12-29-03

RISING CHINA IS A NEW SUN IN ASIA'S SOLAR SYSTEM
Everybody Else Must Adjust

Geoge Yeo is the Minister of Industry and Trade of Singapore. He spoke in Singapore recently with "Pacfic Perspectives" columnist Tom Plate for Global Economic Viewpoint.

Q. Why must Singapore be so "smart" and how you are going to make it smarter?

A: Because we are in a perpetual state of insecurity and that concentrates the mind. That keeps everyone on their toes. It discourages us from taking too many liberties with ourselves. So, there's a practical sense in politics and in the culture of the place. People know if you don't work, you don't eat. No one owes you anything. If you don't study hard, you don't get a good education. Your life chances are diminished.

There's a certain intensity that flows directly from this sense of insecurity-- it is a double insecurity. First, the insecurity of being acity-state in a region where there are much larger polities, not all completely friendly or stable all the time. It is also the insecurity of being a majority Chinese community in a region where the Chinese are...an economically dynamic minority in every country in Southeast Asia and sometimes discriminated against and sometimes looked down upon, because of their ethnicity. And when they are angry at their own Chinese people, they project some of their anger on Singapore, which is kind of a Chinese headquarters in Southeast Asia.

This double insecurity thus gives an edge to our existence. We don't talk about all the time, but it is always there, somewhere in the background.

Q: When the Federation of Malaysia broke apart, the concern at the time was whether Singapore would have sufficient minimum mass to survive. Does the fundamental issue of the size of Singapore now re-surface in a waythat is troubling?

A: For this period of history, size is not such a penalty because globalization has made things smaller. In the process of demassification cities have became much more important in relation to larger polities. In the age of nation states, we were severely disadvantaged because we had no hinterlands, but in the networked globalized world of today we are less dependent on particular hinterlands. We have more options now. If we are cut off by one hinterland we can go for others. It has opened up many more possibilities for Singaporeans.

Q: So, Singapore has intersected with history in way that, for the foreseeable future at least, should ensure its survivability in the international system?

A: I would say for this period, yes; but I don't know now long it will last, I hope for many decades. If so, we are not in a bad position, because we now are sized appropriately. In fact, there are certain advantages in being a city state. We are more compact, it is easier for us to make certain decisions. We are not subsidizing a large agricultural countryside. We don't have any poor people to worry about. And when opportunities come or when dangers rear their head you can diagnose the situation quickly and make adjustments.

One reason we've succeed is not so much that we are brilliant or that we are smarter than others, but because we are more nimble. when we see the flow changing, we can quickly re-position ourselves.

We are now in a major exercise to re-position Singapore because of the changes brought about by the end of the Cold War. I refer specially to the entry of countries like China and India into the global marketplace. These are not small countries. Between the two of them there are 2.3 billion people -- eager, hungry and ready to do our jobs at a fraction of our wages. And they can do so now because of outsourcing -- because globalization has open up all these markets -- and permitted the free flow of parts and factory inputs. This has created a new challenge for us.

A number of industry sectors are now threatened from competition from new players. We have to shift to areas where we have strength in comparison to India, China or Vietnam, instead of knocking our head against the wall. We then dilute costs into cheaper industry inputs that we produce. In this way we convert a problem toan advantage.

But, this is easier said than done. It requires restructuring, it requires a shift in the mindset of Singapore. It is a constant exercise in pulling everyone along. First, we explain to them that the world has changed, that there are new dangers but also new opportunities, and that in order to maximize our position we must adjust.

Q: You cannot change on a dime, as the Japanese have found out...

A: I would not underestimate the Japanese. They may be slow to change because of the nature of the society and the premium they place on consensus and group behavior, but we should not underestimate their capabilities. Multinational Japanese companies are performing much better than the Japanese economy as a whole because they've successfully globalized their operations. They access cheap factory inputs from across Southeast Asia and China. Look at Sony.

Its products, like those of many other Japanese companies, are products of a high civilization with deep technological achievements.

Historically, the Japanese are slow to change. But, when they finally decide to change, they do so like a shift in a laser beam. I would not underrate Japan's ability to respond to changing situations.

Q: There has been a sudden upsurge in Chinese diplomacy, and even Japanese diplomacy. What do you make of this new activity of the big players in Asia?

A: It reflects their growing economic weight. Just last year alone, China accounted for half the growth of global trade. If you add together the GDPs of the countries of East Asia, it is more or less the GDP of the U.S. In 30 years time it will be much larger than the GDP of the U.S. or Europe. It is natural that growing economic weight would be accompanied by a growing, stronger political voice. I think that is to be expected

Q: Japan is coming out from beneath the shadow of the US, and China is coming out from beneath the shadow of Maoist heritage and Westernizing. Is that a big plus for Asia?

A: If we look back to the original causes of the division of the Korean peninsula, it was the result of the Cold War. The dividing line between North and South Korea was the really dividing line between two worlds.

Today, it is no longer in the interest of the surrounding powers, China, the U.S., Japan, Russia, to have continued conflict in the Korean Peninsula. Now the objectives are different, particularly in respect to what we'd rather see the government in North Korea doing and the attitudes towards re-unification. No country in the region wants there to be trouble in the Korean peninsula. So, the strategic environment has become much more favorable than in the past, and that will create the basis of what one might hope to be a long term solution to the problem in the Korean Peninsula. The big change in all of this is the rise of China.
The rise of China is now like another sun entering the solar system. It affects the gravitational and magnetic field. It affects every planet, every asteroid.

As a result of China's rise, everybody is recalculating. From the viewpoint of the Japanese, they've given up the idea that they could remain number one in Asia. They accept now that China will resume its historical position, but they have no intentions of becoming a tributary state of China. So, all their diplomacy is geared towards managing a China, which is going to become stronger and more powerful in Asia, and preserving maximum freedom for Japan. That means having strong links to Southeast
Asia, maintaining Japan's strategic relationship with the U.S. and an emerging policy that secures adequate supplies for Japan's industrial and other needs. China has become an obsession in Japanese thinking. They haven't quite found equilibrium yet. For the time being everyone prefers to keep their options open.

(c) 2003, Global Economic Viewpoint. Distributed by Tribune Media Services.
For immediate release (Distributed 12/29/03)