East Asia is entering the new millennium with hope and excitement. The gloom and doom of the financial crisis has given way to renewed optimism and faith. Last year, this time, most people were pessimistic about this region's prospects. I too was cautious but my faith in the resilience of Asia never left me. In my speech at last year’s Summit, I said: "The herd instinct and herd behaviour which drive investors to exit Asia, will sooner or later re-discover the attractions of Asia and return". I had added then: "Buy into Asia now at bargain prices and position yourself for Asia's recovery". I hope those of you who have done so will re-invest your profits in East Asia, especially in new non-portfolio investments.

Can we say that the Asian crisis is over? Is a new era or new Asia coming out of the economic devastation of the last 27 months? According to the latest estimates of the Asian Development Bank (ADB) and the International Monetary Authority (IMF), all the economies of East Asia, Japan included, will register positive growth this year. The growth rates will vary from a high of 8 per cent in South Korea to a low of 0.5 per cent in Hong Kong. And according to ADB, next year will be an even better year.

Tonight, I want to look at the positive aspects of the Asian crisis, say a few words on how Singapore had responded to the crisis, and then comment on the theme of this Summit, that is, how government and business can co-create opportunities and wealth in Asia.

We know the negative impact of the Asian financial crisis and the lessons that should be learnt. My view is that the crisis has also a bright side to it. It has yielded four positive outcomes. The first is that it has accelerated the opening up of East Asian economies. Due partly to IMF prescriptions and partly to the need to re-capitalise Asian banks and companies, Japan, South Korea, Thailand and other economies have become more open to foreign investment and participation. Even relatively closed sectors such as banking, insurance and automobile have now been liberalised. ASEAN Economic Ministers at their recently concluded meeting in Singapore, have agreed to expand the scope of the ASEAN Investment Area Agreement to cover additional sectors. They recognised that ASEAN has to open wider rather than close its economies.

Second, the crisis has forced Asians to be more aware of the role of good corporate governance in creating and sustaining growth. The Indonesians coined the term "KKN", the acronym for corruption, collusion and nepotism in the Indonesian language. The KKN way of doing business based on political connections, kick backs, and rent-seeking is being challenged. Reformists want increased transparency and accountability, and ultimately, institutional reforms to replace personal ties in transacting business. The reformists also see the need for corporate restructuring in Asia so that Asian businesses are better positioned to become globally competitive. Will they win the struggle? To expect a clear-cut overnight victory for transparency and accountability will be naive. KKN is endemic in many societies. But hopefully, the economic crisis should bring about the retreat of KKN.

Next, the crisis has forced East Asia to think about its long-term growth prospects. What is East Asia's comparative advantage in the world economy? Where are its competitive strengths? Low cost and hard-working workers, good infrastructure and a pro-business environment are no longer enough. Other regions can offer the same. East Asia's economic future will have to depend on productivity growth and its ability to create wealth through new ideas and products. This means that East Asia has to concentrate on upgrading education and training of workers, and promoting innovation, creativity and entrepreneurship. In short, it should do more to develop the potential of its abundant resource - people.

The fourth positive outcome is that Asia received a traumatic but necessary lesson on the realities of globalisation, in particular, the way globalised capital markets work. Having been long the recipient of capital inflows, the financial crisis showed Asia that what came in to benefit economies could also quickly rush out and destabilise them, if the markets perceived serious financial and macroeconomic weaknesses. The crucial lesson for Asia is to make sure that its economies are well run, with rational macroeconomic policies as well as a sound financial system in place. This may not completely insulate the healthy economies from contagion, but it will minimise the ill effects.

Therefore, if the East Asian economies continue to correct the weaknesses exposed by the crisis, there will be a new vitality in the region.

Let me now say a few words about Singapore's response to the financial and economic crisis.

Our short-term response was to cut the direct costs of doing business in Singapore, including wages, instead of going for the soft option of competitive currency devaluation. It is a politically more painful way but it forces our people to focus on their productivity and themselves as a cost factor. Our response has been proven right. Our economy has bounced back. More importantly, our rational approach and social cohesion have, I am told, impressed investors.

Our longer-term response is a more ambitious one, and covers two broad approaches. The first is to transform the Singapore economy into a knowledge-based economy or KBE, and the second, to liberalise our key economic sectors.

The KBE initiative is to build Singapore into a thriving home for industries that are driven by the creation and application of knowledge. To compete on the world stage, we aim to nurture innovation in key high-tech, high-growth sectors, including electronics, engineering, chemicals, life sciences, logistics and communications and media. The companies we are attracting are operating higher on the value chain, with increasingly higher value-added per worker. More and more are setting up their regional, business and even global, headquarters in Singapore.

To support a KBE, we are enhancing the workforce capability in using information technology. We have also launched a US$2.5 billion programme to build new schools, to upgrade existing ones, and to equip them with IT education facilities and Internet access. We will reduce curriculum content and emphasise thinking skills.

In society at large, we want to broaden and deepen Singapore's embrace of the IT culture. We have invested US$3 billion in a high-speed islandwide Internet backbone called SingaporeOne. More and more content and service providers are plugging into this infrastructure. All government services will be online by 2001. Most cash transactions will be replaced by electronic payments. Electronic commerce is poised to take off. In industry, we aim to promote entrepreneurship and the new technologies, using the US$1 billion Technopreneurship Investment Fund to promote new startups.

But promoting a KBE is not only about computers and IT. It also includes businesses which can come from any industry sector, but which add value by boosting the knowledge ingredient of their input and output. Increasingly, knowledge will be the basis upon which new wealth is generated and new jobs created.

The second broad initiative is to ramp up liberalisation in key areas, including the financial and telecommunications sectors.

In finance, we have opened our doors to the world, to promote competition, consolidation and new areas of expertise. The Monetary Authority of Singapore has recently announced several initiatives to ensure that we remain a key financial hub in our time-zone, complementing Hong Kong and Japan. Our strategy is three-pronged: (a) to promote a vibrant asset management industry; (b) to develop deep and broad capital markets; and (c) to build a strong and competitive banking industry. The limits on foreign ownership of Singapore banks have been raised. Foreign banks will find it easier to get licences to operate here. The bond market we are building will help regional economies get financing. We are looking at forming new linkages in the equity market. All these moves will make Singapore’s banks even more resilient and Singapore’s financial sector more global.

As for telecommunications, the approach is to increase consumer choice at the most competitive prices, to stimulate greater efficiency, and to raise service quality. We have recently lifted the local equity restrictions on Internet Access Service Providers and Internet Exchange Service Providers. More licences for local and international basic telecommunication services will be given. These will include services for voice telephony, international direct dialing, leased circuits, public switched message and data services. There is an ongoing policy of market liberalisation, to introduce competition at retail, service and infrastructure levels.

Our aims in developing our economy cannot be achieved if we were to rely solely on our own population of three million. We welcome foreign talent from all parts of the world. The choice for Singapore is simple; we could just be another city in Asia or we could become an international city of excellence.

I shall turn now to the theme of this Summit: how can government and business co-create opportunities and wealth?

Let me begin with the role of government. At the global level, governments should strengthen and defend the multilateral trading system and enhance free trade and investment liberalisation under the framework of the World Trade Organisation (WTO). In the immediate term, the best way to do so is through the launch of a New Round of multilateral trade negotiations. The scope of the New Round must be broad enough to take into account the interests of all WTO members, but yet manageable to allow it to be completed within a reasonable period of time, say three years. The launch of a New Round is especially critical at this point in time, given the depth of the social and economic disarray caused by the Asian economic crisis.

We cannot assume that the WTO and the notion of free and open trade will automatically continue to get political support. When the US and European economies slow down, calls to protect certain industries will be heard. The successful launch of a New Round will help stem such tendencies. The resulting further liberalisation of global markets will provide the foundation for future growth. It is with this in mind that APEC Leaders recently pledged in Auckland to give their strongest possible support to the launch of a New Round at the forthcoming WTO meeting in Seattle in November.

At the regional level, governments should, individually, as well as through such regional organisations as ASEAN and APEC, create a business environment which promotes trade and investments. Within APEC, for instance, economies which are ready to embrace the APEC Bogor goals of free trade could consider entering into Free Trade Agreements (FTAs), leading eventually to an APEC-wide FTA. These could act as "fast-track agreements" to accelerate the pace of trade liberalisation within the region.

Here, I wish to assure the business community that ASEAN has not backtracked from its commitment to free trade. On the contrary, ASEAN has brought forward the date by which it will achieve 0 to 5% tariffs under the ASEAN Free Trade Area (AFTA), from 2003 to 2002. ASEAN has also deepened its AFTA commitment by agreeing to eliminate all tariffs by 2015, which is 5 years ahead of the APEC Bogor goals. ASEAN has also agreed with Australia and New Zealand to study the establishment of an AFTA-CER Free Trade Area by 2010. And for the immediate future, ASEAN will be sending joint Investment Promotion Missions to Japan, Europe and the United States, to collectively market ASEAN as an attractive investment destination.

At the national level, governments should build new capabilities by investing in social and physical infrastructures, and maximizing the potential of their people. A government should spell out its national vision or agenda clearly, and galvanise the people to support that vision. It also needs to respond rapidly to changing business conditions and innovations. One example is electronic commerce. The appropriate hardware and software must be put in place so that the growth of electronic commerce could be expeditiously nurtured.

What can business do? Investors from Europe and the USA should put East Asia back on their computer screens. East Asia is back and it is open for business. Another thing business can do is to transfer management expertise and technology to this region. It can work with governments to increase productivity growth and embark on new and innovative ways of doing business. Business can also make clear to governments that it prefers competition to protectionism, freer flow of trade and investments to beggar-thy-neighbour policies, and transparency to KKN practices. The foreign companies must show that they are not predators but partners in the development of open-market economies.

As the region recovers, there are issues still being resolved, including corporate debt restructuring and banking reform. Creative ideas from governments and businesses will be needed to address these points. Those countries and companies that come up with the right solutions and approaches, and seize the opportunities swiftly, will be richly rewarded.

The growth of East Asia in the last thirty years is an economic miracle. It is a miracle because never before in history have so many people, in so short a time, been liberated from poverty, illiteracy and despair. The economic crisis of 1997 and 1998 has interrupted that miracle, but not derailed East Asia's progress. The crisis has given East Asia an opportunity to quicken its economic liberalisation, jettison KKN in favour of good corporate governance and re-focus on capability building and productivity growth. If we seize this opportunity and build strong partnerships between government and business, between technology and entrepreneurship and between East Asia and the rest of the world, we will co-create many new opportunities for East Asia and for the world. Together, we can increase the momentum towards a new century of economic growth for mutual benefit.

I wish you a pleasant and rewarding stay in Singapore.

Thank you.