The S. T. Lee Distinguished Annual Lecture by Mr Ravi Menon - 14 July 2026

Thank you. Thank you, Ambassador. Ladies and gentlemen, good afternoon. The world no longer works the way we thought it did. Tariffs have become instruments of industrial policy. Critical technologies have become arenas of strategic competition. Businesses are redesigning supply chains not just for efficiency, but for resilience. And a conflict in one corner of the world can, within days, send energy prices, food prices, shipping costs, and financial markets into turmoil across continents. These developments are manifestations of a deeper transformation in what is termed geoeconomics, the less well-known cousin of geopolitics. Geopolitics and geoeconomics both describe how nations compete and cooperate, but through very different instruments. Geopolitics pursues power through armies and alliances, territorial control and deterrence. Geoeconomics pursues it through markets, money, and machines. The toolkit includes tariffs, sanctions, export controls, investment screening, payment restrictions, but it also includes cooperative instruments: trade agreements, harmonized standards, supply chains, digital corridors. Geoeconomics is not new, but what is new is its intensity and growing centrality. The concept of geoeconomics was popularized in 1990 by Edward Luttwak, who argued that with the end of the Cold War, commercial competition would increasingly replace military competition as the medium of great power contest. Twenty-five years later, Robert Blackwill and Jennifer Harris called on the United States to deploy its economic instruments of statecraft, like China and Russia, in their view. More recently, Henry Farrell and Abraham Newman explained how control of critical choke points in global financial, communications, and trade networks creates enormous coercive power. Today I want to share with you my thoughts on this new geoeconomics in three parts. Part one: Disorder, the world of geoeconomics as it is. Part two: Discernment, making sense of the disorder. And part three: Design, how might we shape a new globalization. Let's begin with part one, disorder, or the world of geoeconomics as it is.

The historical arc of geoeconomics has turned in recent years. The post-Cold War economic order assumed that efficiency would dominate. Production would move to where costs are lowest. Capital would flow to where returns are highest. Technology would spread through trade and investment. It was of course not always as orderly as we sometimes recall with misplaced nostalgia, but it was a reasonably predictable world where rules mattered and economic efficiency delivered stability as well as prosperity. That predictability has weakened in the last two decades. 2008, the global financial crisis exposed the fragility of financial integration. 2020, the COVID-19 pandemic exposed the vulnerability of global supply chains. 2022, Russia's invasion of Ukraine exposed the risks of energy dependence. And more broadly, the rise of China and other emerging economies on the back of surging international trade and global production networks was seen as imposing huge adjustment costs in the industrial heartlands of the United States and Europe. And so we have entered a new age of geoeconomics. The old assumption was that economic interdependence delivered prosperity, promoted stability, and reduced conflict. Still true. But there is also a new geoeconomic reality that interdependence can also become a channel through which shocks, vulnerabilities, and conflicts are transmitted. The boundaries between economics, technology, finance, and national security are becoming increasingly blurred. Economics is not just about efficiency. It is also about security. Trade is not just about comparative advantage. It is also about strategic positioning. Finance is not just about allocating capital. It is also about power. As Prime Minister Mark Carney of Canada described at Davos earlier this year, and I quote, 'We know the old order is not coming back. We should not mourn it. Nostalgia is not a strategy.' Let's examine the five flashpoints where the new geoeconomics is playing out most actively: trade, investment, supply chains, technology, and finance. First, trade. The most visible flashpoint of geoeconomic conflict. But the story here is more nuanced than the headlines suggest. It comes in three parts. One, the number of trade restrictions has risen dramatically globally. Tariffs, import restrictions, and export controls are being increasingly used as instruments of national coercive power and industrial strategy. Two, international trade remains robust and continues to grow. Global trade in goods and services reached a record level in 2025, surpassing 35 trillion US dollars. Three, trade is reconfiguring, not exactly retreating. Trade among geopolitical allies has been increasing faster than across geopolitical blocs between 2018 and 2023. But much of the apparent decoupling, the bilateral decoupling, may also be trade rerouting through third countries, not genuine economic separation. It's a mixed picture. The second flashpoint is investment. Here the story is largely one of fragmentation. Governments around the world are tightening investment screening. Inbound investments are scrutinized for security risks. Outbound investments are scrutinized for technology leakage. Industrial policies are reshaping the global geography of investment. The US Chips and Science Act provides huge incentives for semiconductor manufacturing within the United States. This is the largest US industrial policy intervention since the Apollo program of the 1960s. The European Chips Act aims to enhance technological sovereignty and reduce strategic dependencies on foreign chip suppliers. Japan, India, Taiwan, and South Korea all have their own semiconductor subsidy programs. The third flashpoint is supply chains. What used to be designed for efficiency is now being reconfigured for resilience. But it's not a simple story of decoupling or reshoring. Full self-sufficiency is costly and actually impossible. The global economy is too intertwined for any clean separation. What we are seeing instead is more diversification, shorter supply chains, and larger inventory buffers. And this is why global supply chains continued to expand during 2018 to 2023 despite trade frictions and the COVID-19 pandemic. The fourth flashpoint is technology, perhaps the most consequential divide. The semiconductor industry is a critical battleground here. What used to be perhaps the most globalized supply chain in the world is now bifurcating. The US has put in place an extensive export control regime targeting China through restrictions on four choke points: first, on the exports of advanced chips; second, on lithography equipment required for advanced chip manufacturing; third, on access to leading Taiwanese and Korean foundries where the most advanced chips are manufactured; and fourth, on chip design software and intellectual property. On the plus side, technology is deeply embedded in people, products, and platforms, and these continue to work across borders. On balance, though, bifurcation is quite real in advanced technology. The fifth flashpoint is finance, the most damaging if it tips into a genuine fracture. The freezing of Russia's central bank reserves and the ejection of Russian banks from the SWIFT messaging system in 2022 was a watershed moment. It was the first time the coercive power embedded in the global financial system was deployed against a major economy. De-dollarization is happening to some extent, but the US dollar remains dominant. The dollar makes up 58% of global foreign exchange reserves, accounts for more than half of all cross-border payments, and is on one side of 89% of all foreign exchange trades. No other currency offers equivalent depth, liquidity, and convertibility. The big picture is that the world of finance remains highly interconnected. Cross-border banking flows have kept rising through the sanctions and tariff shocks of the past two years, and foreign holdings of US Treasury securities remain near record levels. So looking across the flashpoints of geoeconomics, the five flashpoints, the world looks strange. Everything seems to be connected to everything else and different things seem to be happening at the same time. It reminds us of a movie from a few years ago.

We may need a different lens to better understand the new geoeconomics, which brings us to part two: discernment, or making sense of the disorder. Perhaps the strange world of quantum mechanics offers us a useful frame to make sense of the new geoeconomics. I'm not suggesting that quantum mechanics explains international relations. Nations do not behave like electrons and trade flows are not wave functions. But quantum mechanics is a way of thinking about complex systems, and geoeconomics is a complex system. Quantum mechanics offers us three ideas, or three habits of thought if you will, that could be relevant for navigating the new geoeconomics. It teaches us that apparently contradictory states can coexist. This is what they call superposition. It is both a wave and a particle. It teaches us that distant things can be deeply connected, and this is entanglement, very true in the world of subatomic particles. And it teaches us that uncertainty is an irreducible feature of the system itself, the uncertainty principle. The first quantum-inspired insight is superposition. The world exists simultaneously in multiple possible states. The geoeconomic world may also be said to be in superposition, simultaneously fragmenting and integrating. Trade restrictions have multiplied. Investment screening has tightened. Technology controls have expanded. Yet global trade is at a record high. Cross-border services continue to grow, and companies continue to invest, produce, and sell across borders. A possible insight into this seeming contradiction is to distinguish multilateralism from globalization. Multilateralism is the institutional machinery of international economic cooperation: the WTO, the IMF, the World Bank, the UN system of rules and norms. Globalization is the organic process driven by comparative advantage, specialization, economic incentives, and, of course, a conducive multilateral order. So one is an institutional arrangement, the other is an economic process. So it is possible that institutions can weaken while the underlying process can continue, albeit not as smoothly or robustly as before. So multilateralism has clearly weakened. Tariffs have been imposed unilaterally outside WTO rules. The WTO Appellate Body has been paralyzed since December 2019. Globalization, however, seems to be somewhat more resilient than its institutional scaffolding. The economic logic of comparative advantage cannot be legislated away. When countries specialize in what they produce relatively more efficiently and trade, all countries gain. This is the insight of David Ricardo from 300 years ago. These gains from trade can be so large that even the distortions imposed by tariffs and sanctions do not eliminate them. They reduce them. And this is why trade volumes persist and supply chains reconfigure. So the policy implication of superposition is: if multilateralism is weakening but globalization is more resilient, then we must seek to fill the institutional gap with new forms of cooperation. But we must not give up on multilateralism because it provides the key reference for other forms of cooperation. The second quantum-inspired insight is entanglement. Distant events and domains are deeply interconnected. The geoeconomic world is also entangled. A shock in one node travels quickly across the system through channels that are not visible until the crisis hits. Energy markets are among the clearest illustrations of geoeconomic entanglement. A conflict in the Gulf does not remain in the Gulf. It affects transport costs and food prices, inflation and fiscal sustainability, capital flows and exchange rates in countries far away. Climate change is the deepest form of entanglement because it links all countries through a shared planetary system. Emissions in one country affect the climate everywhere. Deforestation in one region affects carbon sinks for all. A heat wave affects labor productivity, energy demand, and health systems. Policy implication: entanglement changes the question from 'How do we reduce dependence?' to 'How do we manage interdependence?' The third quantum-inspired insight is uncertainty, not as a failure of measurement but as the fundamental nature of a complex adaptive system. The new geoeconomics is inherently uncertain. No government knows how the US-China relationship will evolve. No firm knows how supply chains will reconfigure. No investor knows how tariffs, industrial policy, and technology controls will interact. In the face of this quantum-like uncertainty, three choices present themselves. One: panic and retreat. This sacrifices the gains of openness. Two: wait and see. This is paralysis dressed as caution, leading to irrelevance. Three: scan and shape. And this is the only viable path for a small state like Singapore, which is inherently dependent on the global system. It means understanding the landscape for what it is, not what we wish it to be. It means using our agency to influence outcomes bit by bit. And it is about preparing for multiple possible futures rather than the most likely scenario. Singapore's tradition of national scenario planning takes on added importance in this new geoeconomics. Policy implication: if uncertainty is embedded in the system, we should not wait for clearer signals but prepare for multiple outcomes. So, if superposition teaches us to contemplate multiple states of the world, entanglement to manage interdependence, and uncertainty to act without perfect foresight, then these could become principles to navigate our way forward. And with that, let me turn to part three: design, or how might we shape a new globalization?

Now, when I speak of a new globalization, let me call it for convenience Globalization 2.0, I speak of a possibility, not a forecast or even likely scenario. A forecast asks what will happen given current trajectories. A possibility asks what could happen if determined actors make deliberate choices to bring it into being. Let us picture how a possible Globalization 2.0 might look like. It could comprise two overarching frameworks: plurilateral coalitions, and public-private partnerships. It could play out most prominently in four domains: resilient supply chains, digital economy corridors, interoperable payment systems, and climate and green economy cooperation. And it must have one critical foundation block: a renewed domestic social compact. Let me go through each of these in turn. The first overarching framework is plurilateralism. This is not a new idea. Coalitions of the willing, variable geometries, and flexible groupings have been around for decades. But in a world where multilateral consensus is becoming more difficult, plurilateral cooperation among the willing offers a faster way to deliver stronger outcomes. But to support globalization, plurilateralism must pass two tests. New members should be able to join through transparent rules-based processes, not geopolitical favor. And one coalition's standards must be able to connect with another's, instead of overlapping arrangements creating incompatible systems. The WTO Information Technology Agreement, ITA, is a classic example of the power of plurilateralism at the sectoral level. Signed in 1996 among just 29 economies, the ITA has 84 participants today, accounting for some 97% of world trade in IT products. The ITA did what full multilateral consensus could not. It achieved a zero tariff rate in technology goods among the willing, and the economic gravity of that arrangement pulled in others over time, and it facilitated a boom in global electronics trade, creating millions of jobs. The Regional Comprehensive Economic Partnership, RCEP, demonstrates the same logic at the regional level. It brought together 15 Asian countries to form the world's largest free trade agreement. It targets areas like customs digitalization, logistics connectivity, areas where multilateral consensus remains elusive. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the CPTPP, is an example of a cross-regional plurilateral. It started as simply TPP in 2005 with just four small economies: Singapore, Brunei, Chile, and New Zealand. When I was at the Ministry of Trade and Industry, I went around trying to persuade fellow members of the Asia-Pacific Economic Cooperation, APEC, to join TPP. No one joined while I was at MTI, but today CPTPP includes 12 countries across Asia and Latin America, plus the United Kingdom. As Senior Minister Lee Hsien Loong puts it recently, it shows that small things can grow, and it may not cover the world but it makes a significant contribution. The second overarching framework for new globalization is public-private partnerships, or PPPs. The reality of the new geoeconomics is this. In many areas, government action alone is insufficient. The axis of cooperation is increasingly government-to-business-to-government, or industry-led with government backing, rather than simply government-to-government. Examples: technology protocols are being shaped as much by big tech firms as by national regulators or multilateral bodies. Blended finance is combining concessional public or philanthropic capital with commercial private capital to finance projects which are otherwise not bankable. Multistakeholder bodies like the International Sustainability Standards Board and the World Wide Web Consortium are drawing on businesses, professionals, governments, and civil society to co-design standards and accountability frameworks. Public-private partnerships must pass two tests to serve the course of globalization. They must not become an instrument of private or industry capture, and standards and procurement should remain open and not allow large players to lock others into proprietary systems. At their best, PPPs combine public authority, private execution, commercial discipline, and shared risk to solve problems that neither governments nor businesses can solve alone. So those are the two overarching frameworks: plurilaterals and PPPs.

Let's now turn to the four domains where a new globalization could potentially take shape. The first domain is resilient supply chains. The objective is resilient interdependence. Preserve the efficiency gains across border trade and production while reducing vulnerabilities. A good proof of concept for supply chain cooperation is the recently signed Singapore-New Zealand Agreement on Trade in Essential Supplies, the AOTES. AOTES is the world's first legally binding bilateral supply chain resilience agreement. Both countries have committed themselves to refrain from imposing export restrictions on an agreed list of critical goods during emergencies or crisis. The practical exchange is New Zealand's food for Singapore's refined fuel. But the pact also protects the cross-border movement of healthcare products, medical equipment, chemicals, and construction materials. As Prime Minister Lawrence Wong puts it, we will not shut each other out. Even under strain, trusted partners will keep faith with one another. AOTES can serve as a model to build a plurilateral network of such trusted partners. Supply chain transparency is another emerging area for cooperation. Many companies understand their direct suppliers but have little visibility into their suppliers' suppliers. Public-private partnerships can develop the tools to close that gap: supply chain mapping for a visual blueprint of the entire supply chain ecosystem, and digital product passports that travel with a product detailing where it was made and what materials are inside it. Plurilateral agreements could set common supply chain disclosure standards, enabling governments, companies, and investors to map dependencies in real time. So that's supply chain resilient supply chains. The second domain of Globalization 2.0 is digital economy corridors. Digital trade is the fastest growing component of global commerce. Yet the global digital economy operates within a fragmented governance landscape. The EU's GDPR framework with its stringent privacy protection, the US framework with permissive data flows, and China's framework with security-first provisions and state access. Singapore has been a founding architect of three ambitious plurilateral initiatives to fill the governance gap in the global digital economy. The Digital Economy Partnership Agreement, DEPA, covers cross-border data flows, digital identities, e-payments, fintech, and AI governance, precisely the domains where rules are still being written. DEPA's modular design is truly innovative. It allows economies to join modules where they are ready and defer others. This lowers the barriers to entry while maintaining ambitious standards for those who are ready to go further. Singapore's AI governance framework and Model AI Governance Framework for Generative AI have become the structural anchors for DEPA's AI provisions. Second, the ASEAN Digital Economy Framework Agreement, DEFA. This will cover digital IDs, cross-border data flows, e-commerce facilitation, cybersecurity, and AI governance to support the growing ASEAN digital economy. Third, the WTO Agreement on Electronic Commerce. It provides a potential global baseline for e-signatures, e-contracts, and paperless trade. So, that's the good news.

But the physical infrastructure of the digital economy is becoming the terrain of great power competition. The explosive growth in data centers globally threatens to set off geoeconomic competition for access to energy. US-China tensions are creating geopolitical detours for undersea cables, which carry over 99% of internet traffic today, and access to advanced AI computing infrastructure is increasingly being regarded as a strategic resource. So there's still work ahead. The third domain of a new globalization is interoperable payment systems. The ASEAN Regional Payment Connectivity, RPC, is directly linking the region's national instant payment systems. A first of its kind in the world for retail payments. It bypasses correspondent banking networks, international credit card schemes, and the US dollar. The building block was laid in 2017 with the PayNow PromptPay corridor between Singapore and Thailand, enabling cross-border transfers using only a mobile phone number. This created the blueprint for a series of bilateral ASEAN retail payment linkages. Today, a tourist from Indonesia shopping in Malaysia can open his domestic banking app, scan the Malaysian merchant's QR code, and pay. The tourist is debited in Indonesian rupiah, the merchant receives Malaysian ringgit, and the settlement happens in seconds. Cross-border payment volumes in tourism, remittances, and SME transactions have grown across ASEAN, boosting commerce and trade. The long-term goal is multilateral scaling. ASEAN central banks have partnered the Bank for International Settlements to build a hub-and-spoke model where each national payment scheme connects once, just once, to a central gateway, and through this gateway gains access to all the others. There is scope to extend this model beyond ASEAN, potentially connecting the European Union and even Latin America. Achieving the same seamless connectivity in wholesale payments is much harder. Wholesale payments are high-value transactions involving the settlement of financial assets cross-border. They rely on correspondent banking networks and sequential messaging, compliance, screening, reconciliation, and settlement. Multiple efforts are underway to streamline this process using distributed ledgers, tokenized assets, and smart contracts, but the proliferation of different tokenized payment networks may reduce the benefits of global interoperability if this is not well managed. So this is still further out.

The fourth and final dimension is climate and green economy cooperation. The projections by the Intergovernmental Panel on Climate Change, the IPCC, are unequivocal. Without drastic emissions reductions, global warming will exceed 2°C by mid-century, with devastating consequences for lives and livelihoods. The logic of climate change is like that of COVID-19. No country is safe until every country is safe. Four areas offer some scope for climate cooperation. First, green economy agreements. The Singapore-Australia Green Economy Agreement is the world's first bilateral green economy agreement. It is a potential template for plurilateral climate cooperation, including low-emissions trade and investment, renewable energy, carbon markets, green skills, and critical minerals, all bundled into a single framework. Second, cross-border trade in renewable energy. An interconnected power grid across ASEAN will help enhance electricity trade across borders, with benefits for all. Regions without renewable capacity can have access to clean energy. Clean energy providers can achieve scale by expanding their markets beyond domestic buyers. Singapore's import of renewable energy from Lao PDR through Thailand and Malaysia is a working proof of concept for how this can be done. Third, carbon markets to bridge the climate financing gap in many developing countries. Carbon credits are a market-driven solution to enable decarbonization that would otherwise not have occurred, especially in the Global South. The evolution of carbon markets is a study in plurilateral engagements and enablement, with public-private partnerships building much of the market infrastructure. The Coalition to Grow Carbon Markets, co-chaired by Singapore, Kenya, and the United Kingdom, has provided companies a common framework for the credible use of carbon credits. The Transition Credits Coalition convened by Singapore is a multistakeholder public-private partnership which designed a novel category of carbon credits to incentivize the early retirement of coal-fired power plants. It is currently being piloted in the Philippines. Fourth, blended finance: public and private capital working in combination. Blended finance uses catalytic capital, grants, or guarantees to absorb first-loss risk and attract commercial capital for green and transition projects. Singapore's Financing Asia's Transition Partnership, or FAST-P, applies this logic at platform scale. A $500 million government pledge matched dollar for dollar by other sources of catalytic capital, together aiming to crowd in four times as much commercial capital, for a target fund size of $5 billion. FAST-P is not the only game in town. Many blended finance platforms are taking shape to help bring much-needed financing to the Global South. So those are the four domains.

Let me now touch on one foundation block that is key to holding up the entire architecture of Globalization 2.0. A renewed domestic social compact. There can be no global integration that is politically sustainable without domestic integration. Take the United States. Wage stagnation and rising inequality over the last 30 years. Real wages for the bottom half of the income distribution are barely above 1980 levels. This has led to the dismantling of what George Packer calls middle-class democracy. The unwritten social compact among labor, business, and government that ensured that the gains of economic growth were broadly distributed. And today we see the political consequences of the fracture of this social compact in the form of protectionism and multilateral withdrawal. The populist backlash against globalization you see in many countries is not at its root a verdict on globalization itself. It is a verdict on domestic policy failure: the failure to ensure that the gains from an open world economy were widely shared, that those displaced by trade and technology were supported, and that the promise of a better life through hard work remained credible. As President Tharman Shanmugaratnam puts it, 'Until we tackle the issues besetting countries themselves, the growing social and political polarization, the hollowing out of the middle of workforces, it is going to be very hard for us to achieve a renewed sense of solidarity internationally. We have to do both things together.' A renewed domestic social compact for Globalization 2.0 must be about investing upstream and a stronger jobs and wages agenda in each country. This means equalizing opportunities early in life and building ladders for upward social mobility throughout life. Five years ago, I spoke about a job and wage architecture for building social inclusion. It means a labor market that provides more equal outcomes, more diverse pathways, supports continuous upgrading, and springboards for those who fall to bounce back. Redistribution through taxes and transfers still has an important role in fostering inclusion. But the labor market can do more of the heavy lifting.

Let me conclude. The new geoeconomics is not the end of global connection. The world is still trading. Capital is still moving. Technology is still spreading. Supply chains are still linking economies across continents. But the terms of the connection have changed. Efficiency must now contend with resilience, openness with security, interdependence with power, and global integration must contend with domestic legitimacy. The old order assumed that economic interdependence would largely govern itself. The new order will have to govern interdependence quite deliberately. We can and we must build a more resilient, more trusted, and more legitimate form of globalization. The habits of thought offered by quantum mechanics can help us navigate this task. Superposition reminds us that the world is both fragmentation and integration, and that the task is to manage the risks and harness the benefits of both. Entanglement reminds us that in a deeply interconnected world, position matters, and that a trusted and connected state can carry weight beyond its GDP. Uncertainty reminds us that we will never know enough before we act, and that it is better to act early than late to be able to influence the outcome. A new globalization will not arise from a single grand bargain. It must be built standard by standard, platform by platform, corridor by corridor. Plurilateral coalitions can move where multilateral consensus cannot. Public-private partnerships can mobilize capabilities that governments or markets cannot supply on their own. And a renewed domestic social compact can give globalization the legitimacy it needs to endure. None of this is predetermined or even very likely. The future is neither assured nor foreclosed. It is open to agency, and that matters for Singapore. As a trusted and connected node, Singapore has agency, and we have seen this agency at work in the trade architecture that we helped to build. Thank you.

build in the payment rails that we helped to design in the digital corridors that we helped to pave and in the climate finance that we helped to structure. And that is Singapore's opportunity and responsibility in the new geoeconomics. Thank you very much.

Okay. Yes. No, I fully agree with that. I could have given a whole lecture on that but this was an on international geoeconomics. But the point I was trying to make which is exactly what you're say emphasizing is that this is foundational that until we get domestic economic and social policies right global integration is going to become very difficult. as to re I mean there's a whole literature and commentary on reinventing capitalism and so on. I would say capitalism or what I would call mark the market economy the functioning of the market economy has evolved tremendously over the last 200 300 years. It is highly adaptive. Competing models haven't really done well. I mean you're I mean the last century was a contest between socialism and capitalism. The market economy has worked amazingly well has been resilient precisely because it was continually doing what you have advocated which is it was reinventing itself. some of the I mean in the tw 1920s or even the late 1800s the exploitation of labor was a huge dimension of capitalism and it took the labor market labor movement trade unions workers leg rights and legislations and an enlightened social response to reconfigure and put this into practice and today I think those protections have been well well serving but Now we're facing new challenges. And the environment and the climate is another one where capitalism needs to take account of the social cost of some of its production methods and actually impute that. But you're working within the system and that's the beauty. You provide incentives for people to pursue what is in the collective interest, what turns out to be in the collective interest. So yeah, I I would fully agree. But this has to be done at the country level. You can't have an international social compact, right? You can have rules about taxes. I think companies should pay taxes where most of the activity is done. You know, so there'll be the beeps movement and so on. Clamps down on harmful tax avoidance and so on which is really exploiting people. but you need much deeper social policies and the traditional divide between right and left I think doesn't get to the heart of it because the traditional right-wing view is that you should just leave it to the markets and the traditional leftwing view is that you should intervene in everything and quite often as we know in Singapore's experience there's a balance to be struck there are some things where you have to markets will not work you have to lean in there are other things you have to be very careful if you lean in too hard you you destroy the incentives for market functioning and you should let the commercial dynamics drive things. This is the kind of reform that every country needs. Yeah. And I think increasingly when we talk about international relations and international integration if anything I hope this this discussion will bring back the domestic dimension to it because I think that's critical. Yeah.

Yeah. Um the first thing to note is that comparative advantage is not necessarily purely nature endowed. And if we settle for that definition that you accept what nature has endowed you with Singapore is no future. In fact, Singapore wouldn't exist. We created comparative advantage. We didn't have a drop of oil. We don't have any fossil fuels. But we became the one of the largest oil refining and petrochemical centers in the world because we created comparative advantage. We created the infrastructure. We created the capabilities. We gave incentives to companies to come here, sync roots and provided them a conducive environment but without distorting prices. So there are many ways in which you can build comparative advantage and I think that is perfectly fine. Nations compete on that basis. Now the issue of subsidies for instance it is not unique to just China. Feeding tariffs were used in Europe to promote the clean energy industry. And in many instances when you know an industry or an activity has a great future and as a great social purpose as in clean energy but right now the cost is just too high. You do intervene through policies, incentives, subsidies. Now we could have debates about what is the best form of intervention and some could take issue with the way China has done it but I think the broader point that you need to that you can't be too purist about it that you have to invest in some capabilities upfront in order to create those those things becoming viable in the future. So I think the basic logic that your ability to produce something at relatively lower cost is something that is going to drive trade. And by the way, let's not forget that a lot of manufacturing activity is leaving China. It's going to Vietnam. It's going to Bangladesh. It's going to Mexico. It's going to other parts of the world where is cheaper. And China knows that. And China's adjusting just like we adjusted over the last 30 years. We used to be the world's largest producer of disc drives, matchboxes, all kinds of things. All those industries have gone because once you lose your competitive edge in cost, you move on to something else. And you always have and that's the beauty of comparative advantage. You always have a relative advantage in a cost category for a particular product. And as long as you keep moving and that is also a part of domestic policies. is not just a social compact of looking out for those who have fallen through the cracks. It is continuous upgrading of skills, move investing in new capabilities, moving into new activities where future advantage lies and that is what makes the whole system work.

Yes. So I guess we all use AI now and we're all contributing to the compute loads on data centers. So this is this is a tricky problem. The I think that obvious solutions are to look for greater efficiency in electricity usage in data centers which is happening today because they're finding out that their consumption is so huge because people's demand for using tokens is so high that they just need to build more and more data centers with greater compute capacity. That means more and more electricity consumption and that means you're going to run into a crunch energy. you're going to run into water issues. So they are already beginning to adjust that with improved efficiency is now given a much higher weight in how these things are designed. In in Singapore's own case you know we had a moratorium on data centers for a while until they could meet higher standards of energy efficiency and usage. I think more of this needs to happen across the world. There should be more pressure on these companies to increase efficiency. Now those of you who economists will know of course efficiency gains are in the order of 10 15 20%. The demand for compute is more than 100 200%. So efficiency is not the long-term answer. I think the long-term answer is that we need a mechanism to do AI differently. Now this is not a lecture on artificial intelligence. But sooner or later we're going to come to that crunch point where you have to fundamentally redo redo the way AI works without requiring such large data centers and compute capacity. Today AI is actually not very smart. It's using brute force. It is it is piling on massive amounts of data using up massive amounts of processing and you know shuttling between data and processing and data and processing to draw insights. They're going through the entire internet to answer one simple question. That's not how you and I use our brains. The human brain uses nowhere near that kind of energy. So it is all about algorithms. It is about how you design these algorithms to answer things more to produce insights more efficiently. So I think that has to be the next frontier. But until then you're quite right we have a serious problem. The US deficit has been talked about for at least 50 years. And every now every few years you will have some articles coming out to say this is not sustainable. It's going to break down. The dollar will collapse. But it has not happened. The two things that have not happened in the world and we should be thankful it has not. One is people have been predicting a financial crisis in China for 20 30 years. It's not happened because somehow they manage it. And they have also been talking about you know a loss of confidence in the dollar because of the rising deficits and you can't finance this unless people are willing to buy more and more government US treasury securities. And I just said in the speech as of last year it's a record high. As long as people are willing to buy US treasury securities, the US deficit is sustainable. But once they stop, then it's not. But who knows? It's it's collective decision by by the rest of the world. Yeah.

Sorry, say that again. the trade-off between signal sensitivity

not sure I fully understand and even if I understand the question I'm not sure I have any idea what the answer is but I think you're referring to a phenomenon where we are because of modern technology we are continually exposed exposed to lots and lots of signals and data points and information flows that our bandwidth actually to absorb all of that and make sense of it is actually much diminished and yeah so that's not it. Yes. Is that it? Oh okay.

Okay. Is that a trade-off of I I think there is a trade-off. And okay this gets into brain

but I think there is some this is really beyond me I think there is some evidence that this constant exposure is not helping our brains process information well and drawing insights well the mobile phone is the worst and that's something we all need to exercise great discipline on because each time you look at it and you read a headline or a news it is actually bombarding your brain with something that is yeah and that doesn't allow you to process because you then move on to something else you scroll and you're looking at many many things at the same time I think this is yeah there's a body of literature that suggests this is not helping but it's early days so not sure I I can add much more to that you know my colleagues in RSI sometime look at me they think that I'm getting slower as I age And thank you for the latest explanation. It's not that I'm getting old and slower. It's just that so much the brain had to process. And I have to find some politically correct answer most of the time. You know that really burn up all my spare capacity up there even though I'm aging. But I think this is a phenomena. I think I think the mechanical engineer or electrical engineer can do a bit more on this. But really it's a demanding kind of situation and sometime when we respond to questions or trying to explain certain things we get all the wire cross so the supposedly explanatory situation become more confusing.

It's a very good question. And that's that's something that also troubles me. There are two two two aspects to what what you've just said. One I think I addressed in my lecture partly which is that while pluralateralism offers a faster and more effective way to get to desired outcomes, it's very important that must have open accession. Everybody is welcome to join and different platerals have interoperable standards and systems not identical not the same but interoperable so effort has to go into that the examples of prolateralism that I cited are positive examples right the CPTP especially but the ITA too because you're standardizing things so I think that is a constant reminder it's not that pluralateralism is the answer to our problems. It is a potential way out of our problems provided we use it wisely in the service of globalization. The big danger of pluralateralism as I said is it should not become geopolitical blocks right and so this is something to watch and that's why multilateralism is still important because multilateralism provides that baseline reference from which plurilaterals take their bearings. The second problem you cited is more serious. I didn't touch on it because it may still end up with a large number of countries especially in the global south being left out. Who forms these plurilaterals? It's usually the middle income countries, the middle powers who want to find a safer way out of big power confrontation. Occasionally you will have okay if you have small countries these are high income small countries. So there are vast numbers of countries in the global south that are naturally not in these orbits and that's deeply worrying. I I fully take that is a problem and that is yet another reason why we need and cannot give up multilateralism because multilateralism like the WT or the IMF is the only place where every large every small country can be represented can be heard not always listened to but can be heard their interests are taken into account in some fashion plurilaterals the way they are formed sometimes don't so thanks for that reminder I think that's a good good insight

the ego of big countries.

No no no I'm not an expert. I mean they're all trying to make sense of this. Well I think the I can think of two. One is a a severe breakdown in trust. especially among the big and middle countries, there's a severe breakdown in trust. And if one were to take a very realistic view of this, some of that breakdown in trust is welld deserved. Many countries have not behaved well. I mean trust has to be earned, right? It's not given freely. and many big and middle countries have not behaved well and so they've lost trust in one another and without that trust it's very hard especially in the area of technology to come and cooperate so I think that will be a big stumbling block and how is that going to be addressed it has to be addressed as is the case with human relationships if trust between friends and family break down we have to work very hard to demonstrate that we can be relied upon it's hard work to restore trust. It comes from communication. It comes from demonstrated actions. So I think that would be a that would be a way to overcome it. But it's not easy. I think the other is what I mentioned in the lecture. Until domestic, social and political situations are addressed, it is going to be very hard to build the consensus for global integration. It's as simple as that. And you have to if your own house is not integrated, how do you talk about integrating with your neighbor's house? And this is a problem in many countries. their own house is not in order. You have to rebuild confidence. You have to rebuild solidarity and cohesion within countries and that's both economic policies and social policies and only then can you have the confidence to interact with others. for much of the postw world war period because of the rising stand living standards of that came with openness and the right policies that was very natural but today that's that's has withered so I think that is a second big stumbling block both are huge you know so I painted an inviting I I like the phrase you use not optimistic but an inviting picture of what we could build but it's not easy it's not easy at

So if you're looking for stumbling blocks to achieving some of the things that I outlined yet that is another one. Because even as we try to build rebuild social compacts and reform capitalism as as someone put it earlier on artificial intelligence is going to pose a fresh set of challenges which we don't even fully understand. The literature out there and the commentary is very diffuse. It's going to cut jobs in so many very different ways. So yeah that that could be yet another challenge to to the social compact coming from the impact of AI and how work is done. I should say that there are some who believe and I I I have some sympathy for that view that in a funny sort of way the the widespread adoption of AI could help rebalance income distributions. Who are the people who are most worried about AI? It's people like us. It's people like us who use our brain. No you use it's it's because in an earlier era when manufacturing and robotics and automation took place it made redundant a lot of mechanic routine mechanical tasks. But today AI is actually threatening analytical skills, accounting, legal work, diagnos diagnostics, a lot of analytical work. intermediation work can be done by AI. So the view is that it is actually going to today the problem is those who use our heads we are paid much more than those who use our heart and our hands and because AI is all about head maybe you'll have a better distribution that the jobs of the future that are more impervious to AI penetration are those which use human skills innate human skills like empathy hospitality and so on and so maybe you will see a redressing because today those jobs are underpaid those occupations are not well regarded that may change so I'm presenting you a possible good scenario but you can think of many other bad scenarios as well

Yeah, I think as with all cooperation, as long as there are mutual benefits, mutual benefits to be had, then I think there's a way forward and much of what we have seen in Azan, slow as it is, in many of these spheres, there are mutual benefits. The digital economy in Azan is is growing very rapidly. So, there's basis for cooperation on that. Azen will have to contend with the issue of climate change and decarbonization. It has not done so yet. At some point, Southeast Asia will have to come to grips with it because compared to many other parts of the world, clean energy adoption is slow in Azan. So, and that's why I mentioned the Azan power grid and interconnected grids. You know, you got to reimagine region the way we did 30, 40 years ago when we reimagined the flow of trade, the flow of goods and services and we built mechanisms to facilitate that. Shipping ports, airports, railway lines, containers, all kinds of physical infrastructure that and customs procedures and so on to enable trade and goods and services. services will be harmonized standards and so on. We have to reimagine a world where we now trade energy because energy is going to become is the new water. It scarcity is going to drive a lot of responses and we must make sure those responses are cooperative responses that give rise to mutual benefit. So if we can build an interconnected grid across Southeast Asia, all countries will benefit. Now you could argue over the governance issues. Okay, who gets how much? Who who who puts in how much and know those are real issues and they will take a long time to resolve. But the outcome will be as what we have seen in goods and services which is that real energy renewable energy deficit countries will be able to buy renewable energy from surplus countries and all both parties gain from that. I don't think the issues in semiconductors bifocation would apply to Azan because this is a very top end of the supply chain among a few countries. There's just one Dutch company that does lithography equipment. The the most advanced chips are being made in just two places, Korea and Taiwan. So the contestation there is highly concentration and so you now see a bifocation. China is of course having all kinds of workarounds to overcome these disadvantages. I it is going to make the availability of chips and how we all navigate our own technology pathways a lot more difficult. It's going to be very difficult for the rest of us. But I don't think it needs to affect things like power grid and ASAN.

So the Singapore New Zealand agreement is a I think I turned it termed it as a as a supply chain resilience agreement. It's not a trade agreement. We already are party to RC and the bilateral trade agreements. This is about assuring supplies.

AOTS. It's about assuring mutual supplies. That means if you know bad things happen, shipping routes are dis disrupted. If there are huge embargos, shortages, we will not withhold from one another what we've agreed to supply to each other. And we depend, I think about 15% of our food supply comes from New Zealand. And I think a big chunk, a very large percentage of New Zealand's refined fuels comes from Singapore, our refineries. So that is the kind of agreement we have. And I think this is a very good template because this is what many middle and small countries are looking for. We need assurance. And this is goes goes back to an earlier question. This is how we build trust because when I promise that even if I'm hit, I will be I will make good my obligation that I'll continue to supply you and that you will continue to supply me even if you're facing shortages. I think that goes a long way to build trust and I really hope these kinds of agreements will take place more. There is already a discussion with Australia I believe similar kind of arrangement and more countries are going to see this and I think we can grow this over time and as as assembly said small things can grow you know when I was traveling to South Pacific Islands one particular place I stopped if the tanker from Singapore doesn't arrive the following morning they will have to start patrolling rationing. Yeah. So this is a kind of precarious situation many of these country will face and in the case of Singapore I think food is a very critical part. I remember having to run around to buy eggs for my mother during the COVID 19 and all the usual uncle selling me eggs claimed that there's no egg left in their shop.

Well, social compacts are really about it's a combination of a few things and obviously self-effort and self-reliance must remain core and that is one of the mistakes that we've seen in other experiments that have failed but it needs to be supported by mechanisms to socialize risks and of course having support mechanisms when something goes wrong and I think it's a it's a very It's a that combination is what we need. as to how we are going to manage these risks or costs and so on. Let's not I mean if you're talking about Singapore, let's not forget we are still in a far better situation than we were in 1965 when nothing was assured. Remember the World Bank's assessment was that this can't be sustained as a sovereign independent country. It just doesn't have Yeah. doesn't have what it needs to be to to succeed. And so I wouldn't exchange today's situation with a situation of the 1960s or even the 1970s. So it all boils down to cohesion, how we work together, and how we take risks and flow with the current which is what we did. We did very risky things in those days. We built Jurong Industrial Park. We went into container port containerization of the port. We shifted our airport. We built a prochemical complex out of nothing. Those were all dramatic high-risk ventures. And some failed you know that we often don't know. But there are a few they didn't work right but I think we need that same spirit. And it's generational. Now I wouldn't be able to say whether that will continue. But that's what it takes. That's what it needs to to to flow along and to take things as they come and manage those risks and then we'll thrive.