Singapore Government Press Release
Media Relations Division, Ministry of Information, Communications and the Arts,
MITA Building, 140 Hill Street, 2nd Storey, Singapore 179369
Tel: 6837-9666

Your Excellency, Vice-Premier Wu Yi

Your Excellency Li Lanqing

I am happy to be present to mark the 10th Anniversary of the China-Singapore Suzhou Industrial Park (SIP).

After a bad year in 2003 because of the war in Iraq and SARS, East Asia has rebounded with stronger growth rates. In Q1 of 2004 China led with 9.8%, the ASEAN-5 averaged 6.7% and the NIE-3 (Hong Kong, Taiwan and South Korea) 6.1%. Last year, China overtook the US to become the largest export market for virtually all countries in Asia, accounting for 18% of East Asia’s exports, ahead of 17% for the US. Indeed, even the turnaround in the Japanese and Korean economies has been attributed to strong growth in their exports to China.

Growing Chinese purchasing power is only a part of the explanation. Many Asian countries now supply components and raw materials to China. Last year, East Asian exports to China grew by 34%. China used these inputs to produce final goods for export to developed countries. Hence, China’s exports to OECD countries grew by 35%. At the same time, China (including Hong Kong) received the lion's share, 78%, of all FDI into the region.

China’s economic transformation was launched by Deng Xiaoping with his "open door" policy in the early 1980s when China created Special Economic Zones. These experiments to draw in foreign investments proved successful. Thousands of factories in Hong Kong re-located to the Pearl Delta area, attracted by low cost of land and labour. Town and village enterprises also flourished, supported by a better-off peasantry. The consumer goods industry boomed, and many became entrepreneurs.

Opening up a centrally planned, closed economy and creating a market economy is difficult as Russia experienced. It demands a series of difficult, fundamental changes to policies and institutions, and to the way people work and think.

During this tour Deng cited Singapore as a model for development. Following his endorsement over 400 Chinese officials visited Singapore that year to study how our economic development had progressed without degradation in social order.

But short study trips were not the best way to learn from the Singapore experience. We decided to share what experience we had in a small country. We proposed the SIP project to enable Chinese and Singapore officials to work together - on Chinese soil - and develop an integrated township with industrial, commercial and residential facilities that could attract foreign investors. It would be the vehicle for "software transfer" and a platform to build deeper understanding and friendship between the next generation leaders. We chose Suzhou because the Central Government in Beijing had planned to develop Shanghai as China’s main international centre and drive development up the Yangtze river valley. Also Suzhou had well-educated high quality workers who would be fast learners.

The SIP was a unique experiment. There had never been such a project before, nor one since. Work did not always progress smoothly. Despite speaking the same language and sharing common roots, the working styles and frames of reference of Singapore and Chinese officials and managers were different. The Central Government understood the importance of software and gave full support to the project. But the mindset of the local authorities then was hardware – to obtain immediate benefits and visible results. Competition between the SIP and the Suzhou New District complicated matters. These differences were finally resolved with the help of the Central Government. Meanwhile, we transferred majority ownership and management for SIP to the Suzhou side in January 2001 to bring about a better alignment of interests. But it was a valuable learning experience for all involved.

By four important criteria, the SIP project has been a success. Firstly, the software transfer has worked. Suzhou officials were quick learners and adapters. They developed an appreciation of the value of the software to attract and retain investments as they dealt with international investors. Software became the main differentiating factor of the SIP. And the experience of building and operating the SIP helped the officials to better understand the needs of MNCs and how to attract and bring in investments.

Thirdly, the SIP has kept the confidence of the MNCs who are its tenants, and attracted many more new MNC tenants. As at the end 2003 SIP has attracted over 1,300 projects, including those from Fortune 500 companies. By the end of last year, the SIP has attracted over US$15 billion of cumulative contractual investments. Its GDP also grew 45% per year, from about RMB1 billion in 1994 to over RMB 36 billion in 2003. I understand that SIP’s GDP in 2003 equalled that of the whole of Suzhou in 1992.

And fourthly, the commercial entity driving the development of SIP is becoming commercially successful. The China-Singapore SIP Development Company Ltd (CSSD) is doing well. By 2003, CSSD turned in enough profit to recover its cumulative losses from its start in 1994 and declared its first dividend of US$10 million last year. I understand CSSD plans to list next year.

More than 1,300 officials from Jiangsu (including Suzhou) have had software training in Singapore. The benefits of software can spread beyond Suzhou and Jiangsu. Suzhou officials reported that more than 250,000 officials from all over China have come to study SIP.

The learning has been a two-way affair. Through SIP, many Singapore businessmen and officials today have a much better appreciation of China, and its uniqueness and complexities.

Working and learning together, officials in China and Singapore have formed deep and lasting personal friendships. Through training sessions and day-to-day interactions and negotiating through difficult problems, the younger leaders have built trust and friendship.

Deng Xiaoping’s bold decision to drive China forward through economic liberalization provided the setting for SIP to be launched. Former President Jiang Zemin pushed it forward. SIP’s achievements are now for all to see. Singapore is happy to have contributed to SIP’s success.

Going forward, SIP has to continually improve its standards as competition, both from other parts of China and abroad, intensifies. SIP needs to be abreast of international practices, and continue to innovate to meet new challenges. SIP must go up the value-added ladder, and get into new and high-tech areas, expand services and R&D. Key to SIP’s success is attracting the talented to support the new growth sectors.

In the next 10 years, China and Singapore will face different sets of challenges.

Internally, China has to balance the emergence of a highly competitive society with the need to maintain social cohesion, balance the demands to rapidly industrialise and urbanise against the need to alleviate pressures on natural resources and the environment, balance disparities between fast growing coastal provinces against slow growth in inland provinces. The current leadership’s focus on co-ordinated developments shows that they are facing these challenges head on.

Each wave of reform takes China’s economy to a higher stage. China's regions are at different stages of development, each requiring different policies for growth. The more advanced cities such as Beijing, Shanghai and Suzhou will compete increasingly in high-tech and knowledge intensive industries, while the inner provinces offer cost advantages in labour, land and other factors of production.

China’s rapid economic growth will change the global economy. Other economies will adapt to this new engine for world economic growth. As China’s share of global trade increases, it will reorder the global trading system. In East Asia, China and the region’s economies are increasingly interdependent. China’s proposal for a Free Trade Agreement with ASEAN will make for a more prosperous and stable region.

Singapore's challenges are different. We have to continuously readjust our position to stay relevant against increasing competition from huge countries with huge talent pools, China and India, that draw away investments through lower costs and high quality manpower. We have to select niche areas where our laws and other systems offer competitive advantage until China and India catch up in these areas. Singapore companies must not be deterred by past difficulties to invest more in rapidly growing China and India.

Singapore is honoured to have played a small role in China’s growth and transformation.

Singapore can be a useful springboard for Chinese companies who are venturing abroad. We are setting up a China Centre in Singapore. And with new bilateral agreements we hope to further deepen economic cooperation.

Finally, let me thank past and current Chinese leaders at the Central, provincial and municipal level who have provided strong support for the SIP since its inception. I commend the many officials from China and Singapore for their hard work in the last 10 years.

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