He said it was difficult for Asean to be a single investment destination but it could do better with a more integrated and cohesive regional arrangement.

"If you compare with 10 years ago, we made progress because we have AFTA (Asean Free Trade Area) now and tariff barriers had come down. But we also need to work on non-tariff barriers, services and investments," he said in an interview with a group of Asean journalists in Singapore recently.

They were participants of the Asean Journalists Visit Programme under the Asean Committee on Culture and Information (COCI).

Lee, who is also Finance Minister, was asked on the possibility of Asean projecting itself as a single investment destination when member countries were competing with each other.

"Well, it's not one government, so it is very hard to be a single (investment) destination. Even Europe is not a single destination," he said.

Asean groups Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

Lee said competition among Asean countries was unavoidable but it was possible for them to have better economic cooperation build around AFTA and make the region a more attractive investment destination.

For example, he said Japanese companies may set up production in two or three different Asean countries and then distribute different parts of the production.

Asean's global trade (excluding Cambodia, Laos and Myanmar) recorded a growth of 3.2 percent to US$729.8 billion last year from US$707.5 billion in 2001.

Combined Asean exports increased by 2.9 per cent to US$393.1 billion from US$382 billion previously.

Total Asean imports also increased by 3.5 per cent to US$336.7 billion from US$325.4 billion in 2001.

Intra-Asean trade for 2002 increased by one per cent to US$156.9 billion from US$155.5 billion previously.

Singapore continued to be the major trading partner in intra-regional trade, accounting for 41 percent, followed by Malaysia (25.1 percent) and Thailand (10.9 percent).

Lee also said that bilateral Free Trade Agreements (FTAs) among Asean countries would not complicate its endeavour to forge a common market under AFTA.

"Each country has multiple links. The Europeans have the EU, but they still have trade links outside. If you look at America, it is a WTO member but it also has regional and bilateral FTAs. Ideally, we should all be in the WTO," he said.

He said the FTAs would benefit smaller countries because they were less likely to be targeted on a bilateral basis.

"The WTO takes a long time and we need FTAs. We (Singapore) concluded one with the US. We are so small and they're so big. Thus, the bargaining power is not the same. But we were able to work out a win-win deal and we're happy with it," he said.

Lee was also optimistic that the FTAs would not complicate Asean economic cooperation because each group and arrangement had its own rules and basis for extending privileges.

"Whether it is AFTA or USSFTA (United States-Singapore FTA), rules of origin are specified and it's not possible for the Americans to say `we use Singapore and then we have a back door to ship our goods to the rest of Asean'.

"It cannot be done, but the USSFTA is good for us because it encourages many companies to come here and export to the US," he said.

Lee said Singapore's FTA with Japan was to encourage more Japanese and others to the island.

Singapore was among the first countries to clinch FTAs with those outside Asean.

Apart from the US and Japan, Singapore also had FTAs with Australia, New Zealand and with a small group of European countries.

The republic is also negotiating a FTA with India and Asean is negotiating one with China.

Lee said Singapore viewed China as an opportunity as well and a challenge because it caused a restructuring of the whole global trading system.

Reacting to this, Singapore is in the process of making its people understand the situation the country is facing.

Union leaders, who have had regular trips to China, now fully understand the situation but they need to work hard to explain it to the workers, who have not been to China.

He said Singapore also needed to restructure its wages so that they were more flexible and competitive, besides making sure that workers were paid according to performance.

"We cannot have iron rice bowls. Even China does not have that. So, if our wages are too high, they have to come down. If we don't have flexibility, we have to make adjustments," Lee said.

"Singapore," he said, "needs to restructure the economy by having more skilled jobs, better trained workers and consistently upgrade the manufacturing sector," he said.

At the same time, Singapore must enter into new areas like services where there were opportunities because as China become affluent, they want good quality services, he said, adding this include banking, tourism and medical services.