BURLESQUE AND BILLIONS OF DOLLARS LATER, SINGAPORE

C O N F I D E N T I A L SECTION 01 OF 03 SINGAPORE 000394

SIPDIS

SIPDIS

E.O. 12958: DECL: 02/12/2017
TAGS: ECON PGOV PREL ETRD SN
SUBJECT: BURLESQUE AND BILLIONS OF DOLLARS LATER, SINGAPORE
STILL SEEKING SPONTANEITY

REF: A. 05 SINGAPORE 2058

B. 05 SINGAPORE 2609


1. (SBU) Summary: The Government of Singapore (GOS) is
attempting to steer the economy to become more
knowledge-based and entrepreneurial to counter the
competitive challenges China, India and other lower-cost
exporters pose. Characteristically, the GOS is taking the
lead, putting schemes in place to encourage creativity and
entrepreneurship, particularly in "strategic" sectors. It
has even tinkered around the edges of its tight political
controls, mandating a relaxation in social mores in order to
give Singapore "buzz." But the dominance of
government-linked corporations in Singapore's economy, an
educational system that stifles independent thinking, and the
continued presence of the government in many aspects of
Singaporean life perpetuate "habits of constraint" that may
hinder the development of entrepreneurship in Singapore. The
recent failure of a French topless revue franchise, part of a
GOS-led effort to pump up Singapore's nightlife, has laid
bare the limits of such top-down efforts. End Summary.

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Creativity by Fiat
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2. (U) A strong record of economic success notwithstanding,
Singapore's leadership recognizes that further growth will
depend on finding economic advantages over the rapidly
growing and low-cost economies of China, India, and ASEAN
neighbors. As a developed nation, Singapore must also
compete with other developed economies. To continue
thriving, the GOS believes that Singapore must transform
itself from an efficient platform for manufacturing and
logistics into a global, knowledge-based and more
entrepreneurial economy. With a small population, no natural
resources, and a trade-heavy economy, the GOS is acutely
aware of the need for Singapore to develop a strong
entrepreneurial class that can adapt.


3. (SBU) Pursuing the objective with its usual vigor, the
government is pouring in resources. Prime Minister Lee Hsien
Loong chairs a Research, Innovation and Enterprise Council
(RIEC),established in 2005 to promote R&D and innovation in
"strategic" sectors of the economy. In 2006, the RIEC
announced it would provide $916 million (SGD1.4 billion) over
the next five years to fund entrepreneurs. Also in 2006, the
Ministry of Trade and Industry (MTI) unveiled its Science and
Technology 2010 Plan (STP2010) which commits $4.9 billion
(SGD7.5 billion) over the next five years to encourage
raising R&D spending to 3 percent of Singapore's GDP by 2010.


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The Challenge
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4. (SBU) GOS efforts to promote entrepreneurship continue to
encounter a risk-averse Singaporean mindset, government
domination of the economy, and discouragement of critical
thinking and inflexibility in the educational system. The
2007 Global Entrepreneurship Monitor Report (GEM) showed
that, among the surveyed OECD and developed economies,
Singapore was consistently below the mean for all indicators
of social and cultural attitudes toward entrepreneurship.
For example, only 57.8 percent of Singaporeans believed that
new business success was accorded high status in their
country, compared to an average of 66.2 percent among all the
countries in the survey, ranking Singapore 21st of 24.

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Government Itself a Cause
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5. (C) Entrepreneurs continue to face obstacles in a number
of sectors in the form of Government-Linked Corporations
(GLCs),which account for nearly 60 percent of the national
GDP. Temasek Holdings, the government's investment arm, is
by far the largest investor in Singapore, with an estimated
50-percent stake in Singapore's GLCs. GLCs often compete
against each other in key markets, making entry by an
independently-held company difficult. For example, SingTel
and Starhub, both Temasek Holdings companies, compete
directly in the wireless service market and will soon do the
same in the cable television market. The strong GOS role in
directing the economy likely has the unintended result of
"crowding out" natural economic development, according Dr.
Sha Reilly, Chief Knowledge Officer at the National Library
Board (NLB),which has a mandate to encourage creativity and
entrepreneurship among young Singaporeans. She believes

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Singaporeans look first to the government, rather than the
private sector, to be the innovation leader.


6. (C) Small and medium sized enterprises (SMEs) -- a
potential source of innovation and commercial nimbleness --
find it difficult to secure financing for their businesses
since financial institutions, accustomed to an abundance of
large corporate customers, are reluctant to lend to riskier
SMEs. The 2007 GEM report ranked Singapore 17 out of 21
countries for venture capital availability. The Singapore
Stock Exchange (SGX) is similarly inhospitable to SMEs, with
many Singaporean entrepreneurs opting to list in other
countries. SGX Executive Vice President Lawrence Wong told
us that the SGX targets SMEs with a capitalization of SG$500
million to SG$5 billion ($327 million - $3.27 billion). Wong
characterized the amount as "not a lot," but it does put SGX
listing out of the range of many SMEs. He says a GOS
proposal to develop an exchange catering to smaller firms was
"still under discussion."

7.(C) While the government has allocated various funds to
encourage SMEs, a number of business leaders told us that
funding is still inadequate. They suggested that even if
sufficient funding were available, it would still take at
least a generation before an entrepreneurial culture would
truly take root. Of the $4.9 billion STP2010 budget, less
then two percent has been allocated for SME financing.
Inderjit Singh, a Member of Parliament and an entrepreneur,
told us that the proliferation of entrepreneurial schemes for
SMEs was "government lip-service that fails to address the
critical need to divest GLCs and open markets."

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Political System Discourages Risk-Taking
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8. (SBU) The GOS's tight political control and the "habits of
constraint" it fosters have inhibited the development of an
entrepreneurial spirit and risk-taking culture, according to
Nominated Member of Parliament Kum Hong Siew and others. G.
Jahyakrishan, Assistant Director of International Enterprise
Singapore (IE),a government entity responsible for helping
Singaporean companies grow globally, believes that a
prevailing atmosphere of restraint "subtly" leads to less
risk-taking behavior by firms and individuals. Siew believes
the government's attempt to encourage economic risk-taking
while limiting political and social freedoms is unsustainable
because it discourages the kind of critical thinking required
for entrepreneurship.

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Education System Not Helping
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9. (C) Singapore boasts a highly competitive and
well-regarded primary and secondary education system, but the
number of Singaporeans completing a tertiary education is
relatively low. Only 23 percent of Singaporean students
entering primary school complete a degree at a local
four-year university. In other knowledge-economies such as
Japan's, around 50 percent of students complete a university
degree. However, according to Cheryl Chan, Assistant
Director of the Planning Division at the Ministry of
Education (MOE),the government does not plan to encourage
more students to get a higher education. The university
enrollment rate will continue to be maintained at 20-25
percent because the Singaporean labor market does not need
everyone to get a four-year degree, she asserted.


10. (SBU) Singapore's education system has been criticized
for being heavy on memorization and light on critical
thinking and creativity. Based on the British model, the
system is highly test-focused and separates students (a
process referred to as "streaming") at an early age between
high, middle, and low achievers. The GOS has slowly begun to
introduce greater flexibility into the system by allowing
"streaming" in subjects (rather than based on total average
scores) and has created new magnet schools focused on
mathematics, the arts, and sports. But there are only three
such schools, and the overall education system has changed
little.

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Some "Strategic" Sectors Suffer
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11. (SBU) Growth in the "strategic" media sector may be
hampered by limits the government sets on freedom of speech
and expression. Filmmakers such as Martyn See (reftels) or
productions that touch on sensitive issues often find their

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distribution and broadcasting rights disapproved by the Media
Development Board (MDA),a governmental agency responsible
for regulating and promoting media industries. Cheah Sin
Liang, Deputy Director of International Relations at MDA,
admitted to us that the GOS's tight control over
controversial political, religious, or social topics does
limit growth in the media sector, but argued that such
controls are necessary to prevent negative social
consequences.


12. (SBU) Singapore's approach to promoting R&D development
in the biomedical field, another government-identified
"strategic" sector, has also been criticized by foreign
education specialists as too focused on quick economic gains
rather than fostering the "holistic approach" necessary for
sustained innovation in science and technology. Dr. William
Broady, President of Johns Hopkins University, told the local
press in January that in order to be a leading center for
R&D, Singapore had to get away from "trying to measure
short-term economic returns. There has to be a mindset
change... in tolerating and being comfortable with failure
and ideas that don't seem to be going anywhere." (Note:
Johns Hopkins stopped development of a $53 million (SGD82
million) Biomedical Sciences research unit after its
Singapore Government partner, A*Star, accused Johns Hopkins
of not meeting performance benchmarks. End Note.)

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Casinos, Kumar and the Crazy Horse
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13. (SBU) The GOS appears to recognize the need to give
citizens freer rein in order to foster creativity and
entrepreneurship. Unwilling to loosen political controls, it
has focused so far on easing social restrictions. The
government made a highly controversial decision to allow
casinos, and has awarded contracts to open two integrated
resorts in 2009. Kumar, a popular transvestite nightclub
comedian whose material focuses on taboo subjects including
race, sex and the foibles of government personalities, has
been allowed to perform on television and in public venues.
Singaporeans returning from long stays overseas have told us
of being shocked at the mushrooming of racy billboard
advertising. MDA's Cheah pointed to the opening of the Crazy
Horse French Burlesque in December 2005 (which subsequently
closed in January 2007 due to poor attendance),and to the
"success" of the Singapore Biennale (an arts festival) as
further signs of greater social openness.

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Comment
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14. (C) Ever thinking strategically, Singapore's leadership
will keep pushing innovation in order to stay competitive in
a rapidly changing Asia. To its credit, the government
appears to recognize that its own penchant for control --
however enlightened its policy choices or soft its
authoritarian touch -- may be at odds with the kind of
free-wheeling atmosphere it needs to achieve its economic
objectives. Time will tell whether it can promote
creativity, critical-thinking, and innovation in society by
loosening up on social issues and tinkering with the
education system while keeping politics in quarantine. One
way or another, Singapore's flirtation with openness will
provide another interesting chapter in its unique history as
a social-engineering petri dish.

HERBOLD