Singapore Entrepreneurs (TLE)

While executives from multinational companies in China are worried about the extent of the global financial crisis’ impact on China’s economy, Singaporean Professor Wee Chow Hou (Nanyang Business School’s head of the division of strategy, management and organisation) thinks that what is happening is actually good for Asia. “We knew the East was rising, it was just a matter of time. But the financial tsunami has accelerated this.”

Of course, he has reason to push this idea as he has just launched a book entitled “Business Journey To The East“, which he has co-written with Mr Fred Combe, founder and managing director of Natus, a Singapore-based corporate management consultancy.

Mr Combe added, “Nobody could have perceived the collapse, but everyone knew the East was funding the West’s deficits. The events that happened in the last few months have accentuated the problem. So the book has more relevance today than when we started two years ago.”

I actually disagree with this statement, that “nobody could have predicted …” because many people were pointing to the fact that the housing boom in the US was unsustainable, the rising price of oil was obviously not demand driven but manipulated, global stock markets were in an irrational bullish run such that companies which had no fundamental value were also rising with the tide in the way Enron did, except instead of one company, thousands of companies were doing an Enron- i.e., price inflation by traders, particularly technical analysts.

Is the predicted power shift to Asia wishful thinking or a potential truth that has arrived?

It’s hard to see the assertion as reality just yet, especially as company after company has been closing down in Guangzhou (and the Pearl River Delta region) for lack of work. Just last week, over 12,000 workers were let go in Suzhou’s normally prosperous manufacturing sector. Many in the high-tech industries such as semi-conductors have reported a drop of over 60% for Q4 and do not expect things to pick up until end of Q2 in 2009. In the meantime, they are selling products below cost just to maintain cash-flow. Needless to say, many warehouses are full up even as manufacturing plants are at a stand still.

Expatriates also Leaving
Many expats are also leaving twin powerhouses- Beijing and Shanghai, and not by choice. Businesses simply are unable to sustain the costs of keeping expats in China when the end of the crisis is not yet in sight. Everyone is waiting for the ball to stop dropping before investing any further.

Even Retail Piracy also Aching
China’s tourism industry has also experienced a sharp downturn, making stall owners of pirated goods more desperate for business than usual. Of course, the lower number of international tourists is not only due to the global financial crisis (and the strong RMB) but also because of the clampdown on issuance of visas due to the Beijing Olympics, the earthquake in Sichuan, and the freak blizzard conditions that fell on the country in the beginning of the year.

Much Too Much
What is happening right now is definitely much too much pessimism over the world’s economies. It’s possibly just a reaction to the “irrational exuberance” over the past 3 years, and especially over the spectacular rise (bubble) in world stock markets during the first 6 months of 2008. Newton’s 3rd Law at work if you will: “To every action there is an equal and opposite reaction.”

So will power really shift to Asia? I really don’t know but I highly doubt the prediction right now, especially considering the political instability (Thailand still hasn’t settled down), the terrorism (India, Sri Lanka, Indonesia, Philippines) that still plagues the region, the inability for countries to just meet to discuss the global crisis (because of Thailand’s airport becoming hostage to protestors), let alone come to a consensus.

Beautiful architecture, now heritage sites, line the Bund in Shanghai (the west bank of the Huang Pu).

During the Qing Dynasty (1644-1911), an entrepreneur by the name of Hu Xueyan in Hangzhou, China set up Hu Qing Yu Tang medical hall. It was unlike any other drugstore of its time because Hu Xueyan wanted to make sure that every product on its shelves was authentic and that people knew that. Even during that period (”nothing is new under the sun), fake drugs were aplenty and people were getting duped left and right into buying products that were either watered down or were altogether useless.

To show that his pharmaceuticals were the real thing, Hu Xueyan bought a 4,000 sqm property at the foot of Wushan Hill and put on display his knowledge of over 10,000 medicinal plants, animals, and mineral samples. Whenever an animal had to be slaughtered for its parts, he would announce it to the townsfolk who would gather to see the preparation. All drugs that came from the store would also be prepared in front of the customer. You could witness directly the original ingredients being pulverized into many kinds of pills, powders, capsules and plasters although the recipes and empirical prescriptions handed down by ancestors remained secret to the pharmacy. Testament to its efficacy, the medical hall is still open & in use today with most of its property having been converted into a museum holding around 10,000 animal and plant specimens complete with medical indications.

In addition to Hu Xueyan, Tong Jun, the original practicioner of Traditional Chinese Medicine (TCM) , also worked in Hangzhou. Then, at the beginning of the 12th century when the Song Dynasty (960-1127) moved its capital to Hangzhou, the first national pharmacy bureau was also established there and even issued regulatory practices on TCM.

Today, through years of continuous development, the TCM industry in Hangzhou has actually flourished and given rise to a number of prestigious and large-scale TCM enterprises, such as China Qingchunbao Group, Hangzhou Tianmushan Pharmaceutical Enterprise Co Ltd and Hangzhou Mingsheng Pharmaceutical Group.

Suzhou Industrial Park is a joint venture between China and Singapore. Although it is referred to as an industrial park, that is really more for regulatory purposes and is in fact a misnomer. Unlike other industrial parks all over China, the SIP has full fledged residential, educational and commercial facilities and even ample recreational space. It is also now a thriving community but only a few years ago it was as good as dead.

WHERE IS Suzhou IN RELATION TO Shanghai?

Back in 1994, Singapore went into the JV in a very high handed manner, steering in a very dictatorial manner what should be done and essentially just ordering the Chinese around. Instead of approaching the process as partners, Singapore went in, rightfully, from a position of strength, but wrongly proceeded to bully its way into getting things done in the park. One minister we spoke to said, “you need to make it clear to the Chinese workers that you are the boss or they won’t respect you. So, let me tell you, for you to succeed in China, you should do what I did. From the start of the project I told them that I am going to grade their work and they can only get “0″ or “100″. There is no in between. They either do it right, or if they do it wrong, they will have to do everything all over again.”

Needless to say, while the Chinese, as labourers, cooperated, there was no respect or admiration gained from the way things were done.

In a visit back in 2002, when 7sqkm of the park out of the planned 288 was completed, we saw a beautiful but virtually empty park. It took at least 10 minutes of driving around before we saw a single soul. That soul, to make it even more classically Singaporean, was someone sweeping the empty & clean streets of its thin layer of dust. When we asked the locals in the city about the park, they said even “birds won’t lay their eggs there.”

Only a handful of MNC’s chose to have their businesses in the park, with the rest being Singaporean companies who had invested in the park. (A number of other Singapore private companies had chosen other parks because they were significantly cheaper both in terms of rent and labour.) It was just starting, to be sure, but things definitely looked bleak and the Singapore flag that flew over the exhibition hall showing off the park’s amenities was mighty lonely.

The progression, or lack thereof, was palpable, and the money being drained into the park, enormous. To the credit of the Singapore government, it was swift to cut its losses and fix the problem, which was not that difficult to figure out. At a 70/30 Joint Venture, there was no reason for the Chinese to help push or market the SIP, even with its world class facilities. After all, for every $1 earned, the Chinese only got $0.30 when, in the industrial parks nearby, they would get the full $1. So, Singapore agreed to lowering its stake to 35% with China taking up 65%. Other concessions, not fully disclosed, were also made.

It didn’t take long before businesses started entering the park and more Chinese elements such as green lighting for the trees at night, huge red sculptures, cabbage flowers in the pathways and center dividers, and chinese signs could be seen in the park. The exhibition hall made by Singapore was also torn down and in its place a towering building and permanent exhibit with all the Chinese touches (e.g.-removal of Singapore flag, replaced instead by the Merlion- a clear indication that Singaporeans are mere tourists in the park) put in place.

Today, you can hardly tell the park was originally designed by Singapore except for sections where HDB like buildings can be spotted. Some bus stops have also been maintained that are exact copies of those in Singapore, complete with stainless steel benches. Singapore’s equity in SIP has also been reduced to 28% as China called for more investment from foreign companies & nations.

So was it a good move to go into the JV with China? Yes, definitely. Singapore needed a foothold in the country and it cemented its ability to plan and create the most beautiful and efficient industrial park in all of China (so far) by developing the SIP. It also learned a great lesson in humility which hopefully will get passed on to all of Singapore’s future projects.

For expats in Suzhou.

Very few people know about this place and now even fewer will because its hiding behind some serious bamboo scaffolding and netting. Only a couple of weeks ago I chanced by it while strolling around the area. I wouldn’t have noticed it except the unusually simple architecture caught my eye. Normally, when there is an unfriendly looking security guard sitting by his post, I won’t even bother trying, but this time around, I figured, this building is too interesting to pass up.

Inside, I found the most amazing library in Shanghai, holding a treasure of rare books and relics that are reserved only for the serious researchers but open to the public. You never know what you’ll find in China if you don’t go out of the way and just try.