TEMASEK CEO HO CHING SURVEYS THE REGION

C O N F I D E N T I A L SECTION 01 OF 03 SINGAPORE 000285

SIPDIS

SIPDIS

STATE FOR AMBASSADOR GROSS

E.O. 12958: DECL: 02/10/2007
TAGS: ECON ETRD ECPS EINV EFIN PREL SN
SUBJECT: TEMASEK CEO HO CHING SURVEYS THE REGION

REF: SINGAPORE 221

Classified By: Economical and Political Chief Ike Reed;
reasons 1.4 (b) and (d)


1. (C) Summary. Temasek Holdings CEO Ho Ching (also wife of
Prime Minister Lee Hsien Loong) told Ambassador David Gross
that she was pessimistic about ASEAN's future. Thailand's
interim government was obsessed with "everything Thaksin"
and, having come up short on evidence to implicate the former
Prime Minister, was now blaming Singapore. She asked the USG
to weigh in on Temasek's behalf. Ho Ching foresaw more
posturing and few new policies coming out of Indonesia as the
2009 election distracted the leadership and further
exacerbated tensions between President Yudhoyono and Vice
President Kalla. Malaysia was resource-rich, but the country
had lost its way amidst spats between former Prime Minister
Mahathir and his successor, Abdullah Badawi. She lauded
Philippines President Arroyo's economic team and policies,
but worried that restricting the president to serving only
one, six-year term created too much political uncertainty.
Vietnam's leaders did not want to fall behind China, but
their limited knowledge of how markets worked and xenophobic
tendencies worked against these ambitions. India enjoyed an
advantage over China because the majority of its companies
were privately owned and its political and business elite
spoke English. A stable China and India were of primary
importance to Singapore, Ho concluded. End summary.


2. (U) U.S. Coordinator for International Communications and
Information Policy Ambassador David Gross visited Singapore
February 4-6 at the invitation of the Infocomm Development
Authority (IDA) as part of IDA's Distinguished Infocomm
Speakers series. His speech, entitled "Global Trends and
Converging Expectations," was covered by Singapore-based
media. In addition to CEO Ho Ching, who heads Temasek
Holdings, the Singapore government's investment arm,
Ambassador Gross met with Minister for Information,
Communications, and the Arts Lee Boon Yang, ST Telemedia CEO
Lee Theng Kiat, StarHub Cable Vision CEO Mike Reynolds, and
members of the U.S. business community, including the
American Chamber of Commerce. He also met with academics
from Nanyang Technological University (NTU) and journalists
from Singapore Press Holdings, and was interviewed by the
Straits Times.

ASEAN's Hankering for a Mythical, Golden Age
--------------


3. (C) Ho Ching told Ambassador Gross that she was
pessimistic about ASEAN's future. Its members were hindered
by a lack of leadership, a dearth of knowledge about how a
market economy works, and a "hankering for a mythical, golden
age," she said; Singapore was the exception among ASEAN
nations. Resource-rich ASEAN countries (like Thailand and
Indonesia) should be booming as China and India demanded more
raw materials to fuel their rapidly expanding economies. She
pointed out that Thailand, for example, would barely manage
four or five percent growth instead of the seven percent
forecast a year ago.

Thailand
--------------


4. (C) The interim government was driving Thailand into the
ground, Ho Ching asserted. They were obsessed with
"everything Thaksin," including "petty matters" like his
interviews with CNN and the Asian Wall Street Journal.
(Note: Thaksin's mid-January visit to Singapore, during
which he gave interviews to major international media,
heightened strains in Singapore-Thai relations over Temasek's
controversial US$1.9 billion purchase from Thaksin's family
last year of Shin Corp, one of Thailand's largest media and
telecom conglomerates. See reftel. End note.) Ho Ching
said the interim government was determined to find something
to implicate Thaksin, but having failed to do so, they blamed
Singapore and accused it of holding assets in trust for
Thaksin; the Thais need to get over it -- he's gone, she
said. Thailand's military leaders failed to understand that
the world had changed. They should have learned something
after investors reacted negatively to amendments made to the
Foreign Business Act. Instead, the government had continued
with its anti-foreign tactics, most recently by "whacking"
the pharmaceutical companies, she claimed.

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5. (C) Thailand's stability was under siege, according to Ho
Ching; the ailing King enjoyed universal respect, but not the
Crown Prince. The country's fate would depend on the outcome
of the upcoming elections and how much the constitution was
amended. If the new constitution allowed for a
military-dominated government, then Thailand would become an
"island that steps back in time," Ho Ching warned.
Management of the economy would devolve into a power struggle
as competing interests vied for the loot.


6. (C) Ho Ching predicted that Thailand's problems with its
Muslim minority in the south would fester for at least the
next fifteen years, much like the situation in Mindanao in
the southern Philippines. However, the Muslim issue would
not factor significantly into current Bangkok politics. She
noted that some investors had begun hedging their bets by
building resorts in Vietnam to offset potential losses in
tourist revenues from popular Thai destinations like Phuket
should Muslim discontent spread north.


7. (C) Without making a direct reference to Temasek's
bungled investment in Shin Corp, Ho Ching told Ambassador
Gross that she might want to consult with him periodically
about the situation in Thailand. She emphasized that any
efforts by the USG to weigh in on Temasek's behalf would be
appreciated.

Indonesia
--------------


8. (C) Ho Ching foresaw more posturing and a dearth of new
policies coming out of the GOI due to ongoing tensions
between President Yudhoyono and Vice President Kalla in the
run up to the 2009 election. High commodity prices provided
a temporary windfall for Indonesia's economy, but the
government would need to reform its labor laws and secure
large investments in infrastructure if it were to finally get
the country on a sustainable growth path. Corruption would
continue to undermine this process, Ho Ching commented. The
CEO of ST Telemedia, which has a 42-percent stake in Indosat,
Indonesia's second-largest telecommunications company, had
told her that Indosat had saved an estimated S$100 million
(US$65 million) through more stringent procurement practices,
thus depriving GOI middlemen of their customary take, Ho
claimed. (Note: As in Thailand, Singapore has come under
fire in recent years from Indonesian labor unions and media
for its dominant stake in Indonesia's telecom sector acquired
by Temasek-owned companies SingTel and ST Telemedia. End
note.)

Malaysia
--------------


9. (C) Malaysia was resource-rich, but its leadership was at
a loss about the direction it wanted to take the economy, Ho
Ching asserted. Regardless of what one thought of Mahathir's
peculiar style, the former Prime Minister had a vision for
Malaysia. He had tried to pull Malaysia into the modern
world by focusing on investment in infrastructure and other
key areas. The current spat between Mahathir and his
successor, Prime Minister Abdullah Badawi, hurt Malaysia; you
can't run a country based solely on anti-Mahathir policies,
she concluded.

Philippines
--------------


10. (C) Ho Ching praised Philippines President Arroyo for
getting her economic policies right. Arroyo was smart and
had brought well-trained professionals into her cabinet.
These officials were generally "clean," lending credibility
to Arroyo's efforts to combat corruption more broadly.
However, such progress was overshadowed by the uncertainty of
who would lead the country after Arroyo's six-year term
ended, Ho Ching cautioned. She wondered whether Arroyo's
successor would be another person like former President
Estrada, which would condemn the Philippines to further
mismanagement. The Philippines needed to adopt either a
parliamentary system or a two four-year term system like that
of the United States, she suggested.

Vietnam
--------------

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11. (C) Ho Ching observed that Vietnam was moving forward,
albeit from a low base. Growth prospects were bright in
comparison to underperformers like Thailand, Indonesia, and
Malaysia. Vietnam's leaders did not want to be left behind
China, but their lack of understanding about how markets work
and a persistent xenophobic streak had resulted in some
missteps, she noted.

China and India
--------------


12. (SBU) Ho Ching told Ambassador Gross that, although
Temasek had not done much business in China's telecom sector,
it was active in facilitating information exchange and
training in an attempt to expose Chinese businesses and
government officials to international best practices.
Ambassador Gross noted that China was a huge market, but
still primarily inward looking and insular. Singapore could
set a good example for China in terms of greater
transparency, increased integration, and incentives to abide
by an accepted set of international rules, he said. Ho Ching
agreed, but said that China was hindered by an older
generation of leaders who had not been educated abroad; the
situation would improve over the next ten years as a larger
cadre of officials educated overseas moved up the ranks.


13. (SBU) Ho Ching expressed optimism about India. The
market liberalization process was taking root, and the debate
among political parties, including the communists, had
evolved into one that was less about whether to pursue
economic reform and more about the pace it should take.
Leaders in India and China understood the benefits of opening
up and engaging global markets much better than Singapore's
ASEAN's neighbors, Ho Ching claimed. India enjoyed an
advantage over China because the majority of companies were
privately owned and its political and business elite spoke
English. Admittedly, India had its share of inward-looking
state-owned enterprises, but their potential drag on the
economy was mitigated by private sector stars like Tata and
Reliance Industries. In contrast, China had previously
"chased out" most of its entrepreneurs to Hong Kong and
Taiwan, she said. Large Chinese SOEs were still learning
about outside markets, though she acknowledged they were
learning fast. A stable China and India were of primary
importance to Singapore and the region, Ho concluded.


14. (U) Ambassador Gross cleared this message.
HERBOLD