VIETNAM'S PLACE IN THE SUN: SINGAPORE'S VIEW

UNCLAS SECTION 01 OF 02 SINGAPORE 003829

SIPDIS

SENSITIVE

SIPDIS

E.O. 12958: N/A
TAGS: ECON PGOV PREL ETRD VM SN
SUBJECT: VIETNAM'S PLACE IN THE SUN: SINGAPORE'S VIEW

REF: SINGAPORE 03224


1. (SBU) SUMMARY: Singapore is actively promoting closer
economic and diplomatic ties with Vietnam as an up and coming
regional leader worth cultivating. Singapore is already
Vietnam's largest source of foreign direct investment, and
bilateral trade has grown at a 20-percent annual rate over
the last six years. Senior GOS officials visit Vietnam
regularly and are hailing Vietnam as Southeast Asia's next
big success story in private conversations and public
speeches. Some observers believe that Singapore sees Vietnam
as a potential counterweight within ASEAN to neighboring
Malaysia and Indonesia, with which Singapore's relations are
sometimes testy. The pace of high-profile GOS visits, the
bullish comments of senior officials, and the tone of the
local press coverage suggest that Vietnam figures in
Singapore's long-term strategic plans as a future major
regional player. END SUMMARY.

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Bilateral Ties Growing
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2. (U) As one of Asia's best performing economies, Vietnam is
increasingly visible on Singapore's economic and political
radar, and the Government of Singapore (GOS) has stepped up
efforts to deepen bilateral ties. Singapore is already a
major economic partner for Vietnam. It is Vietnam's largest
source of foreign direct investment and its fourth largest
export market. Government-Linked Corporations (GLCs)
investing in large-scale projects led Singapore's investments
in Vietnam. Among them, the Vietnam-Singapore Industrial
Park (VSIP) has attracted US$1.5 billion and currently
provides 40,000 jobs in the Ho Chi Minh City area. A second
Vietnam-Singapore Industrial Park II (VSIP II) is currently
under construction in Binh Duong Province. Cumulative
Singapore FDI in Vietnam stands at US$7.4 billion (according
to GOS figures provided by Vietnam's Ministry of Planning and
Investment),much of which is focused in the real estate,
food and beverage, and transport sectors.


3. (U) Singapore's efforts have been paying off. Total
bilateral trade with Vietnam grew at rates averaging 20
percent per year between 2000-2005, and in 2005 reached
US$6.7 billion. Vietnam exports primarily crude oil,
seafood, computers and components, machinery, equipment and
spare parts to Singapore. Singapore's exports include
plastic goods, computer and office equipment, fertilizers,
machinery, equipment and spare parts. Singapore has enjoyed
a consistent trade surplus, which totaled US$2.6 billion in

2005.


4. (SBU) Singapore has actively cultivated closer ties with
Vietnam. Since 2005, numerous high-level officials have
visited Vietnam, including Prime Minister Lee Hsien Loong in
September (bilateral) and November (to attend APEC). In
December 2005, Singapore and Vietnam signed the Framework
Agreement on Singapore-Vietnam Connectivity under which the
two governments pledged to encourage cooperation in trade and
services, education, finance, transport, investments and
information technology. MFA Deputy Director for Vietnam
Adrian Tan told us such visits and Singapore's GLC-led
investments reflect the deepening GOS-Vietnam bilateral
relationship.

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Building Up a New Regional Player?
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5. (SBU) Recognizing the competitive challenges China poses
for Southeast Asia, the GOS has long sought to hasten ASEAN
regional integration. In October, MFA Second Permanent
Secretary Bilahari Kausikan reiterated to a visiting U.S.

SIPDIS
official that ASEAN needed to "integrate more deeply" to be
effective as a counterweight to China (Ref A). Some
observers in Singapore believe that Vietnam's vibrant
economy, stable political system, territorial size and past
military successes make it a natural future leader within the
region and ASEAN.


6. (SBU) Singapore officials have been consistently bullish
in their public and private comments about Vietnam in recent
months, suggesting the GOS may be thinking of a closer
partnership with Vietnam within ASEAN. Minister for Trade
and Industry Lim Hng Kiang has called Singapore-Vietnam
relations a "winning connection." During his visit to
Vietnam in September, Prime Minister Lee Hsien Loong's speech
highlighted the many shared interests and perspectives of the
two countries, including on the need for ASEAN integration,
and suggested that Singapore and Vietnam should "pool our
resources and bring together the ASEAN member states as a

SINGAPORE 00003829 002 OF 002


strong and robust economic community." Singapore's
government-controlled media have given Vietnam extensive and
glowing coverage of late. The largest newspaper in
Singapore, the Straits Times, touted Vietnam's success as the
host of APEC in November with the headline "Vietnam the New
ASEAN Star."


7. (SBU) Vietnam experts in Singapore think-tanks offered
different views on Singapore's objectives in developing a
more robust relationship with Vietnam. Ng Chia Sue from the
Institute of Defense Securities Studies told us that
Singapore sought closer ties with Vietnam as a way to
counterbalance Malaysia and Indonesia, two major players in
ASEAN with periodically testy relations with Singapore.
Vietnam's potential as a political and soon-to-be economic
heavyweight in the region makes it an attractive partner for
Singapore. Ng suggested that sustained GLC investment in
Vietnam for a number of years would give Singapore leverage
to build such a partnership.


8. (SBU) However, Dr. David Koh, a prominent Vietnam-watcher
at the Institute of East Asian Security Studies, argued that
political motivations were not the primary factors in
Singapore's investments in Vietnam. They were based on sound
business calculations. The bilateral relationship between
the two countries was rather shallow, argued Koh, lacking
depth on the social, cultural, and non-GLC-led business
sides. Furthermore, Koh thought the Government of Vietnam
(GVN) continued to harbor suspicions of Singapore because of
its close ties to the United States.

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Comment
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9. (SBU) The attention Singapore officials and media are
lavishing on Vietnam indicates the GOS sees it as an
up-and-coming regional player. Singapore undoubtedly wants
to continue profiting from Vietnam's growth, but its heavy
GLC-led investment and diplomatic overtures suggest it also
wants to encourage Vietnam's emergence and perhaps cultivate
it over the long-term as a close partner within ASEAN. From
Singapore's perspective, it would be a natural partnership.
Vietnam appears to have overlapping trade and strategic
interests -- in managing China's reemergence, for example --
and would not bring to the table the historical religious and
ethnic baggage that so often vexes Singapore's relations
with its nearest neighbors. End Comment.
HERBOLD