Dubai as a model for Singapore (page 1 of 3)

Singapore's Prime Minister Goh Chok Tong led a delegation to Iran - the first visit by a Singaporean leader for 30 years.

He held talks with Iran's President Mohammed Khatami, as well as a series of meetings with Iranian political and business leaders. His goal: to build diplomatic ties with Tehran in the hope that economic ties will blossom and business then follow.

In part, the landmark visit reflects Tehran's recent attempts to liberalize its economy, but the implications stretch way beyond the Islamic Republic. Goh's trip was one of a series of Middle East visits by senior Singapore officials in recent months. Collectively, they bear witness to the fact that the Middle East is now at the center of Singapore's investment radar.

"In the Singapore government, we are now reviewing our policy on the Middle East and will give the region greater importance in the future," says George Yeo, Singapore's minister for trade and industry. Evidence of this increased priority is everywhere. Take Jordan.

Earlier this year, Singapore signed a free-trade agreement (FTA) with the Amman administration, Singapore's first with a Middle East country. Minister of State for Foreign Affairs and Trade and Industry Raymond Lim could barely contain his joy when he announced the deal.

"What we have built is a virtual superhighway," said Lim. "Our private sector is encouraged to travel on it - to leverage on the FTA and the good relationship between the two countries, and explore new opportunities in Jordan and the rest of the Middle East."

Negotiations have already begun on an FTA with Bahrain, with Qatar and Egypt also keen to open FTA talks. Lower-level discussions are underway with all the other Gulf Cooperation Council states (Kuwait, Oman, Saudi Arabia and the UAE). These government initiatives are clearly welcome. But are they translating into business deals and investment on the ground?

Officials admit that trade and investment ties between Singapore and the Arab world are modest. In 2003, the Middle East accounted for just five percent of Singapore's international trade, the majority of which was oil-related. Singapore has S$130 billion ($76 billion) of foreign direct investment overseas. Just three percent is in the Middle East.

However, there is evidence - statistical and anecdotal - that business is picking up. Between 1998-2003, Singapore's trade with Iran grew from S$1 billion to S$2 billion. Over the same period, the city-state's trade with the UAE grew from S$3.5 billion to S$5.8billion. Higher oil prices account for some of the increase, but much has come as a result of non-oil trade and investment.

"Visiting Iran in April this year, I was surprised to discover that a Singapore-based company owned and managed one of the largest non-oil foreign investments in the country," says Yeo.

Sanden International Singapore (SIS) began operations in Iran in 2001, with a small 15-man assembly line and minimal expectations. Three years down the road, the company has captured 80 percent of the automotive air conditioner market in Iran and has a workforce of 500. A small Singapore contingent of five managers oversees the company's operations in Iran.

Sanden went to Iran because, during the global economic downturn, business was down and the company was forced to look for new opportunities. The Iranian facility is a joint venture between SIS and Iranian businessman Farhad Shariat.