Singapore's Lee Hsien Loong Talks Global Economics

Singapore's prime minister, Lee Hsien Loong Photograph by Munshi Ahmed/Bloomberg

As he looks ahead to 2013, Singapore Prime Minister Lee Hsien Loong is cautiously optimistic. Lee believes Europeans have made some progress in trying to defuse the euro debt crisis, and while tensions between China and its neighbors have risen because of territorial disputes, he is confident about the role the U.S. plays as part of President Obama’s increased focus on the region. Lee, 60, spoke about these and other topics in a wide-ranging interview in his office on Nov. 26 with Bloomberg News Editor-in-Chief Matthew Winkler and reporter Shamim Adam. Some highlights:

Do you think the global outlook is improving or diminishing?

In Europe, over the last two years, they’ve done many things which they wouldn’t even contemplate in the beginning, and that’s good. It minimizes the chance of a sudden disastrous mishap—for example, the Greeks leave precipitately and then you have a panic and then more unraveling takes place, that’s less likely. But in terms of the fundamental solutions which need to be put into place, really, where you need to put in place the conditions where you can start to solve the problem, I think that takes years. It’s not something which you can decide, even if all the politicians agree. The U.S. has done better in fixing their banks and fixing the immediate problems in the financial crisis. But the fiscal problem is a longer-term issue and that needs political consensus, too. The U.S. is one country, unlike the Europeans. But within that country, the political consensus is not so easy to come by.

How helpful has it been for President Obama to focus as he has on Asia, in light of the continuing tensions in the South China Sea?

I think it’s good that the U.S. is focused on Asia and has said so. I think it is something which must be sustained over a long period of time, rather than spasmodically. I think it needs to be done across the board and in a benign but powerful approach, rather than in a belligerent fashion. Singapore’s interest is that America maintain a long-term presence in Asia. … The South China Sea is the issue which has warmed up over the last few months. The U.S. is not directly involved, although they have an interest as a user state, and freedom of navigation is something which concerns many countries, both in and out of the region. The main negotiations have to be among the countries who are claimants: The Philippines, Malaysia, Vietnam, Brunei, China. ASEAN as a group has to encourage restraint in a neutral, forward-looking way. But America, like other user states, has a legitimate interest in a good outcome.

On balance, would you say that the approach that’s been taken is helpful?

We are very glad that America has focused on this, and Hillary Clinton as Secretary of State particularly has made a very considerable effort since she first became Secretary of State. Her first trip as secretary was to Southeast Asia. And the president, after his re-election, his first trip was to—again—to ASEAN. So that’s a good thing, but it has to be sustained over a long period of time. And we hope that the basis of that will be good relations with China, between China and America, with America also paying attention to its other friends in the region, including in Southeast Asia.

There are more American companies in the top 500 today than there were two years ago. So in some ways, American businesses in the past two years have gotten a lot stronger.

Yes, relatively speaking, because the others are running into trouble. Japanese aren’t growing in the top 500, Europeans not very much. So you’re there by default, but are you fulfilling your full potential?

What do you think?

I think there’s a lot more which you could do. You know you have to invest in your infrastructure and your education. You know you must do things to your social safety net.

Which is what Obama wants to do.

Yes, but he can’t get it done because there’s no consensus. And the other problem is: In an election, these are not the issues which come up and the candidates say: “Let’s work together and do this.” People express relief that China was not a more dominant issue in the election, but the way it did enter the debate was not positive. The candidates accused each other of exporting jobs to China and having their pension plans invested in China, and that’s not really the way to educate the American population about the realities of the world.

Do you think we are moving away from the notion that government is the problem, not the solution? Are we accepting the inevitable reality that government has to be the solution because we are dealing with big issues like climate change?

I think there’s a shift from the period of Reagan and Thatcher, where government was the problem and let’s get it out of the way; things will sort themselves out. In climate change, things will not sort themselves out because it’s a commons issue. It’s not just governments, but the international community must get together and do something. Otherwise you can’t solve it yourself. But also, even domestically, we believe there is a role for government in education, infrastructure, in setting the tone for the society so that we’re not just an economy where each person is out for himself, tooth and claw, but there’s a sense of community. I think you will need that more, even in America, because you’re going into a period of more unequal income distribution. And not just unequal with everybody making progress, but unequal with a significant proportion not moving forward at all. So that’s going to be considerable stress. What are you going to do about it? No government can say: “I’m not going to do anything about it.”

As it turned out, 2012 probably was a better year, all things considered, than 2011. Do you think 2013 will be a better year than 2012?

If you get past the fiscal cliff, it should be. Your economy has got longer-term problems but in terms of cyclical trends, it is gradually picking up. The Europeans have avoided a disaster and should be able to continue avoiding one, although the longer-term problems are not out of the way. And within the region, I think that most of the countries are not doing too badly. So I’m cautiously optimistic.

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