PM Lee: No replay of Asian financial crisis

Prime Minister Lee Hsien Loong does not see a repeat of the Asian financial crisis that sent economies in the region into a deep dive, in spite of concerns over capital flight as the US ends its expansionary monetary policy.

Speaking at a dialogue with business leaders on Tuesday, PM Lee said Asian economies are much stronger than they were in the late 1990s, having put in place safeguards to deal with the impact of large capital flows.

"On balance I would take a sanguine view," he said in reply to a question from moderator Robin Hu, chief executive of the South China Morning Post Group.

While certain individual countries may have problems, "on balance I would say we are in a safe position". He added: "I don't see this being a new global crisis or regional crisis."

He cited the Chiang Mai Initiative as an example of the safeguards.

It is a regional currency swap arrangement which helps countries to strengthen their balance sheets and support their currencies in times of need.

He also believes that big developed economies like the United States, the cause of large capital flows into Asia as their central banks printed money and slashed interest rates, will remove these measures with care so as not to destabilise their own economies.

In the 30-minute dialogue at the celebration of IE Singapore's 30th anniversary, Mr Lee was also asked for his views on the outlook for China and ASEAN.

On China, he said he was confident of its future even though it faces many challenges and needs bold reforms. "They have made a lot of progress," he said. "Now they have to catch up on the reforms which are still outstanding and will continue to be a work in progress, and that is at the top of the minds of the leaders."

Referring to an opinion piece by Chinese Premier Li Keqiang in the Financial Times this week, he said it showed the Chinese are committed to continued economic liberalisation.

He said one Chinese official told him in private that a lot needs to be done, but because China is so big, it cannot make large, drastic changes.

"You cannot do things carelessly, you have to move deliberately - but the pace has to be inexorable.

I think they understand this. It gives me confidence, when I talk to the officials, that the officials understand what is at stake, and they will support what needs to be done."

Turning to ASEAN, Mr Lee said the region is fortunate that it is not likely to face the same problems as the beleaguered euro zone because it does not have a single currency. "I always had my doubts, because a common currency has to follow economic integration and must also have political compatibility," he said.

"For ASEAN, the lesson is there is a lot of benefit from economic integration, but we must not put the cart before the horse. Let's work together, but do it in a way that respects the differences in our countries and also recognises that we are 10 different countries.

We are ASEAN: it is a regional association, not a union, and that makes all the difference."

On IE Singapore's role in helping boost local firms overseas, he said it was making progress getting them to be globally competitive.

He urged firms not to think they could build a wall here and not compete overseas, as Singapore is too small a market.

Instead, they should look to not just the region, but also to markets farther away in Latin America and Africa.

Pressed by Mr Hu to give IE Singapore a grade, Mr Lee said to laughter: "Happy birthday."

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