Cablegate: Singapore Academics: Asean Going Through A

DE RUEHGP #1299/01 3500710
P 150710Z DEC 08




E.O. 12958: N/A


1. (SBU) Summary: ASEAN leaders have yet to hold substantive
discussions on the financial crisis, and ASEAN is in danger
of being marginalized due to its lack of concerted action in
a number of areas, academics at the Institute of Southeast
Asian Studies (ISEAS) told U.S. Ambassador for ASEAN Affairs
Scot Marciel and Ambassador Herbold on December 4. The
academics also warned that mainland Southeast Asian countries
are increasingly gravitating towards China, and that a robust
U.S. presence is needed to balance China's growing influence.
In a separate December 3 lunch hosted by Ambassador Herbold,
Ministry of Trade and Industry (MTI) ASEAN officials said
that while ASEAN integration is proceeding, there has been
backsliding on implementation of the ASEAN FTA in several
countries. MTI added that many ASEAN members feel that U.S.
engagement with ASEAN is not where it should be. In a
separate December 3 meeting, regional financial analysts were
generally downbeat over the near-term economic prospects for
the Southeast Asia region and saw continued declines in
exports and slow economic growth, if not outright
contraction, for some countries. In a meeting at AmCham,
members told Ambassador Marciel that companies in the region
have been hit hard by the financial crisis, and that a
scarcity of credit is the biggest cause for concern. AmCham
members suggested that if a major U.S. firm such as Citibank
were to collapse, there would be significant political
fallout throughout the region. AmCham members also noted
that expats appeared to be leaving Singapore in significant
numbers. End Summary.

ASEAN at a Crossroads

2. (SBU) ASEAN needs to get its act together, as the
organization is in danger of quickly becoming irrelevant, Dr.
Chin Kin Wah, Deputy Director of the Institute of Southeast
Asian Studies (ISEAS) told Ambassador for ASEAN Affairs Scot
Marciel and Ambassador Herbold in a December 4 roundtable
meeting with several ISEAS academics in Singapore. In the
past, ASEAN could be counted on to facilitate meetings
between Asia's leaders. However, during the current
financial crisis, the Plus Three component (China, South
Korea and Japan) of ASEAN Plus Three has met without ASEAN
and, except for a brief meeting on the margins of the Asia
Europe Meeting (ASEM) held in Beijing in October, ASEAN's
leadership has not yet held discussions addressing the
financial crisis, Chin lamented. Ambassador Marciel
acknowledged Professor Chin's concern, noting that ASEAN does
not have a reputation as an organization that gets things
done, and when governments want to get things done quickly,
they rarely look to ASEAN.

3. (SBU) Ambassador Marciel noted that the human rights
situation in Burma continues to deteriorate, and that the
Burmese regime's abuses clearly violate ASEAN's Charter. He
expressed dismay that not one of ASEAN's member countries has
publicly criticized the Burmese regime for its actions.
ISEAS Director Ambassador Kesavapany responded that ASEAN is
facing a critical period, with the worsening human rights
situation in Burma, Thailand seemingly falling apart, and
racial and religious tension simmering under the surface in
Malaysia. Ambassador Kesavapany expressed hope that the new
U.S. Administration, would act to open up new opportunities
for multilateral discussions and cooperation in the region.

The Pull of China and the Need for a U.S. Presence
--------------------------------------------- -----

4. (SBU) Ambassador Kesavapany said the mainland Southeast
Asia states, especially Burma, Laos and Cambodia, but even
Thailand, are increasingly gravitating towards China. Of the
mainland states, only Vietnam is ardently resisting Chinese
influence. Ambassador Kesavapany said that U.S. influence in
the region is needed to counter China and keep these mainland
states from "breaking away."

5. (SBU) Dr. Ian Storey observed that China has increased its
assertiveness in dealings with Southeast Asian countries,

SINGAPORE 00001299 002 OF 003

especially in regards to oil and gas concessions in the South
China Sea. He reiterated a view expressed by several of the
ISEAS professors that the United States appears to be pulling
back from the region. Ambassador Marciel responded that the
United States Government remains deeply engaged on multiple
fronts. For example, the United States gives 600 million USD
per year in assistance to Asia, with approximately 90 percent
slated for Southeast Asia. U.S. exports to Southeast Asia
are roughly equal to U.S. exports to China, Ambassador
Marciel noted. Ambassador Kesavapany expressed surprise at
the numbers and suggested ISEAS hold a U.S.-ASEAN workshop or
seminar to highlight the U.S. involvement in Southeast Asia.

Southern Thailand

6. (SBU) Dr. Storey told Ambassador Marciel that Thailand's
government is embroiled in its own political turmoil and is
therefore unable to pay proper attention to the ongoing
conflict in Southern Thailand. Dr. Storey said the
insurgency in Southern Thailand has many parallels with the
insurgency which previously took place in Algeria and said
the area has become increasingly vulnerable to external

Climate Change

7. (SBU) Michael Robinson noted that climate change issues,
such as drought and rising sea levels, are looming as a major
problem for Southeast Asia. Except for Indonesia, most
countries in the region continue to turn a blind eye to the
problem, he said.

ASEAN Economic Integration Improving, U.S. Falling Behind
--------------------------------------------- ------------

8. (SBU) Ms. Sulaimah Mahmood, Director of the ASEAN
Division at the Ministry of Trade and Industry, told
Ambassador Marciel in a December 3 meeting that ASEAN has
made progress toward its 2015 target of an integrated ASEAN
Economic Community. Member states have improved ASEAN's Free
Trade Agreement (FTA) chapter on trade in goods, incorporated
sanitary/phytosanitary and other elements, have improved the
investment agreement, and are working on another package of
services liberalization. She credited ASEAN's FTAs with
other dialogue partners like Japan, China and Korea with
helping to push integration within ASEAN. However, Sulaimah
admitted that there has been backtracking on implementation
of the ASEAN FTA agreement in some countries, on services in

9. (SBU) Ambassador Marciel said that there was frustration
on the U.S. side regarding the U.S.-ASEAN Trade and
Investment Framework Agreement due to a lack of
responsiveness from ASEAN to U.S. proposals. Sulaimah agreed
that engagement was not where it should be given the high
level of trade and investment between the United States and
ASEAN. She said that Burma has been a thorny issue in
U.S.-ASEAN relations, and noted that ASEAN is making progress
with the European Union, despite its similar concerns over
Burma. Sulaimah said that negotiations with other FTA
partners had helped build relationships for ASEAN, and
observed that the United States had much less frequent
meetings with ASEAN counterparts. She suggested that at
least one or two bilateral activities be held annually.
Sulaimah also recommended that business links be enhanced,
and suggested that U.S. multinationals pair up with ASEAN
small and medium-sized enterprises for discussions of
business issues with governments.

ASEAN Economies Hit Hard by Slowdown

10. (SBU) In a roundtable discussion at a lunch hosted by
Ambassador Herbold on December 3, regional financial analysts
based in Singapore were generally downbeat over the near term
economic prospects for the Southeast Asia region and saw

SINGAPORE 00001299 003 OF 003

continued declines in exports and slow economic growth, if
not outright contraction, for some countries. The analysts
debated the prospects for Indonesia. Currency issues in
Indonesia are fueling fears in the investment community that
a balance of payments crisis may be in the cards, though one
analyst predicted the country would muddle through the
current economic malaise without a serious fall out. The
analysts were negative on the prospects for reform in
Malaysia, citing the lack of a meritocracy and the
"bumiputra" policy that favors ethnic Malays as reasons for
continued slow investment. In Singapore, the analysts saw
the GOS's plans to move up the new budget to January and
introduce new fiscal stimulus measures as positive signs, but
noted the relative lack of influence the GOS could bring to
bear to stimulate Singapore's export-dependent economy.

AmCham: If Citigroup Goes Down, Watch Out

11. (SBU) The economic environment in Southeast Asia has
never been more uncertain, American Chamber of Commerce
members told Ambassador Marciel in a December 4 meeting.
While members noted that some businesses, such as those
involved in agriculture, are still thriving, many are facing
hard times. The biggest concern is the diminished
availability of credit, one member said. Many industries
have been hurt, and there is a growing realization that the
hope that China would pick up the slack had been misplaced.
The shipping industry has "fallen off a cliff here, " one
member said. While there has been no political fallout yet,
"if Citigroup or Goldman Sachs go down, it would have a major
political impact throughout the region," with many perhaps
blaming the United States for their economic woes, one member

12. (SBU) AmCham Chairman Steve Okun said anecdotal evidence
compiled so far indicates that expatriates are leaving
Singapore in significant numbers. For example, two years
ago, expats had difficulties placing their children in their
schools of choice; the Singapore American School (SAS) had a
long waitlist and implemented a U.S. passport-only policy for
potential enrollees. This policy has been rescinded and
there no longer appears to be a waitlist at SAS. (NOTE:
Container Security Initiative officials recently told a
visiting staffdel that containers headed to the United States
had dropped from 14,000 to 10,500, and that during screening,
it is apparent that many of the containers still going are
filled with American citizens' household goods. End Note.)

13. (SBU) AmCham members noted a 12-15 percent increase in
restructuring among Singapore-based companies over the last
six months. While consulting companies have been especially
hard-hit, outsourcing has gone up considerably for larger
firms, they said. AmCham members expect the situation to
worsen over the next six months.

14. (U) Ambassador Marciel cleared this cable.

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