SINGAPORE: Minister Mentor Lee Kuan Yew says the extradition pact between Singapore and Indonesia agreed on Monday will not hurt Singapore's property and banking sectors.

Mr Lee was speaking at the high profile Reuters Newsmaker event, which was attended by about 80 top industry players from the financial sector.

Negotiations for this treaty had been going on a long while - about seven to eight years, according to Mr Lee.

And so, its conclusion should come as no surprise.

"I mean the Indonesians are no babes in the woods and neither are we. They know before an Indonesian can come to Singapore, they must go thru their customs and immigration with a passport," said Mr Lee.

What it does do, he said, is act as an inhibitor for any would-be escapee of their system.

Mr Lee also added that the Singapore financial sector is not built on money from Indonesians alone and that they did not have to park their money in Singapore.

"Please remember that the financial sector is not built up on Indonesian money - it's been going on now since we started in the late 70s - early 80s. And we have, today, handled about 720 billion Singapore dollars in funds. They come from not just the immediate region but now from India, the Gulf, some from China, some from Europe. Indonesian money is no more than two to three per cent of it."

Moving on to the Singapore economy, Mr Lee said it would likely grow at the top end of the forecast range of 4.5 to 6.5 per cent this year, if the US economy continues to do well.

Asked about rising costs in Singapore, Mr Lee said that was merely cyclical, before going on to give an anecdotal example of the confidence in the Singapore economy.

Under previous spikes, the investment in property was from people in the region.

Now that has changed and there is investment in property internationally by a diverse selection of people from as far away as the Gulf and even Monaco.

And because this is investment in property which is more long-term, he said that was an indication of the depth of confidence.

The question of China and India's growth and its impact on the region also came up.

Both were different societies, he said, but Mr Lee's bet is that India would grow to about 65 per cent of China's economic size.

Among other issues raised was the casino issue and the fact that when it came to green issues, Singapore was a big polluter.

It was a question, Mr Lee said, he would asked his staff.

"We are really a base for MNCS here - a manufacturing base. So, it is not the Singapore population using it but the world markets using Singapore through these MNCs to produce that."

This will change as Singapore's economy changes and Singapore must play a responsible role.

Another question posed to Mr Lee - will the Singapore government eventually decriminalise homosexuality?

Mr Lee said: "Eventually I cannot put a finger on it. But I would say if this is the way the world is going and Singapore is part of that interconnected world and I think it is, then I see no option for Singapore but to be part of it.

"They tell me and anyway it is probably half-true that homosexuals are creative writers, dancers, etcetera. If we want creative people, then we got to put up with their idiosyncrasies so long as they don't infect the heartland."

Mr Lee added that Singapore had to respect the views of the people in the heartlands.

He said: "We are not promoters of it (homosexuality) and we are not going to allow Singapore to become the vanguard of Southeast Asia."

Mr Lee said "We would follow the world. A few respectable steps behind." - CNA/yy/de