Mr Lee Yi Shyan at the Infrastructure Opportunities in the Middle East Seminar

SPEECH BY MR LEE YI SHYAN, MINISTER OF STATE FOR TRADE & INDUSTRY AT THE INFRASTRUCTURE OPPORTUNITIES IN THE MIDDLE EAST SEMINAR ON MONDAY, 14 AUGUST 2006, 2.05 PM AT MARRIOTT HOTEL, GRAND BALLROOM

Distinguished Guests,

Ladies and Gentlemen,

Good afternoon. I would first like to bid a very warm welcome to all our overseas speakers, who have come here to share with us their experience and insights into doing business in the Middle East.

Opportunities in the Middle East

Record oil prices have enabled the Middle Eastern countries to re-examine their economic development strategy. Countries in the Gulf Co-operation Council, particularly Saudi Arabia, the UAE and Qatar have decided to diversify their economy, by first re-investing their additional petro-dollars into infrastructure industries and facilities. This has led to the undertaking of many mega-projects not only in oil & gas, but also in logistics, industrial parks, environmental services, and urban infrastructure such as real estate and hospitality.

By April 2006, the total value of planned and active infrastructure projects in the Middle East had exceeded 1 trillion US dollars, of which more than 250 billion US dollars was generated within the first three months of this year alone. For comparison, China attracted some 61 billion US dollars in foreign direct investment in 2004, and India attracted 5 billion US dollars. You might also note that the various infrastructural projects are to be completed within the next few years, within a rather compressed time frame. Let us consider the opportunities in some of the GCC countries.

Dubai

Some 300 billion US dollars worth of these projects reside in the UAE, which many of you are familiar with. Dubai, a city of 1.5 million people, currently holds a quarter of the world’s total supply of cranes. This reflects the magnitude of construction activities there.

Saudi Arabia

Intent on modernization, the Saudi government is planning to build cities from scratch. These include the famous 26 billion US dollar King Abdullah Economic City and the Prince Abdul Aziz Bin Mousaed (pronounced Mo-sa-eed) Economic City, which is a logistics and distribution hub to rival Dubai. With 624 billion US dollars worth of infrastructure projects until 2020, Saudi Arabia remains the most lucrative Arab economy for foreign companies

Qatar

Qatar’s population is one-fifth that of Singapore’s. Yet the country has set aside some 110 billion US dollars for investments in energy and tourism. Major projects include the Pearl Qatar, a 2.5 billion US dollar man-made island, and the 5 billion US dollar North Beach Development.

Our Growing Engagement with the Middle East

Our businesses have benefited from this boom. In the first half of this year, Singapore’s non-oil domestic exports to the region surged by 25% compared to the same period last year. Our investments into the region stood at 1 billion Singapore dollars in 2004 - more than two and a half times the figure in 2000.In the construction and engineering sector alone, Singapore companies clinched deals worth 203 million Singapore dollars last year, a huge jump from the 5 million Singapore dollars in 2002.

Strategies for Continuing Success

SembCorp Utilities won the 1.7 billion US dollar bid last month to buy part of the Fujairah-based Independent Water & Power Plant that is being privatized. It was not easy for an Asian newcomer to break into a sector traditionally dominated by the West, but SembCorp Utilities did it against competing bids from 20-30 contenders. I hope their example will inspire the rest of us.

The Middle East is a complex environment, and we can expect to encounter formidable challenges there. To enjoy more success in the Middle East, like SembCorp Utilities has done, let me share with you some strategies.

Increasing Presence in the Region

Success in the Middle East will not come overnight. Businesses must first get familiar with the market and increase their presence there. Due to the unprecedented level of interest in the Middle East, it is now easier than ever to get there. 66 flights now fly to various destinations in the Middle East from Singapore every week.IE Singapore has overseas centers in Dubai and Qatar that can help you make connections and shorten your time to market.

Building Relationships

Just like the Chinese have guanxi, Arab culture values wasta (pronounced ‘wah-star’).It is critical to spend time building relationships with the local community, important families and government leaders, and to convince your potential partners that you are sincere and not just out to make a quick profit. For instance, one of our panelists, Inter-Roller, spent years studying the market and building up relationships before they clinched their first contract. In this regard, establishing a local presence is also crucial to demonstrate commitment.

Forming Alliances

The sheer size of projects in the Middle East makes the formation of alliances a particularly compelling approach. By pooling together resources and talent to offer better value propositions and mitigate risks, these alliances have more bargaining power and are more competitive.IE Singapore’s International Partners, or iPartners, Programme seeks to catalyze the formation of such win- win partnerships for successful overseas expansion.

The Singapore Water Solutions Alliance

Today, I am pleased to join you here to witness the formation of a new alliance under iPartners, the Singapore Water Solutions Alliance, or SWSA for short. The SWSA is targeting 500 million Singapore dollars worth of projects in Middle East markets such as Saudi Arabia, UAE, Qatar, and Oman by 2009.

Led by Salcon, its other members are CPG Consultants, Dayen Environmental, GrahamTek Singapore, Lee Kim Tah-Woh Hup, Singapore Utilities International (SUI), Smitech Engineering, and United Engineers. Together, they represent the complete value chain in water and waste water treatment. I am happy to add that the SWSA enjoys the strong support of the Environment and Water Industry Development Council, which aims to develop Singapore as a global environment and water industry hub.

The SWSA brings the total number of iPartners alliances since its launch in October 2003, to 23 comprising 119 companies. Together, they are expected to generate over 2 billion Singapore dollars in overseas sales by 2010.

The SWSA is the 6th iPartners alliance focusing on opportunities in the Middle East. The Singapore Building and Infrastructure Consortium formed last year won a project to work on the flagship Dubai Mall, while the Singapore Airport Consortium won a two-year ground handling contract for Qatar Airways.

Conclusion

The Middle East market has indeed become a very exciting market. For firms seeking high growths and rewards, Middle Eastern markets hold great promises.

I wish you all the best in your foray into the ME market.