SINGAPORE VIEW OF TRADE AND INVESTMENT WITH IRAN

S E C R E T SECTION 01 OF 02 SINGAPORE 001217

SIPDIS

DEPARTMENT FOR EAP/MTS M. COPPOLA

E.O. 12958: DECL: 12/18/2019
TAGS: ETRD EINV ENRG ECON PREL KNNP IR SN
SUBJECT: SINGAPORE VIEW OF TRADE AND INVESTMENT WITH IRAN

REF: A. 08 SINGAPORE 1315

B. SINGAPORE 1159

C. KUALA LUMPUR 867

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Classified By: E/P Counselor Joel Ehrendreich for reasons 1.4 (b)/(d)


1. (S) SUMMARY: Singapore maintains positive economic
relations with Iran and would be open to expanded economic
ties, though Singapore is mindful of proliferation issues and
international sanctions, Government of Singapore (GOS)
officials told Emboffs. Singapore has engaged Iran in the
context of a larger outreach effort to the Middle East.
Bilateral trade between Singapore and Iran is estimated
between US$2-3 billion, but most of the trade is in petroleum
or petroleum products and there is a significant trade
imbalance, with few Singaporean exports bound for Iran.
Iranian businesses are struggling to survive under the
isolation imposed by sanctions and have approached the GOS
and Singaporean firms for investment and financing for
projects. Political uncertainty in Iran, sanctions and lack
of trade finance have impeded expanded trade and investment
ties. Tensions exist between Iranian business and the
Iranian government, but the Iranian business community
appears to have little influence on the political situation,
GOS officials assessed. Singapore exports water and
environmental technologies to countries in the Middle East
and North Africa, but Singapore adds little value to Iran as
a bridge to Asia, because China is already so deeply involved
in Iran. Iran has broader ties to Malaysia than it has with
Singapore. End Summary.

Singapore's Middle East Engagement
--------------


2. (C) In 2004 Singapore launched a new policy of greater
engagement with the Middle East, including Iran, primarily
for economic reasons, Ariel Tan, MFA Deputy Director of the
Middle East, North Africa and Central Asia Directorate, told
Econoff. The policy shift was prompted by a realization that
Singapore needed to better understand the Middle East, but
Tan noted that Singapore was also drawn by the region's oil
wealth. Singapore is still learning its way around the
region. However, Iran, other Gulf states, and North African
countries recognize "the Singapore brand," particularly as it
refers to Singapore's technological achievements,
"e-government" (except Iran),and as a potential investment
partner, Tan added. Singapore's expertise in oil refining
and water technology is a natural inroad into the region,
KWANG Koon Way, Deputy Director of the Ministry of Trade and
Industry's (MTI) Middle East and North Africa Division told
Econoffs. Singapore firm Hyflux, which designs and builds
desalination plants, won the contract to build the world's
largest desalination plant in Algeria, reportedly beating
other bidders from the UK, Japan and United States.
Singapore signed a Free Trade Agreement with the Gulf
Cooperation Council in December 2008 (Ref A).

Current Bilateral Trade with Iran
--------------


3. (C) Bilateral trade between Singapore and Iran amounts to
between US$2-3 billion, but there is a substantial trade
imbalance. Imports to Singapore, mostly refined petroleum
products, crude, and hydrocarbons, but also including dried
fruits and nuts, are about twice the value of Singapore's
exports to Iran, which include refined petroleum products,
pumps, heating equipment, iron pipes and aluminum. The GOS
does not actively encourage companies to invest in Iran,
leaving firms to make their own decisions about foreign
business opportunities, MFA's Tan said. However, in October
Singapore's non-resident ambassador to Iran, ONG Keng Yong,
joined an 18-member business delegation to Iran that included
representatives from the oil and gas, IT, engineering and
construction sectors. Ambassador Ong decided to join the
delegation once the trip was planned, but MFA did not
initiate the visit, Tan stated.

Exploring Economic Opportunities in Iran
--------------


4. (C) MTI officials described the October business mission
to Iran as exploratory, noting that it was the first such

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trip to Iran since 2004. Singapore businesses joined the
delegation to better understand the Iranian market and
because they did not feel comfortable traveling to Iran
outside of an organized group, Cody Lee, Director of the
Middle East and Africa division of the Singapore Business
Federation (SBF) told Econoffs. Singaporean companies see
export opportunities in urban solutions, environmental
solutions, and consumer goods due to Iran's large population.
Lee and Kwang also said that Iran has been seeking new rice
imports because they had an issue with the quality of rice
coming in from one of Iran's rice supplier countries.
However, the lack of trade financing has hampered growth in
trade, Lee said. Local businesses have complained to SBF
because banks in Singapore will not extend lines of credit to
Singapore firms seeking to do business with Iran. There are
no branches of Iranian banks in Singapore (Ref B).


5. (S) Iranian businesses seek inbound investment,
especially in infrastructure projects, and offer incentives
such as land, but they have limited money to implement
projects, Lee stated. Singaporean businesses are
apprehensive about investing in Iran because of sanctions,
political uncertainty, and the lack of transparency in the
market, Lee said. MFA's Tan indicated that Iran's ambassador
to Singapore has reached out to the GOS to encourage more
investment in Iran. MFA has conveyed to Iran its concerns
about proliferation issues and cooperation with the
International Atomic Energy Agency, Tan said.

Iran's Struggling Businesses -- Incentive for Change?
-------------- --------------


6. (S) MTI and SBF officials said that they have observed
tension between the Iranian business community and the
Iranian government. Iranian businesses are struggling to
survive and eager to have greater trade and investment ties
outside of Iran, but MFA and MTI officials could not judge
whether business people have any political influence to
encourage change. MFA and MTI officials noted that the
Iranian government and business community are intertwined.
Efforts are underway in Iran to privatize certain sectors and
companies, but the market is not transparent and it is likely
that money moves from "private" companies to the government,
Lee surmised. In Tan's view, Iran's nuclear ambitions have
been motivated by regime preservation and there is little
incentive for the Iranian leadership to change its behaviors
for more outside investment. Iran does not have to look
beyond China for infrastructure investment and financing, Tan
said. MTI officials agreed that China is deeply involved in
Iran's economy, so Singapore likely adds little value as an
English-speaking bridge to Asia, the role Singapore plays for
several Western countries and companies operating in Asia.


GOS Observations about Malaysia-Iran Trade
--------------


7. (S) Singapore's total bilateral trade with Iran is
greater than Malaysia's trade with Iran, which is
approximately $1.2 billion (Ref C). However, MFA and MTI
officials asserted that Malaysia has other, broader ties to
Iran. MFA's Tan estimated that about 50,000 Iranians live in
Malaysia, whereas MFA and MTI said they knew of very few
Iranians living in Singapore. Malaysia allowed an Iranian
bank to set up offshore, Tan added, predicting that Malaysia
would be in a better position than Singapore to take
advantage of opportunities if sanctions against Iran eased.

SHIELDS

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