Transcript of Keynote Speech by Prime Minister Lee Hsien Loong at the Shangri-La Dialogue on 29 May 2015

Dr John Chipman, Director-General and Chief Executive, IISS

Your Excellencies

Distinguished guests, ladies and gentlemen

Welcome to the Shangri-La Dialogue (SLD) and to Singapore. This is a significant year for Singapore. 2015 marks our 50^th anniversary as a nation. When we separated from Malaysia in 1965, it was a completely different world and a completely different Singapore. This is also the 14^th year of the Shangri-La Dialogue. The first Dialogue was held in 2002, not long after 9/11. So this year is a good time to take a step back, and take a longer-term look at what has changed in the past 50 years and since the SLD began.

Balance of Power

In every Shangri-La Dialogue, three issues are always on the agenda: the balance of power; regional cooperation; and terrorism. I propose to speak about these three subjects tonight, beginning with the balance of power.

50 years ago, in 1965, it was the height of the Cold War. The two major camps in the world, led by the US and the Soviet Union, defined the global strategic landscape. There were non-aligned countries, like India and Indonesia, but these two main opposing camps faced off against each other worldwide. In Asia, the conflict manifested itself in the Vietnam War and the tensions and the frozen conflict in the Korean Peninsula.

China then was not a major influence in the region or the world. It was a poor, backward country. Its foreign trade was negligible. China would soon be engulfed in the Cultural Revolution and turn completely inwards. Many Southeast Asian countries saw China as a security threat, because it supported insurgent communist movements in their countries that sought to overthrow governments by armed force.

Japan was an important partner of the US, with the US-Japan Security Alliance. Japan was not an independent player in security terms, because of the history of the War. It was, however, a major economic power, enjoying rapid economic growth from the 1960s all the way to the 1980s. Its dynamic economy energised the whole region, and especially helped the “flying geese” of the Newly Industrialising Economies (NIEs) – South Korea, Taiwan, Hong Kong and Singapore – to also take flight and take off.

Today, it is a different strategic landscape. The Cold War is long over. The Soviet Union has dissolved. Russia continues to participate in this region, but its focus is in Europe and its “Near Abroad”, which means Central Asia – Eurasia. The key players in Asia are the US and China.

The US remains the dominant Pacific power. The Pacific Command and the US 7^th Fleet are a powerful force in being, and a key factor for peace and stability in the region. America’s core interest in Asia has not changed and that is a stable region that is open to do business with all countries and a regional order that enables all major powers to engage constructively in Asia. America has played this benign role in Asia since the War. Its presence is welcomed by the many regional countries which have benefited from it, including Singapore.

US interests in the region have grown with the growing weight of Asia in the world economy. The US has many preoccupations worldwide, not least Iran, the Middle East, Europe and Ukraine. But President Obama has reaffirmed that America is and always will be a Pacific Power and the Obama Administration has articulated a strategic “rebalance” towards Asia. Recently, US Defence Secretary Ashton Carter reaffirmed this, just before he visited Japan and Korea and he is here to affirm this by his presence this evening.

But the strategic balance in Asia is shifting. China has become the second biggest economy in the world. It is now the largest or the second largest trading partner of nearly every country in the Asia-Pacific – South Korea, Japan, Australia, including Singapore, and even the US. China’s interdependence with the external world has grown, whether for resources, markets, technology, or investments. So has its interest in making friends and influencing outcomes, and so has its skill in doing so.

Meanwhile, China is building up and modernising its armed forces. President Xi Jinping has declared that China will be a maritime power. It already has one aircraft carrier and is building a second one. Last week China concluded its first-ever joint naval exercise with the Russians and in the Mediterranean Sea.

So far China’s rise has been peaceful, within the established international order. The key to this peaceful rise continuing is the US-China relationship.

The US-China relationship is fundamentally different from the US-Soviet relationship of old. It is not a zero-sum game. There are elements of competition, but many interdependencies and opportunities for mutual benefit. China is America’s second biggest trading partner. The biggest is Canada, and it is America’s largest foreign creditor. It owns lots of US treasury securities. America is a source of technology and ideas for China. Many many promising young Chinese study in the US, one-quarter million of them, including many children of the elite. Each needs the other’s cooperation to tackle global problems, whether this is nuclear proliferation or global warming.

All Asian countries hope that US-China relations will be positive. No country wants to choose sides between the US and China. We are glad that successive US Administrations and successive Chinese leaderships have engaged, worked together and managed the problems that have come up between them, despite nationalistic pressures on both sides and inevitable tensions from time to time.

So when both the US and China say that the broad Pacific Ocean is “vast enough” to embrace both China and the United States, we read that as a good sign. Provided, by “vast enough”, they mean that there is space all over the Asia-Pacific region for both powers to participate and compete peacefully, and to work out problems constructively, without raising tensions, and provided, they do not mean “vast enough” to divide up the Pacific Ocean between the two, each with its own sphere of influence, circumscribing options for other countries, and increasing the risk of rivalry and conflict between two power blocs.

Realistically speaking, however, competition between major powers is unavoidable. The question is what form this competition will take.

One model of competition is where major powers strengthen their influence within a set of international rules and norms. We can see this in how China is actively deepening its cooperation and making friends all over Asia, through the 2+7 cooperation framework which they designed with ASEAN, through the One Road One Belt, and the Maritime Silk Road initiatives which they are promoting with all of their neighbours, land as well as sea.

One of China’s major projects is the Asian Infrastructure Investment Bank (AIIB). The AIIB will enhance China’s influence in the world, but it also meets a real and urgent need for infrastructure development and capital in the region. And it is a way China can participate constructively in the international order together with other countries, partners in the AIIB. This is similar to how the Americans and Europeans influence the IMF and World Bank, and how Japan plays a major role in the Asian Development Bank (ADB). It is legitimate, it is constructive, and that is why Singapore gave its support very early to the AIIB idea, and why many countries have since welcomed it and joined as Prospective Founding Members (PFMs), not only Asian countries, but also Britain, France, Germany, Italy, Australia and others, considering.

Similarly, the US is giving substance to its rebalancing towards Asia by increasing its engagement. One major initiative is the Trans-Pacific Partnership (TPP). President Obama has personally pushed the TPP hard with the negotiating partners. Every time we meet him for APEC meetings, he has a side meeting and we discuss the TPP. The Administration needs to obtain Trade Promotion Authority (TPA) from Congress, before we can settle this matter, because without TPA no country will close their TPP negotiations with the US. A TPA Bill has now passed the Senate, and is now before the House. Obtaining congressional approval for trade negotiating authority is always a messy and mysterious process, so all the TPP partners are watching this closely and we are praying that Congress passes TPA legislation, in a satisfactory form and in good time.

I hope the American legislators and public realise how big the stakes are in the TPP, not just for Asia but for the US itself too. Because whatever the merits or demerits of individual line items of trade covered in the TPP, the agreement has a wider strategic significance. Getting the TPP done will deepen links on both sides of the Pacific. Failing to get the TPP done will hurt the credibility and standing of the US not just in Asia, but

worldwide.

There is clearly a competitive dynamic here. It is an open secret that the US had reservations about the AIIB and discouraged its friends from participating. And on the TPP, some observers believe that the rules are being crafted to raise the hurdle for China to join. I am quite sure that is not the thinking of all TPP members, although China, as a matter of fact, is not yet ready to join the TPP. Speaking as an Asian country and a participant in both the AIIB and the TPP, Singapore hopes that eventually China will join the TPP, and the US and Japan will join the AIIB.

That is one model of cooperation and competition. But there is another model of competition, where win-win arrangements are harder to reach, and unhappy outcomes tougher to avoid. Take the territorial and maritime disputes in the East China Sea and South China Sea. These disputes have heated up significantly in recent years. There is daily buzzing of ships and aircraft around the Senkaku/Diaoyudao islands, and the testing of boundaries by China and Japan. In the South China Sea, claimant states are taking unilateral actions in the disputed areas, drilling for oil and gas, reclaiming land, setting up outposts, and reinforcing their military presence.

Actions provoke reactions. The US is responding to Chinese activities with increased over-flights and sailings near the disputed territories, to signal that it will not accept unilateral assertions of sovereignty in the South China Sea. Each country feels compelled to react to what others have done, in order to protect its own interests.

Non-claimant countries cannot take sides on the merits of the rival claims. But they do have a stake in the maritime disputes, and in particular a stake in how they are handled. Because every Asian country stands to lose if regional security and stability are threatened. Major sea and air lines of communications pass through the South China Sea. Every state whose trade passes through the South China Sea, or whose ships and aircraft use the South China Sea, every such State has an interest in freedom of navigation and over-flight. This includes Singapore, for whom the South China Sea is a vital life line.

No country can renounce its claims, or sometimes can even concede that a dispute exists over its claims, without paying a high political cost. But the consequence of this difficulty is that all sides harden their positions, and disputes become more difficult to disentangle. These maritime disputes are most unlikely to be solved anytime soon, and most likely will outlive the Shangri-la Dialogue. But they can and they should be managed and contained, because if the present dynamic continues, it must lead to more tensions and bad outcomes.

China and ASEAN should conclude a Code of Conduct on the South China Sea as soon as possible, so as to break the vicious cycle and not let disputes sour the broader relationship. If all parties adhere to international law, including the United Nations Convention on the Law of the Sea (UNCLOS), that is the best outcome. On the other hand, if a physical clash occurs, which escalates into a wider tension or conflict, either by design or more likely by accident, that would be very bad. But even if we avoid a physical clash, if the outcome is determined on the basis of might is right, that will set a bad precedent. It may not lead immediately to a hot conflict, but it will be an unhappier and a less sustainable position. In the long run, a stable regional order cannot be maintained just by superior force. It requires consent and legitimacy in the international community together with the balance of power.

So far, I have spoken about US and China. But other countries, too, play a role in the regional power balance.

This year is the 70^th anniversary of the end of WWII. The War continues to cast a shadow over relations between the old adversaries, in particular between Japan and its neighbours, China and Korea. After 70 years, it is past the time to put this history behind us properly, just like the Europeans have done. This requires statesmanship and largeness of spirit on both sides.

Japan needs to acknowledge past wrongs, and Japanese public opinion needs to be more forthright in rejecting the more outrageous interpretations of history by right-wing academics and politicians. Japan has already expressed remorse or apologies for the war in general terms, including by Prime Minister Murayama, 20 years ago, on the 50^th anniversary. But on specific issues like comfort women and the Nanjing Massacre, its positions have been less unequivocal.

At the same time, Japan’s neighbours need to accept Japan’s acknow­ledgements, and not demand that Japan apologise over and over again. The history of the war should not be used to put Japan on the defensive, or to perpetuate enmities to future generations. Only with largeness of heart can all sides move forward to reduce distrust and build up cooperation.

Such a reconciliation will also help Japan to become a normal country as it wishes to be. The controversy over history hinders Prime Minister Abe’s desire to play a more active role in Asia. Japan has not joined the AIIB, but recently announced a US$110 billion plan for public-private assistance for infrastructure develop­ment in Asia. Most Southeast Asian countries want Japan to play a more active role, but they do not want to get embroiled in rivalry between China and Japan. They will welcome a resolution of the war issues, as they themselves have done between themselves and Japan.

There is also India, which is emerging as a major power in Asia. India can make a big contribution if it opens up its economy, encourages foreign trade and investments, and participates actively in regional cooperation, for example through the East Asia Summit (EAS) or through the Regional Comprehensive Economic Partnership (RCEP), which it is party to. The Modi government has set a new tone in India, and the region looks forward to deepening our partnership with India.

Regional Cooperation

The second regular issue at the Shangri-La Dialogue is regional cooperation and integration.

50 years ago, nobody thought in these terms. Decolonisation was just ending. New countries had very recently been formed – including Malaysia and Singapore. Most countries’ links were not within the region, but to developed countries, particularly their former colonial masters, the metropolitan powers. Cooperation was on security issues, along Cold War lines. The Korean peninsula was on the verge of war, with North Korea building secret tunnels into the DMZ as their strategic weapon. Across the Taiwan Straits, China and Taiwan were in a state of war, with artillery shelling on alternate days by each side between Kinmen and the mainland. In Southeast Asia the Vietnam War was heating up, and Indonesia was waging Konfrontasi – a low intensity conflict – against Malaysia. ASEAN had not been formed, indeed could hardly have been conceived, since Indochina was in turmoil, and Malaysia, Indonesia and Philippines were at odds with one another.

Today, the Korean peninsula is still a problem. But, cross-straits tensions have eased considerably. China has become Taiwan’s largest trading partner. One million Taiwanese live and work in China on the mainland. But Taiwan still has to deal with the question of its identity and its long-term relationship with China. One stabilising factor is that everyone now knows that Taiwan independence is out of the question and that rules out unwise moves and unpredictable outcomes.

Intra-regional trade has grown. A lot of this is trade with China, but in fact, trade between Northeast Asia and Southeast Asia has also grown. Over the last decade-plus, ASEAN-Japan trade has doubled, while ASEAN-Korea trade has increased by five times.

So the region is coming closer together. In Southeast Asia, former adversaries have come together in ASEAN, to deepen relationships and foster regional integration. ASEAN celebrates its 48^th anniversary this year. We have a broad and substantive agenda of dialogue and cooperation. We have a good track record of working together: pursuing win-win opportunities and closer economic partnership, establishing the ASEAN Community by December this year, and dealing with problems that affect the region, like trans-boundary haze pollution, or natural disasters like typhoons or tsunamis.

The most recent humanitarian crisis is the human trafficking of Rohingyas and Bangladeshis, resulting in thousands putting out to sea, suffering and dying, both from the terrible conditions but also through the ill treatment by their traffickers and in fact sometimes, by their kidnappers. This has put huge stress on the downstream countries Thailand, Malaysia and Indonesia. The solution requires a response at the source and not just at sea. It also requires countries to act decisively against the traffickers, and put a stop to this organised racket.

In the broader region, ASEAN has taken the lead to progressively build a framework of cooperation, engaging South Asia and East Asia, Australia and New Zealand, and the wider Asia-Pacific. One important platform is the ASEAN Regional Forum (ARF), now in its 21^st year, which promotes open dialogue on political and security cooperation in the Asia-Pacific. It has fostered more predictable and constructive relations between neighbours and even adversaries. The more recent forum, the ASEAN Defence Ministers’ Meeting (ADMM-Plus), allows the defence establishments of member countries to cooperate on defence and security matters, and to build mutual trust and confidence.

The East Asia Summit (EAS), now in its 10^th year, is also an ASEAN initiative. It fosters an open regional architecture, because its membership includes not just East Asian countries but also India, Australia and New Zealand, Russia and the US. With this broader membership, the EAS ties together the two sides of the Pacific together and reduces the risk of an East Asian bloc forming, which might split the Pacific down the middle.

While regional cooperation has progressed, we have to keep working at it, because the progress will not continue automatically. There are still frictions between countries to manage, and countries have other priorities than regional cooperation. Some are responding to strong nationalist sentiments, and putting self-sufficiency ahead of regional interdependence. Others are preoccupied with major domestic political developments or transitions, making it hard for their governments to focus on regional initiatives. We have our work cut out for us to cooperate more closely year by year.

Terrorism

The third regular issue at the Shangri-La Dialogue is terrorism. Terrorism is not an entirely new phenomenon that burst on the world only after 9/11. 50 years ago, there were already terrorist groups in many stable societies, including advanced countries. In Europe, there were extremists such as the Baader-Meinhof Group. In the US, there were anarchist terrorists – small numbers, but they existed and they were violent. Japan had the Japanese Red Army. Singapore had first-hand experience of them. In 1974, members of the Japanese Red Army and the Popular Front for the Liberation of Palestine (PFLP) attacked the Shell oil refinery on Pulau Bukom, then held a ferry boat and its crew hostage, and bargained for safe passage out of Singa­pore. These groups were politically motivated, not religiously driven, and have largely faded away.

Now we are confronted with jihadist terrorism, religiously driven by a perverted version of Islam. When we first started the Shangri-La Dialogue, 9/11 had just happened. Countries worried about further major attacks by jihadi groups like Al Qaeda. Fortunately, there have been no further spectacular attacks like 9/11, although there have been major incidents like the Bali bombing, and the London and Madrid train bombings, and more near-misses. For the fact that it has not been worse, we have to credit effective actions and cooperation by many Governments.

But the problem will be with us for a long time. Osama bin Laden may have been killed, but Al Qaeda still exists, albeit in a weakened state. In many societies we are finding home-grown terrorists, self-radicalised individuals who can mount attacks with minimal resources.

The latest virulent incarnation of the jihadi threat is ISIS. By skilfully exploiting the Internet and social media, ISIS has attracted malcontents and misfits, misguided souls and naïve youths from all over the world. More than 20,000 people have gone to Iraq and Syria from EU, US, and Asia to fight – for what? But they are there and one day when they return home, they will bring the radical ideology, combat experience, and terrorist networks and the technical know-how with them. ISIS supporters have carried out lone-wolf attacks in a number of countries, including Canada, America, Australia and France, so far. Just two weeks ago, ISIS leader Abu Bakar al-Baghdadi repeated his call for Muslims world-wide to either hijrah (migrate) to the Islamic State – it is what the Prophet did between Mecca and Medina – so either you hijrah to ISIS or you wage violent war for ISIS in your home countries.

Southeast Asia is a key recruitment centre for ISIS. More than 500 Indonesians have joined this terrorist group. Dozens have gone from Malaysia. ISIS has so many Indonesian and Malaysian fighters that they form them into a unit by themselves – the Katibah Nusantara (Malay Archipelago Combat Unit). Recently ISIS posted a propaganda and recruitment video showing Malay-speaking children training with weapons in ISIS held territory. Two Malaysians, including a 20 year old, were identified in another ISIS video of a beheading of a Syrian man. The Malaysian police have arrested more people who were planning to go, including armed forces personnel, plus groups which were plotting attacks in Malaysia. These individuals were going to Syria and Iraq not just to fight, but to bring their families there, hijrah there, including young children, to live in what they imagine, delusionally, is an ideal Islamic state under a caliph of the faithful.

Several radical groups in this region have pledged allegiance to ISIS. Some have links with the Jemaah Islamiyah group, the group whose Singapore chapter had planned to set off truck bombs in Singapore, soon after 9/11. Last year the Jemaah Islamiyah’s spiritual leader, Abu Bakar Bashir, pledged allegiance to ISIS, posing for a photo surrounded by followers in white Arab robes. He was in a jail in Indonesia, but he was able to pledge allegiance and have a group photograph and have it published around the world. Several hundred fellow terrorists presently in jail in Indonesia are due to be released in the next two years.

ISIS has said it intends to establish a wilayat (province under ISIS’ caliphate) in Southeast Asia. The idea that ISIS can turn South­east Asia into a wilayat, into a province of a worldwide Islamic caliphate controlled by ISIS – that is a grandiose, pie-in-the-sky dream. But it is not so far-fetched that ISIS could establish a base some­where in the region, in a geographical area under its physical control like in Syria and Iraq, to have territory in Southeast Asia, somewhere far from the centres of power of state governments, where the governments’ writ does not run.  There are quite a few such places in Southeast Asia. If ISIS did that, it would pose quite a serious threat to the whole of Southeast Asia.

Even in Singapore, where we have a peaceful, well-integrated Muslim population, some individuals have been led astray. A few have gone to join ISIS and others have been intercepted and detained before they could leave. We recently arrested a 17 year old student, and detained a 19 year old student who had been radicalised. The 19 year old was planning to join ISIS in Syria, and if he was unable to leave Singa­pore he intended to assassinate government leaders here, including the President and for good measure, the Prime Minister.

This is why Singapore takes terrorism, and in particular ISIS, very very seriously. The threat is no longer over there; it is over here. We are participating in the international coalition against ISIS, and we are contributing a KC-135 tanker to the operation. In fact the tanker’s deployment to the Middle East begins today.

The Next 50 Years

I have described how our region has changed in the last half century. 50 years ago, had we known that we would be in this position today, we would have been more than satisfied. Asia is peaceful and prosperous. We have successfully navigated a major transition out of the Cold War. A new international order is taking shape, not without problems but basically stable.

50 years from now, I doubt the scourge of extremist terrorism will have entirely disappeared. After half a century the jihadist ideology will surely have visibly failed, or at least weakened its hold on the imaginations of troubled souls. But remember that Soviet Communism, which was another historical dead end, took 70 years to collapse, and that was a non-religious ideology so these things take a long time.

On the broader issues, my optimistic hope is that a stable regional balance will continue to exist. ASEAN should be an effective and relevant actor. The Indochinese countries should have narrowed the development gap, and the grouping should have become more closely integrated and cohesive.

I expect that the US, China and Japan will remain major powers, and India will play an increasing role in the region. I hope that we will continue to have an open global system of trade, investment and economic cooperation, and certainly I hope there will be free trade in the Asia-Pacific instead of the current alphabet soup of trading arrangements. It should not be a world where might is right, where the strong do what they will and the weak suffer what they must. It should be a world where legitimacy and constructive engagement are the international norm, and every country, big and small, can compete peacefully for the chance to prosper.

There is no roadmap to such a happy scenario. The future is not a straight line projection of the past. But if we resist the temptation to be consumed by short-term issues, keep our focus on longer-term shared interests, and continue striving for a peaceful, open and inclusive international order, then step-by-step we will build confidence and trust, and maximise the chances that our next 50 years will be stable, prosperous, and an upward path.