July and August 2014 |
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Manufacturing Hubs Across Southeast Asia
Singapore
LocatedattheheartofSoutheastAsia,thissuccessfulandhighlydeveloped
free-market economy offers a host of opportunities to investors. The
cultural melting pot that is Singapore has been referred to as one of the
most business-friendly and competitive economies in the world, and for
good reason.
As the commercial hub of ASEAN, Singapore is characterized by its open,
efficient,andcorruption-freegovernment,low-interestrates,state-of-the-
art infrastructure, significant investment incentives, and highly-educated
workforce. These reasons and more led to Singapore ranking first on the
World Bank’s “Ease of Doing Business Index” for nine consecutive years
(2006-2014).
Contrary to the belief of many, Singapore is not only home to thriving
finance,business,andretailsectors,butisalsoanimportantmanufacturing
hub. Singapore’s diverse economy depends heavily on exports, and
manufacturing accounts for approximately 21 percent of the country’s
GDP—a percentage much higher than in other advanced economies
suchas theUnitedKingdom, Canada, or theUnitedStates. Incomparison,
wholesale and retail, business services, and finance and insurance—all
sectorsmorestronglyassociatedwithSingapore—constitute18percent,
16 percent, and 13 percent of GDP, respectively.
Singapore’s specialized industries include chemicals, whichmadeup33.4
percent of total manufacturing output in 2013, electronics (27.8 percent),
precisionengineering(11.4percent),transportengineering(11.1percent),
biomedical manufacturing (8.2 percent), and general manufacturing (8.1
percent).
Manufacturing as a Percentage
of Singapore's GDP
21%
Manufacturing
18%
Wholesale &
Retail
16%
Business
Services
13%
Insurance
32%
Other
However, despite all of the positive aspects of Singapore’s business
environment, there are some concerns that the countrywill become less
competitive in coming years as a result of increasing business costs—
which are already significantly higher than those of other ASEANnations.
The average wage of a worker in Singapore’s manufacturing sector was
US$3,375permonthinQ32013versusUS$350inThailandduringthesame
period.Furthermore,betweenQ32009andQ12013,businesscostsinthe
manufacturing sector rose by 19 percent cumulatively.
Analysts are also worried about the country’s dependence on China,
the U.S., and the Eurozone as export markets because these areas are all
expectedtoexperienceslowgrowthoverthenextfewyears.Howeverthis
fear may be mitigated as a result of an expected increase in intra-ASEAN
trade after the implementation of the ASEAN Economic Community in
2015.
In order to sustain its manufacturing competitiveness, the Singaporean
government offers significant incentives for productivity-driven growth,
including cash payouts for training and R&D. The country also maintains
a favorable corporate tax rate of 17 percent, the lowest of any ASEAN
nation, India, or China.
Despite having some obstacles toovercome, Singapore seems certain to
maintainitsmanufacturingcompetitivenessfortheforeseeablefuture,with
Deloittepredictingthatthecity-statewillremaininninthplace(thehighest
ranked ASEAN country) in the World Manufacturing Competitiveness
Index through 2018.
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