Do business in China? U guys should have learnt from how LKY got screwed in Suzhou.
In 1992, the idea of developing a modern industrial area with Singaporean experience was broached.[
citation needed] During his
tour of southern China that year, China's late paramount leader
Deng Xiaoping said: "Singapore enjoys good social order and is well managed. We should tap on their experience, and learn how to manage better than them".[
citation needed]
After rounds of discussions and site surveys, both governments decided to join hands in developing a modern industrial park in the east of
Suzhou.
[2][
page needed] Suzhou was chosen as the site due to its proximity to the financial hub of
Shanghai, as well as its educated and skilled
labor pool.
[3] The China–Singapore Suzhou Industrial Park (CS-SIP) was thus born on February 26, 1994, when Chinese Vice Premier
Li Lanqing and Singaporean
Senior Minister Lee Kuan Yewsigned the Agreement on the Joint Development of Suzhou Industrial Park in
Suzhou.
[2][
page needed]
[3]
Upon its inception, the Singaporean government held a 65% stake in the Suzhou Industrial Park, while the Chinese government held a 35% stake.
[3]
Initial troublesEdit
The Suzhou Industrial Park (SIP) charged high rents in its early days, in part to pay off the expensive new facilities it built for investors.
[4] This created a contradiction, according to one writer of the now-defunct
Far Eastern Economic Review, who suggested that "investors were looking to Suzhou for costs lower than Shanghai's, and the SIP was charging Shanghai-style prices".
[4]
The park ran into trouble when local officials began building
Suzhou New District (SND) industrial park, which many news outlets have seen as a direct competition to the SIP.
[4][5][6][7] As the Suzhou city government had only a minority 35 percent stake in the SIP, while they had a major stake in SND, the city government largely ignored SIP and concentrated on promoting the SND instead.[
citation needed]
Singaporean officials publicly complained in 1997 that Suzhou's city government was promoting the Suzhou New District more than the Suzhou Industrial Park, noting that more billboards in the city advertised the SND than the SIP.
[4]
Singaporean officials tried to get the Suzhou government to suspend advertising for the SND for five years, but Suzhou city officials refused.
[5] As part of their complaint, Lee Kuan Yew threatened that Singapore may "bow out" of the project.
[4] The Singaporean government would later reduce its stake to just 35% in 1999, in an effort to incentivize the local government to support the SIP.
[3][4][5] As part of their partial pullout, Singapore recalled all but three of its civil servants involved in the project,
[4] and sold
power and
water treatment plants to their Chinese partners.
[6] It also downsized its development commitments, announcing it would lead the development of 8 square kilometres (3.1 sq mi), as opposed to the 70 square kilometres (27 sq mi) initially planned.
[6] By 1999, the
New York Times reported that the project "is heavily in debt", and had been losing an average of 23.5 million
United States dollars annually, according to Singaporean partners.
[5] Singaporean investors had poured 147 million into the project by 1999.
[7] Singaporean officials reported that the cumulative projected losses from the project would total 90 million dollars by the end of 2000.
[5][7] However, the Chinese side of the project reported that it was indeed profitable, claiming that it was projected to make a 72 million dollar profit in 1999.
[5]
The New York Times also suggested that "the project was supposed to transfer Singapore's management skills to Chinese bureaucrats and to teach China how to build and run "business-friendly" commercial parks. But it ended up straining the close relations between Singapore and China and bringing home to Singaporeans the often unpredictable, and sometimes underhand, business culture of the Communist mainland".
[5]
Singapore's senior minister,
Lee Kuan Yewconceded that the project had not turned out as planned and had made him more cautious about investments in China, claiming that difficulties arose in signing agreements with the central government, but were then implemented by local officials who "have their own imperatives".
[5] Lee said that Chinese officials were "using us to get investors in, and when investors came in, they said: 'You come to my park, it's cheaper'".
[5]