trouble with Singapore's clone
The Economist January 3, 1998
FIVE years ago, the city-state of Singapore, a dot on the end of a not entirely friendly pensinsula, set out in search of a hinterland. This was in the heady days of the "China boom", when China's success-and much of East Asia's for that matter-seemed to be teaching the rest of the world a thing or two. In turn, Singapore's leaders, never short of self-regard, thought they had something to teach the Chinese about running society. The result was a $20 billion plan to create Singapore's graven image on some 70 square kilometres (27 square miles) outside Suzhou, an ancient merchant town to the west of Shanghai. On this field of dreams the Singaporeans would build a super-city for 600,000 contented people who would enjoy first-world infrastructure, clean government and low taxes.
From the beginning, Singapore's leaders said they would arrange things in the "Asian way"; this was not the table-thumping style of westerners, but a quiet, behind-the-scenes approach based on mutual trust and understanding. The prospect of part of unruly China being placed under Singaporean management seemed irresistible-until, that is, the region's financial troubles made it plain Asian values can work no greater magic than anyone else's. Rather, Singapore, like some other foreign investors in China, has got its fingers burnt by being over-ambitious.
After a visit to Suzhou in December, Singapore's elder statesman, Lee Kuan Yew, made an unprecedented attack on Chinese officialdom and problems at the Suzhou Industrial Park (SIP). Mr Lee's comments suggest his government's commitment to Suzhou may be in doubt. "This matter has to be clarified," he said, "because our credibility is at stake, and the credibility of the Chinese government as well in endorsing the SIP at a very high level."
Mr Lee's gripe is that the authorities are developing a rival economic zone, the Suzhou New District, to the west of the town. This is supposedly at the expense of the SIP, which is to the east. The result, he claims, is a contest for investments by multinationals, which has cost the SIP dear.
Mr Lee criticised local officials for persuading foreign investors to come to the New District, not the SIP . He also attacked the central government, for failing to spot "municipal shenanigans". And for good measure he threw in criticism of flip-flops in central-government policy, notably an imminent about-turn on tax exemptions for imported machinery. "In a period of less than one year," remonstrated Mr Lee, "you turn left, and then you turn right." Singapore, runs the undercurrent of Mr Lee's comments, did not prosper by doing things so inconsistently.
At first sight, a visitor to Suzhou might be tempted to believe Mr Lee's charge of municipal favouritism. The 90-minute drive from Shanghai is lined with billboards advertising the New District, with not a placard for Singapore's pet project in sight. The expressway sliproad for the industrial park is blocked, with no explanation. And the New District itself is chock-a-block with factories where the SIP is notable for its vast tracts of wasteland.
Closer inspection, however, reveals holes in Mr Lee's charges. The New District began fully three years before the SIP, as a way to move 130 or so industries out of Suzhou's city centre. It is hardly an upstart. Indeed, Singapore chose not to join forces with the New District, deeming it to be too small for the Lion City's ambitions. Moreover, the favouritism runs resoundingly the SIP's way. It has political support from the Chinese president down. It has freedoms, such as autonomy over planning and land use, which are unheard of elsewhere in China. And tax revenues that accrue to the park do not have to be handed up to the provincial and central authorities.
The New District, on the other hand, cannot rely upon political powers to help persuade multinationals to set up shop, and it has fewer tax advantages. So it must fend for itself. That "commercial" attitude, as Suzhou's new mayor, Chen Deming, puts it, makes its marketing more effective. The SIP, meanwhile, may be tempted to bask in a state of government grace. In this light, many of Mr Lee's charges of chicanery-he says, for instance, that the New District's website address looks damagingly like the SIP 's-appear petty.
Still, China's leadership has rushed to smooth Mr Lee's feathers. President Jiang Zemin says the SIP is China's most important example of bilateral economic co-operation. Officials promise that they will carry out "deep research" into Mr Lee's remarks.
Though multinationals are investing in the SIP, they are not coming fast enough. Foreign investment is slowing in China, as in other parts of East Asia. The Singaporean shareholders in the project hoped by now to be earning a return on their investments, but they are not, and may not for several years. In the meantime, it is not clear how much more the Chinese can offer the Singaporeans, beyond perhaps new tax concessions.
Nor is Suzhou the only place where Singaporean initiatives have stumbled. Ambitions at another government-sponsored zone in Wuxi (like Suzhou, in Jiangsu province) are likely to be scaled back. And a Singaporean company that contracted in 1995 to build the "Friendship" bridge across the Yangzi River at Chongqing, in Sichuan province, recently pulled out, citing too much red tape. It is all evidence that the infatuation between Singapore and China, based on a belief that they hold cultural and political values in common, cannot survive the grubby necessity to make money in what is still a difficult land.