PM Lee Hsien Loong's Interview with The Hindu (Oct 2016)

The Hindu: Prime Minister Lee, you are here in India for a particularly long working visit where you are travelling not just to Delhi, but a few other places. Give us a sense of what you hope to achieve during your visit as well as how your meetings with Prime Minister Modi went.

PM Lee Hsien Loong: We last had a visit from Prime Minister Modi in November to Singapore when we signed the Strategic Partnership between Singapore and India, and there specific things which we want to do in this Strategic Partnership. The progress over the last ten months. I am happy to be here to follow up. For example we had MOUs signed and exchanged yesterday on vocational and skills training.

We have projects going on in several parts of India, Assam, Rajasthan, I am going to Udaipur today, we have a centre for tourism training. This is one aspect of it. We have progress on Mr Modi's Smart Cities project. We are working on Amaravati, Andhra Pradesh. We did the master plan and we are bidding for the master developer contract. There is process going on right now. We hope we get the contract and we will be able to help and show what we can do. We also got our Comprehensive Economic Cooperation Agreement (CECA) between Singapore and India which is undergoing its second review. It been taking us some time, but I think we are about ready to wrap it up. We made good progress over some of the outstanding issues. So it’s chance for me to touch base with Mr Modi and give these projects and extra push. And I was very happy yesterday we had a good meeting, we are thinking along similar lines in these areas.

The Hindu: You are one of the first visiting dignitaries to come to India after the Uri attacks, as well as the first head of state to be in India after India announced that it has crossed the line of control to carry out attacks over in what is called Pakistan-occupied Kashmir. Do you support India's decision to do?

PM Lee: First of all, on the attack we think it's a tragedy, we are stoutly against terrorism of all forms. Cross-border terrorism is a particular problem which India has. In Singapore we worry about cross-border terrorism as a potential threat too. We are a very small country, our borders are very close by and it is quite possible for an attack to be mounted on Singapore from beyond our shores. In fact, Indonesians have recently picked up a plot by a group of terrorists in Batam, which is just across the Straits of Singapore from us. They were planning or hoping to launch a rocket attack on Marina Bay Sands in Singapore. So we absolutely understand the seriousness with which India takes this problem.[/highlighter] I expressed my condolences on the loss of lives to Prime Minister Modi. I think these are problems which India has to manage over a long term. You need a tactical response, but at the same time you have to try to develop a relationship which is stable and constructive with your neighbour, and in particular with Pakistan. It is not easy to do, but it is something India has to look at and Pakistan also has to look at.

The Hindu: The UN Secretary-General has used the word "raising tensions" with some concern. Obviously the impact of those concerns is always felt first on business and on investments. Do you see an impact right now on these tensions we are seeing?

PM Lee: I think any business which invests in India must understand the geopolitical environment which India exists and the possible risk which come up from time to time. Things like these happen not once in a very long (time), but every so often. I think they have to take a long perspective. If they get excited every time something happens, I think it is very difficult to sustain your business.

The Hindu: So you would say India remains a high priority on the investor's agenda because Singapore is of course the largest source of investment.

PM Lee: We are happy that investments into India have grown globally, but also from Singapore. This was one of the big motivations for India to conclude the CECA with Singapore. Since the CECA has been concluded, in fact there has been very substantial investment inflows from Singapore into India. Direct investments, infrastructure projects, hotels, property projects, port projects – things which are on India's agenda – but also portfolio investments, by Singaporeans as well as by global investors. There has been a whole community which has built up in Singapore – managing these inflows of investment, funding them, supporting them, allocating them, understanding, analysing what's happening in India. We think that's good. We like investments to grow. We like India's links with Singapore and with ASEAN to flourish and we think there's potential.

The Hindu: You spoke about India's role in the ASEAN. The question really is where does Singapore see India's role growing in the east? We are always observers in ASEAN, we are not that firmly in the South-East Asia framework thinking. Where would you see India's role really when it comes to ASEAN? Can you also throw some light into where the RECEP negotiations has been going? They seem to have hit a wall. Some have blamed India for that.

PM Lee: India is not just an observer in South-East Asia. This is your region. You have a lot of interest there. You are one of ASEAN's dialogue partners. You are also a member of the East Asia Summit grouping. You also have an FTA with Singapore but also with ASEAN as a group. So India is engaged in the South-East Asia community of nations. You have been active. I think you can afford to be even more active. As India's economy grows, your interest will grow in developing ties to East Asia and South-East Asia. We hope you will do more, and in particular in the RECEP negotiations, we hope you take an active approach – a liberal approach towards freeing up trade and promoting regional integration between India and the rest of the region. In fact, the RCEP group is specifically drafted in such a way that includes India, as part of the partnership. It could have been a grouping of Southeast Asia and Northeast Asia, but we think it would not have been a wise, ideal state for regional cooperation and India has to be part of this regional cooperation, together with Australia and New Zealand, so that there is a broader and more open group. It is in India's interest to take an active and liberal approach towards the discussions because, as you promote "Make in India", you will need exports, your trade will grow and your interest will be to free up trade, not more protected trade.

The Hindu: I ask because the RCEP group itself has said that they want to end the negotiation by end of this year. However, we heard from our own Commerce Minister, just last month, that there is a worldwide "traffic jam" on all free trade agreements, is RCEP going that way?

PM Lee: The worldwide traffic jam should not affect our particular project. We have to find some way through the traffic, what are our specific difficulty, we have to overcome them. It is not a matter of how long you take to do this, but what you want the end decision to be, how ambitious is your goal and the concept of the way we want to work together. The old model for India was substantially self-sufficient. It was the ideal which India became independent with. You spin your own thread and make your own clothes. Today, you don’t do that. You make clothes for the whole world, you buy things from all over the world. Therefore, you need a different kind of approach in order to prosper your industries and your economy. We hope India will take such an approach and progressively deepens its integration with the RCEP partners.

The Hindu: Is India sticking for it?

PM Lee: It is never helpful to point at sticking points, but it is always helpful to encourage our partners to take a forward-looking approach.

The Hindu: About India's political role in the region, PM has mentioned about keeping communications open, respecting international legal laws, as a shared priority between India and Singapore. That is a clear reference to the South China Sea, in particular China's rule over there. Many have spoken about India's role in helping to ease the situation. The US as expressed its vision. Where do you see India's role?

PM Lee: The South China Sea issue has many levels and aspects to it. The specific territorial and maritime disputes between the claimant states, specifically China and within the ASEAN countries, there are four of them, Philippines, Malaysia, Brunei and Vietnam. It is between the claimant states as to "who owns what", but other countries in the region and outside of it, have an interest in this issue because of freedom of navigation, international rule of law, including UNCLOS, peaceful resolution of disputes according to international laws and procedures. These are issues that countries have legitimate issues and we hope that the interests of the wider global community will be taken into account in whatever comes out of the resolution of the specific disputes. In that context, India can contribute in the region, just like what the other regional countries can contribute towards promoting a climate managing dispute peacefully, countries are discouraged from escalating their disputes and work towards a solution that is in accordance to international laws.

The Hindu: Is there a diplomatic or military rule in this region as the US has spoken about joint patrol?

PM Lee: The US has conducted the freedom of navigation and operation. I am not aware that other countries have done so. They could have. Each country needs to decide where its focus is. For India, I would say you have an interest in the wider region. Historically, your interest has been in the subcontinent because there were many issues in the subcontinent which you have to deal with. Increasingly, you have an interest in the wider region and it has to be done in a constructive way together in partnership with the other countries in the region which is why India is part of the ASEAN Regional Forum which discusses security issues.

The Hindu: That is exactly what the concern is. If India was to have a role in this region, in the South China Sea in particular, in East Asia, that could lead to tensions, that the impact could be felt back here, and perhaps open up two fronts – there is already clearly a tense front with Pakistan. The last thing you would need is another tense front with China. You see that as a challenge?

PM Lee: I think that is something which your decision makers must be quite conscious of and weighing quite carefully.

The Hindu: I ask because your father has famously spoken about the India-China rivalry. In fact, times he felt that China will live within a rules-based system. You think that world has changed?

PM Lee: The Chinese have grown bigger, their economy is much more developed. It continues to grow, not as fast as before, but at 5% or 6% a year, that is not low. Its influence continues to grow. Increasingly, it will have an interest as the status quo power and certainly, a power which has an interest in … Only international regime, including international law and in working with its partners and neighbours as partners rather than aversively. These are calculations that the Chinese government would have to make.

The Hindu: Is Singapore perhaps, playing the role of a bridge?

PM Lee: We are a small, tiny little country. We hope we can be constructive but really, we are a small player.

The Hindu: Coming back to the bilateral relationship, you mentioned about the MOUs that were signed. Yet, they really were not big. Perhaps it is still under discussions as you mentioned. The CECA, on revisiting the tax treaty in the light of what India has done with Mauritius, in view of the airline rights which has been a long-term sticking point between India and Singapore. I ask because despite the growing optimism of the relationship, bilateral trade is actually down.

PM Lee: Yes, that is true. But investments are up compared to where we were 10 years ago. And even bilateral trade, if you compare it with where we were 10 years ago, we are much better off today.

The Hindu: Not year-on-year?

PM Lee: Not year-on-year. But in the last two or three years since the new government took over, I think you have set a new direction for your economic policy and as the new investments in India become realised and start to operate, I'm optimistic that the trade will grow. But for the trade to grow, basically also, India must make a strategic decision that you want to encourage interdependence and a more open and more trade-based economy. Your trade for example, is still much less than the Chinese trade – you’re about one-fifth the Chinese international trade. So your GDP is about one-third the Chinese GDP and it's not in proportion to what it could be.

The Hindu: Tell me more about why you think that India needs to do more to open trade and what ways…?

PM Lee: Your approach has been, as I said, you started off working on the basis of self-sufficiency. And your trade used to be five, ten per cent of your GDP – some very small proportion. And it was a way to promote national cohesion and identity and build a nation. But it was not a very effective way to grow the economy and I think for many years your economy progressed very – how shall we put it – well, languidly. It didn’t integrate into the world. So in WTO, GATT, you are a member but really, your stakes were not high. And you started to shift that when Dr Manmohan Singh when he was Finance Minister around 1990 and then thereafter through successive governments, and then when he became Prime Minister. And then India opened up and your growth rate started to go up considerably. So now you are six, seven per cent. In fact, you could be more. But what’s the reason your growth rates have been able to open up? It's because you have been prepared to open up sectors of your economy, loosen up government control, enable private sector investments, enable private sectors to hire and restructure more freely than before and therefore free up the animal spirits and entrepreneurship which India actually has abundance, and enable it to have a consequence, not just domestically but internationally. So your companies, whether it’s Tata; whether it’s Infosys; whether it’s Mahindra Group, I mean so many of them who are all over the world. And if you want to be all over the world, you have to be part of that world and that means other countries must also be able to operate in India and then you have that interdependence. It cannot be a one-way exercise and I think that the process is not complete – both the process of changing the rules and your business environment and the process of reimagining where you stand in the global economy. If that can go further, then there will be more opportunities for growth. You’ve made some adjustments. You've opened up some sectors of the economy. Where you have allowed them to compete, it has prospered. Telecoms has prospered; IT has prospered. And now you are easing up even on retail and I think there is opportunity there. Indian consumers, housewives, ordinary homes, they have many more opportunities to buy things – competitive price, wide range. I think these are things which are good for India. But you have to change your perspective of where you stand and rethink what you have thought for a very long time and persuade people this is the right way to go. I think that’s a process.

The Hindu: I give you specific examples. You were talking about a larger way of thinking in India, especially since Singapore was expected to make major contributions when it comes to India's infrastructure development – when we talk about Smart Cities. Your Deputy PM was here last month and he gave a very interesting talk to bureaucrats and planners and the Cabinet and he made very specific (remarks) about employment laws, about land acquisition. Tell us specifically where you think India needs to improve because the advertisement always seems to be that India has great potential, investors are always interested. But yet, we seeing right now a shift in nuclear plants for example, from one state to another. The entire GE project had to go out of Gujarat because of land acquisition issues. Give us a sense of where you see the greatest bottleneck?

PM Lee: Well, I think your rules are a consideration because you have multi-levels of government – you have the state government; you have the local government; you have the federal government. And there are many rules and not all of them are fully consistent with one another and if you want to comply with all of them, you may find there's no possible solution. So that’s one thing which investors are concerned about. You mentioned land acquisition – that's another thing that investors are concerned about. I think if you look at even some of the projects which we had wanted to do – Singapore entities wanting to do industrial parks in India for example, they have often taken very long to clear the issues of land acquisition and it becomes politicised. And you can't settle it and in the end the project just languishes and nothing happens. Yesterday, I met some of the business people who came with me and I asked them. They said they had a very good meeting. They went to one of the eight ministries and the ministry said there's nothing to stop them policy-wise, from acquiring land and making a farm. This is for a commodities company wanting to make a big farm. So I said "Really?" He says "Yeah, nothing to stop you but you have to go and buy the land.". Well, that may take quite a long time and if you have to be on an industrial scale, how are you going to do this? So these are practical issues and if they are not overcome, well, I think there will be a problem.

The Hindu: Is the Singapore industrial park in Gujarat in trouble?

PM Lee: There is no park there. We have investments down in Hyderabad, in Bangalore, I think they are ok. They have been there a long time but there are some other projects which we have been talking about and still talking about.

The Hindu: So since you quote Prime Minister Manmohan speaking about unleashing animal spirits, what is the animal that describes India right now?

PM Lee: I think the Indians consider themselves like an elephant. I mean it moves not always the fastest but inexorably.

The Hindu: But do you see a change?

PM Lee: Well I think there is a change in mood certainly and there is a change in direction, in determination to get something done. You are getting your GST implemented in April next year. That is a big step which has been in the works for a very long time. I think it is a good thing. But of course India is a complicated country and what you can decide in the centre, you have got to work with the states, and you can’t direct the states what you can do and what Mr Modi is trying to do is to get the states to compete with one another, and therefore they would want to do the right thing themselves. Some of the states are doing well, other states continue to take some time.

The Hindu: Are we also going to see a revised tax treaty as we did before?

PM Lee: That is one of the issues because you have revised your tax treaty with Mauritius and you want to change your tax treaty with us which you are entitled to do. But you also have to understand that Singapore is quite different from Mauritius because one of the motivations for working out the tax treaty as you did with us was so as to encourage investments to come through Singapore to India. And we know that India is very focused on the question of black money. It is a very high political hot subject. And we have been very careful in Singapore to make sure that the investments into India are legitimate ones that these are bona fide investments and there is no round tripping and there is no hot money or bad money which is being funneled through Singapore. If you look at the track record since we made this tax treaty in 2006, the investments from Singapore have gone up enormously and these are real investments, direct investments in infrastructure, in ports, in highways, portfolio investments and a wide range of things. You are talking about more than a hundred billion dollar investments taking place through Singapore over these last ten years. As a result of that, there is a whole ecosystem which has been built up in Singapore of the investment bankers, of the financing, and of the source of the investments. It is a good thing for India because you actually need foreign investments and you are actually competing for foreign investments against other destinations. In the G20, in the OECD, there is a movement to rationalise tax benefits and try to not just level the playing field but to make sure that the countries get to collect taxes from the companies, whether source or destination, but at least to tax them properly once. And I think all of us are trying to rationalise our tax systems to comply with this. It is partly in our own interest, it is partly a cooperative exercise but you also have to understand that even if you rationalise it, your bargaining power is different between different countries and the bargaining power of the companies you are looking for is different between different companies. So if you are specifically wanting particular companies, particular projects, particular industries to come to you, you cannot avoid having some treatment treating them more favourably than you do other companies or other sources. It’s a reality. Every country has some mechanism for doing this and they have some way to present it so that it looks like you are completely impartial, neutral and correct but you have to do what you need to do. And I think India will also need to do that. And I think within that context, Singapore can help to foster India’s economic objectives. That is something that we are talking with your government.

The Hindu: But a revised tax treaty is on the cards?

PM Lee: It is something which we would like to discuss with the Indian government and Mr Modi agreed with me yesterday we’d get our delegation officials to look at it. On my side led by the Deputy Prime Minister Tharman Shanmugaratnam and on your side, led by Finance Minister Mr Arun Jaitley. As Mr Modi said, hope they can think out of the box and see how else we can work together.

The Hindu: Interesting that you use that term because I just have a couple of questions more. Former Prime Minister and your father Mr Lee Kuan Yew had called India a nation of unfulfilled greatness, and there is a quote that is often used when he said that the average Indian bureaucrat has little trust in India’s business community but they view Indian business people as opportunists who don’t have the welfare of the country at their heart and all the more so if they are foreign.

PM Lee: I don’t know where you got that quote from…

The Hindu: From the Robert Blackwill book of quotes. But do you think that has changed now, that the bureaucracy, when you are speaking of out of the box, that the bureaucracy that was often seen as the great stumbling block, is that changing?

PM Lee: Well, I think Mr Modi is working very hard to change the ethos within the bureaucracy and I wish him success.

The Hindu: You took a bus from the airport yesterday. I am not sure that you saw much of Delhi’s traffic but I am sure you have heard about it.

PM Lee: Well I am afraid we may have contributed to some of it because they cleared the streets for us.

The Hindu: Do you think Singapore’s new project with driverless cars is something that might work in India?

PM Lee: I don’t know that but I am sure you will have driverless cars in India but I am not sure that that was a solution to Delhi’s traffic problems. You need infrastructure, you need public transport, and many things have to change before you can solve this problem. It is integrated into the whole concept of smart cities. What is it that makes it smart? It is not just that you have computers or cameras or traffic policemen with wearable gadgets but it is the whole management and governance of the city and also the way in which the population accepts and adapts to the rules which are necessary in order to live cheek by jowl and harmoniously together.

The Hindu: Someone said that the option would be to increase the air flight capabilities and trying to pin that to my last question which is why do you think India has resisted so much to open up its air corridors for Singapore because this has perhaps been the longest…

PM Lee: I would say in fairness that over the years we have actually expanded the Air Services Agreement. The flights have increased, they are better now. We are flying to more cities now. Scoot has just started flying to Jaipur in Rajasthan. That is the 15th city Singapore carriers are flying to. So there has been expansion but it has not been as fast as the demand is and as the potential growth could have been. Partly because of the basic mindset which you start off with, which is that the ideal position is not to be completely open but the ideal position is that you have access externally and well, you guard your own domestic market. But also I suppose there is a concern that your own carriers may not be able to compete and the carriers have influence and encourage your own government to take their commercial interest into close account. And it is like that in many countries, every country has to pay some attention to the interest of its domestic carriers. But at the same time every government should take a broader approach, at the very least, towards the importance of the transportation, the civil aviation sector, the significance of its airports, building up becoming hubs for the region and therefore needing traffic whether domestic airlines or foreign airlines, and also the broader approach for the economy, for the country that even though it may mean your airlines have to work harder to compete, if you open up you will bring in a lot more tourists, a lot more business and therefore a lot more growth and prosperity for the country. So I think that’s the basic argument, how fast to open, where to draw the line, that is always a political decision.

The Hindu: Thank you so much Prime Minister.

PM Lee: Thank you.