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Keep manufacturing as key pillar in Singapore economy: Analyst

f50pilling

03 Dec Keep manufacturing as key pillar in Singapore economy: Analyst

The Republic needs to keep manufacturing as a key pillar of its economy and raising productivity will be important to keep ahead of competition in the region, said economic commentator David Pilling.

 

Singapore needs to continue moving up the value chain and keep ahead of other countries where labour is cheaper, says economic commentator David Pilling.

Mr Pilling, who is the Asia Editor for Financial Times, was speaking at the first of five Future50 talks held by the Singapore Institute of International Affairs in conjunction with SG50 on Wednesday (Dec 3). The talk was titled Economic Transitions: The Next Phase for Singapore.

He said: “Singapore is way ahead if you look at GDP per capital. It is US$55,000 in Singapore, the nearest in Asia is Japan – US$38,000, then you go to Korea – US$25,000, Malaysia – at about US$10,000. Economics is not a perfect science, but that’s basically a reflection of productivity. This is one of the most manufacturing-intense countries in the world, with Switzerland and Japan being the other two. I think manufacturing is very important. It’s probably been underestimated by some economies.

“Countries that give away their manufacturing are probably unable to get it back again or it is very hard to get it back again, so that is a challenge for Singapore to maintain that kind of level of manufacturing within the economy … It is a continued process of moving up the value chain and keeping one, two, three steps ahead of those countries that are poorer, where labour is cheaper.”

Currently, the manufacturing sector accounts for about 20 per cent of the Singapore economy.

During the panel discussion, Mr Pilling outlined some trends and potential threats that could shape Singapore’s future. These include the low birth rate, the state of the financial market, rise of technology, and environmental constraints. He added that Singapore, being trade-dependent, will also be dependent on trade routes that function properly despite tensions around territorial disputes.

He expects Singapore, which currently invests through companies like Temasek Holdings, to put more focus on investment. “To some extent, I think part of the Singapore economy will become what you might call a ‘rentier economy’. Singapore is very wealthy, it has a lot of savings, it also has a lot of know-how. So one of the ways Singapore can make money is by placing bets on other companies, other countries, other technologies. Just like how a big pharmaceutical company for example has all its R&D in house and it take stakes in and might even buy technology companies,” Mr Pilling added.

“This is a process of hedging, it is a processing of turing savings into a stream of income. This is already a part of what Singapore does and it would be my guess that they will continue to do it and it will become more important.”

This article originally appeared on Channel NewsAsia on 3 Dec 2014.