Tax cuts and greater transparency in government rules have helped to boost productivity in manufacturing because companies such as disk-drive maker Seagate Technology upgraded their factories to make higher-value products, he said.
Mr Lee said Singapore and its nine fellow members of Asean, must speed up efforts to integrate their economies and boost trade with India, China and Japan to spur investment.
The region needs to remove trade barriers to reduce costs and spur exports after losing investment to India and China. "Asean countries know that the world is changing on them," he said. "They can see whats happening in China and India, they know theyre facing tougher competition and if they dont get their act together, theyll get a lot less attention from investors and do much less well."