growth that is sustainable. Inspired by new leadership in the major Asian economies, there is a renewed sense of hope that Asian countries will continue to revitalise their economies, facilitate necessary infrastructure investments and undertake the required reforms, thereby providing global and Asian businesses with a more conducive operating environment to take advantage of the opportunities arising from the “Global-Asia Confluence”.

Executive Summary

SINGAPORE SUMMIT 2014 POST-SUMMIT REPORT | 03

19 September 2014 - Welcome Dinner

Summit Welcome Address byMr Heng Swee Keat

Of Nutmegs, Ideas, and an Island Called Singapore

INTRODUCTION

Mr George Yeo, Singapore Summit Conference Chair, distinguished guests, ladies and gentlemen.

Welcome to Singapore and to the 3rd Singapore Summit. I am very pleased to see so many friends and so many leaders in the various industries coming together to explore ideas and opportunities.

A LESSON FROM THE HUMBLE NUTMEG

It has been six years since the Global Financial Crisis (GFC) of 2008, which was triggered by problems of excessive credit growth and over-priced assets, especially in the US property market. As we continue to reflect on the lessons learnt from this tumultuous event, I am reminded of a story a friend sent me about the world’s most valuable properties in the early 17th century. These were the islands in the Banda Sea, in today’s Indonesia, and the most valuable were Pulau Ai and Pulau Run. Pulau is the Malay word for island.

The islands drew the fortune seekers at that time for one and only one reason: a spice called nutmeg. Nutmeg was, in the words of a contemporary observer, the ‘most coveted luxury in 17th century Europe’. A recent American radio programme in the US explained that

nutmeg “was fashionable among the wealthy. It was exotic and potent enough to induce hallucinations”. And trade in it was highly lucrative – profit margins were reportedly up to 60,000%.

For over a hundred and fifty years, the maritime powers of the day fought over these islands, starting with the Portuguese who came in 1511, then the Dutch and the English. Rivalry between the English and Dutch was fierce, and the islands changed hands twice. When the Dutch seized the island Run in 1665, the English retaliated and took New Amsterdam in North America. Two years later, they negotiated a peace treaty. The English gave up both Pulau Ai and Pulau Run, and in return, got a small trading post with less than 1000 people – really nothing compared to the riches of nutmegs produced in these two islands. Do you think it was a good deal? Nobody did at the time. But guess what this trading post was? Well – it was Manhattan Island – yes, New York.

Today, nutmeg is just another commodity, and the two islands are sleepy atolls. And New York – well, it’s New York!

What is the point of my story? There are several.

First, trade is an enormously important part of the growth story, indeed in the advancement of mankind. In the continuing rivalry between the maritime powers, Singapore too became a trading outpost for the British East India Company in 1824. Right from its early days, Singapore benefited greatly from open and free trade, including the spice trade. Singapore was for centuries an


emporium of the world, thriving in the trade of physical goods, and a key node in the Maritime Silk Road.

Second, the nutmeg story is an instructive lesson about the basis for sustainable economic development. An agricultural commodity like nutmeg has limited supply, which fluctuated with the broader economic cycle and climatic conditions. To win the economic race, the players sought to control the supply, by dominating the lands, suppressing the natives and keeping rivals out. It was a zero-sum game, and often a brutal exercise. But the fervour over a single product could not last – it was also subject to changing tastes, fads and the challenge of new and better products.

The contrast between the fortunes of Pulau Run and that of New York could not have been starker. New York flourished when the ideas of the Enlightenment, and the Industrial Revolution that started in England, reached the US. It was the story of migration and entrepreneurship, of free markets, of ideas and technology that created a new wave of prosperity, and which transformed the global economy. New York’s model of development, driven by ideas and an embracing vision, is constantly now being played out.

For 200 years from 1750, starting with the Industrial Revolution until the 1950s, the economies in Europe and the US took off. While this was punctuated by WW I and WW II, and the Great Depression, standards of living rose dramatically. After WW II, the enlightened American policy of not punishing the vanquished, but instead helping them to re-build their economies through the Marshal Plan, ushered in a period of prosperity in Western Europe. GATT (and later WTO) was conceived in 1947 out of the vision that greater cooperation in trade enables all to prosper.

In the rest of the world, the post-1950 period saw many colonies fight off the yoke of colonialism. A few made the

right decision to embrace global capitalism, plugged themselves into the global economy and prospered. Singapore, which had always kept itself open to the world, was one of those few Asian countries which narrowed the income gap with the West. The success of these “dragons” encouraged many more, including the “tigers” and then China and other developing nations, to join the global grid. Hundreds of millions have been lifted out of poverty.

IMPLICATIONS FOR THE CHALLENGES TODAY

When I joined the world of central banking in 2006, it was a time of optimism and even exuberance. Central banks around the world were expressing quiet confidence in our ability to engineer stable growth and low inflation. But the GFC of 2008 had a great dampening effect. Confidence and optimism has been replaced by uncertainty and doubt. In world trade, the DOHA round is stuck. All around the world, people began to question the benefits of globalisation and the Financial Times ran a series of articles on the “Crisis of Capitalism”. US businesses still sit on vast amounts of cash relative to what they could have invested – a considerable war chest, but investment has been moribund for an extended period and is only now showing tentative signs of life. In emerging markets, the earlier euphoria has been tempered by a more sober analysis of growth prospects.

But I am also encouraged by the more positive developments – the advances in ICT, in robotics, nanotechnology, genetic engineering renewal energies and the exploitation of shale gas. The US manufacturing sector has recovered quite remarkably, with higher productivity.

The other reason for cautious optimism is that, gradually but surely, policy-makers around the world are beginning to take structural reforms to heart. From economic restructuring in China and Europe, to Abenomics’ third arrow, and the recent pledges made in the run-up to the Indian and Indonesian elections, we can see the desire for change. If there is one lesson to be learnt from dealing with the consequences of the GFC, it is that real, sustainable growth can only come from the hard and continual work of restructuring, and ultimately from productivity growth.

IDEAS, RULES AND COOPERATION

In looking at the supply-side and structural changes relevant for securing sustainable growth, three big factors come to mind.

First, ideas matter. Certainly, ideas that make for a better world, ideas from the East and West, from humanities and the sciences, from the abstract to the practical. Ideas that should be shared freely. But also ideas that are put into action, to produce better goods and services, to enhance the quality of life. This means respect for intellectual property, investment in R&D and


commercialisation of ideas. This means investment in basic education, higher education and continuing education. These are critical to a more flexible and productive labour force, and a more enlightened citizenry.

Second, rules and institutions matter. One highly visible consequence of the GFC has been a proliferation of rules to regulate the financial sector. But I think there are many other important rules and institutions that we need to evolve and adapt if we want to make the best use of new opportunities and new technology. Rules on investment need to be predictable, given long gestation periods. Rules need to create sufficient incentives to enable the decisions of billions of economic actors to be coordinated to achieve a good outcome. Rules need to respond to the possibilities opened up by new technology, and institutions need to adapt to the changing global environment.

Third, consensus and cooperation matter. We need a consensus on how we can generate and sustain growth within countries, and cooperation across countries at the bilateral, regional, and global levels to expand the economic space for all. One bright spot is that the GFC did not result in a closing of markets. But we need a more positive agenda – to continue to open up markets to trade and investment.

Let me draw out some examples from Singapore to illustrate the above tenets.

First, to generate ideas, we will invest in education, R&D, protect and advance the use of IP. While our education system is sound, we must strive to do better. We are now seeking to create multiple pathways, promote multiple modes of learning, to develop talents in multiple domains. We are helping our students to learn more about the world around them – in 2013 alone, over 100,000 of our students in primary and secondary schools travelled abroad, with 60% to the ASEAN countries. This represents about 20% of all our students, and most of them were funded by the government to go abroad.

• To make lifelong learning real and relevant, we are working with companies to make workplaces great learning places. We have to change the current

paradigm of just frontloading education in the first 20 years of a person’s life, to a lifelong journey of learning. We are investing in a transformational initiative called SkillsFuture. DPM Tharman Shanmugaratnam will be chairing a Council to spearhead this. So you are going to see major changes in this.

• We are also bringing together key decision-makers to connect and discuss the ideas, big and small, that can make a difference. The Singapore Summit is one excellent example. Our universities are deepening research in the confluence of Asia and the world, and several companies have sited their corporate universities and training centres here. We welcome all to make use of Singapore as a Global-Asia node.

Second, Singapore’s success has been a story of adapting rules, strategies and strengthening institutions to changes in the domestic and global environment. The government has had to adapt its strategies and policies to nudge and nurture industry as they strive to take full advantage of the new possibilities.

• For over 700 years, Singapore functioned as emporium of the world. When the global economy was all about trade in goods, we served as a display and trading centre, taking advantage of the monsoon seasons for sailing boats to come and go. When industrialisation in Asia was at its infancy, we sought to draw in manufacturing investments and welcome MNCs. And indeed, we have benefitted a great deal from many of your investments, and many of you helped build our institutions of learning. As regional incomes and demand expanded our thrust into services took off. Throughout, our institutions have continued to emphasise predictability of our policies and ensured fiscal prudence, macroeconomic stability and openness.

19 September 2014 - Welcome Dinner Summit Welcome Address by Mr Heng Swee Keat


• In the future, the global economy will be defined more by ideas, innovation and creativity. We hope to be a living laboratory for these changes, and usher in an era where advanced manufacturing and new services, powered by technology, powered by ideas, will enhance people’s welfare.

• Singapore has very few natural advantages, so we must make the best use of all that we have. One of these is that we are a city, and also a country. So our little island can serve as a test-bed, a living laboratory, a prototype for all sorts of urban solutions, mobility and liveability solutions, for smart city, for green, sustainable development.

• Hence, we are investing in R&D, and in creating the conditions to enable commercialisation, particularly, in respecting IP. So our other DPM, Mr Teo Chee Hean, who chairs our National Research Foundation, is spearheading this effort, and our Prime Minister chairs an overall Committee to look at Research, Innovation and Enterprise.

Third, consensus and cooperation matters. I recall that when we negotiated our first free trade agreement with New Zealand in 2000, we were criticised for breaking ranks and for creating a spaghetti bowl of rules. Over the last decade, however, economies within Asia have concluded many trade agreements.

• So I am glad that this little initiative has grown, and blossomed into a free trade movement, with more bilateral, regional deals coming our way. My hope is that as we see the gains from cooperation, these regional trade pacts will blossom into global free trade.

CONCLUSION

Let me now return to my nutmeg and island story. The nutmeg story was about a scarcity mentality – nutmeg was a scarce commodity, and economic competition meant a zero-sum game – the gains of one are the losses of the other.

After almost 400 years, the rules of the game have changed. The prosperity of our neighbours is good for our own prosperity. Working together, we can grow the pie. And with new ideas, new technology, we can expand our space for growth. Provided we have good rules, and a willingness to cooperate.

For the future, will we have the wisdom to cooperate and expand our space, or will we, like the nutmeg traders of the 17th century, fight and kill one another over islands that produce what eventually became a commodity? Will we make the wise decision of developing free economies, with innovation powered by new ideas and new technologies, and new ways of working? Will we have a growth mentality or a scarcity mentality?

Finally, I should say a few words about the Gardens by the Bay that we are in now. In many ways, these

beautiful Gardens are a symbol of Singapore and what we hope we can do to be relevant to the world. Built upon a theme of celebration of tropical plant diversity, the Gardens currently houses nearly three thousand varieties numbering one and a half million plants, both indigenous and introduced. Very special conditions are created for the beautiful, weird and wonderful plants and flowers from different parts of the world to thrive. I am sure that there will be a variety and species of plant from every part of the world you come from.

The Garden is located at the historical maritime gateway to Singapore. It has become a national icon that not only enhances the city skyline, but also provides an oasis of peace in our city centre for people from all walks of life to connect, recreate, and enjoy the bounty of nature. It is a place for us to reflect upon the need to cherish the fragile ecosystems in the world, to think of the possibilities of environmental restoration where man has done damage, and to reap the rewards made possible by such endeavour. The amazing increase in biota from insects to birds and otters within this new entirely man-made habitat in Singapore has also allowed resident nature lovers and biologists from all over the world to meet and interact. It is a catalyst for thinking about our future, and our relation to planet Earth and fellow humans. This Garden complements our historical Botanic Gardens which also holds deep heritage value for us.

You have many interesting sessions ahead – on sustainable growth, economic integration in Asia, geopolitical risks and energy dynamics. I wish you all a fruitful discussion. Do enjoy the evening in this special Garden. And by the way, we have nutmegs in this Garden.

Thank you.


20 September 2014 - Conference

Opening Remarks by Conference Chairman Mr George Yeo

Dear friends, may I on behalf of GIC, Temasek, MAS and EDB, thank all of you for your participation at the third Singapore Summit. It has gained some traction and the quality of attendance has been improving. We would like to think it is because of our organisational ability but I think the reason is much deeper than that. I think we are all here trying to make sense of some of the changes swirling around us.

Since last year, the global economy is still muddling along. I read carefully Federal Reserve Chairman Yellen’s announcement a few days ago. QE (quantitative easing) will stop in October, but very low interest rates will continue for a considerable period of time because there is slackness in the labour market. Her statement was very carefully crafted, reflecting the fact that, while the US is showing growth, it is still fragile and somewhat uncertain. And while in the US, QE is being turned down, in Europe it is just being started, also in October. And for good reason because the European economies are in the doldrums. The conflict over Ukraine and the stand-off with Russia have not helped. And now, our common revulsion against what is happening in Syria and in Iraq.

In Japan, the third arrow is still finding its mark but Prime Minister Abe’s leadership and determination

are impressive. We have got to wait and see. In the meantime, developing Asia, despite many problems, continues to do well. We are seeing slower growth but higher quality growth.

China, of course, is the big drama. Last year, we talked about the anti-corruption struggle. At a Politburo meeting in June this year, President Xi Jinping described it as a life and death struggle and reminded everyone of what Zhu Rongji said, when he became Premier, about preparing a hundred coffins - ninety-nine for those he was going after and one for himself. In fact, it is remarkable how, within a relatively short period of time, President Xi Jinping has been able to take over command. His authority is no longer in question, both domestically and internationally, and he has set a different tone. Economically, the measures have dampened the economy’s growth and, for multi-nationals, China is becoming harder. For Chinese companies, China has also become harder. But the organic vitality is still unmistakable. Before the Global Financial Crisis, for my company, for our China business, 80% consisted of taking things out from China to the developed world. After the Global Financial Crisis, two-thirds of our China business consisted of bringing stuff into China. So while high brands have become less popular, mass consumption and mass fashions have


become more important and this is happening all over China.

Xi Jinping has just left India and his visit to India bears careful analysis. Under Prime Minister Modi, there is a new spirit in India and he may have a honeymoon of maybe two years. He knows that he must move fast because his campaign slogan was “good times are coming”. As everywhere, the electorate is impatient and fickle and, already in many local elections, the BJP has lost ground. Prime Minister Modi knows that the economic agenda is critical to his long-term agenda of strengthening India and taking it to the front ranks of major countries in the world. The way he has managed relationships with China has implications for all of us. We read how President Xi Jinping was the first foreign leader to congratulate Prime Minister Modi when he became Prime Minister. Now, let us remind ourselves that who is the first to congratulate Prime Minister Modi depended not on who called first but whose call he wanted to receive first. Prime Minister Modi decided that for various reasons, he will receive the call from President Xi Jinping first.

When Prime Minister Modi went to Japan, he was very careful to show that he was not going to get involved in some coalition against China. So in Tokyo, he repeatedly made cooing noises towards China. Xi Jinping went first to Ahmedabad. Modi was celebrating his 64th birthday and along the banks of the Sabarmati River, there was a big party with vegetarian food served, and great warmth. President Xi Jinping responded in kind, promising industrial estate investment in Gujarat. But it was in Delhi where the formal statements were made by both leaders, and I would strongly recommend that you read those statements because they say a lot about what is happening between two countries which together make up 35-40% of the world and probably provide a higher proportion of global brain power.

Among various things – like 20 billion dollar worth of investments in five years, the more-than-doubling of trade in five years, China investing in railroads and infrastructure and in manufacturing, and cooperation in the peaceful use of nuclear energy - there was a curious agreement that an important place of pilgrimage in Tibet, the homeland of Lord Shiva, called Kailash Mansarovar, would be accessible via an obscure mountain pass which is of strategic importance, called the Nathula Pass, squeezed between Sikkim and Bhutan. For Indian strategic thinkers, that pass is of absolute importance because it can break India from its eastern portion. When Indira Gandhi, many years ago, moved the Indian Army into Bangladesh, she waited till winter time when that pass was filled with snow and China could not intervene. China has agreed that there will be a second pilgrimage route to Kailash Mansarovar through the Nathula Pass. This means India is now envisaging an opening of a new major channel of communication

across the high Himalayas to China. There are big implications. If Prime Minister Modi succeeds in his plans for economic development, and he has a good five year term ahead of him, the relationship between China and India will be transformed. And as they themselves said in Delhi, “If both of us agree on any issue, the whole world has to take note”. India and China are both ancient civilisations and this re-encounter between them will have the greatest importance in the years to come.

Southeast Asia is in between. We have both China and India growing organically, and Southeast Asia is benefiting powerfully from their growth. In fact, there are some reports that Southeast Asia received more foreign investment than China last year, partly because China itself is investing in Southeast Asia. We are seeing here a new growth surge powered by two major trends. One is that coastal China has become expensive and factories are relocating either inland to cities like Xi’an, Chengdu, Chongqing, Wuhan, Kunming where logistics are still difficult, or into Southeast Asia where logistics are simpler. The other is Japanese businesses diversifying into Southeast Asia from China. In North Vietnam, between the border and Hanoi, Samsung and Foxconn have invested billions of dollars into electronics manufacturing facilities. The road connecting Vietnam to China between Hanoi and Nanning is being improved - on the Chinese side, it is all highways, six lanes, and, on the Vietnamese side, a highway is being built. Philippines, Cambodia, Indonesia are positive stories too.

Let me touch on two countries in Southeast Asia —Thailand and Indonesia. In Thailand, some of us look askance at the army moving in again. We should look deeper than that. Thai society is going through a critical transition in its history because the King is aging. And unlike in 2006, when the army stayed on a year and dismounted with the deeper problems largely unresolved, this time around, the Thai army has decided to hang around for a few years to make sure that during the transition, nothing will fall in between. A civilian government has been formed with soldiers changing their uniforms to civilians, so that does not really count. But by the end of next year there will be new elections, but under a new constitution. The Thais expect that under the new constitution, the army will continue to play a special role. Western countries will sniff at all this but for countries in Asia - in ASEAN, for India, China and Japan - they will take a different view. For us in business, it is worth our while to stay invested in Thailand because long-term stability is good for Thailand and good for Southeast Asia. Democracy, if it does not deliver good government, may have to be attenuated here and there in order that good government may be achieved. But of course, it must not, in resolving the shorter term issues, create longer term problems.

In the case of Indonesia, it is a story where democratic arrangements have developed a remarkable stability.


It is remarkable how, within a relatively short period of time, President Xi Jinping has been able to take over command. His authority is no longer in question, both domestically and internationally, and he has set a different tone.

Last year, Jusuf Kalla, now Vice President-elect, addressed us. The Jokowi-Jusuf Kalla combination will create a new situation in Indonesia. Watch how they handle the reduction of fuel subsidies. If it is watered down, that will signal a bad start. If it is decisive, if despite uproar and demonstrations, they still follow through, then invest in Indonesia. Because it will show determination, that many problems of infrastructural bottlenecks, of regulatory reforms, of cronyism will be tackled. But these are things before us and by the time we meet again next year, the picture will be clearer.

On the whole, I think we have reasons to be bullish about ASEAN. If you add together China, ASEAN, India, that is half the world’s population. Are there problems? Yes, of course, there are problems, there are problems everywhere, but problems of a very different kind from the problems in the Ukraine or in the Middle East. We are very fortunate that Singapore is smack right in the middle of the happier half of the World. What are the possible problems? There are two levels to consider. At one level, we have to worry about big power relations - Sino-US relations, Sino-Japan relations, maybe Sino-Vietnam relations - but they all turn on Sino-US relations.

In the US now, there is growing concern about China’s growth and one can sense, reading the media and the journals, that anti-China sentiments are on the rise. And in dark rooms, dark thoughts are being nursed. So too on the China side. But among leaders, there is recognition that the relationship is too important, the interdependence is too great, the cause of a fall-out too dramatic, for that relationship to be mismanaged. Over the South China Sea, there could have been a possible triggering point in the last year but, since then, the temperature has calmed down. Between Vietnam and China, one must distinguish the relationship between foreign ministries and the relationship between the communist parties. Between foreign ministries, there is a stand-off, but between the two communist parties, which are the two oldest communist parties in the world, the relationship remains profound. Recently, the Vietnamese sent one of their top leaders from their communist party to China. He met Xi Jinping. I noticed the visit was reported in a positive way in the Chinese media. So I think there are reasons not to be too pessimistic about the South China Sea.

The relationship between China and Japan is dependent on the relationship between China and the US. During Susan Rice’s recent visit to China for the strategic dialogue, which my good friend Bob Zoellick initiated some years ago, Xi Jinping’s repeated statement that China will make relentless efforts to push forward what the Chinese called the”新型大国关系” or “The New Model of Big Power Relations”, is not to be questioned. China knows that if that relationship falters, every other calculation will have to change. And from the US side, the US needs China to solve many of the world’s problems - Ukraine, the Middle East, Ebola virus, the role of the US dollar in the world. Occasional hiccups and accidents could happen in the East Asian Sea or the South China Sea – like the Hainan spy plane incident in 2001 - but so long as at the strategic level, between the leaders, they maintain calm and strategic discipline, the overall relationship will be okay. On balance, although from time to time, there could be anxious moments, the picture in Asia is not bad. And it is partly for this reason that the Singapore Summit will grow in importance.

But there is a second set of problems at a different level, which arises not from geopolitics but from the effect that technology is having on all hierarchical structures. The recent referendum on Scotland is an example of this. What is the pressure? The pressure is, with the disintermediation of hierarchies, there is a pressing need for greater devolution of power everywhere and for leadership to become less hierarchical and more inspirational. And everywhere, for the same deep reasons, middle classes are becoming unhappy, because despite all their efforts in working hard, in being responsible, they are competing against computers, algorithms and new suppliers from the developing world. We see this in the West, we see it in Hong Kong, we see it in Singapore, we see it in Britain, we see it in Spain, we see it in Eastern Europe — it is a global phenomenon. Governments are under pressure to take from the rich to help these middle classes. But that is a 20th century solution which will not work because capital

20 September 2014 - ConferenceOpening Remarks by Conference Chairman Mr George Yeo



and talent will flee. And in the end, to face this challenge, we cannot avoid the moral question of the growth of inequality. In the end, the problem of mass unhappiness among global middle classes is a moral question of what it means to be a member of a community. There is growing desire for greater autonomy all over the world. Many feel that far away - in Beijing, in Tokyo, in Brussels, in London — the leaders live in their own world, they do not know local circumstances, how ordinary people live, the hardships they have to go through. Many do not understand why they are unhappy and so they listen to those who provide simple explanations, who make simple appeals — and that can be dangerous. These are questions which we, who are in business cannot close our eyes to. I remember early this year, in Davos, a message from the Holy Father. Klaus Schwab had invited him to speak. He sent a cardinal there to deliver a speech reminding everybody that, yes, it is good to meet and to talk about business and to promote growth, but please do not forget, in the end, what is it all for? It is for the human being. And maybe in the course of our discussion today, we should not neglect that moral dimension.

We have a full day today. We are keeping the programme short and compact, to end by 4:30 - 5 pm. In the morning, we talk about the growth of the Asian economy, about integration, about the Regional CEP (Regional Comprehensive Economic Partnership) versus the Trans Pacific Partnership. We will talk about Xi Jinping’s visit to Jakarta last year, calling for the trade between ASEAN and China to grow from 400 billion dollars in 2012 to one trillion dollars by 2020. Then we will have Sri Mulyani as our Distinguished Guest Speaker. She is from the World Bank but she is also from Indonesia. Earlier, I asked Nik Gowing to set aside some time for questions on Indonesia because Indonesia is a big country and makes up almost half of ASEAN. How Indonesia performs in the coming years will affect all of us in ASEAN in many ways. The Prime Minister will join us for lunch and he has

agreed that it will be an open dialogue. Nothing barred, so please make full use of the opportunity to ask any question you wish. Ambassador Chan Heng Chee will chair the session. As we have less than an hour, she will have to be a school mistress and be very strict. No verbosity please. Short sharp questions collected together so that the time is maximally used.

In the afternoon, the first session on risk will be on geo-politics and geo-economics. We will talk about the things which worry us and there are many things which should worry us. The last session focuses on energy. I remember Lee Raymond telling me years ago that China’s foreign policy was increasingly being dictated by China’s energy needs and this is perhaps a perspective which applies not only to China but all over the world. You cannot have growth without energy. Like in the biological world, whoever can optimise the use of energy will have a great Darwinian advantage. In fact, one way to analyse the quality of a government is through its energy policy. If its energy policy is bad, you see pollution, high subsidies, traffic jams, all kinds of absurdities. If energy policy is sensible, many things work well. I remember Amory Lovins of the Rocky Mountain Institute telling me some years ago that no government takes its energy strategy and policy as seriously as the Chinese government. And that was many years ago. Energy policy is like a dipstick, a thermometer, into the quality of governance of a country. We are going to discuss many things - about technology, the impact of shale oil and gas, geo-strategic implications on the Middle East, on China, the Straits of Malacca, about alternative energy sources. It should be an interesting session. Then by 4:30pm we should wrap up, leaving you free in the late afternoon and the evening for your other affairs, and tomorrow we meet again at the Roundtable for those of us who are involved in it. After that, we have the F1 party in the afternoon and evening.

Thank you all for coming and we look forward to an interesting day but please do not forget Chatham house rules. Apart from Sri Mulyani and the Prime Minister’s dialogue, if you want to quote anyone else during the sessions, please ask for his permission. Thank you very much.

Among leaders, there is recognition that the [Sino-US] relationship is too important, the interdependence is too great, the cause of a fall-out too dramatic, for that relationship to be mismanaged.

Plenary Session 1:Staying Ahead, Sustaining Growth

Moderator: Nik Gowing International Broadcaster

Panellists: Anshu Jain Co-CEO of the Management Board and the Group Executive Committee, Deutsche Bank AG Michael A. Spence William R. Berkley Professor in Economics and Business, New York University Stern School of Business Tian Guoli Chairman, Bank of China Sunil Bharti Mittal Founder and Chairman, Bharti Enterprises Minoru Makihara, KBE Senior Corporate Advisor and Former Chairman, Mitsubishi Corporation

OBJECTIVE OF THE SESSIONThis session discussed the economic transformations that are taking place in Asia as the region moves to become less dependent on export-led growth and growth fuelled by easy monetary conditions. The panel also discussed the economic outlook for Asia’s key economies and how growth could be sustained.

KEY POINTS

Impact of Easy Monetary Policies on Asia

• Although Asia has built up resilience since the Asian Financial Crisis, Asia is still dependent on easy global monetary conditions. Firstly, Asia has been reliant on export-led growth and has, therefore, benefitted from the support that Quantitative Easing (QE) has provided to bolster domestic demand in advanced economies.

Secondly, Asia is reliant on external borrowing. Supported by plentiful and cheap financing, there was US$300 billion worth of capital inflows into Asia (excluding Japan and China) in 2013.

• In some Asian countries, especially those which may have become over-reliant upon easy borrowing, some dislocations can be expected as a result of a tightening of the US monetary policy. However, overall resilience in Asia has increased considerably, as Asian central banks are sitting on reserves of about US$6 trillion (i.e. 2.5 times more than that of the 1997 Asian Financial Crisis), and debt is increasingly denominated in local currencies. Asia’s shock absorption capacity has increased, and it is unlikely that a repeat of the Asian Financial Crisis will be seen.

• Overall, QE tapering should be regarded as good news, rather than bad news, since it means that the


From left to right: Anshu Jain, Michael A. Spence,Tian Guoli, Sunil Bharti Mittal, Minoru Makihara, KBE

US is on the recovery path. With a renewed positive outlook, US corporates are likely to put to work large amounts of currently unutilised funds, much of which will form capital expenditure inflows into Asia. Nonetheless, risks remain as excess liquidity over the last few years have resulted in dysfunctional markets and mispricing in many asset classes, not just in Asia but also in peripheral Europe.

Sustaining Growth in Asia

• Since the Global Financial Crisis, Asia has been a key driver of growth in the global economy. However, the opportunities and challenges within each country are different.

• In China, there remain tremendous opportunities for growth. There is still considerable growth potential in second and third-tier cities, before they become comparable to first-tier cities like Beijing and Shanghai. With continued rural-urban migration as well as a huge domestic market, China is likely to generate additional jobs for its citizens through the creation of tens of thousands of new domestic service businesses.

• Currently, policymakers in China have two key concerns: ensuring sufficient funding for economic development, and ensuring social stability. As China advances to a higher stage of economic development, addressing environmental and income inequality issues has also risen in priority.

• In India, there is a renewed sense of hope and optimism under the leadership of Prime Minister Narendra Modi. To boost growth, Modi’s government has been seeking Foreign Direct Investments (FDIs) and has been active in its engagement of China, Japan and the United States. These foreign investments are key to starting the manufacturing revolution, as well as to boost the infrastructural investments required in India.

• Over the years, manufacturing, as a share of India’s GDP, has fallen to about 15%. Under Prime Minister Modi’s “Make in India” campaign, the aim is to increase the manufacturing’s share of GDP to 25%. With one million people joining the workforce annually, manufacturing is the only economic sector which can provide sufficient employment. This initiative to boost manufacturing needs to be complemented by investments into critical infrastructure. In this regard, India can learn from China’s experience; China’s investments in infrastructure about a decade or two ago has been instrumental in helping China reach its current growth rates.


• The Indian government has taken steps to calm the nerves of investors, who have been cautious about cases of retrospective taxations. This can be seen by the increase of FDI from US$10.2 billion in Q4 2013 to US$20 billion in Q1 2014. Nonetheless, India is a huge country and the economic reforms will take time to percolate throughout the entire economy.

• In Japan, Prime Minister Shinzo Abe has succeeded in lifting consumer sentiments and boosting business confidence, which should translate into higher domestic spending in the near future. However, while the Bank of Japan has been increasing the monetary base, bank lending has remained weak. For the third arrow of Abenomics to succeed, deregulation, and a smaller government who listens to the requirements of businesses are needed.

• The size of the Japanese government debt (currently 2.5 times of the country’s GDP) remains a source of concern although much of the debt is held in local hands. The implementation of a consumption tax in April 2014 was a factor leading to the 7.1% decrease in annualised GDP in Q2 2014. Going forward, it is not possible for Japan to substantially lower its debt burden solely via taxation; Japan would need to grow its way out of it through structural reforms.

Outlook in Advanced Economies

• There were mixed views on the recovery of the United States and its long-term prospects. On one hand, its recovery is broad-based and supported by several factors, including the rise of alternative sources of energy, increased consumer demand, technological advancements, and improving prospects for the real estate sector. On the other hand, US growth remains below its full long-term potential, reflecting a systematic pattern of under-investment in the public sector. Nonetheless, the United States is seen to have sufficient structural flexibility, and the bottoming out of consumer debt as a percentage of the country’s GDP, since the 2008 subprime crisis, leaves room for tremendous upside.

• Among the advanced economies, the Eurozone appears most at risk of “secular stagnation”. Growth has remained elusive over the past several years and unemployment rates have remained high. Unlike the US, the Eurozone lacks structural flexibility.

The Way Forward

• Asia has been a key driver of growth in the global economy. Opportunities remain for companies in Asia, as large developing nations like China and India continue to urbanise. In order for growth to be sustained, structural reforms need to continue.

• For Asia to sustain its growth, a better match between the demand and supply of capital is needed. For example, countries like India need access to global capital in order to maximise their long-term potential, which could be significantly improved through investments into critical areas such as infrastructure.

• Technology is likely to be a key enabler in developing societies. If technology enables the development of more effective supply chains, growth will shift to where markets are, rather than where the demand originates. Under this scenario, growing regions such as Asia and Africa are expected to benefit significantly.

20 September 2014 - ConferencePlenary Session 1: Staying Ahead, Sustaining Growth


Plenary Session 2:Asian Economic Integration and Its Global Implications

Moderator: Ambassador Tommy Koh Ambassador-at-Large, Ministry of Foreign Affairs, Republic of Singapore

Panellists: Jiang Jianqing Chairman of the Board of Directors and Executive Director, Industrial and Commercial Bank of China Limited Pravin Krishna Chung Ju Yung Distinguished Professor of International Economics and Business, Johns Hopkins University Lin Bin Co-Founder and President, Xiaomi Corporation Wishnu Wardhana President Director and Group Chief Executive Officer, Indika Energy Robert Yap Chairman and Chief Executive Officer, YCH Group

OBJECTIVE OF THE SESSIONThis session focussed on the outlook of free trade agreements involving Asia such as the Trans-Pacific Partnership (TPP), Regional Comprehensive Economic Partnership (RCEP) and the ASEAN Economic Community (AEC), and the implications of Asia’s growing economic connections with the world and within Asia itself.

KEY POINTSOutlook of Regional Trade Negotiations

• The Trans-Pacific Partnership (TPP) is a trade agreement that covers issues beyond lowering tariffs on goods and liberalisation in services; it also includes discussions on intellectual property, E-commerce, and labour and environmental standards. Concluding the TPP will be a challenge, as market-access interests may not always be matched by participating countries that have domestic sensitivities. Another potential obstacle to an early conclusion of the TPP negotiations is the lack of domestic political support for the Trade Promotion Authority in the United States.

• In contrast with the TPP, the Regional Comprehensive

Economic Partnership (RCEP) is a more traditional “nuts-and-bolts” type of trade agreement that focuses on the liberalisation in trade in goods, services and investments. The success of the RCEP would require harmonisation of rules within existing trade agreements. This is a challenge, as less than 30% of goods in the region are treated in a similar manner across the existing trade agreements. It would also require consensus among members who have not had prior trade agreements with each other. With a substantial amount of negotiations still required, it will be a challenge for the RCEP negotiations to conclude by end-2015.

• The panel also deliberated whether, at a broader level, trade agreements have been as beneficial as people expect them to be. While hundreds of trade agreements have been signed in the last 20 years or so, only a minor fraction (<16%) of world trade actually gets preferential status, and only 2% of trade gets significant preferential rates of more than 10% of duty reduction. For the full effects of liberalisation to be realised, greater harmonisation across these agreements is therefore required.

From left to right: Pravin Krishna, Jiang Jianqing, Wishnu Wardhana, Ambassador Tommy Koh (moderator), Robert Yap, Lin Bin


Developments in ASEAN trade

• Economic integration within ASEAN has made good progress in terms of tariff reductions, and has helped to integrate various sectors such as automotives and electronics. However, there are still gaps towards reaching an integrated ASEAN Economic Community (AEC) as a “single market”:

o Business knowledge is still lacking. While the Asia-Pacific Economic Cooperation (APEC) was driven by businesses, the AEC has been driven by governments. If businesses do not fully understand the benefits of the AEC, there is a risk that they would adopt nationalist or protectionist attitudes.

o There is a concern of unbalanced liberalisation between sectors. Thus far, ASEAN has been focussed on tariff liberalisation. However, other areas such as investment and services liberalisation have progressed more slowly. ASEAN governments ought to make it clear to businesses that liberalisation of services and investments are a priority for them.

o Companies in ASEAN still face challenges competing on the international stage due to supply-side factors such as poor infrastructure. These supply-side challenges are high priority issues that have to be addressed before a single market under the AEC can be fully realised.

Asia’s Growth Engines

• Asia has become an engine of growth for the world economy in the context of relatively weak growth in the US and stagnant economies in Europe. This has boosted greater economic integration which brings about more opportunities for companies operating in the region.

• China, in particular, has led this Asian growth, averaging about 9.8% annual GDP growth in the last 30 years. Although there are concerns on the level of Chinese growth as its average annual GDP growth rate moderates downwards, China is still expected to grow at a relatively healthy rate of around 7 to 7.5% year on year. This moderation is due to a shift from investment-led growth towards consumption-led growth, and the development of the service sector which is driven more by domestic demand than external demand.

• China is paying more attention to creating growth in a way that is more environmentally friendly and energy efficient. While it is a costly process, as certain industries and sectors have to be phased out, results thus far have been positive; the levels of economic growth and employment are still healthy and there is continued innovation from SMEs and individuals.

20 September 2014 - ConferencePlenary Session 2: Asian Economic Integration and Its Global Implications


• Moreover, China has demonstrated its resolve to be as business friendly as possible. If measures undertaken in pilot projects, such as Bonded Logistics Parks and Export Processing Zones, have been shown to be successful, these effective measures are replicated across China quickly. In an environment where the government is decisive and resolute to resolve business concerns, businesses will feel more confident to invest.

• India has the potential to become an important engine of growth for Asia as well, although challenges remain. Businesses occasionally still find existing concessions provided in licenses retrospectively nullified as a result of new legislation or lobbying. Varying state taxes also add to friction and inefficiencies for investors. Businesses that are able to learn how to navigate this unstable environment are the ones who will find success in India. With new leadership in India, businesses are expecting a government that is more transparent and business friendly.

• The growth potentials of India and China have implications for the rest of Asia, and the rest of the world. While intra-Asia trade used to be dominated by Chinese exports, Chinese demand is now driving increased flow of products in the reverse direction. In fact, intra-Asia trade has increased substantially, constituting up to 53% and 56% of the region’s total imports and exports respectively. With greater wealth in China and India potentially driving consumption from within the region, the growth of regional trade looks set to continue.

Opportunities to Leverage on Technology for Asia’s Growth

• An integrated Asia brings about more opportunities for companies operating in the region, particularly for those who leverage on technology to spur growth.

• The advent of E-commerce has allowed companies to remove many of the costs associated with intermediaries and to sell products directly to consumers at a low cost. The increasing use of E-commerce has been supported by developments in logistics within Asia. For example, it has become possible to ship from a central warehouse in Beijing to anywhere in China within a day for less than US$2. India and Indonesia have similar capabilities to distribute products to consumers in a cost-effective and timely manner. Particularly within Asia, where the countries are huge with many cities facing traffic and infrastructure woes, the ability for businesses to directly sell to their consumers will result in a huge transformation of these countries.

The Way Forward

• Asia is a region with a large population and great diversity of wealth. China, Indian and ASEAN are major growth engines within Asia. While efforts are underway to further integrate countries and regions within and beyond Asia, there is a need for Asian governments to address supply-side challenges (e.g. infrastructure) and to provide a conducive and consistent operating environment for businesses.

• The ASEAN model has been working so far and could be even more successful going forward as its members deepen their economic linkages. It could potentially be a feasible model for other emerging regions such as Africa and Latin America.


Distinguished Guest Speaker Addressby Dr Sri Mulyani IndrawatiManaging Director and Chief Operating Officer, World Bank

Asia in the World EconomyA. INTRODUCTION:

It is a great pleasure to be with you here at the Singapore Summit. This forum has become a prime event for discussing developments in Asia and beyond.

Singapore is an obvious place for this forum, a country at the very heart of Asia, strongly linked to the region through trade, finance and people. At the World Bank we are pleased to be a partner of Singapore with a growing office that focuses on infrastructure and urban development.

Many have predicted that the 21st century will be “the Asian century”.

Asian economies have done well in the past decades: first led by Japan, then by the Asian Tigers, and more recently by China and India.

With few exceptions, Asian economies have rebounded from the Asian financial crisis in the late 1990s and the recent global financial crisis - often faster and stronger than expected.

If measured in comparable prices, China will soon overtake the U.S. as the largest economy. And by 2050 it will constitute a quarter of the world economy. India will compete with the U.S. for second place, and Indonesia will be about to overtake Japan.

This success inspires others.

I just visited Tanzania and Ethiopia, both countries with high poverty and high growth rates in the last decade. Both are looking towards Asia to learn from its lessons and copy the region’s successes. This illustrates how dynamic this region is.

But despite these prospects, Asia faces challenges, and there is no reason for complacency.

History is not destiny and the question is: are they ready to face new hurdles?

I believe more can be done. I believe if emerging economies in Asia manage a complex and intertwined set of challenges, success lies ahead. Today, I want to highlight three areas in which Asian economies can influence their future:

B. CHALLENGES:

First, Asia needs to balance its growth strategy by looking inward, not just outward.

A first challenge for many of the successful Asian economies is to change their economic model.

Asia, especially East Asia, has followed an export oriented model, which allowed for rapid growth, while OECD countries were happy to run trade deficits. After three decades of a successful export oriented model, the region is slow to adapt to the new situation.

But the global financial crisis and its aftermath require just that. The current outlook is mixed. To put it simply:


global economic growth relies on the U.S. to continue its upturn, hopes for Japan to implement further reforms, and prays for Europe not to decline further.

Trade intensity has declined, in part because demand was led by governments as part of their counter-cyclical measures. External demand for Asian exports is therefore likely to be more lackluster than before the crisis.

In addition, normalisation of monetary policies will lead to an increase in global interest rates. With more flexible exchange rates, ample reserves and stronger banking systems most Asian countries are now better prepared than a year ago to handle this. But higher interest rates will provide headwinds for investment demand.

Asia therefore needs to boost its domestic engines of growth through productivity.

In addition, governments can help domestic demand by addressing their infrastructure gap. But the fiscal space for some countries has become limited. India is one such example.

They will need to select the right investments and govern them smartly to ensure that they will create demand and employment in the short run but also raise productivity in the long-term.

As Asia’s growing middle class will consume more, demand for services such as education, health services, housing and financial security is set to grow

too. Policymakers should build financially sustainable services, and by doing so, support domestic demand.

But there are also countries who struggled to reform their social sectors, creating a negative effect on their productivity and even threatening the sustainability of their public finances. It will be wise to learn from their mistakes.

The second area where Asian economies can make a difference in guiding their future is productivity.

Despite the rapid growth that developing Asian economies experienced in recent decades, their productivity still lags behind.

China’s value added per employee is only 1/7th of the average OECD country and India is less than 1/10th.

Productivity will be critical for avoiding the middle income trap. And it is not just about volume, but also quality.

Mobilising more capital and more human resources—something that most Asian countries have done well – is no guarantee for long term success. In fact, out of 100 middle income economies in 1960 only 13 graduated to high income level. The others got trapped in the middle.

Avoiding this trap means first and foremost changing the growth model and refocus from mobilising productive resources to better using them.

But this can be challenging.

The transition to more productivity-driven growth requires investing in people, upgrading their skills and gradually building innovation systems.

It seems that several institutions need to be built concurrently to secure a continued reallocation of resources to the most productive sectors, even after economies reach middle income status:

First, countries need to be able to innovate, create and absorb new technologies. Korea achieved this through its universities that have strong ties to industries, a well-educated workforce and a flexible business climate. Countries such as China and Malaysia are actively building their own innovation system.

Second, they need labor market institutions that maintain flexibility in the labor force.

Third, they need financial institutions capable to channel money where it is most productive combined with a positive business climate that allows new firms to emerge and unproductive ones to exit.

And finally they need policies that increase competitiveness and openness to trade that forces companies to innovate and seek further productivity gains.

The most difficult part of productivity shifts is avoiding state capture. If the privileged few, the elites, protect state enterprises from competition and maintain exclusive access to productive resources, opportunities are wasted.

This is where leaders can make a difference: by tackling the structure of state-owned companies and by leveling


the playing field, even if this comes at a political cost and the results are not immediate.

Mexico is a good example of a country that has tackled necessary but difficult reforms. But they have yet to pay off.

Further economic integration can be an engine of productivity gains.

East Asia’s close integration has allowed the region to become home to key production networks that supply the world.

ASEAN has played a central role by keeping external barriers low. We are now only 15 months away from the creation of its economic community, a much anticipated step for further integration.

A seamless economic space with 600 million people can be a powerful engine of growth for the region and the world. It could become an important market for global investors.

ASEAN can also be an alternative production base for China, which is becoming more expensive and will move away from low-skilled manufacturing and exports.

But for this to become reality, the new economic community must realise its vision.Too many exceptions in opening trade and too many limits on foreign direct investment will undermine its goals. It could undermine ASEAN’s attractiveness as a location of global supply chains.

Pursuing closer integration requires political leadership that can explain the benefits and cushion the impact on those that stand to lose in the short term.

It also requires more than signing agreements—but hard work in reforming institutions and taking on interest groups that have little interest in sharing the pie.

While the European Union has its own struggles, its success is based on the fact that its integration was very broad, even addressing competition and social policies. Its structure encourages high level political commitment to implement the Union’s policies at the country level.

We should learn from its success and mistakes.

And to succeed beyond middle income status, countries need to focus on macroeconomic stability.

In some countries in the region, credit growth has been rapid in recent years and leverage has been building up. The effects on growth of all this credit have been leveling off, and increasingly credit seems to be propping up asset prices rather than productivity and healthy growth.

Reduced pressures from capital inflows in the course of the Fed’s tapering can help in reducing some of the risk that come along with that.

Nevertheless, the balance in some countries should shift from economic stimulus propped up by governments and central banks to containing the build-up in financial sector risks. Fiscal consolidation and monetary policies as well as macro-prudential policies should be used to achieve that balance.

The third challenge for Asian economies lies in the social fabric of their countries. There, policies need to be guided by what is good for most, not just a few people.

Fast growing countries in Asia, like countries elsewhere in the past, are experiencing rapid urbanisation, rising income inequality and a fundamental reorganisation of societies away from traditional structures.

In addition, their societies and labor force are aging. China’s labor force has already started to decline. While others such as India and Indonesia could still benefit from a demographic dividend in the decades ahead. Without generating sufficient jobs, they also could face rising tensions of growing youth unemployment.

Let me focus here on the challenge of rising inequality.

Productivity will be critical for avoiding the middle income trap. Avoiding this trap means first and foremost changing the growth model and refocus from mobilising productive resources to better using them. The transition to more productivity-driven growth requires investing in people, upgrading their skills and gradually building innovation systems.

20 September 2014 - ConferenceDistinguished Guest Speaker Address by Dr Sri Mulyani Indrawati


With rapid growth in Asia, the gap between the rich and the others has widened, notably in China and Indonesia, but also in India -- all traditionally egalitarian societies.

Cross-country analysis of inequality suggests that inequality first rises and then declines again, which has been a comforting thought for rapidly growing countries.

However, regardless of the debate around his data and methodology, the recent analysis of Piketty suggests otherwise. He finds that the top 10 percent of earners has considerably increased its share of total income. This is true also for Asia.

Some rise in inequality may be good for growth, as it provides the incentives for people to strive to succeed. Some inequality is also a reflection of people moving from traditional to modern sectors.

But as World Bank research shows, if inequality starts to affect equity of opportunity, inequality could threaten growth.

Further, high inequality could undermine the political consensus needed to implement policies and reforms that keep growth high.

So countries that strive to reach high income levels should care about three areas to promote a healthy income and wealth distribution.

First, managing inequality requires creating access to equal opportunities. Recent research suggests that many Asian countries still perform well in that respect: A child’s school performance is less dependent on its parents’ socio-economic position than in many other parts of the world.

One reason could be that most East Asian countries managed to maintain low cost public education with reasonable quality.

This is something Asia should protect and even improve.

Second, maintaining an open, competitive and meritocratic society and avoiding political capture by the privileged. To achieve this, countries need competition laws, access to finance, and business regulations with low barriers to entry.

They need inclusive political systems that ensure equal access to opportunity in society and can help avoid political capture by the privileged.

Third, establishing a tax system that is seen as just could be a further means to manage inequality. This not only requires sufficiently progressive tax laws, but also the investment in tax administration to make these laws work.

Many countries are struggling to design the right tax policy and set the right rates. The U.S. and France are just two examples where tax aversion and inversion can dilute the effectiveness of the system. This is why this issue needs a collective approach.

I’ve experienced firsthand how difficult it can be to overcome these challenges.

But we should remember that while taxes are important, the spending side is equally relevant to address inequality.

C. THE WAY FORWARD:

Asian countries have much to be proud of in the way they have managed their economies in the past decades. But they should not take success for granted: the challenging international environment, the need to rebalance growth and the challenges of productivity and social justice require continued vigilance of policymakers in the years and decades to come.

It is encouraging indeed that several countries in the region have revamped their efforts to reform in recent years. Japan’s Abenomics and China’s Third Plenum reforms are good examples of this, and the incoming governments in other countries, including India and Indonesia, have an opportunity to follow suit.

I think it is fair to say that we know a lot about what policies are needed to achieve high income levels, or at least which ones to avoid.

But maintaining reform momentum won’t be easy, and it is no surprise that reforms often accelerate in a crisis, when policymakers have no alternative.

Making good use of a crisis is one thing, sustaining the reforms over the decades that it takes to bring countries from middle to high income is altogether a different challenge for policy makers.

The most crucial ingredient for sustained reforms is unlikely to be economics.

In my view, it is social justice that maintains consensus for reforms and open and participatory political systems that avoids political capture and ensures that policies are set to benefit society as a whole rather than the privileged few. Investing in the institutions that can deliver on that is probably the best investment policymakers can make.

Thank you.


Ambassador Chan Heng Chee: Thank you, Prime Minister for agreeing to participate in this dialogue session. We have been looking forward to this the whole morning. Now we have 45 minutes for this session, which means I really have to start with very little extra comments.

PM: Go ahead.

Ambassador Chan Heng Chee: Let me explain the format to the audience. I will begin by throwing three questions to the Prime Minister and the floor is yours after that. We will invite questions from the floor and when you ask questions, please send them through electronically to me, or I will recognise you by turning to the audience, wave a paper or a handkerchief and I will see you. So, Prime Minister let me begin by asking you the first question. We live in a world today that is faced by disorder, challenged by disorder. What worries you most for Singapore when you think of the following? ISIS, Ukraine, the implications of Ukraine, Ebola, Scottish independence – they voted no but it could be a ‘neverendum’ – or rising nationalism in Asia and the territorial disputes and someone mentioned in the last session protectionism?

PM: Well, it is a very connected world. So things which happened far away can have a very quick impact on us. If you worry about all of the things, you will not

get to sleep at night. But you have to think about them before you go to bed. So I would say I think of two things before I go to bed. One is what you described as rising nationalism in Asia and you can see it in many countries, in China, in Japan, in Southeast Asia and some other countries. You can see in territorial disputes; you can see it in the tone which is taken in the national debates and in an exaggerated and often very harsh and nasty way in the internet discourse. And I worry about it because we have enjoyed more than half a century basically of peace and stability in the whole of the Asia-Pacific region. And people say it is the Asia Pacific Century but to make that happen, you have to continue to have peace and stability and you need good relations between the major powers and there must be space for the small powers like Singapore to survive and to make to a living for ourselves in a predictable and secure world and nationalism can upset that. So that is one thing which I worry about. The other thing we have to pay attention to is ISIS. It is not a problem with a Poke solution but it is a problem because it is not just in the Middle East, but people all over the world are drawn in to it. Some online, some by personal contacts and you find fighters there who are from America, from Europe, from Southeast Asia, the Malaysians have people there, the Indonesians have people there. There is just a report today that there was a Malaysian woman, doctor, 26 years old, who went there in order to marry an ISIS fighter. And she is completely au fait with social media, she blogs about the cause

20 September 2014 - Conference

Dialogue withPrime Minister Lee Hsien Loong


and there is a picture of her, completely covered up. What is it which has possessed people to go and want to do such things in a faraway land? There have been Singaporeans who have done that. So if they destroy their own lives, that is one thing. They come back and they bring back trouble to our societies, there is more difficulty. So we have to worry about that.

Ambassador Chan Heng Chee: Thank you. Now this morning, we talked a bit about the Trans Pacific Partnership (TPP) and the Regional Comprehensive Economic Partnership (RCEP), the second will be on trade. In fact, trade negotiations are stalling. TPP is not working fully, it is stalling. RCEP stalling and recently we found the Bali package negotiated by the trade ministers, the WTO trade ministers facilitating trade also, you know, not being ratified by India actually. Let me ask you, do you think TPP will conclude and what are the implications if TPP is not completed?

PM: Well, I hope TPP will conclude. We have promised to conclude about three years in a row. So I think this is our last chance to fulfil our promise and if you do not fulfil your promise this year, you will be running into the American presidential elections in two years’ time and I think there will be further delays of an indefinite nature. And you will lose a lot because it is an ambitious deal, it is a deal which has strategic as well as economic benefits. It brings together all the key players in the Asia-Pacific or many of the key players on both sides of the Asia Pacific. China is not in but Japan is. Southeast Asia is there, Australia is there, so is Latin America. And it has very significant economic advantages. I mean we already have bilateral FTAs with many of the participants but this will allow us to do regional cumulation which means when you manufacture in many countries, you can add together all the value-added content and qualify for the benefits and so more of your trade will be free. And it will cover new things like electronics, commerce as well as intellectual property protection. So it is a major step forward and a major factor which can contribute to the stability and the prosperity of the Asia Pacific. And one day the Chinese may want to join. I know that not before long, the Koreans will also want to join and we will have a free trade in the Asia-Pacific.

Ambassador Chan Heng Chee: Now the United States is a partner of TPP. In fact a leading one, but the United States is not in a lot of the trade negotiations and FTAs

in the region. With so many American participants here, I wonder if you could explain what it would mean for the United States if TPP is not comprehensive?

PM: It is the only game you have in play for trade. We have many other trade arrangements going on. America is not party to them, you are party to this. The US President has said that America is a Pacific power, and will remain so. It will rebalance and have a strategic and significant presence in the Asia-Pacific. And to have a presence, it is not just battleships and aircraft carriers and aeroplanes. You have to have trade; you have to have those exchanges, that interconnection and interdependence. And TPP is your way of doing it. You do not do this, or you are just giving the game away. We are all in Asia, interacting, integrating, trading with one another. Our trade with China has become the biggest of our trading partners around the world, bigger even than America, bigger even than Europe last year. It has not been so for many years. It is now. It is so for many of the ASEAN countries, even for Japan, China is the biggest trading partner. Even for South Korea. So if you do not promote trade, what are you promoting? What does it mean when you are a Pacific power? It just does not make sense but Congressmen have different calculations and you have to make this sense percolate through and register with them. And maybe after the midterm elections, you will have a window to do that because after you have negotiated the agreement, it has to be ratified and in America, that cannot be taken for granted.

Ambassador Chan Heng Chee: Indeed. Now my third question, Prime Minister, will be on Singapore. Business people in this room want to know what is the next frontier for Singapore. We have invented ourselves and reinvented ourselves over the years. What is next for us? And how do we stay competitive?

PM: Well, it’s a never-ending business. I have just spent a week in southern China, and I went to Guangzhou, I went to Shenzhen, then I went to Guangxi which is not quite so developed, and also to Hongkong. And you can see how the people are moving, how quickly they are thrusting ahead and with that anxiety and urgency that they do not want to be left behind by the next-door city and we are a next, next-door city. So I was asked do I see this as a threat, I say no, provided we are also moving ahead. If we do not, we will be in trouble.

[The TPP] is an ambitious deal – it is a deal which has strategic as well as economic benefits. It brings together all the key players in the Asia-Pacific or many of the key players on both sides of the Asia Pacific. Southeast Asia is there, Australia is there, so is Latin America. One day, the Chinese may want to join. Not being long, the Koreans will also want to join in, and we will have a free trade in the Asia-Pacific.


We have constraints, with land area that is finite, we reclaimed land but every square kilometre of land you reclaim means one square kilometre of sea which you lose for the port and our harbour. So we expand the space but really what we need to do is to re-use and exploit over again the space which we already have. Higher, deeper, smarter, better integrated, better designed. It is urban planning, it is your economic renewal, it is really the renewal of your people and their skills and be able to engage them to the full and engage them to operate in a consistent and aligned direction. So we are not all pulling in different directions, lots of smart guys, result zero – which happens in a lot of countries and must not happen in Singapore.

Ambassador Chan Heng Chee: Will it be harder to keep this discipline in the country?

PM: I think so, I think so because we are starting from a higher base and when you start from zero, you know acutely that where you are is something to rejoice and to give thanks for. If you start at this point, well you assume that this is what ought to be and the natural way the world is, and you hope for something better and you can strive for something better. But that same awareness of fire and brimstone is not quite the same.

Ambassador Chan Heng Chee: Thank you. Now I am going to open this discussion to the floor and invite questions from the audience. When you ask your question, could you please state your name and give us also your organisation. The question is on cross border labour movement. Singapore is doing its bit to restrict labour supply. What is the right formula to solve this tricky issue? And should countries ease the regulation to allow free movement of labour to spur growth and reduce inequality. Oh this question comes from Sandi Uno from Saratoga Capital, Indonesia.

PM: Well, I would not say we are doing our best to restrict supply of labour. We are doing our best to manage our population and our workforce in a sustainable way so that it can grow but in a way which our resources can support and our infrastructure can support. If we just open our doors and say anybody can come, free movement of labour, I think tomorrow there will be one million people on the way here, maybe more, some will fly, many more will come by boat and it will be a different Singapore. So we cannot do that. So we have to grow in a way which is sustainable and we must be able to manage the inflow in a way that talent can come in and people who can make a contribution to Singapore can come in and will be welcome in Singapore and that is what we are trying to do. I think that from the point of view of countries which have got surplus labour, or people who are looking for work and want to work overseas, you would like rules to be laxer. From the point of view of having economic results, there has to be flexibility and talent must be able to flow and services must be able to be delivered across borders, so you

can have people come in do a project, build a hospital or even become doctors and lawyers or accountants and be able to operate that way. But from the point of view of managing a sustainable society and country, I think some controls along borders will be necessary for a long time. If you look at the debate in America about immigration, it is a very fraught subject. You look at what has happened in Europe where you have got Schengen and people can move freely. Britain does not have Schengen but they are already worried about the flow of people coming to work within the EU. And these are real problems which have to be dealt with.

Ambassador Chan Heng Chee: And we are not going to get it in ASEAN anytime soon. Free movement of labour.

PM: I think that there will be mutual recognition of qualifications, there will be arrangements to allow for people to work across borders, for people to visit and do projects but to say that within ASEAN, you can go anywhere you want just as in Europe, you can go from Romania to Scotland, well, even the Scots have views on that matter.

Ambassador Chan Heng Chee: Now, there is a question from Kishore Mahbubani of the Lee Kuan Yew of Public Policy. The question is – this morning the ASEAN Economic Community was discussed. There was scepticism that ASEAN will deliver on its AEC commitments in 2015. Is Prime Minister Lee optimistic that ASEAN will come through by 2015?

PM: I think we will pass. I am not sure I would award myself a distinction but I think we will pass the exam because we have already done most of the term assignments. I mean the deadline is December 2015, but we have been making progress along the way and about 85

20 September 2014 - ConferenceDialogue with Prime Minister Lee Hsien Loong


percent of what we promised to do we have already done. So we are a substantial way there. Of course, the rest of it will include some of the more difficult things to do and I am sure there will be some leftover jobs which will have to be done even beyond the deadline. But that is the way it is when you are bringing sovereign countries together and trying to work a deal on a win-win basis.

Ambassador Chan Heng Chee: Right now we have about 90 percent of tariffs down for all the countries?

PM: Yes, I think tariffs are no longer the problem. There are non-tariff issues, there are always some other sorts of restraints and ingenious ways by which local operators can persuade the regulators or the governments to lean a little bit in their direction without appearing to do so. I think these games will continue to be played and we just have to have a counter-balancing force within ASEAN to press against that.

Ambassador Chan Heng Chee: And it will include services?

PM: I think it already includes services, not as much as goods but it does include services.

Ambassador Chan Heng Chee: Alright. Any question. Is there a question from the floor? Prime Minister will go with the flow, he says. Yes, I think Martin Sorrell.

Q: Prime Minister Lee, there are a number of very great similarities between Singapore and Scotland – both historic, size, GDP size. Is an independent or non independent Scotland viable or not?

PM: Well, everybody believed and we believed that an independent Singapore was not viable and it happened to us and we proved ourselves wrong. So it may be that

you can do the same in Scotland. You have resources, you have oil, you have beautiful scenery, you have very talented people. I am quite sure that you will be able to survive this in the world. There are many non-viable countries in the world which survive.

Ambassador Chan Heng Chee: You are not encouraging Scottish independence, are you?

PM: Since it is the morning after, we have had a drink and we can afford to say. But you are a part of the Great Britain. You have been for 300 years, you have got a strong Scottish identity which have been maintained all these 300 years. So I can understand the sentiments. It is a beautiful country, it is a glorious place to be, but if you are looking to the future, you really have to be part of a bigger whole and in Singapore, we tried to do that. I mean we wanted to be part of a bigger whole in Malaysia and we really believed that if we did that, there would be a common market, there would be an economic base, there would be greater security over the long term and we went for that. It did not work, we came out, we accepted this as our karma. We have made this work thus far. I think in Scotland, your conditions are less precarious than ours because you are more like Canada next to America rather than Singapore in the middle of Southeast Asia. So your odds are not as long as ours were in 1965. But why do you want to go that way if you can have the advantage of having your cake and eating it while being part of the status quo improved? That is my view. In Singapore’s case, we had no choice, we went the other way and succeeded. I do not know which way you voted in the referendum.

Ambassador Chan Heng Chee: But we know one person in the room who voted for Scottish independence. There is a question from the audience and it is this. It is from Jaishankar from the Brigade Group. Since ISIS and rising nationalism worries Prime Minister, what in your opinion should be the way to find a solution?

PM: Nationalism is a very powerful force. It can be a plus, it can be a minus. If you harness it to get people to take pride in themselves and to work to develop and grow, you can transform the country. I mean if you are not proud of your country, you are not going to go anywhere. But at the same time, you have to understand that you are living in a world where you have to have to be friends with others, where power is not the only factor, and if you are going to maintain your power, then being able to have that equal relationship with other countries, it is something which is critical. And I think small countries know that instinctively. We look to build up our armed forces and our national pride, but we also look to make friends with neighbours. I think it applies also to the big countries. I mean it is one of the reasons why America has been able to maintain its position and it is welcome in the region all these decades. So you do not need a solution to nationalism, you need to channel nationalism in a direction which is constructive


and which is compatible with us all prospering together. ISIS has no solution in terms of going in and taking them out and making peace break out in the Middle East. You can do various things to hem them in, weaken them, knock out their leaders, deploy your drones. But even if you put boots on the ground which the Americans had, hundred thousand boots on the ground in Iraq until not very long ago. You cannot really change fundamentally the texture of the society and the people there and when you are gone, the problem will come back. So that is a very difficult problem in the Middle East. What we can do in our own homes is to watch to the security, watch to the confidence building and trust building between the different communities, and make sure that amongst our own communities here, the Muslims have leaders who will stand up and say that the ISIS that is not Islam, that is evil and we repudiate them and condemn them and try and prevent people from being misled by them. And that fortunately in Singapore, we have got religious leaders who have said that and said that emphatically and I think that the population in general understands that. Once in a while, you get people who are led astray and if we are lucky, well we discover it and pick them up early. If not, once in a while, they slip through and we have a couple who are in Syria and Iraq, including a woman with teenage children who are there and the children are part of this. So it is something to be taken with absolute seriousness.

Ambassador Chan Heng Chee: We, of course, encountered the Al-Qaeda threat in the region a few years earlier and it was still there and we were watching for this and then ISIS was a new phenomenon. You think ISIS is a more serious threat? About the same?

PM: Well, they are not trying to change us. Al-Qaeda explicitly had a group in Southeast Asia which was aiming to set up a caliphate, an Islamic state which covered all the Muslim parts of Southeast Asia and we are not a Muslim part of Southeast Asia but we are right in the middle thereof. So we were directly the target. In the case of the ISIS we are not their targets. Their target is a caliphate where they are but people go there and adopt their cause and fight there and if they come home with that passion and those convictions and those skills, who knows what is going to happen. You see what the Australians have just had to do? They have picked up a bunch of people because they had information that the man in the Middle East had called up the main in Australia and said let us randomly behead somebody and inspire terror in the Australians. They think very differently from you and me.

Ambassador Chan Heng Chee: Yes, thank you. Is there a question from the floor?

Q: Prime Minister, most of us in the emerging nations aspire to be one day like your country. The way you have provided for healthcare, education, security for your society. It is truly a role model for any nation. Yet we see

some form of stress developing even in the Singaporean society. When they have everything that the whole world would want to have, why do not you see that they are satisfied in all that you have provided for them? This is not the role model, all the efforts of eradicating poverty, bringing better life to hundreds of millions of people, if eventually they are going to get use to a better life and still be stressed about it, is it better to be having a Bhutan model of spirituality?

PM: Well some of us were attracted to the Bhutan model of spirituality but the Bhutanese held a general election and the government lost and the opposition who once said that all this stuff is just stuff and we need to resolve problems and have growth. So I accept that as the human condition that wherever you are, you would like to be better and wherever you are not, sometimes appears to be better. And so things hopefully progress and sometimes go around in great circles. And I think we are at a good level by international standards but I would be very sad if we concluded that we were unimproveable because we had reached perfection. That is the surest way to go downhill. That you can always do better, you always need to improve and there will also be new issues which will arise, which will become new problems which did not use to exist. For example, our population is ageing. I mean when our population’s average age was 20, and we built flats, we could build flats where there was lift on every five storeys. So you have a ten-storey building with lift goes up to the fifth and the tenth storey. If you live in the middle either you go up and walk down or you go stop down and walk up. It is only two storeys, you are young. Today old people already in the 60’s, some 70’s and 80’s, you ask them to go up and down steps, some of them maybe wheelchair bound and even if not, a step appears like an obstacle course. And well, that means we have got to put money in and build new lifts and provide for the mobility and the needs of the old people, and it is not just lifts so that they can go up and down, it will also be medical care, it will also be nursing homes, it will also be social needs so that they are part of the community. So no society is static and reaches a level of perfection. You always want to have that passion to improve but you should also have some of the Buddhist acceptance. That how do they put it? That resources are finite and desires are unlimited.



Ambassador Chan Heng Chee: Thank you. I think there was a question here.

Q: Mr Prime Minister, my name is Ajay Banga from MasterCard and my question really is that the digital economy is a large part of the possibility of growth, of productivity in the future. In many ways, your government and your country have made a lot of investments in that space. How do you think about the other side of this which is cyber security, cyber theft, cyber terrorism, the issue is expanding, it does not receive the public attention it probably should. My fear is two years later sitting in a room like this that would be the first topic that came up in the list that kept you awake at night. So I would like to understand how you are thinking about it and how leadership of your calibre and thought process is approaching the issue?

PM: Well, we think about it quite a lot because we think that digital economy is a big part of the solution to improving Singapore. We talk about a smart city, we talk by Big Data, we talk about having sensor network so that you know what is happening all over the island and if something does happen and you can bring the information together, you collate it, you can relate it to your database, makes sense of it and react to it. We talk about having systems where you can have remote medicine where you can be at home and you can be doing your physiotherapy because you may have had

a stroke and be able to have your physiotherapist in the hospital watch you, track whether you are doing it correctly, give you advice, vary your medication and so on. All these are marvellous things which can happen. But you must have systems which are secure because otherwise somebody will capture your heart pacemaker or your other critical systems and either subvert you or do some harm to you and we have had some incidents; we have had data stolen sometimes from the government. Fortunately so far not serious ones, sometimes from the private sector. I think one website just had 300,000 accounts stolen just a few days ago. K-Box website but even the K-Box website can be the key to open up many other things in the people’s lives. So it is something which we are taking seriously. We need to upgrade some of our systems. We do not go around telling people where they are weak but I know there are things which we need to upgrade and one of them is we have got the Singpass which is an ID to access all your government services. And we really need to go on a two-factor authentication because right now you have a password and everybody knows that half of the passwords in the world are spelt PASSWORD. I am sure some of them in this room are too. So we have to change but to get everybody to go to you say two-factor not everybody even knows what two-factor is. And then to have the infrastructure which is working and not just against normal failure but against malevolent intent of intrusion and exfiltration, for people to come in and take


out information or to damage your system. I think that is very frightening. You have your water plants, you have your power plants, and you have your telecom networks. If they come down, well, life comes to a stop. So we are putting resources into this. It is something which we are working with other countries but at the same time, some of these things you have to do for yourselves.

Ambassador Chan Heng Chee: Now I have quite a few questions coming in. This one is from Mr James Riady of Lippo Group. The question is Prime Minister, I wonder if you could share your views about Singapore’s hopes and concerns for Indonesia as your largest neighbour?

PM: Well, after President Suharto resigned and in quite difficult circumstances back in 1998, we worried which way Indonesia would go because Suharto had given us stability for 30 years and that stability had created prosperity in Indonesia and allowed other countries in Southeast Asia to prosper and many things could have gone wrong. I mean you have separatist groups in different parts of the country. You have extremist groups which are operating and in fact, we discovered the Jemaah Islamiyah group subsequently. You have social issues to resolve. To grow the economy is a big challenge and it was not all geared that a successful path forward would be able to be found. And it took some time to find a path forward but Indonesia did and for the last ten years, we have had President Yudhoyono and there has been stability, there has been growth, there has been a certain basis for the ASEAN countries to work together, big and small. You may be 200 plus million, you may be few hundred thousand, but we are ASEAN countries, we work together. And what we would like to see in the next phase is for that happy state of affairs to continue. The new president, President Jokowi, or President-elect Jokowi has come in with a very strong mandate. He has got a very clear sense of the needs of the ordinary Indonesian citizens. He wants to do good for the country and he has started off talking about one quite difficult subject which is how to reduce subsidies on fuel which are taking up one quarter of the state budget and squeezing out other urgently needed spending on hospitals, on education, on infrastructure, and so many other things. And we can only wish him every success. There are pressures in every society. You asked me about nationalism earlier. I think we have to watch how nationalism develops in Indonesia as in other countries and we have to watch how the relationship evolves over the next five, ten years and whether the changes which the new President will want to make will take and will help him to consolidate and strengthen his position to do more good or not and that is never easy to do because you are building on success but you are going to make change which is not easy, otherwise would have been done already.

Ambassador Chan Heng Chee: Now there is a question from Mr Meher Pudumjee from the company Thermax. Do you think the Singapore Model is replicable on a larger scale? If Singapore was the size of say, India, what

a thought, could you have achieved what you have done currently?

PM: No, I do not think so. I think it is not replicable not only because of scale but also because of history and circumstance. We are an island, we came through a certain history of colonial government which laid the base for infrastructure, for the way our society became, we had certain formative experiences in the anti-colonial period, fighting for independence, fighting against the communists, going into Malaysia, running into new problems in Malaysia, coming out from Malaysia suddenly and the shock of that sudden independence, galvanising a generation of Singaporeans and their children to do something exceptional together. Those are unique circumstances in a unique environment where it may not have resulted in success but fortunately for us, it did. In a different country, the circumstances are quite different. I mean India is a huge and diverse society. We say we have four official languages but in India, you have twenty-something official languages and few hundred different languages spoken. And you have got caste, you have got religion, you have got geography, so it is a completely different circumstance. China is also completely different. But maybe if you look at how we have solved individual problems and the approach which we have taken, you can pick up some ideas and apply them in your own environment. We have tried to do that in China. We have had some success in Suzhou Industrial Park where we said how about we do in China in one city or township something like what we did in Singapore using the ideas and the approaches we did in Singapore adapted to you and then it can be a model for other things to be done in China. And with quite a lot of trouble, eventually we succeeded in doing that. So we have a township, it is successful, it is adapted from what we have here but it is a success on its own terms and it has been a model which tens of thousands of officials have come from all over China to look at and pick up ideas from and to do in their own ways all in their own cities and provinces. We wanted to do the same in India. We still would like to do something like that in India but so far, we have not managed to get it off the ground and we hope that perhaps eventually we will be able to start doing something like that.

Ambassador Chan Heng Chee: Yes, and another question. This is from Kevin Schneider from McKinsey. One of the side effects, he says, of Asia’s rapid growth is growing income inequality. How serious is an issue is this inequality, unequal growth and what do you think Asian leaders should be doing? By the way, he also puts a P.S., he is from Glasgow, Scotland and he thanks you for the nice comments about his home country.

PM: Well, thank you. I think first of all, I am not sure that rising income inequality is the result of rapid growth. You see rising income inequality in Europe, in America, even in Japan, they have no rapid growth to worry about. But they are seeing these trends and we are seeing some



of the trends in Asia also. It is partly from globalisation because we are seeing hundreds of millions of quite low-paid workers joining the global economy in China, in India. It is partly because of technology, because the jobs are being automated and what used to be a skilled person’s job, now can be done by a skilled robot or skilled AI programme but whatever it is, it is a worldwide trend and it is causing some social tensions and unhappiness. Some of it I would say candidly is to put it as; how shall I put it politely? Some of it is because everybody is talking about it, it has become the fashionable thing to talk about. So you have books written about it, we have articles Mr Piketty, a French economist writes a book it becomes a best-seller which is quite amazing for a subject like that and so it is become cocktail table conversation. Some of it is real but what can you do about it? I think what we can do as individual governments is first to upgrade our people so that they have skills which are in demand to the maximum extent possible. And not just people who go to universities and have degrees but people who may go on a technical route, people who may work what we called thinking hands. That means hand work but with skills and train and educated. This is what Heng Swee Keat was trying to explain yesterday when he spoke to you at dinner last night. I think giving people the skills and generating growth is part of the solution. So with the skills, you can generate growth and we can generate jobs for the people. But at the same time, there is a role for the government to redistribute and to give everybody what Mr Lee Kuan Yew used to call “chips to play with”. So we help you to have public housing, home ownership, we help you to have very good education which is subsidised, we make sure that the healthcare which is also of a high quality and available to all. Therefore, we level up and we enable a greater sense of equity and justice in the system. I think that is possible to do. If you go on theoretical solutions, you will say we should have a global wealth tax or a global income tax or better still, we should outlaw extreme wealth but I do not think those are going to happen and I do not think if you try to do that, you would make the world happier. What is possible to do within individual countries, we can do and the income inequality may be there but in absolute terms, I think we can improve lives for nearly everybody in the society provided they work at it and are prepared to make the effort.

Ambassador Chan Heng Chee: Thank you. We are running out of time. About three minutes left but there are a couple of questions. This one comes from Takihiro Matsutomo from Caixin Media. According to news reports, Prime Minister, you have sent the Malaysia Prime Minister Najib a letter regarding the reclamation projects in Johor Baru. Can you make comments on these concerns?

PM: Yes, we have been in contact with the Malaysians over the reclamation projects. In fact, we have answered questions in Parliament on them. So what you have read is what I am about to tell you. And that is that the Malaysians

have some reclamation projects in the Straits of Johor, they are quite major. We are concerned that there may be transboundary implications for us and we want to be quite sure that we will not be adversely affected. So we have asked them for Environmental Impact Assessments and to understand what is happening and I am quite sure we can work the issues with them.

Ambassador Chan Heng Chee: Now the last question, I will give it to Simon Tay and his question is actually a rather long one. Prime Minister, the growth of China can help many prosper, especially the rest of Asia, yet some distrust China over issues such as the maritime claims. Can more trust be built in our region and how?

PM: I think it is one of those issues where words do not solve the problem. You can give a verbal answer but really as the Chinese say ‘listen to his words and then look at his actions, his deeds’. 听其言，观其行 And I think that it has to play out in the way China acts, in the way the regional countries respond and the interaction between them because it is not just China, it is also the other claimant states which have to take measured, reasonable, proper views and approaches to these disputes which are consistent with international laws and including the Law of The Sea. And it is something which will have to play out over a period of time. The last two years, I think have been stressful and we hope that there will be an improvement in the future.

Ambassador Chan Heng Chee: Well, thank you, Prime Minister. We have just heard Prime Minister Lee Hsien Loong cover a wide range of questions and cover much terrain. I think you can see for yourself now why Singapore is doing as well as it is. Please join me to thank Prime Minister Lee.


OBJECTIVE OF THE SESSION

This session discussed recent geopolitical developments in Asia, including the outlook of China’s relationships with the United States and Japan, and the role that the United States, China and ASEAN can play in mitigating geopolitical risks in the region.

KEY POINTS

The Evolving Role of Asia and the United States in Maintaining the Global Order

• The United States helped to build the security and economic order in Asia, having actively supported and engaged the region after the Second World War and also during the fallout of the Asian Financial Crisis. While the United States has been actively intervening within the region, it will require active cooperation from its partners to be able to answer the call by the international community to help resolve global problems, such as the Ebola outbreak or ISIS.

• Presently, “zero-sum thinking” seems to persist in the geopolitical strategies of Asian nations. The Asian geopolitical vision needs to broaden, and Asian countries need to take over more responsibilities that the United States now bears. Given that Asia is going to be more dependent on the Middle East for its energy supply than the United States (who is benefitting from the shale gas revolution), this may provide the necessary impetus for Asia to take on more geopolitical responsibilities.

• ASEAN has strong relationships with all the major countries in Asia as well as other global powers, having focussed on promoting peace as a neutral partner within the region. Another way ASEAN can contribute to maintain the global order is through the influence of moderate Muslim nations in ASEAN such as Malaysia and Indonesia, who can lead a

Plenary Session 3:Geopolitical Risks in Asia and Implications for the Global Economy

Moderator: Professor Kishore Mahbubani Dean, Lee Kuan Yew School of Public Policy

Panellists: Dr Han Seung-soo, KBE Former Prime Minister, Republic of Korea Dato’ Sri Nazir Razak Group Chairman, CIMB Group Heizo Takenaka Director, Global Security Research Institute, Professor, Faculty of Policy Management, Keio University Zhao Qizheng Dean of the School of Journalism of Renmin University of China, Former Minister of the State Council Information Office, Former Chairman of the Foreign Affairs Committee of CPPCC Robert B. Zoellick Chairman, International Advisors, Goldman Sachs


“coalition of moderates” to counter the impact of ISIS and radicalism globally.

China’s Role In the Global Order

• China has benefitted greatly from peace and stability in the Asian region, allowing it to thrive economically over the past three decades. Hence, China is very willing to preserve the international order. However, the question remains whether China will be content with the existing model of international order, or it will seek to evolve it further.

• Sustaining the regional order depends much on the relationship between China and the United States. The relationship between China and the United States is likely to improve and deepen, as evidenced by the 7-hour meeting between Presidents Xi and Obama when President Xi visited the United States in 2013. There is mutual interest for both China and the United States to strengthen their bilateral dialogue and have mutual respect for each other’s core interests.

• In the past, some accused China of not shouldering sufficient responsibility as a global power. However, China has since contributed to shape the international order by being an economic force that other countries have relied on to grow their own economies. China’s emergence has also greatly influenced the economic relations within the region. For example, China is now the largest trading partner of many ASEAN countries.

• Due to its nuclear programme, North Korea remains one of the major geopolitical risks in North East Asia. There have been concerns over North Korea’s nuclear ambitions since it first threatened to withdraw from the Nuclear Non-Proliferation Treaty (NPT) in 1993. China, a long-time ally of North Korea, has been successfully applying pressure lately on North Korea, as it has interests to maintain the current regional order.


From left to right: Robert B. Zoellick, Zhao Qizheng, Dr Han Seung-soo, KBE, Heizo Takenaka, Dato’ Sri Nazir Razak, Professor Kishore Mahbubani (moderator)

Cautious Optimism for Sino-Japanese Relations

• Sino-Japanese relations are deeply complex and heavily influenced by the economic ties that both countries have with each other. This deep economic relationship is underscored by the successful IPO of Alibaba, whose investors include Japan’s Softbank, which holds a 30% stake in the Chinese e-commerce giant. While there were tensions between Japan and China in the first decade of the 21st century, trade volume between the two East Asian nations still quadrupled.

• Anti-Japanese sentiments in China often surface when painful memories of the Second World War are re-visited. However, it was noted that such sentiments expressed by netizens are not necessarily an accurate gauge of the relationship between the two nations. The Chinese leadership and China’s older generation of citizens are acutely aware of the dangers of war. Sino-Japanese relations will improve by not invoking symbolism associated with the Second World War.

• Notwithstanding the recent tensions between Japan and China, both sides have been making efforts to improve bilateral relations. Former Japanese Prime Minister Yasuo Fukuda had a fruitful meeting with President Xi earlier this year. When China hosts the APEC Economic Leaders’ Meeting this October, there is a likelihood that President Xi and Prime Minister Abe will engage in bilateral talks, which gives more hope for improved Sino-Japanese relations.

The Way Forward

• The United States remains active in Asia, and will need the support of its Asian partners to maintain the existing global order. Given its desire to maintain the present international order, China is likely to put more effort into its diplomatic efforts

with the United States. The strong economic ties between China and Japan provide an incentive for both sides to address differences amicably. As both sides take steps to improve its bilateral relationships, there is a sense of cautious optimism.

• Asian countries should be cognisant of each other’s interests, as each seeks to maintain the regional order for stability and prosperity. As a neutral partner, ASEAN can play a crucial mediating role to address geopolitical issues within Asia.

20 September 2014 - ConferencePlenary Session 3: Geopolitical Risks in Asia and Implications for the Global Economy


OBJECTIVE OF THE SESSION

This session focussed on the developments in the global energy landscape and the impact of the shale oil and gas revolution on energy markets. Panellists also discussed the prospects of renewable forms of energy such as solar and wind, and the challenges for these technologies to become mainstream.

KEY POINTS

Impact of the Shale Gas Revolution on Energy Markets

• With the United States enjoying an abundant supply of gas at reasonable prices, it is undeniable

that a shale gas revolution in the United States is underway. Compared to global prices, the Henry Hub price of gas currently trades at a discount of about 50-70%. The United States is now at an inflection point, as decisions need to be made whether the abundant shale gas it possesses should be consumed or exported.

• One of the impacts of the shale gas revolution in the United States is that Mexico, who used to be a gas exporting nation, has made the decision to become a consumptive nation. Mexico is now importing gas from the United States using pipelines that were originally built for exporting gas to its northern neighbour.

Plenary Session 4:Global-Asia Energy Dynamics

Moderator: Parag Khanna Managing Partner, Hybrid Reality Pte Ltd

Panellists: Gary Cohn President and Chief Operating Officer, Goldman Sachs Peter Voser Former Chief Executive Officer, Royal Dutch Shell plc Xizhou Zhou Director and Head of China Energy, IHS with contributions from Dr Steven Chu Professor of Physics and Molecular & Cellular Physiology, William R. Kenan, Jr., Professor of Humanities and Sciences, Stanford University


From left to right: Gary Cohn, Peter Voser, Xizhou Zhou

• The next wave of shale gas revolution will be seen in other regions around the world, including in Western Siberia, Argentina, Australia and China. In particular, China has extensive shale gas reserves, amounting to about 1,100 trillion cubic feet (TCF). However, the impact of the shale gas revolution in China is likely to take some time to materialise, given the complex geology as well as the infrastructure that needs to be built. The shale gas in China is likely to be pricier than in the United States.

Global and Asian Developments in Liquefied Natural Gas (LNG)

• The global LNG market is welcoming a whole wave of new supply from across the world, including Eastern Africa (Mozambique and Tanzania), Australia, Middle East and Eastern Mediterranean. The number of countries exporting LNG more than doubled in the past two decades, from 8 in the 1990s to 19 today, providing buyers with a huge abundance and diversity of supply. As a result, many countries are switching to an energy mix that places more emphasis on gas. In the 1990s, there were 9 countries that imported LNG. This number has grown to 25 countries, and is expected to double in the near future.

• Asia is a huge destination for LNG, and is projected to have the strongest growth over the next few decades. Currently, the biggest LNG buyers in the world are Japan, Korea, and China. While there has been speculation over the possibility of a regional gas hub in Asia, it is unlikely it would be established in the near term. For a regional gas hub to be established, there needs to be good pipeline connections, price liberalisation and a transparent price setting mechanism – all of which do not concurrently exist in any single Asian location at the moment.

• A global convergence in gas prices is unlikely to happen, given the huge variance in transportation and liquefaction costs. Even within continental United States, with its well-connected pipeline network, there is still a huge variance in price across many gas sub-markets within the country. But if Asia continues to be an end-user market, there might be a case for a regional convergence in price.

Geopolitics of LNG

• Concerns that the recent Chinese-Russia gas deal will divert the Russian gas supply from Europe to China are unfounded. This gas deal covers gas reserves that are from the Eastern Siberian region, which is separate from the supply that is going into Europe, which are situated in the western part of Russia. It is unlikely that President Vladimir Putin will take the risk of turning off Ukraine’s gas supply this coming winter, as Europe may be affected too.

• President Vladimir Putin was eager to develop the “Eastern Gas Program” so that Russia can leverage on China’s prepayment and investment in the pipelines to unlock the resources in Eastern Siberia. Besides China, this supply will go to many of the big LNG projects on the east coast of Siberia such in Sakhalin and Vladivostok, which are critical for Russian companies to seek other markets like Japan and Korea.

Opportunities and Challenges of Renewable Energy

• Currently, fossil fuels are cheaper than renewables, but it is possible that price parity between both sources of energy will be achieved within the next 10 to 20 years. The crucial invention needed is the technology for renewables to be converted to liquid hydrocarbons that can be shipped at room temperature. Once that happens, transport cost will then become a fraction of energy production cost.

20 September 2014 - ConferencePlenary Session 4: Global-Asia Energy Dynamics


• Inter-fuel competition also presents opportunities for renewables to gain a larger share in the energy mix. It is possible for countries to switch from fuels into renewables as a result of the price differentials between these sources of energy. In Southeast Asia, there are similar pricing arbitrage opportunities, although there are obstacles as a result of a lack of infrastructure investment.

• Despite the potential of renewables, challenges remain.

o Firstly, governments will have to find a way to guarantee a reliable source of energy to meet the growing demands from industries, commercial outlets and residential households. As a result, fossil fuels, and, in particular, coal as it is abundant and the cheapest resource, are inevitably going to feature in the energy mix.

o Secondly, on top of these demand pressures, inertia, outdated regulations and established monopolies have made it difficult for governments to liberalise their energy sector in a way that would allow these alternative sources of energy to take off. This problem features heavily in Asia’s emerging markets, where there is an excessive amount of government regulations that stifle the industry.

o Lastly, for renewable energy to overcome the monopoly of traditional sources, it would require not only the liberalisation of the energy sector, but also for these renewable energy supplies to gain enough credibility to secure long term power contracts. For example, despite Mexico liberalising its energy sector and possessing a solar capacity comparable to Arizona, its solar sector has not taken off. This is because there is still a lack of credibility which prevents the solar sector from securing long term contracts.

The Way Forward

• Even though shale gas becomes more important as an energy source, it is important to note that it would take time for its impact to be fully realised. The United States, for example, took about 10 years to attain its current status. The primary challenge for shale gas is the underinvestment in shale gas consumption. This stems from the long payback process for consumers considering the switch to shale gas, and the uncertainty associated with the consistency of supply and environmental sustainability in the long term.

• Looking forward, Asia is likely to be the main growth market for LNG, given the region’s ever growing demand for energy. In order to support the growth, governments will need to make the necessary infrastructure investments. Businesses can help lead the way as well. In the United States, the electric car industry is fast becoming a reality because of the willingness of corporates to invest in the necessary infrastructure.

• In order to become mainstream, renewables require strong support from governments and corporates. If governments recognise that renewables are a risk management policy against climate change, they would be more willing to invest in these technologies, even though the impact of climate change might seem to be a distant reality. Such a mind-set change will increase the technological likelihood for renewables to be a mainstream energy source by 2050.


Summit Participants

1: George Yeo, Singapore Summit Conference Chairman; Tim Brown, CEO, IDEO; 2: Dr Steven Chu, Professor of Physics and Molecular & Cellular Physiology, William R. Kenan, Jr., Professor of Humanities and Sciences, Stanford University; Michael R. Splinter, Chairman, Applied Materials, Inc.; Patricia Splinter, Chief Operating Officer & Managing Director, VantagePoint Capital Partners; 3: Welcome Dinner, Flower Field Hall, Gardens by the Bay; 4: Hiroaki Nakanishi, Chairman & CEO, Hitachi Ltd.; Mrs Heng Swee Keat; Ajay Banga, President & CEO, MasterCard; 5: George Yeo, Singapore Summit Conference Chairman; Antonio Villegas, President, Swiber Offshore Mexico; 6: Harish Manwani, Chief Operating Officer, Unilever; Richard Lesser, President & CEO, The Boston Consulting Group, Inc.; 7: Margarita Louis-Dreyfus, Chairperson of the Supervisory Board, Louis Dreyfus Holdings

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8: Conference, Shangri-La Hotel; 9: Piyush Gupta, CEO, DBS Group Holdings Ltd; Tidjane Thiam, Group Chief Executive, Prudential plc; 10: Ajay Banga, President & CEO, MasterCard; 11: Sir Martin Sorrell, CEO, WPP; 12: Dr Ngozi Okonjo-Iweala, Coordinating Minister for the Economy & Minister of Finance, Federal Republic of Nigeria; Dr Sri Mulyani Indrawati, Managing Director & Chief Operating Officer, World Bank; 13: Arrival of Lee Hsien Loong, Prime Minister of Singapore; 14: Dominic Barton, Global Managing Director, McKinsey & Company; Dr Steven Chu, Professor of Physics and Molecular & Cellular Physiology, William R. Kenan, Jr., Professor of Humanities and Sciences, Stanford University; Dr Ngozi Okonjo-Iweala, Coordinating Minister for the Economy & Minister of Finance, Federal Republic of Nigeria; Lee Hsien Loong, Prime Minister of Singapore; Sunil Bharti Mittal, Founder & Chairman, Bharti Enterprises; George Yeo, Singapore Summit Conference Chairman

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Summit ProgrammeDay One19 September 2014, FridayVenue: Flower Field Hall, Gardens by the Bay, 18 Marina Gardens Drive, Singapore 018953Dress Code: Smart Casual (Jacket without Tie)

1715 – 1815 Shuttle service from Shangri-La Hotel to Gardens by the Bay

1745 – 1930 Registration, Flower Dome Tour and Welcome Reception

1930 – 2200 Summit Welcome Address Heng Swee Keat Minister for Education, Republic of Singapore

Welcome Dinner Night viewing of the Flower Dome

Shuttle service back to Shangri-La Hotel

Day Two20 September 2014, SaturdayVenue: Island Ballroom, Shangri-La Hotel, SingaporeDress Code: Business

0845 – 0900 Opening Remarks by Conference Chairman George Yeo Chairman of Kerry Logistics Former Minister for Foreign Affairs, Republic of Singapore

0900 – 1005 Plenary Session 1: Staying Ahead, Sustaining Growth

Three broad transformations are taking place in Asia. What shape will they take and what are the implications for businesses?

• Asia is becoming less dependent on growth fuelled by easy global monetary conditions. What are the risks facing Asia arising from the tapering of easy monetary policies in America? Will tightening financial conditions derail Asia’s growth trajectory? How are businesses positioning themselves to mitigate against such risks?

• Asia is becoming less dependent on export-led growth and boosting domestic demand to achieve more balanced growth. How far will it succeed? What are the implications for demand patterns, income distribution, product innovations, and business strategies?

• Asia is becoming less reliant on growth supported by access to a large, low-cost labour pool, and shifting towards productivity-led growth. How sustainable is this? Will Asian countries escape the middle income trap? How can technology be better harnessed to achieve productivity-driven growth in Asia?

Panellists:

Anshu Jain, Co-CEO of the Management Board and the Group Executive Committee, Deutsche Bank AGMinoru Makihara, KBE, Senior Corporate Advisor and Former Chairman, Mitsubishi Corporation

Sunil Bharti Mittal, Founder and Chairman, Bharti EnterprisesA. Michael Spence, William R. Berkley Professor in Economics and Business, New York University Stern School of Business

Tian Guoli, Chairman, Bank of China

Moderator: Nik Gowing, International Broadcaster

1005 – 1025 Tea Break


1025 – 1130 Plenary Session 2: Asian Economic Integration and Its Global Implications

Asia’s economic connections within and with the world are growing. The ASEAN Economic Community will take shape in 2015, creating a single market and production base. China’s economic transformation will boost intra-Asia trade and investment, with the Regional Comprehensive Economic Partnership (RCEP) bringing the ASEAN-10 and its six dialogue partners in Asia closer together. The Trans-Pacific Partnership (TPP) will offer a complementary pathway to greater regional integration involving key economies in North and South America.

• What are likely to be future developments in intra-Asia trade and investment? How will a more integrated Asia transform global supply chains?

• Sino-ASEAN trade is targeted to reach US$1 trillion by 2020. What shape will the targeted expansion in trade take? What investments and partnerships in infrastructure and connectivity are necessary? What role could an Asian infrastructure investment bank play?

• What will be the role of the RMB in Asia’s economic integration?

Panellists:Jiang Jianqing, Chairman of the Board of Directors and Executive Director, Industrial and Commercial Bank of China LimitedPravin Krishna, Chung Ju Yung Distinguished Professor of International Economics and Business, Johns Hopkins University

Lin Bin, Co-Founder and President, Xiaomi CorporationWishnu Wardhana, President Director and Group Chief Executive Officer, Indika Energy

Robert Yap, Chairman and Chief Executive Officer, YCH Group

Moderator: Ambassador Tommy Koh, Ambassador-at-Large, Ministry of Foreign Affairs, Republic of Singapore

1130 – 1215 Distinguished Guest Speaker Address Dr Sri Mulyani Indrawati Managing Director and Chief Operating Officer World Bank1215 – 1400 Lunch and Dialogue with Prime Minister Lee Hsien Loong

Moderator: Ambassador Chan Heng Chee, Ambassador-at-Large, Ministry of Foreign Affairs, Republic of Singapore

1400 – 1500 Plenary Session 3: Geopolitical Risks in Asia and Implications for the Global Economy

Asia is undergoing economic transformation. At China’s Third Plenum exercise, President Xi Jinping announced a set of fundamental and wide ranging reforms to drive the country forward. In Japan, Prime Minister Shinzo Abe’s “Abenomics” plan is the most ambitious effort yet to revitalise the economy and restore Japan’s role as a leading Asian power. President Park Geun-hye of South Korea has pushed for new growth industries based on building a “creative economy”. Southeast Asia is also moving toward an integrated region to harness its full potential.

These reforms are taking root amidst an evolving geopolitical order. Amid long-standing issues such as tensions in the Korean peninsula, new flash points have emerged. The dispute over the energy-rich South China Sea region has intensified, entangling both North and Southeast Asia, while in the East China Sea, both China and Japan have taken measures to protect their interests.

While much of Asia’s future will depend on economic reforms, the political dynamics will also shape the region in the decades to come. This session will address the following questions:

• Can economic reforms succeed in addressing social challenges like corruption, aging population, labour reforms, and create a more competitive region?


Summit Programme

• What are the implications of rising political risks in Asia on the global economy?

• How will uncertainty and geopolitical instability affect the business, trade and investment potential in the region?

• What role will the US, as a Pacific and economic power, have in the region?

• Can ASEAN play a more active role or offer solutions?

Panellists: Dr Han Seung-soo, KBE, Former Prime Minister, Republic of Korea Dato’ Sri Nazir Razak, Group Chairman, CIMB Group

Heizo Takenaka, Director, Global Security Research Institute, Professor, Faculty of Policy Management, Keio UniversityZhao Qizheng, Dean of the School of Journalism of Renmin University of China, Former Minister of the State Council Information Office, Former Chairman of the Foreign Affairs Committee of CPPCCRobert B. Zoellick, Chairman, International Advisors, Goldman Sachs

Moderator: Professor Kishore Mahbubani, Dean, Lee Kuan Yew School of Public Policy

1500 – 1520 Tea Break

1520 – 1620 Plenary Session 4: Global-Asia Energy Dynamics

The global energy landscape is changing with developments in shale oil and gas.

• What is the impact of shale oil and gas revolution on energy markets? Will the US become energy independent and, if so, what are the implications?

• Will lower energy costs lead to a manufacturing renaissance in the US? What are the implications for manufacturing in Asia?

• Is Asia moving into a coal century? Is this sustainable? What reforms to the energy sector are required? What are the implications of China’s energy policy for the global energy outlook?

• What are the prospects for other alternative sources of energy (e.g. nuclear and solar) and fuel efficiency technologies? What are potential game changers?

Panellists: Gary Cohn, President and Chief Operating Officer, Goldman Sachs Peter Voser, Former Chief Executive Officer, Royal Dutch Shell plc Xizhou Zhou, Director and Head of China Energy, IHS Moderator: Parag Khanna, Managing Partner, Hybrid Reality Pte Ltd

1620 – 1630 Closing Remarks by Conference Chairman George Yeo

Day Three21 September 2014, Sunday

Closed-door Roundtable for the International Advisors of the Monetary Authority of Singapore, Singapore Economic Development Board, GIC and Temasek

Chairman: Deputy Prime Minister Teo Chee Hean


Global-Asia Programme Office250 North Bridge Road #28-00 Raffles City Tower Singapore 179101

Tel: +65 6832 6117 Fax: +65 6832 6538

[email protected]

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