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Cablegate: Dustr Bhatia and Gos Officials Discuss Domestic

VZCZCXRO5764
RR RUEHCHI RUEHFK RUEHHM RUEHKSO RUEHPB
DE RUEHGP #3786/01 3490103
ZNR UUUUU ZZH
R 150103Z DEC 06
FM AMEMBASSY SINGAPORE
TO RUEHC/SECSTATE WASHDC 2049
INFO RUEHZU/ASIAN PACIFIC ECONOMIC COOPERATION
RUEHIN/AIT TAIPEI 6383
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC

UNCLAS SECTION 01 OF 02 SINGAPORE 003786

SIPDIS

SENSITIVE
SIPDIS

USTR FOR DUSTR BHATIA

E.O. 12958: N/A
TAGS: ETRD ECN EINV USTR PGOV SN
SUBJECT: DUSTR BHATIA AND GOS OFFICIALS DISCUSS DOMESTIC
AND REGIONAL GROWTH

1. (SBU) Summary: Singapore's growth opportunities and
regional development figured prominently in discussions
between Deputy U.S. Trade Representative Karan Bhatia and GOS
officials. Representatives from the Ministry of Trade and
Industry (MTI) and the Economic Development Board (EDB)
offered positive assessments for the future of Vietnam and
Indonesia, while recognizing that 2007 economic growth in
Southeast Asia might lag behind 2006. MTI Permanent
Secretary Peter Ong expressed cautious optimism regarding the

SIPDIS
feasibility of an Asia-Pacific Free Trade Agreement (FTA-AP).
End Summary.

2. (SBU) Deputy U.S. Trade Representative (D/USTR) Karan
Bhatia met separately with Ministry of Trade and Industry
(MTI) Permanent Secretary Peter Ong and Economic Development
Board (EDB) Chairman Lim Siong Guan during his December 4
visit to Singapore. While in Singapore, the D/USTR also met
with the Straits Times (on background), the Singapore
Business Times (for an interview), the American Chamber of
Commerce, APL Shipping, and, over dinner, financial and
academic community representatives. This message covers the
D/USTR's meetings with GOS officials.

3. (SBU) MTI's Ong told the D/USTR that Singapore found
Treasury Secretary Paulson's Strategic Economic Dialogue a
laudable initiative and encouraged the USG to remain strongly
engaged with China on multiple levels. Ong agreed with the
D/USTR that Asian economies might slow in 2007 but thought
regional growth would still be driven ahead by China, whose
economic power and influence would continue to grow. Turning
briefly to cross-straits issues, Ong opined that the
mainland's bargaining position continued to strengthen due to
growing Taiwan investments in China, China's greater
willingness to take a long-term approach to the relationship,
and the recent scandals involving Chen Shui Bien.

4. (SBU) Ong concurred with the D/USTR that an FTA-AP was a
real possibility, though only in the longer-term. It would
not be practical or even necessary for all twenty-one
economies to sign at once, he continued. Rather, Ong
envisioned a gradual process. One way to move the plan
forward, Ong suggested, would be to form a high-level
advisory group to recommend benchmarks at an upcoming Senior
Officials Meeting. The D/USTR and Ong agreed that it would
be important to maintain momentum once the idea was formally
introduced.

5. (SBU) EDB Chairman Lim stated that Singapore was
optimistic about Indonesia's economic prospects and was
actively working with the GOI to promote foreign investment.
A GOI trade mission had recently visited the
Vietnam-Singapore Industrial Park (VSIP) outside of Ho Chi
Minh City. The group was surprised and disconcerted that the
VSIP had surpassed in terms of development the
Indonesia-Singapore Industrial Park on Batam Island, which
opened before the VSIP. Lim expressed confidence in
Vietnam's commitment to economic reform, calling it
"impressive," and said that Burma was now the only country in
Asia not embracing economic openness as a long-term growth
strategy.

6. (SBU) Lim said Singapore had two pieces of advice for
Indonesia to attract foreign companies, particularly those
from the United States and Japan: first, Indonesia should
decrease the rate of minimum wage growth; and second, it
should establish a dialogue with labor unions in order to
avoid strikes. Through such investor-friendly measures, Lim
believed Indonesia could attract 135,000 jobs and USD1
billion in investment to a series of Special Economic Zones
(SEZ) in Indonesia's Riau archipelago, just south of
Singapore. The EDB hoped that investors would one day view
Singapore and these SEZs as single entity, with Singapore
acting as not only the base for managers and their families,
but also as the port for transferring raw materials and
finished products into and out of Indonesia.

7. (SBU) Asked about Singapore's growth prospects, Lim said
the country could not afford to be "in the same competitive
space" as its neighbors. Singapore was a highly developed
economy that lost investments to Europe, not to other
countries in the region, he continued. The EDB planned to
bill Singapore as a "high trust economy" and to attract
IP-intensive business and R&D investment through its emphasis
on rule of law, transparency, and efficiency. Singapore was
also still working on "cluster development" to attract
certain high-end manufacturing segments, Lim said. The EDB

SINGAPORE 00003786 002 OF 002


hoped to develop a silicon wafer fabrication cluster similar
to the existing pharmaceutical and petrochemical clusters.

8. (SBU) Singapore viewed education as another growth area,
and hoped to become a "global schoolhouse," according to Lim.
The EDB saw educating foreign students both as a means to
generate income and as a way to augment the limited number of
Singaporean-born PhDs. Most foreign students did not stay
for more that three years after graduation, he said, as they
viewed Singapore as a stepping stone to the United States.
However, Singapore could take advantage of this talent as it
flowed through.

9. (SBU) Lim discussed Singapore's efforts to cope with
citizens left behind by its rapidly changing economy. He
pointed to Prime Minister Lee Hsien Loong's recent
announcement that the Workfare program, begun earlier this
year, would be a permanent part of Singapore's social
security system. Workfare, which provides supplemental funds
to low income adults, was an acknowledgement that structural
underemployment would be an issue for the foreseeable future,
Lim said.

10. (U) D/USTR Bhatia cleared this message.
HERBOLD

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