Speech by George Yeo, Minister for Foreign Affairs, at the 2nd Global Public Policy Network Conference at the Lee Kuan Yew School of Public Policy on 22 Oct 07 at 9.00 am

Asia and the World

I visited the Pearl River Delta last week after many years. My last time was in April 1992, three months after Deng Xiaoping's famous southern tour which put China back on its path of reform and opening up.

The transformation has been truly dramatic. Guangzhou has become a major metropolis and will become one of Asia's great cities. Near the beach at Hu Men where the Qing Commissioner Lin Zexu destroyed opium belonging to the East India Company in 1839, which led to the Opium War, a beautiful new bridge now connects Nansha on the right bank to Dongguan on the left bank. Shenzhen is no longer a jungle of skyscrapers. Learning from Singapore, by the open acknowledgement of its city leaders, Shenzhen is now lush with tropical vegetation, comparable to what you see in Singapore. Recently, the Mayor led a big delegation on a visit here. They studied what we have done at Sungei Buloh mangrove reserve and will no doubt do better than us in the conservation of their wetlands. This new Chinese city how become an attractive living habitat.

From Shenzhen, I crossed over by ferry to Macao which has grown so remarkably, it has already overtaken Las Vegas in gambling revenues. In 10 years, it will be much larger than Las Vegas. Sheldon Adelson of Sands is building 20,000 hotel rooms in Macao. The first casino on the mainland was such a hit, the cost was recovered in nine months. At the Venetian which has 3000 suites, I was told that the market value of the retail area alone will cover the cost of the entire development. To ensure easy passage to and from Hongkong, Sands is building a fleet of 11 ferries. There is a plan to build a long bridge linking Hongkong to both Shenzhen and Macao. In Hongkong, the economy is revving away fuelled by the tourism flow from China. A friend told me that one watch shop ran out of Rolex watches.

The Pearl River Delta is a major growth pole in Asia. It is but one of many. The Yangtze Delta is an even larger phenomenon and will probably become the greatest centre of economic activity in the world. Further north, the Bohai Gulf is abuzz with development. Inland, Chengdu, Chongqing and Xian are all exploding.

It is not only China. Vietnam's trot has become a canter. In 5 to 10 years, it will be galloping away like China.

India is beginning to look very interesting. Although less homogeneous than China, poles of development are also emerging centred on Delhi, Mumbai, Calcutta, Chennai, Bangalore and Hyderabad. Despite relatively poor infrastructure and complicated domestic politics, the Indian economy is growing easily at 8-9% a year. Once the bottlenecks are decongested, India's growth will also be in double digits.

Further West, the Gulf states are flushed with money from oil and gas. Just Abu Dhabi alone has more than a trillion dollars in reserve. With the growth of Asia keeping world energy prices high, the Middle East has become both an important market and an important source of finance. Mega-developments have become commonplace. Anything project less than a billion dollars is small beer.

In between these growth poles are countries and regions which lag behind for reasons of politics or culture. Sooner or later, they will be dragged along. In Northeast Asia, it is important to hold out hope to North Korea of rapid economic development once it changes policy. It is the increasing economic integration of the Taiwanese economy to the Mainland's that will gradually bring about reunification. In Southeast Asia, it is absurd that while everyone is powering forward, Myanmar has moved into reverse gear. In India, even states like Uttar Pradesh will eventually be brought into the 21st century. Bihar is already stirring. India's growth in turn puts pressure on other countries in South Asia to adopt similar economic policies.

The Middle East, however, faces political problems that the tide of economic development may not be able to overcome. With its long history and its great wealth of human and natural resources, Iran ought to be a centre of growth. But it has become a source of instability which can plunge that region into war. The problems of Iran, Iraq, Afghanistan and Palestine are all unfortunately intertwined making a simultaneous solution fiendishly difficult.

From a long-term perspective, we can be optimistic about the prospects for East, Southeast and South Asia. But over the short to medium term, we face important challenges in North Korea, the Taiwan Straits and Myanmar. Things can still go badly wrong and derail our progress. We must work at them and progressively build structures which promote cooperation and enable conflicts to be peacefully resolved or managed.

North Korea and the Taiwan Straits are two problems which I do not need to go into. The key is keeping Sino-US relations on an even keel. The Chinese are completely hardheaded in their assessment. They say that Sino-US relations can never be very good but neither can they go very bad. The interdependence has become too great. The only regional institution where these two big powers come together is APEC which must remain the most important regional organisation for us. When problems suddenly arise, such as during the US spyplane incident over Hainan in the spring of 2001, it was APEC which provided a ready forum for them to meet.

The problem of Myanmar has deep roots in its history. U Thant's granson, Thant Myint-U reminds us of this in his excellent book 'The River of Lost Footsteps'. The Western embargo cannot work so long as Myanmar's giant neighbours China and India do not go along. For them, Myanmar is a buffer state which neither side wants to see destabilized. ASEAN has moral influence but little economic leverage. At the coming East Asia Summit, which brings China, India and ASEAN together around the same table, together with Japan, Korea, Australia and New Zealand, the Leaders will be discussing how we in the region can support UN Special Envoy Ibrahim Gambari in his mission. The East Asia Summit is another important regional organisation because it brings China and India together.

For us in Southeast Asia, ASEAN is our best hope for the future. If we are divided, the region will eventually be balkanized. It is a strategic part of the world through which pass the world's most important sea lanes. If we are not united, the major powers will all be forced to interfere in their own self-defence. For this reason, expelling Myanmar from ASEAN is not an option. Next month, at their summit in Singapore, ASEAN Leaders will sign the ASEAN Charter which will provide the constitutional basis for our future integration. It is a major milestone which the problem in Myanmar will not stop us from crossing. We fully expect Myanmar to sign the Charter as well.

In all this, what is Europe's role? It is mainly for Europe to decide. A stronger European presence, in political, economic and cultural terms, is welcome by everyone in Asia because it gives us more room to play. ASEM (Asia Europe Meeting) was started precisely to encourage closer links between Europe and Asia. Unfortunately, Europe is too often preoccupied with its own integration. Externally, relations with the US, Russia, China and the Middle East consume most of its remaining energies with not very much left for us in Southeast Asia. Europe's interest in us tends to be issues-based. After the Boxing Day tsunami, the generosity which flowed from Europe was heartwarming. On Myanmar, there is an idealism which we admire but cannot afford. It is not good for Europeans to see ASEAN through the lens of Myanmar. We hope that the coming ASEAN-EU Summit will begin a process of greater European involvement in ASEAN including speedy negotiations for an ASEAN-EU Free Trade Agreement.

If we can maintain the peace in Asia for another generation, large parts of Asia will enter the First World, and it will become a very different world. But it is in the nature of human beings to be contentious even when they cooperate. We need to improve existing institutions and establish new ones to govern our common affairs so that global challenges like climate change, pandemics, terrorism and financial instability can be effectively addressed. How Asia changes the world will be a major theme of this century.

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