Speech by MOS for Foreign Affairs Mr Raymond Lim at the Singapore Conference of the Paul H Nitze School of Advanced International Studies, Johns Hopkins University, Washington D.C., 3 October 2002 - SINGAPORE'S KEY EXTERNAL CHALLENGES

SINGAPORE'S KEY EXTERNAL CHALLENGES

1 Small countries cannot afford illusions about themselves. We cannot change the world. During our short history, we have therefore had to constantly adapt ourselves to remain relevant in a constantly changing world. That is why Singapore has survived and prospered against all odds.

2 Today, we are at the cusp of yet another transformation, possibly the most far-reaching and complex that we have attempted since independence in 1965. I thank you for giving me this opportunity to share with you my thoughts on some of the key external challenges facing us and the vital role that I believe the US plays in them.

3 The post-Cold War world has proved a messy place. And post-9/11, the world has become even messier. Globalisation has compressed space and accelerated time, forcing international change at an ever-greater pace. Globalisation is simultaneously integrating the world and dividing it. Globalisation is changing the very nature of state and government.

4 International anxieties and uncertainties are high. All countries are facing fundamental and profound questions of identity. Singapore is not immune. But it makes a difference whether you face this challenge from the perspective of hundreds of years of history or barely forty. And what does it mean to build a nation when the very notion of nationhood is being deconstructed by globalisation's pressures?

5 But such large questions with no ready answers are indigestible at lunchtime. I pose them to only underscore the scope of what we are undertaking in Singapore. This afternoon, I would like to confine myself to two more immediate issues:

i?? East Asia's post-Cold War geopolitical configuration; and

i?? Managing changes in Southeast Asia.

6 Singapore cannot remake itself in a vacuum. What we do is inextricably embedded in East Asia's overall strategic environment. And remaking Singapore is inevitably influenced by broader political and economic changes catalysed by the crisis of 1997 to 1998.

7 America's post-Cold War global strategic pre-eminence ensures that the US will be a primary influence on these processes, and hence on our development and prosperity. America provides the stability that must be the foundation of growth. America is a vitally important market and source of technology and investments.

8 All East Asian countries know this. But the historically unprecedented scale of American global pre-eminence has nonetheless provoked a degree of uneasiness, even among some close American friends and allies. We may all be more comfortable with a more even distribution of international power. Still, wishing it will not make it so. And what are the alternatives? Were we really better off during the Cold War? Would it have been preferable if the Soviet Union had won? Singapore has no doubts on this score.

9 The overarching strategic issue is managing a rising China. China poses a relentless competitive challenge. There has been a great anxiety among East Asian countries about the loss of foreign investment to China and relocation of manufacturing bases there. And China's rise will eventually alter the balance of power in Asia.

10 As a rising power, China cannot be expected to acquiesce in the status quo if it is against its interests. And as the pre-eminent global power, the US interest is by and large in the preservation of the status quo. The fundamental difference is real. While this does not spell inevitable conflict, it does present a new challenge to US foreign policy in the region.

11 Still, fierce competition and new challenges notwithstanding, a prosperous and globally integrated China is in all our interests. A rising China represents not just a competitive challenge, but also a tremendous opportunity. The alternative of a poor and isolated China will pose challenges without the opportunities. The key to coping with these challenges, while maximising the opportunities, lies in maintaining a balance.

12 Only the US can maintain balance as China grows. The key question is the character of this balance. The US-China relationship is the key bilateral relationship in East Asia. If the relationship is stable, it has a calming effect on the entire region. But when US-China relations are roiled, the entire region is unsettled.

13 This administration is more sceptical towards China than its predecessor. But America needs China to support the global anti-terrorism effort. In Washington, the debate between those who are inclined to view China as a strategic competitor and those who want a more nuanced relationship with China is as yet unresolved. The anti-terrorism campaign has nevertheless muted the debate and impelled a more restrained approach.

14 China is uncomfortable with what it regards as US unilateralism. It is also distrustful of Japan's military support for US anti-terrorism efforts. But China has refrained from pressing these concerns. China has its own problems with terrorism. It faces serious internal political and economic challenges and is undergoing a leadership transition. It wants stable relations with the US. Beijing does not want to have to tangle with a US that is in a mood of heightened assertiveness. Hence, the immediate effect of 9/11 has been to calm US-China relations.

15 Taiwan is still the issue that is most likely to lead to trouble. With the end of the Cold War, 'one China' is no longer a strategic imperative for the US. But reunification with Taiwan is still a neuralgic issue for China. Even so, China has softened its posture without compromising its bottom line. Beijing has recognised that the powerful magnetic attraction of China's growing economy on Taiwan has shifted long-term trends in its favour. China is also perhaps more assured that the US will not support Taiwan's independence.

16 Post 9/11, Prime Minister Koizumi has stretched the boundaries of Japan's military support for the US campaign against terrorism. This buttressed Japan's status as the key US ally in East Asia. Underlying this effort is anxiety about the implications of a rising China on a Japan which has not been able to shake off a decade of slow growth. Japan is fearful of being permanently relegated to a secondary status vis-? -vis China.

17 But for all its problems, Japan is still the second largest economy in the world, of great importance to Singapore and the region. As China grows, the changing relationship between China and Japan bears careful monitoring. East Asia has never experienced a period when both were simultaneously strong. China's proposal for an FTA with ASEAN within ten years and Japan's riposte of a Closer Economic Partnership (CEP) with ASEAN, were opening moves in a new geopolitical competition.

18 For now, the US seems detached. Post 9/11, your immediate preoccupations are elsewhere. And such is the scale of US pre-eminence, that Washington perhaps is convinced that its immediate interests will not be adversely affected. I do not disagree. Overall, I see the immediate strategic situation as essentially stable.

19 Fortunately so, because significant and complicated political and economic changes are unfolding across Southeast Asia, generating serious uncertainties. And 9/11 has impelled more attention to the most complex challenge of all: political Islam.

20 Southeast Asian Islam has traditionally been syncretic and moderate. Most governments were secular. But globalisation has heightened the impact of external influences, particularly from South Asia and the Middle East. A greater religiosity is now evident throughout the region, while US policies in the Middle East have made many Southeast Asian Muslims increasingly uncomfortable with the US.

21 And not just Muslims. In Southeast Asia as in other regions, the sheer scale of US pre-eminence often gives an anti-American tinge to nationalism.

22 Growth has resumed in most of Southeast Asia. But reform is incomplete. To a greater or lesser degree, all Southeast Asian governments face the challenge of managing change in the context of internal political dynamics that have become more pluralistic and complex. This had already made establishing a domestic consensus for reform and change more difficult. Political Islam is a further complication for those with large Muslim populations.

23 There is no real alternative for any Southeast Asian government than to try to forge the best possible relationship with an ascendant US. Post 9/11, this requires governments to cooperate against terrorism. But Southeast Asian governments will also have to find ways to assuage the anxieties of their Muslim populations which are uneasy about US policies, while taking firm action to neutralise extremists. How governments deal with this sensitive political conundrum will have a profound influence on Southeast Asia's future.

24 The greatest challenges are in a post-Soeharto Indonesia which has the largest Muslim population in the world. The majority of Indonesian Muslims have been characterised as abangan, tolerant Muslims who have fused Islam with Buddhism, Hinduism and animistic beliefs. The conventional wisdom is that they are different from the intense and fanatical Muslims of the Middle East.

25 This is a comforting thought. But it is one which is perhaps also besides the point. The challenge in Indonesia comes from political Islam, not Muslims in general. And the beliefs and values of the majority of ordinary Muslims are not necessarily central to the agendas of Indonesian Muslim political groups. It will take many years before a new internal equilibrium is established in Indonesia. Post 9/11, uncertainties in Indonesia have global security ramifications.

26 This makes ASEAN an even more vital part of the Southeast Asian equation. The financial crisis of 1997 to 1998 jolted ASEAN badly and removed much of its gloss. ASEAN has not yet fully recovered. But the growth prospects have improved considerably. And post 9/11, the US and other major powers have rediscovered ASEAN's charms are now engaging ASEAN with renewed enthusiasm.

27 Whatever its shortcomings, ASEAN remains a vital and irreplaceable framework for maintaining a modicum of order in a region rent by primordial cleavages of race, language and religion, and in which order is therefore not to be taken for granted. Key economic initiatives such as AFTA are largely on track. The ASEAN Free Trade Area (AFTA) will come into full effect on 1 January 2003, with tariffs on 95% of goods entering the ASEAN-6 lowered to between 0 and 5%. AFTA performs a valuable integrative function and sets clear parameters for managing change, keeping the region market-oriented and outward-looking.

28 Valid criticisms of ASEAN should therefore not distract Americans from ASEAN's continuing relevance. And ASEAN's fate cannot be neatly insulated from that of Northeast Asia.

29 One of the effects of the 1997 - 1998 crisis was to stimulate a nascent sense of East Asian regionalism. It brought Northeast and Southeast Asia closer together. An East Asian regionalism is slowly evolving around ASEAN's annual summit meetings with China, Japan and South Korea; the ASEAN + 3 process. How should the US respond? The challenge is subtle. Relations between China, Japan and South Korea are delicate for a variety of complex historical reasons. All three have important interests in Southeast Asia. All three also have a growing interest in exploring new and more positive relationships between themselves.

30 This is a stabilising trend. Yet the very sensitivity of their relationships means that China, Japan and South Korea could only come together in the context of ASEAN. ASEAN does not in itself have sufficient strategic weight to indefinitely maintain this equilibrium between the complex interests of larger players. We need help. If Washington neglects Southeast Asia, sooner or later the centre of gravity of the ASEAN + 3 process will shift northwards.

31 This is neither in ASEAN nor US interests. Herein lies the strategic importance of the US to ASEAN and ASEAN to the US. No other ASEAN dialogue partner has the strategic weight to maintain equilibrium between the two component parts of East Asia.

32 America's status as a key ASEAN Dialogue Partner and the regular participation of the US Secretary of State in ASEAN's Post-Ministerial Conferences (PMC) and the ASEAN Regional Forum (ARF), adds stability to the US presence in the region. It allows the US to maintain good ties with the region, irrespective of the state of any particular US bilateral relationship with any individual member of ASEAN. This is of obvious importance post 9/11.

33 Less obviously, but no less importantly, ASEAN has changed the political context of US engagement in Southeast Asia. The ARF, in particular, represents a paradigm shift in the regional security framework.

34 In the 1960s through the 1970s and even to the end of the 1980s, many Southeast Asian countries sought security by trying to exclude major powers from the region. But through the ARF, regional security is now acknowledged to reside in the engagement of all major powers, in which process the US necessarily has a central role. The ARF is a forum created and sustained by ASEAN; that is, by Southeast Asian countries which have exercised their sovereign prerogative to invite the US and others to join them in discussing the affairs of Southeast Asia. As long as this is so, no matter what other shifts may occur in the region, no one can argue that the US presence in Southeast Asia is somehow illegitimate or an intrusion into the region.

35 Let me conclude with a few words about the US-Singapore Free Trade Agreement (USSFTA). This is obviously a very important project for Singapore. I venture to suggest it is also not without some importance to you. We are a tiny country. But we are nevertheless not insignificant as an export market for the US. Tiny Singapore with a population of just about four million buys more from you than Italy, Australia, Brazil or Chile.

36 But the real importance of the USSFTA to you is geopolitical and should be seen in the light of the developments I have briefly sketched this afternoon. Strategically, the USSFTA complements ASEAN and your treaty relationships, giving the US an institutional foothold in the emerging East Asian regionalism. This will serve as a long-term buffer against the vicissitudes of unpredictable events.

37 More immediately, Southeast Asia will inevitably assume an ever-more prominent role in the global campaign against terrorism. None of us should flinch from what needs to be done. But, as I have argued, it is undoubtedly a complication to an already complex situation. Like it or not, there will be stresses. Despite our best intentions, there will be tensions. Nationalism will often be a distraction. It is therefore all the more important to keep Southeast Asia firmly focussed on the many vital interests it shares with the US.

38 A USSFTA will signal America's confidence in Southeast Asia and the importance that the US attaches to engaging Southeast Asia. It will underscore the benefits that the region derives from such engagement. Today, the USSFTA has already generated interest in similar agreements from countries like Thailand, the Philippines and even Malaysia. We urge you to consider this favourably. Deeper economic engagement with ASEAN nations provide the foundation for broader strategic cooperation. The war against terrorism must be fought with butter as well as guns.

39 Ladies and Gentlemen, thank you for listening to me. I will now be happy to take some questions.

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