Singapore: A long-term play for mid-corporates
Over the past half-century, Singapore has become a manufacturing and trading powerhouse, and the economic envy of the world. At independence in 1965, its GDP per capita was USD516 in current US dollars; by 2018, it had risen 125-fold to about USD64,600.1
A range of factors propelled this transition: its strategic location, a deep-water port, advanced infrastructure, a keen focus on education, forward-looking government and rule-of-law, to name a few. All that has helped Singapore post 6 per cent average annual GDP growth between 1980 and 2018,2 compared to the 2.9 per cent growth in global GDP in the same period.3
Recent headwinds – such as the US-China trade tensions, an uncertain global economy4 and a slowing manufacturing sector5 – saw economic growth decelerate in 2019 to 0.7 per cent.6 That said, the city-state remains an attractive place to do business: It recently surpassed the United States to become the world’s most competitive economy, according to the World Economic Forum.7 This milestone follows Singapore’s second place ranking in the World Bank’s 2020 ‘Ease of Doing Business’ index.8 Further, the government’s fiscal prudence is reflected in its move to provide near-term support for households and businesses to cope with the economic impact of the coronavirus,9 announcing a range of stimulus measures worth nearly USD5 billion in the 2020 budget.10
In short, while Singapore’s near-term growth prospects are softer,11 it remains extremely well-placed to weather any dips. And, central to past successes and its future is the contribution of Singapore’s mid-corporates. Within that grouping, two sectors stand out: high-value manufacturing and infrastructure.
Strengthening core competence
Manufacturing has been Singapore’s mainstay since the 1970s, and today comprises 21 per cent of the economy.12 The sector – encompassing subsectors such as electronics, biomedical and precision engineering – remains highly competitive globally, being ranked fifth for manufacturing value-added in the 2019 Bloomberg Innovation Index.13 Singapore is also the world’s fourth-largest exporter of high-value goods.14
In its efforts to further enhance manufacturing, Singapore’s government has since 1991 invested large sums to boost research, innovation and enterprise.15 Its most recent five-year plan, running through 2020, allocated SGD19 billion (about USD14 billion at current rates) to four key sectors: advanced manufacturing and engineering; health and biomedical sciences; urban solutions and sustainability; and, services and digital economy.16
At the same time, the government is backing Industry 4.0, which is revolutionising industrial production processes with emerging technologies such as autonomous and collaborative robots (cobots), the Internet of Things (IoT), additive manufacturing and augmented reality (AR).17 The aim is that Industry 4.0 will “revamp [Singapore’s] manufacturing model into one that offers more innovation-based and high-value production.”18
It is part of a strategy to make Singaporean manufacturing more efficient and more competitive in the face of rising regional competition, and is a key element of Singapore’s efforts to retain its attractiveness as a global hub for advanced manufacturing. Industry 4.0 will move the industrial base further up the value chain by ensuring processes become digitalised and more automated.19
The manufacturing sector remains Singapore’s best-performing when it comes to productivity,20 recording a 9.8 per cent increase in 2018.21 That was significantly higher than the 4.8 per cent and 4.2 per cent gains posted by the next-best performers: accommodation and food services, and financial services, respectively.
Looking ahead, precision engineering is one area of high-value manufacturing that is projected to enjoy strong growth, driven by increased demand for semiconductor-related equipment.22 Segments such as electric cars, hydroponics, optoelectronics and surveillance solutions, which are enjoying increased investment and R&D spending, are also expected to do well.23 Another sector likely to perform strongly is transport engineering, which encompasses land transport, aerospace, and marine and offshore engineering industries. Singapore’s Smart Mobility 2030 vision is expected to drive growth in land transport, with key elements being disruptive technologies such as autonomous vehicles, big data and AI.24
Building up and out
Singapore is a renowned infrastructure hub and regarded as a powerhouse for design, development, project management, procurement, engineering, proprietary technology, finance, construction and maintenance. This breadth means the country’s firms have extensive experience in areas such as energy, Smart Cities, tourism infrastructure, waste management and water facilities.25
That knowledge will increasingly be in demand as the region urbanises and modernises, a process that will create further opportunities in infrastructure development. Indeed, the Asian Development Bank estimates that the Asia Pacific region needs more than USD26 trillion of infrastructure investment by 2030 once climate change mitigation and adaptation costs are factored in.26
At the same time, given Singapore’s size, looking abroad is also essential for local mid-corporates, says Kee Hong Ong, Executive Director, Chan & Chan Engineering. The Singapore-based building contractor specialises in logistics and transport infrastructure, with operations in the Middle East.
“Because Singapore is quite a small market, operating overseas is a matter of survival for us,” Ong says, adding that the local sector is facing strong competition from, among others, foreign entrants. As more entities, including those from China, enter the Singapore market, a crowded playing field is hurting growth.27
To help local firms expand outside the city-state, Singapore set up Infrastructure Asia, a government agency, which offers finance as well as technological expertise to assist in the successful completion of projects in foreign markets across Asia. Among the projects that have benefited is a power generation facility in Myanmar that is part of a larger urban development initiative called ‘New Yangon’.28 Singapore also negotiates with countries to allow its firms access to projects.
There are also domestic opportunities, with energy and transport comprising two key components in the infrastructure pipeline. Singapore has 13 power plants and transmission projects planned, along with 75 transportation-related initiatives.29
Over the longer term, key infrastructure growth areas in Singapore include connectivity, digital infrastructure, energy, and sustainability and tourism. The government’s focus on climate change also opens up opportunities for mid-corporates in areas such as green buildings and waste management.
Looking ahead
With its location at the fulcrum of Asia, its expertise, highly educated workforce, clean and supportive government, and well-respected business sector, Singapore has for decades proven an ideal location for mid-corporates. Today, all of those aspects still hold, as does the country’s desirability as a regional base for foreign corporations: 80 of the world’s top 100 tech firms, for example, have a presence in Singapore.30
For mid-corporates in the city-state – whether in the high-value manufacturing arena or in infrastructure – it remains an ideal base from which to expand across the region. Positive steps have already been taken in this regard: For example, the Singapore Business Federation has signed agreements with various regional organisations to facilitate partnerships between local companies and entities in China and across Asia.31
And with the government well aware of the importance of maintaining Singapore’s competitive position, both regionally and globally, such initiatives will surely not be the last.
1 World Bank data. See: https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?end=2018&locations=SG&start=1965
2 PwC Report; World Bank, ‘Singapore Overview’, April 2019
3 https://data.worldbank.org/indicator/ny.gdp.mktp.kd.zg?end=2018&start=1980
4 https://www.scmp.com/business/article/2183063/imf-cuts-forecast-global-economic-growth-2019-amid-trade-tensions
5 https://www.ft.com/content/da723f94-af62-11e9-8030-530adfa879c2
6 https://www.channelnewsasia.com/news/business/singapore-economy-gdp-2019-q4-mti-12226222
7 The Global Competitiveness Report 2019, World Economic Forum (October 2019). See: opens in a new windowhttp://www3.weforum.org/docs/WEF_TheGlobalCompetitivenessReport2019.pdf
8 Doing Business 2020: Comparing Business Regulation in 190 Economies, World Bank (2020). See: opens in a new windowhttps://openknowledge.worldbank.org/bitstream/handle/10986/32436/9781464814402.pdf
9 SC Global Research; ‘Singapore – Addressing current and future needs’, 18 February 2020
10 https://www.bloomberg.com/news/articles/2020-02-18/singapore-boosts-spending-to-counter-virus-economic-threats
11 https://www.straitstimes.com/business/economy/adb-cuts-asia-growth-forecasts-on-escalating-trade-war
12 https://www.singstat.gov.sg/modules/infographics/economy
13 These Are the World’s Most Productive Countries, Bloomberg (January 22, 2019). See: https://www.bloomberg.com/news/articles/2019-01-22/germany-nearly-catches-korea-as-innovation-champ-u-s-rebounds
14 Singapore Economic Development Board (EDB). See: https://www.edb.gov.sg/en/our-industries/industries-and-key-activities/advanced-manufacturing.html
15 RIE2020 Plan, National Research Foundation, Prime Minister’s Office Singapore. See: https://www.nrf.gov.sg/rie2020
16 RIE2020 Plan, National Research Foundation, Prime Minister’s Office Singapore. See: opens in a new windowhttps://www.nrf.gov.sg/docs/default-source/default-document-library/rie2020-publication-(final-web).pdf
17 PwC Report; Singapore National Library, ‘Economic & Productivity Growth’, 2017; Singapore Economic Development Board, ‘Factory forward: Advanced manufacturing takes root in Singapore’, 2019
18 Singapore’s advanced manufacturing avatar “Industry 4.0”, Singapore Economic Development Board (July 10, 2017). See: https://www.edb.gov.sg/en/news-and-events/insights/manufacturing/singapores-advanced-manufacturing-avatar–industry-4-0.html
19 Ibid.
20 Measured as growth in highest value-added per actual hour worked in 2018. See: Economic Survey of Singapore 2018, Ministry of Trade and Industry, op cit.
21 Economic Survey of Singapore 2018, Ministry of Trade and Industry, op cit.
22 https://www.edb.gov.sg/content/dam/edbsite/downloads/articles/bem-media-release-q12020.pdf
23 PwC Report; Economic Development Board Singapore, ‘Industries and Key Activities – Precision Engineering’, 2019; Enterprise Singapore, Industries: Precision Engineering’, 2018; The Business Times, ‘To Revive Their Fortunes, Precision Engineering Firms Need to Diversify’ September 2018; Ministry of Trade and Industry Singapore, Precision Engineering Industry Transformation Map to Pave the Way for Digital Manufacturing’, October 2016; Economic Development Board Singapore, ‘Manufacturing performance 2017’, 2018
24 Ibid.
25 Enterprise Singapore. See: https://www.enterprisesg.gov.sg/industries/hub/infrastructure-hub/market-opportunities
26 Asia Infrastructure Needs Exceed $1.7 Trillion Per Year, Double Previous Estimates, ADB (February 28, 2017). See: https://www.adb.org/news/asia-infrastructure-needs-exceed-17-trillion-year-double-previous-estimates
27 PwC Report; Economic Development Board Singapore, ‘Industries and Key Activities’, 2019; Economic Development Board Singapore, ‘Advanced Manufacturing’, 2019; Enterprise Development Board Singapore, ‘Introducing EDB and Singapore’, April 2019
28 https://www.bloomberg.com/news/articles/2019-08-20/singapore-goes-all-in-with-private-sector-in-infrastructure-push
29 PwC Report; BMI Reports, ‘Singapore Infrastructure Report’ , July 2019; Building and Construction Authority, ‘Singapore’s Total Construction Demand To Remain Strong This Year’, January 2019
30 Singapore flexes its standing as Asia’s technology capital, Singapore Economic Development Board (March 2, 2018). See: https://www.edb.gov.sg/en/news-and-events/insights/innovation/singapore-flexes-its-standing-as-asias-technology-capital.html
31 Singapore well-positioned to facilitate Asia’s infrastructure development and growth: Teo Chee Hean, Singapore Times (August 15, 2019). See: https://www.straitstimes.com/business/economy/singapore-well-positioned-to-facilitate-asias-infrastructure-development-and-growth