The world has changed, and Singapore can no longer take it for granted that relations with both of the world's hyper-powers, China and the U.S, will always remain friendly, according to Prime Minister Lee Hsien Loong.

PM Lee was sharing his thoughts during a special session of the 50th World Economic Forum (WEF) in Davos, Switzerland on Jan. 22, titled "A conversation with Lee Hsien Loong, Prime Minister of Singapore."

He described three external factors that contributed to Singapore's success since independence in 1965:

• The United States (U.S.)
• China
• Globalisation

The US

PM Lee said that the US has generated peace, stability and security throughout the Asia-Pacific over the last half-century, Vietnam War notwithstanding.

This has allowed Singapore to develop and prosper over time, he said.

In addition, PM Lee noted that the US's investments and belief that being open to others helped Singapore to grow.

China

PM Lee said that China's opening of their economy, with the enormous trade flows between it and Singapore, have also helped Singapore's economy.

PM Lee noted that Singapore, according to the Chinese statistics, is China's bigger source of foreign investments.

"The engagement generated confidence, lift and a certain vibrancy throughout the whole region, which Singapore benefited hugely from", PM Lee said.

Globalisation

With the help of the WTO, Singapore was able to plug into the global economy and do business with countries from across the world.

However, PM Lee added: "Now we are at a turning point, all three factors are changing."

The U.S.: Are we carrying too much of a burden?

PM Lee pointed out that the strategic balance in the region is shifting as China is becoming more influential.

America is asking whether they're carrying too much of a burden, and want their allies to bear for responsibility for the cost of common security.

He added that views on the economy had also changed, with Americans becoming more focused on the impact of globalisation on workers, and concerned about being taken advantage of by other countries.

Said PM Lee: "We don’t know that it is irreversible, but it is also certainly a very fundamental shift of stance."

Singapore being pushed to take sides

On China, PM Lee said that with their growing stature and influence, China's relations with other countries have become more difficult to manage.

Singapore will have to contend with these changes. Said PM Lee:

"Whereas previously it was effortless to say, I am friends with everybody, and including being friends with the United States and China, now, we still want to be friends with everybody, but we are pushed to be better friends with one side or the other. So that’s a change in the world."

He added that people's views on globalisation were also changing, becoming more concerned about its impact on disadvantaged groups and the environment.

PM Lee said that despite the changes, America's role in the Asia-Pacific remained "indispensable", though perhaps not alone.

This is because neither China nor Japan could play the same role in the region.

The way forward for Singapore

So Singapore will have to continue to maintain relationships with both the U.S. and China, even if it results in difficult choices having to be made, when it is pressed to take sides.

Said PM Lee:

"And when we do have to make a stand, I think it’s very important that people understand that Singapore’s choices are on its own behalf, because we are making decisions for Singapore, and not because we are a cat's paw for one side or the other."

He added:

"And that means you have to have the courage to stand up and call things as they are, and from time to time, it will incur, well, at least a raised eyebrow, and sometimes more than one raised eyebrow, from one side or the other. And occasionally both.

And it’s necessary to do that. Because once people no longer think that you are a serious interlocutor, calculating on your own behalf, you’re written off, you’re finished."

Singapore has only one chance to succeed

On the challenge of mitigating the ill-effects of globalisation, PM Lee said Singapore needed to continually upgrade its workers, industries and environment, and ensure that its benefits are felt by all.

And when Singaporeans are disadvantaged, help and support are necessary to gain new skills and employment. PM Lee said:

"And not feel that they are fending for themselves on their own, and that the system is not on their side. This system has to work for them because if it doesn’t work for them, the system will fail. And in Singapore, it must not fail, because we only have one chance to succeed."

Borge Brende, president of the WEF, asked about Singapore's slower pace of growth in 2019, which stood at just 0.7 per cent.

PM Lee said that this was partly due to a slowdown in global demand for electronics, and partly due to the trade war between the U.S. and China, and things should be better in 2020.

However, he added that no one was certain about the U.S. economy and whether the U.S. could avoid a recession this year.

A lot at stake

PM Lee criticised protectionist tactics such as tariffs and counter-tariffs, and reminded the audience that the global, coordinated effort during the 2008 global financial crisis ensured that such behaviour did not hinder the recovery.

PM Lee also pointed out that it was not possible for every country in the world to run trade surpluses

PM Lee said: "We can't all be running trade surpluses. Whom are we going to be having (trade) surpluses against? Antarctica?" (laughter in the crowd)

Referring to the Great Depression of the 1930s which was, followed by World War II in the 1940s, PM Lee said this was a situation that could not be taken lightly. He said:

"There is a lot at stake. I don't think we will repeat our follies in the same way, but it is quite possible for us to be inventive in making new mistakes." (laughter in the crowd)

You can watch the entire conversation here.

Top image via World Economic Forum.