RESTRUCTURING OF THE MANUFACTURING SECTOR IN SINGAPORE

Abstract

Since the economy first embarked on the path of industrialisation in 1960, the manufacturing sector has grown to become the primary engine of economic development. Moreover, Singapore has been hailed as the hallmark of successful industrialisation due to the remarkable performance of the sector over the years. The success of both her past and future industrialisation is, in part, determined by her ability to restructure according to the changes in comparative advantage. This means that the industrial structure must change to reflect factor endowment, technology and skill level and stage of development. Consequently, the objectives of the thesis are to evaluate past industrial restructuring as well to provide insight to future development of the manufacturing sector.

The restructuring of the manufacturing sector in Singapore is a case of dialectic interplay between the market and the state. This differs from the approach of the neoclassical economists who stress solely on the former and the economists who advocate the new political economy approach that focuses solely on the latter. While the government has led and guided industrial development, it has not distorted market forces. The government has intervened to hasten and enhance Singapore's comparative advantage in higher value-added activities but not to alter her comparative advantage. The extent of government intervention depends on the strength of the market forces. As such, since the late l980s, the private sector has played a greater role in both policymaking and entrepreneurial activities. The history of Singapore's industrial development demonstrated that the role of technological change increases with the depth and complexity of manufacturing activities. This implies that future restructuring, inevitably, demands a sufficient level of advanced technology and R&D capabilities to lift the economy onto a higher plane of research-intensive, higher technology activities. To meet the intensified competition from the other Asian NIEs, near-NIEs, such as Malaysia and Thailand, and emerging economies, such as China, the economy must climb the technological ladder so that she will not lose out in the quest for competitive edge in certain industries, in particular, the electronics and chemicals industries. The thesis focuses on the challenge that Singapore faces from the other Asian NIEs. To further progress into the investment-driven stage and eventually transit to the innovation-driven stage of national competitive development, the economy must develop her factor conditions, demand conditions, supporting and related industry and firm strategy and rivalry. (Porter, 1990) Based on these four conditions, the thesis suggests four critical areas in the future restructuring of the manufacturing sector: promotion of an external economy, development of indigenous technological and organisational capabilities and industrial clusters as well as the establishment of a partnership approach among the MNCs, GLCs and local enterprises. In addition, it is imperative that the government modifies its role to become a team leader, coordinating the participation of the private sector as it envisages the desired directions for the sector and the economy. With regard to its role as an entrepreneur, it must not crowd out the involvement and initiatives of the private sector.