EDB draws S$11.8 billion in fixed asset investments in 2014

Investments down as S'pore chases quality
It is looking to attract projects in line with its tighter manpower policies
By Chia Yan Min, The Straits Times, 3 Feb 2105

THE big-ticket foreign investments that keep Singapore's economy humming continue to fall.

The trend took hold since Singapore tightened its manpower policies and lost its attraction for companies that depend on cheap foreign labour. This year, the uncertain global outlook could dampen investments further.

In its latest forecast, the Economic Development Board (EDB) said it expects to attract $9 billion to $11 billion worth of fixed asset investments this year, which will create 13,000 to 14,000 skilled jobs.

This year's targets are down from $11.8 billion worth of inbound investments last year, which are expected to eventually yield some 16,100 skilled jobs.

But the slowdown started before that. Singapore attracted $12.1 billion worth of investments in 2013 while, in 2012, when labour policies had just started to tighten, it raked in investments to the tune of $16 billion.

This moderating trend reflects a "sharper focus on attracting projects that are in line with Singapore's stage of economic development, manpower policies and planned international commitments on carbon emissions", the EDB said.

Apart from chasing new, high-quality investments, the EDB will work closely with companies that already have operations here, including those that are looking to restructure or relocate. This would include handling the associated layoffs in a "planned manner", said EDB chairman Beh Swan Gin.

"In so doing, we can work with unions so that workers who may be affected can be retrained," said Dr Beh.

Even if companies shrink their footprint, the key is for their remaining operations here to be more productive, he said.

Singapore International Chamber of Commerce chief executive Victor Mills said Singapore remains an attractive investment destination and is being sensible in weaning itself off cheap foreign labour. But he asked for more flexibility.

"There needs to be recognition that the local workforce doesn't want to do certain jobs," said Mr Mills. "The manpower policy needs to have a different approach for different sectors (and ease up on sectors which find it tougher to hire Singaporeans)."

Said DBS economist Irvin Seah: "The EDB is being more selective with the types of foreign investment it brings in, given the tight labour market here.

"Singapore is no longer aiming for high growth but sustainable and quality growth. The type of foreign investments the EDB brings in should reflect that."

Meanwhile, last year's investment reflected the changing landscape, with the chemicals sector accounting for the largest chunk - about $2.6 billion, or 22 per cent of the total. The share from electronics was 13.6 per cent last year, down sharply from 26.9 per cent in 2013.

The EDB said Singapore remains plugged into major growth trends in the electronics industry, such as cloud computing.

Fewer skilled jobs expected to be created this year
By Angela Teng, TODAY, 3 Feb 2015

A sharp reduction in the number of skilled jobs created; lower fixed asset investments (FAI); and a decline in business expenditure. These are what the Economic Development Board (EDB) has projected for the Singapore economy this year as it sharpens its focus in attracting high-value-added projects while the global economic outlook becomes more uncertain.

The EDB said yesterday it forecast between 13,000 and 14,000 skilled jobs to be created this year, down from 16,100 last year, while FAI will fall to between S$9 billion and S$11 billion from S$11.8 billion. Total business expenditure is forecast at between S$5.5 billion and S$6.5 billion, down from S$7 billion last year.

Last year, skilled job creation slightly exceeded its projection of 14,000 to 16,000, FAI was at the higher end of its S$10 billion to S$12 billion forecast range, while total business expenditure was within the S$6 billion to S$7.5 billion band. Value-added last year — which measures the direct contribution to the economy excluding multiplier effects — was S$12.5 billion, within expectations of between S$11.5 billion and S$13.5 billion. It is forecast in a range of S$11 billion to S$13 billion this year, the EDB added.

Economists said the projected fall in skilled jobs is in line with the Government’s restructuring exercise to raise productivity and reduce reliance on foreign workers. They said the lower investment projections will not affect Singapore’s position as a regional hub for companies to do business in.

“Singapore looks to be a better player compared with its neighbours due to its better business environment as it has advantages in its political and economic situations. The reason the figures are trending down is partly policy-driven measures by the Government and worker policies. There is certainly moderation in investment attractiveness due to supply constraints, but the drive inevitably is to attract higher-quality companies,” said Credit Suisse economist Michael Wan.

“Singapore is currently facing land and labour constraints and investments are affected by that, and also because of the worker levies and the drive for the nation to be a less labour-intensive economy. Attractive wages would tend to be present if higher value-added services companies increase their footprints in the economy,” he added.

However, UOB economist Francis Tan said the lower number of skilled jobs created will not lead to a wage spiral.

“This is all part of the ongoing restructuring exercise by the government... The lower numbers would not lead to an increase in salaries as wages are tied to the productivity of the companies. Businesses need to work on their margins and are also cautious on increasing any costs that would transfer over to the consumers in this period of uncertainty,” he said.

The lower EDB projections continue the trend from 2013 and the business development agency expects the FAI, which was at its lowest last year since the global financial crisis in 2009, to stay within the current forecast in the coming years.

“We see the numbers operating downwards. We think that in the next few years we should be seeing numbers in the S$9 to S$11 billion range. Of course this is subjected to any other shocks that may happen in the external economy,” said EDB chairman Beh Swan Gin.

EDB said it will be more targeted in promoting investments and will place more emphasis on helping existing companies and sectors strengthen their competitiveness and make more productive use of resources. It will also explore ways to help Singapore-based companies create new businesses through innovation, and in so doing, generate economic growth and good jobs for Singaporeans.

“This is a win-win situation. In so doing, this will allow them to be more competitive. For instance, companies that need to introduce a lot more technology into their operations, whether it is automation, robotics or new manufacturing technologies, or companies which are traditionally reliant on unskilled labour and want to develop new processes to increase productivity per worker – a lot more of our time and effort will be spent on the installed base. We want companies that are already operating in Singapore to be more competitive,” said Dr Beh.

The Singapore economy grew 2.8 per cent last year, based on the government’s preliminary estimate, and is expected to grow 2 to 4 per cent this year.