| The challenges of a new operating
environment are not restricted to the services sector.
For example, Singapore faces increasingly tough competition
in the electronics industry. Both developing and developed
countries understand the key importance of this sector
to their manufacturing base, and are going all out to
attract MNCs to locate projects there. We have had many
successes, but the Economic Development Board has also
seen some desirable projects slip through its hands.
While Singapore has managed to maintain
the manufacturing sector at about 24 per cent of our
GDP, other countries with high per capita incomes have
seen this share shrink. Hong Kong, at the extreme, has
practically de-industrialized. Manufacturing now constitutes
only about 8 per cent of Hong Kong's GDP. Unless we
make a special effort to maintain the manufacturing
share of GDP, we run the risk of weakening a key pillar
of our economy and losing a primary means to generate
wealth.
The competitive environment, however,
has changed tremendously. Unlike the past when we were
one of the most liberal countries seeking to attract
foreign direct investments, both developed and developing
countries are now going all out to attract high-value
projects, offering very generous incentives, including
in some cases outright grants.
Many of our competitors have the advantage
of lower land and labour costs. Singapore, on the other
hand, is constrained by our small size and limited resources.
Industrial land in Singapore costs three to four times
that in Johor and Bangkok. Even compared to Taiwan,
we are more expensive. Labour costs in Singapore are
high too. The cost of hiring a production worker in
Singapore, while lower than the developed countries,
is much higher than our neighbours in other dynamic
economies in Asia.
The Government cannot artificially
depress labour costs, as these are set by market forces.
In any case, our aim must be to create better paying
jobs for Singaporeans. We also cannot underprice our
land as we have to ensure that each piece of land is
used efficiently, and yields full economic returns.
We also need to balance the country's needs in housing,
industry, commerce and recreation.
But at the same time, we must watch
the overall cost of doing business in Singapore. For
us to remain competitive, higher costs in Singapore
must be justified by higher capabilities and performance.
The Government has thus made special efforts to improve
key supply side factors. In manpower, for example, we
have continued to grant work permits and employment
passes liberally. The Ministry of Labour has also recently
cut the foreign worker levy for the manufacturing sector.
In addition, we have created new schemes or customised
existing schemes to train engineers and skilled workers
in specific areas in the electronic, chemicals, logistics
and communications industries. We are also continuing
to develop competence in various high technologies sectors
including production engineering and biotechnology.
The Government recognizes that the
cost of industrial land is a key issue for manufacturing
investors. Prices of industrial land have escalated
sharply in the past few years together with the rise
in the residential property market. We cannot afford
to let the high prices of residential or commercial
land overwhelm the industrial land market, and crowd
out manufacturing industries and MNCs. MNCs generally
have more choices of where to site their projects, are
more sensitive to cost factors, and are less tolerant
of high prices for land in Singapore. Singaporean companies
in high technology manufacturing face the same cost
pressures and have the same options. These companies
cannot operate in Singapore if their industrial land
prices are inflated by our residential land prices.
The Government has therefore taken
steps to allocate adequate land for industries, especially
for strategic projects, and to price industrial land
realistically, considering the likely tenants, to keep
Singapore an attractive destination for manufacturing
investments. |
