This research report examines the impact of foreign direct investment (FDI) and key external and internal factors on Singapore's manufacturing sector. Drawing on government statistics, industry surveys, and trade policy data from the early-to-mid 2000s, the paper documents strong growth across manufacturing clusters—including biomedical, transport engineering, electronics, and chemicals—while identifying weaknesses such as insufficient R&D collaboration and rising labor costs. The report also evaluates Singapore's strategic responses, including innovation initiatives, tax incentives, open trade policies, and government-linked investment vehicles, demonstrating how these measures aim to sustain manufacturing's roughly 25% share of GDP and attract high-value-added FDI.
On December 2, 1996, a news release from Singapore entitled "Upgrading Capabilities in the Manufacturing Industry" stated that the National Computer Board's efforts in the Manufacturing and Distribution Cluster were focused on: (1) upgrading the internal capabilities of companies in this sector; (2) enabling enterprise integration; (3) manpower upgrading and re-skilling; and (4) creating new ways to do business (Upgrading Capabilities in the Manufacturing Industry, 1996). Several initiatives were identified to assist manufacturing companies as they transitioned from "the current paper-intensive design environment to an automated and integrated mode of operation" (Ibid). These initiatives included adding capabilities of: (1) Quickmold; (2) Product Data Exchange Service (PDEX); and (3) Internet-Based Parts Design Library.
In the work entitled "Sensors for Industrial Automation," author Lim Yew Gee reports that "manufacturing is one of the key pillars of Singapore's economic growth. Our manufacturing sector accounts for some 25 per cent of GDP. To maintain this figure in the future, our industrial and manufacturing sectors need to continue to adopt IT. The use of IT will ensure plants' operational costs are always kept low and productivity high to stay competitive. The adoption of sentient technology such as networked sensors for industrial monitoring and control is one way to meet these challenges" (2006). Singapore has reportedly been working toward these goals, and the growth being experienced in the manufacturing sector suggests those goals are being realized.
The work entitled "2005 Foreign Direct Investment Confidence Index" states that the foreign direct investment inflow for Asia reached approximately $155.5 billion, described as "an unprecedented $48.6 billion increase over the year before." The top five hot economies identified were: (1) China; (2) Hong Kong; (3) Singapore; (4) South Korea; and (5) India, which together "account for 80% of the flows to the region" (2006). Cross-border mergers and acquisitions deals in 2004 equaled $25 billion, up from $22 billion in 2003. Singapore maintained its position at 18th place, tied with Thailand (Ibid).
The work entitled "Monthly Manufacturing Performance — November 2006," published by the Singapore Government Online, states that manufacturing output in November rose 14.7% over the same month of the prior year. Excluding biomedical manufacturing, output was 7.0% higher than in November 2005. Leading growth were the biomedical manufacturing and transport engineering clusters. Biomedical manufacturing experienced year-on-year growth of 45.9% in November, while pharmaceuticals and medical technology products grew 46.1% and 44.6%, respectively. Cumulative output from January through November grew 22.9% for the entire cluster compared to the same period in 2005. The climate for imports is one that is receptive to international business, with Singapore's open economy and free trade policy allowing the import of raw materials duty-free.
The manufacturing sector is comprised of the following segments and clusters, with the accompanying statistics for November 2006 (Monthly Manufacturing Performance — November 2006):
Transport Engineering Cluster — expanded across all segments in November; output rose 23.5% over November 2005. The Marine and Offshore Engineering segment grew 25.7%, driven by substantial ship repair work and continued shipbuilding activity. Oil rig fabrication was propelled by strong demand. The aerospace segment expanded 18.4% due to increased air travel. The land transport segment grew 50.9%, and transport engineering overall grew 32.7%.
Precision Engineering Cluster — the precision modules and components segment recorded 3.8% growth on higher output of precision springs, die castings, wires, cables, connectors, metal stampings, and electroplating services, and 10.7% growth over the prior year. The cluster as a whole grew 9.8% year-on-year. The machinery and systems segment grew 20.4%.
Chemicals Cluster — year-on-year growth of 3.0%. Petrochemicals grew 3.6%, specialty chemicals grew 6.4%, and the petroleum segment recorded 1.0% growth.
Electronics Cluster — 2.1% year-on-year growth. Hard disk drive production was lower by 21.5% than the previous November, with a cumulative decline of 27.8%, attributed to "relocation of production" (Ibid). The Infocomms and Consumer Electronics segment recorded 15.6% less production of telecommunications products, PCs, and consumer electronics. The semiconductors segment grew 8%, with higher output of DRAMS, NAND flash, and microprocessors. The computer peripherals segment grew 5.1% in November. The electronics cluster overall recorded 4.4% growth in the first eleven months of 2006.
The report concludes that general manufacturing industries experienced 13.6% year-on-year growth in November, with food and beverage manufacturing growing 13.2%. The external trade and manufacturing statistics for Singapore in November 2006 are presented below (Monthly Manufacturing Performance — November 2006):
External Trade & Manufacturing — Singapore — November 2006
Total Trade (Current Prices, S$m): Nov '06 — 68,899.1 (8.7% change); Previous Period — 67,450.3 (–0.4% change). Total Exports (Current Prices, S$m): Nov '06 — 37,151.0 (8.0% change); Previous Period — 36,669.2 (–2.7% change). Total Imports (Current Prices, S$m): Nov '06 — 31,748.1 (9.6% change); Previous Period — 30,781.0 (–3.8% change). Industrial Production Index (2003 = 100): Nov '06 — 152.6 (14.7% change); Previous Period — 147.6 (–3.4% change).
The work entitled "The Pattern of Innovation in Singapore's Manufacturing Sector," published in January 2003, reports a study of Singapore's manufacturing sector using the results of the first national innovation system (NIS) survey. The study reports that Singapore "has a long way to go in its development of an innovation-based economy," but that progress "has been made, with companies making visible efforts to engage in innovation activities." This is significant because, as the report notes, innovation activity has been found to be "positively related to sales volume, sales growth, employment growth and internationalization" (Ibid).
Weaknesses identified in Singapore's system include: (1) "insufficient collaboration between firms and the public R&D sector"; (2) "deficiencies in the availability of scientific and technical manpower and innovation-supporting services"; and (3) "adverse societal attitudes to failure" (Ibid). A major problem noted is the fear of failure due to the social stigma attached to it. The report suggests that Singapore "needs to learn to accept failure as an inherent part of the innovation and entrepreneurial process" (Ibid).
The following data illustrates the principal statistics of manufacturing in Singapore for the years 2001–2005 (Economic Development Board):
Principal Statistics of Manufacturing — Singapore (2001–2005)
Employment (Number, 2005p): 344,141. Total Output ($Million): 138,323. Materials ($Million): 76,724. Remuneration ($Million): 12,665 (2001) / 12,965 (2003–2004). Value Added ($Million): 31,923 (2001) / 36,360 (2004–2005). Direct Exports ($Million): 84,209 (2001) / 88,384 (2004–2005).
"Government and industry initiatives across manufacturing clusters"
"FDI stock data, investor countries, and returns by sector"
"Policy outcomes and Singapore's manufacturing growth outlook"
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