Andrew Ong
Despite an expected slow recovery from the recession and the rise of business costs, it seems manufacturing in Singapore remains a vibrant and relevant industry. This article aims to present Singapore’s edge as a manufacturing hub that has seen companies such as Abbott, Neste Oil and Illumina investing here.
As an export-dependent economy, Singapore had been the first country in Asia to slump in a recession. Now our manufacturers are feeling the heat especially with the rising cost of running their businesses that have been eroding their competitiveness.
It is not wrong to say that manufacturers are looking into more viable means of sustaining their businesses such as moving to cheaper production hubs like Vietnam and China. However, the truth remains that Singapore has strong fundamentals that still makes her an attractive location for manufacturers.
IP protected location
Besides Singapore’s reputation as one of the best connected countries in the world, with all the sea, air and telecommunications links needed for business, it has also gained recognition for being an Intellectual Property (IP) rights protective country.
For the past two years, Singapore has been voted the most-IP protective country in Asia by the Political & Economic Research Consultancy (Perc). Like Aalst, a local chocolate manufacturer, many who have located their bases in Singapore have found it easier to maximize the value of their corporate IP here.
CIBA VISION, with divisional HQ in the US and a Swiss parent company NOVARTIS, is a global leader in the research, development and manufacturing of contact lenses and lens care products. They chose Singapore to set up their manufacturing plant for their DAILIES disposable contact lens in 2005.
Mr Mark Chua, General Manager for CIBA VISION’s DAILIES & Distribution Asian Supply Chain explained. “Despite having other plants in Malaysia and Batam with cheaper alternatives,” he told me, “we chose Singapore to manufacture this particular product because of our long-term strategy in taking advantage of Singapore’s IP protection environment and technology base.”
Their DAILIES are produced by high technology automated machines that dispenses what they call “lightstream technology” that gives its lens precise accuracy. Because they are fully automated without using any manual labour, this provides thorough cleanliness for top quality products.
With manufacturing performances no longer solely dependent on physical assets alone, Singapore still gets a high vote of confidence from high-tech manufacturers in this new era where growing and managing intangible assets, such as brands, inventions and processes, are critical in achieving the equilibrium of long-term sustainability for their businesses.
Talented and skilled workforce
Makino Asia, a leading manufacturer of advanced machine tools has its manufacturing headquarters in Singapore where its office is fully integrated with R&D and engineering production. It produces S- and E-series Milling Machines, which are sold worldwide, as well as the CNC Electrical Discharge Machines (EDM) and CNC Wirecut Machines.
As such, a skilled workforce is essential in meeting their clients’ every need by providing high-quality engineering solutions, and reliable technical support. This remains one of the main factors why Singapore has been an ideal location for Makino Asia.
“In Singapore, we are well-positioned to access a three billion population market from India to China in a short time, due to its excellent logistics infrastructure. Language and communication are not a problem with the multicultural workforce,” said Dr Moh Chong Tau, CEO and President of the company (picture right). “There are no limitations to getting the right talent here, regardless of where they come from. This makes doing business here fast and easy.”
Despite labour costs in Singapore being generally more costly than in China and India, their logistics and administrative costs for such operations can add up to as much as three times more than Singapore. That is why Dr Moh is confident that Singapore will continue to play a pivotal role in Makino’s operations.
Moving ahead
Manufacturing in Singapore is moving rapidly up the value chain towards increasingly knowledge-intensive and innovation-driven activities. This transition has been made possible with Singapore’s vibrant economic eco-system of complementary activities – from manufacturing, R&D and innovation, and supply chain management, to shared services and intellectual property management.
Manufacturers also benefit much from Singapore’s network of trade agreements and linkages, such as Free Trade Agreements (FTAs). The most significant agreement recently signed was with China. This FTA would allow more growth and integration between both countries, and provide freer movement and more economic benefit for our manufacturers.
Moving forward, Singapore is positioning itself for the future. Apart from its strategic location, IP protected environment and availability of skilled and talented workforce from a well-educated population, Singapore’s political stability and security in comparison to our neighbouring countries are conditions that favour business sustainability and profitability.
With such attributes, it only stands to reason that Singapore is in an advantageous position in spite of the harsh external conditions. Manufacturing in Singapore, though costly, might pay off greater dividends in the long run by tapping on the island’s strong and tested fundamentals when the economy bounces back.
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ok, that’s a consolation
Thanks will take a look at that read =)
47) Andrew Ong to Tan Ah Kow on March 12th, 2009 9.23 pm :
My latest comment was not to defend. It was merely to clarify on the intent so that all of us could have a fruitful discourse.
Again like I say before, from my point of view and I don’t speak for others, is that your intention to write this article is not the point of the debate. For me what was more worth debating on is the points or if you like the “logic” raised in the article.
Whatever your intention is to write the article, whether it is to make your fellow Singaporean appreciative of what we have, as you put it “sound” fundamentals or to shame or to whatever your reasoning is would not, in my opinion, not going to make a fruitful discourse.
I think if we are to have a fruitful discourse it would make sense to understand the logic behind your message. That way we can really debate about the issue of manufacturing policy in Singapore rather than focus on whether your intention to spread the message is a sinister one or miguided one.
As I have indicated, you have raised two key parameters of success factors, why not just explain how YOU see the logic of the parameters contribute to the success factor of Singapore manufacturing based. May you could also elaborate on what you mean by “high tech”, “manufacturing”, sector.
I did not picked up quotes and pasted them in this article. I met this people and had discussions with them on this matter.
I think you are taking the word “pick up” too literally.
The fact of the matter is that you have quoted someone for saying something and you have used it, on face value, as evidence to support your thesis, which is manufacturing is really sound. The fact that you did not do a cut-and-paste or for that matter even if you did is not really the issue.
The point I was making is that you simply pick out a statement made in your discussion with someone. And just using that statement as a basis of evidence for you to come to you conclusion is flimsy at best.
I am not saying that the statement you quoted is inaccurate or accurate but the problem with just quoting what someone say at face value, without some degree of inquiry on your part to further probe what is being said does not make for sound analysis.
Andrew Ong talked about IP protection and skilled labour for Novartis’s Ciba Vision and Leblond Makino setting up in Singapore.
Does he mean that Switzerland where Novartis originates and is headquartered does NOT have laws which safeguard their IP and that Switzerland’s labour force is less skilled than in Singapore?
Ditto Leblond Makino which is a Japanese company – Japan does NOT protect IP & less skilled labour than Singapore?
Please!
Glaxo has been in manufacturing in Singapore since the 1970s or earlier BEFORE Singapore enacted strict IP laws.
In the sense of ..
Manufacturing here is a sunset industries,
High overhead, High labor cost, lots of red tapes, shortage of high skilled workers, and one last thing, is not the top priority from the EDB.
In regards to your comments on Novartis’s Ciba Vision and Leblond Makino in question, MNCs like them are in Singapore because our country is an ideal launch pad because of good business conditions
They did not relocate their plants here. Theirs are expansions of their businesses.
They chose Singapore for its accessibility to reach the Asian market. It is also a globalised and lawful country so it is easy and safe to adapt and operate here.
to #56, Andrew Ong
Hello, why couldn’t Novartis Ciba Vision or Leblond Makino rely on their home countries to do the launching?
Don’t try wriggling your way out when the fundamental basis of what you said in your leading commentary has been exposed as unsound.
Actually what Andrew said in the article is kind of the standard answer that a manufacturer in Singapore will give when posed with the question why are you manufacturing in Singapore. I build some of my electronic products in Singapore, some in Indonesia and some in China. Most of the production is done in Indonesia. My European and US Customers prefer Singapore because of the “Made In Singapore” brand equity and the IPR protection. Other Customers hate to produce here because of our high costs (now top 10 most expensive in the world) so I have to go China or Indonesia.
In my opinion, China have already caught up with us in the production of high tech and high precision stuffs. I am sure all decent MNCs who are here may also have some operations in China. They are much cheaper. The current downside to do business in China is still the red tapes with hidden cost and the highly unreliable and challenging business climate.
However if Andrew had interviewed me, I would have given him exactly what he has written in his article. How else can I answer to my shareholders that I am still producing things here?
in another word, the manufacturers that are still in SG are only justifying why they are still in SG. Therefore, the biasness is inevitable.
Reading the report by Andrew, it makes me think why manufacturing especially in south east asia is diversifying elsewhere. I still wonder as well why Creative is still here. They should have moved their manufacturing to china by now.
China is going down soon at the rate they are buying the debts over from the US. So it is nothing spectacular whether people intend to manufacture their exports from there. Not forgetting that there are also competitors and they are moving fast into the market.
I’d agree with Manabo that Indonesia is a good place to set up your manufacturing business because there is land, space and economy for development. But more importantly, the indonesian market is not as open as china.
In other words, the western MNC’s have trouble breaking into their market and setting up their base there because of state laws. However, we as asian businesses have the advantage in this area.
This article highlights an important fact that businesses here are protected by government and tight regulations. Imagine how will your businesses fare overseas where none such laws exist and you have to have a good network of influential people in order for it to survive.
Corruption is everywhere, it just depends on the degree it extends into the economy. Governments everywhere are the biggest culprits, not just in Singapore.
Interesting article, and I too would have written a similar one when I was working for EDB, not too long ago.
Having worked there for a number of years, the fact is that EDB’s biggest KPI by far is FAI (fixed asset investment), which comes solely from mfg projects. I believe that the bosses tried to change this mindset and target set by the political masters, but the latter felt that other metrics (eg. value-added, value-added per employee – which have a direct correlation to GDP) were too, well “cheem” for them to boast about to the man-in-the-street, who they felt would more easily understand “ah, foriegn company invest $XXBil, wah!!”. I remember being stunned when I was told this.
This is also why they focus so much on attracting electronics, chemicals and biochemical manufacturing, because these are big FAI (each one in the billions) projects. It certainly does not mean that they are the best projects in terms of well-paying jobs for S’poreans.
But whatever my misgivings are about mfg, I can say that my conclusion too is that S’pore needs mfg. It is more stable than services industries (eg. you cant move a mfg plant as easily as you can move a call centre or IT operation) and it does have a greater multiplier effect (suppliers etc). For a country with a negligible domestic market, it needs to export products.
The problem is that S’pore continues to indulge in attracting the wrong type of manufacturing projects – all making some kind of commodity or another. Microchips may look complex, but ultimately they are a mass-produced commodity, requiring not so much on the skill of the engineers or labour on the shop floor, but the cost of labour and other input prices. These goods are highly cost-sensitive.
As competition from lower cost countries increases, the govt continues to attract and promote manufacturing through generous subsidies for big projects (which are never made public) and through a low-wage policy. The latter is of course highly effective due to the ease of hiring foriegn labour.
There is little effort to promote the kinds of manufacturing that keeps the likes of Germany, Japan and Sweden highly competitive export economies. These countries focus on automation of processes, manufacture of customized/complex goods such as semiconductor mfg equipment, turbines, aerospace equipment etc etc. These are niche industries which suit a small population like S’pores which doesnt have to worry about finding high-employment projects.
Frankly, engineering/manufacturing is a very exciting and certain can be a well-paying job. Just not in Singapore.
Singaporeans are always and forever so negative and skeptical leh…good news also criticise, bad news also crticise…wah, tak boleh tahah lah!
This is also why they focus so much on attracting electronics, chemicals and biochemical manufacturing, because these are big FAI (each one in the billions) projects. It certainly does not mean that they are the best projects in terms of well-paying jobs for S’poreans. – Hasta La Vista (#61)
The same can be said for casino jobs too.
63) smallvice585 on March 15th, 2009 9.11 am
“The same can be said for casino jobs too.”
I think this was rationalised more from the point of attracting more tourist and MICE dollars; and more subtly to give a boost to the property sector. Frankly I think the latter was more of a red herring, and cant help but laugh at all those analysts who bought this hook,line and sinker and talked up the potential for renting expensive condos to casino workers.
62) Puzzled on March 15th, 2009 9.04 am
“Singaporeans are always and forever so negative and skeptical leh…good news also criticise, bad news also crticise…wah, tak boleh tahah lah!”
Granted that some of the comments at TOC are a little over the top, but frankly, for the bulk of S’poreans who are hard-working, honest workers, they are not compensated as well as they should be. I’m not comparing S’pore to third-world countries (and after almost 45 years of advancement, we should not be!)- but rather to opportunities that similarly skilled workers have in N America/W Europe/Aus.
Why do you think so many of the skilled workers from neighbouring countries merely use S’pore as a stepping stone?
Re: 64) hasta la vista on March 15th, 2009 6.04 pm
“Granted that some of the comments at TOC are a little over the top……”
I don’t think ANY of the comments following the article by Andrew Ong could be considered “over the top”
Andrew Ong’s rationale/basis has been shown to be rather facile whereas the person you were responding to was just trying to tarnish and discredit the people who countered Andrew………..the usual SOP of the supporters of the govt./ruling party.
Mfg hub? Sure or not? i am in the mfg industry and now I am considering changing industry. Raw materials all imported and GST between warehouse/store is a huge operating cost. More than 10 years ago the gahmen stopped charging such GST which helped most manufacturers. Over the years so many household brands moved out from Sillypore mainly due to lower operating cost locations close by Singapore. If our gahmen wants to make SGP a mfg hub, they need to do more.
there is no such thing as a mfg hub!
most mfg jobs move to where the cheapest labor & other tangible costs are the lowest
wake up!