Made in Singapore: Looking Forward to 2015

Based on the figures released by the Ministry of Trade and Industry (MTI), the Singapore economy grew by 2.9 per cent in 2014. MTI has also maintained the growth forecast for 2015 at 2.0 to 4.0 per cent.

The Singapore economy grew by 2.1 per cent on a year-on-year basis in the fourth quarter of 2014. Meanwhile, the manufacturing sector contracted by 1.3 per cent year-on-year, reversing the 1.7 per cent growth in the previous quarter. The transport engineering and electronic clusters were the primary clusters that held back the sector’s overall growth.

The year opened with a slow start for Singapore’s manufacturing sector, which grew less than expected. The weak showing was attributable to a broad-based, uninspiring performance across all industrial clusters except for biomedical manufacturing and precision engineering.

According to the data released by the Economic Development Board (EDB), factory output rose to 0.9 per cent in January on a year-on-year basis, which is lower than the market’s consensus forecast of a 3.3 per cent growth. January’s meagre rise in industrial production was all attributable to the biomedical manufacturing cluster, which expanded 5.3 per cent. The EDB said that after adjusting for seasonal factors, industrial production contracted 4.7 per cent month-on-month in January. If not for the biomedical manufacturing cluster, output would have fallen by 4.6 per cent.

Industry Developments

The manufacturing sector remains a key pillar of the Singapore economy, providing more than half a million jobs and contributing about a fifth of GDP in 2013. In recent years, key manufacturing sectors have continued to grow even as Singapore’s cost base has increased.

Keenly aware of the need to maintain Singapore’s attractiveness as a manufacturing hub, the government has been actively promoting productivity and innovation-driven growth through a wide variety of incentives and support.

Some of these initiatives include the Productivity and Innovation Credit (PIC) scheme — which partly subsidises companies adopting technologies to improve productivity — and the Singapore Innovation and Productivity Institute (SiPi) — which was established under the Singapore Manufacturing Federation (SMF) to assist the manufacturing and engineering sectors.

The government has also been encouraging the transformation of the sector, continually moving manufacturing clusters up the value chain and repositioning the country as an advanced manufacturing hub.

One way it has been doing so is by leveraging on Singapore’s strengths in existing sectors to upgrade and move into adjacent ones, such as from precision engineering to aerospace, and petrochemicals to specialty chemicals.

Singapore is further investing in research and development (R&D) to deepen its manufacturing capabilities. Through its S$500 million Future of Manufacturing initiative, the government is helping businesses develop and adopt new technologies in order to build up industry capabilities, in areas such as additive manufacturing, robotics, and manufacturing information technology.

The workforce is also being upgraded, with the EDB working with industry stakeholders to develop a pipeline of multi-skilled engineering talent to support the growth of manufacturing. These include initiatives such as the EDB’s Precision Engineering Vocational Continuing Education and Training programme, which aims to groom a pool of 2,800 master craftsmen to take on higher value, more complex manufacturing operations and leadership responsibilities.

With all this in consideration, Singapore still remains a competitive manufacturing location. In its 2013 Global Manufacturing Competitiveness Index (GMCI) report, Deloitte predicted that Singapore will retain its ninth ranking through to 2018, citing key advantages such as the educated workforce, quality infrastructure, favourable tax system and R&D incentives.

Manufacturing Sector Performance

According to EDB’s official report released on 26 February, Singapore’s manufacturing output grew 0.9 per cent on a year-on year basis in January 2015. Aside from biomedical manufacturing, overall output remained unchanged.

Precision Engineering
Overall output of the precision engineering cluster showed a remarkable 4.1 per cent increase year-on-year in January 2015. The precision modules and components segment increased by 9.7 per cent due to higher production of metal precision components as well as optical instruments and photographic equipment. Meanwhile, output of the machinery and systems decreased by 1.0 per cent due to lower output in mechanical engineering work and measuring devices.

Biomedical Manufacturing
Output from the biomedical manufacturing cluster expanded by 5.3 per cent in January 2015 compared to the same period a year ago. The medical technology segment’s output grew by 12.2 per cent due to strong demand for new medical devices. Meanwhile, pharmaceuticals output increased by 3.6 per cent.

Electronics Manufacturing
The electronics manufacturing cluster was unchanged in January 2015 compared to January 2014. Driven by higher regional demand, the other electronic modules and components segment expanded by 30.8 per cent. In addition, the semiconductors and computer peripherals segments also registered growths. Meanwhile, the infocomms and consumer electronics and data storage segments declined by 3.8 and 13.2 per cent, respectively.

Chemicals Manufacturing
Output from the chemicals cluster contracted by 0.5 per cent on a year-on-year basis in January 2015. The specialties segment expanded 8.6 per cent due to new production capacities and higher output in additives. Meanwhile, the other chemicals segment grew by 6.4 per cent with higher output in glass products and fragrances. Plant maintenance shutdowns made a huge dent in the petrochemicals output, with an astounding 12.2 per cent decline.

Transport Engineering
Output of the transport engineering cluster fell 2.2 per cent year-on-year in January 2015. The land transport segment grew 24.4 per cent while the marine and offshore engineering segment grew by 4.2 per cent. The aerospace segment offset such growth, with a contraction of 18.2 per cent due to low demand for repair jobs.

General Manufacturing
Output of the general manufacturing cluster decreased 0.3 per cent on a year-on-year basis in January 2015. The printing segment increased by 1.3 per cent, while the miscellaneous industries segment rose by 1.1 per cent. The food, beverages and tobacco segment declined by 3.1 per cent partly because of the high base in 2014 when output was boosted by festive demand.

SG50 Special
In conjunction with Singapore’s 50th birthday, Global Yellow Pages (GYP) has collaborated with the National Heritage Board to promote the 19 most iconic made-in-Singapore brands. Some of these Singapore-manufactured brands include Axe Brand Universal Oil, RISIS, Boncafé and DFurniture Pte Ltd — formerly known as Diethlem Furniture. To read more about this special feature, click here [hyperlink to SG50 article].

The Economic Outlook for 2015
According to MTI’s 2015 GDP forecast released on 17 February, the global outlook has more or less softened in the recent months. Growth this year is expected to be only marginally better than in 2014. Meanwhile, the pace of recovery is expected to remain uneven across the economies, with the US economy being the main bright spot.

Growth in the US is expected to accelerate, while growth in the Eurozone will most likely remain weak because of sluggish labour market conditions and deflationary pressures. Likely due to sluggish real estate activities, China’s growth is also expected to ease further this year. Furthermore, despite the recent plunge in oil prices benefitting oil-importing economies, it has notably dampened growth prospects in oil-exporting countries.

Due to the challenges of the global economic environment, externally-oriented sectors such as the manufacturing and wholesale trade sectors are likely face headwinds. In the domestic scene, the labour market is expected to remain tight, with low unemployment and increasing vacancy rates. Due to these factors, labour-intensive sectors such as construction, retail and food services may see their growth weighed down by labour constraints. However, other domestically-oriented sectors are expected to remain resilient.

Sources: International Enterprise Singapore, Ministry of Trade and Industry, Monetary Authority of Singapore and the Economic Development Board
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