Thursday 14 January 2016

Opportunities in niche areas for Singapore: Heng Swee Keat

Finance Minister singles out niche production, consumption spending and modern services
By Rachael Boon, The Straits Times, 13 Jan 2016

The slowing global economy is making life hard for some sectors here but there are still rich pickings to be had elsewhere, said Finance Minister Heng Swee Keat yesterday.

He noted that while industries like wholesale trade are facing an uphill slog, opportunities abound on three fronts - niche production, consumption spending and modern services.

Mr Heng's remarks came after Monday's first meeting of the Committee on the Future Economy that he chairs. The committee is looking into Singapore's next stage of economic development.

While Asia faces forces that are beyond control, Finance Minister Heng Swee Keat says Singapore needs to keep its economy flexible and nimble to strengthen its robustness against unexpected shocks. UBS)
Posted by Channel NewsAsia Singapore on Tuesday, January 12, 2016

In a wide-ranging speech on the economy, he told a wealth insights conference organised by Swiss banking giant UBS that in the domestic information technology sector, "manufacturers have recast business models and shifted towards niche production as well as services-related activities, such as chip design, delivery of IT services and innovative solutions".

Home-grown electronics player Venture works with manufacturers to produce devices and core components for the medical and life- science industries. This is an example of how Singapore firms provide "services that complement the evolving production networks in the region", Mr Heng said.

The backdrop for all this is the economic performance of emerging Asia - including places such as China, India, Taiwan and Singapore - the slowest since 2001, Mr Heng noted. He said investors need to be vigilant amid the volatile markets, but Asia is coming from a stronger base compared to the 1990s.

Apart from niche production, another potential area is consumption spending, which is likely to expand as income levels grow and the population rises - two factors at play in Singapore and the region.

"Consumers value diversity in consumption, and this provides good potential for intra-regional trade in final goods and services, even as trade in intermediate components remains important," said Mr Heng.

Singapore could grow with this trend, with tourism a good example of the potential. Mr Heng noted that Chinese visitor arrivals to Singapore have grown on average by 25 per cent every year since the global financial crisis, except in 2014.

A third area he cited was modern, not traditional, services. He said exporters of modern services here have the edge, especially in the financial sector where there is great potential to develop niche growth areas.

The country is already a pan-Asian centre for wealth management, with total assets under management here up 30 per cent to $2.4 trillion in 2014 from 2013. It is also the world's third-largest foreign exchange centre.

China's internationalisation of the yuan and technology have also "given greater impetus to Singapore's development as an international financial centre", Mr Heng added.

Asked where Singapore could excel, OCBC economist Selena Ling said the best position would be in modern services, including financial services. She noted that niche production areas require a lot of resources and attention. "Based on our clean government, clear legal and regulatory regime, head start in regional wealth management hub, and AAA-rated sovereign, these factors put us in good stead," she added.

But Singapore must still develop what Mr Heng called "an innovative agility" to grow on these fronts.

"What we can and must do is to strengthen our robustness against unexpected shocks by keeping the economy flexible and nimble. We must persevere with structural reforms, to reposition ourselves and build new capabilities, especially in innovation, that will secure sustainable and inclusive growth," he said.

Govt to 'keep eye on business costs'
By Rachael Boon, The Straits Times, 13 Jan 2016

The Government will not let Singapore businesses be priced out of global markets but it will also allow market forces to prevail, said Finance Minister Heng Swee Keat yesterday.

Mr Heng was responding to a question from Mr Edmund Koh, head of UBS Wealth Management Asia-Pacific, who led a dialogue session as part of a wealth insights conference organised by the Swiss banking giant.

Referring to the recent results of a survey by Singapore Chinese Chamber of Commerce and Industry (SCCCI), Mr Koh asked if policies would change in the light of higher interest rates and lower profit margins.

"We will always make sure we don't price ourselves out of the global market, but at the same time, we need to allow market forces to shape these costs," said Mr Heng.

He said that providing a stable environment for Singapore businesses is the best - and most important - factor. This serves as a foundation for firms as they build their competitiveness amid structural changes.

Mr Heng, asked a question from the floor about a review of property cooling measures, said in reply that "as far as Budget 2016 is concerned, I've not seen anything on my table relating to measures about property".

Mr Heng also noted how a group of businesses have suggested reducing land or property prices so rents can come down, for instance. He pointed out that Singapore's focus has always been on the medium term rather than reacting when markets move, which might leave the economy vulnerable.

Earlier in his welcome remarks, Mr Koh said that "it's a changing economic, geopolitical world" this year. "We continue to have quantitative easing in Japan and Europe, interest rate rises in the US, and China restructuring its economy. These four elements are a potent mix that will impact currencies, commodities, interest rates, and equities."

But Mr Koh was positive about the many opportunities in Asia's booming Internet industry, with e-commerce the dominant trend and China's Internet giants benefiting amid industry consolidation.

Mr Heng said businesses will have to embrace structural changes to the economy, invest in new technology and upgrade their skills to stay competitive. That involves firms taking the lead to develop a "far greater entrepreneurial spirit" as the economy transforms to become more service-led, instead of an over-reliance on the Government.

Businesses here have to embrace technology such as robotics to its fullest potential to move Singapore to higher value-added and high productivity industries. He said: "This is one major trend that we cannot avoid, and I hope that Singapore businesses will be among the best in the world in making use of technology to raise productivity."

Mr Eric Boo, chief operating officer of Colourscan, a digital imaging and printing firm, said: "With technological advances, you can bring down your cost. We also have to upgrade our workforce, and gear them for technological changes so they can be the ones operating the new technology, rather than being replaced by them."

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