PM Lee: No replay of Asian financial crisis

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PM Lee: No replay of Asian financial crisis

Economies stronger now, with safeguards to deal with capital flows

Published on Sep 11, 2013

By Robin Chan Political Correspondent And Alvin Foo


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 yesterday, 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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Published September 11, 2013

Asia not headed for repeat of 1997 crisis: PM Lee

Regional economies are stronger now, with more safeguards in place

By Teh Shi Ning [email protected]


[SINGAPORE] Asia is not on the verge of financial crisis, despite the recent turmoil in regional equity and currency markets, Prime Minister Lee Hsien Loong said at International Enterprise (IE) Singapore's 30th anniversary dinner last night.

There have been fears that the sharp drops in regional currencies such as India's rupee and Indonesia's rupiah - following talk of an imminent end of economic stimulus from the US Federal Reserve and the expected capital outflows from emerging markets - could trigger a repeat of the 1997 Asian financial crisis.

Asked for his take during a dialogue session with the 600 local and foreign business leaders last night, Mr Lee said that he holds a sanguine view.

"I don't see this being a new global crisis or regional crisis," he said.

"I think the Asian economies are in a stronger position than they were in '97 when the crisis came. I think we've got more safeguards instituted now over the last decade and a half since the Asian crisis, to deal with the likely consequences of big capital flows."

He cited the Chiang Mai Initiative, the multilateral currency swap arrangement among the Asean member states, as an example of efforts that have materialised since to ensure that regional economies can cooperate to support one another in the event of big and destabilising flows in capital.

"Also, I think the Americans withdrawing the QE (quantitative easing), or the Europeans, will be very mindful to do it carefully because they don't want to destabilise their own economies. So, on balance, I would say we're in a safe position," he said.

This is not to disregard the fact that concern runs high in certain economies. "If you have some questions of confidence, whether the country is going quite the right direction or not, or whether the reforms are moving well or not - in the case of India, some investors are questioning it - then you would be quite anxious about your exchange rate and capital flows."

Chinese Premier Li Keqiang, writing in the Financial Times (FT) on Monday, had also expressed confidence that Asian countries have learnt from the crisis of 1997 and significantly enhanced their capabilities to fend off the risks of external shocks.

Asked for his view on China, having met with Mr Li and China's President Xi Jinping on his recent visit, Mr Lee said that he is confident that officials there understand what is at stake with the economic reforms now underway and will support what needs to be done.

China's leadership has shown clear resolve to continue to liberalise China's economy and grow through urbanisation, while making the rural sector more productive through agricultural reforms, Mr Lee said.

It is not just economics either, he added, citing the growing population of Internet users who tend to be unrestrained in their criticism of the government. "These are changes that they are going to have to adapt to and be able to accommodate in their system within the next 10 years. I think it's absolutely necessary for them to do that," Mr Lee said. "We very much hope they will succeed because in China's success we will derive great benefit."

Businessmen in the audience also raised several questions on the future of Asean.

In response to one on the lessons Asean can learn from the European Union, Mr Lee said: "For Asean, the lesson is, there is a lot of benefit in economic cooperation and economic integration but we must not put the cart before the horse, Let's work together, but let's do it in a way which respects the differences in our countries. And also recognising that we are 10 different countries. We are Asean, which is a regional association, not a union."

As for whether the goal of an Asean economic community by 2015 will be attained, Mr Lee said that a lot of the trade between Asean countries is already tariff free, but that in other areas - such as free movement of labour and civil aviation - not all agreements have been implemented yet.

"There will be significant cooperation by 2015, but there will be work to be done after that," Mr Lee said, stressing that there will be opportunities for Singapore's companies in the region.