The establishment of democratic political systems of government is a difficult and protracted process. This particularly holds true for Southeast Asia. Despite various democratization attempts in the region, authoritarian setbacks seem to be a constant feature of Southeast Asian politics. The most serious and promising democratization efforts over the last decades were undertaken by Thailand, Indonesia, and the Philippines.

All these three countries became democratic in the so-called third wave of democratization (Huntington 1991). High hopes were set in the newly introduced democracies by democratic-minded people in the region. The re-start of Thailand's democracy with the 1997 Constitution was widely hailed as a political breakthrough to end decades of elite-controlled semiauthoritarianism. In the Philippines, the removal of dictator Ferdinand Marcos by the so-called People Power Revolution in 1986 offered a great chance to establish a full-fledged democratic order and to remove the authoritarian remnants. The same holds true for Indonesia after the downfall of long-time autocrat Soeharto in May 1998.

In the first years after the regime changes, there was rising optimism that a full-fledged democracy could be established in all three countries. However, disappointment over the implementation of the expected democratic consolidation soon became the dominant impression among analysts and ordinary people. Initial euphoria turned into frustration since the democratic promises did not always transfer into daily political practice and reality. Worse, particularly in Thailand and the Philippines, the political systems temporarily adopted authoritarian features and turned away from being liberal democracies. For some time, it was therefore justified to speak not of a weak democratic consolidation process but rather a veritable regression in democracy.

In Thailand, people witnessed a military coup in 2006, election boycotts, and about one decade of political violence and unrest, mostly not in the political institutions but rather on the streets. In the Philippines, the recent pork-barrel scandal made the dimensions of graft in public office visible to the general public. Previously, a president was impeached under legally dubious conditions, whereas his successor led the country into more or less open authoritarianism. Indonesia was spared from direct authoritarian backlashes, but the current political system is still marred by a multitude of corruption scandals and undemocratic power struggles at all levels of government. More than 350 Indonesian government officials have been jailed on corruption charges since 2002, including national ministers, provincial governors, dozens of members of the national parliament and high-ranking judges.

Introduction

Since the establishment of diplomatic relations between China and Singapore in 1990, the bilateral economic relation has witnessed rapid and spectacular growth that has been beneficial to the two countries. In particular, Singapore's total foreign direct investment (FDI) in China has grown rapidly since 1985 from a tiny S$60 million to a huge S$70.6 billion in 2010. In terms of FDI volume, Singapore ranks eighth among the major investment sources for China, accounting for 4.5 per cent of China's total paid-in foreign investment. Moreover, Singapore has the largest share of China's FDI from ASEAN countries.

Not only did the total size of investment experienced two periods of rapid expansion in 1992–98 and 2005–10, the portfolio of investment has seen a major diversification, covering almost all the important sectors of the Chinese economy, from traditional sectors like trade and commerce services, industrial parks, real estate, financial services to new emerging areas like education, healthcare and clean energy. In terms of regional distribution, Singapore's investment in China has been spreading from China's coastal regions to inland and western provinces, especially since the early 2000s, and that fully align with China's central and western development schemes.

At the crossroad of world economy and global network of Chinese diaspora, the city state of Singapore enjoys many advantages in accessing the Chinese market. These are its cultural proximity with China, strategic position in Asian and global trade network, and an active developmental government always bent on seeking new markets across the world. Relying on these strategic advantages, the Singapore government and thousands of private enterprises have so far invested very extensively in China by taking advantage of an increasingly open economy.

Singapore's investment activities in China have encountered some difficulties since China is a far larger and much more complex environment for Singapore investors. There are as many challenges as opportunities in this huge market. Although most Singapore enterprises have so far fared well, there are many perils in China's informal regulations and institutional complexities.

Introduction

Forging education links has been an integral part of the well-established bilateral cooperation that existed between Singapore and China. The former is keen to offer assistance to Chinese Government officials from both the central and provincial levels and to private citizens to benefit from the good educational opportunities available in Singapore, based on English as a medium of instruction. While many Chinese students are attending schools run according to the system as it exists, special programmes have been designed to suit the Chinese students. This is just a continuation of the tradition practised by Singapore to provide education, with scholarships, to citizens from nearby countries as part of its foreign aid and as part of its objectives to develop the island state into an international education hub within its overall strategic economic plan. On the other hand, China is quite interested to upgrade the skill and knowledge of some of its senior government officials by sending them to the city state to attend specially tailored training or formal degree programmes offered by government departments and institutions of higher learning. There are Singapore students who opt to study in Chinese schools and universities, but not on such a big scale as those coming from mainland China.

With the demand for foreign education becoming quite prevalent among the increasingly more affluent families, cross-border education has become an important industry that can contribute to the development of the economies of the receiving countries. Some of these countries may also regard foreign students as a way of injecting more talent into the labour force to ensure the continuous growth of their economies in the years ahead. Indeed, economic consideration has emerged as the major driving force in the promotion of international educational collaboration, though the traditional notion of promoting language, culture and greater understanding still holds. In a knowledge-based economy, having an edge over other countries in talent and innovation is of primary importance in boosting economic competitiveness.

Introduction

The rapid process of industrialization and urbanization in China has brought about greater environmental and social problems, including water and energy shortage, air pollution, overcrowding, traffic congestion, loss of biodiversity and desertification. Influenced by the internationally popular concept of eco-city that focuses on integrating sustainability into city planning, the Chinese Government in recent years has been paying increasing attention to the know-how of building cities in balance with nature. As the notions of eco-city and garden city are imported and China is still in the take-off stage of economic development, the country has been enthusiastic about cooperating with other foreign partners in eco-city projects, with the flagship Sino-Singapore Tianjin Eco-City Project being the most well-known and successful up to date. Based on its indigenous experience with the construction of “ecological garden cities” (shengtai yuanlin chengshi), China has started to plan and build its own eco-cities in some localities.

The trajectory of the Singapore-China project based cooperation from the Suzhou Industrial Park (1994) to the Tianjin Eco-City (2008) has manifested China's shift in its economic strategy from building itself into an export-oriented manufacturing base to a service-driven and low- carbon economy. Compared with the unilateral knowledge transferred from Singapore to China in the Suzhou Industrial Park, the Singaporean side has found its participation in the Eco-City project to a larger extent an expertise-sharing and mutual-learning interaction between the two countries when the pollution and energy problems have pushed the rising China to lead the world in tapping renewable energy. At the strategic level, it marks Singapore's continued effort to stay relevant to China's rise by identifying a niche area for collaboration with China. In doing so, Singapore can leverage on China's growth. On the other hand, the project enables China to devise a model that balances the goals of economic growth, environment protection and social harmony, one that is based on Singapore's own developmental experience which may be more realistic and attractive to China compared to other models.

Introduction

Since China and Singapore established diplomatic relations in 1990, tourism has become one of the most important economic relations between the two countries. For Singapore, the tourism industry has played an essential role in supporting its economic development over the past few decades. In recent years, compared to tourists from Japan, South Korea, Taiwan and other Southeast Asian countries, Chinese tourists have become far more important. Indeed, as a result of rising income, the relaxation of travel restrictions, and more holiday periods, Chinese people have much more opportunities for travelling abroad. According to China National Tourism Administration (CNTA), 57.4 million Chinese travelled out of China in 2010. CNTA estimated that by 2015, there will be some 100 million Chinese travellers going abroad and spending approximately US$100 billion, making China the largest source of tourism in the world. Being one of the most important tourism hubs in the world, Singapore will benefit from this rising tide of Chinese tourists.

The emergence of Chinese tourists is not only lucrative for the Singaporean tourism sector but also imperative for China's domestic tourism industry's development. CNTA's figures show that the number of domestic tourists in China reached 2.1 billion in 2010, a 12 per cent increase from 2009, and generated 1.1 trillion Chinese yuan (about US$170 billion) of revenue for the industry. The Chinese government regards the tourism industry as strategically important because of its low resource consumption, abundant job opportunities, and great capability to promote the development of other industries. In 2009, China's State Council unveiled plans to boost the tourism industry, namely, “Opinions of the State Council on Accelerating the Development of Tourism Industry”. Domestic tourism was the main focus, followed by inbound tourism and outbound tourism. Chinese Vice-Premier Wang Qishan further highlighted in March 2011 that China would “strive to develop tourism into a strategic pillar industry of the nation's economy over the 12th Five-Year Plan period from 2011 until 2015”.

Introduction

Most industrial parks are run on a commercial basis, with minimal or no governmental intervention. If the government is involved, it is usually to provide a conducive regulatory framework or the right incentives to give the industrial park a head start in attracting investors. It would appear that the lesser the government involvement the better it is for any particular industrial park to reach its full market potential.

Yet, the Suzhou Industrial Park (SIP), which Singapore and China embarked on in 1994, was and still is no ordinary industrial park. Like other industrial parks, it had to be commercially viable in order to be sustainable. Unlike other industrial parks, the SIP served a broader strategic and political function that is less known. More specifically, it provided a platform for government and business leaders, especially the younger ones, from both sides to come together and work on a common project. By working on the details of the project, both sides would get to know each other better. This would lay the basis for a long-term and robust relationship. More significantly, arising from the SIP, a high-level institutional mechanism was developed and consequently expanded to oversee all areas of bilateral cooperation. Moreover, the Singapore brand name that is often associated with the project has generated positive mileage for both sides. On these counts, the SIP performs a function that goes beyond that of a purely commercially-run industrial park.

This chapter examines the SIP within the broader context of the Sino-Singapore relationship. It argues that the project laid a good foundation for the development of bilateral ties. To flesh out this argument, we will focus on four key aspects. First, it will touch on the origin of the SIP. It will discuss the broad political context in which the SIP was conceived. This will show how the governments of the two countries were actively involved in conception of the project.

Second, we will outline the defining feature of the project which is the transfer of Singapore's economic management and public administration software.

Introduction

China has been expanding rapidly its foreign direct investment (FDI) since 2000 when it officially initiated a ‘go global’ strategy. Starting from an insignificant volume of US$28 billion in 2000, the country has accumulated about US$425 billion FDI by the end of 2011, standing as the second-largest source of FDI among developing countries. Since Chinese FDI has reached commercially and geo-economically significant level, it has started to affect host country development and challenge international investment norms.

Singapore has been an attractive destination for Chinese FDI since 2004. According to Foreign Equity Investment in Singapore 2010, an annual survey conducted by the Singapore Department of Statistics, Chinese FDI in Singapore saw a significant jump when its total investment in the city state grew from S$360 million in 2004 to S$910 million in 2005, an increase of over 150 per cent. In 2007, Chinese investment in Singapore gathered new momentum and its stock rose fourfold to S$9.7 billion as at end-2009. By the end of 2010, the Chinese cumulative FDI in Singapore reached a high of S$11.5 billion (see Figure 5.1).

In spite of the impressive growth, Chinese investment in Singapore remains small relative to those from traditional investor countries. As at end-2010, FDI from China amounted to just 2 per cent of total FDI in Singapore, compared with 11 per cent (or S$65.4 billion) from the United States, 10 per cent (or S$60.9 billion) from the Netherlands, and 9 per cent (or S$53.9 billion) from Japan. Nevertheless, China has emerged as an increasingly important investor for Singapore and the volume of Chinese FDI to the city state is clearly on the rise. In fact, Figure 5.1 shows that China's share of FDI in Singapore grew from 0.4 per cent in 2001 to 1.9 per cent in 2010, and its share of FDI from Asian countries in Singapore rose even faster from 1.7 per cent in 2001 to 7.6 per cent in 2010.

The East Asian Institute (EAI) at the National University of Singapore participated in the 20th anniversary celebration of the establishment of diplomatic ties between the Republic of Singapore and the People's Republic of China in late 2010 by launching two important projects. The first was the International Conference on 20 Years of Advancing Singapore-China Relations held in May 2011 and attended by participants from government departments and agencies, the business community, and academia. The well-attended Conference succeeded in providing the participants with a better understanding of the dynamics underlying the strong economic relations existing between the two countries.

The second project is this book, Advancing Singapore- China Economic Relations, which was designed to put on permanent record the multifaceted nature of the economic cooperation and links between the two countries during the last twenty years or so. The book consists of five chapters that were originally presented at the Conference, but were all substantially revised and updated to include events happening after the Conference. The other chapters did not originate from the conference papers, but were specially commissioned for inclusion in the book. The book has been constructed in such a manner as to provide a more comprehensive chronicle of the complexity and intricacy involved in the major areas chosen by the public and private sectors to develop the economic links that have brought immense benefits to the two countries.

We would like to thank the chapter writers who have put in so much effort to prepare their conference papers for publication in this book, as well as those who have kindly agreed to write the completely new chapters at our request. Our thanks go to Mrs Triena Ong of ISEAS Publications Unit for overseeing the expeditious publication of the book. We are delighted to have ISEAS as a co-publisher.

Background

The origin of official bilateral relations between Singapore and China can be traced to 3 October 1990 when the two countries finally established diplomatic ties. Singapore had decided to be the last among the major countries in Southeast Asia to formalize relations with the People's Republic of China as it wished to ease the concerns of the neighbouring states which had encountered some difficult times during the Cold War days in the 1950s to the 1970s. Bilateral contacts between the tiny city-state and the giant country endowed with a huge population, vast land area, and an enormous economy have in fact taken place before the official recognition of one another. The more important events were the first state delegation led by the then Singapore Minister for Foreign Affairs S. Rajaratnam in 1975, the then Prime Minister Lee Kuan Yew's first visit in 1976, the exchange of Trade Representatives in 1981, and the establishment of direct air links in 1985 with Singapore Airlines (SIA) flying to Beijing and Shanghai and Chinese airlines coming to Singapore. Another noteworthy event occurred in 1985 when the late Dr Goh Keng Swee, the then Deputy Prime Minister and Finance Minister of Singapore, was appointed by the Chinese Government as an Adviser to the development of the coastal states and economic zones in mainland China.

What eventually proved to be a significant occasion was the landmark visit of paramount leader Deng Xiaoping to the island-state in November 1978. The visit of Deng Xiaoping was carefully planned to allow him ample time to meet with the then Prime Minister Lee Kuan Yew and his top leaders and to give him sufficient time to observe the achievements in the various areas of social and economic development since the attainment of independence in August 1965. He was certainly impressed by what he saw in his various itineraries as proof of the remarkable socio-economic progress chalked up by the city-state within such a short period of time.

Introduction

Since the establishment of diplomatic relationship between China and Singapore in 1990, bilateral trade has increased remarkably from US$2.82 billion to US$57.06 billion in 2010, with an average annual growth rate of 16.2 per cent. According to the statistics of International Enterprise Singapore, China was Singapore's third-largest export market and import source in 2010. On 23 October 2008, China and Singapore signed the China-Singapore Free Trade Agreement (CSFTA) which further accelerates the liberalization of bilateral trade in goods and services. This chapter examines the general and structural features of China-Singapore bilateral trade and the potential effect of the establishment of CSFTA on bilateral trade.

Development of China-Singapore Bilateral Trade

Based on trade data for the period of 1990–2010, the development of China-Singapore bilateral trade can be examined in different phases.

Firstly, as shown in Table 7.1 the bilateral trade has kept increasing since 1990, except for two temporary declines in 1998 and 2009 due to the Asian financial crisis and the global financial crisis respectively. The trade value has grown rapidly from US$2.82 billion in 1990 to US$57.06 billion in 2010. To be more specific, China's export to Singapore has increased from US$1.97 billion in 1990 to US$32.35 billion in 2010, with an average annual growth rate of 15.0 per cent. China's import from Singapore has reached US$24.71 billion in 2010 compared to US$84.08 million in 1990, with an average annual growth rate of 18.2 per cent. According to trade intensity index (TII), as shown in Table 7.2, the bilateral trade relations have remained close.

Secondly, China is an increasingly important trading partner for Singapore, while Singapore's position in China's import and export remain stable. The share of Singapore's total export to China has grown from 1.5 per cent in 1990 to 10.3 per cent in 2010, and the share of Singapore's import from China in its total import has increased from 3.4 per cent to 10.8 per cent. According to the recent statistics produced by International Enterprise Singapore, China has become the largest trading partner of Singapore in January 2011.

Introduction

The year 2010 marks the 20th anniversary of the establishment of diplomatic relations between Singapore and China. Yet, well before formal ties were established, Singapore and China had extensive interactions as an important part of China's overall relations with Southeast Asia, then known as Nanyang. Furthermore, during the height of Beijing's Cold War relations with Southeast Asia in the 1950s and 1960s, Singapore still maintained economic ties with China while China's ties with other Southeast Asian states had been disrupted or suspended. Today, Singapore-China bilateral ties are broad-based, substantive and rapidly expanding. The achievements today are extraordinary given their past ideological differences.

In several ways, ties between the two countries can be described as special and unique. Chinese leader Deng Xiaoping during his Nanxun in 1992 specifically singled out Singapore's development experience as being useful to China. This set the basis for the two countries to cooperate in various fields and benefit from each other's growth. Other Chinese leaders have also mentioned Singapore from time to time to push relevant reforms in China. Besides the close personal ties between the leaders of the two countries, there is the high-level Joint Council for Bilateral Cooperation headed by the Deputy Prime Ministers of the two countries that oversees various forms of bilateral cooperation.

A strong bilateral relationship has thus given rise to strong bilateral economic relations. Singapore's two-way trade with China over the past two decades has increased 30 times, from US$2.9 billion in 1990 to US$75 billion in 2010. China was also Singapore's third-largest trading partner and second-largest source of tourist arrivals in 2011. From China's perspective, Singapore is China's ninth largest trading partner and seventh-largest investor with Singapore's cumulative foreign direct investment (FDI) in China amounting to US$48 billion in 2009.

Singapore's special economic relationship with China can best be epitomized by Singapore's three flagship projects in China: Singapore-Suzhou Industrial Park; Sino-Singapore Tianjin Eco-City; and Knowledge City in Guangzhou.

Once Indonesian independence was internationally recognized, the fragile unity of the new United States of Indonesia (Republik Indonesia Serikat [RIS]) fractured in a variety of ways, including within the new armed forces as the central government strove to amalgamate the disparate elements of the TNI with the remnants of the KNIL, which had been fighting on the Dutch side only months before. The first challenge occurred within weeks.

On 23 January 1950, forces under the command of the notorious Raymond (“Turk”) Westerling briefly occupied Bandung, supposedly to protect the local regional negara of Pasundan. Sultan Hamid approached Defence Minister Hamengku Buwono and offered to mediate, but Hamengku Buwono declined the offer because he distrusted Hamid. An armed clash occurred the next day in the Kramat area of Jakarta between TNI elements and pro-Westerling forces. The Hatta government got wind of a plot to attack the cabinet during a meeting in Jakarta either on the evening of the same day (24 January) or on 25 January; the meeting was held, but Hatta forestalled the attack by closing the meeting early.

The putsch discredited the Pasundan federalists, but the entire federalist movement was compromised when Hamid's complicity became known. He was arrested in April, accused of planning the attack on the cabinet and of ordering Westerling to kill Hamengku Buwono, Secretary-General of the Defence Department Ali Budiarjo and Armed Forces Chief of Staff Simatupang. Hamid himself was to be wounded in the leg, to direct suspicion away from himself. He apparently believed that he himself would then be the obvious candidate to become the next Minister of Defence.

Revelation of this outlandish plot ended Hamid's career, and he was jailed for over ten years, acquiring a reputation in Indonesian history similar to Benedict Arnold in U.S. history. His autonomous territory of West Kalimantan was abolished, and the affair encouraged the move towards a unitary Republic of Indonesia. The involvement of former Dutch KNIL officers and KNIL deserters inflamed suspicions of the Dutch, enhanced by a statement in which Hamengku Buwono appeared to blame the Dutch high command. The inability of Dutch officers to control their troops, and their inaction against Westerling before the coup despite Indonesian government pleas to restrain him, gave grounds for suspicion.

This book is based on my doctoral thesis written at the Australian National University (ANU) several years ago, about the life of Hamengku Buwono IX of Yogyakarta, who was long prominent in Indonesian affairs but had not attracted much scholarly interest from foreigners.

I would like to thank the supervising panel for their care and attention, especially my supervisor Ann Kumar, and the other panel members Virginia Hooker and the late and much-missed Ian Proudfoot. At ANU, I am indebted to various colleagues for much useful advice and dialogue, including my fellow PhD students at the time, Mary Kilcline Cody, Peter Quinn and Mark Emmanuel. David MacRae provided me with a useful information statement for informants, which I used virtually verbatim.

I would also especially like to thank David Reeve, Shigeru Sato, David Jenkins, McComas Taylor, Liudmila Mangos, and Chris Manning and the Indonesia Project. I appreciate the help of Oliver Mann, then of the National Library, and others there, as well as Mrs Betty Feith for permission to examine her late husband's private papers in the Library. My thanks go to Monash University, especially Brenda Le Grand, for access to Herb Feith's public archives in the library there. Particularly warm thanks are due to my wife, Isti Monfries, who helped and supported me in a wide variety of ways.

In Yogyakarta, I have to thank H.H. Hamengku Buwono X for his help and reminiscences of his father, as well as that of several family members, especially G.B.P.H. Prabukusumo, Romo Noordi Pakuningrat and K.R.T. Jatiningrat, Pak Suwignyo and staffers at the Kraton Archives, as well as personnel of the Yogyakarta Special Region Archives, such as Bu Ikrar and Pak Hardo.

In Jakarta, the large numbers of necessary acknowledgements make it difficult to single anyone out, but I should particularly mention the late (and also much missed) Geoffrey Forrester and his partner Peter Kelly, Nono Anwar Makarim, G.B.P.H. Pakuningrat, and Princess Nindyokirono. My research afforded me the unique opportunity to meet and converse with a number of distinguished older-generation Indonesians, some of whom are now alas deceased. It was a real privilege to meet and interview such figures as the late Sudarpo Sastrosatomo, Rosihan Anwar, Radius Prawiro, Frans Seda and Wijoyo Nitisastro.