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Transcript of Minister for Foreign Affairs Dr Vivian Balakrishnan's IISS Fullerton Lecture on 14 May 2018

15 May 2018

Excellencies, 
Ladies and Gentlemen,

It’s a pleasure to be here, and I shall start by noting that we live in very interesting times.  I think you will agree that - fortunately or unfortunately for Singapore - we’ve got a lot of work ahead of us.  We assumed the ASEAN Chairmanship against a backdrop of profound, and indeed unpredictable changes sweeping our region and dare I say, even at a global level.  Consequently, one of our key areas of focus as Chair of ASEAN has basically been to maintain ASEAN unity and relevance in the midst of these profound changes. Therefore, we chose the themes “Resilience” and “Innovation”.  These are not just meant to be topical buzzwords, but indeed to encapsulate what we believe ASEAN needs to do in order to maintain unity, centrality and relevance.  

So let’s start first by scanning the broad challenges that confront all of us.

The first is that the strategic balance is shifting, and it is shifting both at a global level as well as within the region itself. We see, quite obviously, rising new powers - China, India - in Southeast Asia.  These are steadily growing their economies, and with growth of the economy obviously comes the ability to invest in technology.  Economy plus technology enhances military weight, and all these lead to strategic heft and a shift in the centre of gravity.  This has opened up new opportunities for ASEAN.  If you think about ASEAN, or if you think about the Southeast Asian region, we have always been a thoroughfare.  A thoroughfare for silk, a thoroughfare for spices and, later on, for oil and gas.  And as world trade exploded in the last 50 years, it has been a vital channel for goods.  This has meant, therefore, that Southeast Asia has always been exposed to the tidal pulls of increasing economic and therefore strategic competition amongst the major powers. We connected China to Europe - certainly that was the case for silks; we connected Southeast Asia to Europe for spices; we connected the Middle East to China and Japan for fossil fuels; and of course now, we all know that USD 5 trillion worth of trade flows through the South China Sea. The key challenge then, knowing that we are in a sense, a traffic junction, is whether we can maintain our position, our relevance and our unity, or whether everyone just rides roughshod over us. We therefore want to maintain an open, inclusive, and what we call an ‘ASEAN-led’ regional architecture.  We want to be friends with all, and we want to be able to collaborate with all the powers - big and small - in order to benefit our region and to expand opportunities for our people. That’s the first challenge – dealing with the shift.  

The second challenge is that we are in the midst of a new revolution, and I refer to the digital revolution. In fact, we are still in the early phase of this digital revolution. Going beyond just computing and connectivity, the new platform technologies of robotics, artificial intelligence and big data are transforming jobs, radically transforming economies, societies and even politics.  History has taught us that technological mastery begets geopolitical influence.  The reason we are using English today in this room is because the Industrial Revolution began in England and in Europe.  That gave Europe a head-start, and in a sense also led to our colonisation by European powers. Today’s digital revolution, I believe, is no less a transformation of that paradigm.  

I want to deviate a little bit and ask you to consider the Industrial Revolution, characterised by the manufacture of physical goods, urbanisation and the development of cities - especially cities along riverways or international straits, or along sea ports.  Competitive advantage was derived by economies of scale, gaining access to global markets, and getting access to the lowest-cost raw materials possible. Countries - especially for developing countries that wanted to get up onto that ladder - competed by offering low-cost, hardworking and disciplined labour.  That’s the paradigm of the Industrial Revolution. The question is - what is the paradigm, and what are the sources of competitive advantage in the digital revolution?  I think in the digital revolution, we are seeing a transformation from the age of ‘mass production’ to the age of ‘mass customisation’. Second, you are seeing that more and more products, goods and services can now be intermediated - directly or indirectly - through digital means.  The key change that the digital medium introduces is the fact that the cost of replicating something, and the cost of transmitting something - if you think about your email, cut and copy is free - is virtually free.  When you start doing this replication and transmission at very low-cost rates, and you transfer this to goods and services, you get a different paradigm.  Then it is about smart cities that are connected; and I spend more time examining fibre optic maps of the world than I do just looking at geography and international straits.  The law of the sea is still very important, but cyberspace is an equally vital global commons.  Another example, is that where in the past, developing countries competed to offer low-cost labour, today we have to compete to offer low hurdles caused by policy red tape.  We need enlightened regulations.  In a digital world, a small start-up can theoretically have a market that is global, but at same time, competition is also intensified.  

So my point is that, because there is such a paradigm change and a revolution occurring, we live actually in an age of mass anxiety - and especially middle-class anxiety. The white-collar middle class that was brought up under the aegis of the Industrial Revolution thought that jobs were secure and that an education - literacy - was sufficient.  But today, the middle class is anxious, and in particular the middle class in developed countries. The countries that first reaped the harvest of the Industrial Revolution have been watching wage stagnation, have been watching rust belts developing, and have been reflecting great anxiety.  My point is that if governments and the leadership cannot explain to people what is going on, and cannot convince your population that we’ve got what it takes to invest in the infrastructure and in the skills capacity of our people; if you can’t give your people confidence to cope with this new revolution, then the siren calls of populism and xenophobia become very compelling.  And in a sense, if you look at various outcomes of elections and referenda over the last couple of years, in fact, this is a symptom of this underlying political anxiety.  So that’s my second major challenge.

The third challenge is on the security front. The point is, security challenges today are increasingly faceless, nameless and borderless.  We need to be resilient to the conventional security equations, but we also need to deal with unconventional threats - terrorism, cyber-attacks - which have become increasingly prevalent in our region. These challenges do not reflect the neat Westphalian borders that define the nation state.  We know that ISIS is supposed to have been defeated militarily in Iraq and Syria.  Yet it continues to propagate its dangerous ideology and foment trouble, particularly in Southeast Asia, which is a receptive and sometimes fertile ground for these ideologies. If you needed to be convinced, the attacks yesterday in Surabaya - apparently conducted by one single family that is supposed to have returned from Syria, including the children - isare a stark reminder of the power of ideology.  

We are also witnessing more cyber-attacks as we push for greater digitalisation.  In a sense, the more we depend on it, the more vulnerable we become.  And in today’s Internet age, there is the guise of anonymity and the proliferation of fragmented echo chambers. I mentioned just now that we are reaching the end of the age of the mass production, and are shifting to the age of mass customisation.  Well, in the media space, I think we are reaching the end of the age of broadcasting, and we are watching the rise of ‘narrowcasting’ - all of us increasingly being trapped in our respective echo chambers.  Is it therefore a wonder that our politics is fractured, our societies are divided, and we are unable to find consensus and to locate the middle ground? All this means that these threats - military, cyber and ideological - are in fact much harder to deal with. 

The fourth challenge is that for 70 years, we have depended on an open, rules-based multilateral trading system. Indeed, it goes beyond a trading system.  It has almost been a political philosophy - some people used to call it the Washington consensus, except nowadays I’m not sure there’s any consensus in Washington.  We have taken it for granted that free trade, cross-border investments, economic integration, multilateralism and a rules-based world order were good things, were essential to achieve peace and prosperity. Yet today, if you really seriously ask your population, you know that the political mood has changed, and has shifted against this concept of consensus.  And indeed, free trade has become a convenient scapegoat for working and middle-class disaffection.  Remember I explained just now the change due to the technological revolution - you see, it is much harder to deliver a rousing rally speech on digital disruption.  It is much easier to blame free trade, globalisation and foreigners.  

We have witnessed with concern emerging trade friction between the United States and China - in fact, this has been brewing for some time.  We note the announcement of unilateral tariffs; and when one side announces it, the other side immediately announces a suite of counter-tariffs.  The spectre of a trade war has never been more real.  For Singapore, because our trade is about three times our GDP, we have to be deeply concerned.  And there is no easy answer to dealing with this political angst.  The US’ share of global GDP was 40% in 1960. Its relative share has shrunk to 25% today.  When this happens, it is an entirely understandable and legitimate political question for the voters in the United States to ask whether the United States should continue to unilaterally underwrite the global world order that has sustained us for the past 70 years.  After all, every politician has to justify its programme to its local electorate.  So the point I am making - without any value judgements - is that this angst, this anxiety, this question about free trade, whether the Washington consensus should prevail, and whether the United States should unilaterally underwrite it.  These are all perfectly legitimate political questions.  

Having said that, if we do end up with a full-blown trade war between the world’s two largest economies, there will be serious ramifications on all of us.  I mentioned the ratio of trade to GDP for Singapore being three.  Even for ASEAN, trade in goods accounts for 90% of ASEAN’s GDP, and the US and China accounted for 26% of ASEAN’s total merchandise trade of USD 2.2 trillion in 2016.  The US and China have the most important bilateral relationship – most important to the rest of us as well. Competition between these two powers is to be expected, but whether this competition takes place within a framework of interdependence and generally-accepted international rules, or will it degenerate into unilateral and retaliatory measures? That makes all the difference. Ultimately, to quote my Prime Minister, what is at stake is war and peace, and the security and stability for of the world.

Having outlined these four major themes of challenges confronting us, let me try, in the short time available, to spell out how we believe ASEAN should respond.
At our recent Summit, our Leaders adopted a Vision Statement for a Resilient and Innovative ASEAN. You can look it up. It captures our Leaders’ assessment of our changing landscape.  It articulates their overarching vision for ASEAN’s future, three years since the ASEAN Community was established in 2015.  It sets out our key principles that underpin this collective vision, and injects political impetus into the slate of concrete initiatives which are listed in the document.  So the point is, we need to translate this vision into reality.

And in the immediate term, ASEAN Member States are working to address several challenges that affect our regional peace and stability.  Let me cite a few examples. 

First, the threat posed by ISIS.  You’ve seen it in southern Philippines, you see it in Indonesia, and of course, we also worry about Rakhine State in Myanmar.  At its peak, the ISIS campaign to establish a caliphate in Marawi City was arguably the most visceral, visible and present danger that terrorism posed to our region.  I think even my Filipino counterparts were surprised at how long it took to clear that threat.  The Philippines did clear that threat and dealt with it effectively. ASEAN, in our own small way, did what we could to assist them in terms of providing resources and support.  On our part, Singapore was able to contribute our drones and urban warfare training to help our Filipino brothers. ASEAN Member States have also been working together to tackle radicalisation at its roots, which ultimately is a political battle for hearts and minds, especially for young people. This is not something that you can deal with simply through intelligence and military operations.

Second, we mobilised the ASEAN Coordinating Centre for Humanitarian Assistance on Disaster Management to deliver assistance to all the affected communities in Rakhine State. We recognise that Rakhine State, if not properly resolved, will be another hotbed for radicalisation and violent extremism, and we need to work together to avert this. We are ready to support efforts by all parties to work together to achieve a long-term viable solution so that people can rebuild their lives, rebuild homes, and ultimately have hope and peace. You need a political solution.

Third, we have tried our best to reduce tensions in the South China Sea, and in particular, the negotiations on the Code of Conduct. The Code of Conduct does not set out to resolve longstanding sovereignty disputes - that is worth remembering.  In fact, my own sense is that ‘longstanding’ could extend to generations.  But what we are trying to do is to reaffirm a rules-based approach to managing the situation at sea and de-escalating tension.  This exercise of negotiating a COC is also a valuable platform, which if properly handled, and if all parties approach it with good faith, is also an opportunity to enhance and strengthen strategic trust between the ten member states of ASEAN, and China. But the truth is there remains deep-seated differences, and I don’t want to trivialise it, or assume that it’s a matter of a clever turn of phrase – it’s not so simple. But we do have to make step by step progress, and we have to continue to negotiate in good faith. We also need to enhance our mutual trust and confidence. We hope, and we implore all parties to exercise self-restraint in the conduct of activities that may otherwise complicate or aggravate the situation.  Singapore will co-chair the COC process until our term as ASEAN-China coordinator ends - should I say “fortunately” - in August 2018, which is three months’ time.  Nevertheless, rest assured we will continue to support these efforts to formulate an effective Code of Conduct.

Now, whilst tackling these urgent and immediate issues, ASEAN also has to keep up the momentum towards long-term issues.  So at our recent Summit, the Leaders launched two flagship initiatives. 

The first is the ASEAN Smart Cities Network. Again, I’ve explained to you our thoughts on the circumstances behind this digital revolution. Establishing an ASEAN Smart Cities Network is a response to that.  We hope to establish an ecosystem of 26 pioneer smart cities throughout Southeast Asia, who can come together, articulate a common framework for smart city development, craft specific action plans, match needs and capability, draw in investments, share mistakes, avoid those mistakes, and in particular make our economies - especially our digital economies - interoperate.  If we do this, it will be the digital reflection of ASEAN’s prior investments in infrastructure and connectivity. And if we do it right, we will expand opportunities - especially job opportunities - for our people and our small enterprises scattered throughout Southeast Asia.  So let’s wait and see what projects and initiatives emerge from this Smart Cities Network.  

The flipside of this is that even as we seek to digitalise more aspects of our society and economy, we will also become more vulnerable - cybersecurity. That’s why our Leaders also published a statement on cybersecurity cooperation. It sends a clear political signal of the importance we place on cybersecurity, and captures our vision for a peaceful, secure and resilient cyberspace that will act as a platform to facilitate economic growth, deepen connectivity and raise living standards for all. 

Against the backdrop of growing protectionism, ASEAN needs to double down on the calls for free trade. That’s why the other thing that is going to keep us busy over the next few months is to try to settle the Regional Comprehensive Economic Partnership by the end of this year – the RCEP. The RCEP, if we succeed, will include 45% of the world’s population and one-third of global GDP into a single integrated market.  Together with the recently concluded CPTPP, which was the original TPP minus a significant player; if you put the RCEP and CPTPP together, these become fundamental pillars for what we hope ultimately will be a Free Trade Area of the Asia-Pacific.  At the strategic level, it is an example of ASEAN holding on, and in fact doubling down on the importance of free trade as a formula for peace and prosperity for our future.

So we have had a busy start to the year.  We have adopted several initiatives.  Our objective is to make our region future-ready, and in a sense I am trying to give you an idea that we want to focus attention on tomorrow’s jobs, and not squabble about yesterday’s battles, and even yesterday’s trade and technological challenges.  It is important for us to keep our eyes forward.  We believe if we can all do this, our prospects remain bright.  60% of the 630 million population of ASEAN is below the age of 35.  This represents a demographic dividend that has not yet been harvested.  This in fact stands in stark contrast to the situation in Northeast Asia and even in Europe. We must give our young people jobs; we must give them skills for the future, and hope for the future. Our combined ASEAN GDP stood at USD 2.55 trillion in 2016, and we have a compound annual growth rate of over 5% in the last decade. If we can keep this growth rate up - and because the demographic winds are in our sails - and if we can continue to invest in digital infrastructure and skills capacity, we believe ASEAN is set to become the world’s fourth largest single market by 2030.  In fact, there are some estimates that ASEAN’s digital economy alone could grow to USD 200 billion by 2025.  But challenges lay ahead of us, and I’m always reminded that we don’t have control over tectonic forces.  We live in a very different world from the 60s, when ASEAN was formed - basically, the non-communist part of Southeast Asia decided that if we didn’t hang together, we would hang individually. In the 60s, United States drew a line, committed blood and treasure to hold the line in Vietnam and Korea, and gave the rest of us time and space to develop and prove that this model worked. Today, we live in very different circumstances, and the chief underwriter is having second thoughts.  But we also live in a time of enormous opportunity because of this digital revolution. If we get our priorities right, execute our programmes, then in fact I really believe that ASEAN’s Golden Age lies ahead of us. 

So thank you for your attention; I will take questions now. The more robust and frank, the better. Thank you all. 

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