Singapore faces uphill struggle in Suzhou

The time frame for completion of the project, signed in 1994 by Singapore’s senior minister Lee Kuan Yew and China’s Vice-Premier Li Lanqing, is between 15 and 20 years.

Within three years, District One has been filled, and infrastructure like roads, sewers, drains, water and gas pipes installed. It has attracted 105 projects, with fixed asset investments worth about $3.24 billion.

More than 50 companies are in full production while construction of many other factories is under way.

Big-name investors include Glaxo Wellcome of the United Kingdom,Hitachi of Japan and Black and Decker of the United States, which accounts for the biggest foreign investment. Development work has moved beyond District One into District Two.

But all is not well in the Park and ripples of discontent have begun to disturb the seemingly calm surface.

In a visit to China last year, Singapore’s Lee – the mastermind behind the project — voiced for the first time his unhappiness over the progress in the Beijing-endorsed park, highlighting concerns that a nearby industrial park was getting preferential treatment.

His frustrations led to a complaint to president Jiang Zemin that the Suzhou authorities were exploiting Singapore’s marketing efforts and pulling investors to their own park, the Suzhou New District (SND) run by the municipal government.

Officials at the CSSIP Development Co Ltd (CSSD) said despite Lee’s complaint and Jiang’s assurance of his commitment to the venture, price undercutting by the rival park continues.

"Whatever price we offer, they offerlower," Goh Toh Sim, the senior general manager of the CSSD in Suzhou, told Reuters.

A dispute over the land tenancy agreement is another problem.

"The industrial land tenure in Suzhou Industrial Park has been shortened from 70 to 50 years. As Singapore had assumed a period of 70 years in calculating the land price, this would have increased our costs when the tenure is adjusted," CDDS Chief executive officer Lim Neo Chian explained."We were told we will get 70 years lease. The contract was signed on that basis."

The group’s non-profitability was due to high land costs related to "the burden of providing public and social amenities in the park, he said.The group had hoped the park would have a population of 85,000 in five years compared to 500 now.

But due to different opinions on residential land prices, targets for residential developments could not now be met, Lim said.

"Hence, Suzhou Industrial Park was unable to attract the targeted number of people into the park and therefore (this) resultedin a lack of life and certain air of vibrancy.

"The commercial development has also been stymied for similar reasons."Singapore’s frustrations in Suzhou surprised many investors, though most said they had faced similar problems.

"I didn’t think the government would have the same problems I faced when I set up my firm in Shanghai a few years back. I mean, this is supposed to be a government-to-government agreement," said Singapore businessman Chen Wei Shiong.

"Guess it is a sober reminder that, though China has great potential, it is a tough place to do business."

According to investors with dealings in China, the problems faced by Singapore stems from a lack of a strict, transparent and effective legal framework and investment rules.

"It’s not that there are no laws. But laws here can be interpreted differently. A lot of times an agreement is not adhered to," said Ken Chan, another Singapore businessman.

Confusion can sometimes be exacerbated by rifts between Beijing and the provinces.

"When thecat’s away, the mouse plays. Like the saying goes, `bian chang mo ji’ (the whip is not long enough)," Chen said, referring to Beijing’s distance from these southern-based economic zones, making it difficult for the capital to get what it wants.

Despite the uphill battle, Singapore and most investors say they will stay in China. "The potential offered by China is so great. You can either worry about it or learn to deal with the problems," said Goh of the CSSD, which is hoping to be listed by April 2003.