A Sweeter Cut For Manufacturing

Source : Weekend Today, 11 Aug 2007

Sector grows 8.3 per cent, boosted by biomedicals, transport engineering

















The manufacturing sector has loosened its dependence on electronics, with other industries such as transport engineering and biomedicals helping it to expand a strong 8.3 per cent from a year earlier, faster than the first quarter’s 4.4-per-cent growth.

With a first-half slump in the electronics sector, such growth “would not have been possible 10 to 15 years ago”, said Mr Ravi Menon, second permanent secretary of the Ministry of Trade and Industry (MTI) yesterday.

“The fortunes of the economy (10-15 years) ago were very closely tied to electronics,” he said. “Over the past 10 years or so, there’s been a structural change in manufacturing, developing a reduced dependence on electronics.”

The transport engineering sub-sector reported a 31-per-cent growth from a year earlier, compared to 23 per cent in the first quarter.

Biomedical manufacturing, a sub-sector making pharmaceuticals and medical devices, chalked an 11-per-cent rise, reversing the 5.1-per-cent drop a quarter earlier.

Electronics grew only 2.5 per cent while the precision engineering sub-sector contracted 2 per cent.

Manufacturing contributed 27 per cent of Singapore’s second quarter nominal gross domestic product (GDP) this year, which stood at about $56 billion.

The biomedical segment has grown substantially in the last 16 years, increasing its share of the manufacturing pie from 5.3 per cent in 1990 to 24.6 per cent last year — the second largest. While it is still the largest portion, the electronics sector has dropped from 31.1 per cent in 1990 to 28.8 per cent in 2006.

Still, Mr Vishnu Varathan from economic research house ForeCast said the biomedical industry tends to be volatile, partly because of the portion of output from pharmaceuticals.

“There’s only a handful of the big names here producing,” UOB economist Alvin Liew said. “So, the coincidence of a few big plants shutting down for cleaning purposes in a month could see a sharp drop in production for that month.”

Mr Liew added: “In time to come, when more firms come in to produce, you can grow a bigger pool and the volatility may then be reduced.”

While pharmaceuticals will likely see more volatile months ahead, “we expect to see at least 15-per-cent growth for pharmaceutical exports this year”, he said.

Diversification may be one way of broadening economic growth. The economist added that manufacturers should do more research and development and move up the value chain as the economy matures.

“So far, we have seen a few (pharmaceutical) companies starting operations, but most of them do production, not much in terms of research and development. So that needs to be improved,” he said.

S’PORE ECONOMY LOOKING UP: INDEX

Singapore’s Composite Leading Index (CLI) rose 3.4 per cent in the second quarter, up from 3 per cent in the first quarter, reflecting increased optimism about the economy.

Eight of the nine index components posted gains for the quarter, with only domestic liquidity showing a decline from the last quarter.

Attributing the fall to “fluctuations in the financial markets”, Mr David Cohen, economist at Action Economics, said that is not a major concern the banking system has enough liquidity to keep the economy growing.

The financial market has been volatile lately because of heightened concerns over the shaky United States sub-prime mortgage market, which might spill over and hurt the quality of risky assets held by local banks.