AN ANALYSIS OF THE VIABILITY OF THE SINGAPORE PETROCHEMICAL INDUSTRY WITH PARTICULAR EMPHASIS ON THE POLYOLEFIN SECTOR

Abstract

The objective of this study is to critically examine the viability of the petrochemical industry in Singapore, a relatively newcomer to Singapore's industrial scene. This industry comprises an integrated group of joint venture companies collectively referred to as the Singapore Petrochemical Complex. Located on an offshore island, the Complex took over ten years and S$2 billion to complete - the largest private undertaking in Singapore's history. The study unfolds with a review of the events surrounding the birth of this project, While this project marked a significant milestone in Singapore's industrial development and put the Republic on the world petrochemical map, its viability was hotly debated and questioned by both participants and informed observers alike right from the outset. Indeed, as recently as one-and-a-half years ago, any sceptics were still assailing this project as a "white elephant" destined to failure from the beginning. The reason for this sentiment of doom and gloom is readily apparent from an analysis of the structure of the industry and its supply and demand pattern. Based on the model propounded by Porter, the study will analyse the interplay between raw material supplies, customer's bargaining power, competitors' advantages and the threats and opportunities of substitutes from technological developments. The study continues with an evaluation of the strategies adopted by the fledging Singapore companies in their quest to stay afloat in the face of a global glut, weak prices and a tiny home market. During that trying period, the Singapore industry was awashed in a sea of red ink as far as profitability went. Fortunately, a recovery in the industry looms in the horizon and the study concludes with a peep into the future and an assessment of the staying power of Singapore's industry. Materials for this study are obtained from industry publications, annual reports and other authoritative journals. The data and information provided are those available up to July 1987.