Singapore sees no immediate profit from Suzhou project

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The Suzhou saga

SINGAPORE does not expect immediate profits from a flagship industrial park near Shanghai which has faced stiff competition from a local Chinese venture, Deputy Prime Minister Lee Hsien Loong said Tuesday.

Lee told parliament that Singapore should have considered the competition posed by Suzhou New District, an industrial park backed by the Chinese authorities, before launching its Suzhou Industrial Park (SIP).

"It is still not guaranteed that the project will become profitable but they have to make the best of it in the circumstances," he said, adding "it is too early too speculate."

He expected the SIP "to turn around and become profitable in the medium term, provided the external investment climate does not deteriorate."

The SIP, launched in February 1994, was designed to be an efficient and ultra-modern Singapore-style industrial township in Suzhou hosting multinational firms setting up in China.

But competition from the Suzhou New District for international investment came to a head when the Chinese and Singaporean sides renegotiated an agreement in June.

Under the pact, the Singapore consortium agreed to scale down its shareholding to 35 percent in January 2001 from 65 percent now.

"In retrospect ... I would say obviously we did not pay enough attention to it," he said, referring to the SIP's Chinese-backed rival.

He rejected a claim by a Singapore opposition leader that billions of dollars in taxpayers' money was wasted in the SIP project, saying investment in it from statutory boards and government-linked companies so far was US$147 million.

Lee said the government's investment arm, Temasek Holdings, would guarantee an additional loan of $65 million out of $100 million still required to meet operational needs.

"Beyond these commitments, the Singapore consortium does not expect to inject further amounts into the SIP project," he said.

The new memorandum of understanding between Singaporean and Chinese officials signed in late June established the SIP as having priority over the Suzhou New District.

"These measures will put the SIP project on a workable track and improve the joint-venture company's financial viability," Lee said.

At the end of May, 133 projects worth $3.76 billion had been committed to the SIP, which it is estimated will cost $20 billion to $30 billion over 20 years.