>> rose: welcome to the broadcast. tonight, a look at asia today and tomorrow with lee hsein loong, the prime minister of singapore. >> i think china's relationship with the u.s. is crucial. it's a most important bilateral relation in the world now. and both sides have a big stake in making sure it turns it right and not turns out sour because your trade, your interdependence your mutual security interests, of course they are issues where you rub against one another, human rights or google or whatever. but both sides have a greater stake in keeping it right than letting it go wrong. and in asia, we particularly don't want to have to choose sides between china and the u.s. we want to be friends with both. we are a lot of opportunities in china, china is making a big effort to win friends all over the region and doing well at this. but at the same time all the

countries in the me john know america plays an indispensable role and we'd like america to continue to do that. >> rose: a conversation about china, the united states, asia, and the world with the prime minister of singapore when we continue. captioning sponsored by rose communications from our studios in new york city, this is charlie rose. >> rose: singapore's prime minister lee hsein loong is here. he is in the united states this week for the nuclear security summit and for meetings with

american officials, including the secretary of state. he's been prime minister since 2004, he's only the city state's third prime minister. he is the son of lee kwan yue, singapore's founding father. i am pleased to have him back on this broadcast with me while he's making this visit to washington. welcome. >> hello. >> rose: tell me what you think was accomplished at this summit of 46 nations. >> i think president obama did the world a service. this is an issue, nuclear security and nuclear terrorism which is important but not urgent. it's not something which we have to solve overnight but it's a problem which is a real problem and if we don't do something about it, some time, some place something disastrous will happen. and he managed to get many leaders together, focus their minds, put on the table what they are able to do, what they are planning to do further to secure the nuclear materials and trade and smuggling of these materials and commit to take further steps together to make

the world a safer place. >> rose: so over the next four years, the goal is to make sure that they know where all the nuclear weapons are, they can make sure that they're safe and not likely to fall in the hands of terrorism? >> well, the nuclear weapons, the loose nukes are the first problem. because that's... if i were a terrorist, that's the first thing i'd look for. >> rose: look for the loose nukes. >> yes. but even short of the loose nukes, if you can find highly enriched uranium, you might find people smart enough to put that together into a bomb. there's enough information on the internet to make a good stab at it. >> rose: how much of the topic here was about iran? or was it only among certain nations? >> i'm sure the key players, the p five plus one, permanent members of the u.n. security council plus germany were discussing it. i know they were. it's a subtext. we didn't explicitly discuss iran, but obviously iran is one of the concerns. we were not at the meeting but if they have this capability, either make their weapons or to

make the materials, then there are implications for proliferation and for nuclear security. >> rose: give me your assessment, if you will, of president obama's global leadership at this time. he came here after health care success in america. he came here after a deal with... he came to the summit with the russians and now this summit. is he becoming-- beyond the fact that he represents america-- an important player? >> america is always an important player. and the president is always a key person. and right now president obama has inherited a full plate globally: iran, which we mentioned, iraq, which is sort of on the mend but i think will be a concern for some time to come. afghanistan, which is a long way from being done. north korea. relations with china. relations with russia. israel, palestine.

and amidst all this busy program we hope that he has some mind share and some focus to pay attention to southeast asia and a little bit to sing mother. >> rose: do you feel that he is doing that? >> i think he's doing a good job of that. he came to the aipac meeting which we hosted in singapore last year. he came to the first ever meeting of the u.s. president summit with all ten of the asean leaders, including myanmar, and it was a good meeting. all ten welcomed the meeting and welcomed america's engagement in the region. and that's saying something. >> rose: china, especially today and its relevance to this, certainly with respect to iran. where do you see china and its role in the world and china and its relationship to the united states? >> i think china's relationship with the u.s. is crucial. it's a most-important bilateral relation in the world now. and both sides have a big stake in making sure it turns out right and not turns out sour

because your trade, your interdependence, your national security interests, of course they are issues where you will rub against one another, human rights or google or whatever. but both sides have a greater stake in keeping it right than letting it go wrong. and in asia we particularly don't want to have to choose sides between china and the u.s. we want to be friends with both. there are a lot of opportunities in china. china is making a big effort to win friends all over the region and doing well at this. but at the same time, all the countries in the region know that america plays an indispensable role and we would like america to continue to do that. >> rose: are there things that america should be doing to make better its relationship with the region? china, but also sing snore also... >> attention is, of course one thing. is f your mind is focus misdemeanor good ideas will come along. but one major area is trade. the chinese trade in asia with

china is growing rapidly. all your major allies in asia, except perhaps the philippines, have china as their number-one or number-two trading partner. so if you want to be at the table, if you want to enhance this relationship and talk about security and political relations you must have economic relations. and you must taken a active trade agenda. that means pushing for america to be present in the region for your companies and opening american markets and enhancing the relationship. >> rose: with respect to american companies, my impression is they have a huge presence in asia and singapore. >> the economy is growing and there are many more possibilities. >> rose: so they should do more. >> i think there are many possibilities for them to do more. both to exploit the markets which are in asia and also to be based in asia to produce for the world. a lot of china's trade with america has american companies based in china manufacturing and selling back to america. >> rose: there is also the issue of currency.

>> yes. >> rose: everybody wants china to change its currency. >> yes. >> rose: to let it rise. do you? do you believe they should? or r you prepared to urge them to do that? >> i think the position which they took before the crisis, to let the currency float up, actually rise up gradually in a managed sort of way was the right thing to do in their circumstances. you are running a trade surplus, their exports are booming. if they allow the currency to rise it will... it may raise the costs sum but it will sat the same time diminishing the inflationary pressures within that country. and it's part of the adjustment as you become more productive and your standards of living go up. they shifted to a more conservative position over the last two years and fixed to the u.s. dollar. >> rose: right. >> caused a lot of angst. >> rose: and helped their exports. >> yes, temporarily. but after a while it causes

overheating in the economy. and i think in this situation really they should revert to where they were before the crisis and allow the u.n. to go up gently again. >> rose: the "new york times" has an editorial today reflecting i think what many people believe. a number of nations ought to come to china and say that so it doesn't look like one nation is trying to pressure them. >> i think many people have made the point to them and they have to make their own calculations and when they do it they'll do it for their own reasons. >> you know the chinese mind. where do you think they see it? because people say they do not want the west especially to pressure them and to treat them >> i don't think it's just the chinese. no country want to be pressured. you ask netanyahu or any other leader whom you have had dealings with. you have to have a certain courtesy and respect and restraint. but countries have to make calculations in their own interest and america has many ways to influence their

calculus. >> rose: has president obama set the country on a new course as far as you can observe? because you've been prime minister since 2004. >> i think he set a new tone. his instincts are different. his personal styles and his strengths are different set of strengths from president gr gohr's. >> rose: how is his instinct different? >> well, i think he is much more prepared to start with talking from his allies rather than starting from deciding where america wants to go and then bring along a posse of the willing. it doesn't solve all problems, but it's a refreshing new approach which i think has improved america's image in a lot of the world, including the muslim world. >> rose: and how does that make a difference if america's image... >> it doesn't solve the israel/palestine problem but it's one of the ingredient which is america must deploy when you're trying to tackle these very difficult issues. the issues will be there for a long time to come. you won't clear them all even

with two presidential terms. but you're now in the world where america is a superpower but you're interdependent and you have to work with other countries to make things happen which is what i think obama did with this nuclear security summit. >> rose: and with russia. >> indeed. >> rose: was the united states hurt in terms of its relationship with china because of the sale of the aircraft to taiwan and receiving the dalai lama. >> you have to do what you have to do. these are not issues which you could expect to be received with acclaim in beijing, but you have to make your own chral collations and decide what's in the long-term interest and what your relationship with china can weigh. you haven't... you have a reputation to hold up. you must be seen as a reliable friend. at the same time you must also friend of your allies. by the same time, you must know which are the issues which are red lines and if you want to

cross them, do so without thinking about it. >> rose: the consequences of. >> yes. >> rose: and china, china came to the summit and people were pleased by that. because there was a feeling right before that they were being more aggressive and in a sense less friendly to the united states. >> i think that they are trying to calibrate their position because having emerged in the world and become economically much more powerful than before and influential with friends and connections all over the world, deng xiaoping's old victim to hide your light under a bushel and go quietly into the world, it still applies while they're trying to figure out how to apply it. >> rose: because their light is so much brighter today. >> well, because now when they move they can no longer just move as a small country. it affects the whole system. and you have to decide how to trade of your interests, maximizing for yourselves. first the interest of the whole

system and your long-term requirement to be a constructive player in the world system. which is what america has done since the second world war. you were at one time the enormously preeminent superpower. but there was a restraint, good will, generosity of spirit. and so after 60, 70 years in asia people still say america plays an indispensable role. >> yes. >> rose: and i think that is something which if the chinese could achieve it would be quite something. >> if the chinese could achieve... >> if the chinese could achieve that acceptance of that place in the world. >> rose: so people around in the world in latin america and... >> they are going to be powerful but they are not going to be this middle kingdom because the world is not like that anymore. however powerful you are, you need friends, you need allies, you need a peaceful world environment in which they can operate and they can concentrate on growth and development and improving the lives of their people. and that takes... that requires

you to take a long-term perspective and not try to maximize on every single issue. >> rose: for chinator united states or both? >> for both. i'm saying america has been able to do this by and large over a long time and china now emerging i think was having to recalibrate its position in order to take these... hitherto totally alien considerations into account. they never had to think this because previously... i mean, the smaller impact on world affairs was not significant. they could do whatever they want and it's a closed kingdom but now you can't. >> what do you think they will do on iran? >> i think they will... they are discussing that among the p p5 now. i believe president hu had a discussion with president obama on that. >> rose: your impression that was a very good meaning? >> from what the administration people have told us, the u.s. side was happy with it and felt there was progress. but their calculation will be a little different from your

calculation you want to... you are very seized with the issue of iran becoming a nuclear power and the implication strategically and the middle east and worldwide. >> rose: do you agree with that? >> yes, i agree with that. >> rose: does china agree with that? >> i think they intellectually agree with that but they will at the same time calculate their reliance on iranian oil. secondly there is the overall relationship with america and other critical issues to them and then try and decide how this fits into the overall system of their foreign affairs. >> rose: china's also experiencing... each leadership level, each time they have a next leadership decade they seem to be different and give us a sense because you represent that in singapore. how the upcoming generation of chinese leaders and other asian leaders are different from those they succeeded. >> this current generation...

the generation before this experienced the second world war and the japanese invasion and occupation of china. it was an indelible impression for them and the experience revolution as the communists took over china and the first really exhilarating years. the great hall of the people in 12 months and the hole things that went on in 18 months and this tremendous sense of china standing up again. the current generation of leaders experienced a cultural revolution. they know what a mess china can be. it was mismanaged and how important it is that china get its act together, what challenges chinl faces internally and how important it is for china to grow and improve the lives of its people. and to continue to do this for another generation at least. the next... or maybe the next next group of leaders would be post-cultural revolution. they will have grown up in 30

years of reform and opening up. they will live in a china which is connected with the internet, with people who know what's... who are much better informed with what's going on throughout the world. where interests are expressed, there will be tensions between different parts of china and they will have to run this whole system not as a central system but with a market economy and with a coherent political framework on top of that and i think they will have a big challenge. >> what is it they see as a system that they would like to have? i mean, is it evolving away from the system that mou had? clearly it has in terms of its economy. but overall that and evolution you believe is ininevitable for china? >> i think it will evolve. i don't think they will ever have presidential elections every fourth year like you do. >> rose: (laughs) yes. >> but it will have to evolve and it's happening slowly, maybe slower than it ought to, is but

they're extremely cautious... >> rose: and what are they worried about? >> instability. they have one chinese word for it, luan, which is disorder. and having seen the cultural revolution, they don't want to go back. >> rose: and then they saw tiananmen. >> and falun gong who appeared as a flash mob one day in front of the inner sanctum and it was the first they ever heard of falun gong and that scared the daylights out of them. >> rose: it did? >> yes. that's how they discovered it existed. >> rose: but is that a threat to them? >> when they discovered who was in the falun gong and how many of the senior officials had joined the secret group it was... >> rose: they were what? >> they were shaken. >> rose: so therefore they have >> so they are concerned about disorder but at the same time i think they though they have to allow for people to be engaged in the system and to make able chinese feel that this is a

system which reflects their interest and aspirations and which they have some stable... you may not vote for the president but if you are a person with ideas and whose views are relevant, they ought to carry weight and should be expressed somewhere in your system in your policies and outcomes. i think they know how that. how to get there, i don't think they've worked it out and they are moving only quite slowly. >> rose: because they haven't worked it out. do they want to be part of the existing international system? >> yes, but they would like to have their share of the sunshine >> rose: which is reasonable. >> which is reasonable. but how do they get their share compared to where they are and what is the transition like? that's something that has to be managed. >> how would you define their share of the sunshine? >> well, they would tell you they have one thousand three hundred million people. and each one of them... >> rose: that's the fair share. >> and each one is entitled to

so many kilograms of carbon dioxide. >> they do say that. they say we have a billion three and the world has six billion, figure it out. >> yes. well they know that they are not there because they will also tell you that per capita income is very low. there are many people below the poverty line, that agriculture is abysmal by global standards of productivity and that they have to make major transformations even to get to a modest middle-income level. so their thoughtful leaders have their that prominently in their minds and therefore are quite cautious about overasserting their arrival. but not all young people are quite as careful about it. >> rose: your father told me once that dung chao ping came and was... deng chao ping came and was appreciative of what happened in singapore to observe and said we want to do that. how do we do that.

>> they came, they looked at our schools and water conservation, the way we recycle waste water and turn that into new water which we can use again for industrial and drinking purposes indirectly. they look at the way we manage our financial system. they look at the way we manage our housing. they look at our health care system. they are interested in many of the pieces we are doing, but most of all they want to know how do you run a system where the government can have legitimacy and there's order and there's continuity over a long period of time. and the system works and is incorrupt and there's accountability. and that's a secret which is... they think it's a secret. in fact, they can see how we do it. but to be able to translate what we do, three million people in a

tiny little island to one thousand three hundred million people-- one quarter of humanity-- that's not a so easy. which is not to say they haven't learned. but it means what we do in singapore, it's a mod tell we can look at, it's very interesting. but they have to work it out how they make their own model in china. >> are they becoming creative, innovative, less as we used to have this image of china as being more sort of... >> if you visit you will see it's a very diverse, very vibrant place. many arguments and debates very open discussion of many issues except far few taboo areas. >> rose: which are are politics. >> communist party, taiwan, tibet. >> rose: but politics... >> other aspects of politics would be discussable. >> rose: but what's not discussable? >> what's not discussable is that the communist party is ruling china. >> rose: so any dissent from

that is not allowed. >> that's not allowed. >> rose: that's a giant insecurity, isn't it? >> yes. >> rose: so google, how do you explain google? >> google operated in china and they decided to move. >> rose: well, they decided to move because they refused to accept or anymore. >> because one of the founders changed his mind. sergei bren who was not keen but decided himself to be persuaded. after they got hacked he persuaded the other people in google and particularly eric schmidt and they moved to hong kong. practically nothing has happened because you can still get google in china except now it's censored by the chinese rather than google! (laughs) what's the difference? and google is still in china. their web search is not in china but they are indeed still in china. so in fact it's really from our point of view. it's helpful to their image but

it's not earth shaking. >> but on the other hand, some people are aflaweding google for standing up for sergei bryn saying "i don't want to be part of this." but you don't agree with it? >> he had to make his decision. these are decisions google had to make. they were on an edge. a small thing happens which makes them tip a different way. >> rose: what should we learn from the chinese experience? what should singapore certain since they are learning from your experience and perhaps from other experiences? >> i think firstly that sense of drive and desire that tomorrow must be watch better. if you talk to the business people or bureaucrats or the young people in the schools, that drive to make tomorrow better is tremendous. and that willingness to explore and examine alternatives, what should we change? what should our system be. how should we make our health care work or our pensions.

or even anti-pollution measures. and try and work a system which if it doesn't work, well, we will change it again. they are... i don't know that they can do this across the country but where they do do this it's very impressive. >> and they feel that way. their own self-esteem has grown and they really want to say we've been around for a long time and look at how good we are now. >> especially after the olympics and now after the shanghai expo which is going to... >> rose: start may 1. that's their symbol to the world that we have arrived. >> yes, or we are arriving. >> rose: we are arriving. india. because you asked us to focus on your region. india. where do you see india in all of this. >> >> we would like india to be a big part of the story in the region because from our point of view in southeast asia, we have india as well as china, we will have two wings to fly with. >> rose: (laughs)

>> and it makes a big difference. >> rose: (laughs) yes. >> now, the reality is india's g.d.p. is about a third china, purchasing power party. india's foreign trade is about one-fifth china's. and india is growing rapidly but the transformation is not quite as deep as per vase i as china's is and i don't think it can take place in the same way. >> because of their political system or something else? >> because of their political system but their political system also reflects the diversity of the society. the caste, the religions, the differences are very deep. >> rose: so is india an argument for democracy or not? >> well, india is a model unto itself. >> rose: really? >> that's the way it works in india. you probably can't govern india the way china is governed but if you say that's what you should do somewhere else, say in singapore, i think... >> rose: but could you... >> too complicated for us. >> rose: (laughs) could you say that china could not have become what it did

without the system it had? >> i think they could not have become what they did as fast if they had not evolved their system and their incentives and their policies in order to get the whole country moving. there's a phrase in china that the mountains are high and the emperor is far away. so you can give any orders you like out of beijing where the government is but far away in the provinces your governor, he does what he wants and he will report to you what you want to hear. >> rose: (laughs) >> so for them to have got the whole country moving in this way not micromanage and centrally directed but all with this own center of growth and dynamism, it's remarkable. >> rose: why doesn't the world speak out more intense human rights? not just in china but around the world? in myanmar, everywhere else. >> well, in china as a reality,

if you go by human rights and ask if they have the same legal protections as they do in america and miranda rule and first amendment, they don't. but if you ask whether the real rights which they enjoy-- freedom of association, expression, information, movement, travel have improved tremendously compared to where it was. i think the answer has to be... in fact they enjoy de facto many rights. myanmar is a problem. they have a system. the government, the military is in charge. the world has limited influence over them and you can't change them short of going there and providing a government, which the british did for a couple of centuries, but eventually they can't carry on. so they have to move ngor ward because i think many people in myanmar know that this is not a solution for myanmar. many of the people know that the government is doing badly and

resent it deeply. i think many people know that this is nowhere and needs to change. i suspect that... >> rose: how about many people in the military? >> including. but i suspect a few key people who make the decisions, they have decided that this is an existential thing for them. if they're out, it's not just the country and the government has changed but where do i go and which jail will i be in and my children and my jewels and my billions? so they are not likely to be persuaded by elections. you have to wait. i think there will be a change over time as the generations change and they're holding elections this year. may or may not be perfect but it's a step forward and they'll look at indonesia and president suharto, he came to power in a coup, military-backed, but over 30 years he acquired legitimacy, he developed a kind of ideology to legitimize the rule, he had

some kind of elections, he had some sort of a... >> rose: but at the end of the day he was a dictator. he was in control. >> at the end of the day he did a lot of good for indonesia but unfortunately towards the end the a pasty became... a passty became intolerable. and he didn't deserve the end he came to. >> rose: and if he'd given up power? >> if he had given up power, even in the last election which he contested or better still the one before that and there had been three, four years for a new government to settle in and grass the reigns before the asian crisis had come, i think indonesia might not have gone through the traumatic time which is it did. and suharto would be remembered today as a great patriot. >> rose: korea. what can be done about north korea and nuclear weapons? >> you've got the six party talks, you've got to keep on talking and engaging them. the saving grace is that you have... i think the chinese do

not want the north koreans to have nuclear weapons. >> rose: they already have them! >> they already have them but the chinese disapprove and this is something the koreans have to take into account. but again for the regime it's an existential thing. so the regime is not going to give it up lightly. >> rose: because they think it's the only way they can get any kind of attention from the rest of the world. >> yes. but also because this is the way they make sure nobody's going to cause regime change in north korea. >> rose: yes. right. >> regime change can come in other ways, but you have to keep on talking to them and making sure first they they do not destabilize the korean peninsula. second they that they don't proliferate these nuclear weapons and cause problems elsewhere in the world. and you can't have a final solution but you can do a certain number of things which visit punishment for behavior which is harm to feel the global society. >> rose: tell me what your philosophy is for the relevance and the future of singapore. $if we want to make a living for

ourselves, we've got to be extraordinary. if there are any number of cities with a million, two million people in them, hundreds in asia, hundreds more worldwide why is singapore different? it's because the people make it so and the people, meaning our own people and the talent we have within singapore and the talent we can attract to singapore and make members of our extended family coxwho who can help us to prosper. >> rose: what do you consider members of the extended family? >> people who come to singapore and work. people who come to singapore and strike roots. people who come and eventually become citizens. >> rose: is singapore's future as bright or brighter today than it was five years ago? >> i would say so. i would say so. over the last five years we've weathered sars-- well, it was a bit longer than five years. we've weathered the financial... global financial crisis. we've come through, bounced

back. we've just had our fourth quarter growth. >> rose: so for 2010 what do you snex >> we're expected 7% to 9%. so we are on a good platform not to cruise ahead but to build for the future and this is a platform on which we can say now we've got the growth, let's get the transformation moving. >> rose: how did this happen? >> i think firstly we were lucky. the world picked up better than we expected. i think the american team, paulson and bernanke and geithner did a good job and we are beneficiaries. secondly, we had programs which we had launch which had are coming on stream now, like that casinos and integrated resort which is you mentioned. and they are creating 20,000, 30 jobs for us. and it's coming at a time just when the economy is picking up and generating a tremendous amount of buzz and a tremendous amount of tourists and visitors

who are paying attention to singapore and writing about singapore. thirdly i think we were lucky we did the right thing in the town turn has year. >> rose: confidence? >> we decided to focus on saving jobs and keeping companies viable. so the government, we had resources so the government helped to bear the social security expenses for workers. companies worked with unions to keep workers employed and therefore they were... firstly we kept social cohesion and secondly when the moment came to pick up, they were ready to pick up and to increase production and go again. and so they are year we are booking again. >>. >> rose: so if you look back even further, to what might be called the singapore miracle or singapore way, what was the essence of that? >> being put in a position where you have no choice but to do well. and then you get together and work at it. we had no oil and no gas. >> rose: no natural resources to sell. >> no immigration. so we had to make a living for

ourselves. >> rose: so what did you do? >> we invested in education. we invested in public housing so that people would have home to own and to defend. we built up our armed forces so we could be secure in an uncertain world. we built up our institutions so that you have a government which people can trust and is competent and can protect our interest in the international community. and the people supported the government and worked with the government. and that reservoir of trust is one of our most valuable and sustainable competitive advantages. >> rose: the reservoir of trust? >> yes. >> rose: your father said to me you have to stay relevant. you have to stay relevant to the world. >> yes. >> rose: there are people today when they talk about the middle east specifically they'll say this place could become the singapore of the middle east. meaning that if they concentrated, even if they don't

have oil resources and say this about the palestinians. the palestinians because of the human resources talent there. >> well, we're happy to be a metaphor but we remind ourselves that we have no safety net and we can always fail if we get it wrong. >> rose: and what would "get it wrong" be? >> if you don't have the right government. if you have the wrong policies. if you cause a loss of confidence. supposing we were in the situation of iceland, of greece. >> rose: yeah, i wanted to talk to you about that. >> rose: where would we be? iceland is a friend of the e.u., germany is in the e.u. so the germans come riding to the rescue in some way. sing singapore, how are you ever come back? >> rose: and who would come to the rescue of singapore if you had a huge debt problem? >> exactly. you'd be another broken back country permanently. >> rose: so you can't afford to be... have that kind of financial crisis because you're

not sure... >> we can't afford to have... >> rose: i.m.f. is not going to be there for you. >> we can't afford to have a disastrous bump in the night. whether there's a financial crisis, whether there's government misbehavior. whether it's a security problem. but we only have one chance to make a go of it. you can fail... you can succeed in many battles. you fail once... >> rose: it was not that long ago we had an asian economic crisis. >> ten years. >> rose: ten years ago. right. there was also a mexican crisis. we see the debt crisis in greece. >> yes. >> rose: when you look at all the sovereign debt around the world, your father said to me the thing he worries most about is america's debt. >> yes. we all depend on america, you are the anchor for the whole system. you are the way people define a.a.a. i mean, the a.a.a. is defaultable. what happens... what do you

believe in, yes. >> where do you go? >>. >> rose: so america has to get its economic in order for its leadership? the world. >> for the long term. you have to get your economy stable. you have a huge budget deficit. you needed to get out of the crisis last year. i was just talking to alice rivlin yesterday who was chairing the congressional budget committee, deficit committee and she says it's a very serious problem, these are political decisions, they have to put forward proposals... >> rose: do you think the american public has the political will and political leaders have the will to meet the crisis in the way that... it's never easy to close a budget deficit. but when george w. bush became president he inherited a surplus from bill clinton. so you have been there before and it is possible to get back there if there's a will and bipartisanship. >> rose: what's your opinion of

a value-added tax. >> we have one, whether you have one i would not comment. i think politically you have a lot of difficulty introducing it >> rose: you also have a sovereign wealth fund. >> yes. well, it's not really a sovereign wealth fund. >> rose: i don't understand the model. what is it then? you're asking about damassy? >> rose: yes. >> damassy owns a stable of companies. sovereign wealth funds own portfolio of financial assets. >> rose: but go ahead. you are different in what way? >> well, damassy operates completely on commercial basis. their boards do not decide for the boards of subsidiary and associate companies because each of the companies, many of which are listed, have their own boards and each one is accountable to all of their shareholders. >> rose: so it's more like a kind of giant sovereign private equity firm except that it's owned by the government. >> except that it's owned by the

government, yes. >> rose: do you have less confidence in american financial... >> not at all. i mean, you're asking me where i'm going to put my... portfolio these decisions i leave too the portfolio managers. i'm not a portfolio manager. >> rose: i know but you're the prime minister. >> rose: and you have a responsibility to the people of singapore to make sure they do well. >> my responsibility is to make sure that i appoint the right... that we have the right people managing the portfolio, that they make the right long-term decisions taking into account the risks. it will maximize our returns over the long term. not every year but on the whole portfolio basis. and my job is to provide them the political environment in which they can do their job without being distracted. >> rose: have your changed your philosophy about that sense of the economic crisis?

>> we review our strategic asset allocation from time to time. we make incremental adjustments but we are long-term players and we don't make major switches overnight. >> rose: how will you measure your commitment to democracy? >> i think we measure it by the legitimacy of the government and the results. how singapore works and whether singapore is able to have a better life. >> rose: is it jeffersonian democracy? >> i don't... we don't measure ourselves by an american model to how... to what extent we approximate you. the countries which approximate you most closely, asia, probably the philippines operates very differently from american democracy. so we're not trying to approximate you. we are trying to find a formula which works. >> suppose... you know, the president calls you in before you leave and says what we have to do is what? what does the united states have

to do? >> be engaged in the region, you have a lot of interests, a lot of friends, a lot of investments. and a lot of people who want you to be part of the region and helping it to prosper in peace. >> rose: what mistakes do we have to watch out and make sure we don't snake >> manage a good relationship with china but don't make that your own relationship. >> rose: india, southeast asia, philippines. >> japan. >> rose: where is japan? >> japan is northeast asia. >> rose: but where is their economy? why can't they get back on track? >> i think they have a very serious demographic problem. the population is shrinking, it has for several years and it's very... aging is very advanced and they've just changed to a new government which is still finding its footing. >> rose: you have a demographic problem, too. >> i have one coming. that's one of the reasons why we emphasize babies as well as immigration. >> rose: (laughs) how do you do that?

>> how do i do what? >> rose: emphasize babies as well as immigration. you can come to our country if you have a brood of kids? >> we have incentives for singaporeans to have babies. >> rose: what's an incentives? if they have babies, a tax advantage? >> no, a cash bonus. >> rose: oh! so if you're is a singapore citizen... >> there's a cash bonus. >> rose: explain it to us. >> i can't remember the numbers now but the first second and third, fourth child you have $5 or $10,000 or $15,000 and if you co-pay into a savings account the government will match that for the child. up to a certain amount. because the more well off people are, the more they feel the cost is having a child is exorbitant. which is true. if i'm a lawyer it's very expensive to stay home and have a baby. so here's a small gesture to help you defray your child care, your tuition, your kindergarten, your school expses. and it's just a gesture to show

we recognize you're carrying a burden and you're helping us to generate your next generation. >> rose: your father is enormously respected around the globe. you know that you are his son. your wife is important in singapore as a business person, correct? >> she's... i'm not sure i'd call her a business person. i think she's an employee. (laughs) >> rose: she's a business person she's known around the world as a business person, correct? >> she's an employee, you can call her what you want. >> rose: all right. well you seem to be sensitive. you were... to the issue of what's called nepotism. >> we are very sensitive. >> rose: tell me about the sensitivity. >> the whole of our system is founded on a basic concept of meritocracy. you are where you are because you are the best man for the job and not because of your connections or your parents or your relatives.

and if anybody doubts that i as prime minister is here not because i am the best man for the job but because my father fixed it or my wife runs damassy because i put her there and not because she's the best woman for the job, then my entire credibility and moral authority is destroyed. i'm not fit to be where i am. and it's a fundamental issue. a fitness to govern. first you must have the moral right, then you can make the right decisions. it's a basic conn fusion precept. >> rose: only when you have to moral rigs >> then can you govern and make the country right. and in singapore people expect that. so if there's any doubt that this is so, and people believe that i'm there because my father fixed it or the whole system is make believe then the system will come down.

it's not tenable. if it's true, it better be proven and i better be kicked out. if it's not true, it better also be proven to be not true and the matter put to rest. >> rose: so if some journalist writes about nepotism and you think it's not true >> well, then we sue him! >> rose: yes, you do. >> as we did recently. >> rose: and won, you sued the international "harold tribune" >> we raised the message and they paid damages but we didn't go to court. they didn't win. >> rose: i would consider that wining if they paid damages and apologized. >> all right. >> rose: but you thought what was written in the international "harold tribune" would somehow attack the moral fiber of your trust... >> yes, of course. >> rose: with the people you govern because... >> yes, of course. they put us in the similar list as kim jong il. >> rose: because he inherited his power from his father. >> yes, indeed. in a similar way. >> rose: and you're saying we will not stand if that are

because it goes to the essence of our moral authority to govern. >> yes. in this case the same journalist and same newspaper had made the same allegation and apologized and paid damages and promised never to do it again. and they did it again. >> rose: so they promised one time and then did it again so you went back? >> yes. >> rose: are you anxious to send a signal that you don't dare write about nepotism in singapore because singaporeans will sue you? >> no, the signal we want to send is if you want to make an allegation, make sure it's true and be prepared to prove it. we were prepared when we sued them to go into court, get evidence, enter the witness box and be cross-examined under oath and they can bring the lawyer and demolish us and prove that what they said is true. what more can you ask? >> rose: has anybody else

written anything? >> from time to time, including boomberg. they apologized. >> rose: bloomberg apologized? >> yes. >> rose: what did they say? >> something similar. >> rose: about nepotism? >> yes. >> rose: so you went to them and they apologized and said "i'm sorry we were wrong." >> yes. >> rose: finally, what's the legacy of your dad, somebody i admire, as you know, from many conversations he and i have had together. >> well, he made a state where there was none. a country, a nation which will become a nation which nobody believed could succeed. and he's made a system which went on without him and which endure beyond him. >> rose: but he remains as the senior mentor. >> he calls himself a mascot. and he doesn't have time to worry about all these issues anymore. >> rose: what's the most important lesson he taught you? >> never say die. however desperate the situation, if you think hard enough you'll find a resource and find the way out of it.

>> rose: never say die. never give up. >> right. >> rose: never forget the goal. >> and don't forget where you came from. it could all be very different. >> rose: and the world today, are we in a good place? are we moving out of this economic recovery? are we accepting the new realities about where we are? >> you have to accept new realities! you have no choice. i think you have come out from the crisis much better than we had any right to expect. >> rose: "we" the united states? >> no, the whole world. i think lastly the united states because you reacted more decisively and promptly than europeans have done, for example. >> rose: well their potential growth rate suggests that, too. >> well, there are other problems which lead them to be different. so we are in a much better position than we have a right to expect but there are still

issues you have a-to-deal with. you have to figure out too big to fail and things like that. and there are other imbalances from the world which have to be managed like your imbalance with china. >> rose: right. how do you manage that? >> part of it is change of policy and change of economic structure. >> they should do more consuming and less savings, we should do more savings and less consuming. >> that's to put it simply. but it's also a political thing to get people to understand that you can change the exchange rate but it won't solve more deeper underlying problems which we have to recognize. and that's very difficult because a temptation, when people get agitated and unemployment is 9.7%, you say it's the chinese fault, let's fix them. >> rose: or let's engage in protectionism. >> you'd never say that, of course. let's make sure after american

jobs. >> rose: you look up to singapore jobs, don't you? >> well, you look at the a way this which is sustainable. because i have to make things selling to the world. >> that's exactly wh what the chinese are trying to do. they're trying to make things to their own billion three and if they can create an internal demand, there will be a better place. that's their opinion. >> i think they are selling to america. they're selling to china, the world. >> rose: but they want to create a demand internally. >> they need to create demand internally. some can be consumption, some can be investment, some can be environmental to clean up the environment. there are many ways to do this. >> do we need a new international structure of any sdmind a new bretton woods? a new reserve kurn any a new united nationss? a new asean. whatever. >> ideally we would redesign humankind. >> rose: (laughs) >> so we've got i.m.f., the world bank, the u.n. security

council. >> rose: so that's enough. >> and we will work on that and improvise and improve. you've got the g-20 emerge after the financial crisis. there's a useful grouping and i'm sure over time more such groups will emerge. >> and the idea of g-20 is simply... >> i think that's an extrapolation beyond the facts. you are not there and the chinese know that. >> rose: they are not there? >> they are not there. >> rose: and don't want to be there right now? >> i think they would feel much more comfortable to be in a less exposed position. >> rose: this has been a wonderful conversation from our standpoint. thank you for being candid. thank you for coming here. a pleasure to see you again. >> thank you very much. >> rose: the prime minister of singapore. thank you for joining us for this hour. see you next time. on the next charlie rose, a conversation with ark the text jean novell and a look at the photograph yay of andre cartier. >> i tried to be a contextual architect and i think one of the disasters in the urban situation

today is what i call the general make architecture. it's all these buildings in every city in the world now and now with the computer you have a lot of facilities toe do do that. it's very easy. you can do three stalls more. you can do it a bit wilder but it's the same building. what i researched is the roots. it's always for the building. why this building has to be like this? what can i do here? i cannot do in another place. >> rose: what made him so very, very good at photography? >> that's a hard question to answer but i think maybe because he had to a painter's eye. he also liked people, he had an

insatiable curiosity. he wanted to discover the world and share the world with his people and remember he did live the golden years of photojournalism no one had been able to travel, he traveled the world for us. >> he had a marvelous sense, intuitive sense, because if you had to sit about it it was already gone. the marvelous sense of how the picture was going to transform what he was looking at and then a completely other thing which was his marvelous ability... curiosity about people that led him to to be able to... anywhere in the world whether he spoke the language or he didn't-- although he did speak a lot of languages-- and at any social level from kings to peasants he could walk into a situation and observe it and within a few minutes he would know who was the powerful one, who was the

weak one, who was the wise one, who was the stupid one, who was the liar. >> i think it was very important to the great reader and on top of on top of that i think it will a which you are was very important.