The Singapore economy is too dependent on the manufacturing industry. Manufacturing industry consists of 26 percent of the overall GDP of Singapore. The manufacturing sector is very volatile and the maufacturing sector was one of the first (if not the first) to shrink in any recession. Your assertion, “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”, is mere speculation.

It depends on what clusters of manufacturing and which value chain of manufacturing you are referring to.

Presently, manufacturing in Singapore is evolving and going high tech. New trends are emerging like clean energy and biomedical. Old ones like electrical will be eventually phased out.

Our government will still go heavy on manufacturing as it has a great multiplier effect on the economy. Almost a quarter of the workforce in Singapore is employed by the manufacturing industry. The largest among the other sectors.

The high-tech manufacturing and services sector will continue to drive the economy.

all these are foreign MNCs. I would rather see more home grown companies growing and thriving here

TOC needs more Andrew Ongs to write for it.

The local MSM unthinkingly sprouts PAP propoganda and vocal netizens react on the Internet. All very natural. But a space like TOC often sounds like, “Nothing good about S’pore”.

Well argued totful articles like this help balance this perception.

It might even open minds that not every govmin policy is wrong.

Ravi Philemon

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Your assertion, “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”, is mere speculation.

—

Data shows that traditionally when the US economy recovers, manufacturing is a very strong economic driver.

The article reads too much like an EDB oversell. The factors cited were IP protection and talented workforce. What makes us think that China cannot work on IP issues in the near future? Given the Chinese govt politcal will and determination to make their economy work, it is only a small matter of time before the infrastructure is set up, and people educated to treat IP rights in the proper way. Secondly, China already has a larger pool of young, eager, computer savvy, and hardworking and talented and most important cheaper workforce, and is poised to break into higher tech sectors better than Singapore can. They will capture these sectors as quickly and as masterfully as they have conquered consumer electronics. At one time, it was popular to think that when China comes of age, Singapore can move up the next rung on the tech ladder to more high tech products. This is no longer the case, as China has shown they are capable of leapfrogging us – they didnt want to move into B&W TV production when we gave it up; they went directly to colour TV production and they have never looked back! Now they are in plasma and LCD TV and Singapore has completely hollowed out in this sector. Ask any Purchasing Manager where do they source for good and cheap and fast moldmakers and toolmakers, if not in China. Shanghai and the Zhejiang region has a long tradition of precision and supporting industries, altho these places have gotten more costly for business, but still cheaper than Singapore; Dalian has a strong worldbeating logistics sector. What is to stop MNCs siting their manufacturing centres in/near the logistics bases in Shanghai/Dalian region and beating the daylights out of Singapore again? R&D is also not a problem in China as they can count on a returning diaspora of PhDs from US.

Singapore should review the sectors that we are strong thus far, and they seem to be in the sectors of education providers, specialist healthcare, food hygiene and technology, environmental technology, water management, port and airport management and urban planning, and it will do well for us to see where they might bring us. Are these the very areas in which China is weak in? If so, we could exploit the weaknesses instead of competing headon, which will be suicide.Ater all, pharma sector does not support high employment numbers except PhDs for which we have little; and the IRs provide jobs for the average high school leaver but not so many for U grads, as e.g. we could train more grad teachers, more grad healthcare providers, food inspectors etc.

Andrew Ong@2 says, “Almost a quarter of the workforce in Singapore is employed by the manufacturing industry. The largest among the other sectors.”

A Tan@5 says, “Data shows that traditionally when the US economy recovers, manufacturing is a very strong economic driver.”

Rightly said A Tan. “When the US economy recovers”. Precisley why the economic policies should not over-lean on the manufacturing sector. As they are the most volatile, in the event of a downturn, a quarter of the workforce become at-risk for being retrenched. The over-reliance on the manufacturing sector could be the albatross around the neck of Singapore.

If an industry phases out too fast, unemployment goes up too fast too. With regards to protecting foreign-owned IPs, this is at the expense of local firms trying to build home-grown capacity for intermediate technologies. Even worse, the government offers GLCs protection at the expense of local companies who are trying to go up the value chain. Every time the private sector comes up with a good idea which needs government support (e.g. changes in law, licensing, etc), the government passed on the new opportunities to GLCs at the expense of the enterprises that came out with the idea at first. It is very clear that PAP industrial policies is that GLCs must remain as the sole key player in Singapore’s private sector so that the private sector will never grow beyond PAP’s influence.

I agree with 9) Ravi Philemon. Somehow or rather, dependence on the same old formula will not work, and if we are struck again by another recession, the manufacturing will be the first one affected again.

EDB I believe is trying to slow the exodus of MNC Manufacturers by offering incentives but they cannot stop the inevitable. I personally think that the long term solution is to groom our homegrown industries which will always be second class compared to the foreign companies unless the government changes their old strategy.

For those we think that we can do high tech stuff and let the low tech stuffs be done by the developing countries, please buy a ticket to China visit the factories there. Tell me what you think…I bet they can make a panadol tablet or a syringe cheaper then us.

Given Singapore’s limitations and understanding that downturns are inevitable in an economic cycle, what would you think could be a better alternative to our current strategy?

Yeah, this reads like an EDB article.

The strong S$ drive many industries out.

If oil prices suddenly jump up making transportation cost expensive, we may have by then driven out many money making industries.

“It depends on what clusters of manufacturing and which value chain of manufacturing you are referring to.”

While you are right about the stuff on the value chain and the multipliers effect. It very much depends how much value ($$$) is being trickled down locally for the multiplier effect to work with better punch and how much it is flown out. Very high tech means high level of mechanisation (where capital investment mostly comes from overseas) with smaller number of very specialised people are being employed to run the manufacturing process proper.

While it is grand comfort to be associated with big name manufacturers (previously it was ML, CITI, etc) and with a small land mass and increasing population which may be artificially brought up, how many global big name manufacturers names there are in this world that we can attract to sustain the level & type of skill force (a significant portion of which may well be expatriate community) that we have matching this type of manufacturing.

And how about the bulk of our locals (in the tunes of hundreds of thousands if not millions) that do not possess such skill set to benefit from such manufacturing.

In short, high value does not mean more value being filtered down. In fact & sometimes, low value may even mean more local not so specialised employment content which has better filtered down multiplier effect. Unfortunately, our country is getting more and more expensive and the very fact that technology has brought about better & faster manufacturing than the number of people required to run it and in turn to demand it. The recent bubble has proven it.

When the supply chain of doing manufacturing business here is escalating very fast due to high operational businesss cost and high standard of living thus eroding profit margin, what the incentive of company continue to do manufacturing here ?

It is not just a matter of whether manufacturing industry will continue to drive the economy in good time, but whether manufacturing industry can reap enough profit to be viable in Singapore.

In fact, in this bad time, manufacturing companies are scaling down, and take the opportunities to build their manufacturing infrastructure and capabilities in other low-cost countries, and when the economy again, they will be ready for it. So what’s the point of setting a business in Singapore where the operational cost will continue to be as high in bad time and even much higher in good time ?

Another thing, since when any “hub” has been successful in Singapore ? None I can recall…. maybe StarHub

To Andrew Ong,

All i know is, to depend on the same old formula that has produce success will result in failure.

Basically what you are just suggesting is true, and recession is inevitable. but what i feels is that if we depend back on the same old formula, when a recession hit again, the cycle will be back. So therefore, the best way is to look for solution that will minimize the future impact of recession. Every little bit of changes will help, even though singapore is limited and small. look at all the people from the M sector that are been laid off around the world…

oh which btw, since some illness are inevitable, so do you think we should just follow the same formula and risk falling sick again in the future? or create a change, a new style based on changing environment that may help to prevent the illness from striking or minimise the impact.

There is a connection between society, economy and the environment and there is an imperative need to understand out their implications so that appropriate economic and social policies may be drawn. Singapore faces a daunting crisis from three fronts; the credit-fuelled economic crisis, the accelerating climate change and an approaching peak in oil production. Singapore needs a model which does not just focus on economic and environmental measures, but measures which has profound social consequences as well. There needs to be a redesign of our system so that it values and works with the vital operating systems – social and natural – in ways that protect and enhance them both. And it will need a new perspective on the market economy. It cannot rely on continuing growth to provide sufficient finance for public services, or on market mechanisms to ensure their efficiency – because financial markets are less reliable than ever, because markets only reflect and cannot repair inequalities, and because unchecked growth puts the everything we hold dear, at risk.

The proof of the cake is in the eating. Look at HK’s economy today. It had moved the bulk of its manufacturing industries across the border to China where land and labour, key ingredients for economic growth, are abundant and cheap. HK today thrives on tourism, financial and service industries. Singapore should crystal-ball this for itself and restrategise along this line. Niche manufacturing sectors can still be viable in the medium term, but the days of high volume, labour-intensive industires are numbered. How can we sustain competitive advantage using imported foreign workers against kingpins like China and India and other growing economies like Vietnam?

Singapore must lower its ambitions on high GDP growth rate and grow within our means as the strive for high growth has imposed great social, inflationary and economic costs (in cost of living and doing business) to the majority of people whose individual prosperity trails behind that of the country and the minority elites. But lowering growth rate, and hence reducing economic bubbles, can still ensure that the country can still live well. After all a bigger tiny red dot is still a tiny red dot despite all our years of high growth – as the relevation from the current financial crisis has shown us.

There seems to be only two strategic factors mentioned here; IP protection and talented workforce. That unfortunately is not sufficient to confer a competitive advantage to support the whole idea of sustaining a manufacturing enterprise.

What was not discussed but should have been given more extensive treatment is the issue of high labor cost, land scarcity along with the prohibitive cost of operating manufacturing enterprises in Singapore.

Maybe the author would do well to consider the following salient:

(a) How many green field sites have been started in what he calls high end manufacturing enterprises in the last 5 years?

(b) Do we even have the critical mass to even pursue high end value added manufacturing. Comparatives should have been done with to account for the deficits in intellectual capital needed to support such enterprises / along with cost structures which would militate against such goals.

(c) Was enough scoping given to manufacturing by the EDB in the last 5 years? Or did they instead dilute their focus on other growing other enterprises such as bio-tech, education, banking and shipping?

(d) How much diversification was pursued to support the strategic manufacturing fit between the whole idea of growing manufacturing assets and ensuring sustainability?

Had the author done his home work; we would not be so inclined to end it off with a bang that’s really full of sound and fury signifying very little:

“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.”

SD (Internet liaison officer of the brotherhood)

Actually, the author makes it very clear that this article is meant to read like an EDB Advertisement for Singapore: 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.. So how could A Tan (#5) conclude that this article is a well-argued thoughtful article when there is no element of discourse at all?

“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.”

============

its not wise to rely on manufacturing. To some extent it is ok, like pharma and high tech areas even r&d. But not the mass production manufacturings like electronic goods and textiles among others. Those are best done in China.

why is the author still trying to think that sg should rely on manufacturing? think out of the box. relying on old ways will lead to more problems in future.

‘talented and skilled workforce’ : these come from overseas for many positions.
sg is such a small market. so few companies exist and invest here if you are able to compare with India and China. Their people get to work in numerous companies and learn about manufacturing. locally, there is opportunity but much less. This is why i feel that there is a talent shortage. with the door wide open, when job opportunities are created here, foreign workers stand to gain as locals with limited exposure are competing head on with foreign workers who come from land of many exposures.

You gave yourself away SD. Only a very rare vocation uses the term greenfield to describe start ups. Gotcha! If you really want to add value to EDB, just dont throw tomatoes. Why dont you people come up with something that can really work and get us all out from this recession. Anyone can talk, but not everyone can do.

This article made me realised something which i like to share :

1. many JOBs created in singapore have gone to FT (long term permit PRs and those on shorter ones) although some went to citizens as well.

2. many BUSINESSES doing business in singapore are FT MNCs although some are local companies like creative but these are few and rare in terms of size and revenue.

So, where are all the citizens?

“23) babu on March 11th, 2009 3.26 pm
Anyone can talk, but not everyone can do.”

mr. babu , so which category are you from. The “can talk” kind or the “can do” kind. We have quite of a lot of “can talk” kind in our country already. how to come with something that really can work if you do not want to work on the suggestion.

To begin something with, ask your ‘can do’ type to reduce gst to 4%.

It does not matter what is the incentive or how they want to slow the exodus.

The crux of the problem is the limited land in Singapore for manufacturing industries which required CHEAP LANDSPACE for their operations as it is infeasible for them to expand vertically.

Even with incentives to lower the cost of starting operation here. Expansion options are also limited due to the limited land space.

Hey andrew,

not a very impressive article. sorry. just my purest honest opinion.
hope you can improve.

all the very best.

“The crux of the problem is the limited land in Singapore for manufacturing industries which required CHEAP LANDSPACE for their operations as it is infeasible for them to expand vertically.”

Bingo, once you reached the peak. You find more and more slowly coming up to the peak and there is no more space to take in so many people.

In our context, It is a matter of space (limited land mass or the type of manufacturers still finding here ‘economically’ attractive) vis-a-vis human resources (absolute increasing population or the skill set) and the distribution of the national benefits ($$$$) among those different groups of population to make it liveable – those who may be stampeded at the peak if they can’t find a proper foothold.

Not even talking about other production or service variables which we may not even have the advantage taken in totality in their fine / optimal mix, once the pressure point is reached in either space or population, we are in for a rough rough ride as other externalities will start to creep in.

In short, if you want to increase your population, there must be work & space assuming education / skillset is not a constraint..

Seems to me :

1. no natural resources, so need a lot of foreign MNC come here invest. How many GLCs are there? how many local companies succeeded like Creative?
What is the market for wanabee local company? anything left for them?

2. not enough humans, so FTs relied on heavily for decades especially nowadays. Wanna go high tech manufacturing? Local talents where? enough or not ? So, again, rely heavily on foreigners. for so long rely on foreigners? until when? Jobs created from these high tech manufacturing, go to who? Oh, i forgot, there is PRs (foreigners) . and they are part of the singapore employment statistics.

can sg improve on this model?

“Presently, manufacturing in Singapore is evolving and going high tech. New trends are emerging like clean energy and biomedical. Old ones like electrical will be eventually phased out.”

Sorry to disappoint the authour, we might not be able to compete with the power of china let alone USA, germany and other countries. The most promising of all he clean energies is solar power.
Do you know that there are more than 50 solar sales and manufacturing companies in china not to mention those that are now based in US. How many solar capabilities do singapore have. If singapore really want to be successful in the photovolatic industry, it require a lot of effort by the government to not only attract MNCs, it need to encourage homegrown SMEs by tapping the singapore market first. For MNCs, it would provide more sense for them to go into countries like china , india and USA directly because of long term potential of their big population.

must admit I am not sure what this article is trying to say. I read it over and over again and all I can gather is a collection of marketing speak quotes being pass off as “research material” presumably to assure, presumably, the Singaporean audiences that all is well in the manufacturing front. Recession/Depression notwithstanding.

Whilst I am somewhat skeptical about the assertion, I’ll reserve my comments about the state of the manufacturing sector. What would be helpful is if someone can help me clarify how two so-called strengths highlighted is well the thing that, as the article seemed to eluded to, make Singapore such a haven for manufacturing.

(a) IP protection
———————–

Now since these manufacturing companies manufacture to exports, how exactly does an IP that is “protected” by the Singapore courts really be of use, say when, other countries chose to violate the IP?

After all, companies located in other countries don’t have to compete in the Singapore market and if they elected to violate the products made by Singapore-based MNC manufacturers what can the Singapore court do?

What is the real value of so call IP protection offered by Singapore to MNC choosing to manufacturer here in Singapore?

(b) Talented and Skill workforce
———————————————

Is the author refering to “Talented and Skill” Singapore workforce or the ease with which MNCs can recruit “Talented and Skill” foreigners?

If it is a case of MNC being able to easily recruit foreign “Talents and Skills” then what exactly is the strength of Singapore in terms of “talent and skills” and the so-call “fundamentals” that is being spoken about in the article?

Manufacturing is important for S’pore. What needs to be done is now is to implement the following policies

(i) immediately send home those PR holders who have worked in Singapore for quite a long time. The bulk of these are Malaysians. Let’s send the whole bunch of the blood-suckers home. Replace these foreign workers with Singaporeans.

(ii) devalue the Sing$ by at least 20%. Singapore has now become the 10th most expensive country (city state) in the world. Lee KY wants the Sing$ to be strong so that he can boast “we have a strong dollar”. Well recent events have shown that his economic and financial judgment is very poor indeed.

I am looking for more balanced arguments to be put forward along the following lines : real cases why companies have decided to move out of singapore, and why aspiring companies have decided not to even consider setting up operations here in the first place.
I don’t want to pour cold water on the pros we offer, but if you have sat in general management meetings, where the discussions are filled with cold hard facts on our prohibitive (not merely high) costs, and now coupled with the backdrop of short term focus by almost any stakeholder in public traded companies, you will know why many companies have decided to scale down, or head elsewhere. The question to ask is what contributed to the prohibitive costs….

1) Ravi Philemon on March 11th, 2009 1.03 am

“The Singapore economy is too dependent on the manufacturing industry. Manufacturing industry consists of 26 percent of the overall GDP of Singapore. ”

The issue isn’t whether we are too dependent but the nature of our dependencies. You see much of our manufacturing supply chain (from raw material to parts to final assembly) has over the time exclusively depended on MNC. The MNCs largely import the raw materials and parts do some value added activity and then re-export. Mind you even labour is largely imported. These MNCs don’t rely much on second or even third tier suppliers based in Singapore for parts, let alone raw materials. Although there was a time we had a strong Singapore based SME third tier supplier industry supplying things like mould for first tier (MNCs) industry (when we had large scale PC manufacturing). That has rapidly gone by the wayside now. Now the more fashionable “biotech” industry relies virtually on zero local SME to supply components (even in the form of Intellectual Property as is the case in many Scandinavian and Swiss bio-tech).

As for labour, the so-call “Skills and Talent” of the local are increasing becoming a mismatch for what is needed in the MNC companies. For example, in many “traditional” manufacturing like say disk drives, I am aware that there is a crying need for good old fashion mechanical engineers but fewer and fewer students are taking up this course of study. More are attracted to the more fashionable “biotech” industry, thanks in part to the government industrial policy by fashion, rather than do boring course like mechanical engineering.

Worst of all is not whether there is a lack of graduate but a serious lack of entreprenuer to startup new companies and building up capabilities to service MNCs based in Singapore and also for export. At the “high tech” end, like I indicate before, many Scandinavian bio-tech industry are SME capable of generating IPs which can then bought up by bigger companies. In the field of IT too (namely MySQL, Qt, and many more). In Singapore many of the local “talent” are more interested in being employee (especially managerial rather than technical) for MNCs than actually startup. I supposed EDB policies of favouring MNCs also has a part to play. However, it is worth pointing out that many expats (ang mor) who end up in Singapore are quite entreprenurial, many setup small companies.

Also this “small island” mentality means that we have virtually decimated manufacturing that can service the local and export sector. For example, boring stuff like making stationaries (pencil box, etc), clothes, etc. Contrast with Taiwan that has SME ranging from making simple stationary for Japanese market (which they were able to switch to serve the local market) to those capable of supplying parts for “high tech” companies like Apple.

So you see the so-call manufacturing industry that we have in Singapore is really flimsy if you scratch the surface. It is this flimsiness that is making our dependence on manufacturing so troublesome. The dependencies are not the source of our problem.

Before I comment on this articles, here are few questions I would like to ask:

1. This articles would be better coming from entity such as EDB to attract foreign investors.

2. So, has TOC suddenily become speaker of EDB? Or best still PAP?

3. What is the purposes of this articles? Giving comfort to people who already being retrenched by MNC manufacturing? Then again, why do they want to pack their bags or down scale if what Mr. Andrew said is truth?

4. Did Mr. Andrew himself even worked in the manufacturing before? Why I ask? Because if Mr. Andrew understand how the manufacturing is being run in Singapore and what is driving them. He may not even suggest high tech manufacturing.

Referring to #33, high cost might not be the only reason for MNC to leave, but profit margin definitely is! As a person spending half of my career life in manufacturing, I am telling you that in order for Singapore to remain competitive in the manufacturing industry, we need to ensure that we are efficient and not purely productive. There is basically no room for wastage. Meaning if 100kw of electricity being used and it can produce 1 million products, it is 1 million and zero wastage! Now, if you work in a manufacturing industry before, you know it is impossible for most factory. Duely because of our workforce diversity and different in culture and behaviour.

You would ask why zero wastage, and my answer is, China! For every 5% they wasted. They have a backup of 20% extra to be wasted because they can afford it thru labour intensive process (very much cheaper than Singapore and also mean don’t have to invest in too much machines this less assets to maintain or break even), cheap rental, cheap energy supply etc.

High tech industries? Where our workforce mainly come from? If our PRC or Malaysian workforce can do it, then I am asking what stop Malaysia or china from going into high tech? I still have not touch on corruption in our manufacturing industry! Yes, you hear me correct, corruption! Do you know how many high post management executives had profit thru getting some indirectly related people to setup company and sub out the contract to them? Or unneccessary scrapping of materials to yield personal gain? And later setup their own business after the factory packup. Well, with the high cost of living in Singapore, who don’t want to get rich faster?! Can you blame them?!

Think harder, you are living in a fairy tales if you really think Singapore is that cleaning.

aiyoyo

thought china is the world’s manufacturing factory?

aiyoyo

Ah Kow@35: You are a good writer and should consider writing for TOC…

This is not the 1st time TOC release such articles.
i am beginning to sus…..p…ct……

Hi Andrew, I think your aticle is good. Some commentators who don’t have a basic grounding in the context of S’pore’s economy can be ignored lol.

Tan Ah Kow is quite observant too, that “It is this flimsiness that is making our dependence on manufacturing so troublesome. The dependencies are not the source of our problem”.

At the end of the day, it is all back to the govt vs. market debate. While I think S’pore has an edge in manufacturing industries which are high-value, high-wage, these industries are largely dominated by MNCs, and not because of groundbreaking work by a S’pore firm.

I think the govt is uneasy at sitting back and allowing the market to choose the next ‘growth industry’. The govt has done a good job in nurturing dynamic comparative advantage in selected industries, but the next frontier of growth is likely to come from homegrown innovation to push the productive capacity of the economy, rather than from MNC tech transfer again.

eternalhap@39: You could have made your comments without belittling the opinions of other commenters. After all, what you have expressed is an opinion as well.

Thanks for everyone’s invaluable opinions and comments. It will definitely help me to see from a broader perspective and also improve my writing.

Just for everyone’s general info, I did this article after meeting up with people in the senior management level of manufacturing firms. Its part of my work dealing with manufacturers.

From this, there were many good points they had praised about Singapore from a business point of view which I had mainly focused on two in this article as these were commonly mentioned in regards to high-tech manufacturing.

I do not work for EDB or neither am I for the government, nor am I an anti-PAP. I am pro-singapore. I am proud to be a Singaporean and of our nation in what it has achieved since our independence. We have achieved much in a short span.

I think where credit is deserved we should give credit. And where there are flaws, we should also identify and fix it. Not just criticise.

In this case, I had to accept some of the credits that Singapore is where it is because of our government’s strategies (though there are also some I do not agree) and the hard work of each one of us.

Hence, I decided to highlight them here in this article to share and hopefully, fellow Singaporeans can feel proud of Singapore in some sense.

I do agree with comments that more should be done to help local SMEs. Actually my next contribution article will be on that.

Nonetheless, I feel (my personal opinion) that the government can only help local entrepreneurs so much. Cos we are a young nation, therefore MNCs here actually help us by giving us vision, ideas, benchmarks in respective clusters in manufacturing.

If we are more entrepreneurial and more risk adverse, we in fact can learn from them (MNCs) and tap on their expertise to create our own business model.

However, it seems, whenever we encounter difficult, we only blame the government. I think they should not be shouldering the entire blame.

A true entrepreneur or businessman sees the opportunities in problems and not the other way. If every problem we need help from others as business people, we might as well be a charity organisation. Not sure if you agree.

The government cannot be responsible for everything in our lives. How can rite? We need to help ourselves first. Their role is to open up the playing field for us and the rest is up to us in how we want to play and how far we want to play.

Having said that, from the Budget and with alot of focus to help our SMEs this time, I believe our government’s next approach and strategy will be focusing more in building them up.

#35, I understand your point on costs and profit margins. Unfortunately, profit margin is not solely dependent on costs, but all other aspects including, but not limited to successful commericialisation, demand creation, efficiency, regulatory/ legal issues etc, all of which I will termed as ‘real value’ (I used this term in a previous article on this site) to raise the fact that, locally the costs and rate of cost rise is not neutralised with an equivalent or higher level of value add. In manufacturing, unless the setup locally is closely integrated to other functions including R and D, marketing, …..it’s an uphill task trying to raise profit margins (high tech or not). That’s where cost becomes the key factor because business usually flows to the point of ‘lowest’ overall costs.
Then there are zones where through your differential analyses/ FPAs, you will no longer be able to raise (or even sustain) profit margins, without sacrificing your EBITs. Hope this helps.

“Just for everyone’s general info, I did this article after meeting up with people in the senior management level of manufacturing firms. Its part of my work dealing with manufacturers.”

Of course, it is good to them officially as it is always good tactic not to show your cards too fast, just in case. Anyway, this is business right.

It is the unofficial & informal loose talks that you may be in for big surprises (or perhaps pretend not to be surprised), ending by getting “please do not quote me”.

“A true entrepreneur or businessman sees the opportunities in problems and not the other way. If every problem we need help from others as business people, we might as well be a charity organisation. Not sure if you agree.”

Business people do need help, in fact even more of it and the good ones know how to do it and ask for it ‘rightly’. If possible, they will even get away for free.

“The government cannot be responsible for everything in our lives. How can rite? We need to help ourselves first. Their role is to open up the playing field for us and the rest is up to us in how we want to play and how far we want to play.”

Open up playing field. GLCs ??? Now, we have moved up to notch 10 as the world most expensive city, definitely some achievement to talk about in some convoluted sense.

Those they can eat, they eat. Those they cannot eat, that is where you and those high value manufactureres are here for, perhaps still within the cost parameter of notch 10.

After all the pinches & punches, your article is still a good one for the good of Singapore, to extract whatever possible value there is left to extract.

Hi Andrew and All,

Following my post # 19, there was an interview in ST of March 11 with Professor Linda Lim who is a US-based Singaporean economist and strategist on this topic. Sorry I don’t have a e-copy to share but maybe someone else may have.

It is an excellent must-read from someone authoritative and will give you a refreshing and different perspective of your take on PAP govt’s economic policies and strategies. She is of the view that it will no longer be viable for Singapore to have more of the same old things and says why. I agree with most of what she wrote as I had also said so in my earlier post.

41) Andrew Ong on March 12th, 2009 5.09 pm:

I find it strange in your latest responds that you need to explain the rationale for wanting to write the article rather than defend the points raised in your article. In other words, I was wondering why you didn’t explain why the two factors were parameters that made, as you have concluded in your article, Singapore such as sound manufacturing place.

Personally, I think you need not have been too concern about why you wrote the article. Also I do not think there is a need for you to be defensive even if you are pro-PAP, pro-government, pro-establishment, or “pro-Singapore” (whatever that means). There is nothing with having a view that is not quite flavour of the audiances. In any case, it is your view so stand by it.

More importantly, if you wish to put forth a view, whatever leaning that may be, is to be focus on what message you intend the article to carry. For instance, if you feel that the two parameters of competitiveness that you mentioned as the focus of attention, then YOU should have explained in terms of how these parameters feeds into the strong Singapore “fundamentals”. Remember to explain why YOU believe what you so. That way than it is meaningful for commentators to know what the article is about.

As it stands, the article seemed to have leap from the specific to broad generalisation. In this case, you pick up the quotes of people and you then conclude in your article:

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.

Yet in between your specifics and your generalisation, you have not really explain the connection, which unsurprisingly presents an opening for people to point out flaws or misunderstand you. Personally for me, it would be useful to add to my understanding how you saw the connect between IP and Singapore sound fundamentals.

Hi Andrew, with all due respect to you

“However, it seems, whenever we encounter difficult, we only blame the government. I think they should not be shouldering the entire blame.”

Well, if they didn’t hype up themselves to be such great people who deserve great pay, then they wouldn’t be shouldering so much blame. Remember, the more you hype is like blowing a super big balloon and when that balloon burst, it will hurt much more then the small one and the bang will also be much louder. What you reap is what you sow.

“The government cannot be responsible for everything in our lives. ” for that i truly agree with you, we should depend on ourselves and not on the gahmen. however, taxpayer who have contribute so much to their coffer expect them to help when in need, that ain’t surprising and should be expected. these people who truly need aid are not expecting free lunch but they just need the aid to tide over a dark period.

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.

In regards to what you said, “it stands, the article seemed to have leap from the specific to broad generalisation. In this case, you pick up the quotes of people and you then conclude in your article”

I did not picked up quotes and pasted them in this article. I met this people and had discussions with them on this matter.

SZ, you are right.

None of us are asking for welfare, or subsidy. We are only hoping that the govt does not treat us like cash cows.

Why is there a 40 cents tax per of petrol? Why are we paying sky high prices for public housing? And yes, is not Singapore economically competitive, but at the expense of its cititzen’s pay?

Andrew, why don’t you meet up with those many more manufacturers who have left our shoresl, instead of those who are staying put?

I do. They have adapted by shifting their manufacturing plants to lower-cost neighbouring countries like Batam and Malaysia. But they have kept their R&D, sales and distribution here.

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!