SCENESETTER FOR EEB A/S SULLIVAN'S VISIT TO

UNCLAS SECTION 01 OF 02 SINGAPORE 001323

SIPDIS

SENSITIVE
SIPDIS

FROM AMBASSADOR HERBOLD FOR ASSISTANT SECRETARY SULLIVAN

E.O. 12958: N/A
TAGS: ECON ETRD EFIN PGOV PREL SN
SUBJECT: SCENESETTER FOR EEB A/S SULLIVAN'S VISIT TO
SINGAPORE

REF: A. SINGAPORE 1304


B. SINGAPORE 933

C. SINGAPORE 703

D. SINGAPORE 394

E. SINGAPORE 221

F. 06 SINGAPORE 3110


1. (SBU) Embassy Singapore looks forward to your July 22-23
visit. While we are not allies, the United States enjoys a
close relationship with Singapore, based on similar strategic
views and substantial trade and investment ties. Singapore
is a keen observer of regional developments, but for
political and demographic reasons does not play a leadership
role. Your meetings with key Singapore government officials
and regional financial analysts offers an excellent
opportunity to:

-- discuss economic developments in Southeast Asia and beyond;
-- support efforts to ensure that Singapore has the strongest
possible Anti-Money Laundering and Countering the Finance of
Terrorism (AML-CFT) regime; and
-- encourage Singapore to fulfill its outstanding FTA
obligations.

Partners, not Allies
--------------


2. (SBU) Our excellent relationship with Singapore is founded
on a convergence of views on key strategic issues and
substantial trade and investment ties. As a tiny, wealthy,
predominantly ethnic-Chinese state surrounded by much larger,
poorer, Malay/Muslim neighbors, Singapore has an acute sense
of vulnerability. It is also grappling with the economic and
strategic impact of China's and India's reemergence on the
world stage. Consequently, Singapore views a strong U.S.
diplomatic, economic, and military presence in the region as
essential to its own and the region's peace and prosperity.
No matter how broad or deep our engagement with Southeast
Asia, however, Singapore's leaders always encourage us to do
more. The GOS worries that perceptions of flagging U.S.
attention to the region could embolden terrorists and others
who might see opportunities, if they think we are not
watching. Singapore's leaders are equally concerned about
the "Arabization" of Southeast Asia's traditionally tolerant
approach to Islam and the potential spread of Middle
East-inspired radicalism here.


3. (SBU) Singapore is a valuable logistics hub for U.S.
forces, supports Coalition efforts in Iraq, and contributes
to a Provincial Reconstruction Team in Afghanistan. However,
Singapore worries about being seen in its Muslim-majority
neighborhood as "too close" to the United States. Thus,
Singapore does not wish to be a treaty ally. Our military
leases its facilities here; there are "places, not bases" on
the island.

Economic Success and the FTA
--------------


4. (SBU) With its commitment to free trade, attracting
Foreign Direct Investment (FDI),and sound economic
management, Singapore has enjoyed four decades of high
growth, giving it a per capita GDP of approximately USD
28,000. Our bilateral economic ties are flourishing. The
2004 U.S.-Singapore Free Trade Agreement (FTA) has been a
tremendous success; U.S. exports have grown by nearly 50
percent and in 2006 we enjoyed a USD 6.9 billion trade
surplus with Singapore. FTA implementation has proceeded
smoothly. However, during the third annual review of the FTA
in May, we noted a number of areas where Singapore needed to
make further progress, such as on telecommunications
(especially providing reasonable access to "last mile" leased
lines),intellectual property rights, environmental
cooperation, and market access. Some 1,500 U.S. companies
operate here and U.S. Foreign Direct Investment (FDI) in
Singapore exceeds USD 56 billion, second only to Japan in
Asia.

The Hub
--------------


5. (SBU) Singapore's role as the leading shipping and
transportation hub in the region has long been the foundation
of its economy. By attracting FDI, Singapore has also become
a major regional hub for financial services and a
manufacturing center for information technology products, and
pharmaceuticals, and even oil refining. Singapore has
enjoyed 6-8 percent growth per year since 2004, fueled by
booming exports to China, the United States, and India. To

SINGAPORE 00001323 002 OF 002


further diversify the economy, Singapore has aggressively
moved into private wealth management and biomedical research,
and the GOS has licensed two casinos, set to open in 2009.

AML-CFT
--------------


6. (SBU) The casinos could lead to an increase in criminal
activity and money laundering in Singapore. A major weakness
in Singapore's AML-CFT regime is the lack of reporting
requirements for the physical cross-border transportation of
currency. Singapore is working to implement the
recommendations of the Financial Action Task Force (FATF) and
is scheduled for a FATF review in September. We hope this
will push Singapore to further tighten its AML-CFT
regulations and adopt a declaration system for cash couriers.
In general, Singapore has been reluctant to share financial
data with our law enforcement agencies due to its stringent
bank secrecy laws and highly restrictive Official Secrets Act.

Domestic Scene
--------------


7. (SBU) The People's Action Party (PAP) has held power since
1959 and won another landslide victory at the polls in May

2006. While the PAP's hardball treatment of the opposition,
gerrymandering, and tight media controls contributed to the
magnitude of victory, there is no doubt the PAP enjoys broad
public support based on its record of delivering security,
prosperity, excellent services, and clean government.


8. (SBU) Minister Mentor Lee Kuan Yew (LKY),founding father
of modern Singapore, remains active and continues to
inculcate younger ministers with his hard-nosed approach to
promoting Singapore's interests, as he defines them. His
continued prominence, however, has made it difficult for his
son, Prime Minister Lee Hsien Loong, to put his own stamp on
the Singapore political system. Most observers agree that
fundamental change toward a more democratic system is
unlikely until the older generation of leaders passes from
the scene, and even then is likely to come slowly.

Regional Pacesetter, but Not a Leader
--------------


9. (SBU) With its strategic vision and efficient and
effective government, Singapore wants to come in first and be
seen as a leader: whether it is in its use of e-government to
deliver services, or surveys on the world's most globalized
city, to indices of economic (but not political) freedom.
This does not translate, however, into a capacity to be a
regional leader, particularly in the political arena.
Singapore's small size (in terms of territory and
population),wealth, demographics, and unique political
culture often lead to testy relations with its neighbors.
Even if it wanted to, Singapore is not well suited to play a
leadership role or carry water for the United States in
Southeast Asia. Rather, it is content to work within ASEAN's
slower, consensus-based style to deal with regional issues.
However, Singapore's leaders are keen observers of regional
developments and able to share useful insights with USG
counterparts.

Visit Embassy Singapore's Classified website:
http://www.state.sgov.gov/p/eap/singapore/ind ex.cfm
HERBOLD