Singapore Seeking to Move Up Value Chain – Real Time Economics

Singapore’s industrial production for June tells an interesting story. Output grew 0.4%, surprising analysts who expected a contraction. But electronics production continued to fall heavily, by 4.8% on year after a 4% fall in May. Biomedical production was up 1.6%.

This data shows a conscious effort by Singapore to move into more value-added industries and away from lower-margin businesses, such as electronics assembly and the like. Singapore’s leaders want the country to be more competitive in service sectors, such as design of products, and biomedical research, while leaving manufacturing to nations with lower wages like Malaysia.

ANZ said in a note that Singapore’s economy is suffering now because of this restructuring. But in the long term it’s the right choice. Other nations with cheaper workers will eventually eat this business anyway.

As you can see in the chart, manufacturing’s share of Singapore’s economy has fallen in recent years, while business services’ portion has grown.

 


 


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25 July 2014 | 8:21 am – Source: blogs.wsj.com

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