Speeches
US-ASEAN Business Council Country Briefing
Ambassador Patricia L. Herbold
Washington, D.C. June 13, 2008
Thank you. I’m very pleased to be in Washington today, and want to extend my special thanks to the US-ASEAN Business Council for organizing this terrific program for my fellow Ambassadors and me.
I’d like to focus my remarks on where the United States Government thinks Singapore is heading – its continuing political stability, our strong bilateral cooperation, Singapore's future economic challenges, and the country's role as this year's Chair of the Association of Southeast Asian Nations.
I'd also like to say a few words about Singapore's sovereign wealth funds and the important role they play in global financial and investment circles.
Domestic Politics
As many of you know, Singapore's ruling political party, the People's Action Party (PAP) has been in power since 1959 and can be expected to stay in power for the foreseeable future.
The next general election will likely take place around 2011. Assuming he avoids any health problems, Prime Minister Lee Hsien Loong should stay in power for at least the next decade.
The PM has not made any moves to indicate who a potential successor might be among the younger members of the cabinet.
There was a minor cabinet reshuffle earlier this year, which largely tinkered at the margins of the cabinet and avoided any major changes.
Despite much foreshadowing in the local press, the PM failed to appoint a woman to the cabinet or any of the MPs first elected in 2006. It appears that the PAP will look to the next batch of MPs elected in 2011 for a potential PM candidate.
Bilateral Relationship
Turning to our bilateral relationship with Singapore, our security and economic cooperation remains excellent. U.S. military access to facilities in Singapore under the terms of our 2005 Strategic Framework Agreement helps us promote regional stability, maintain a healthy strategic balance in Asia, and support operations in Southeast Asia and elsewhere.
In the Gulf, Singapore continues to provide valuable logistical support through its rotating deployments of tanker aircraft and LSTs (landing ship tanks).
In Afghanistan, Singapore deployed medical and engineering teams to support a New Zealand-led Provincial Reconstruction Team, or PRT. This year, Singapore will renew and expand its PRT support.
Economic and Trade Relationship
When it comes to the economy, I think you're all well aware that Singapore's strong commitment to free trade, attracting foreign direct investment, and sound economic management has created one of the region's best growth stories.
The resource-poor and economically struggling Singapore that became independent in 1965, with a per capita GDP of less that $300, is a far cry from a country which today boasts a per capita GDP of more than $35,000.
Bilateral economic ties are flourishing, with Singapore now being our 15th largest trading partner.
The 2004 U.S.-Singapore Free Trade Agreement has been a tremendous success. U.S. exports to Singapore have increased more than 50 percent since the FTA came into force and our $7.9 billion trade in goods surplus in 2007 was our sixth largest.
Remarkably, U.S. exports to Singapore's 4.6 million people are almost one-half of our exports to China’s 1.3 billion people.
And Singapore remains attractive to U.S. foreign direct investment – the value of the stock of U.S. FDI -- $60.4 billion -- made Singapore the second largest recipient of U.S. FDI in Asia after Japan, and the fourteenth largest recipient worldwide.
To put this number in perspective, the stock of U.S. FDI in Singapore is more than double our FDI in China.
The United States also welcomes growing amounts of Singaporean investment to our shores.
Where Singapore Is Going
Singapore recognizes that it must continue to evolve to remain competitive in attracting business and foreign investment.
Although the economy has performed extremely well since 2004, Singapore's leadership has not forgotten the more volatile economic ride the country experienced between the 1997 Asian financial crisis and the SARS epidemic in 2003.
Singapore has been growing strongly, but there are now again some dark clouds on the horizon.
The economic slowdown experienced by the United States and some of Singapore's other key trading partners has begun to affect export numbers in certain sectors.
Inflation in April hit a new 26-year high at 7.5 percent, fueled by rising food costs, a 2 percent increase in the general services tax since last year, and a tight labor market where the unemployment rate is less than 2 percent.
In response, the government has been allowing the Singapore dollar gradually to appreciate against a benchmark basket of currencies in an attempt to reduce the cost of imports – but inflation remains a concern.
Despite these worrying trends, the Singapore government still expects the economy to grow between 4 and 6 percent in 2008.
This confidence in Singapore's fundamentals stems in part from the leadership's belief that the country has taken to heart the economic lessons of the last decade and has worked hard to further diversify the economy.
The government has opened new avenues for business investment that go beyond its traditional strengths in electronics, shipping, aviation, logistics, and petrochemicals.
For example, it has granted two licenses to build and operate multi-billion dollar Las Vegas-style casinos, set to begin operating in 2009 and 2010.
This decision to emphasize the "MICE industry" – i.e., Meetings, Incentives, Conventions, and Exhibitions – will take advantage of Singapore’s location and strong services sectors and boost its attractiveness to tourists.
Singapore is also seeking growth avenues that do not require cheap labor, but rather good intellectual property protection and a highly educated workforce.
Thus, it has been establishing itself as a center for high-tech science and medical research through such state-of-the-art facilities as Biopolis. Recognized as one of the world’s top five biotech hotspots, Singapore’s aggressive efforts to promote cutting-edge technologies are attracting internationally-renowned experts to Singapore to live and work.
Singapore has also achieved excellent results in expanding increasingly important sectors such as pharmaceuticals and financial services, and continues to encourage foreign universities to establish programs designed to position Singapore as a regional hub for education.
ASEAN and the Region
Regionally, Singapore is focused on its chairmanship this year of ASEAN, which runs through July.
This 40th anniversary year of ASEAN was supposed to be about the future – turning ASEAN into a more cohesive and effective organization, promoting regional integration, and giving ASEAN a greater role on the world stage.
To provide frameworks for achieving these goals, ASEAN leaders launched the ASEAN Charter and the ASEAN Economic Blueprint, which they signed at their summit meeting last November.
Unfortunately, events in Burma -- from September's bloody crackdown against the monks to the regime's slow response to Cyclone Nargis -- have to some extent upstaged ASEAN's important achievements.
Under Singapore's leadership, ASEAN broke new ground in issuing strong statements condemning the September crackdown and calling for political reform in Burma and in stepping in to help coordinate international relief efforts in the wake of the cyclone.
However, ASEAN's struggle to deal effectively with Burma also highlighted its continuing challenge in trying to integrate countries with such diverse cultures, levels of economic development, systems of government, and, increasingly, political values.
While Burma exposed some of the organization's weaknesses, the revulsion evident throughout the rest of the region at the regime's behavior equally highlighted just how far most of Southeast Asia has come.
Apart from Burma, Southeast Asia today is a region of enormous energy and hope, and the United States will be an important part of its future.
To reach that future, the U.S. Government is working hard to help Singapore and ASEAN to achieve the goals they have set out in the Charter and the Economic Blueprint.
Doing so is in our own interest, as a stronger and more cohesive ASEAN would help maintain strategic balance in the region and create better access for U.S. business to an ever-expanding ASEAN market.
We continue to work closely with ASEAN through the ASEAN-U.S. Enhanced Partnership, which includes initiatives related to political-security, social-cultural, and economic cooperation.
Another pillar of our economic engagement with Southeast Asia is the ASEAN-U.S. Trade and Investment Framework Arrangement, or TIFA, which aims to increase trade and investment between the United States and ASEAN.
P-4 Agreement
This year marked the beginning of another exciting initiative on both the United States' and Singapore's trade agendas.
In February, U.S. Trade Representative Susan Schwab announced that the United States would join negotiations on investment and financial services among Singapore, Chile, New Zealand and Brunei, known as the “P-4” group of countries.
These four countries have negotiated their own FTA, formally known as the Trans-Pacific Strategic Economic Partnership, which is based largely on the United States’ FTAs with Singapore and Chile.
While the P-4 Agreement entered into force in 2006, the investment and financial services chapters remain to be negotiated.
The United States and the P-4 held an initial round of talks this March in Santiago and are preparing for a second round hosted by New Zealand next week.
Now, this is where it gets really interesting.
In addition to pursuing investment and financial services negotiations with the P-4 countries, the United States has also begun a detailed exploratory process to determine whether it should participate in the full P-4.
This process will include consultations between the Administration and Congress and a wide array of stakeholders over the coming months.
Full participation could provide a pathway to broader Asia-Pacific regional economic integration with like-minded countries committed to high-standard free trade agreements.
The United States is already pursuing further regional economic integration in APEC through intensive exploration of the prospect of a Free Trade Area of the Asia- Pacific (FTAAP), as well as through bilateral FTAs such as the pending agreement with South Korea.
Sovereign Wealth Funds
Before closing, I also want to say a few words about Singapore's financial system and the role its sovereign wealth funds are playing in the global economy.
The Singapore financial system remains solid despite the global financial turmoil. The banks have limited exposure to the sub prime crisis and are very liquid and well-capitalized.
Singapore’s sovereign wealth funds – namely Temasek Holdings, the government's investment arm, and the Government Investment Corporation of Singapore, or GIC -- have provided capital to Western financial institutions to help them get back on their feet.
I understand that United States Treasury Assistant Secretary for International Affairs Clay Lowery will speak later to you about the U.S. Government’s overall efforts related to sovereign wealth funds.
I'll defer to Assistant Secretary Lowery on the details, but I would just say at this time that Singapore has been a constructive partner in an initiative led by the International Monetary Fund to develop best practices for sovereign wealth funds so that other funds can benefit from the lessons of its success.
Even Temasek, whose head once told me it was not a sovereign wealth fund, is now participating constructively in this undertaking by the IMF and like-minded member nations including the United States.
Thank you very much for your time and I look forward to taking your questions.