Asia's major economies have reached a point where existing growth strategies have run their course, and major structural change must take place, said Prime Minister Lee Hsien Loong on Saturday night. Citing China and Japan specifically, he said that continued high growth would depend on their leaders undertaking painful economic, social and political reforms.
Whether enforcing property rights, developing financial markets or social safety nets, it is active governments that create the pre-conditions for markets to work well, he said. PM Lee surveyed the state of Asian economies and gave his reading of the region's prospects at the second Singapore Summit, a two-day conference for international business and financial leaders - which Myanmar opposition leader Aung San Suu Kyi will also address this year - and which is timed to coincide with the Singapore Grand Prix.
Mr Lee pointed to China's political adjustments as "hardest of all" but necessary and overdue. "To curb excesses and malpractices, meet rising public expectations for accountability and participation, maintain social order and stability - that's the hardest of all, because unlike with economic reforms, there is no road map," he said.
The Chinese Communist Party's Third Plenum in November, a traditional forum for its leadership to announce major policy initiatives, will be closely watched by the world "for signs of the leadership's strategy, and even more for the leadership's resolve", he added.
In Japan, Mr Lee said Prime Minister Shinzo Abe's "Abenomics" has "changed the mood and discourse", as has its winning of the rights to host the 2020 Olympics in Tokyo. But it is Mr Abe's "third arrow" of structural reform to transform its labour market, pensions system and agricultural sector that is the key, noted Mr Lee. These will take years to implement and years more to bear fruit, he said.
Assessments of the region's potential are all based on the assumption of peace and stability - if not, "all bets are off", he added.
Territorial disputes in the region have "become more difficult over the past year", he noted. As China continues its economic rise and military expansion, its friends and partners hope the process will be peaceful and based on "equal, win-win relations".
All Asian countries are also either ageing rapidly or have an abundance of young people who need to be employed, and both are challenges that need to be overcome. Shrugging off talk of another Asian financial crisis should the United States' quantitative easing taper off, Mr Lee said that this prospect may actually allow regional leaders to focus on fixing structural problems, which the "cheap money" of recent years has caused to be glossed over and put aside.
On balance, he is confident in Asia - home to more than half the world's population - and in its people who are driven, talented and want to change the world. "It would be presumptuous to think that none of them will join the ranks of developed countries in the next 20 to 30 years."
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