Profits of doom for Singaporean traders - Brief Article

Business Asia, Oct 25, 1999

For Singaporean businessman Paul Yong, it's been eight hard years trying to turn China's potential into profits.

Take his plan for a Singapore-style food court near Shanghai's famous Yu Garden teahouse.

Even before Yong finished refitting the second floor, the building's landlord and partner were busy converting ground floor shops into a rival food mall.

"In less than a year, we went bankrupt," the former engineering lecturer said.

Yong is not alone among foreign investors struggling in China.

What's surprising is Singaporeans have fared as badly as they have, even with active support of a government eager to tap Asia's fastest-growing economy.

Singapore's linguistic and cultural links -- 77 per cent of the island's 3.2 million people are Chinese -- have also delivered disappointing dividends.

"I've seen more failures than successes," said Chey Chor Wai, a Singapore partner of PricewaterhouseCoopers LLP.

Singapore has bet more than US$13 billion on China.

Much of the money has flowed to a showcase investment park near the eastern Chinese city of Suzhou.

The industrial park, "a national priority for both governments", aimed to lure US$20 billion in investments over a 15- to 20-year period, glossy promotional brochures proclaimed.

Instead, the park has been a model of frustration for its Singapore managers.

Losses have averaged US$23 million a year since its opening in 1994, even as Singapore government-linked companies pumped in more than US$147 million, Singapore's Straits Times reported.

Even with backing from China's central government, Singapore found competition tilted in favour of a nearby investment zone run by the Suzhou city government.

PricewaterhouseCooper's Chey said Singapore misjudged the ability of local authorities to ignore orders from Beijing.

Local interference "can really hinder the progress companies have", Chey said.

Singaporean companies' travails go well beyond Suzhou, with earnings of many firms battered by their China plays.

Take Cerebos Pacific Ltd. The company, best known for its Brand's Essence of Chicken, posted its first loss in 15 years in the year ended September, hurt by a S$34 million (US$19.9 million) provision for unsold or returned stock in China.

Other Singapore companies, as with many foreign investors, have struggled to fend off domestic rivals quick to copy products and undercut prices.

For Singapore-listed Want Want Holdings Ltd, whose name connotes good fortune and prosperity in Chinese, local firms are mimicking its sweet and savoury rice crackers and selling them for a pittance, said vice-president Adams Lin.

While some Singapore companies, such as the PSA Corp Ltd, which runs the world's biggest container port, continue to invest in China, others are beginning to grow wary.

First-half investment inflows fell 10 per cent on year to US$1.3 billion.

Wang Shouqing, a researcher of China at the National University of Singapore, said the island's by-the-book approach is often incompatible with China's relationship-based business.

Erik Wang Wah Khiam, Singapore's Consul-General in Shanghai, said more bad projects may start to appear as companies end their investment phase.

"Now the cycle of full operations has come, so problems are emerging," Wang said.

For Yong, the former academic, there's a simple lesson to pass on to Singaporeans investing in China: "Know how to cheat others more than they cheat you."