These government-owned investment funds also have 'particular strengths', especially in the current climate of uncertainty: They use little leverage and take a long-term view, which enables them to ride out periods of short-term volatility, he said.

Mr Lee was speaking at the inauguration of the Investment Corporation of Dubai, the holding company for the Dubai government's assets.

Like Singapore, Dubai is small, with a populaton of 1.5 million. Oil and gas account for 6 per cent of its revenues now but these are expected to dry up within 20 years, hence the push by the Dubai rulers to diversify its revenue sources.

Said Mr Lee: 'There is a Chinese saying - Big fish eat small fish and small fish eat shrimp... Singapore and Dubai are shrimps.'

Small cities, he said, will always be vulnerable to global events, which today have a much bigger impact because of the highly interconnected globalised environment.

He stressed that world order depends on the ability of major powers to achieve stable relations among themselves and then influence the rest to accept their rules.

Read the full story in Monday's edition of The Straits Times.