Singapore Government Press Release
Media Relations Division, Ministry of Information, Communications and the Arts
MITA Building, 140 Hill Street, 2nd Storey, Singapore 179369
Tel: 6837-9666

PRIME MINISTER LEE HSIEN LOONG’S NATIONAL DAY RALLY 2004 SPEECH, SUNDAY 22 AUGUST 2004, AT THE UNIVERSITY CULTURAL CENTRE, NUS

OUR FUTURE OF OPPORTUNITY AND PROMISE

I Tribute to Goh Chok Tong

1 Friends and fellow Singaporeans, I've known Mr Goh Chok Tong for a very long time, more than 25 years. We first met in 1978. It was not long after he entered politics. We met socially and I remember he was explaining to me how he was consciously staying away from making speeches on shipping matters because he was from NOL (Neptune Orient Lines) and he wanted to broaden out and talk about other subjects. Soon after I met him, I went away to the US to study. When I was away, I needed to make a presentation on Singapore – Know Your World – and wanted something to show the Americans what Singapore was like. So, I asked Mr Goh and he sent me some slides of activities in Marine Parade, a kite-flying competition, something you won't find in America and it added something to letting the Americans know us. I came back from America after two years in the SAF (Singapore Armed Forces). He was my minister. I would brief him regularly. Then I entered Cabinet and he was a colleague and then, he was the Prime Minister.

2 When Mr Goh took over from Mr Lee Kuan Yew as PM, many people wondered how he would work out because Singapore had had only one PM ever since it was independent, in fact, ever since before it was independent. What would the new PM be like? Would he be his own man? What mark would he put on Singapore? All this uncertainty was soon dispelled. Chok Tong established his own style, milder, gentler, consultative and inclusive, but firm and clear. He built his own team. He retained key members from his own generation to help with the transition. He brought in new and younger ministers and he got good men and women to work with him and formed a strong team. And I'd just like to mention two of the people who kept on and stayed with him. One is Mr Dhanabalan, who had actually gone into the private sector after the transition was completed and came back in again when I was ill with lymphoma in 1992 and took over from me in MTI (Ministry of Trade and Industry) and looked after MTI for one year, one crucial year, and helped out at a very difficult time. And the other one is Dr Tony Tan, who also went out after the transition into the private sector, but came back in 1995 because Chok Tong asked him to help run Mindef (Ministry of Defence) for two years. And he stayed for nine years and now, he's staying for another year to help me out with my transition. So, I owe them a thank you.

3 Chok Tong launched new policies to take Singapore forward. Some were popular policies, like Edusave and Medifund. Everybody liked them. Some were difficult but necessary policies. We had to cut the CPF (Central Provident Fund), we had to raise the GST (Goods and Services Tax), not popular, but we had to do it and Chok Tong sold these policies and persuaded people to do it. Many things were in foreign policy. He travelled, he made friends with foreign leaders, he established contacts, gained their respect and made use of these links for our advantage, for example, establishing many free trade agreements with important trading partners and I should just mention one, the US free trade agreement because that one was born on a golf course. One evening after dinner, he persuaded Bill Clinton to play golf in Bandar Seri Begawan at night and over 18 holes, a free trade agreement was born. So, that means he's telling me I should play golf.

4 Chok Tong established his own connection with Singaporeans, not high-flown oratory, but sincere, direct, personal. He made people feel comfortable and listened to. He persuaded people to accept tough decisions. He explained highly-sensitive issues and defused them and so, when we had dialogues discussing very difficult things, I was always very comfortable sitting next to him because I knew that no matter how difficult the subject, how awkward the question, how uncomfortable the audience, he would be able, with a soft turn of word, with a joke, with a nice question back, to put the audience at ease and get his point across. And that's why when you see the pictures of me sitting next to him on a dialogue, I'm always smiling. But following him on the National Day Rally all by myself here, well, that's a different show altogether. But Chok Tong won the support of voters and the respect and the affection of Singaporeans and brought us all closer together as one people and, for that, I think we all thank Chok Tong.

II Entering politics and becoming PM

5 I owe a personal debt to Goh Chok Tong. I didn't plan to enter politics or to become PM, but he brought me in. He guided me and supported me and especially over these last 14 years when I was his Deputy PM (DPM) and since coming in, politics has engaged all my energies and abilities. It's what they call a 24/7 job, there's no running away from it.

6 I've been part of a team dealing with many issues, big and small, and I've learnt much from the previous two PMs, especially not just to focus on policies but on how the policies impact people, the lives of individual Singaporeans, what does it mean, how does it hurt, where can we help. So, I've always paid a lot of attention to my MPS cases, my Meet-the-People Session cases. Nine out of 10 are routine, but always keep my eye open for that last tenth one where the policy has gone wrong, the implementation is not right or maybe the policy is wrong and has to be changed and we have to do something, intervene and put it right. I won't tell you which ones otherwise you will all come and look for me. But I have red stickers on my table so when such a case comes, I put a red sticker and I see to it personally. I've learnt that not all problems can be solved, but some can and must and when you do solve one of these, it really gives you a high and it gives my helpers a high too. It makes my evening worthwhile and then the next time you come back for the MPS, chuffed up, enthused, energised and we try again. And when you have a long case, well, we sit patiently and we wait.

7 It's a big step from being DPM to being PM. It's not just working out policies or managing the economy. It's really uniting all Singaporeans, making sure everybody knows and feels that we are on the same venture together and building our nation and making each generation of Singaporeans feel proud to be Singaporean, proud to carry that pink IC and that red passport wherever we go.

III Singapore at a crossroad

8 It's a unique challenge leading Singapore now, in 2004, because Singapore is at a crossroad. It's a different world out there. It's a post-Cold War world. What does that mean? It means there's one hyperpower, the United States. There's no two superpowers, it's not a multipolar world, it's one hyperpower. China is rising, India is opening up, Southeast Asia is also growing in transition, but reasonably optimistic overall. And one major reality out there is the war on terrorism which is going to continue for a long time to come.

9 In Singapore, this is not just a change of the PMs. It's a generational change to the post-independence generation. It's a different generation of Singaporeans, different from the group which fought for independence, different from the group who grew up with independence in the immediate post-independence years who experienced the transformation, saw how Singapore changed, saw the effort and the passion which went into building Singapore, which went into achieving what we have and wanted to pick up and run and carry on with the job. Now, it's a new generation and it's got to take Singapore another step forward, another level higher.

IV A fresh, bold approach

10 To do that, we need a fresh and bold approach. We've been successful, wildly successful. Otherwise, we wouldn't be sitting here today. But we can't stand still because the world is changing, our people are changing and so must Singapore and so must the way we govern Singapore.

11 To succeed, we have to balance between continuity and change, keeping what is still working and good and strong in our system, which is a lot, and changing the part which is obsolete, discarding the part which is no longer relevant, inventing new pieces, new ideas to deal with new problems and to take advantage of new opportunities and to develop new strengths and strategies to thrive in a different world.

12 We can never afford to be satisfied with the status quo, even if we are still okay, even if our policies are still working. People say, "If it ain't broke, don't fix it". I say, if it ain't broke, better maintain it, lubricate it, inspect it, replace it, upgrade it, try something better and make it work better than before.

13 I was a member of Chok Tong's team and I contributed to many of Chok Tong's policies. These are sound policies, but we must always be prepared to look at them again, we must never be trapped by what we have and we must update them and conceive new ideas to go ahead. And this is true not just of the government but also of Singapore, also of society.

14 The Ministry of Education recently did a survey of CEOs and employers. They wanted to know how the employers looked at the output from our schools, looked at the young generation of people who are coming out from school, universities, working, what are their strengths and weaknesses. And they made many observations, but it boiled down basically to one key point which I think we know at the bottom of our hearts, sometimes we don't articulate it, and it is this – we are so capable, we are so efficient, we are so comfortable that we stick with what we have tried and tested and found working and we are reluctant to take risks and try new things. And that is a weakness. It's a weakness which we have to overcome.

15 The key to overcoming this is a mindset change. We have to see opportunities rather than challenges in new situations, we have to be less conventional, we must be prepared to venture and you've got to do this as individuals, we've got to do this as a government and I think we have to do it as a society. Let me give you some examples of what I mean. As individuals, let me give you a personal example because this is something which is true of all of us and me, too.

16 One day recently, I was coming back to Singapore Changi Airport, Arrival Hall, immigration counters. The security officer said, "Walk through". I said, "No, let me queue up and see what it's like". So, I came in. There are about eight counters, right? "All Passports", "All Passports", "All Passports", "All Passports". The last two say "Singapore Passports Only". What shall I do? The "All Passports" counters were all empty. The "Singapore Passport" counters had a long queue. So, I looked at this -- this doesn't make sense. Why is everybody doing that? They should go across. Then, I thought of it more, I thought maybe, they know something I don't. So, I joined them at the "Singapore Passports" counter. I stood there for 30 seconds. I said, "This doesn't make sense", went across, sailed through. The girls smiled at me, beamed, offered me a sweet. So, I think the pressure to conform, to go with what we're comfortable with -- he's doing it, let's do the same -- it happens to all of us. I think it's something we have to combat. Nobody is there, let's go there first, see what happens. So, that's on the individual level. I am sure you have examples, but I will just stick to myself today.

17 As a government, we have to rethink all our problems, big and small. Nothing should ever be set in stone. We've made big changes recently. The GST changes is a big one. The CPF cut was a big one and now, we are working on wage reform. That's another big one which will take some time and this will have a significant impact on our future. So, we've got to change our policies or look at our policies. We've got to support entrepreneurs. We've got to support Singaporeans being spontaneous, being unconventional. We should not put obstacles in their way. We should help them to succeed.

18 Let me give you one example. These are the Duck and Hippo Tours. You know what's a Duck Tour? It's a boat with wheels where you take a ride, you go into the harbour, you sail around, you come back. The Duck took two years to get a licence -- nearly died. Very difficult because they went to the LTA (Land Transport Authority). LTA says, "Your duck has a propeller, how can it be a car?" They went to the MPA (Maritime and Port Authority of Singapore). MPA says, "Your duck has wheels!" So, ding-dong, it took two years. Eventually, we sorted the problem. The Duck became a success. So, came the Hippo. The Hippo is a bus with no top, okay? So, you sit on top, you drive around. It's just like in London or one of the other Western cities. Question -- Is the Hippo a bus? A very important question because if it is not a bus, it is not allowed to stop at a bus-stop. So, that one we did better. Six months, we solved the problem. I think we have to do better than that.

19 We also need, as a government, to encourage participation and debate. We have opened up over the years. We've got the Speakers' Corner. We've allowed a lot more discussion. If you read the newspapers, what the newspapers write, the columnists, the Forum Page writers, the degree of debate is much more than we used to have, or in Parliament. But I think we can go further.

20 So, there are two things we are going to do. One, for indoor talks, we are going to do away with licensing. Right now, if you are going outdoors or indoors, if you want to do a talk, you need a Public Entertainment licence. Usually, it's approved, it's not a problem, but once in a while, you are slow or the police have reservations, they say, "No", but it's very rare. So now, we've decided we are going to exempt indoor talks from licensing requirements unless they touch on sensitive issues like race and religion.

21 The second thing we're going to do is to open up the Speakers' Corner where you can go and make any speech you like and we are going to say, "Well, if you want to go there and have an exhibition, go ahead". Once in a while, Think Centre says they want to go to the Speakers' Corner and they want to plant 100 flowers there, let the 100 flowers bloom. Well, I think go ahead. They want to water the flowers, go ahead. They want to turn the flowers down, go ahead. I mean, free expression as long as you don't get into race and religion and don't start a riot. It's a signal – speak, speak your voice, be heard, take responsibility for your views and opinions.

22 As a society also, we have to be forward-looking. I asked some young people what they would like me to say tonight and one of them said this – "Be forward-looking. Don't let elders deter you by saying it cannot be done or scare you with war stories". Maybe, I was telling him war stories because I know him. I agree that you shouldn't be scared by your elders, but I think you should listen to them, think carefully what their lessons mean in this new day and age and then use those lessons to avoid unnecessary mistakes and solve problems our way today. But we have to be prepared to accept the diversity of views and to listen to the debate and to have this discussion, always with a view to moving Singapore forward.

23 Let me give a controversial example. It's quite a controversial one. Some people told me, "Don't raise it, it’s your first rally speech, very dangerous", but I'm going to do it anyway. It's to do with the casino.

24 We've said, "No'' to the casino for a very long time. I've said "No" to the casino for a very long time. In 1985, we had a recession. I remember the late Mr Teh Cheang Wan wanted the casino, argued for it. We said, "No". We didn't proceed. This time round, we had the ERC (Economic Review Committee). The Subcommittee has put up the proposal for a casino. On the ERC, I said, "No", a majority of the members said, "No". We didn't recommend it.

25 But the subject didn't die and we have to reconsider because the argument comes up, the situation changes.

26 Why is the situation different? Because there are "cruises to nowhere", more and more cruises to nowhere. Some don't even cruise, some anchor nowhere. You can go to Batam. I'm told there are 13 down there. I haven't been there, but Wong Kan Seng has been. He told me it was by accident, and Singaporeans go there. So, Singaporeans are already doing this, right?

27 Then you want tourists. There are millions of tourists because the Indians have money to spend, the Chinese have money to spend. Every tour group to Singapore goes to Genting. Macau is opening up. Now, they have broken the monopoly, new operators, more shows, more games.

28 If we want to grow our tourism traffic and double the number of tourists to Singapore, we don't just want them to come here because of gambling, but if gambling is one of the things they want to do, then maybe we should allow them to do that in Singapore, find some way to do that and if, as a result of that, I get, over 10 years, double the traffic volume, I think we should think about it.

29 So, MTI has come with a new proposal, not just a casino, but an integrated resort, entertainment centre. So, you have shows, you have family entertainment, you have food, restaurants, art, all sorts of things and in the middle, of course, you also have this place.

30 Should we say, "No"? Well, I think we should take a deep breath and think about it carefully. I know many Singaporeans have expressed concerns and very strong concerns and the religious groups particularly have very strong views and their objections are not irrelevant. They are valid objections. It's because of these objections that for so long, we haven't done this. But I think we shouldn't just say, "No". I think we should consider - can we have the casino and still contain the social problems? Let's study it. Let's see if there's some way to do it.

31 So, I think what we are going to do is to request for proposals. Let's put out to say we are going to impose the following restrictions: Singaporeans below a certain income, you don't go. I mean, if they want to travel all the way to Batam, that's them, but we will not make it easy for people to go broke and ruin their families in Singapore. But if a millionaire wants to bring another millionaire friend from China or India, I don't think I should say "no" to him. It may help lessen my other taxes. So, I think we will find a reasonable restriction, draw a line, call for the proposals, test the market. Let's see what proposals come in. If it makes sense and people think that this is worth doing commercially, we make a judgment, we proceed. If it's not worth it, not worth the downside risks, then we will call it off.

32 We will consider all views before deciding. Finally, if we decide against it, then I think we will have had a valuable debate in our society, a valuable discussion and sent a strong signal that we are prepared to discuss all sorts of things and reopen long-settled issues. But if we decide to proceed, then the final solution which we implement will have to address the valid concerns which Singaporeans have raised. So, it's not black and white. I mean, it's looking for an appropriate middle way where we can have our cake and also eat most of it.

33 Increasingly, the world is going to be like that. China opened up. Deng Xiaoping said, "When you open the windows, the flies will fly in". So, you can't close the windows, you'll just have to have a fly-swatter, a fly-trap, have one of these UV lights to zap them, but keep the windows open and keep your interior as clean and as hygienic for your own people as possible. And I think that's the attitude we should have.

V What are our priorities?

34 So, with such a framework, with such an approach to our problems, what are our priorities? There are many, but tonight, I would like to list just five of them.

35 Firstly, external relations, making friends with other countries and protecting our interests overseas. Secondly, building the economy, creating jobs, helping wages and incomes to go up, pressing on with upgrading, looking after those who are affected by this. Thirdly, engaging the new generation. Fourthly, educating, investing in our young so that they are not just learning to make a living for themselves but also developing their character and their emotional roots in Singapore and discovering their strengths and achieving their potential; not just for a few, but for every child and also to get them to learn their mother tongues. And the fifth one, I put it last, but I'm sure you won't forget it, has to do with more babies. But let me start with external relations even though I think for many Singaporeans, the economy is at the top of your minds.

VI External relations

36 One thing which isn't going to change is our approach to external relations. We seek to be friends with all countries, and especially with our immediate neighbours and the major powers. We pursue win-win co-operation with all countries who are willing to co-operate with Singapore, but that doesn't mean that we can always accommodate the views or the positions of other countries. When our vital interests are at stake, we must quietly stand our ground. As Dr Habibie said, I'm sure you’ll remember, Singapore is a little red dot. If we don't defend our interests, who will? This approach has earned us respect internationally and a network of good relations with many countries around the world.

37 From time to time, we are put to the test. As a small country, we can't afford to flinch. When Michael Fay was sentenced to caning for vandalism, Bill Clinton as President wrote to our President on his behalf. But we couldn't remit his sentence of caning. All we could do is to reduce two strokes. From six, we went to four. If this were a Chinese punishment, wu shi da ban (fifty floggings with the stick) would become si shi wu da ban (45 floggings). And people in Asia noted our stand. When PM Mahathir of Malaysia pressured us to change the water agreements, we stood firmly by our legal rights. We gave a full public explanation of the negotiations with Malaysia – why we were justified in international law and we were prepared to go to any international tribunal. But we still do our best to maintain good relations with the US and with Malaysia and, in fact, our relations with these two countries, I think, are good.

38 Our closest neighbours are Indonesia and Malaysia. They will always be of special importance to us. Indonesia is holding its second round of the presidential elections soon. Malaysia has a new PM. I've known PM Abdullah Badawi for many years already and under him, our relations have taken a fresh start and I look forward to working with PM Abdullah Badawi to strengthen our bilateral relations further. I was very grateful that after I was sworn in, the next day he gave me a call to congratulate me and to wish me well. So, I said I look forward to working with him.

39 We have broad relations with China for many years since the visit of Deng Xiaoping to Singapore – he was then the Vice-Premier – in 1978. And we want to deepen these relations for the future. Unfortunately, our ties with China are currently under some strain after the Chinese reaction to my recent visit to Taiwan.

40 I've seen letters to the press – Straits Times, also Zaobao, also Berita Harian – which show they understand the Government's position and I am grateful for the support they've shown the Government. But nevertheless, tonight, let me explain why I needed to visit Taiwan, why Singapore is not changing its one-China policy and why I've become more worried about the cross-straits situation after my visit.

41 Why did I visit Taiwan? Because the cross-straits situation is the most serious security problem in the region, the most dangerous problem. Economically, China and Taiwan are getting closer together. They say half-a-million Taiwanese work in China, but politically, the two are drifting apart. China has made it very clear that if Taiwan moves towards independence, China is not going to stand idly by and war may be inevitable.

42 In this current, very tense situation, I will have to make some very difficult judgment calls as PM. I wanted to understand the thinking of my friends and contacts in Taiwan. Some of them are now key leaders on both sides, on the Pan-Green side and on the Pan-Blue side. I needed to sense the shifts in the tone and texture of Taiwanese society. Only then can I make an objective assessment with conviction and knowledge. You've got to talk to people, feel them, sense their mood, their body language, the atmosphere in the society and I can't get this feel just by sitting in my office surfing the Internet, reading reports, even secret reports, or watching CNN or CNA. It’s not possible. You have to be there.

43 If other countries are going to take Singapore's views and assessments of the cross-straits situation seriously, then they've got to view us as informed, impartial and balanced. If Singapore can help in some way to prevent miscalculations by some key players, then we are going to do our utmost to do so. We are small, we are not influencing the events, but we can provide some inputs to help the key players avoid mistakes and misjudgments.

44 Why did I go in July? Because Chok Tong had told me that the handover would be in August and so, July was the only window for me to go before becoming PM.

45 The Chinese have protested that my visit to Taiwan was contrary to Singapore's one-China policy. But Singapore has always observed the one-China policy. We took this position right from our independence in 1965. In 1971, we voted for PRC's admission into the UN to take its UN seat. In October 1990, we established diplomatic relations with China. By then, China understood Singapore's position on Taiwan, that historically, we have unique and important interests there which continue to be vital to our security today.

46 Two years after we established diplomatic relations with China, I visited Taiwan in 1992. I was then already DPM. So, my recent visit to Taiwan is not my first one under these circumstances, it's my second one, and it doesn't contradict our one-China policy. Nor can it be seen as emboldening Taiwan independence elements. This makes no sense because the Taiwanese know too well that we stand for one China and are opposed to Taiwan independence. Indeed, we are very worried by the growth of Taiwan independence forces.

47 Singapore's one-China policy will not change. A move by Taiwan towards independence is neither in Singapore's interests nor in the region's interests. If Taiwan goes for independence, Singapore will not recognise it. In fact, no Asian country is going to recognise it. Nor will the European countries. China will fight. Win or lose, Taiwan will be devastated. Unfortunately, I met only very few Taiwanese leaders who recognised t, his reality. The problem is that it's not going to be just Taiwan which is going to be damaged. It will be a grave setback for the whole region. Our hope for China to emerge peacefully and for the region to prosper through investments and trade and tourism will be shattered.

48 In any case, I think it would be the height of absurdity for Singapore to want to quarrel with China over the question of Taiwan because the cross-straits issue is not a permanent problem. It will be resolved sooner or later – either sooner if matters come to a head when Taiwan amends its Constitution, or later, eventually, if the situation evolves peacefully over two or three decades, China continues to grow and Taiwan's economy is progressively integrated into China's economy. The process is inexorable; there can be no other final outcome.

49 I came back from Taiwan more troubled than before I went because the ruling party, the DPP, is preoccupied with domestic politics. Their immediate priority is the upcoming Legislative Yuan elections –立法院选举 – at the end of the year and they're going to go all out to have the Pan-Green parties win an absolute majority. On the KMT side, they're also preoccupied with domestic policies, with the shooting incident on March 19 when somebody tried to assassinate President Chen Shui-bian and also with the recounting of the last presidential election votes. So, neither side has had time to think about Taiwan's future, about the longer term, how to manage relations with China, how best to reconcile the aspirations of the Taiwanese people with the realities of their international position.

50 There is a stronger Taiwanese identity emerging. More people are speaking in the Taiwanese dialect, what they call 河洛语 is a Taiwanese form of Hokkien. Before Lee Teng-hui and Chen Shui-bian became President, most Taiwanese people considered themselves as Chinese. Now, many think of themselves as Taiwanese, not Chinese. Somebody told me they did a poll. You have a choice – are you Taiwanese, are you Taiwanese/Chinese, or are you Chinese? And a majority said, "I am not Chinese, I am not Taiwanese/Chinese, I'm Taiwanese". And the Green leaders, some of them tell me that they believe that a majority of the people of Taiwan support an independent Taiwan now, so that the idea of Taidu (Taiwan Independence) has now become a mainstream view in Taiwan society. But the Blue leaders questioned this because they said, "Well, if you say independence is the status quo, yes, people like that. If you say independence is a declaration of independence, that's a different matter". But the reality is the Green side believes that the majority is pro-independence and they may act on it.

51 The Taiwanese media are a freewheeling and parochial lot. They thrive on juicy news and speculation. They chased me around when I was in Taiwan. The 代表 (representative) asked me what I wanted to do for breakfast. I said, in the old days, I used to go to the coffeeshop, to have 豆浆油条 (fritters and soya bean drink). He says, "No, no, no. You cannot go for豆浆油条 . We will bring the 豆浆油条to you because if you go out, you will be surrounded by the paparazzi and you will be more popular than 5566 (the Taiwanese boy band)”. So, it's a completely different media milieu. The newspapers cover almost exclusively domestic news, very little or no reporting of the situation in North Korea, of war against terrorism, or of the war in Iraq, or of the US elections.

52 So, I don't sense, therefore, that the Taiwanese people appreciate the international strategic environment. They don't understand how preoccupied the US is with the war in Iraq, how much they want to settle North Korea, how interdependent America and China have already become. Many also don't realise how rapidly China is transforming itself and how major powers in the world are repositioning themselves in response to a rising China. The problem is made worse because they have a rule that if you are a government officer, a political leader or a civil servant, you cannot visit China. So, the business people know, but the political leaders and the civil servants who are making policy, they can read the reports, but they have not seen firsthand Shanghai, Suzhou, Wuxi, Shenzhen, how China has changed and how Taiwan's position has changed.

53 Many Taiwanese believe that China will not use force on Taiwan even if it moves towards independence. They are wrong. I visited China in May. I met the top leaders. The cross-straits issue was at the top of their agenda and China is absolutely serious. For China, the 2008 Olympics is a small matter, but preventing Taiwanese independence is crucial to China.

54 The Taiwanese press, amongst other misreportings, speculated that I had visited Taiwan in order to play a mediator's role between China and Taiwan. It showed that they didn't understand the situation. It's not just a misreporting, they didn't understand the core situation because I am in no position to play such a role and I have no desire to do so and the key thing is, they didn't understand that the issue between China and Taiwan is not a misunderstanding which 和事佬 (mediator) can come along and, you know, jolly both sides and resolve, then you shake hands like in Everitt Road. It's a fundamental and deep contradiction which will require great skill and restraint and wisdom on both sides to resolve and to manage.

55 Therefore, there is a real risk of miscalculation and mishap. If war breaks out across the straits, we will be forced to choose between the two sides. As a friend of both sides, any decision is going to be painful, but if the conflict is provoked by Taiwan, then Singapore cannot support Taiwan.

56 I will not change our one-China policy. But I had no choice but to make this visit to Taiwan in order to be confident that I can take the right decision for Singapore in a looming crisis.

57 We value our relations with China. I have met many senior Chinese leaders, most recently in May, and I deeply appreciated their goodwill and friendship and their warm welcome and their readiness to co-operate with Singapore. This co-operation has always been on the basis of equality, mutual respect and mutual benefit – 平等互惠互利 – that's their slogan and that's ours too. If our co-operation is affected, both sides will lose.

58 I regret that my visit to Taiwan has caused this severe reaction in China which affected relations. I also regret the way the Taiwanese media chose to play up my private and unofficial visit.

59 This isn't going to be the last time our relations with a major friendly power are strained. We strive for good relations with all countries, but from time to time issues are going to arise and big powers have their own interests and will exercise their influence to get their way. We may be old friends, but when our interests diverge, or even when our approaches to the same problem differ, they have to put their interests first and their approaches first and so must we. This is a reality of the compelling pressures of international politics and of national interests and we must remember this.

VII Restructuring our economy

60 Let me move on to domestic affairs now and talk about restructuring the economy, which I think, for many Singaporeans, is the item at the top of your agenda.

61 Our economy is doing well because we have been restructuring it, because we have been taking the painful but necessary steps and we have made ourselves competitive and so, this year, we've got 10 per cent growth in the first half and maybe 8 or 9 per cent for the year. It's because of restructuring, it's not by chance. The challenge for us is how to continue growing and the answer is, well, we've got to continue to restructure, we've got to continue to upgrade.

62 It's difficult, it's painful, it's tiring, but it's not just Singapore. It's a worldwide trend because of globalisation. It's happening everywhere. There is ferocious competition. The developed countries are facing it, in America, in Europe. The developing countries are facing it, China and India. We see them as ferocious competitors. They see other China men and other Indians as ferocious competitors. So, we are afraid of 1,300 million Chinese, maybe. They are afraid of 1,299 million Chinese, too. And the competition is ferocious. So, the result is less job security, more need to adapt as the market changes. And overall, if you look at it in broad trends, I think in the developing countries, where they've upgraded themselves and got their infrastructure right and their rules right and their conditions right, like the coastal cities in China, like some cities in India, I think that their incomes will rise because they are very cheap now.

63 In the developed countries, in Germany where they have too much social welfare and they can't afford it; in America where their wages are very high and things can be done cheaper overseas, even for programmers, even for skilled workers, even doctors, I think in the developed countries, the incomes are going to fall. So the bottom is going to come up and the top is going to come down, we are somewhere in between. What happens to us? I think we have to try and push our incomes up and to do that, we have to restructure, upgrade, improve our productivity and make our labour markets more flexible so that when the conditions change, when business change, we can also get our companies to alter, to adapt, to get into the new business and get out of the old business so that they can continue to be productive and can continue to make a living for Singaporeans.

64 So, we talk about wage reform. It's not just flexible wages, a few more bonuses here and there, the MVC (Monthly Variable Component), but defining goals for the company, setting goals for the workers, rewarding them according to their goals. It's what people call KPIs, key performance indicators. So, you have a key performance indicator – how many boxes you move or how many chips you make, how low your defect rate is, getting people motivated to do the right thing so that they will be productive, so that they will align their interests and they can earn a good living.

65 And that's what we have been trying to do this year – we've had a tripartite taskforce, we had recommendations in January, we've made good progress – hotels, banks, some other sectors have restructured already and other companies should also follow, especially the SMEs (small- and medium-sized enterprises) who find it more difficult. And the economy is picking up. In fact, that's a good time to restructure because then you can build up the buffer of the variable bonus. When the economy is down, the fear is there, but the pain is great. So, I think do it now.

66 We also have to raise our productivity, which means retraining workers but also means restructuring the companies and I think we can do it. PSA and HDB restructured last year.

67 PSA particularly had a very difficult exercise, but they've done it and they have done well. They had to drop about 600 workers, they had to slash costs to the bone, they had to retrain their people, cut their prices to their customers so as to lock them in and get them signed on. But they have turned around. The volume is up, profits are up, KPIs have been met, bonuses will be paid and the customers say there's a new PSA now because when there's a problem, the PSA staff will go to the company to ask the company, "How can I help you?" rather than wait for the company to come and then say, "Well, sorry, it's your problem, you look after it". So, PSA has changed and as PSA has done, other companies have to do too.

68 It will not be the last one because many others will be necessary. SIA is one company which is in this category. You know all about SIA also. You've seen what Senior Minister has said, you've seen what SIA unions have said. We know that the unions are discussing this, negotiating with the company and making good progress, particularly the NTUC affiliates. But let me just add this – it's not just the LCCs (low cost carriers) which are the problem, it's not just Bangkok Airport which is the problem. The problem is that SIA's competitors used to be very poor and are now quite good. So, SIA's margin used to be very comfortable, but now, it's much less. If you fly one of the other airlines, you will find that they're not bad at all, but 20 years ago, it was different.

69 I give you one example again. I went to China 20 years ago for the first time. In those days, SIA didn't fly, so I flew a Chinese airline, Singapore to Beijing. It's about six hours, quite a long flight. The service was abysmal. We got onto the aeroplane about 11 o'clock, and I said, "What are we going to eat for lunch?'' So, I saw these boxes coming onto the aeroplane, little white boxes, paper boxes, and they passed them down the corridor from passenger to passenger. Each passenger, one, that's your 打包 (takeaways). Dim sum inside – cold, greasy, salty, unappetising, a few toothpicks, so you can help yourself. I was sitting in front, First Class. So, I thought, maybe First Class passenger, they'll give me special treatment. Let's see what happens. So, they went all the way down, they reached the First Class. We got special treatment – we got two boxes each.

70 That was 20 years ago. Today, you fly a Chinese airline, the air hostess comes, she serves you wine, she gives you food, here is the menu. Would you like a newspaper, sir? The arrival, the temperature is such and such, remember to wear a coat. Would you like a blanket? It's different.

71 So, SIA's competition is different and SIA knows this and I hope their executives go and ride other airlines regularly to make sure they know what's happening and I think their workers also should ride other airlines from time to time and I think that this is a reality which SIA and its unions have to confront together and to deal with. And they will do it.

72 And so will other companies. And I think the Civil Service also has to do it because if the Civil Service is the only place where you have an iron rice bowl, we’ll have a problem. Then we'll have more Duck and Hippo stories.

73 So, we've got to continue running the marathon. I know that some Singaporeans worry that new PM, maybe very fierce and may push Singaporeans to run even faster.

74 Let me be quite candid with you. I can't promise you air-con coaches to ride you there in comfort. Not possible, but I think we can provide everybody with good shoes, good coaching, running shoes, drink of water and we'll have first aid points along the way, so you can rest and even for those with wheelchairs, we'll bring them along and we will run together as a team and we will get to the ending point together. But remember, finally, it's not the shoes, it's not the drinks, it's the runner.

75 You've watched Home Run, right? I watched it a couple of nights ago, taking a break from writing this speech. You watch the race – Ah Kun, he had lousy shoes, tattered and torn, shared with his sister. It disappeared half-way down the race, but he won because he wanted to win and I think it's that spirit, that determination, that guts which we've got to have if we are going to want to run and win.

76 I understand what restructuring means for companies and for workers and for the unions and for the families. Retrenchment is a very emotional experience for everybody – for the workers, for the IROs (industrial relations officers), for the employers, for the human resource people. In PSA's retrenchment exercise, everybody was involved. It was a wrenching experience, I think everybody wept. Even the management wept because they've never had to do this before but at the end of it, it was done. I think it was done well and the union leaders and the IROs were given PBMs and BBMs in this year's National Day for their blood, sweat and tears. We salute them.

77 Other cases are less wrenching. We have more time to prepare. I think it's less of a shock to the workers. We can get them prepared psychologically. We can have those more willing to go arranged to leave earlier, but even then, many families are affected and even those with jobs are worried and unsettled because, they say “will I be next?” So, we will do our best to support and to help those who are affected because we have to look after them, not only when they lose a job but to help them to find a new one, especially the older workers. And that means we need retraining programmes and we need to restructure and redesign jobs so that workers will be able to do these new jobs. The programmes are there. We have many retraining programmes, but the workers have to make an effort because if they don't make an effort, it's going to be difficult for them to do it.

78 I recently watched a video Othman Harun showed me made by Mendaki and WDA (Workforce Development Agency) to encourage workers to change jobs because you can make any number of speeches until your throat gets hoarse, but you need real-life examples of people who have made this transition, who have learnt new skills, who have been able to cross over. So, this was an effort by Mendaki in Malay and it was called "Kalau Hendak, Seribu Daya". I thought it was a good movie, just 10, 15 minutes and it showed four stories, but one particularly struck me. It was a widow, Madam Hafidah Maaruf. She had five children she was looking after, the eldest doing 'O' levels. She was a cook when she got retrenched. Then she attended a reflexologist/masseuse course. Very tough, but she persevered and she completed the course with her children's help and she set up business in a fitness centre. I'll just quote what she said in Malay: "Mula saya merasa takut juga, pasal apa saya bukan dari aliran Inggeris atau Melayu, saya dari sekolah Arab, saya tak begitu faham. Adalah juga masalah masalah yang saya hadapi. Apabila saya pulang ke rumah guru guru saya adalah anak anak saya."

79 In other words, "at first I felt afraid, because I was not from the English or the Malay stream, I was from the Arabic stream, which means a madrasah. So, I met many difficulties, but when I went home, my teachers were my children". So, she had the guts to make the transition and to change over and become a reflexologist. It's not easy. Her business is not doing very, very well, but I wish her well and I think with her spirit, she will be able to make it.

80 The other thing we have to do to help the retrenched workers and people who lose their jobs is job redesign because there are jobs at the bottom, but they are not attractive. They are dirty, they are sweaty, they are tiring, unpleasant but if we can restructure them, I think we can make them more attractive to Singaporeans, pay better, make more sense for Singaporeans to do.

81 Lim Swee Say has been doing this in ENV (Ministry of Environment) and now, he's gone back to NTUC. I think this is going to be one of the key things on his plate. So, he explained to me, he says, at hawker centres, the hawker assistant picks up the plates and washes them, he’s usually in a pair of slippers, dirty singlet, torn shorts. He takes the thing, he takes a dirty pail of water, sloshes it around, declares it a clean plate. So, now, he's organised them, there’re proper uniforms, proper hot water machines to clean the plates, pride of work, proper standards and hygiene, better pay. And the hawkers who get better service are willing to pay for this to get their plates and dishes washed. It makes sense. So, he says 1,000 x 1,000, 1,000 jobs for S$1,000 per job, let's create these 1,000 jobs for a start, 1,000 by 1,000. He's got about 500 or 600.

82 I asked him, what other examples? He says, well, town councils. Town council cleaners are paid very poorly. Very often, you see foreign workers, sometimes illegally employed by the subcontractor, cheap, but the job is quick and dirty and they finish by 10 o'clock in the morning. So, because they finish by 10 o'clock in the morning by contract, you only have three or four hours in the morning to clean the floor. Therefore, you can only clean very few number of flats every day. Therefore, the wages are poor, S$600. Why do you want to stop at ten o'clock in the morning? The town councils say, this way, when the residents come out, the place looks clean. So, he says, why not stop by two o'clock in the afternoon? So, when the residents come out, they see people cleaning it and they feel happy it's being cleaned. But anyway, if you do it at two o'clock in the afternoon, you have a longer period, you can do more work, you can clean more, you can be paid more and you can get more Singaporeans to do it.

83 So, I think these are practical ways we can do things in cleaning. In other industries, too, I think we should pay some attention to this so as to help the workers at the bottom who are out of work find work. We have foreign workers, yes, they are a great help to our economy and we need them, but we also have to help to restructure our jobs so that Singaporeans can do them, and will do them.

84 Besides jobs, one of the things Singaporeans worry about is the cost of living. A lot of people worry about the cost of living going up and, indeed, some prices have gone up – electricity, you know, because of oil prices. S&C charges have gone up because we haven't revised them for more than 10 years and we have to raise charges if we are going to maintain standards and clean the estates properly. Even prices of chickens and eggs have gone up recently. I think these can't be helped, but overall, our prices have been stable, yet many people still worry about it. So, I think we have to understand this worry and see what we can do about it.

85 I think for most Singaporeans, the reason why they feel cost of living is up is because wages have come down, bonuses have shrunk and so, belts have been tightened and for everyone, a little bit of an increase hurts. And they are committed because they plan on a house of a certain size, they have obligations, they have old folks to look after, children to send to schools and so on. Also, to be quite frank, expectations have gone up. In the old days, very few people had aircons. Today, when people come to me with an electricity bill problem in Meet-the-People Sessions, I ask them, "Do you turn on your aircon?" He says, "Only for a short while at night". I'm sure if I do a show of hands tonight, there'll be many aircons in this room. And handphones, too. People come to see us with financial problems. They need the handphone, they feel they must have it and I can understand these are conveniences and comfort items which people want, but you have to realise that they do cost something and that's part of the reason why you feel that money is tight. So, that's one reason why people feel the cost of living is up.

86 The other groups, of course, are the low-income groups an