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Manufacturing sector to be 'around 20%' of GDP in medium term
MANUFACTURING should account for about a fifth of Singapore's gross domestic product (GDP), said the task force formed to prepare the country for the future - the first time in recent years that such a target has been set for the sector.
The Committee on the Future Economy (CFE) said in a report on Thursday that it recommends the country build a "globally competitive" manufacturing sector at "around 20 per cent of GDP, over the medium term", adding that the sector "generates strong spillovers to the rest of the economy".
Economists said on Thursday that manufacturing share of GDP has been slightly below 20 per cent for the past two years but that 20 per cent figure is still feasible. However, achieving it may require more reliance on foreign multinational corporations that can bring in high value-add manufacturing, they said.
The CFE said the manufacturing sector remains important to the economy because it "anchors high-value and complex activities" that provide jobs for Singaporeans, preserves and grows technical and engineering skills, and diversifies the country's products and export markets.
It added the sector accounted for "around 20 per cent" of GDP and 14 per cent of total employment in Singapore last year, and that between 2009 and 2016 the real median income of resident workers in the sector rose by 2.9 per cent annually - surpassing the 2.6 per cent annual real growth in the overall economy.
Between 2009 and 2016, real productivity - measured in real value added (VA) per actual hour worked - in the sector grew 6.2 per cent per year, higher than the 2.5 per cent annual growth in the overall economy and the 2.1 per cent annual growth in the services sector over the same period, it said.
Economists said on Thursday that manufacturing share of GDP used to be 20-25 per cent, but that slid to about 17-18 per cent in the past couple of years partly due to a global economic downturn.
"Actually in the past the government used to target manufacturing share to be around 20-25 per cent of GDP but such rhetoric has been absent in recent years," OCBC economist Selena Ling said. "Manufacturing's share of GDP has been declining since 2011 (the last time it was more than 20 per cent) and probably stabilised around (the) 18 per cent handle last year."
But she said the target of around 20 per cent was "ambitious but not unrealistic", adding that it signified Singapore does not want manufacturing activities to hollow out here.
CIMB economist Song Seng Wun said that the 20 per cent target would simply be a return to where the sector used to be as a component of total GDP. For it to get back to that level, though, global growth and external demand would have to pick up.
Singapore may also have to rely on bringing in "large specialised foreign companies who see Singapore as a very stable place to do certain sorts of manufacturing" due to its law and order, intellectual property protection, labour pool and infrastructure, he said.
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