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