SPEECH BY MINISTER OF STATE FOR TRADE AND INDUSTRY MR LEE YI SHYAN AT THE ECONOMIC COOPERATION FORUM ON SUZHOU AND SUZHOUINDUSTRIAL PARK HELD ON 13 JULY 2007 AT 4.00 PM IN SINGAPORE

Prof Wang Rong, Party Secretary of the CPC Suzhou Committee

HE Zhang Xiaokang, Ambassador, Embassy of the People’s Republic of China

Mr Yan Li, Mayor of Suzhou

Mr Wang Jin Hua, Deputy Party Secretary of Suzhou

Distinguished Guests, Ladies and Gentlemen:

Good afternoon.

Introduction

It gives me great pleasure to be here at the Economic Cooperation Forum on Suzhou and Suzhou Industrial Park. The strong turnout today reflects our companies’ keen interest in Suzhou and SIP.

SIP is the centerpiece of a successful collaboration between Singapore and China. It is unique because it is a joint project between the two countries. It is our project.

Today, it is one of China’s most admired industrial parks, growing from strength to strength and at a remarkable pace. To guide SIP’s development in the second 10years, the 7th Joint Steering Council in 2004 endorsed an ambitious set of 10-year performance targets, which had been superceded in a short span of just three years. It is notable that SIP has also done well at the national level. As highlighted by Commerce Minister Bo Xilai at this year’s 9th JSC, although SIP occupied only 0.003% of China’s land area, it had contributed 3% to China’s total hi-tech industrial value. Its R&D spending of 2.87% of local GDP had also far exceeded the national average of 1.4%.In terms of energy consumption, SIP is also more efficient than the country as a whole, using only 0.43 tons of standard coal for every $10,000 of GDP, well below the national average of 1.22 tons. This shows SIP is not only one of the most technology-intensive and best integrated parks in China, it is also one of the most environmentally friendly, people-centered residential township developed in a sustainable manner.

At this year’s JSC, both sides have revised the 10-year targets to further steer SIP towards a hi-tech and high value-added economy. It is envisaged that by 2014, SIP’s service sector’s value-add to the local economy would reach 40%, R&D spending would constitute 5% of the local GDP and 75% of total industrial value would be created by hi-tech industries. These are important targets in the right direction.

Investment Opportunities in SIP

Given the accomplishments of SIP, I am not surprised to hear that many Singapore investors in SIP have found success. Until end of 2006, there were 304 Singapore projects which had invested a total of US$1.97 billion in the park. With an average growth rate of 23% over the past three years, SIP’s GDP is poised to grow even more rapidly in the next few years, along with the robust expansion of Jiangsu and the Yangtze River Delta region. But still, there is scope for our companies to play an even bigger role.

As SIP sets out to achieve its new 10-year goals, I see opportunities for Singapore to participate in at least three sectors:

BPO

The first sector is BPO. China is an increasingly popular destination for BPO operations, due to its large pool of labor resources, cost efficiencies and sound infrastructure. In an effort to promote the development of service outsourcing, China has embarked on a strategic project (“千百十”工程) to establish ten BPO hubs, attract 100 MNCs and cultivate 1,000 BPO companies. Since then, SIP has been designated as a BPO demonstration base. It is currently the first and only location amongst the BPO hubs and demonstration bases to secure preferential tax rates for BPO activities. Today, the first batch of BPO companies involved in software development, product technology and ICT in SIP has already been certified to enjoy the preferential policies.

These initiatives make SIP a very attractive platform for our companies to ride the BPO wave in China. I am heartened to note that Ascendas and NCS will each be signing a Memorandum of Understanding on BPO cooperation with SIPAC later today. This will set the stage for closer business collaboration between Singapore and SIP in future.

Logistics

The second sector is logistics. As a manufacturing stronghold in China, SIP requires reliable and experienced logistics players to support the demands of its manufacturers. Our third party logistics companies are well-equipped to meet those needs, having developed the requisite competencies through years of experience in serving MNCs.

An example of a Singapore logistics company that has done well in China is YCH. In 1999, YCH entered into a successful partnership with Motorola in Tianjin to help the latter improve its inventory management. Since then, the collaboration has been elevated to a higher plane with the opening of the Tianjin YCH DistriPark, which houses the Asia Materials Hub and manages more than 300 suppliers to support Motorola’s manufacturing plants world-wide.

Besides third party logistics services, our companies can also explore opportunities in areas such as air cargo transportation. The Chinese Government’s recent approval to enhance the air-land intermodal transportation operations of SIP’s integrated bonded zone has created good scope for cooperation between our companies and SIP.

Water and Environmental Services

The third sector is water and environmental services. The rapid pace of industrialization and urbanization in China has brought increasing environmental challenges to the country and its people. As you may be aware, in its 11th Five-Year Plan, the Chinese State Council has adopted a number of restrictive KPIs for provinces and cities to implement. These include reducing energy consumption per unit of GDP by 20% by 2010 based on 2005 levels and cutting emission of key water and air pollutants by 10% over the same period. I understand that all cities are also expected to look into the construction of central sewage disposal facilities to increase the sewage disposal rate and capacity.

Given China’s pressing needs and ambitious goals in environmental protection, our own developmental experience and Singapore companies’ expertise in environmental engineering will come in useful. I am encouraged to note that some of our water and environmental companies such SembCorp, Keppel and Hyflux are already actively pursuing projects in China. But I think there are still untapped areas in Suzhou and SIP that Singapore companies can look into. For instance, we can look at a more integrated fashion on helping Chinese authorities to achieve their 节能降排targets, by providing the necessary hardware and software solutions.

Conclusion

At the 9th JSC held three days ago, leaders of both sides have re-iterated their commitment to make SIP a further success in the years ahead. DPM Wong Kan Seng, Co-Chairman of JSC, said that: “As the highest priority project between our two countries, a successful SIP is the pride of both Singapore and China. The Singapore Government will continue to work closely with all levels of the Chinese Government to bring SIP to greater heights”. As such, Singapore companies can feel assured and confident in making new investments into SIP. We are confident that SIP in the second 10 years will achieve even greater heights.

Lastly, I would like to take this chance to express my appreciation to the Jiangsu leaders, Suzhou leaders, the consortium partners, CSSD staff and all who have contributed towards SIP all these years for your strong and continued support. I wish you all the best in your future endeavor.

Thank you.